CREDIT AGREEMENT

 

 

Exhibit 10.15

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT, dated as of November 12, 2008 (this “ Agreement ”), is among Ecosphere Technologies, Inc., a Delaware corporation (“ ETI ”), Ecosphere Energy Solutions, Inc., a Florida corporation (“EES”), and Bledsoe Capital Group, LLC, a Montana limited liability company (together with its successors, assigns, endorsees and transferees, the “ Holder ”).

 

WHEREAS, the Holder has agreed to lend money to EES to be evidenced by one or more Notes (as hereinafter defined);

 

WHEREAS, in order to induce the Holder to make the loan evidenced by the Notes, EES has agreed to execute and deliver to the Holder this Agreement and to grant the Holder a security interest in certain property of EES to secure the prompt payment, performance and discharge in full of the Obligations (as hereinafter defined);

 

WHEREAS, in order to induce the Holder to advance credit to EES, ETI, the sole shareholder of EES, has agreed to grant certain security to the Holder and to guarantee EES’s obligations to Holder;

 

NOW, THEREFORE, in consideration of the agreements herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

1.

Certain Definitions . As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.  Terms used but not otherwise defined in this Agreement that are defined in Article 9 of the UCC shall have the respective meanings given such terms in Article 9 of the UCC.

 

“ Collateral ” means (a) all of ETI's and EES's rights, title and interest in and to the property described in Schedule A , (b) all products, proceeds, rents and profits of the foregoing; and (c) all of the foregoing, whether now owned of existing or hereafter acquired or arising or in which ETI and/or EES now has or hereafter acquires any rights.

 

“ Loan Documents ” means this Agreement, the Notes and any other instruments, agreements or other documents executed and/or delivered in connection herewith or therewith, excluding the Warrants.

 

“ Obligations ” means all of the liabilities and obligations (primary, secondary, direct, contingent, sole, joint or several) due or to become due, or that are now or may be hereafter existing, of ETI and EES under the Loan Documents, in each case, whether now or hereafter existing, voluntary or involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not jointly owed with others, and whether or not from time to time decreased or extinguished and later increased, created or incurred, and all or any portion of such obligations or liabilities that are paid, to the extent all or any

 

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part of such payment is avoided or recovered directly or indirectly from the Holder as a preference, fraudulent transfer or otherwise as such obligations may be amended, supplemented, converted, extended or modified from time to time.  Without limiting the generality of the foregoing, the term “Obligations” shall include, without limitation: (i) principal of, and interest on the Notes and the loans extended pursuant thereto; (ii) any and all other fees, indemnities, costs, obligations and liabilities of ETI and EES from time to time under or in connection with the Loan Documents; and (iii) all amounts (including but not limited to post-petition interest) in respect of the foregoing that would be payable but for the fact that the obligations to pay such amounts are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving ETI or EES.

 

“ Organizational Documents ” means with respect to ETI or EES, the documents by which either party was organized pursuant to its certificate of incorporation, and including its bylaws.

 

“ Shares ” means all shares and other securities issuable under the Warrants.

 

“ Security Interest ” means the security interest granted herein by ETI and EES to the Holder.

 

“ UCC ” means the Uniform Commercial Code of the State of Florida and or any other applicable law of any state or states which has jurisdiction with respect to all, or any portion of, the Collateral or this Agreement, from time to time.  It is the intent of the parties that defined terms in the UCC should be construed in their broadest sense so that the term “Collateral” will be construed in its broadest sense.  Accordingly if there are, from time to time, changes to defined terms in the UCC that broaden the definitions, they are incorporated herein and if existing definitions in the UCC are broader than the amended definitions, the existing ones shall be controlling.

 

“ Warrants ” means the three-year warrants to purchase ETI’s common stock exercisable at $0.25 per share in the form annexed as Exhibit B to be issued by ETI to the Holder contemporaneously with delivery each Note as described in Section 6 .

2.

Loan .  On the terms and conditions contained in this Agreement, the Holder shall lend to EES up to $2,000,000 (the “Loan”).  

 

3.

Advances .  

 

(a)

Upon the execution and delivery of this Agreement, the Holder shall advance to EES $500,000 by wire transfer (“Initial Advance”).  Subject to the conditions set forth in this Section 3, the Holder shall make the following advances (the Initial Advance, First Additional Advance and Second Additional Advance each being an “Advance”) of the Loan upon the written request of EES to the Holder and the Holder shall make such Advance to EES in U.S. dollars and readily available funds within five business days of the Holder’s receipt of such request by EES:

 

 

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(i)

An Advance of $500,000 (“First Additional Advance”), provided that the Holder makes a reasonable determination that the lab results from the first week of test runs on the Ecosphere Ozonix™ unit which is located at the Newfield well site (“Newfield Unit”) are satisfactory to the Holder.

 

(ii)

An Advance of $1,000,000 (“Second Additional Advance”), provided that (x) the condition set forth in (i) above has been satisfied, (y) the Holder makes a reasonable determination that the lab results from the second week of test runs on the Newfield Unit are satisfactory to the Holder, and (z) the Holder receives written, verbal or other objective verification (including, but not limited to, the Newfield Unit continuing to operate at the Newfield affiliate well site) that Newfield is reasonably satisfied with the results of operations of the Newfield Unit.

 

The Holder shall act diligently in reviewing the lab results or other information described in (i) and (ii) above and shall complete any required determinations within three business days following receipt of lab results or other relevant information. ETI agrees that each of the lab results required by (i) and (ii) above will be accompanied by a non-technical explanation of the same that can be understood by a typical layperson.

 

(b)

Notwithstanding the preceding, the Holder shall have no obligation to make the Initial Advance until EES and ETI shall have delivered to the Holder a release in the form annexed as Exhibit C-1 and Exhibit C -2 , respectively, and the Holder shall have no obligation to make any Advance until:

 

(i)

EES shall have delivered to the Holder the Note for such Advance; and

 

(ii)

EES shall have delivered to the Holder certified copies of resolutions of EES’s board of directors authorizing EES to enter into this Agreement or, after the initial Advance, a certificate of its Secretary that EES’s board of directors has not revoked the authorization.

 

4.

Acknowledgment of Limit .  EES acknowledges that, except to the extent set forth herein or another written agreement between the parties, the Holder shall have no further obligation to make any loans or advances to EES prior to the receipt of an unencumbered assignable contract with Newfield, Williams or another energy company or any affiliate the parent of which is listed on the New York Stock Exchange or the Nasdaq Stock Market and the exercise by the Holder of its Exclusive Option referred to in the following sentence. Nothing contained herein shall be construed as any modification or waiver of any rights of the Holder pursuant to that certain Exclusive Option Agreement with EES dated June 5, 2008 (“Exclusive Option”).

5.

Promissory Notes .   The amounts borrowed under this Agreement shall be evidenced by a promissory note to be issued to the Holder in the form annexed as Exhibit A (individually, a “Note” and collectively, the “ Notes ”).  

 

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6.

Warrants .  As additional consideration for the Holder making each Advance to EES, ETI shall issue Warrants to the Holder upon the execution and delivery of each Note in an amount equal to one Warrant for each $3.00 of Advance.

7.

Guaranty. ETI unconditionally and irrevocably guarantees the full and prompt payment and performance when due of all EES's obligations under the Loan Documents (the "Guaranteed Obligations").  This guaranty is an absolute guaranty of payment and not a guaranty of collection.  ETI's guaranty is absolute and unconditional irrespective of:

(i)

any lack of validity or enforceability of any provision of any Loan Document or any other agreement or instrument relating to any Loan Document, or avoidance or subordination of any of the Guaranteed Obligations;

(ii)

any change in the time, manner or place of payment of, or in any other term of, or any increase in the amount of, any of the Guaranteed Obligations, or any other amendment or waiver of any term of, or any consent to departure from any requirement of, any of the Loan Documents;

(iii)

any exchange, release or non-perfection of any lien on any Collateral, or any release or amendment or waiver of any term of any other guaranty of, or any consent to departure from any requirement of any other guaranty of, any of the Guaranteed Obligations;

(iv)

the absence of (A) any attempt to collect any of the Guaranteed Obligations from EES or (B) any other action to enforce the same or the election of any remedy by the Holder;

(v)

any waiver, consent, extension, forbearance or granting of any indulgence by the Holder with respect to any provision of any Loan Document;

(vi)

the Holder's election in any proceeding under chapter 11 the Bankruptcy Code of the application of section 1111(b)(2) of the Bankruptcy Code;

(vii)

any borrowing or grant of a security interest by the Holder, as debtor-in-possession, under section 364 of the Bankruptcy Code;

(viii)

the disallowance, under section 502 of the Bankruptcy Code, of all or any portion of the claims of the Holder for payment of any of the Guaranteed Obligations; or

(ix)

any other circumstance that might otherwise constitute a legal or equitable discharge or defense of a borrower or a guarantor.

 

8.

Representations, Warranties and Covenants of ETI and EES .  ETI and EES, jointly and severally, represent and warrant to and covenant with the Holder as follows:

 

(a)

ETI and EES each has taken all corporate action necessary for their respective authorization, execution and delivery of the Loan Documents and the Warrants

 

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and performance of all Obligations, as applicable.   The Loan Documents and the Warrants each shall constitute a valid and legally binding obligation of ETI and EES, as applicable, enforceable in accordance with their respective terms.

 

(b)

The Shares, when issued in accordance with the terms of the Warrants, will have been duly and validly issued, and will be fully paid and nonassessable (except for the payment of the exercise price under the Warrants), will have been issued in compliance with all applicable state and federal securities laws, and will be free of any restrictions against transfer other than those set forth in this Agreement and applicable securities laws.  

 

(c)

All consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings with, any federal or state governmental authority or other person on the part of ETI or EES, as applicable, required in connection with the execution, delivery and performance of the Loan Documents and the Warrants and the consummation of the transactions contemplated thereby, have been obtained, except that any notices of sale that may be required to be filed with the Securities and Exchange Commission pursuant to Regulation D promulgated under the Securities Act of 1933 (the “Securities Act”) or any state securities law authority pursuant to applicable blue sky laws may be filed within the applicable periods therefor.

 

(d)

ETI and EES have no place of business or offices where their respective books of account and records are kept (other than temporarily at the offices of its attorneys or accountants) or places where Collateral is stored or located, except as set forth on Schedule B attached hereto.  Except as disclosed on Schedule B , none of such Collateral is in the possession of any consignee, bailee, warehouseman, agent or processor.

 

(e)

ETI and/or EES, as applicable, are the sole owners of the Collateral, free and clear of any liens, security interests, encumbrances, rights or claims, and are fully authorized to grant the Security Interest.  There is not on file in any governmental or regulatory authority, agency or recording office an effective financing statement, security agreement, license or transfer or any notice of any of the foregoing (other than those that will be filed in favor of the Holder pursuant to this Agreement) covering or affecting any of the Collateral.  

 

(f)

No written claim has been received that any Collateral or ETI's or EES’s use of any Collateral violates the rights of any third party. There has been no adverse decision to ETI's and/or EES's claim of ownership rights in or exclusive rights to use the Collateral in any jurisdiction or to ETI's and/or EES's right to keep and maintain the Collateral in full force and effect, and there is no proceeding involving said rights pending or, to the best knowledge of ETI or EES, threatened before any court, judicial body, administrative or regulatory agency, arbitrator or other governmental authority.

 

(g)

ETI and EES, as applicable, shall maintain the Collateral at the locations set forth on Schedule B attached hereto and may not relocate such tangible Collateral

 

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without delivering to the Holder at least three days prior to such relocation (i) written notice of such relocation and the new location thereof (which must be within the United States) and (ii) evidence that appropriate financing statements under the UCC and other necessary documents have been filed and recorded and other steps have been taken to perfect the Security Interest to create in favor of the Holder a valid, perfected and continuing perfected first priority lien in the Collateral.

 

(h)

This Agreement creates in favor of the Holder a valid security interest in the Collateral securing the payment and performance of the Obligations.  Upon making the filings described in the immediately following subsection, all security interests created hereunder in any Collateral which may be perfected by filing UCC financing statements shall have been duly perfected.  Without limiting the generality of the foregoing, except for the filing of said financing statements, no consent of any third parties and no authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for (i) the execution, delivery and performance of the Loan Documents, (ii) the creation or perfection of the Security Interest created hereunder in the Collateral or (iii) the enforcement of the rights of the Holder with respect to the Obligations.

 

(i)

ETI and EES hereby authorize the Holder to file one or more financing statements under the UCC, with respect to the Security Interest, with the proper filing and recording agencies in any jurisdiction deemed proper by the Holder.

 

(j)

The execution, delivery and performance of the Loan Documents and the Warrants by ETI and EES, as applicable, does not (i) violate any of the provisions of any Organizational Documents of ETI or EES, as applicable, or any judgment, decree, order or award of any court, governmental body or arbitrator or any applicable law, rule or regulation applicable to ETI and/or EES, as applicable or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing ETI 's or EES’s debt or otherwise) or other understanding to which ETI or EES, as applicable, is a party or by which any property or asset of ETI or EES is bound or affected.  If any, all required consents (including, without limitation, from stockholders or creditors of ETI and EES) necessary for ETI and EES, as applicable, to enter into and perform their obligations hereunder have been obtained.

 

(k)

ETI and EES, as applicable, shall at all times maintain (1) the liens and Security Interest provided for hereunder as valid and perfected first priority liens and security interests in the Collateral in favor of the Holder until this Agreement and the Security Interest hereunder shall be terminated upon payment in full of the Notes and (2) the Collateral free and clear of all liens and encumbrances, other than the Security Interest and liens and encumbrances in favor of the Holder.  ETI and EES, as applicable, each hereby agrees to defend the same against the claims of any and all persons and entities, and to safeguard and protect all Collateral for the account of the Holder.  At the request of the Holder, ETI and EES, as applicable, will pay the cost of filing UCC

 

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financing statements in all public offices wherever filing is, or is deemed by the Holder to be, necessary or desirable to effect the rights and obligations provided for herein.  Without limiting the generality of the foregoing, ETI and EES, as applicable, shall pay all fees, taxes and other amounts necessary to maintain the Collateral and the Security Interest hereunder.  

 

(l)

Except as provided in this Agreement, ETI and EES will not transfer, pledge, hypothecate, encumber, license, sell or otherwise dispose of any of the Collateral (except for non-exclusive licenses granted by ETI or EES in the ordinary course of their business and sales of inventory by EES in its ordinary course of business) without the prior written consent of the Holder.

 

(m)

ETI and EES, as applicable, shall keep and preserve the equipment, inventory and other tangible Collateral in good condition, repair and order and shall not operate or locate any such Collateral (or cause to be operated or located) in any area excluded from insurance coverage.

 

(n)

ETI and EES, as applicable, shall maintain with financially sound and reputable insurers, insurance with respect to the Collateral, against loss or damage of the kinds and in the amounts customarily insured against by entities of established reputation having similar properties similarly situated and in such amounts as are customarily carried under similar circumstances by other such entities and otherwise as is prudent for entities engaged in similar businesses but in any event sufficient to cover the full replacement cost thereof.  ETI and EES, as applicable, shall cause each insurance policy issued in connection herewith to provide, and the insurer issuing such policy to certify to the Holder, that (a) the Holder will be named as lender loss payee and additional insured under each such insurance policy; (b) if such insurance be proposed to be cancelled or materially changed for any reason whatsoever, such insurer will promptly notify the Holder and such cancellation or change shall not be effective as to the Holder for at least 30 days after receipt by the Holder of such notice, unless the effect of such change is to extend or increase coverage under the policy; and (c) the Holder will have the right (but no obligation) at its election to remedy any default in the payment of premiums within 30 days of notice from the insurer of such default.  

 

(o)

ETI and EES shall promptly execute and deliver to the Holder such further deeds, mortgages, assignments, security agreements, financing statements or other instruments, documents, certificates and assurances and take such further action as the Holder may from time to time request and may in its sole discretion deem necessary to perfect, protect or enforce the Holder’s security interest in the Collateral.

 

(p)

ETI and EES shall permit the Holder and its representatives and agents to inspect the Collateral during normal business hours and upon reasonable prior notice, and to make copies of records pertaining to the Collateral as may be reasonably requested by the Holder from time to time.

 

 

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(q)

ETI and EES will from time to time, at the joint and several expense of ETI and EES, promptly execute and deliver all such further instruments and documents, and take all such further action as may be necessary or desirable, or as the Holder may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Holder to exercise and enforce its rights and remedies hereunder and with respect to any Collateral or to otherwise carry out the purposes of this Agreement.

 

(r)

ETI's and EES's Federal Employer Identification Numbers and their organizational identification numbers are set forth on Schedule C .

 

(s)

Neither ETI nor EES shall change its name, type of organization or jurisdiction of organization without first giving the Holder three days prior written notice of its intended change.

 

(t)

The proceeds of the Loan shall be used primarily for the manufacturing of of Ozonix™ units, including components and related equipment, and for working capital and related expenses for the Ozonix™ business of EES.

 

9.

Representations and Warranties of the Holder .  

 

(a)

The Holder has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the purchase of the Notes.  This Agreement, when executed and delivered by the Holder, will constitute a valid and legally binding obligation of the Holder, enforceable against the Holder in accordance with its terms.

 

(b)

The Holder is acquiring the Notes and the Warrants to be purchased by the Holder for the Holder’s own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distribution or selling the same, and, except as contemplated by this Agreement, the Holder has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for the disposition thereof.  The Holder understands that the Notes, the Warrants and the common stock issuable upon exercise of the Warrants in accordance with their respective terms may not be sold, transferred or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the Notes, the Warrants and the common stock or an available exemption from registration under the Securities Act, the Notes, the Warrants and the common stock must be held indefinitely.

 

(c)

The Holder understands that the Notes, the Warrants and the common stock issuable upon exercise of the Warrants are not registered under the Securities Act in reliance on an exemption from registration under the Securities Act pursuant to Section 4(2) thereof and Rule 506 thereunder for the sale contemplated by this Agreement and the issuance of the Notes and the Warrants and the shares of common stock issuable upon exercise of the Warrants will bear a restrictive legend.

 

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(d)

The Holder acknowledges that the purchase of the Notes and the Warrants and any shares of common stock issuable upon exercise of the Warrants entails a high degree of risk , including the risk factors contained in filings by ETI with the Securities and Exchange Commission including its annual report on Form 10-KSB for the year ended December 31, 2007 and in other publicly available information.  These risks include, without limitation, the inability of ETI to achieve its business plan objectives, including the successful commercialization of its Ozonix™ process and the risk of a failure to pay in full the principal and interest of the Notes in accordance with its terms.

 

(e)

The Holder represents that the Holder has had an opportunity to ask questions and receive answers from ETI regarding the terms and conditions of this Agreement and the reasons for this offering of the Notes and the Warrants, the business prospects of ETI, the risks attendant to ETI’s business, and the risks relating to an investment in ETI, including the terms and conditions of the Notes and Warrants and further acknowledges that the Holder has had an opportunity to obtain additional information (to the extent ETI possesses such information and could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to such Holder or to which such Holder had access. ETI will put such information in writing if requested by the Holder. The Holder acknowledges the receipt (without exhibits) of ETI’s annual report on Form 10-KSB with respect to the year ended December 31, 2007, the quarterly report on Form 10-QSB for the quarter ended March 31, 2008,  the quarterly report on Form 10-QSB for the quarter ended June 30, 2008, the quarterly report on Form 10-QSB for the quarter ended September 30, 2008, and the current reports on Form 8-K (as well as any other reports) filed prior to the time the Holder submits his subscription.  These reports will be made available to the Holder upon written request by the Holder.  The Holder is relying solely upon these reports, other public information distributed by ETI and other written information prepared by ETI.  The Holder also acknowledges that ETI may pay a finder’s fee in connection with his investment; provided, however, that any such finder’s fee shall be the sole responsibility of ETI.

 

(f)

The Holder represents that the Holder is an “accredited investor” within the meaning of the applicable rules and regulations promulgated under the Securities Act or is otherwise experienced in evaluating and investing in private placement transactions of securities in similar circumstances and acknowledges that the Holder:

 

can bear the economic risk of such Holder’s investment;

 

has such knowledge and experience in financial and business

matters that such Holder is capable of evaluating the merits and

risks of the investment in the securities comprising the Notes.

 

Further, the Holder:

 

has adequate means of providing for his, her or its current financial

needs and contingencies,

 

 

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is able to bear the substantial economic risks of an investment in

the securities comprising the Notes for an indefinite period of time,

 

has no need for liquidity in such investment,

 

has made commitments to investments that are not readily

marketable which are reasonable in relation to the Holder’s net worth, and

 

can afford a complete loss of such investment.

 

(g)

The Holder acknowledges that the Holder is purchasing the Notes and the Warrants for an indefinite period of time , has no need for liquidity in such investment, has made commitments to investments that are not readily marketable which are reasonable in relation to the undersigned’s net worth and can afford a complete loss of such investment.   

 

(h)

The Holder has such knowledge and experience in financial, tax and business matters so as to enable the Holder to utilize the information made available to it in connection with the offering of the securities comprising the Notes and the Warrants to evaluate the merits and risks of an investment in the securities comprising the Notes and the Warrants and to make an informed investment decision with respect thereto.

 

(i)

The Holder is not relying on ETI with respect to the tax and other economic considerations of an investment in the securities comprising the Notes and the Warrants, and the Holder has relied on the advice of, or has consulted with, only the Holder’s own advisors.  

 

(j)

The Holder is not subscribing for the securities comprising the Notes and the Warrants as a result of or subsequent to any advertisement, articles, notice or other communication published in any newspaper, television or radio or presented at any seminar or meeting, or any solicitation of a subscription by a person not previously known to the undersigned in connection with investments in securities generally.

 

(k)

The information furnished by the Holder contained in this Agreement including Schedule D , is true and correct in all material respects, including any information which the Holder has furnished and will furnish to ETI with respect to such Holder’s financial position, business experience and residence, is correct and complete as of the date of this Agreement and if there should be any material change in such information prior to ETI’s acceptance of this Agreement and the depositing of the payment described above, the Holder will furnish such revised or corrected information to ETI.  The representations, warranties and agreements of the Holder contained herein shall survive the execution and delivery of this Agreement and the purchase of the Notes and the Warrants.

 

(l)

The Holder acknowledges that the Holder has received notice of the Holder’s possible right under applicable Florida law to rescind the purchase of the securities

 

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comprising the Notes and the Warrants within three business days following the payment of the purchase price as set forth in Section 25 hereof.

 

10.

Holder’s Representations and Warranties Concerning Suitability of Accredited Investor, Etc.   Attached as Schedule D is a Suitability Questionnaire which shall be submitted by the Holder to EES in addition to the signature page of this Agreement.

 

11.

Indemnification by the Holder .  The Holder agrees to indemnify and hold ETI and its affiliates and their agents, representatives and employees harmless from and against all liability, damage, loss, cost and expense (including reasonable attorneys’ fees) which they may incur by reason of any material inaccuracy or omission in the information furnished by such Holder herein or any material breach of the representations and warranties made by such Holder on Schedule D .

 

12.

Grant of Security Interest in Collateral . As an inducement for the Holder to extend the loan as evidenced by the Notes and to secure the complete and timely payment, performance and discharge in full, as the case may be, of all of the Obligations, ETI and EES hereby grant the Holder a security interest in and to, a lien upon and a right of set-off against all of ETI's and EES’s right, title and interest of whatsoever kind and nature in and to, the Collateral.

 

13.

Defaults . The following events shall be “Events of Default”:

 

(a)

The failure to pay principal or any interest under any of the Notes when due;

 

(b)

Any representation or warranty of ETI or EES in this Agreement shall prove to have been incorrect in any material respect when made;

 

(c)

The failure by ETI or EES to observe or perform any of the other Obligations; or

 

(d)

Any Event of Default under the Notes (as defined in the Notes).

 

Notwithstanding the preceding, the Holder shall provide ETI with written notice of the occurrence of any event described in Sections 13(a) or (c), and in the event ETI or EES cures such event within five (5) business days with respect to an event described in Section 13(a) and within fifteen (15) business days with respect to an event described in Section 13(c) following receipt of notice from Secured Party, such event shall not be deemed an Event of Default hereunder.

 

14.

Duty to Hold in Trust . Upon the occurrence of any Event of Default and at any time thereafter, ETI and/or EES shall, upon receipt of any revenue, income, dividend, interest or other sums subject to the Security Interest, whether payable pursuant to the Notes or otherwise, or of any check, draft, note, trade acceptance or other instrument evidencing an obligation to pay any such sum, hold the same in trust for the Holder and shall forthwith endorse and transfer any

 

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such sums or instruments, or both, to the Holder for application to the satisfaction of the Obligations.

 

15.

Rights and Remedies Upon Default .

 

(a)

Upon the occurrence and during the continuation of any Event of Default, the Holder shall have the right to exercise all of the remedies conferred under the Loan Documents and all the rights and remedies of a secured party under the UCC.  Without limitation, the Holder shall have the following rights and powers:

 

(i)

The Holder shall have the right (but not the obligation) to take possession of the Collateral and, for that purpose, enter, with the aid and assistance of any person, any premises where the Collateral, or any part thereof, is or may be placed and remove the same, and ETI and/or EES shall assemble the Collateral and make it available to the Holder at places which the Holder shall reasonably select, whether at ETI 's and/or EES’s premises or elsewhere, and make available to the Holder, without rent, all of ETI’s and/or EES’s respective premises and facilities for the purpose of the Holder taking possession of, removing or putting the Collateral in saleable or disposable form.

 

(ii)

The Holder shall have the right (but not the obligation) to ex