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EXHIBIT 10.41
AMENDMENT NO. 2
TO
CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE AGREEMENT
THIS AMENDMENT NO. 2 TO CONVERTIBLE DEBENTURES AND WARRANTS PURCHASE
AGREEMENT (the "Amendment") is entered into as of the 7th day of March 2001
(the "Effective Date") by and among the undersigned investors (each an
"Investor" and together the "Investors") and Eco Soil Systems, Inc., a
corporation organized and existing under the laws of the State of Nebraska (the
"Company") and its subsidiaries, Agricultural Supply, Inc., a Delaware
corporation ("Ag Supply"), and the subsidiaries of Ag Supply, Sistemas Y Equipos
Agricolas, S.A. de C.V. and Agricultural Supply de Mexico, S.A. de C.V., each
incorporated under the laws of Mexico (each a "Subsidiary" and all of such
subsidiaries taken together, the "Subsidiaries").
WHEREAS, the parties entered into that certain Convertible Debentures
and Warrants Purchase Agreement dated January 17, 2000 (the "Purchase
Agreement"), pursuant to which the Company agreed to issue and sell to the
Investors, and the Investors agreed to purchase from the Company, $4,500,000 of
the Company's secured subordinated Convertible Debentures and to receive in
connection therewith Warrants to purchase shares of the Company's Common Stock;
and
WHEREAS, the parties desire herein to amend the Purchase Agreement to,
among other things, (a) provide for the execution and delivery of amended and
restated Convertible Debentures, pursuant to which, among other things, the
Maturity Date of a portion of the indebtedness owed under the Debentures will be
extended to January 24, 2002 and the repayment of at least $1,500,000 of
principal thereunder (together with a 10% premium thereon) will be due and
payable on March 31, 2001 (the "First Maturity Date") and (b) provide for the
issuance of additional Warrants, in the form attached hereto as Exhibit B-1 (the
"New Warrants").
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Amendment and the Purchase Agreement, the parties hereto agree as follows:
1. Defined Terms. Terms that are used herein with initial capital
letters and that are not otherwise defined herein will have the meanings given
to them in the Purchase Agreement.
2. Amendments to Article I.
(a) Effective upon the Closing Date (as defined herein), the
definitions of the following terms contained in Article I of the Purchase
Agreement shall be amended and restated in their entirety as follows:
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Section 1.7 "Convertible Debentures" shall mean the Company's 7% Senior Secured
Convertible Debentures, as amended and restated, in the form attached hereto as
Exhibit A-1.
Section 1.31 "Warrants" shall mean the Warrants substantially in the form of
Exhibit B and the New Warrants substantially in the form of Exhibit B-1, to be
issued to the Investors hereunder.
(b) Effective upon the Closing Date, the following definition shall
be added as a new definition under Article I of the Purchase Agreement:
Section 1.33 "Senior Lender" shall mean First National Bank.
3. Closing. On the Closing Date (as defined below), the parties hereto
shall make the deliveries set forth below. The closing shall occur at the
offices of Xxxxxx & Xxxxxxx, 00000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000, or at such other place as the Investors shall determine, at
9:00 a.m., local time, on a date which is on or before two (2) business days
after the date on which the Company receives the approvals or consents from the
Senior Lender necessary for the transactions contemplated by this Agreement and
the New Debentures (as defined below), but in no event later than 5:00 p.m. on
March [31], 2001, subject in all respects to the fulfillment or waiver of the
parties' respective conditions to closing set forth in Section 6 or other such
time and place as the parties may agree (such date, the "Closing Date").
(a) The following items shall be delivered by the Company and its
Subsidiaries to the Investors prior to or on the Closing Date:
(i) The original Amended and Restated 7% Senior Secured
Convertible Debentures in the form attached hereto as
Exhibit A-1 (the "New Debentures"), having an aggregate
principal amount equal to the original aggregate
purchase price of the Convertible Debentures, plus
accrued and unpaid interest thereon through the Closing
Date;
(ii) The opinions of Xxxxxx & Xxxxxxx, counsel to the Company
and of Fitzgerald, Schorr, Xxxxxxxxxx & Xxxxxxx, P.C.,
Nebraska counsel to the Company, substantially to the
effect of Exhibit D hereto, shall be delivered to the
Investors;
(iii) Documentation reasonably satisfactory to the Investors
demonstrating that the Company has obtained any and all
approvals or consents from the Senior Lender (and the
Company's subordinated lenders, if and to the extent
required) necessary for the transactions contemplated by
this Amendment and the New Debentures (including,
without limitation, waiver by the Senior Lender of
existing defaults on any and all indebtedness owed by
the Company, Ag Supply or the Subsidiaries to the Senior
Lender, such waiver to extend at least until March 31,
2001); provided, however, that the Company's obligation
to deliver the Senior
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Lender's consent is subject to execution and delivery by
the Investors of a subordination agreement satisfactory
to the Senior Lender; and
(iv) A certificate signed by the Company's Chief Executive
Officer confirming satisfaction of the conditions to
closing set forth in Section 6(a) hereof; and
(v) Documentation reasonably satisfactory to the Investors
evidencing termination of any UCC financing statements
evidencing security interests in favor of Coast Business
Credit in assets of the Company, Ag Supply or the
Subsidiaries;
(b) The following items shall be delivered by the Investors to the
Company prior to or on the Closing Date:
(i) The original Convertible Debentures issued on January
24, 2000 for cancellation by the Company and its
Subsidiaries;
(ii) The Registration Rights Agreement in the form attached
hereto as Exhibit C.
(c) The following items shall be delivered by the Company to the
Investors on March 31, 2001 if the entire $1,650,000 payment obligation due on
the First Maturity Date is not met:
(i) New Warrants, in the form attached hereto as Exhibit
B-1, exercisable for an aggregate 200,000 shares of
Common Stock.
4. Confirmation of Continued Accuracy of Representations and Warranties.
Each Investor, severally and not jointly, represents and warrants that all of
its representations and warranties contained in the Purchase Agreement remain
true and correct as of the date hereof. The Company, and as to itself, each
Subsidiary, represents and warrants to the Investors that, except as otherwise
disclosed in any Supplemental Disclosure Schedule delivered by the Company
herewith, all representations and warranties of the Company contained in the
Purchase Agreement remain true and correct as of the date hereof.
5. Covenants.
(a) The following covenants shall be added as new covenants of the
Company under Article VI of the Purchase Agreement:
Section 6.12. Shareholder Approval. Upon request of Investors
holding a majority of the Registrable Securities, the Company
shall prepare and file with the SEC and shall provide to each
shareholder entitled to vote at the next meeting of shareholders
of the Company, which meeting shall be not later than sixty (60)
days from the date of the request (the "Shareholder Meeting
Deadline"), a proxy statement in accordance with Section 14 of
the Exchange Act, which has been previously reviewed by the
Investors
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and a counsel of their choice, soliciting each such
shareholder's affirmative vote at such shareholder meeting for
approval of the Company's issuance of all of the Conversion
Shares and the Warrant Shares in excess of any limitation or cap
imposed by the Principal Market or otherwise, and the Company
shall use its reasonable best efforts to solicit its
shareholders' approval of such proposal and cause the Board of
Directors of the Company to recommend to the shareholders that
they approve such proposal. If the Company fails to hold a
meeting of its shareholders or fails to secure stockholder
approvals as contemplated hereby by the Shareholder Meeting
Deadline (unless such failure is the result solely of the
actions of the Investors), then, as partial relief (which remedy
shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Investor an amount in
cash per share equal to 2.0% of the aggregate Purchase Price
paid for the Debentures purchased hereunder per month until the
shareholder approval is obtained (pro rated for partial months).
The Company shall make the payments referred to in the
immediately preceding sentence within five (5) days of the
earlier of (I) the holding of the meeting of the Company's
shareholders and (II) the last day of each 30-day period
beginning on the day after the Shareholder Meeting Deadline. In
the event the Company fails to make such payments in a timely
manner, such payments shall bear interest at the rate of 2.0%
per month (pro rated for partial months) until paid in full.
Section 6.13. Investor Review of Operations. So long as any
indebtedness remains outstanding under the Convertible
Debentures or the Investors shall hold any Registrable
Securities, upon request of the Investors provided to the
Company, the Company shall permit the Investors to send two
representatives to visit and inspect the Company's properties
and to discuss the Company's affairs, finances, operations and
accounts with its officers, management and other key employees,
at such reasonable times as the Investors may request (not to
exceed more than two investigations) and the Company shall make
available all of its publicly available documents and properties
as may be reasonably necessary for the purpose of such review
and shall cause the Company's officers, directors and employees
to assist in providing such information as reasonably requested
by the Investors' representatives; provided, further, that upon
receipt of such request notice provided by the Investors to the
Company, the Company shall, within twenty-four (24) hours of
such notice, transfer $6,000 by wire to the account and pursuant
to the instructions provided by the Investors in such notice, in
order to provide for costs and expenses of such requested
investigation or inquiry. Notwithstanding the foregoing, the
Company shall not disclose material nonpublic information to the
Investors or their representatives unless prior to disclosure of
such information the Company identifies such information as
being nonpublic information and provides the Investors and their
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representatives with the opportunity to accept or refuse to
accept such nonpublic information for review, and any Investor
or representative that accepts to review such nonpublic
information shall, as a condition to disclosure of that
information to the Investors, enter into a confidentiality
agreement in form and content reasonably satisfactory to the
Company and the Investors.
Section 6.14. Payments to Junior Lenders. The Company shall not
make any payments to any unsecured or junior lender until an
aggregate amount of $2,200,000 is repaid under the terms of the
Convertible Debentures; provided, however, that so long as the
Company is not in default on the repayment of the payment
required on the First Maturity Date or any of the Mandatory
Monthly Redemption Payments (as defined in the Convertible
Debentures), subject to the rights of any other senior lender,
the Company shall be permitted to make monthly interest
payments, not to exceed $12,000 in the aggregate per month,
collectively to Albion Alliance Mezzanine Fund, LP ("Alliance")
and Paribas Capital Funding LLC ("Paribas").
(b) Right to Participate in Future Financing. Effective on the Closing Date, the
second sentence of Section 6.9 of the Purchase Agreement shall be amended and
restated in its entirety as follows:
In addition, until January 24, 2002, the Company agrees that it
will not enter into any sale of Capital Shares Equivalents
(other than the sale of shares of Common Stock at a price of not
less than $1.00 per share with warrant coverage of up to 40% for
aggregate proceeds of up to $3,500,000, or pursuant to the
exceptions set forth in the previous sentence) without offering
each Investor, severally and not jointly, (i) the right of first
refusal to purchase such Capital Shares Equivalents on the same
terms and conditions on which the Company is prepared to sell
such Capital Shares Equivalents to other persons and (ii) if the
Investor does not exercise such right of first refusal, the
further right to exchange all or part of the securities
purchased pursuant to this Agreement (as elected by each
Investor) for an equivalent Purchase Price amount of the
securities being sold in such subsequent offering.
(c) The Company covenants and agrees that it will undertake reasonable and
diligent efforts to secure, before the Closing Date, any consent, approval or
waiver, in form and substance reasonably satisfactory to the Investors, from the
Senior Lender (and from any subordinated lenders, if and to the extent required)
necessary for the transactions contemplated by this Amendment and the New
Debentures.
6. Conditions to Closing.
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(a) The obligations of the Investors under this Amendment shall be, at the
option of the Investors, subject to the satisfaction of the following conditions
on or prior to the Closing Date:
(i) There shall have been no material breach by the Company
or its Subsidiaries in the performance of any of their
covenants and agreements herein; each of the
representations and warranties of the Company and its
Subsidiaries contained or referred to herein shall be
true and correct in all material respects on such
Closing Date as though made on such Closing Date, except
for changes therein specifically permitted or
contemplated by this Agreement;
(ii) The Company shall have obtained the consents, approvals
or waivers, as the case may be, of the Senior Lender and
the subordinated lenders as contemplated by Section 5(c)
above; and
(iii) The Company and its Subsidiaries shall have made all of
their deliveries to be made at or prior to Closing, as
described in Sections 3 and 12.
(b) The obligations of the Company and its Subsidiaries under this Amendment
shall be, at the option of the Company, subject to the satisfaction of the
following conditions on or prior to the Closing Date:
(i) Each of the representations and warranties of the
Investors contained or referred to herein shall be true
and correct in all material respects on such Closing
Date as though made on such Closing Date, except for
changes therein specifically permitted or contemplated
by this Agreement;
(ii) The Company shall have obtained the consents, approvals
or waivers, as the case may be, of the Senior Lender
contemplated by Section 5(c) above; and
(iii) The Investors shall have made all of their deliveries to
be made at Closing, as described in Section 3.
(c) The obligations of the Investors, the Company and the Subsidiaries to close
under this Agreement shall be, at the option of such parties, subject to
execution and delivery of the Intercreditor Agreement by and among the Senior
Lender, the Investors and the Company, in substantially the form attached hereto
as Exhibit D, on or prior to the Closing Date.
7. Registration of Additional Shares. The Company agrees that if at any
time the number of shares of Common Stock of the Company available for resale by
the Investors under an effective Registration Statement is less than 150% of the
total number of shares of Common Stock remaining issuable to the Investors upon
conversion of the Debentures, as amended, and upon exercise of the Warrants,
then the Company shall promptly take all action necessary,
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including the filing of a post-effective amendment or a new registration
statement, as may be required, to register additional shares for resale by the
Investors to cover such shortfall.
8. Effect of Amendment. The provisions of the Purchase Agreement are
amended and modified by the provisions of this Amendment. If any provisions of
the Purchase Agreement are materially different from or inconsistent with any of
the provisions of this Amendment, the provisions of this Amendment shall
control, and the provisions of the Purchase Agreement shall, to the extent of
such difference or inconsistency, be deemed to be amended and modified. Any
provisions of the Purchase Agreement not amended hereby shall remain in full
force and effect. This Amendment shall take effect immediately upon execution
and delivery thereof by the parties. This Amendment supersedes Amendment No. 1
to Convertible Debentures and Warrants Purchase Agreement dated as of December
11, 2000 among the parties hereto ("Amendment No.1"), and Amendment No.1 shall
have no further force and effect after the Effective Date.
9. Single Agreement. This Amendment and the Purchase Agreement, as
amended and modified by the provisions of this Amendment, shall constitute and
be construed as a single agreement.
10. Representations and Covenants Regarding Turf Partners. The Company,
and as to itself, each Subsidiary, represents and warrants to the Investors that
Turf Partners, Inc., a Delaware corporation and subsidiary of the Company ("Turf
Partners"), sold all of its assets to a non-affiliated third party in July 2000
and Turf Partners is an inactive corporate shell that no longer holds any assets
or properties with an aggregate value in excess of $10,000. If Turf Partners or
any successor entity thereto ever acquires any assets, the Company agrees to
take all necessary action to add such party to this Amendment and the New
Debentures and such other documents as the Investors may reasonably request
relating hereto.
11. Limited Waiver. Reference is made to the last sentence of Section 3
of the original Convertible Debentures issued on January 24, 2000, which states,
"In no event shall the Conversion Price be less than two-thirds (66.67%) of the
Conversion Price which would apply on the issuance date of this Debenture (the
"Floor Price"), subject to adjustment for any subsequent stock splits or the
like." In consideration of the Investors' entering into this Amendment (and
irrespective of whether the transactions contemplated herein are consummated),
the Company hereby agrees that the limitation set forth in such sentence shall
terminate effective immediately on the Effective Date and there shall be no
Floor Price applicable to any and all conversions of the Convertible Debentures
after the Effective Date hereof.
12. New Warrants. In consideration of the Investors' entering into this
Amendment, which consideration the parties hereto acknowledge is sufficient, the
Company shall simultaneous with the execution of this Amendment execute and
deliver to the Investors: (a) New Warrants, in the form attached hereto as
Exhibit B-1, exercisable for an aggregate 500,000 shares of Common Stock; and
(b) the Registration Rights Agreement in the form attached hereto as Exhibit C;
and
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to Convertible Debentures and Warrants Purchase Agreement to be executed by the
undersigned, thereunto duly authorized, as of the date first set forth above.
Eco Soil Systems, Inc.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Xxxxxxx X. Xxxxx, Chief Executive Officer
Agricultural Supply, Inc.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
, Chief Executive Officer
Sistemas Y Equipos Agricolas, S.A. de C.V.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
, Chief Executive Officer
Agricultural Supply de Mexico, S.A. de C.V.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
, Chief Executive Officer
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INVESTORS:
Address: 000 Xxxxx Xxxxxx Xxxx Xxxxxxxx: BH Capital Investments, L.P.
Xxxxx Xxxxx, 0xx Xxxxx By: HB and Co., Inc., its General Partner
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Fax: 000-000-0000 By: /s/ Xxxxx Xxxxxxxxx
Total principal amount of -----------------------------------------
New Debentures held: Name: Xxxxx Xxxxxxxxx
Authorized Signatory
Address: 00 Xxxxxx Xxxxxx Xxxxxx Investor: Excalibur Limited Partnership
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 By: Excalibur Capital Management, Inc.,
Fax: 000-000-0000 its General Partner
Total principal amount of
New Debentures held: By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxxx, President
Address: 0000 Xxxxx Xxxxxx, Xxxxx 000 Investor: Gundyco in trust for
Xxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 RSP 000-00000-00
Fax: 000-000-0000
Total principal amount of
New Debentures held: By: /s/ Xxxx Shoom
-----------------------------------------
Name: Xxxx Shoom, Authorized Signatory
Address: c/o Borden, Elliot, Xxxxx & Investor: MB Capital Partners
Aylen By: MSM Management Corporation,
0000-00 Xxx Xxxxx Xxxxxx its General Partner
Ottawa, Canada K1P 5Y7
Fax: 000-000-0000 : By: /s/ Xxxxxxx X. XxXxxx
-----------------------------------------
Name: Xxxxxxx X. XxXxxx, President
Total principal amount of
New Debentures held:
EXHIBIT A-1
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FORM OF NEW DEBENTURE
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EXHIBIT B-1
FORM OF NEW WARRANT
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Exhibit A-1
AMENDED AND RESTATED
7% SENIOR SECURED CONVERTIBLE DEBENTURE
NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE
BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED,
RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
[NO. ___] [US $________]
____________, 2001
Eco Soil Systems, Inc. and Subsidiaries
AMENDED AND RESTATED
7% SENIOR SECURED CONVERTIBLE DEBENTURE
[PRO RATA PORTION OF $1,650,000] due on March 31, 2001
Entire remaining balance due January 24, 2002
THIS AMENDED AND RESTATED DEBENTURE is issued jointly and severally by
Eco Soil Systems, Inc., a corporation organized and existing under the laws of
the State of Nebraska (the "Company") and its wholly-owned subsidiaries,
Agricultural Supply, Inc., a Delaware corporation, and the subsidiaries of
Agricultural Supply, Agricultural Supply de Mexico, S.A. de C.V. and Sistemas Y
Equipos Agricolas, S.A. de C.V., each incorporated in Mexico (all of such
subsidiaries collectively being referred to herein as the "Subsidiaries") and is
designated as their Amended and Restated 7% Senior Secured Convertible Debenture
due in part on March 31, 2001 with the remaining balance due on January 24,
2002. This amended and restated Debenture replaces and supersedes the 7% Senior
Secured Convertible Debenture dated January 24, 2000 issued by the Company to
the Investor (the "Original Debenture").
FOR VALUE RECEIVED, the Company promises to pay to [INVESTOR], or
permitted assigns (the "Holder"), the principal sum of:
(A) [PRO RATA PORTION OF ONE MILLION SIX HUNDRED FIFTY THOUSAND
DOLLARS ($1,650,000)] (which includes a premium equal to ten
percent (10%) of the principal required to be paid on this
date), to be paid on March 31, 2001 (the "First Maturity Date");
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(B) [THE ORIGINAL PURCHASE PRICE, LESS THE AMOUNT OF PRINCIPAL
REPAID ON THE FIRST MATURITY DATE] ($X,XXX,XXX)], plus a premium
equal to ten percent of the outstanding principal balance
remaining, to be paid on January 24, 2002 (the "Final Maturity
Date," collectively with the First Maturity Date, a "Maturity
Date"),
and to pay interest on the principal sum outstanding from time to time
quarterly in arrears at the rate of 7% per annum accruing from the date of
issuance. Accrual of interest shall commence on the first business day to occur
after the date of issuance and continue until payment in full of the principal
sum has been made or duly provided for. Quarterly interest payments under this
amended and restated Debenture shall be due and payable on March 31, June 30,
September 30 and December 31 of each year, commencing with March 31, 2001. If
any interest payment date or any Maturity Date is not a business day in the
State of New York, then such payment shall be made on the next succeeding
business day. The interest on this amended and restated Debenture is payable at
the option of the Company, in cash or in registered shares of Common Stock of
the Company, $.005 par value per share ("Common Stock"), valued at the closing
bid price of the Common Stock on the interest payment date, at the address last
appearing on the Debenture Register of the Company as designated in writing by
the Holder from time to time. The Company will pay the principal of and any
accrued but unpaid interest and premium due upon this amended and restated
Debenture on the Final Maturity Date, less any amounts required by law to be
deducted, to the registered holder of this amended and restated Debenture and
addressed to such holder at the last address appearing on the Debenture
Register. The forwarding of such check shall constitute a payment of principal
and interest hereunder and shall satisfy and discharge the liability for
principal and interest on this amended and restated Debenture to the extent of
the sum represented by such check plus any amounts deducted as required by law.
In addition, the Company agrees that within three business days following the
later of the date hereof or the closing of any Sale Transaction (defined below)
occurring at any time on or after [FEBRUARY 28, 2001] resulting in cash proceeds
to the Company, the Company will remit to the Holder fifty percent (50%) of such
proceeds [("SALE TRANSACTION PAYMENT")] up to an aggregate amount equal to the
difference of (x) Two Million Two Hundred Thousand Dollars ($2,200,000) minus
(y) the amount paid by the Company to the Investors on the First Maturity Date,
to be applied first to the repayment of accrued interest, then to principal and
any premiums. For purposes of this Amendment, a "Sale Transaction" shall mean
any of the following transactions involving the Company or any Subsidiary:
(a) sale by the Company or a Subsidiary of any equity securities
(other than the routine exercise of stock options or warrants by
employees to the extent the aggregate amount thereof is less
than $25,000) or convertible debt securities;
(b) sale of software licenses;
(c) issuance of promissory notes or letters of credit to or by the
Subsidiaries (provided, however, in the event Coast Business
Credit or First National Bank confirms in writing to the
Investors that it will provide
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such funding only if the Investors waive this subsection (c),
then the Investors agree to grant such waiver);
(d) sale or other disposition of the Bioject assets or any leased
assets;
(e) receipt of rebates from vendors;
(f) sale of inventory outside the ordinary course of business; and
(g) any other sale or disposition of assets or properties outside
the ordinary course of business.
[NOTWITHSTANDING THE FOREGOING, THE COMPANY'S OBLIGATION TO MAKE ANY
SALE TRANSACTION PAYMENT SHALL BE LIMITED TO THE EXTENT THE INVESTORS WOULD BE
PROHIBITED FROM RECEIVING SUCH PAYMENTS PURSUANT TO THE INTERCREDITOR AGREEMENT
BETWEEN THE SENIOR LENDER AND THE INVESTORS, IN WHICH CASE THE COMPANY'S
OBLIGATION TO MAKE SUCH PAYMENTS WILL CONTINUE TO ACCRUE, BUT SHALL NOT BECOME
DUE AND PAYABLE UNTIL SUCH TIME THAT ANY SUCH PROHIBITION IMPOSED BY THE SENIOR
LENDER SHALL NO LONGER APPLY.]
This amended and restated Debenture is subject to the following
additional provisions:
1. The Company shall be entitled to withhold from all payments of
principal of, and interest on, this amended and restated Debenture any amounts
required to be withheld under the applicable provisions of the United States
income tax laws or other applicable laws at the time of such payments, and
Holder shall execute and deliver all required documentation in connection
therewith.
2. This amended and restated Debenture has been issued subject to
investment representations of the original purchaser hereof and may be
transferred or exchanged only in compliance with the Securities Act of 1933, as
amended (the "Act"), and other applicable state and foreign securities laws. The
Holder shall deliver written notice to the Company of any proposed transfer of
this amended and restated Debenture. In the event of any proposed transfer of
this amended and restated Debenture, the Company may require, prior to issuance
of a new Debenture in the name of such other person, that it receive reasonable
transfer documentation including legal opinions that the issuance of the amended
and restated Debenture in such other name does not and will not cause a
violation of the Act or any applicable state or foreign securities laws. Prior
to due presentment for transfer of this amended and restated Debenture, the
Company and any agent of the Company may treat the person in whose name this
amended and restated Debenture is duly registered on the Company's Debenture
Register as the owner hereof for the purpose of receiving payment as herein
provided and for all other purposes, whether or not this amended and restated
Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary. This amended and restated Debenture has been
executed and delivered pursuant to the Convertible Debentures and Warrants
Purchase Agreement dated as of January 17, 2000 between the Company and the
original Holder, as
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amended (the "Purchase Agreement"), and is subject to the terms and conditions
of the Purchase Agreement, which are, by this reference, incorporated herein and
made a part hereof. Capitalized terms used and not otherwise defined herein
shall have the meanings set forth for such terms in the Purchase Agreement.
3. The Holder of this amended and restated Debenture is entitled, at its
option, to convert at any time commencing on the date hereof the principal
amount of this amended and restated Debenture or any portion thereof, together
with accrued but unpaid interest, into shares of Common Stock of the Company
("Conversion Shares") at a conversion price for each share of Common Stock
("Conversion Price") equal to the lowest of (a) the lower of (i) $3.00 (adjusted
for any subsequent stock splits or the like), or (ii) the greater of $1.25 or
the average of the closing bid prices on the Principal Market during the period
of five consecutive Trading Days ending the day prior to January 24, 2001, or
(b) 90% of the three lowest closing bid prices on the Principal Market during
the fifteen consecutive Trading Days ending with the last Trading Day prior to
the date of conversion; provided, however, that beginning in March 2001, the
Company shall not be required to effect conversions of indebtedness from the
Holder and other holders of the same class of Debentures in any month,
collectively and in the aggregate, in excess of the greater of (x) $315,000 x
(the principal amount outstanding following the payment made on the First
Maturity Date) / ($2,500,000), or (y) 18% of the average cumulative trading
volume of the Company's Common Stock per month based on trading volume for the
immediately preceding month x (the principal amount outstanding following the
payment made on the First Maturity Date) / ($2,500,000) (the "Monthly Conversion
Cap"). Provided, further, that any portion of the amended and restated Debenture
voluntarily redeemed by the Company during any month (excluding any Mandatory
Monthly Redemption Payment, as defined below) shall count, on a dollar for
dollar basis, against the Monthly Conversion Cap for that month. If any such
redemption (excluding any Mandatory Monthly Redemption Payment) causes the
Monthly Conversion Cap to be exceeded for a particular month, such excess shall
carryover to the next month. Likewise, any portion of the Monthly Conversion Cap
not utilized during any month shall automatically carryover to the next month
and shall thereby increase the Monthly Conversion Cap for that next month by
that amount on a dollar for dollar basis. To illustrate, if the Monthly
Conversion Cap in month 1 is $315,000 and the investors only convert $100,000 of
the debenture in month 1, then $215,000 of the unused cap shall carryover into
month 2 and the Monthly Conversion Cap in month 2 shall be $215,000 higher than
it otherwise would have been.
4. The Company shall at all times prior to the conversion in full or
payment in full of this amended and restated Debenture reserve a sufficient
number of shares of Common Stock to permit the Holder to convert the entire
principal amount of this amended and restated Debenture, including at a minimum
a number of shares on the date hereof assuming the Conversion Price were to fall
to two thirds (66.67%) of the Conversion Price applicable on the date hereof.
5. (a) [ON] April 15, 2001, and on the 15th day of each month thereafter
(each, a "Mandatory Redemption Date"), the Company shall redeem [A PRO RATA
PORTION OF $75,000] of the face value of the outstanding amount of this
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amended and restated Debenture (each, a "Mandatory Monthly Redemption Payment,"
and collectively, the "Mandatory Monthly Redemption Payments"), at a price equal
to (i) 110% of the average of the closing bid prices of the Common Stock on the
Principal Market for the five Trading Days prior to the Mandatory Redemption
Date multiplied by the number of shares which would otherwise be issuable upon
conversion of such [PRO RATA PORTION OF $75,000] on such Mandatory Redemption
Date, plus (ii) all accrued but unpaid interest on such amount[, EXCEPT TO THE
EXTENT THE INVESTORS WOULD BE PROHIBITED FROM RECEIVING SUCH PAYMENTS PURSUANT
TO THE INTERCREDITOR AGREEMENT BETWEEN THE SENIOR LENDER AND THE INVESTORS, IN
WHICH CASE THE COMPANY'S OBLIGATION TO MAKE SUCH PAYMENTS WILL CONTINUE TO
ACCRUE, BUT SHALL NOT BECOME DUE AND PAYABLE UNTIL SUCH TIME THAT ANY SUCH
PROHIBITION IMPOSED BY THE SENIOR LENDER SHALL NO LONGER APPLY]. The Company
shall make each Mandatory Monthly Redemption Payment to the Holder on the
applicable Mandatory Redemption Date, or on the next succeeding business day if
such Mandatory Redemption Date is not a business day in the State of New York.
The Company shall have no further mandatory redemption obligations after it has
repaid an aggregate of $2,200,000 under the Debentures (including the payment on
the First Maturity Date, if and when repaid).
(b) In addition to the Mandatory Monthly Redemption Payments, the
Company shall have the right to deliver to the Holder a written notice of the
Company's intent to redeem all or a part of the outstanding amount of this
amended and restated Debenture upon at least ten (10) Trading Days' prior
written notice, at a price equal to 110% of the average of the closing bid
prices of the Common Stock on the Principal Market for the five Trading Days
prior to the redemption date specified in such notice multiplied by the number
of shares which would otherwise be issuable upon conversion of the entire
principal balance hereof on such redemption date, plus all accrued but unpaid
interest. The Company shall make the redemption payment to the Holder within two
(2) Trading Days of the redemption date set forth in the Company notice of
redemption, or else the redemption notice shall be void, and the Company shall
thereafter not have any further right to redeem this amended and restated
Debenture. Subject to the provisions of Section 3, the Holder shall have the
right to convert this amended and restated Debenture until the Trading Day prior
to the Trading Day set for payment of the redemption price.
6. Notwithstanding anything to the contrary contained herein, unless the
shareholders of the Company shall have approved such issuance in accordance with
the requirements of the Principal Market, in the event that a conversion (when
aggregated with all prior conversions of portions of this amended and restated
Debenture and all other Debentures and Warrants issued pursuant to the Purchase
Agreement) requires the Company to issue a number of shares of Common Stock
which would exceed 19.9% of the number of shares of Common Stock issued and
outstanding on the date of the Original Debenture, the Company shall issue only
such number of shares of Common Stock as shall not exceed such limit and shall
pay the Holder cash in the amount of the closing price on the Conversion Date
(as defined below) for the number of shares of Common Stock in excess of such
number of shares into which this amended and restated Debenture (or the portion
thereof then being converted) is then convertible at the then-applicable
Conversion Price. Any payments under this Paragraph 6 shall be made to an
account designated in writing by the Holder to the Company when the Notice of
Conversion (as defined below) is given. The rights of all holders of Convertible
Debentures issued under the Purchase Agreement to convert their Convertible
Debentures into shares of Common Stock shall
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be prorated among such holders based on their respective percentage holdings at
the time of conversion of the aggregate outstanding amount of all Convertible
Debentures in order to comply with the aforesaid overall limitation. Any
conversion which is paid in cash under this Paragraph 6 shall be paid within
five (5) Trading Days of the Conversion Date, or else the Company shall
thereafter be unable to exercise its redemption rights under Paragraph 5(b) with
respect to the outstanding amended and restated Debentures.
7. [intentionally omitted]
8. (a) Conversion shall be effectuated by surrendering this Debenture to
the Company (if such conversion will convert all outstanding principal) together
with the form of conversion notice attached hereto as Exhibit A (the "Notice of
Conversion"), executed by the Holder of this amended and restated Debenture
evidencing such Holder's intention to convert this amended and restated
Debenture or a specified portion (as above provided) hereof, and accompanied, if
required by the Company, by proper assignment hereof in blank. Interest accrued
or accruing from the date of issuance to the date of conversion shall, at the
option of the Company, be paid in cash as set forth above or in Common Stock
upon conversion at the closing bid price on the Conversion Date. No fraction of
a share or scrip representing a fraction of a share will be issued on
conversion, but the number of shares issuable shall be rounded to the nearest
whole share. The date on which a Notice of Conversion is given (the "Conversion
Date") shall be deemed to be the date on which the Holder faxes a duly executed
Notice of Conversion to the Company. Facsimile delivery of the Notice of
Conversion shall be accepted by the Company at facsimile number (000) 000-0000
Attn.: Xxxxxx Xxxxx. Certificates representing Common Stock issued upon
conversion will be delivered to the Holder within three (3) Trading Days from
the date the Notice of Conversion is delivered to the Company. Delivery of
shares upon conversion shall be made to the address specified by the Holder in
the Notice of Conversion.
(b) The Company understands that a delay in the issuance of shares of
Common Stock upon a conversion beyond the four (4) Trading Day period described
in Paragraph 8(a) could result in economic loss to the Holder. As compensation
to the Holder for such loss, the Company agrees to pay late payments to the
Holder for late issuance of shares of Common Stock upon conversion in accordance
with the following schedule (where "No. Trading Days Late" is defined as the
number of Trading Days beyond four (4) Trading Days from the date the Notice of
Conversion is delivered to the Company).
Late Payment for Each
$5,000 of Principal Amount
No. Trading Days Late Being Converted
--------------------- --------------------------
1 $ 100
2 $ 200
3 $ 300
4 $ 400
5 $ 500
6 $ 600
7 $ 700
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Late Payment for Each
$5,000 of Principal Amount
No. Trading Days Late Being Converted
--------------------- --------------------------
8 $ 800
9 $ 900
10 $1,000
More than 10 $1,000 +$200 for each Trading Day
Late beyond 10 Trading Days
The Company shall pay any payments incurred under this Paragraph 8(b)
in immediately available funds upon demand. Nothing herein shall limit Holder's
right to pursue injunctive relief and/or actual damages for the Company's
failure to issue and deliver Common Stock to the holder, including, without
limitation, the Holder's actual losses occasioned by any "buy-in" of Common
Stock necessitated by such late delivery. Furthermore, in addition to any other
remedies which may be available to the Holder, in the event that the Company
fails for any reason to effect delivery of such shares of Common Stock within
four (4) Trading Days from the date the Notice of Conversion is delivered to the
Company, the Holder will be entitled to revoke the relevant Notice of Conversion
by delivering a notice to such effect to the Company, whereupon the Company and
the Holder shall each be restored to their respective positions immediately
prior to delivery of such Notice of Conversion, and in such event no late
payments shall be due in connection with such withdrawn conversion.
(c) If at any time (i) the Company challenges, disputes or denies the
right of the Holder to effect the conversion of this amended and restated
Debenture into Common Stock or otherwise dishonors or rejects any Notice of
Conversion delivered in accordance with this Paragraph 8 or (ii) any Company
stockholder who is not and has never been an Affiliate (as defined in Rule 405
under the Securities Act of 1933, as amended) of the Holder obtains a judgment
or any injunctive relief from any court or public or governmental authority
which denies, enjoins, limits, modifies, delays or disputes the right of the
holder hereof to effect the conversion of this amended and restated Debenture
into Common Stock, then the Holder shall have the right, by written notice, to
require the Company to promptly redeem this amended and restated Debenture for
cash at a redemption price equal to one hundred thirty percent (130%) of the
outstanding principal amount hereof and all accrued and unpaid interest hereon.
Under any of the circumstances set forth above, the Company shall be responsible
for the payment of all costs and expenses of the Holder, including reasonable
legal fees and expenses, as and when incurred in disputing any such action or
pursuing its rights hereunder (in addition to any other rights of the Holder),
subject in the case of clause (ii) above to the Company's right to control and
assume the defense of any such action. In the absence of an injunction
precluding the same, the Company shall issue shares upon a properly noticed
conversion.
(d) The Holder shall be entitled to exercise its conversion privilege
notwithstanding the commencement of any case under 11 U.S.C. Section 101 et seq.
(the "Bankruptcy Code"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. Section 362 in respect of the
Holder's conversion privilege.
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9. No provision of this amended and restated Debenture shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of, and interest on, this amended and restated Debenture at
the time, place, and rate, and in the coin or currency or shares of Common
Stock, herein prescribed. This amended and restated Debenture is a direct
obligation of the Company.
10. This amended and restated Debenture is secured, pari passu with all
other holders of the Company's 7% Senior Secured Debentures, by a security
interest in all assets of the Company and the Subsidiaries as set forth in a
security agreement dated as of January 17, 2000 among the original holders of
the Original Debentures, the Company and each Subsidiary.
11. Payment of this amended and restated Debenture is subject to the
provisions of that certain Intercreditor and Subordination Agreement between the
original holders of the Original Debentures and First National Bank of San
Diego.
12. If the Company merges or consolidates with another corporation or
sells or transfers all or substantially all of its assets to another person and
the holders of the Common Stock are entitled to receive stock, securities or
property in respect of or in exchange for Common Stock, then as a condition of
such merger, consolidation, sale or transfer, the Company and any such
successor, purchaser or transferee agree that this amended and restated
Debenture may thereafter be converted on the terms and subject to the conditions
set forth above into the kind and amount of stock, securities or property
receivable upon such merger, consolidation, sale or transfer by a holder of the
number of shares of Common Stock into which this amended and restated Debenture
might have been converted immediately before such merger, consolidation, sale or
transfer, subject to adjustments which shall be as nearly equivalent as may be
practicable. In the event of any proposed merger, consolidation or sale or
transfer of all or substantially all of the assets of the Company (a "Sale"),
the Holder hereof shall have the right to convert by delivering a Notice of
Conversion to the Company within fifteen (15) days of receipt of notice of such
Sale from the Company.
13. This amended and restated Debenture shall be governed by and
construed in accordance with the laws of the State of New York. Each of the
parties consents to the jurisdiction of the federal courts whose districts
encompass any part of the City of New York or the state courts of the State of
New York sitting in the City of New York in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by law,
any objection, including any objection based on forum non conveniens, to the
bringing of any such proceeding in such jurisdictions.
14. Any one of the following shall constitute an "Event of Default":
a. The Company or any Subsidiary shall default in the
payment of principal or interest on this amended and
restated Debenture and same shall continue for a period
of three (3) days; or
b. Any of the representations or warranties made by the
Company or any Subsidiary herein, in the Purchase
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Agreement, the Security Agreement, the Registration
Rights Agreement, or in any agreement, certificate or
financial or other written statements heretofore or
hereafter furnished by the Company or any Subsidiary in
connection with the execution and delivery of this
amended and restated Debenture, the Original Debenture
or the Purchase Agreement or the Security Agreement
shall be false or misleading in any material respect at
the time made; or
c. The Company fails to issue shares of Common Stock to the
Holder or to cause its Transfer Agent to issue shares of
Common Stock upon exercise by the Holder of the
conversion rights of the Holder in accordance with the
terms of this amended and restated Debenture, fails to
transfer or to cause its Transfer Agent to transfer any
certificate for shares of Common Stock issued to the
Holder upon conversion of this amended and restated
Debenture as and when required by this amended and
restated Debenture or the Registration Rights Agreement,
and such transfer is otherwise lawful, or fails to
remove any restrictive legend or to cause its Transfer
Agent to transfer any certificate or any shares of
Common Stock issued to the Holder upon conversion of
this amended and restated Debenture as and when required
by this amended and restated Debenture, the Purchase
Agreement or the Registration Rights Agreement and such
legend removal is otherwise lawful, and any such failure
shall continue uncured for five (5) business days; or
d. The Company or any Subsidiary shall fail to perform or
observe, in any material respect, any other covenant,
term, provision, condition, agreement or obligation of
the Company under the Purchase Agreement, the Security
Agreement, the Registration Rights Agreement or this
amended and restated Debenture and such failure shall
continue uncured for a period of thirty (30) days after
written notice from the Holder of such failure (it being
understood that if the Company cannot achieve or
maintain the effectiveness of the Registration Statement
but continues to use its best efforts to achieve such
effectiveness and otherwise complies with the terms of
the Registration Rights Agreement, its failure to
achieve or maintain effectiveness of the Registration
Statement shall not be deemed a breach for purposes of
this subsection d., so long as the Company makes timely
payment of the liquidated damages provided for in
Section 3 of the Registration Rights Agreement); or
e. The Company or any Subsidiary shall (1) admit in writing
its inability to pay its debts generally as they mature;
(2) make an assignment for the benefit of creditors or
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commence proceedings for its dissolution; or (3) apply
for or consent to the appointment of a trustee,
liquidator or receiver for its or for a substantial part
of its property or business; or
f. A trustee, liquidator or receiver shall be appointed for
the Company or any Subsidiary or for a substantial part
of its property or business without its consent and
shall not be discharged within sixty (60) days after
such appointment; or
g. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency
shall assume custody or control of the whole or any
substantial portion of the properties or assets of the
Company or any Subsidiary and shall not be dismissed
within sixty (60) days thereafter; or
h. Any money judgment, writ or warrant of attachment, or
similar process in excess of One Hundred Thousand
($100,000) Dollars in the aggregate shall be entered or
filed against the Company or any Subsidiary or any of
its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of sixty
(60) days or in any event later than five (5) days prior
to the date of any proposed sale thereunder; or
i. Bankruptcy, reorganization, insolvency 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 the Company or any
Subsidiary and, if instituted against the Company or any
Subsidiary, shall not be dismissed within sixty (60)
days after such institution or the Company or any
Subsidiary shall by any action or answer approve of,
consent to, or acquiesce in any such proceedings or
admit the material allegations of, or default in
answering a petition filed in any such proceeding; or
j. Any holder of Senior Debt or any holder of other
indebtedness of the Company or any Subsidiary for
borrowed money shall declare an Event of Default
pursuant to the documents evidencing such indebtedness,
or such other lender takes any other action to collect
any part of such debt other than regularly scheduled
payments of principal or interest;
k. The Company shall have its Common Stock suspended or
delisted from trading on a Principal Market for in
excess of two (2) Trading Days;
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l. The Company shall breach any of its obligations under
the Registration Rights Agreement; or
m. The Company shall fail to timely secure any shareholder
approval required under the Purchase Agreement.
Then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default), at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
amended and restated Debenture immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived,
anything herein or in any note or other instruments contained to the contrary
notwithstanding, and the Holder may immediately enforce any and all of the
Holder's rights and remedies provided herein or any other rights or remedies
afforded by law.
15. Nothing contained in this amended and restated Debenture shall be
construed as conferring upon the Holder the right to vote or to receive
dividends or to consent or receive notice as a shareholder in respect of any
meeting of shareholders or any rights whatsoever as a shareholder of the
Company, unless and to the extent converted in accordance with the terms hereof.
16. In no event shall the Holder be permitted to convert this amended
and restated Debenture for shares of Common Stock in excess of the amount of
this amended and restated Debenture upon the conversion of which, (x) the number
of shares of Common Stock owned by such Holder (other than shares of Common
Stock issuable upon conversion of this amended and restated Debenture) plus (y)
the number of shares of Common Stock issuable upon conversion of this amended
and restated Debenture, would be equal to or exceed 9.9% of the number of shares
of Common Stock then issued and outstanding, including shares issuable upon
conversion of this amended and restated Debenture held by such Holder after
application of this Paragraph 16. As used herein, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder. To the extent that
the limitation contained in this Paragraph 16 applies, the determination of
whether this amended and restated Debenture is convertible (in relation to other
securities owned by the Holder) and of which a portion of this amended and
restated Debenture is convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such
Holder's determination of whether this amended and restated Debenture is
convertible (in relation to other securities owned by such holder) and of which
portion of this amended and restated Debenture is convertible, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of a holder to convert
this amended and restated Debenture into shares of Common Stock at such time as
such conversion will not violate the provisions of this Paragraph 16. The
provisions of this Paragraph 16 may be waived by the Holder of this amended and
restated Debenture upon not less than 75 days' prior notice to the Company, and
the provisions of this Paragraph 16 shall continue to apply until such 75th day
(or such later date as may be specified in such notice of waiver). No conversion
of this amended and restated Debenture in violation of this Paragraph 16
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but otherwise in accordance with this amended and restated Debenture shall
affect the status of the Common Stock issued upon such conversion as validly
issued, fully-paid and nonassessable.
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IN WITNESS WHEREOF, the Company and the Subsidiaries have caused this
instrument to be duly executed by their respective officers thereunto duly
authorized.
Dated: ______________, 2001
Eco Soil Systems, Inc.
By:
----------------------------------------
Xxxxxxx Xxxxx, Chief Executive Officer
Agricultural Supply, Inc.
By:
----------------------------------------
, Chief Executive Officer
Sistemas Y Equipos Agricolas, S.A. de C.V.
By:
----------------------------------------
, Chief Executive Officer
Agricultural Supply de Mexico, S.A. de C.V.
By:
----------------------------------------
, Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the amended and
restated Debenture)
The undersigned hereby irrevocably elects to convert $ ________________
of the principal amount of the above amended and restated Debenture No. ___ into
Shares of Common Stock of ECO SOIL SYSTEMS, INC. (the "Company") according to
the conditions hereof, as of the date written below.
Date of Conversion* ___________________________________________________________
Applicable Conversion Price * _________________________________________________
Accrued Interest_______________________________________________________________
Signature______________________________________________________________________
[Name]
Address:_______________________________________________________________________
_______________________________________________________________________
