Exhibit 10.13
ASSUMPTION AND RELEASE AGREEMENT
THIS ASSUMPTION AND RELEASE AGREEMENT ("Agreement") is dated as of August
22, 2003 by and among EARTH SCIENCES, INC., a Colorado corporation ("Original
Borrower"), ADA-ES, INC., a Colorado corporation ("Assuming Borrower") and
TECTONIC CONSTRUCTION CO., a Colorado corporation (the "Lender").
RECITALS
A. Lender advanced funds (the "Loans") to Original Borrower in the
aggregate principal amount of US $1,250,000.00 currently evidenced by a
convertible debenture in the amount of $1,000,000.00 and a promissory note in
the amount of $250,000.00.
B. Original Borrower has now elected to separate its operations into two
separate businesses through a spin-off of Assuming Borrower to the existing
shareholders of Original Borrower (the "Spin-Off"). Pursuant to the plans for
the Spin-Off, Original Borrower and Assuming Borrower have requested that
Assuming Borrower be allowed to fully assume all the obligations of Original
Borrower with respect to the Loans and other agreements and instruments relating
thereto.
C. The parties are willing to agree to the substitution of Assuming
Borrower for the Original Borrower, subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the following mutual agreements and
other valuable consideration, the receipt and sufficiency of which are
acknowledged and intending to be legally bound, the Parties agree as follows:
1. Incorporation of Recitals and Exhibits. The Recitals are incorporated as
part of this Agreement, and the Parties agree that the above Recitals are
accurate.
2. Acknowledgment of the Spin-Off. Original Borrower, Assuming Borrower and
Lender each acknowledges that concurrently herewith, Original Borrower will
separate its environmental technology and specialty chemical business from its
mineral property development business by distributing one (1) share of the
common stock ("Common Stock") of Assuming Borrower, a wholly-owned subsidiary of
Original Borrower, for every ten (10) shares of the common stock of Original
Borrower, thereby creating two independent public companies.
3. Conversion of Common Stock Following Spin-Off. Following the Spin-Off,
Lender, and pursuant to the terms of the Note and the Debenture (as such terms
are defined below) Lender shall be entitled, at any time up to and including the
respective maturity dates of the Debenture and the Note, to convert up to the
entire outstanding principal amounts on the Debenture and the Note into shares
of Common Stock of the Assuming Borrower at a conversion price for each share of
the Common Stock of the lesser of $2.10 or the average trading price per share
of Common Stock on the conversion date. Nevertheless, the aggregate combined
number of shares of Common Stock into which this Promissory Note and the
Debenture may be converted shall not exceed 100,000. Such conversion shall be
effectuated in accordance with the terms and conditions of the Debenture and the
Note.
4. Transaction Documents. In connection with the making of the Loans by
Lender, Original Borrower, and in some cases, Lender have executed or caused to
be filed the following documents (collectively, the "Loan Documents"):
(a) Earth Sciences, Inc. Amended and Restated 10% Convertible Debenture
No. 1 dated September 8, 2000 in the face amount of US $1,000,000.00 (the
"Debenture") executed by Original Borrower in favor of Lender, as holder.
(b) Earth Sciences, Inc. 10% Convertible Debenture No. 1 dated June 12,
1997 in the face amount of US $1,000,000.00 executed by Original Borrower in
favor of Lender, as holder.
(c) Amended and Restated Promissory Note dated September 8, 2000 in the
face amount of $250,000.00 (the "Note") executed by original Borrower and
payable to Lender.
(d) Promissory Note dated May 20, 1998 in the face amount of $250,000.00
executed by original Borrower and payable to Lender.
(e) Security Agreement dated June 12, 1997 executed by Original
Borrower, as Debtor and Lender, as Secured Party.
(f) Deed of Trust, Security Agreement, Financing Statement and
Assignment of Rents and Revenues dated June 12, 1997 executed by Original
Borrower for the benefit of Lender and recorded with the Clerk and Recorder of
Xxxxxxxx County, Colorado on June 19, 1007 at book 349, Page 590, Reception
Number 209825.
(g) Uniform Commercial Code Financing Statement (Form UCC-1), in which
Original Borrower was the debtor and Lender was the secured party, that was
filed on June 13, 1997 in the office of the Secretary of State of Colorado as
File No. 19972049113.
(h) Uniform Commercial Code Financing Statement (Form UCC-1), in which
Original Borrower was the debtor and Lender was the secured party, that was
filed on July 19, 2001 in the office of the Secretary of State of Colorado as
File No. 20012057100.
(i) Security Agreement Registration registered on May 29, 1997 in the
Personal Property Registry in Edmonton, Alberta at Registration Number
97052908486, in which Original Borrower was the debtor and Lender was the
secured party. This Registration was renewed on May 24, 2000 at Registration
Number 00052405271, and again March 13, 2003 at Registration Number 03031303450.
(j) Notice of Security Interest (Fixture or Crops) registered on June
20, 1997 with the Registrar of South Alberta Land Registration District at
Reception Number 971 177 594, in which Original Borrower was the debtor and
Lender was the secured party.
5. Third Party Documents. In connection with the issuance of the Debenture
and the making of the Loans by Lender, third parties and, in some cases, Lender
have executed or caused to be filed following documents (collectively, the
"Third Party Documents"):
(a) Security Agreement dated June 12, 1997 executed by Earth Sciences
Extraction Company, a limited partnership under the laws of Alberta, Canada
("Earth Sciences Extraction"), as Debtor, and Lender, as Secured Party.
(b) Security Agreement dated June 12, 1997 executed by ESI Resources
Limited, a corporation incorporated under the laws of Alberta ("ESI Resources"),
Canada, as Debtor and Lender, as Secured Party.
(c) Security Agreement dated September 8, 2000 executed by ADA
Environmental Solutions, LLC, a Colorado limited liability company ("ADA
Environmental"), as Pledgor, and Lender, as Secured Party.
(d) Guaranty Agreement dated June 12, 1997 executed by Earth Sciences
Extraction in favor of Lender.
(e) Guaranty Agreement dated June 12, 1997 executed by ESI Resources in
favor of Lender.
(f) Guaranty Agreement dated September 8, 2000 executed by ADA
Environmental in favor of Lender.
(g) Uniform Commercial Code Financing Statement (Form UCC-1), in which
Earth Sciences Extraction was the debtor and Lender was the secured party, that
was filed on June 16, 1997, in the office of the Secretary of State of Colorado
as File No. 19972049176.
(h) Uniform Commercial Code Financing Statement (Form UCC-1), in which
Earth Sciences Extraction was the debtor and Lender was the secured party, that
was filed on July 19, 2001, in the office of the Secretary of State of Colorado
as File No. 20012057102.
(i) Uniform Commercial Code Financing Statement (Form UCC-1), in which
ESI Resources was the debtor and Lender was the secured party, which was filed
on June 16, 1997 in the office of the Secretary of State of Colorado as File No.
19972049177.
(j) Uniform Commercial Code Financing Statement (Form UCC-1), in which
ESI Resources was the debtor and Lender was the secured party, that was filed on
July 19, 2001, in the office of the Secretary of State of Colorado as File No.
20012057101.
(k) Uniform Commercial Code Financing Statement (Form UCC-1), in which
ADA Environmental was the debtor and Lender was the secured party, that was
filed on July 19, 2001, in the office of the Secretary of State of Colorado as
File No. 20012057099.
(l) Security Agreement Registration registered on May 29, 1997 in the
Personal Property Registry in Edmonton, Alberta at Registration Number
97052908817, in which ESI Resources was the debtor and Lender was the secured
party. This Registration was amended on May 29, 1997 at Reception Number
97052909161, renewed on May 24, 2000 at Registration Number 00052405651, and
renewed again on March 13, 2003 at Registration Number 03031303385.
(m) Security Agreement Registration registered on May 29, 1997 in the
Personal Property Registry in Edmonton, Alberta at Registration Number
97052908932, in which Earth Sciences Extraction was the debtor and Lender was
the secured party. This Registration was renewed on May 24, 2000 at Registration
Number 00052404670, and renewed again on March 13, 2003 at Registration Number
03031303278.
(n) Security Agreement Registration registered on December 15, 1997 in
the Personal Property Registry in Edmonton, Alberta at Registration Number
97121514505, in which Earth Sciences Extraction was the debtor and Lender was
the secured party. This Registration was renewed June 5, 1998 at Registration
Number 98060506403, and renewed again on April 28, 1999 at Reception Number
99042809766, amended on July 27, 1999 at Registration Number 99072702980, and
renewed again on May 24, 2000 at Registration Number 00052404597.
(o) Security Agreement Registration registered on April 28, 1999 in the
Personal Property Registry in Edmonton, Alberta at Registration Number
99042809642, in which Earth Sciences Extraction was the debtor and Lender was
the secured party. This Registration was amended on July 27, 1999 at
Registration Number 99072703079, renewed on May 24, 2000 at Registration Number
0052404704, and renewed again on March 13, 2003 at Registration Number
03031303567.
(p) Notice of Security Interest (Fixture or Crops) registered on June
20, 1997 with the Registrar of South Alberta Land Registration District at
Reception Number 971 177 595, in which Earth Sciences Extraction was the debtor
and Lender was the secured party.
(q) Notice of Security Interest (Fixture or Crops) registered on June
20, 1997 with the Registrar of South Alberta Land Registration District at
Reception Number 971 177 596, in which ESI Resources was the debtor and Lender
was the secured party.
6. Outstanding Balance of Loans. The Parties agree that, as of August 1,
2003, the outstanding principal balance of the Debenture is $1,000,000.00, and
the outstanding amount of accrued interest is $8,493.07. The Parties agree that,
as of June 30, 2003 (as hereinafter defined) a, the outstanding principal
balance of the Note is $150,000.00, and the outstanding amount of accrued
interest is $1,274.1.
7. Assuming Borrower's Covenant to Perform. Assuming Borrower hereby
unconditionally assumes, covenants, and agrees to timely pay and perform all
indebtedness and obligations of Original Borrower under those Loan Documents and
Third Party Documents that were executed by Original Borrower (collectively, the
"Transaction Documents"), and to comply with all of the terms, covenants, and
conditions of the Transaction Documents as if Assuming Borrower originally had
executed the Transaction Documents (including, without limitation, the Debenture
and the Note). Assuming Borrower is familiar with all terms, conditions, and
provisions of the Transaction Documents, and fully comprehends the same, as
modified by this Agreement.
8. Release. Lender hereby releases Original Borrower from all indebtedness
and obligations to Lender under the Transaction Documents. It is expressly
understood and agreed that Assuming Borrower's assumption of the obligations of
Original Borrower under the Transaction Documents as set forth herein and in
this Amendment Documents shall in no manner alter or affect (except as herein
expressly provided), extinguish or impair the indebtedness evidenced by the
Debenture or the Note, and shall not extinguish or impair any rights and
remedies of Lender thereunder or the priority of the Transaction Documents.
Original Borrower and Assuming Borrower each hereby acknowledges and confirms
that the liens created by the Transaction Documents are valid, subsisting and
enforceable liens on the property described in such Transaction Documents.
9. Acknowledgments, Representations, and Agreements. Original Borrower and
Assuming Borrower (collectively, the "Borrowers"), to the best of their
knowledge, each acknowledges, represents, warrants, and agrees, as of the date
hereof, as follows:
(a) There exists no defense, offset or counterclaim with respect to the
payment of the Loans or with respect to the performance of Borrowers'
indebtedness and obligations under the Loans, this Agreement, or any of the
Transaction Documents, without limitations, any claim for breach of contract,
failure to act in good faith, lack of fair dealing, misrepresentation, breach of
fiduciary duty, fraud, or negligence. The Borrowers have no claim, defense,
abatement, offset, or counterclaim against Lender or otherwise applicable to the
Loans. If any such claims, defenses, abatements, offsets, or counterclaims, do
presently exist, as additional consideration for this Agreement, the Borrowers
hereby waive and release them to the fullest extent permitted by applicable law;
(b) Lender has not breached any duty to Borrowers in connection with the
Loans. Lender has timely and fully performed all obligations which Lender may
have had or now has to Borrowers in connection with the Loans;
(c) Lender has no obligation whatsoever to make any other loans or
advances to or for the benefit of Borrowers or to grant any modifications or
extensions in connection with the Loans, except as may be set forth specifically
in the Transaction Documents and this Agreement;
(d) Borrowers acknowledge that Lender has a properly perfected, xxxxxx,
absolute and present first priority security interest relating to the collateral
("Collateral") identified in Transaction Documents and the Third Party
Documents;
(e) Assuming Borrower is a Colorado corporation and Original Borrower is
a Colorado corporation as of the Effective Date. Borrowers have all requisite
power and authority to enter into this Agreement and to perform all actions
required or contemplated by any provision contained in this Agreement or the
Transaction Documents. This Agreement and the Transaction Documents are and
shall be legal, valid, and binding obligations of Borrowers;
(f) There is no legal or other action, proceeding or investigation
pending or threatened against the Borrowers or the Collateral before any court,
administrative agency or arbitrator that might in any way adversely affect the
Borrowers ability to fulfill their respective obligations under this Agreement,
the Third Party Documents or any of the Transaction Documents;
(g) None of the Borrowers are involved as a debtor in any state or
federal bankruptcy, reorganization, arrangement, insolvency proceedings,
receivership, or any other debtor-creditor proceeding, and none of the Borrowers
have made any assignment for the benefit of creditors;
(h) All information and documentation supplied by Borrowers to or for
the benefit of Lender in connection with this Agreement are true and correct in
all material respects;
(i) This Agreement is not intended for, and shall not be construed to
be for, the benefit of any person or entity not a signatory hereto.
10. Conditions to the Legal Effect of this Agreement. This Agreement shall
become operative and legally binding on the Parties hereto as of the Effective
Date, when, and only when, Lender shall have received each of the following in
form and substance satisfactory to Lender and its counsel:
(a) A complete counterpart of this Agreement executed and acknowledged
by all of the Parties, and properly recorded in the Official Records;
(b) Evidence satisfactory to Lender that Original Borrower is a
Colorado corporation in good standing, and authorized to transact business in
the State of Colorado; that Original Borrower has authorized the execution of
this Agreement, and that the persons executing this Agreement on behalf of the
Original Borrower have full power and authority to bind the Original Borrower to
the same;
(c) Evidence satisfactory to Lender that Assuming Borrower is a
Colorado corporation in good standing, and authorized to transact business in
the State of Colorado; that Assuming Borrower has authorized the execution of
this Agreement, and that the persons executing this Agreement on behalf of the
Assuming Borrower have full power and authority to bind the Assuming Borrower to
the same;
(d) Acknowledgments, in form and substance acceptable to Lender by
Earth Sciences Extraction Company, ESI Resources, LTD, and ADA Environmental
Solutions, LLC.
(e) Such other documents as Lender may reasonably have requested at any
time at or prior to the closing on this Agreement; and
(f) Payment by Original Borrower and Assuming Borrower of all costs,
premiums, fees, and expenses (including, without limitation, reasonable
attorneys' fees) incurred by Lender in the negotiation and preparation of this
Agreement.
11. Closing. Closing under this Agreement shall occur contemporaneously
with the distribution of the Common Stock of Assuming Borrower to the
shareholders of Original Borrower. If all the conditions set forth in paragraph
10 are not satisfied within a reasonable time thereafter, then this Agreement
automatically shall terminate, and none of the Parties shall have any further
liability or obligation to one another under this Agreement, and the respective
rights, duties, and obligations of the Parties shall continue unmodified as if
this Agreement had never been negotiated or executed, except for the continuing
obligation of the Original Borrower and/or Assuming Borrower to pay all costs,
fees, and expenses (including attorneys' fees) incurred by Lender in connection
with the negotiation and preparation of this Agreement and the other documents
described therein.
12. Affirmation. Borrowers hereby affirm that, as of the Effective Date,
the representations and warranties of Original Borrowers set forth in the
Transaction Documents (to the extent not inconsistent with the representations
made herein) are and remain true and correct as though made on and as of the
Effective Date, and are hereby affirmed, ratified, and confirmed by Borrowers.
Borrowers will immediately notify Lender of any change or discovered inaccuracy
in the representations and warranties contained in this Agreement or in the
Transaction Documents provided that Borrowers' duty to notify Lender of any such
inaccuracy shall only apply to presently existing inaccuracies which existed
before the Effective Date or any future inaccuracies. Borrowers hereby confirm
that the Transaction Documents are and shall remain enforceable against Assuming
Borrower in accordance with their terms, shall continue to be in full force and
effect, and are hereby confirmed and ratified in all respects. Borrowers agree
that this Agreement shall not impair the Transaction Documents or any lien
securing the Note, that such liens are not waived, released, or extinguished in
any manner, and that such liens are hereby acknowledged to be valid and existing
and shall continue to secure payment of the Note and all other obligations under
the Transaction Documents.
13. Security. Assuming Borrower's performance under the Transaction
Documents shall continue to be secured by the Transaction Documents. After the
Effective Date, all references to the Transaction Documents shall include this
Agreement.
14. Notices, Consents, and Approvals. Any notice, consent, or approval that
Lender or Borrowers may desire or be required to give to the other shall be in
writing and shall be mailed or delivered to the intended recipient thereof at
its address set forth below or at such other address as such intended recipient
may, from time to time, by notice in writing, designate to the sender pursuant
hereto. Any notice, consent, or approval required or permitted to be given shall
be in writing and will be deemed given (a) upon personal delivery or upon
confirmed transmission by telecopier or similar facsimile transmission device,
(b) on the first business day after receipted delivery to a courier service
which guarantees next-business-day delivery, or (c) on the third business day
after mailing, by registered or certified United States mail, postage prepaid,
in any case to the appropriate party at its address set forth below.
If to Lender:
Tectonic Construction Co.
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Telecopier: 000-000-0000
With copy to:
Xxxxxxx Xxxxxx LLP
Tower I, Suite 1000
0000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Telecopier: 000-000-0000
If to Original Borrower:
Earth Sciences, Inc.
0000 XxxxxXxxx Xxx, Xxxxx X
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. XxXxxxxxx
Telecopier: 000-000-0000
If to Assuming Borrower:
ADA-ES, Inc.
0000 XxxxxXxxx Xxx, Xxxxx X
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. XxXxxxxxx
Telecopier: 000-000-0000
15. Construction. Captions and headings are for convenience and reference
only and do not define, limit, or affect the contents of this Agreement.
Reference to "paragraphs" or "sections" refer to this Agreement unless stated
otherwise. All grammatical usage shall be deemed to refer to the masculine,
feminine, neuter, singular, or plural as the context and identity of any persons
may require. Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in the Transaction Documents.
16. Severability and Interpretation. The invalidity or unenforceability of
any provision of this Agreement does not affect the remaining provisions. This
Agreement shall be construed as if it excluded any invalid or unenforceable
provision, which shall be severed from this Agreement. Whenever possible, this
Agreement shall be interpreted so as to be valid under applicable law, and shall
not be construed strictly in favor of or against any particular Party, including
any Party who drafted or prepared this Agreement, but instead according to its
plain meaning to give effect to its intended purposes.
17. Governing Law. This Agreement is governed by the laws of the State of
Colorado, including its choice of law principles. The Parties consent and submit
to the non-exclusive jurisdiction of the courts of the State of Colorado and the
United States District Court for the District of Colorado, to be venued in
Denver, Colorado, concerning any action or proceeding involving the Lender and
arising under this Agreement, the Transaction Documents, or the Loan.
18. Counterparts. This Agreement may be executed in identical counterparts,
each of which upon execution shall be deemed an original, but all of which
together shall constitute one document. Partially executed signature or
acknowledgment pages of any one counterpart may be combined with or attached to
any other partially executed counterpart of this Agreement.
19. Entirety; Modification. This Agreement constitutes the entire agreement
of the Parties with respect to the assumption contemplated hereby of the Loans.
There are no verbal agreements between the Parties. This Agreement and the
Transaction Documents as amended by this Agreement may be amended or modified
only by a written document signed by all the Parties.
20. Time. TIME IS OF THE ESSENCE FOR THE PERFORMANCE OF EACH PROVISION OF
THIS AGREEMENT. If this Agreement requires any action to be performed on a date
that is not a "business" day (a Saturday, Sunday, or federal or state legal
holiday), such action shall be validly performed on the next succeeding business
day.
21. Negotiated Agreement. This Agreement is the result of arms-length
negotiations between the Parties, each of whom has been represented by counsel,
and no Party has acted under duress or compulsion, whether legal, economic, or
otherwise.
22. Binding Effect. This Agreement is binding upon and inures to the
benefit of the Parties and their respective permitted successors and assign.
23. Effective Date. This Agreement is effective as of the date of the
distribution of the Common Stock of Assuming Borrower to the shareholders of
Original Borrower (the "Effective Date"); provided, however, unless otherwise
agreed to by the parties hereto in writing, if the date of distribution of the
Common Stock of Assuming Borrower to the shareholders of Original Borrower does
not take place on or before January 1, 2004, this agreement shall be null and
void and of no further force or effect.
24. Further Assurances. On the date hereof, or thereafter, if necessary,
Assuming Borrower agrees to execute and deliver to or cause to be executed and
delivered to Lender such further instruments as the Lender may reasonably
request and take such other action as the Lender may reasonably require to carry
out more effectively the transactions contemplated by this Agreement.
ORIGINAL BORROWER:
EARTH SCIENCES, INC.,
a Colorado corporation
By: /s/ Xxxx X XxXxxxxxx
-------------------------------
Name: Xxxx X XxXxxxxxx
Title: President
ASSUMING BORROWER:
ADA-ES, INC., a Colorado corporation
By: /s/ Xxxxxxx X Xxxxxx
-------------------------------
Name: Xxxxxxx X Xxxxxx
Title: President
LENDER:
TECTONIC CONSTRUCTION CO.,
a Colorado corporation
By: /s/ Xxxxxx X Xxxxxxxxxx
-------------------------------
Name: Xxxxxx X Xxxxxxxxxx
Title: President
