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As filed with the Securities and Exchange Commission on December 30, 1998.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): DECEMBER 14, 1998
ECO SOIL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
NEBRASKA 0-21975 47-0709577
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
10890 THORNMINT ROAD, SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices, including zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 675-1660
Page 1 of
Exhibit Index on Page 4
<PAGE>
This Current Report on Form 8-K is filed by Eco Soil Systems, Inc., a
Nebraska corporation (the "Company"), in connection with the matters described
herein.
ITEM 5. OTHER EVENTS.
On December 14, 1998, the Company and all of its domestic subsidiaries
entered into a Credit Agreement (the "Imperial Bank Credit Agreement") with
Imperial Bank which provides for a $10 million secured revolving line of credit
(the "Line of Credit"). The Line of Credit has a term which runs through April
28, 2000. Borrowings will bear interest at floating rates of interest tied to
prime or LIBOR rates and is secured by certain of the Company's and its
subsidiaries' tangible and intangible assets. Concurrently with the execution
of the Imperial Bank Credit Agreement, the Company paid all amounts due under,
and terminated, a line of credit (the "Provident Bank Line of Credit") under
that certain Credit Agreement dated as of August 25, 1998 with The Provident
Bank. The Provident Bank Line of Credit would have permitted outstanding
borrowings of up to $20 million through August 2001, subject to satisfaction
of various conditions (including certain future performance criteria). The
Company had approximately $6,800,000 outstanding under The Provident Bank
Line of Credit prior to the payoff.
The foregoing summary of the terms of the Imperial Bank Credit Agreement
does not purport to be complete and is qualified in its entirety by reference to
the full text of the Imperial Bank Credit Agreement and the corresponding
promissory note (and LIBOR addendum thereto) and security agreement, copies of
which are attached hereto as Exhibits 10.1, 10.2 and 10.3, respectively, and
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) EXHIBITS.
<TABLE>
<S> <C>
10.1 Credit Agreement dated as of December 2, 1998.
10.2 Promissory Note (and Libor Addendum thereto) dated as of December 2, 1998.
10.3 Commercial Security Agreement dated as of December 2, 1998
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 30, 1998 Eco Soil Systems, Inc.
By: /s/ WILLIAM B. ADAMS
----------------------------------
William B. Adams
Chief Executive Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Page
- ----------- ----
<S> <C> <C>
10.1 Credit Agreement dated as of December 2, 1998.
10.2 Promissory Note (and Addendum thereto) dated as of December 2, 1998
10.3 Commercial Security Agreement dated as of December 2, 1998
</TABLE>
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[IMPERIAL BANK LETTERHEAD]
Member FDIC
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on December
2, 1998, by and between Eco Soil Systems, Inc., a Nebraska Corporation, Aspen
Consulting Companies, Inc., a Colorado Corporation, Turf Specialty, Inc., a
Delaware Corporation, Eco Turf Products, Inc., a Delaware Corporation,
Mitigation Services, Inc., a Delaware Corporation, Agricultural Supply, Inc., a
Delaware Corporation, Benham Chemical Corporation, a Michigan Corporation, Turf
Acquisition Sub, Inc., a Delaware Corporation, and Yuma Acquisition Sub, Inc., a
Delaware Corporation (collectively, "Borrower") and Imperial Bank, a California
banking corporation, ("Bank").
Subject to the terms and conditions of this Agreement, any security
agreement(s) executed by Borrower in favor of Bank, any note(s) executed by
Borrower in favor of Bank, or any other agreements executed in conjunction
therewith (collectively, the "Loan Documents"), Bank shall make the loans and or
advances (individually a "Loan" and collectively "Loans") referred to below to
Borrower.
In consideration of mutual covenants and conditions hereof, the parties
hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 REVOLVING CREDIT COMMITMENT.
(a). REVOLVING LINE OF CREDIT. Subject to the terms and conditions of
this Agreement, provided that no Event of Default then has occurred and is
continuing, Bank shall, upon Borrower's request make advances ("Revolving
Loans") to Borrower, for general corporate purposes, including, without
limitation, acquisitions, capital expenditures, construction of proprietary
systems, repayment of existing debt, financing working capital and payments with
respect to capital stock, in an amount not to exceed $10,000,000 (the "Revolving
Line of Credit") until April 28, 2000 (the "Revolving Line of Credit Maturity
Date"). Revolving Loans may be repaid and re-borrowed, subject to the
provisions of the LIBOR Addendum attached to the promissory note evidencing the
Revolving Line of Credit, provided that all outstanding principal and accrued
interest on the Revolving Loans shall be payable in full on the Revolving Line
of Credit Maturity Date.
(b) REVOLVING LOANS INTEREST. Borrower shall pay to Bank from the
date of the initial Revolving Loan until all Revolving Loans are paid in full,
on or before the 5th day of each month, commencing with the month following the
month in which funds are first disbursed, interest on the average daily unpaid
balance of the Revolving Loans during the immediately preceding month at a
variable rate of interest equal to one half of one percent (.50%) in excess of
the Prime Rate as defined below or, at Borrower's option, at an annual rate
equal to the LIBOR Rate plus three percent (3.00%) as specified in the LIBOR
Addendum annexed to the promissory note evidencing the Revolving Line of Credit.
(c) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to availability
under the Revolving Line of Credit, at any time and from time to time from the
date hereof through the banking day immediately prior to the Revolving Line of
Credit Maturity Date, Bank shall issue for the account of Borrower such standby
and commercial letters of credit ("Letters of Credit") as Borrower may request,
which requests shall be made by delivering to Bank a duly executed letter of
credit application on Bank's standard form; provided, however, that the
outstanding and undrawn amounts under all such Letters of Credit (i) shall not
at any time exceed $5,000,000 ("Letter of Credit Sublimit") and (ii) shall be
deemed to constitute Revolving Loans for the purpose of calculating availability
under the Revolving Line of Credit. Unless Borrower shall have deposited with
Bank cash collateral in an amount sufficient to cover all undrawn amounts under
each such Letter of Credit and Bank shall have agreed in writing, no Letter of
Credit shall have an expiration date that is later than the Revolving Line of
Credit Maturity Date. All Letters of Credit shall be in form and substance
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form application and letter of credit agreement. Borrower
will pay all usual issuance and other fees that Bank notifies Borrower will be
charged for issuing and processing Letters of Credit for Borrower.
(d) FORWARD CONTRACTS. Subject to availability under the Revolving
Line of Credit, at any time and from time to time from the date hereof through
the Revolving Credit Maturity Date, Bank will allocate up to $50,000 for
exposure on foreign exchange contracts ("Forward Contracts") on terms acceptable
to Bank, provided that the aggregate amount of Forward Contracts at any one time
shall not exceed five hundred thousand dollars ($500,000).
1.02. INTEREST CALCULATIONS. The term "Prime Rate" shall mean the
rate that the Bank has announced as its prime lending rate, which shall vary
concurrently with any change in the Prime Rate. The term "LIBOR Rate" shall
mean the LIBOR rate as specified in the LIBOR Addendum annexed to any
promissory note. Interest based on the Prime Rate shall vary concurrently
with any change in the Prime
<PAGE>
ECO SOIL SYSTEMS, INC. CREDIT AGREEMENT
Rate. All interest shall be computed at the rate specified in any note on the
basis of the actual number of days during which the principal balance of the
corresponding Loans are outstanding divided by 360, which shall for interest
computation purposes be considered one (1) year.
1.03 LOAN FEE. In addition to any other amounts due, or to become
due, concurrent with the execution hereof, in connection with the Revolving Line
of Credit, Borrower shall pay to Bank a loan fee of thirty-three thousand
dollars ($33,000).
1.04 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other
amounts due, or to become due, concurrently with the execution hereof, Borrower
agrees to pay to Bank a documentation fee in the amount of $250 and all other
costs and expenses incurred by the Bank in the preparation of this Agreement,
the other Loan Documents and the perfection of any security interest granted to
Bank by Borrower.
1.05 LATE CHARGE. If any installment payment, interest payment,
principal payment or principal balance due hereunder or due under any note or
obligation issued pursuant to this Agreement is delinquent ten (10) or more
days, Borrower agrees to pay Bank a late charge in the amount of five percent
(5%) of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the Bank
to accept payment of any payment past due or less than the total unpaid
principal balance after maturity. All payments, at Bank's sole discretion,
shall be applied first to any late charges owing, then to interest and the
remainder, if any, to principal.
1.06 DEFAULT RATE. If an Event of Default occurs hereunder, then
during the continuance thereof at the Bank's option, the interest rate shall be
five percent (5%) per year in excess of the rate otherwise applicable.
1.07 COLLATERAL. Borrower shall grant or cause to be granted to Bank
a first priority lien on any and all personal property assets of Borrower which
is assigned or hereafter is assigned to Bank as security or in which Bank now
has or hereafter acquires a security interest or pursuant to the terms of any
security agreement, an intellectual property security agreement or otherwise as
security for all of Borrower's obligations to Bank.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized
and existing and in good standing under the laws of the state of their
incorporation, without limit as to the duration of its existence. Borrower is
authorized and in good standing to do business in the state of its
incorporation; Borrower has the appropriate powers and adequate authority,
rights and franchises to own its property and to carry on its business as now
conducted, and is duly qualified and in good standing in each state in which the
character of the properties owned by it therein or the conduct of its business
makes such qualification necessary except where the failure to be so qualified
could not reasonably be expected to have a material adverse effect on the
consolidated financial condition of Borrower; and Borrower has the power and
adequate authority to make and carry out this Agreement. Borrower has no
investment in any other business entity unless specified in writing to Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of
this Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's charter/articles of incorporation or similar document as
the case may be, and this Agreement is the valid, binding and legally
enforceable obligation of Borrower in accordance with its terms; subject only to
bankruptcy, insolvency or similar laws affecting creditors rights generally.
2.03 NO CONFLICT. The execution, delivery and performance of this
Agreement and the Loan Documents are not in contravention of or in conflict with
any agreement, indenture or undertaking to which Borrower is a party or by which
it or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 LITIGATION. Except as disclosed in writing to bank by Borrower,
there is no litigation or other proceeding pending or, to the best of Borrower's
knowledge, threatened against or affecting Borrower which if determined
adversely to Borrower or its interest would have a material adverse effect on
the consolidated financial condition of Borrower, and Borrower is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority.
2.05 FINANCIAL CONDITION. The consolidated balance sheet of Borrower
as of September 30, 1998, and the related profit and loss statement for the
twelve months ended as of that date, a copy of which has heretofore been
delivered to Bank by Borrower, and all other statements and data submitted in
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<PAGE>
writing by Borrower to Bank in connection with this request for credit are true
and correct, and said balance sheet truly presents the consolidated financial
condition of Borrower as of the date thereof, and has been prepared in
accordance with generally accepted accounting principles on a basis consistently
maintained. Since such date there have been no material adverse changes in the
consolidated financial condition or business of Borrower. Borrower has no
knowledge of any liabilities, contingent or otherwise, at such date not
reflected in said balance sheet, and Borrower has not entered into any special
commitments or substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its business, which may
have a materially adverse effect upon its consolidated financial condition,
operations or business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the
same are not subject to any liens or encumbrances other than those permitted by
Section 5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses
all necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used to
purchase or carry margin stock (as defined within Regulation U of the Board of
Governors of the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the
Employees Retirement Income Security Act of 1974, as amended ("ERISA"), of
Borrower meet, as of the date hereof, the minimum funding standards of Section
302 of ERISA in all material respects, and no Reportable Event or Prohibited
Transaction as defined in ERISA has occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as
applicable, have reviewed the areas within their operations and business which
could be adversely affected by, and have developed or are developing a program
to address on a timely basis, the Year 2000 Problem and have made related
appropriate inquiry of material suppliers and vendors, and based on such review
and program, the Year 2000 Problem will not have a material adverse effect upon
its consolidated financial condition, operations or business as now conducted.
"Year 2000 Problem" means the possibility that any computer applications or
equipment used by Borrower may be unable to recognize and properly perform date
sensitive functions involving certain dates prior to and any dates on or after
December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN
Prior to Bank being obligated to make any Loan pursuant to this
Agreement, Bank must receive all of the following, each of which must be in form
and substance satisfactory to Bank:
3.01 PROMISSORY NOTE(S). Original, executed promissory note(s).
3.02 INSURANCE. Borrower shall have delivered to Bank evidence of
insurance coverage required pursuant to Section 4.03 in form, substance,
amounts, covering risks and issued by companies satisfactory to Bank, and where
required by Bank, with loss payable endorsements in favor of Bank.
3.03 ORGANIZATIONAL DOCUMENTS. Copies of the charter/articles of
incorporation, or similar document as the case may be, of the Borrower.
3.04 AUTHORIZATIONS. Certified copies of all action taken by the
Borrower and each grantor of a security interest to authorize the execution,
delivery and performance of the Loan Documents.
3.05 GOOD STANDING. Good standing certificates from the appropriate
secretary of state of the state in which the Borrower is required to be
qualified to do business unless failure to so qualify could not reasonably be
expected to have a material adverse effect on the consolidated financial
condition of Borrower.
3.06 ADDITIONAL DOCUMENTS. Such other documents as Bank may
reasonably deem necessary to obtain a first priority interest in and to any
collateral securing any Loan.
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4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under
borrowings, or other indebtedness, or so long as Bank has any obligation to
extend credit to Borrower it will, unless Bank shall otherwise consent in
writing (such consent not to be unreasonably withheld):
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair
(unless such property, equipment or facilities are obsolete or failure to
maintain such property, equipment or facility could not reasonably be expected
to have a material adverse effect on the consolidated financial condition of
Borrower); conduct its business in an orderly manner without voluntary
interruption and, if a corporation or partnership, maintain and preserve its
existence.
4.02 USE OF PROCEEDS. Use the proceeds of the Loans only for purposes
specified in Section l of this Agreement.
4.03 INSURANCE. Maintain public liability, property damage and
workers' compensation insurance and insurance on all its insurable property
against fire and other hazards with responsible insurance carriers to the extent
usually maintained by similar businesses and/or in the exercise of good business
judgment. Bank to be shown as Lenders Loss Payee on such policies.
4.04 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental charges upon or against it or any of its properties, and all
its other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by
appropriate proceedings in such manner as not to cause any materially
adverse effect upon its consolidated financial condition or the loss of
any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated
to the extent required by generally accepted accounting practice) deemed
by it to be adequate with respect thereto.
4.05 RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at all reasonable times and
upon reasonable notice during normal business hours; and furnish Bank:
(a) MONTHLY FINANCIAL STATEMENT. As soon as available, and
in any event within thirty (30) days after the close of each month, a
consolidated balance sheet, profit and loss statement and reconciliation
of Borrower's capital balance accounts as of the close of such period
and covering operations for the portion of Borrower's fiscal year ending
on the last day of such period, all in reasonable detail and reasonably
acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified
by an appropriate officer of Borrower;
(b) QUARTERLY FINANCIAL STATEMENT. As soon as available, and
in any event within forty-five (45) days after the close of each
quarter, a consolidated balance sheet, profit and loss statement and
reconciliation of Borrower's capital balance accounts as of the close of
such period and covering operations for the portion of Borrower's fiscal
year ending on the last day of such period, all in reasonable detail and
reasonably acceptable to Bank, in accordance with generally accepted
accounting principles on a basis consistently maintained by Borrower and
certified by an appropriate officer of Borrower;
(c) ANNUAL FINANCIAL STATEMENT. As soon as available, and in
any event within ninety (90) days after and as of the close of each
fiscal year of Borrower, a consolidated report of audit of Borrower, all
in reasonable detail, prepared on an audited basis by an independent
certified public accountant selected by Borrower and reasonably
acceptable to Bank, in accordance with generally accepted accounting
principles on a basis consistently maintained by Borrower and certified
by an appropriate officer of Borrower;
(d) OFFICER'S CERTIFICATE. Within ninety (90) days after the
end of the fiscal year ended of Borrower, a certificate of the
controller or chief financial officer of Borrower, stating that Borrower
has performed and observed each and every covenant contained in this
Agreement to be performed by it and that no event has occurred and no
condition then exists which constitutes an Event of Default hereunder or
would constitute such an Event of Default upon the
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lapse of time or upon the giving of notice and the lapse of time
specified herein; or, if any such event has occurred or any such
condition exists, specifying the nature thereof;
(e) AUDIT REPORTS. Promptly after the receipt thereof by
Borrower, copies of any detailed audit reports submitted to Borrower by
independent accountants in connection with each annual or interim work
on the accounts of Borrower made by such accountants;
(f) OTHER INFORMATION. Such other information relating to
the affairs of Borrower as the Bank reasonably may request from time to
time.
4.06 MODIFIED QUICK RATIO. Maintain at all times a consolidated
minimum ratio of total accounts receivable divided by total Trading Liabilities
(meaning the total of Revolving Loans, accounts payable and accrued liabilities)
of .85 to 1.00.
4.07 TRADING CAPITAL. Maintain at all times consolidated Trading
Capital (meaning total accounts receivable and inventory minus total Trading
Liabilities as defined in section 4.06) of not less than fifteen million dollars
($15,000,000).
4.08 EFFECTIVE TANGIBLE NET WORTH. Maintain at all times a
consolidated Effective Tangible Net Worth (defined as (a) stockholder's equity
(including without limitation preferred stock) less any value for goodwill,
trademarks, patents, copyrights, leaseholds, organization expense and other
similar intangible items, and any amounts due from stockholders, officers and
affiliates plus (b) subordinated debt including, without limitation, the
$15,000,000.00 offering of senior subordinated notes with detachable warrants
offered pursuant to the Note and Warrant Purchase Agreement and the Common Stock
Purchase Warrant, each dated as of August 25, 1998) of not less than thirty-six
million dollars ($36,000,000).
4.09 TOTAL LIABILITIES TO EFFECTIVE TANGIBLE NET WORTH. Maintain at
all times a consolidated ratio of total liabilities to Effective Tangible Net
Worth (as defined in section 4.08) of not greater than .75 to 1.00.
4.10 PROFITABILITY. Maintain on a consolidated basis, profitable
operations (meaning a net profit after taxes) of at least one dollar ($1) on an
annual (calendar year) basis.
4.11 ERISA. Cause all defined benefit pension plans, as defined in
ERISA, of Borrower to, at all times, meet the minimum funding standards of
Section 302 of ERISA in all material respects, and ensure that no Reportable
Event or Prohibited Transaction, as defined in ERISA, will occur with respect to
any such plan.
4.12 LAWS. At all times comply with, or cause to be complied with,
all laws, statutes, rules, regulations, orders and directions of any
governmental authority having jurisdiction over Borrower or Borrower's business,
unless such failure of compliance could not reasonably be expected to have a
material adverse effect on the consolidated financial condition of Borrower.
4.13 USE OF PROCEEDS. Use the proceeds of the Loans only for the
purposes specified in Section I herein.
4.14 GAAP. Compliance with all financial covenants shall be
calculated based on generally accepted accounting principles applied on a
consistent basis as maintained by Borrower. The term "consolidated" as used
herein refers to the Borrower and all subsidiaries required to be consolidated
with Borrower in accordance with GAAP.
4.15 YEAR 2000 COMPLIANT. Perform all acts reasonably necessary to
ensure that (a) Borrower and any business in which Borrower holds a substantial
interest, and (b) all customers, suppliers and vendors whose compliance is
likely to be material to Borrower's business, become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all Borrower's systems and adopting a
detailed plan, with itemized budget, for the remediation, monitoring and testing
of such systems. As used in this paragraph, "Year 2000 Compliant" shall mean,
in regard to any entity, that all software, hardware, firmware, equipment, goods
or systems utilized by or material to the business operations or financial
condition of such entity, will properly perform date sensitive functions before,
during and after the year 2000. Borrower shall, immediately upon request,
provide to Agent such certifications or other evidence of Borrower's compliance
with the terms of this paragraph as Bank may from time to time require.
4.16 OPERATING ACCOUNTS. Maintain all significant business deposit
accounts at Bank.
4.17 NOTICES. Promptly notify Bank in writing of (i) the occurrence
of any Event of Default hereunder or any event which upon notice and lapse of
time would be an Event of Default; (ii) all
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litigation affecting Borrower where the amount is $50,000 or more; any
substantial dispute which may exist between Borrower and any governmental
regulatory body or law enforcement authority; any change in Borrower's name or
principal place of business; or any other matter which has resulted or might
result in a material adverse change in Borrower's financial condition or
operations.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so
long as Bank has any obligation to extend credit to Borrower, it will not,
without Bank's written consent (such consent not to be unreasonably withheld):
5.01 TYPE OF BUSINESS; MANAGEMENT; CHANGE IN CONTROL. Make any substantial
change in the character of its business or make any change in its executive
management.
5.02 OUTSIDE INDEBTEDNESS. (a) Create, incur, assume or permit to exist any
indebtedness for borrowed moneys in excess of one million dollars ($1,000,000)
other than (i) Loans from the Bank, (ii) obligations now existing as shown in
the financial statement dated September 30, 1998, excluding those obligations
being refinanced by Bank, (iii) indebtedness incurred in connection with
acquisitions prior to the date of this Agreement for post-acquisition
performance of the business or assets acquired in connection with such
acquisition ("Earn Out Obligations"), (iv) indebtedness secured by liens
permitted pursuant to Section 5.03 below and (v) short term trade indebtedness,
or (b) sell or transfer, either with or without recourse, any accounts or notes
receivable or any moneys due or to become due.
5.03 LIENS AND ENCUMBRANCES. Create, incur, or assume any mortgage, pledge,
encumbrance, lien or charge of any kind upon any asset now owned or hereafter
acquired by it in excess of one million dollars ($ 1,000,000), other than liens
for taxes not delinquent, liens in Bank's favor, liens granted in the ordinary
course of business (including without limitation liens of carriers,
warehousemen, mechanics, materialmen and other liens imposed by law), liens
granted pursuant to capital leases or other equipment purchase contracts, liens
with respect to Earn Out Obligations and liens with respect to that certain
property located at 10740 Thornmint Road, San Diego, California 92127 (the "San
Diego Property") and other than liens agreed to in writing by Bank.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances
to any person or other entity other than in the ordinary and normal course of
its business as now conducted or make any investment in the securities of any
person or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business.
5.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor;
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same in excess of $1,000,000 prior to the Revolving Line of Credit Maturity Date
but excluding the sale and lease back of the San Diego Property.
5.06 LOSSES. Incur losses in the first quarter of fiscal 1999 (ended March
31) of greater than two million five hundred thousand dollars ($2,500,000) or
incur quarterly losses in excess of one dollar ($1) in any two consecutive
calendar quarters.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Events
of Default") shall, at Bank's option, terminate Bank's commitment to lend and
make all sums of principal and interest then remaining unpaid on all Borrower's
indebtedness to Bank immediately due and payable, all without demand,
presentment or notice, all of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or
of interest on any indebtedness of Borrower to Bank within five (5) days of its
due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other
term or condition of this Agreement or any Loan Document binding upon Borrower
and such failure shall continue for more than thirty (30) days after the date
which Borrower should have or shall have first become aware of such failure.
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6.03 BREACH OF WARRANTY. Any of Borrower's representations or
warranties made herein or any statement or certificate at any time given in
writing pursuant hereto or in connection herewith shall be false or misleading
in any material respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become
insolvent; or admit its inability to pay its debts as they mature; or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business.
6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $50,000,
writ or warrant of attachment, or similar process shall be entered or filed
against Borrower or any of its assets and shall remain unvacated, unbonded or
unstayed for a period of thirty (30) days or in any event later than five (5)
days prior to the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against Borrower
and, if instituted against it, shall not be dismissed within sixty (60) days
thereafter.
6.07 REVOCATION OF SUBORDINATION AGREEMENT. Any subordination
agreement required hereunder is breached or becomes ineffective; or any
subordination creditor disavows or attempts to revoke or terminate such
subordination agreement.
6.08 CESSATION OF BUSINESS. Borrower shall voluntarily suspend its
business.
6.09 ADVERSE CHANGE. Any change which, has a materially adverse
effect to the consolidated financial condition of Borrower.
6.10 OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's
obligations to Bank, shall commit or do or fail to commit or do any act or thing
which would constitute an event of default (after expiration of applicable
notice and cure periods) under any of the terms of any other agreement, document
or instrument executed or to be executed by it concerning the obligation to pay
money in excess of one hundred thousand dollars ($ 100,000).
6.11 ADVANCES. Notwithstanding anything to the contrary contained
herein, Bank shall have no duty to make advances while any Event of Default
exists notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of Bank or any holder of notes issued hereunder, in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
All rights and remedies existing under this Agreement or any note(s) issued in
connection with a Loan that Bank may make hereunder, are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be deemed to
be an original and all of which shall constitute together but one and the same
agreement. This Agreement, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without
demand after notice, with interest thereon from the date of expenditure at the
rate applicable to the Loan, reasonable attorneys' fees and all costs and
expenses paid or incurred by Bank in collecting or compromising the Loan after
the occurrence of an Event of Default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
7.04 REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the
successors and assigns of Bank and the permitted successors and assigns of
Borrower.
7
<PAGE>
7.06 APPLICABLE LAW. This Agreement and all other agreements and
instruments required by Bank in connection therewith shall be governed by and
construed according to the laws of the state of California, to the jurisdiction
of whose courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of
offset that Bank or other holder of the Loan may have under applicable law, Bank
or other holder of any note issued hereunder shall, upon the occurrence of any
Event of Default or any event which with the passage of time or notice would
constitute such an Event of Default, have the right to appropriate and apply to
the payment of the Loan any and all balances, credits, deposits, accounts or
monies of Borrower then or thereafter with Bank or other holder, within ten (10)
days after the Event of Default, and notice of the occurrence of any Event of
Default by Bank to Borrower.
7.08 SEVERABILITY. Should any one or more provisions of the Agreement
be determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the
essence of this Agreement and of every part hereof.
7.10 ACCOUNTING. All accounting terms shall have the meanings applied
under generally accepted accounting principles unless otherwise specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Credit Agreement, any security agreement executed by Borrower
in favor of Bank or any note executed by Borrower in favor of Bank or any other
agreement or instrument issued in favor of Bank by Borrower (collectively in
this Section, the "Agreement") which controversy, dispute or claim is not
settled in writing within thirty (30) days after the "CLAIM DATE" (defined as
the date on which a party subject to this Agreement gives written notice to all
other parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of Section
638 ET SEQ. of the California Code of Civil Procedure, or their successor
section ("CCP"), which shall constitute the exclusive remedy for the settlement
of any controversy, dispute or claim concerning this Agreement, including
whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the real property, if any, is
located or San Diego County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP Section 170.6.
The referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the date of selection of the referee and (b) try any and all
issues of law or fact and report a statement of decision upon them, if possible,
within ninety (90) days of the Claim Date. Any decision rendered by the referee
will be final, binding and conclusive and judgment shall be entered pursuant to
CCP Section 644 in any court in the state of California having jurisdiction.
Any party may apply for a reference proceeding at any time after thirty (30)
days following notice to any other party of the nature of the controversy,
dispute or claim, by filing a petition for a hearing and/or trial. All
discovery permitted by this Agreement shall be completed no later than fifteen
(15) days before the first hearing date established by the referee. The referee
may extend such period in the event of a party's refusal to provide requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days written
notice, and request for production or inspection of documents shall be responded
to within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provided herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
(b) Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter except
that when any party so requests, a court reporter will be used at any hearing
conducted before the referee. The party making such a request shall have the
obligation to arrange for and pay for the court reporter. The costs of the
court reporter at the trial shall be borne equally by the parties.
8
<PAGE>
(c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the state of
California. The rules of evidence applicable to proceedings at law in the state
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.
(d) In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted), any
dispute between the parties that would otherwise be determined by the reference
procedure herein described will be resolved and determined by arbitration. The
arbitration will be conducted by a retired judge of the Court, in accordance
with the California Arbitration Act, Section 1280 through Section 1294.2 of the
CCP as amended from time to time. The limitations with respect to discovery as
set forth hereinabove shall apply to any such arbitration proceeding.
7.12 SURETYSHIP WAIVERS AND CONSENTS. Each Borrower agrees that it is
jointly and severally, directly, and primarily liable to Bank for payment in
full of all obligations under the Loan Documents ("Obligations") and that such
liability is independent of the duties, obligations and liabilities of the other
Borrower. The Loan Documents are a primary and original obligation of each
Borrower, are not the creation of a surety relationship, and are an absolute,
unconditional, and continuing promise of payment and performance which shall
remain in full force and effect without respect to future changes in conditions,
including any change of law or any invalidity or irregularity with respect to
the Loan Documents. Each Borrower acknowledges that the obligations of such
Borrower undertaken herein might be construed to consist, at least in part, of
the guaranty of obligations of persons or entities other than such Borrower
(including any other Borrower party hereto) and, in full recognition of that
fact, each Borrower consents and agrees that the Bank may, at any time and from
time to time, without notice or demand, whether before or after any actual or
purported termination, repudiation, or revocation of this Agreement by any one
or more Borrowers, and without affecting the enforceability or continuing
effectiveness hereof as to each Borrower: (a) supplement, restate, modify,
amend, increase, decrease, extend, renew, accelerate, or otherwise change the
time for payment or the terms of the Obligations or any part thereof, including
any increase or decrease of the rate(s) of interest thereon; (b) supplement,
restate, modify, amend, increase, decrease or waive, or enter into or give any
agreement, approval, or consent with respect to, the Obligations or any part
thereof, or any of the Loan Documents or any additional security or guaranties,
or any condition covenant, default, remedy, right, representation or term
thereof or thereunder; (c) accept new or additional instruments, documents or
agreements in exchange for or relative to any of the Loan Documents or the
Obligations or any part thereof-, (d) accept partial payments on the
Obligations; (e) receive and hold additional security or guaranties for the
Obligations or any part thereof; (f) release, reconvey, terminate, waive,
abandon, fail to perfect, subordinate, exchange, substitute, transfer, or
enforce any security or guaranties, and apply any security and direct the order
or manner of sale thereof as the Bank in its sole and absolute discretion may
determine; (g) release any Person from any personal liability with respect to
the Obligations or any part thereof; (h) settle, release on terms satisfactory
to the Bank or by operation of applicable laws, or otherwise liquidate or
enforce any Obligations and any security therefor or guaranty thereof in any
manner, consent to the transfer of any security and bid and purchase at any
sale; or (i) consent to the merger, change, or any other restructuring or
termination of the corporate or partnership existence of any Borrower or any
other Person, and correspondingly restructure the Obligations, and any such
merger, change, restructuring, or termination shall not affect the liability of
any Borrower or the continuing effectiveness hereof, or the enforceability
hereof with respect to all or any part of the Obligations.
Upon the occurrence and during the continuance of any Event of
Default, the Bank may enforce this Agreement independently as to each
Borrower and independently of any other remedy or security the Bank at any
time may have or hold in connection with the Obligations, and it shall not be
necessary for the Bank to marshal assets in favor of any Borrower or any
other Person or to proceed upon or against or exhaust any security or remedy
before proceeding to enforce this Agreement. Each Borrower expressly waives
any right to require the Bank to marshal assets in favor of any Borrower or
any other Person or to proceed against any other Borrower or any Collateral
provided by any Person, and agrees that the Bank may proceed against
Borrowers or any Collateral in such order as it shall determine in its sole
and absolute discretion.
The Bank may file a separate action or actions against any Borrower,
whether action is brought or prosecuted with respect to any security or against
any other person, or whether any other person is joined in any such action or
actions. Each Borrower agrees that the Bank and any Borrower and any affiliate
of any Borrower may deal with each other in connection with the Obligations or
otherwise, or
9
<PAGE>
alter any contracts or agreements now or hereafter existing between any of them,
in any manner whatsoever, all without in any way altering or affecting the
continuing efficacy of this Agreement.
The Banks hereunder shall be reinstated and revived, and the
enforceability of this Agreement shall continue, with respect to any amount at
any time paid on account of the Obligations which thereafter shall be required
to be restored or returned by the Bank, all as though such amount had not been
paid. The rights of the Bank created or granted herein and the enforceability
of this Agreement at all times shall remain effective to cover the full amount
of all the Obligations even though the Obligations, including any part thereof
or any other security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable as against any Borrower and whether or not
any other Borrower shall have any personal liability with respect thereto.
To the maximum extent permitted by applicable law and to the extent that
a Borrower is deemed a guarantor, each Borrower expressly waives any and all
defenses now or hereafter arising or asserted by reason of (a) any disability or
other defense of any other Borrower with respect to the Obligations, (b) the
unenforceability or invalidity of any security or guaranty for the Obligations
or lack of perfection or continuing perfection or failure of priority of any
security for the Obligations, (c) the cessation for any cause whatsoever of the
liability of any other Borrower (other than by reason of the full payment and
performance of all Obligations), (d) any failure of the marshal assets in favor
Bank of any Borrower or any other person, (e) any failure of the Bank to give
notice of sale or other disposition of collateral to any Borrower or any other
Person or any defect in any notice that may be given in connection with any sale
or disposition of collateral, (f) any failure of the Bank to comply with
applicable law in connection with the sale or other disposition of any
collateral or other security for any Obligation, including any failure of the
Bank to conduct a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation, (g) any act or omission of the
Bank or others that directly or indirectly results in or aids the discharge or
release of any Borrower or the Obligations or any security or guaranty therefor
by operation of law or otherwise, (h) any law which provides that the obligation
of a surety or guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a surety's or
guarantor's obligation in proportion to the principal obligation, (i) any
failure of the Bank to file or enforce a claim in any bankruptcy or other
proceeding with respect to any Person, (j) the election by the Bank of the
application or non-application of Section 111l(b)(2) of the United States
Bankruptcy code, (k) any extension of credit or the grant of any lien under
Section 364 of the United States Bankruptcy code, (1) any use of cash collateral
under Section 363 of the United States Bankruptcy Code, (m) any agreement or
stipulation with respect to the provision of adequate protection in any
bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of
the Bank for any reason, or (o) any action taken by the Bank that is authorized
by this section or any other provision of any Loan Document. Until such time as
all of the Obligations have been fully, finally, and indefeasibly paid in full
in cash: (i) each Borrower hereby waives and postpones any right of subrogation
it has or may have as against any other Borrower with respect to the
Obligations; and (ii) in addition, each borrower also hereby waives and
postpones any right to proceed or to seek recourse against or with respect to
any property or asset of any other Borrower. Each borrower expressly waives all
setoffs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Obligations, and all notices of acceptance
of this Agreement or of the existence, creation or incurring of new or
additional Obligations.
In the event that all or any part of the Obligations at any time
are secured by any one or more deeds of trust or mortgages or other instruments
creating or granting liens on any interests in real property, each Borrower
authorizes the Bank, upon the occurrence of and during the continuance of any
Event of Default, at its sole option, without notice or demand and without
affecting the obligations of any Borrower, the enforceability of this Agreement,
or the validity or enforceability of any Liens of the Bank, to foreclose any or
all of such deeds of trust or mortgages or other instruments by judicial or
nonjudicial sale.
To the fullest extent permitted by applicable law, to the extent that
a Borrower is deemed a guarantor, each Borrower expressly waives any defenses
to the enforcement of this Agreement or any rights of the Bank created or
granted hereby or to the recovery by the Bank against any Borrower or any
other Person liable therefor of any deficiency after a judicial or
nonjudicial foreclosure or sale, even though such a foreclosure or sale may
impair the subrogation rights of Borrowers and may preclude Borrowers from
obtaining reimbursement or contribution from other Borrowers. To the fullest
extent permitted by applicable law, each Borrower expressly waives any
suretyship defenses or benefits that it otherwise might or would have under
applicable law. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS SECTION, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER WAIVES ALL RIGHTS AND DEFENSES ARISING OUT OF
AN ELECTION OF REMEDIES BY THE BANK, EVEN THOUGH THAT ELECTION OF REMEDIES,
SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT TO SECURITY FOR THE
OBLIGATIONS, HAS DESTROYED SUCH BORROWER'S RIGHTS OF SUBROGATION AND
10
<PAGE>
REIMBURSEMENT AGAINST THE OTHER BORROWERS BY THE OPERATION OF LAW, INCLUDING
BUT NOT LIMITED TO SECTION 580d OF THE CODE OF CIVIL PROCEDURE, OR OTHERWISE.
Borrower and each of them warrant and agree that each of the waivers and
consents set forth herein are made after consultation with legal counsel and
with full knowledge of their significance and consequences, with the
understanding that events giving rise to any defense or right waived may
diminish, destroy or otherwise adversely affect rights which Borrower otherwise
may have against any other Borrower, the Bank or others, or against Collateral.
If any of the waivers or consents herein are determined to be contrary to any
applicable law or public policy, such waivers and consents shall be effective to
the maximum extent permitted by law.
7.13 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
ECO SOIL SYSTEMS, INC. IMPERIAL BANK
("BORROWER") ("BANK")
By: /s/ WILLIAM B. ADAMS By: /s/
---------------------------- ----------------------------
William B. Adams
Its: CEO Its:
---------------------------- ----------------------------
Date: 12/8/98 Date:
--------------------------- ---------------------------
ASPEN CONSULTING COMPANIES, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its:
----------------------------
Date: 12/8/98
---------------------------
TURF SPECIALTY, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
ECO TURF PRODUCTS, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
11
<PAGE>
MITIGATION SERVICES, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
AGRICULTURAL SUPPLY, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
BENHAM CHEMICAL CORPORATION
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
---------------------------
Date: 12/8/98
---------------------------
TURF ACQUISITION SUB, INC.
("BORROWER")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
YUMA ACQUISITION SUB, INC.
("Borrower")
By: /s/ WILLIAM B. ADAMS
----------------------------
William B. Adams
Its: Chairman
----------------------------
Date: 12/8/98
---------------------------
12
<PAGE>
[IMPERIAL BANK LETTERHEAD]
INNOVATIVE BUSINESS BANKING
Member FDIC
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$10,000,000.00 12-02-1998 04-28-2000 711062437/7 617133 PD
- ----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ----------------------------------------------------------------------------------------------------------------------------------
BORROWER: ECO SOIL SYSTEMS, INC., A NEBRASKA LENDER: Imperial Bank
CORPORATION; et al. San Diego Regional Office
10890 THORNMINT ROAD, #280 701 B Street, Suite 600
SAN DIEGO, CA 92127-2402 San Diego, CA 92112-4168
- ----------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT: $10,000,000.00 INITIAL RATE: 8.250% DATE OF NOTE: DECEMBER 2, 1998
</TABLE>
PROMISE TO PAY. ECO SOIL SYSTEMS, INC., A NEBRASKA CORPORATION, ASPEN
CONSULTING COMPANIES, INC., A COLORADO CORPORATION, TURF SPECIALTY, INC., A
DELAWARE CORPORATION, ECO TURF PRODUCTS, INC., A DELAWARE CORPORATION,
AGRICULTURAL SUPPLY, INC., A DELAWARE CORPORATION, YUMA ACQUISITION SUB,
INC., A DELAWARE CORPORATION, TURF ACQUISITION SUB, INC., A DELAWARE
CORPORATION, BENHAM CHEMICAL CORPORATION, A MICHIGAN CORPORATION and
MITIGATION SERVICES, INC., A DELAWARE CORPORATION (referred to in this Note
individually and collectively as "Borrower") jointly and severally promise to
pay to Imperial Bank ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Ten Million & 00/100 Dollars
($10,000,000.00) or so much as may be outstanding, together with interest on
the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON APRIL 28, 2000. (1) The
annual interest rate for this Note is computed on a 365/360 basis; that is by
applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to any unpaid collection costs and any late
charges, then to any unpaid interest, and any remaining amount to principal.
VARIABLE INTEREST RATE. Subject to designation of a different interest rate
index by Borrower as provided below, the interest rate on this Note is
subject to change from time to time based on changes in an index which is the
Imperial Bank Prime Rate (the "Index"). The Prime Rate is the rate announced
by Lender as its Prime Rate of interest from time to time. Lender will tell
Borrower the current index rate upon Borrower's request. Borrower
understands that Lender may make loans based on other rates as well. The
interest rate change will not occur more often than each day. THE INDEX
CURRENTLY IS 7.750%. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL
BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS OVER THE
INDEX, RESULTING IN AN INITIAL RATE OF 8.250%. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by
applicable law.
INTEREST RATE OPTIONS. The following interest rate options are available
under this Note:
(a) DEFAULT OPTION. The interest rate margin and index described in
the "VARIABLE INTEREST RATE" paragraph above (the "Default Option").
(b) LIBOR. A margin of 3.000 percentage points over LIBOR. For
purposes of this Note, LIBOR shall mean London Inter-Bank Offered Rate
as provided in the LIBOR ADDENDUM TO NOTE attached hereto and made a
part hereof.
When the interest rate is based on a fixed rate, the rate shall be in effect for
a period of the number of days or months as indicated in the rate option
description (the "Interest Period"), in any case extended to the next succeeding
business day when necessary, beginning on a borrowing date, conversion date or
expiration date of the then current Interest Period. Adjustments in the
interest rate due to changes in the maximum nonusurious interest rate allowed
(the "Highest Lawful Rate") shall be made on the effective day of any change in
the Highest Lawful Rate.
Provided (2), Borrower may designate in advance which of the above interest rate
indexes shall be applicable to any loan advance under this Note and shall
designate any optional Interest Period applicable to any fixed rate loan or
advance. In the absence of any such designation the interest rate option shall
be the Default Option. Thereafter unpaid principal balances under this Note may
be converted (at the end of an Interest Period if the index used to determine
the interest rate therefore is a fixed rate) to another of the above interest
rate options, or continued for an additional (3), when applicable, as designated
by Borrower in advance; and in the absence of sufficient advance designation as
to conversion to or continuation of a fixed rate index, the index shall be
converted to the Default Option. Notwithstanding the foregoing, a fixed rate
index may not be elected for a loan or advance under this Note, nor any
conversion to or continuation of a fixed rate index be elected, if the Interest
Period thereof would extend beyond the maturity of this Note.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a MINIMUM INTEREST
CHARGE OF $250.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OR MORE LATE, Borrower will be charged
5.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED PAYMENT.
DEFAULT. (4)
LENDER'S RIGHTS. Upon (5), Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. (6) (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at
the rate provided in this Note (including any increased rate). Lender may hire
or pay someone else to help collect this Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all other sums
provided by law. THIS NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER
IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGLES
COUNTY, STATE OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY
JURY TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER LENDER
OR BORROWER AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
RIGHT 0F SETOFF. (7)
<PAGE>
Page 2
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LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note may be requested orally by Borrower or by an authorized
person. All oral requests shall be confirmed in writing on the day of the
request. All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown above. The
following party or parties are authorized to request advances under the line
of credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: WILLIAM B. ADAMS, CEO;
DOUGLAS M. GLOFF, PRESIDENT, AND L. JEAN DUNN, SECRETARY. Borrower agrees to
be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. (8)
REFERENCE PROVISION. 1. Other than (i) non-judicial foreclosure and all
matters in connection therewith regarding security interests in real or
personal property; or (ii) the appointment of a receiver, or the exercise of
other provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this document ("Agreement"), which controversy,
dispute or claim is not settled in writing within thirty (30) days after the
"Claim Date" (defined as the date on which a party subject to the Agreement
gives written notice to all other parties that a controversy, dispute or
claim exists), will be settled by a reference proceeding in California in
accordance with the provisions of Section 638 et seq. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall
constitute the exclusive remedy for the settlement of any controversy,
dispute or claim concerning this Agreement, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other than
the Superior Court in the County where the Real Property, if any, is located
or Los Angeles County if none (the "Court"). The referee shall be a retired
Judge of the Court selected by mutual agreement of the parties, and if they
cannot so agree within forty-five (45) days after the Claim Date, the referee
shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP 170.6. The
referee shall (a) be requested to set the matter for hearing within sixty
(60) days after the Claim Date and (b) try any and all issues of law or fact
and report a statement of decision upon them, if possible, within ninety (90)
days of the Claim Date. Any decision rendered by the referee will be final,
binding and conclusive and judgment shall be entered pursuant to CCP 644 in
any court in the State of California having jurisdiction. Any party may
apply for a reference proceeding at any time after thirty (30) days following
notice to any other party of the nature of the controversy, dispute or claim,
by filing a petition for a hearing and/or trial. All discovery permitted by
this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for
any reason whatsoever, including, without limitation, legal objections raised
to such discovery or unavailability of a witness due to absence or illness.
No party shall be entitled to "priority" in conducting discovery.
Depositions may be taken by either party upon seven (7) days written notice,
and request for production or inspection of documents shall be responded to
within ten (10) days after service. All disputes relating to discovery which
cannot be resolved by the parties shall be submitted to the referee whose
decision shall be final and binding upon the parties. Pending appointment of
the referee as provide herein, the Superior Court is empowered to issue
temporary and/or provisional remedies, as appropriate.
2. Except as expressly set forth in this Agreement, the referee shall
determine the manner in which the reference proceeding is conducted including
the time and place of all hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the
reference proceeding. All proceedings and hearings conducted before the
referee, except for trial, shall be conducted without a court reporter,
except that when any party so requests, a court reporter will be used at any
hearing conducted before the referee. The party making such a request shall
have the obligation to arrange for and pay for the court reporter. The costs
of the court reporter at the trial shall be borne equally by the parties.
3. The referee shall be required to determine all issues in accordance
with existing case law and the statutory laws of the State of California.
The rules of evidence applicable to proceedings at law in the State of
California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will
be binding upon the parties. The referee shall issue a single judgment at the
close of the reference proceeding which shall dispose of all of the claims of
the parties that are the subject of the reference. The parties hereto
expressly reserve the right to contest or appeal from the final judgment or
any appealable order or appealable judgment entered by the referee. The
parties hereto expressly reserve the right to findings of fact, conclusions
of law, a written statement of decision, and the right to move for a new
trial or a different judgment, which new trial, if granted, is also to be a
reference proceeding under this provision.
4. In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is enacted,
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the
Court, in accordance with the California Arbitration Act, 1280 through 1294.2
of the CCP as amended from time to time. The limitations with respect to
discovery as set forth hereinabove shall apply to any such arbitration
proceeding.
CREDIT AGREEMENT. This Note is subject to the provisions of the Credit
Agreement dated December 2, 1998 and all amendments thereto and replacements
therefore (9). (10).
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Each Borrower understands and
agrees that, with or without notice to Borrower, Lender may with respect to
any other Borrower (a) make one or more additional secured or unsecured loans
or otherwise extend additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or
other terms any indebtedness, including increases and decreases of the rate
of interest on the indebtedness; (c) exchange, enforce, waive, subordinate,
fail or decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) apply such security and direct the order
or manner of sale thereof, including without limitation, any nonjudicial sale
permitted by the terms of the controlling security agreements, as Lender in
its discretion may determine; (a) release, substitute, agree not to sue, or
deal with any one or more of Borrower's sureties, endorsers, or other
guarantors on any terms or in any manner Lender may choose; and (f) determine
how, when and what application of payments and credits shall be made on any
other indebtedness owing by such other borrower. Borrower and any other
person who signs, guarantees or endorses this Note, to the extent allowed by
law, waive any applicable statute of limitations, presentment, demand for
payment, protest and notice of dishonor. Upon any change in the terms of
this Note, and unless otherwise expressly stated in writing, no party who
signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this loan,
or release any party or guarantor or collateral; or impair, fail to realize
upon or perfect Lender's security interest in the collateral; and take any
other action deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this loan without
the consent of or notice to anyone other than the party with whom the
modification is made. The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
EACH BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A
COMPLETED COPY OF THE NOTE.
BORROWER:
ECO SOIL SYSTEMS, INC., A NEBRASKA CORPORATION
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
AUTHORIZED OFFICER
ASPEN CONSULTING COMPANIES, INC., A COLORADO CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
<PAGE>
Page 3
- -------------------------------------------------------------------------------
TURF SPECIALTY, INC., A DELAWARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
ECO TURF PRODUCTS, INC., A DELAWARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
AGRICULTURAL SUPPLY, INC., A DELAWARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
YUMA ACQUISITION SUB, INC., A DELAWARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
TURF ACQUISITION SUB, INC., A DELAWARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
BENHAM CHEMICAL CORPORATION, A MICHIGAN CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
MITIGATION SERVICES, INC., A DELA ARE CORPORATION, Co-Borrower
By: /s/ WILLIAM B. ADAMS
-------------------------------------------
WILLIAM B. ADAMS, CEO
By: /s/ DOUGLAS M. GLOFF
-------------------------------------------
DOUGLAS M. GLOFF, PRESIDENT/COO
By: /s/ L. JEAN DUNN
-------------------------------------------
L JEAN DUNN, CFO/SECRETARY
<PAGE>
Page 4
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PROMISSORY NOTE INSERTS
(1) "In addition, Borrower will pay regular monthly payments of accrued
unpaid interest in accordance with Section 1.0 I (b) of the Credit Agreement,
and such Section is expressly incorporated herein."
(2) "there is no Event of Default under the Credit Agreement"
(3) "Interest Period"
(4) "An Event of Default under the Credit Agreement shall be an Event of
Default hereunder, and such applicable provisions of the Credit Agreement,
including without limitation Article 6 of the Credit Agreement, are expressly
incorporated herein."
(5) "an Event of Default"
(6) "Additionally, Bank shall have the right after the occurrence, and
during the continuance, of an Event of Default, to (a) increase the interest
rate on this Note in accordance with Section 1.06 of the Credit Agreement and"
(7) "Bank's right to setoff pursuant to Section 7.07 of the Credit Agreement
is expressly incorporated herein."
(8) "Lender will have no obligation to advance funds under this Note in
accordance with Section 6.11 of the Credit Agreement, and such Section is hereby
expressly incorporated herein."
(9) "(the "Credit Agreement")"
(10) "In the event of any conflict or inconsistency between the provisions
of this Note and the Credit Agreement, the terms of the Credit Agreement
shall control. All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit
Agreement."
<PAGE>
[IMPERIAL BANK LETTERHEAD]
Member FDIC
LIBOR ADDENDUM
TO NOTE
This Libor Addendum ("Addendum") is dated as of DECEMBER 2, 1998, and
is by and between ECO SOIL SYSTEMS, INC., A NEBRASKA CORPORATION, ET. AL. (
(1) "Borrower") and Imperial Bank ("Bank"). This Addendum amends and
supplements the Note to which it is attached (the "Note") and forms a part of
and is incorporated into the Note.
In the event of any inconsistency between the terms herein and the
terms of the Note, the terms herein shall in all cases govern and control.
AR capitalized terms herein, unless otherwise defined herein, shall have the
meanings set forth in the Note.
1. ADVANCES.
1.1 PRIME LOANS. Advances permitted pursuant to the terms of the
Note or this Addendum which bear interest in relation to Bank's Prime Rate shall
be referred to herein as "Prime Loans" and each such advance shall be a "Prime
Loan." Each Prime Loan shall bear interest at an annual rate equal to the sum of
0.500% plus the Bank's Prime Rate. "PrimeRate" shall mean the rate of interest
xxxxxxxxxxxxx publicly announced by Bank from time to time in Inglewood,
California, as its prime rate for lending. The Prime Rate is not intended to be
the lowest rate of interest charged by Bank in connection with extensions of
credit to borrowers.
1.2 LIBOR LOANS. Advances permitted pursuant to the terms of the
Note or this Addendum which bear interest in relation to the Libor Rate shall be
referred to herein as "Libor Loans" and each such advance shall be a "Libor
Loan." Each Libor Loan shall bear interest xxxxxxxxxxxxxxxx at the Libor Rate,
as defined below. A Libor Loan shall be in the minimum amount of ONE MILLION
DOLLARS ($1,000,000) or such greater amount which is an integral multiple of
Fifty Thousand Dollars ($50,000). No Libor Loan shall be made after the last
Business Day that is at least THREE (3) MONTHS prior to the Maturity Date
described in the Note.
2. INTEREST ON LIBOR LOANS.
2.1 RATE OF INTEREST. Each Libor Loan shall bear interest on the
unpaid principal amount thereof from the Loan Date through the date paid
(whether by acceleration or otherwise) at a rate equal to the sum of 3.000% per
annum plus the Libor Rate for the Interest Period.
(a) "Loan Date" shall mean the date on which (i) a Libor
Loan is made, a Libor Loan is continued, or a Prime Loan is converted to a
Libor Loan.
(b) "Interest Period" shall mean a period of THREE (3), SIX
(6) OR NINE (9) MONTHS, commencing on the applicable Loan Date, as selected
by Borrower pursuant to Section 2.2; PROVIDED, HOWEVER, that Borrower may not
select an Interest Period that would otherwise extend beyond the Maturity
Date of the Loan. Borrower may also select a twelve (12) month Interest
Period if and when Bank notifies Borrower that such Interest Period is
available, as determined by Bank in its sole discretion.
(c) "Libor Rate" shall mean, for the applicable Interest
Period for a Libor Loan, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) equal to (i) the Libor Base Rate for such Interest Period
divided by (ii) 1.00 minus the Reserve Requirement Rate (expressed as a decimal
fraction) for such Interest Period.
(d) "Libor Base Rate" shall mean with respect to any Interest
Period, the rate equal to the arithmetic mean (rounded upwards, if necessary, to
the nearest 1/16 of 1%) of:
(i) the offered rates per annum for deposits in U.S.
Dollars for a period equal to such Interest Period which appears at 11:00 a.m.,
London time, on the Reuters Screen LIBOR Page on the Business Day that is two
(2) Business Days before the first day of such Interest Period, in each case if
at least four (4) such offered rates appear on such page, or
(ii) if clause (i) is inapplicable, (x) the offered
rate per annum for deposits in U.S. Dollars for a period equal to such
Interest Period which appears as of 11:00 a.m., London time on the Telerate
Monitor on Telerate Screen 3750 on the Business Day which is two (2) Business
Days before the first day of such Interest Period; or (y) if clause (x) above
is inapplicable, the arithmetic mean (rounded upwards, if necessary, to the
nearest 1/16 of 1%) of the interest rates per annum offered by at least three
(3) prime banks selected by Bank at approximately 11:00 a.m. London time, on
the Business Day which is two (2) Business Days before such date for deposits
in U.S. Dollars to prime banks in the London interbank market, in each case
for a period equal to such Interest Period in an amount equal to the amount
to which the Libor Rate applies.
Page 1 of 4
<PAGE>
(e) "Business Day" means any day on which Bank is open for
business in the State of California.
(f) "Reuters Screen LIBOR Page" means the display designated
as page LIBOR on the Reuters Monitor Money Rates Service or such other page as
may replace the LIBOR page on that service for the purpose of displaying London
interbank offered rates of major banks.
(g) "Reserve Requirement Rate" means, for any Interest
Period, the aggregate of the rates, effective as of the Business Day which is
two (2) Business Days before the first day of the Interest Period, at which:
(i) reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System; and
(ii) any additional reserves are required to be
maintained by Bank by reason of any Regulatory Change against (x) any category
of liabilities which includes deposits by reference to which the Libor Rate is
to be determined as provided in the definition of "Libor Base Rate;" or (y) any
category of extensions of credit or other assets which include Libor Loans.
(h) "Regulatory Change" means, with respect to Bank, any
change on or after the date of the Note and this Addendum in any Governmental
Regulation, including the introduction of any new Governmental Regulation or the
rescission of any existing Governmental Regulation.
(i) "Governmental Regulation" means any (i) United States
Federal, state or foreign law or regulation (including without limitation
Regulation D); and (ii) the adoption or making of any interpretation,
application, directive or request applying to a class of lenders, including
Bank, of or under any United States Federal, state, or any foreign law or
regulation (whether or not having the force of law) by any court or by any
governmental, central banking, monetary or taxing authority charged with the
interpretation or administration of such law or regulation.
2.2 DETERMINATION OF INTEREST RATES. Subject to the terms and
conditions of the Note and this Addendum, Borrower, at its option, may request
an advance in the form of a Libor Loan, a continuation of a Libor Loan, or a
conversion of a Prime Loan into a Libor Loan, only upon delivery to Bank of an
irrevocable written notice received by Bank at least three (3) Business Days
prior to the requested Loan Date, specifying (i) the principal amount of such
Libor Loan, (ii) the requested Loan Date, and (iii) the selected Interest
Period. Upon receiving such notice, Bank shall determine (which determination
shall be in accordance with Section 2.1 and shall, absent manifest error, be
final, conclusive and binding upon all parties hereto) the Libor Rate applicable
to such Libor Loan two (2) Business Days prior to the Loan Date, and shall
promptly give notice thereof (in writing or by telephone confirmed in writing)
to Borrower. If Borrower shall fail to notify Bank of its selected Interest
Period for a Libor Loan (including the continuation of an existing Libor Loan or
the conversion of a Prime Loan into a Libor Loan), the Borrower shall be deemed
to have selected an Interest Period of three (3) months.
2.3 COMPUTATION OF INTEREST AND FEES. AR computations of interest
and fees payable pursuant to the Note shall be calculated on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed
(less the date of repayment).
2.4 RECORDATION BY BANK. Bank is hereby authorized to record the
Loan Date, the applicable Interest Period, the principal amount, and the
interest rate of each Libor Loan made (or continued or converted) by Bank, and
the date and amount of each payment or prepayment of principal thereof, in
Bank's records. Any such recordation shall constitute PRIMA FACIE evidence of
the accuracy of the information recorded; PROVIDED that the failure to make any
such recordation shall not in anyway affect the Borrower's obligations
hereunder.
3. CONVERSION TO PRIME LOANS.
3.1 ELECTION BY BORROWER. Subject to all the terms and conditions of
this Addendum, Borrower may elect from time to time to convert a Libor Loan to a
Prime Loan by giving Bank at least three (3) Business Days' prior irrevocable
notice of such election, and any such conversion of a Libor Loan shall be made
on the last day of the Interest Period with respect thereto.
3.2 FAILURE OF NOTICE BY BORROWER. If Borrower otherwise fails to
give notice specifying its requests with respect to any Libor Loans that are
scheduled to become due, such failure shall be deemed, in the absence of any
notice from Borrower to the contrary, to be notice of a requested advance in the
form of a Prime Loan in a principal amount equal to the amount of said Libor
Loan.
4. PREPAYMENTS.
4.1 VOLUNTARY PREPAYMENT BY BORROWER. Subject to the terms and
conditions of the Note and this Addendum, Borrower may, upon at least three (3)
Business Days' irrevocable notice to Bank as provided herein, at any time and
from time to time on any Business Day prepay any Prime Loan or Libor Loan in
whole or in part, without penalty or premium, other than customary actual
"Breakage Fees" and "Prepayment Costs" as defined below, resulting from
prepayment of any Libor Loan prior to the expiration of the Interest Period
relating thereto. The notice of prepayment shall specify the date and amount of
the prepayment, and the Loan to which the prepayment xxxxxxxxxxxxxx
xxxxxxxxxxxxxxx
Page 2 of 4
<PAGE>
prepayment applies. Each partial prepayment of a Libor Loan shall be in an
amount not less than Fifty Thousand Dollars ($50,000) or such greater amount
which is an integral multiple of Fifty Thousand Dollars ($50,000); PROVIDED,
that unless a Libor Loan is prepaid in full, no prepayment shall be made if,
after giving effect to such prepayment, the aggregate principal amount of
Libor Loans having the xxxxxxxxxxxxxxxxxxxxxxxxx same Interest Period shall
be less than ONE MILLION DOLLARS ($1,000,000.00). Notice of prepayment
having been delivered as aforesaid, the principal amount of the prepayment
specified in such notice shall become due and payable on the prepayment date
set forth in such notice. All payments of principal under this Section 4
shall be accompanied by accrued but unpaid interest on the amount being
prepaid through the date of such prepayment.
4.2 BREAKAGE FEES. If for any reason (including voluntary or
mandatory prepayment, voluntary or mandatory conversion of a Libor Loan into a
Prime Loan, or acceleration), Bank receives all or part of the principal amount
of a Libor Loan prior to the last day of the Interest Period for such Loan,
Borrower shall immediately notify Borrower's account officer at Bank and, on
demand by Bank, pay Bank the Breakage Fees, defined as the amount (if any) by
which (i) the additional interest which would have been payable on the amount so
received had it not been received until the last day of such Interest Period
exceeds (ii) the interest which would have been recoverable by Bank (without
regard to whether Bank actually so invests said funds) by placing the amount so
received on deposit in the certificate of deposit markets or the offshore
currency interbank markets or United States Treasury investment products, as the
case may be, for a period starting on the date on which it was so received and
ending on the last day of such Interest Period at the interest rate determined
by Bank in its reasonable discretion. Bank's determination as to such amount
shall be conclusive and final, absent manifest error.
4.3 PREPAYMENT COSTS. Borrower shall pay to Bank, upon the demand of
Bank, such other amount or amounts as shall be sufficient (in the sole good
faith opinion of Bank) to compensate it for any loss, costs or expense incurred
by it as a result of any prepayment by Borrower (including voluntary or
mandatory prepayment, voluntary or mandatory conversion of a Libor Loan into a
Prime Loan, or prepayment due to acceleration) of all or part of the principal
amount of a Libor Loan prior to the last day of the Interest Period for such
Loan (including without limitation any failure by Borrower to borrow a Libor
Loan on the Loan Date for such borrowing specified in the relevant notice of
borrowing hereunder). Such costs shall include, without limitation, any
interest or fees payable by Bank to lenders of funds obtained by it in order to
make or maintain its loans based on the London interbank eurodollar market.
Bank's determination as to such costs shall be conclusive and final, absent
manifest error.
5. REMEDIES UPON EVENTS OF DEFAULT.
5.1 CONVERSION TO PRIME LOANS. If any Event of Default has occurred
and is continuing under the Note or this Addendum, then in addition to all other
remedies available to Bank under the Note, at the option of Bank and without
demand or notice, all Libor Loans then outstanding shall be automatically
converted to Prime Loans on the last day of each respective Interest Period for
each Libor Loan.
5.2 INDEMNITY. Borrower agrees to pay and indemnify Bank for, and to
hold Bank harmless from, any and all cost, loss or expense (including without
limitation any such cost, loss or expense arising from interest or fees payable
by Bank to lenders of funds obtained by it in order to maintain its Libor Loans
hereunder, or in its reemployment of funds obtained in connection with the
making or maintaining of Libor Loans) which Bank may sustain or incur as a
consequence of any default by Borrower in connection with or related to: (a)
payment of the principal amount of or interest on Libor Loans, (b) making a
borrowing or conversion of a Libor Loan after Borrower has given a notice
thereof in accordance with this Addendum, or (c) making a prepayment of a Libor
Loan after Borrower has given a notice thereof in accordance with this Addendum,
or any prepayment (whether optional or mandatory) of any Libor Loan prior to the
end of the applicable Interest Period for such Loan.
6. ADDITIONAL PROVISIONS REGARDING LIBOR LOANS.
6.1 LIBOR RATE TAXES. All payments of principal, interest, fees,
costs, expenses and all other amounts payable to Borrower pursuant to the Note
and this Addendum shall be made free and clear of and without reduction by
reason of all present and future income, stamp and other taxes or other charges
whatsoever imposed, assessed, levied or collected by any national government or
any political subdivision or taxing authority thereof or any organization of
which it is a member (excluding (i) any taxes imposed on or measured by the
overall net income or gross receipts of Bank by any such entity, and (ii) any
taxes which would have been imposed even if no provisions for Libor Loans had
appeared in this Addendum) (collectively, "Libor Taxes").
If any Libor Taxes are required to be withheld from any
amounts payable to Bank, Borrower shall pay such additional amounts as may be
necessary so as to yield to Bank a net amount equal to the total amount of
the payments provided for in this Addendum or under the Note which Bank would
have received if such amounts had not been subject to Libor Taxes.
If any Libor Taxes are payable directly by Borrower, they
shall be paid by Borrower prior to the date on which penalties attach for
failure to timely pay such Libor Taxes. Within forty five (45) days after
the date on which payment of any such Libor Taxes is due pursuant to
applicable law, Borrower will furnish Bank the original receipt for the full
payment of such Libor Taxes or, if such is not available, evidence of such
payment satisfactory in form and substance to Bank. Borrower shall indemnify
and hold Bank harmless against, and will reimburse to Bank, upon demand, any
incremental taxes, interest or penalties that may become payable by Bank as a
result of any failure by Borrower to pay any Libor Taxes when due.
Page 3 of 4
<PAGE>
6.2 INABILITY TO DETERMINE FAIR INTEREST RATE. If at any time
Bank, in its sole and absolute discretion, determines that: (i) the amount of
the Libor Loans for periods equal to the corresponding Interest Periods are
not available to Bank in the offshore currency interbank markets, (ii) the
Libor Rate does not accurately reflect the cost to Bank of lending the Libor
Loan, or (iii) by reason of any changes arising after the date of the Note
affecting the London interbank eurodollar market, adequate and fair means do
not exist for ascertaining the applicable interest rate on the basis provided
for in Sections 2.1 and 2.2 above, then Bank shall promptly give notice
thereof to Borrower. Upon the giving of such notice, Bank's obligation to
make Libor Loans shall (2), unless Bank and the Borrower agree in writing to
a different interest rate applicable to Libor Loans, or until such time as
Bank notifies Borrower that the circumstances giving rise to Bank's notice no
longer exist. While such circumstances continue to exist, (x) any requested
Libor Loan shall be treated as a request for a Prime Loan, (y) any Prime Loan
that was to have been converted to a Libor Loan shall be continued as a Prime
Loan, and (z) any outstanding Libor Loan shall be converted retroactively, on
the first day of the then current Interest Period with respect thereto, to a
Prime Loan.
6.3 ILLEGALITY OR IMPRACTICABILITY. If (i) due to any Governmental
Regulation it shall become unlawful for Bank to continue to fund or maintain
any Libor Loans, or to perform its obligations hereunder, or (ii) due to any
contingency occurring after the date of the Note which has a material adverse
effect on the London interbank eurodollar market, it has become impracticable
for Bank to continue to fund or maintain any Libor Loans, or to perform its
obligations hereunder, then Bank shall promptly give notice thereof to
Borrower. Upon the giving of such notice, Bank's obligation to make Libor
Loans shall (2) (3), and in such event, (x) any requested Libor Loan shall be
treated as a request for a Prime Loan, (y) any Prime Loan that was to have
been converted to a Libor Loan shall be continued as a Prime Loan, and (z)
any outstanding Libor Loan shall be converted retroactively, on the first day
of the then current Interest Period with respect thereto, to a Prime Loan.
6.4 GOVERNMENTAL REGULATIONS; INCREASED COSTS. Borrower shall pay
to Bank, within 15 days after demand by Bank, from time to time such amounts
as Bank may determine to be necessary to compensate it for any increased
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any Libor Loans to Borrower (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"), in
each case resulting from any Regulatory Change which:
(a) imposes a new tax or changes the basis of taxation of any
amounts payable to Bank under the Note or this Addendum in respect of any Libor
Loans (other than changes which affect taxes measured by or imposed on the
overall net income of Bank by the jurisdiction in which such Bank has its
principal office); or
(b) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other assets of,
or any deposits or other liabilities with or for the account of Bank
(including any Libor Loans or any deposits referred to in the definition of
Libor Base Rate); or
(c) imposes any other condition affecting the Note (or any
of such extensions of credit or liabilities); or
(d) imposes or modifies a Governmental Regulation regarding
capital adequacy which has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank ("Parent")
as a consequence of its obligations hereunder to a level below that which
Bank (or its Parent) could have achieved but for such adoption, change or
compliance (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by Bank to be material.
Bank will notify Borrower of any event occurring after the date of the
Note which will entitle Bank to Additional Costs pursuant to this Section 6.4 as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. Bank will furnish Borrower with a statement setting
forth the basis and amount of each request by Bank for Additional Costs under
this Section 6.4. Determinations and allocations by Bank for purposes of this
Section 6.4 of the effect of any Regulatory Change on its costs of maintaining
its obligations to make Libor Loans or of making or maintaining Libor Loans or
on amounts receivable by it in respect of Libor Loans, and of the additional
amounts required to compensate Bank in respect of any Additional Costs, shall be
conclusive and final, absent manifest error.
This Addendum is executed as of the date first written above.
<TABLE>
<CAPTION>
BORROWER BANK
<S> <C>
SEE ATTACHED SIGNATURE PAGE FOR BORROWERS SIGNATURES, IMPERIAL BANK,
a California banking corporation
a
---------------------------------------------
By By:
--------------------------------------------- ---------------------------------------------
PETER M. DREES
Its Its AVP
--------------------------------------------- ---------------------------------------------
By
---------------------------------------------
Its
---------------------------------------------
</TABLE>
Page 4 of 4
<PAGE>
SIGNATURE PAGE FOR LIBOR ADDENDUM TO NOTE DATED DECEMBER 2,1998
ECO SOIL SYSTEMS, INC., A NEBRASKA CORPORATION
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Aspen Consulting Companies, Inc., A Colorado Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Turf Specialty, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Eco Turf Products, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Agricultural Supply, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Yuma Acquisition Sub, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Page 5 of 4
<PAGE>
Turf Acquisition Sub, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Benham Chemical Corporation, A Michigan Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Mitigation Services, Inc., A Delaware Corporation
By: /s/ WILLIAM B. ADAMS
------------------------------------
Authorized Officer
Page 6 of 4
<PAGE>
LIBOR ADDENDUM TO NOTE INSERTS
(1) "collectively,"
(2) "be suspended"
(3) "(until such time as Bank notifies Borrower that the circumstances
giving rise to Bank's notice no longer exist,)"
Page 7 of 4
<PAGE>
[IMPERIAL BANK LETTERHEAD]
INNOVATIVE BUSINESS BANKING
Member FDIC
COMMERCIAL SECURITY AGREEMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$10,000,000.00 12-02-1998 04-28-2000 711062437/7 617133 PD
- ----------------------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
or item.
- ----------------------------------------------------------------------------------------------------------------------------------
BORROWER: ECO SOIL SYSTEMS, INC., A NEBRASKA LENDER: IMPERIAL BANK
CORPORATION SAN DIEGO REGIONAL OFFICE
10890 THORNMINT ROAD, #200 701 B STREET, SUITE 600
SAN DIEGO, CA 92127-2402 SAN DIEGO, CA 92101-4168
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THIS COMMERCIAL SECURITY AGREEMENT IS ENTERED INTO BETWEEN ECO SOIL SYSTEMS,
INC., A NEBRASKA CORPORATION (REFERRED TO BELOW AS "GRANTOR"); AND IMPERIAL BANK
(REFERRED TO BELOW AS "LENDER"). FOR VALUABLE CONSIDERATION, GRANTOR GRANTS TO
LENDER A SECURITY INTEREST IN THE COLLATERAL TO SECURE THE INDEBTEDNESS AND
AGREES THAT LENDER SHALL HAVE THE RIGHTS STATED IN THIS AGREEMENT WITH RESPECT
TO THE COLLATERAL, IN ADDITION TO ALL OTHER RIGHTS WHICH LENDER MAY HAVE BY LAW.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Commercial Security
Agreement, as this Commercial Security Agreement may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Commercial Security Agreement from time to time.
COLLATERAL. The word "Collateral" means the following described
property of Grantor, whether now owned or hereafter acquired, whether
now existing or hereafter arising, and wherever located:
ALL PERSONAL PROPERTY, WHETHER PRESENTLY EXISTING OR HEREAFTER
CREATED OR ACQUIRED, INCLUDING BUT NOT LIMITED TO: ALL
ACCOUNTS, CHATTEL PAPER, DOCUMENTS, INSTRUMENTS, MONEY,
DEPOSIT ACCOUNTS AND GENERAL INTANGIBLES INCLUDING RETURNS,
REPOSSESSIONS, BOOKS AND RECORDS RELATING THERETO, AND
EQUIPMENT CONTAINING SAID BOOKS AND RECORDS. ALL INVESTMENT
PROPERTY INCLUDING SECURITIES AND SECURITIES ENTITLEMENTS.
ALL GOODS INCLUDING EQUIPMENT AND INVENTORY. ALL PROCEEDS
INCLUDING, WITHOUT LIMITATION, INSURANCE PROCEEDS. ALL
GUARANTEES AND OTHER SECURITY THEREFOR.
In addition, the word "Collateral" includes all the following, whether
now owned or hereafter acquired, whether now existing or hereafter
arising, and wherever located:
(a) All attachments, accessions, accessories, tools, parts,
supplies, increases, and additions to and all
replacements of and substitutions for any property
described above.
(b) All products and produce of any of the property
described in this Collateral section.
(c) All accounts, general intangibles, instruments, rents,
monies, payments, and all other rights, arising out of
a sale, lease, or other disposition of any of the
property described in this Collateral section.
(d) All proceeds (including insurance proceeds) from the
sale, destruction, loss, or other disposition of any
of the property described in this Collateral section.
(e) All records and data relating to any of the property
described in this Collateral section, whether in the
form of a writing, photograph, microfilm, microfiche,
or electronic media, together with all of Grantor's
right, title, and interest in and to all computer
software required to utilize, create, maintain, and
process any such records or data on electronic media.
EVENT OF DEFAULT. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth (1).
GRANTOR. The word "Grantor" means ECO SOIL SYSTEMS, INC., A NEBRASKA
CORPORATION, its successors and assigns.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with the Indebtedness.
INDEBTEDNESS. The word "indebtedness" means the indebtedness evidenced
by the Note, including all principal and interest, together with all
other indebtedness and costs and expenses for which Grantor is
responsible under this Agreement or under any of the Related Documents.
In addition, the word "Indebtedness" includes all other obligations,
debts and liabilities, plus interest thereon, of Grantor, or any one or
more of them, to Lender, as well as all claims by Lender against
Grantor, or any one or more of them, whether existing now or later;
whether they are voluntary or involuntary, due or not due, direct or
indirect, absolute or contingent, liquidated or unliquidated; whether
Grantor may be liable individually or jointly with others; whether
Grantor may be obligated as guarantor, surety, accommodation party or
otherwise; whether recovery upon such indebtedness may be or hereafter
may become barred by any statute of limitations; and whether such
indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means Imperial Bank, its successors and
assigns.
NOTE. The word "Note" means the note or credit agreement dated December
2, 1998, in the principal amount of $10,000,000.00 from ECO SOIL
SYSTEMS, INC., A NEBRASKA CORPORATION to Lender, together with all
renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the note or credit agreement.
(2)
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, agreements,
environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the
Indebtedness.
RIGHT OF SETOFF. (3)
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
ORGANIZATION. Grantor is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Nebraska.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement by Grantor have been duly authorized by all necessary action
by Grantor and do not conflict with, result in a violation of, or
constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Grantor or (b) any law, governmental regulation,
court decree, or order applicable to Grantor.
PERFECTION OF SECURITY INTEREST. Grantor agrees to execute such
financing statements and to take whatever other actions are requested by
Lender to perfect and continue Lender's security interest in the
Collateral. Upon request of Lender, Grantor will deliver to Lender any
and all of the documents evidencing or constituting the Collateral, and
Grantor will note Lender's interest upon any and all chattel paper if
not delivered to Lender for possession by Lender. Grantor hereby
appoints Lender as its irrevocable attorney-in-fact for the purpose of
executing any documents necessary to perfect or to continue the security
interest granted in this Agreement. Lender may at any time, and without
further authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as
a financing statement. Grantor will reimburse Lender for all expenses
for the perfection and the continuation of the perfection of Lender's
security interest in the Collateral. Grantor promptly will notify
Lender before any change in Grantor's name including any change to the
assumed business names of Grantor. THIS IS A CONTINUING SECURITY
AGREEMENT AND WILL CONTINUE IN EFFECT EVEN THOUGH ALL OR ANY PART OF THE
INDEBTEDNESS IS PAID IN FULL AND EVEN THOUGH FOR A PERIOD OF TIME
GRANTOR MAY NOT BE INDEBTED TO LENDER.
NO VIOLATION. The execution and delivery of this Agreement will not
violate any law or agreement governing Grantor or to which Grantor is a
party, and its certificate or articles of incorporation and bylaws do
not prohibit any term or condition of this Agreement.
ENFORCEABILITY OF COLLATERAL. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable
<PAGE>
PAGE 2
- -------------------------------------------------------------------------------
in accordance with its terms, is genuine, and complies with applicable
laws concerning form, content and manner of preparation and execution,
and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they
appear to be on the Collateral.
LOCATION OF THE COLLATERAL. Grantor, upon request of Lender, will
deliver to Lender in form satisfactory to Lender a schedule of real
properties and Collateral locations relating to Grantor's operations,
including without limitation the following: (a) all real property owned
or being purchased by Grantor; (b) all real property being rented or
leased by Grantor; (c) all storage facilities owned, rented, leased, or
being used by Grantor; and (d) all other properties where Collateral is
or may be located. Except in the ordinary course of its business,
Grantor shall not remove the Collateral from its existing locations
without the prior written consent of Lender.
REMOVAL OF COLLATERAL. Grantor shall keep the Collateral (or to the
extent the Collateral consists of intangible property such as accounts,
the records concerning the Collateral) at Grantor's address shown above,
or at such other locations as are acceptable to Lender. Except in the
ordinary course of its business, including the sales of inventory,
Grantor shall not remove the Collateral from its existing locations
without the prior written consent of Lender.
TRANSACTIONS INVOLVING COLLATERAL. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall
not sell, offer to sell, or otherwise transfer or dispose of the
Collateral (4). While (5), Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a
buyer in the ordinary course of business. A sale in the ordinary course
of Grantor's business does not include a transfer in partial or total
satisfaction of a debt or any bulk sale. Grantor shall not pledge,
mortgage, encumber or otherwise permit the Collateral to be subject to
any lien, security interest, encumbrance, or charge, other than the
security interest provided for in this Agreement (6), without the prior
written consent of Lender. This includes security interests even if
junior in right to the security interests granted under this Agreement.
Unless waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for Lender and
shall not be commingled with any other funds; provided however, this
requirement shall not constitute consent by Lender to any sale or other
disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.
TITLE. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement (7). No financing
statement covering any of the Collateral is on file in any public office
other than those which reflect the security interest created by this
Agreement or to which Lender has specifically consented. Grantor shall
defend Lender's rights in the Collateral against the claims and demands
of all other persons.
COLLATERAL SCHEDULES AND LOCATIONS. Insofar as the collateral consists
of inventory, Grantor shall deliver to Lender, as often as Lender shall
require, such lists, descriptions, and designations of such Collateral
as Lender may require to identify the nature, extent, and location of
such Collateral. Such information shall be submitted for Grantor and
each of its subsidiaries or related companies.
MAINTENANCE AND INSPECTION OF COLLATERAL. Grantor shall maintain all
tangible Collateral in good condition and repair (8). Grantor will not
commit or permit damage to or destruction of the Collateral or any part
of the Collateral. Lender and its designated representatives and agents
shall have the right at all reasonable times to examine, inspect, and
audit the Collateral wherever located. Grantor shall immediately notify
Lender of all cases involving the return, rejection, repossession, loss
or damage of or to any Collateral; of any request for credit or
adjustment or of any other dispute arising with respect to the
Collateral; and generally of all happenings and events affecting the
Collateral or the value or the amount of the Collateral.
TAXES, ASSESSMENTS AND LIENS. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon
this Agreement, upon any promissory note or notes evidencing the
Indebtedness, or upon any of the other Related Documents (9). Grantor
may withhold any such payment or may elect to contest any lien if
Grantor is in good faith conducting an appropriate proceeding to contest
the obligation to pay and so long as Lender's interest in the Collateral
is not jeopardized in Lender's sole opinion. If the Collateral is
subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to
provide for the discharge of the lien plus any interest, costs,
attorneys' fees or other charges that could accrue as a result of
foreclosure or sale of the Collateral. In any contest Grantor shall
defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as
an additional obligee under any surety bond furnished in the contest
proceedings.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Grantor shall comply
promptly with all laws, ordinances, rules and regulations of all
governmental authorities, now or hereafter in effect, applicable to the
ownership, production, disposition, or use of the Collateral (10).
Grantor my contest in good faith any such law, ordinance or regulation
and withhold compliance during any proceeding, including appropriate
appeals, so long as Lender's interest in the Collateral, in Lender's
(11) opinion, is not jeopardized.
HAZARDOUS SUBSTANCES. Grantor represents and warrants that the
Collateral never has been, and never will be so long as this Agreement
remains a lien on the Collateral, used for the generation,
manufacture, storage, transportation, treatment, disposal, release or
threatened release of any hazardous waste or substance, as those terms
are defined in the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986,
Pub. L. No. 99-499 ("SARA'), the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through
7.7 of Division 20 of the California Health and Safety Code, Section
25100, et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. The terms
"hazardous waste" and "hazardous substance" shall also include,
without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations and warranties
contained herein are based on Grantor's due diligence in investigating
the Collateral for hazardous wastes and substances. Grantor hereby
(a) releases and waives any future claims against Lender for indemnity
or contribution in the event Grantor becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnity and hold
harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. This obligation to
indemnify shall survive the payment of the indebtedness and the
satisfaction of this Agreement.
MAINTENANCE OF CASUALTY INSURANCE. Grantor shall procure and maintain
all risks insurance, including without limitation fire, theft and
liability coverage together with such other insurance as Lender may
require with respect to the Collateral, in form, amounts, coverages and
basis reasonably acceptable to Lender and issued by a company or
companies reasonably acceptable to Lender. Grantor, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be canceled or diminished without
at least thirty (30) days' prior written notice to Lender and not
including any disclaimer of the insurers liability for failure to give
such a notice. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of Grantor or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest, Grantor will provide Lender with such loss
payable or other endorsements as Lender may require. In no event shall
the insurance be in an amount less than the amount agreed upon in the
Agreement to Provide Insurance. If Grantor at any time fails to obtain
or maintain any insurance as required under this Agreement, Lender may
(but shall not be obligated to) obtain such insurance as Lender deems
appropriate, including if it so chooses "single interest insurance,"
which will cover only Lender's interest in the Collateral.
APPLICATION OF INSURANCE PROCEEDS. Grantor shall promptly notify Lender
of any loss or damage to the Collateral. Lender may make proof of loss
if Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed
Collateral, Lender shall, upon satisfactory proof of expenditure, pay or
reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration. If Lender does not consent to repair or replacement of the
Collateral, Lender shall retain a sufficient amount of the proceeds to
pay all of the indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their
receipt and which Grantor has not committed to the repair or restoration
of the Collateral shall be used to prepay the indebtedness.
INSURANCE RESERVES. Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be
created by monthly payments from Grantor of a sum estimated by Lender to
be sufficient to produce, at least fifteen (15) days before the premium
due date, amounts at least equal to the insurance premiums to be paid.
If fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender.
The reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for
Grantor, and Lender is not the agent of Grantor for payment of the
insurance premiums required to be paid by Grantor. The responsibility
for the payment of premiums shall remain Grantor's sole responsibility.
INSURANCE REPORTS. Grantor, upon request of Lender, shall furnish to
Lender reports on each existing policy of insurance showing such
information as Lender may reasonably request including the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the property insured; (e) the then current value on the
basis of which insurance has been obtained and the manner of determining
that value; and (f) the expiration date of the policy. In addition,
Grantor shall upon request by Lender (however not more often than
annually) have an independent appraiser satisfactory to Lender
determine, as applicable, the cash value or replacement cost of the
Collateral.
GRANTOR'S RIGHT TO POSSESSION. Until default, Grantor may have possession of
the tangible personal property and beneficial use of all the Collateral and may
use it in any lawful manner not inconsistent with this Agreement or the Related
Documents, provided that Grantor's right to possession and beneficial use shall
not apply to any Collateral where possession of the Collateral by Lender is
required by law to perfect Lender's
<PAGE>
PAGE 3
- -------------------------------------------------------------------------------
security interest in such Collateral. If Lender at any time has possession of
any Collateral, Whether before or after an Event of Default, Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall request
or as Lender, in Lender's sole discretion, shall deem appropriate under the
circumstances, but failure to honor any request by Grantor shall not of itself
be deemed to be a failure to exercise reasonable care. Lender shall not be
required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security
interest given to secure the Indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an event of
default.
EVENTS OF DEFAULT. (12)
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
ACCELERATE INDEBTEDNESS. Lender may declare the entire Indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
ASSEMBLE COLLATERAL. Lender may require Grantor to deliver to Lender
all or any portion of the Collateral and any and all certificates of
title and other documents relating to the Collateral. Lender may
require Grantor to assemble the Collateral and make it available to
Lender at a place to be designated by Lender. Lender also shall have
full power to enter upon the property of Grantor to take possession of
and remove the Collateral. If the Collateral contains other goods not
covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.
SELL THE COLLATERAL. Lender shall have full power to sell, lease,
transfer, or otherwise deal with the Collateral or proceeds thereof in
its own name or that of Grantor. Lender may sell the Collateral at
public auction or private sale. Unless the Collateral threatens to
decline speedily in value or is of a type customarily sold on a
recognized market, Lender will give Grantor reasonable notice of the
time after which any private sale or any other intended disposition of
the Collateral is to be made. The requirements of reasonable notice
shall be met if such notice is given at least ten (10) days, or such
lesser time as required by state law, before the time of the sale or
disposition. All expenses relating to the disposition of the
Collateral, including without limitation the expenses of retaking,
holding, insuring, preparing for sale and selling the Collateral, shall
become a part of the indebtedness secured by this Agreement and shall be
payable on demand, with interest at the Note rate from date of
expenditure until repaid.
APPOINT RECEIVER. To the extent permitted by applicable law, Lender
shall have the following rights and remedies regarding the appointment
of a receiver: (a) Lender may have a receiver appointed as a matter of
right, (b) the receiver may be an employee of Lender and may serve
without bond, and (c) all fees of the receiver and his or her attorney
shall become part of the indebtedness secured by this Agreement and
shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.
COLLECT REVENUES, APPLY ACCOUNTS. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of its nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance
policies, instruments, chattel paper, choses in action, or similar
property, Lender may demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose, or realize on the Collateral as Lender may
determine, whether or not Indebtedness or Collateral is then due. For
these purposes, Lender may, on behalf of and in the name of Grantor,
receive, open and dispose of mail addressed to Grantor; change any
address to which mail and payments are to be sent; and endorse notes,
checks, drafts, money orders, documents of title, instruments and items
pertaining to payment, shipment, or storage of any Collateral. To
facilitate collection, Lender may notify account debtors and obligors on
any Collateral to make payments directly to Lender.
OBTAIN DEFICIENCY. If Lender chooses to sell any or all of the
Collateral, Lender may obtain a judgment against Grantor for any
deficiency remaining on the Indebtedness due to Lender after application
of all amounts received from the exercise of the rights provided in this
Agreement. Grantor shall be liable for a deficiency even if the
transaction described in this subsection is a sale of accounts or
chattel paper.
OTHER RIGHTS AND REMEDIES. Lender shall have all the rights and
remedies of a secured creditor under the provisions of the Uniform
Commercial Code, as may be amended from time to time. In addition,
Lender shall have and may exercise any or all other rights and remedies
it may have available at law, in equity, or otherwise.
CUMULATIVE REMEDIES. All of Lenders rights and remedies, whether
evidenced by this Agreement or the Related Documents or by any other
writing, shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude
pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement,
after Grantor's failure to perform, shall not affect Lender's right to
declare a default and to exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of Los Angeles County, the State of California. Lender and
Grantor
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hereby waive the right to any jury trial in any action, proceeding, or
counterclaim brought by either Lender or Grantor against the other.
This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
ATTORNEYS' FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lenders costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender's attorneys' fees and legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimile (unless otherwise
required by law), and shall be effective when actually delivered or when
deposited with a nationally recognized overnight courier or deposited in
the United States mail, first class, postage prepaid, addressed to the
party to whom the notice is to be given at the address shown above. Any
party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose
of the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Grantor, notice to any
Grantor will constitute notice to all Grantors. For notice purposes,
Grantor will keep Lender informed at all times of Grantor's current
addressees).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution to
do the following: (a) to demand, collect, receive, receipt for, sue and
recover all sums of money or other property which may now or hereafter
become due, owing or payable from the Collateral; (b) to execute, sign
and endorse any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and, in the
place and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or to take
any action or institute or take part in any proceedings, either in its
own name or in the name of Grantor, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. This power
is given as security for the indebtedness, and the authority hereby
conferred is and shall be irrevocable a shall remain in full force and
effect until renounced by Lender.
PREFERENCE PAYMENTS. Any monies Lender pays because of an asserted
preference claim in (13) bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by (13) as
provided above in the "Expenditures by Lender" paragraph.
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be within
the limits of enforceability or validity; however, if the offending
provision cannot be so modified, it shall be stricken and all other
provisions of this Agreement in all other respects shall remain valid
and enforceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
WAIVER. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or
constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this Agreement.
No prior waiver by Lender, nor any course of dealing between Lender and
Grantor, shall constitute a waiver of any of Lender's rights or of any
of Grantor's obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such
consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole discretion
of Lender.
WAIVER OF CO-OBLIGOR'S RIGHTS. If more than one person is obligated for
the Indebtedness, (13) irrevocably waives, disclaims and relinquishes
all claims against such other person which (13) has or would otherwise
have by virtue of payment of the indebtedness of any part thereof,
specifically including but not limited to all rights of indemnity,
contribution or exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 2,
1998.
GRANTOR:
ECO SOIL SYSTEMS, INC., A NEBRASKA CORPORATION
BY:
--------------------------------------------
AUTHORIZED OFFICER
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COMMERCIAL SECURITY AGREEMENT INSERTS
(1) "in the Note"
(2) "In the event of any conflict or inconsistency between the provisions of
this Agreement and the Note, the terms of the Note shall control."
(3) "Bank's right to setoff pursuant to the Note (Section 7.07 of the Credit
Agreement) is expressly incorporated herein."
(4) "unless permitted by the Note"
(5) "there is no Event of Default"
(6) "or permitted by the Note"
(7) "or liens permitted by the Note"
(8) "unless otherwise permitted by the Note"
(9) "unless failure to pay such taxes, assessments or liens is permitted by
the Note"
(10) "unless failure to so comply is permitted by the Note"
(11) "reasonable"
(12) "An Event of Default under the Note shall be an Event of Default
hereunder, and such applicable provisions of the Note (including without
limitation Article 6 of the Credit Agreement), are expressly incorporated
herein."
(13) "Grantor"
