EXECUTION FORM
ECO SOIL SYSTEMS, INC.
00000 XXXXXXXXX XXXX
XXX XXXXX, XXXXXXXXXX 00000
Dated as of November 12, 1999
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A
AMENDMENT NO. 3 AND WAIVER
Ladies and Gentlemen:
Reference is made to the Note and Warrant Purchase
Agreement, dated as of August 25, 1998, as amended by a letter agreement,
dated March 31, 1999, and by Amendment Xx. 0, xxxxx xx xx Xxxx 00, 0000 (xx
so amended, the "Note Agreement"), among Eco Soil Systems, Inc., a Nebraska
corporation (the "Company"), and Albion Alliance Mezzanine Fund, L.P. and
Paribas Capital Funding LLC (collectively, the "Purchasers"). The Purchasers
hold 100% of the Notes outstanding under the Note Agreement. Capitalized
terms used herein without definition have the meanings specified therefor in
the Note Agreement.
The Company hereby agrees with the Purchasers as follows:
1. LIMITED WAIVER. The Company represents and
warrants that, except for (a) the Company's non-compliance with sections
10.2(a), (b) and (c) of the Note Agreement for the quarter ended September
30, 1999, (b) any past failure of the Company to have provided monthly
financial reports of the type and within the time period set forth in section
7(e) of the Note Agreement and (c) any past failure of the Company to have
provided notice of its non-compliance with the covenants referred to in this
paragraph 1 within the time period set forth in section 7(h) of the Note
Agreement (the "Existing Defaults"), no condition or event exists which
constitutes an Event of Default or Potential Event of Default. In
consideration of the agreements of the Company set forth hereinafter, the
Purchasers hereby waive the Existing Defaults. This waiver is limited to the
Existing Defaults and may not be construed to extend to any other or
subsequent Events of Default, whether or not disclosed.
2. AMENDMENT OF SECTION 11. Section 11 of the Note
Agreement is hereby amended to add after subdivision (j) thereof the
following new subdivision (k):
"(k) if the Amendment No. 4 Transactions shall not
have been consummated to the satisfaction of the Purchasers on or prior
to December 10, 1999;"
3. ADDITIONAL DEFINITION. The following defined term
is hereby added to section 14 of the Note Agreement in the appropriate
alphabetical order:
"AMENDMENT NO. 4 TRANSACTIONS: collectively, the
following instruments and transactions:
(a) the execution and delivery by the
Company of Amendment No. 4 to this Note Agreement, providing
for:
(i) the amendment of sections 10.2(a), (b)
and (c) of this Agreement for the fiscal quarters
ending December 31, 1999, March 31, 2000 and June 30,
2000, to replace the ratios set forth therein with a
requirement that the Company have EBITDA for such
quarters of not less than zero, negative $750,000 and
$2,700,000, respectively; and for the fiscal quarter
ending September 30, 2000, to amend the ratios set
forth therein to be not greater than 4.31 to 1, for
section 10.2(a), not greater than 6.15 to 1, for
section 10.2(b), and not less than 1.5 to 1, for
section 10.2(c);
(ii) the amendment of sections 10.2(d) of
this Agreement for the fiscal year 2000 to prohibit
the Company from making Capital Expenditures of more
than $1,000,000 for such fiscal year;
(iii) the amendment of section 10.1 of this
Agreement to provide that the references therein to
section 10.2 mean section 10.2 as in effect prior to
the amendments contemplated by paragraph (i) above;
(iv) the addition to section 9 of this
Agreement of a new provision requiring the
2
Company to apply the cash proceeds received by the
Company or its Subsidiaries after the date of the
Amendment No. 4 Transactions as consideration for the
issuance of capital stock or securities convertible
into or exercisable for capital stock, as follows:
(x) the first $7,500,000 of such proceeds to the
prepayment of the Notes, without premium, and accrued
interest thereon; (y) the next $2,500,000 of such
proceeds to be retained by the Company and (z) 50% of
all proceeds received after the first $10,000,000 to
be applied to the prepayment of the Notes, without
premium, and accrued interest thereon; (excluding,
however, from any of the proceeds referred to in this
paragraph (iv) the first $5,000,000 of the proceeds
of the issuance of capital stock to Palladin Group or
other investors approved by the Purchasers and
amounts received pursuant to the exercise of employee
stock options or any outstanding warrants);
(v) the amendment of section 9 to eliminate
the premium on voluntary prepayment of the Notes; and
(vi) the payment of the reasonable fees and
expenses of counsel for the Purchasers incurred in
connection with Amendment No. 3 and 4 to this
Agreement;
or, in each case, such other amendments as shall be
satisfactory to the Purchasers;
(b) the execution and delivery by the
Company of an amendment to the Warrants, (i) advancing the
commencement of the exercise period of the Warrants from
February 25, 2000 to the date of the Amendment No. 4
Transactions; (ii) extending the expiration of the exercise
period from August 25, 2003 to August 25, 2005 and (iii)
adding a provision satisfactory to the Purchasers requiring
that, in the event any exercise of Warrants (including the new
warrants provided in paragraph (d) below) causes such any
Purchaser to violate any provision of applicable law, the
Company will either cooperate with such Purchaser
3
in any efforts by it to dispose of some or all of it shares of
Common Stock so as to avoid such violation or use its best
efforts to create a non-voting stock to be issued to such
Purchaser upon exercise in lieu of the Common Stock;
(c) the issuance to the Purchasers of a
number of shares of Common Stock equal to X in the following
formula (each Purchaser to receive its PRO RATA share of such
number of shares):
X = 1,275,000 / Q
Q = the lesser of (i) $4.00 and (ii) the average of the
closing price for the Common Stock for the ten consecutive
trading days immediately prior to the date of the Amendment
No. 4 Transactions;
(d) the issuance to the Purchaser of new
warrants, having the same exercise price, exercise period and
other terms as the Warrants (as amended pursuant to paragraph
(b) above), for the purchase of a number of shares of Common
Stock equal to Y in the following formula (each Purchaser to
receive its PRO RATA share of such number of shares):
Y = [262,500 x (8 / Q)] - 262,500
Q has the meaning specified in paragraph (c);
(e) the execution and delivery by the
Company of an agreement to issue to the Purchasers on March
31, 2000, an additional number of shares of Common Stock equal
to the greater of 1,000,000 and 5% of the fully-diluted Common
Stock on the date of the Amendment No. 4 Transactions (each
Purchaser to receive its PRO RATA share of such number of
shares) if on such date the Notes shall not have been prepaid;
such amount to be reduced in the case of a partial prepayment
of the Notes, in proportion to the amount of the Notes
prepaid; such share quantities to be adjusted in the event of
share splits on or prior to such date;
(f) the execution and delivery by the
Company of an agreement conferring on the shares issued
pursuant to the foregoing paragraphs (c),
4
(d) and (e) registration rights comparable to the registration
rights currently set forth in the Warrants;
(g) the timely payment on November 25, 1999,
of the interest payment due on the Notes on that date; and the
payment into an escrow account on or prior to December 10,
1999, on terms satisfactory to the Purchasers, of an amount
sufficient to pay the interest payment to become due on the
Notes on February 25, 2000; and
(h) the delivery by the Company to the
Purchaser of a certificate to the effect that, after giving
effect to the above transactions, no Event of Default or
Potential Event of Default exists."
4. RATIFICATION. Except as amended hereby, all of the
provisions of the Note Agreement shall remain in full force and effect.
5. MISCELLANEOUS. This Amendment and Waiver shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, whether so expressed or not. THIS
AMENDMENT AND WAIVER SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND
GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Amendment and
Waiver are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof. This Amendment and Waiver may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
[THIS SPACE IS LEFT BLANK INTENTIONALLY]
5
If the Purchasers are in agreement with the foregoing, please
sign the form of agreement on the accompanying counterparts of this letter and
return one of the same to the Company, whereupon this letter shall become a
binding agreement between the Purchasers and the Company.
Very truly yours,
ECO SOIL SYSTEMS, INC.
By:_________________________________
The foregoing Amendment is
hereby agreed to as of the
date hereof.
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC,
its General Partner
By:___________________________
Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
PARIBAS CAPITAL FUNDING LLC
By: ___________________________
Name: Xxxx Xxxxx
Title: Managing Director
6
