EXHIBIT 10
AMENDMENT AND FORBEARANCE AGREEMENT
AMENDMENT AND FORBEARANCE AGREEMENT (this "Agreement"), dated as of
September19, 2007, by and among EARTHFIRST TECHNOLOGIES, INCORPORATED, a Florida
corporation ("EFTI"), ELECTRIC MACHINERY ENTERPRISES, INC., a Florida
corporation ("EME"), PRIME POWER RESIDENTIAL, INC., a Florida corporation
("PPR"), EARTHFIRST RESOURCES, INC., a Florida corporation ("EFR"), WORLD
ENVIRONMENTAL SOLUTIONS COMPANY, INC., a Florida corporation ("WESCO"),
EARTHFIRST INVESTMENTS, INC., a Florida corporation ("EF Investments"), EM
ENTERPRISE RESOURCES, INC., a Florida corporation ("Enterprise") and EME MODULAR
STRUCTURES, INC., a Florida corporation ("EME Modular" collectively with EFTI,
EME, PPR, EFR, WESCO, EF Investments and Enterprise, the "Companies" and each a
"Company") and LAURUS MASTER FUND, LTD. ("Laurus").
W I T N E S S E T H:
WHEREAS, Laurus and EFTI are parties to a Securities Purchase Agreement
dated as of March 30, 2005 (as the same may have heretofore been or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time, the "Securities Purchase Agreement") pursuant to
which EFTI issued and Laurus purchased a Secured Convertible Term Note dated
March 30, 2005 in the original principal amount of $3,000,000 (as the same may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time, "Term Note");
WHEREAS, Laurus and the Companies have entered into a Security Agreement
dated as of March 30, 2005 (as the same may have heretofore been or may
hereafter be further amended, modified, supplemented, extended, renewed,
restated or replaced from time to time, the "Security Agreement") pursuant to
which Laurus provides certain financial arrangements to the Companies as
evidenced by a Secured Revolving Note dated March 30, 2005 in the principal
amount of $5,000,000 (as the same may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced from time to time, the
"Revolving Note") and the Secured Convertible Minimum Borrowing Note dated as of
March 30, 2005 in the original principal amount of $1,000,000 (as the same may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced from time to time, the "Minimum Borrowing Note"); and
WHEREAS, as of the date hereof, the Designated Defaults (as hereafter
defined) have occurred and are continuing under the Securities Purchase
Agreement, the Term Note, the Security Agreement, the Revolving Note and the
Minimum Borrowing Note by reason of which Laurus has no obligation to make any
additional Loans and Laurus has the full legal right to exercise its rights; and
WHEREAS, each Company has requested that Laurus forbear for a period of
time from exercising its rights and remedies as respects the Designated
Defaults; and
WHEREAS, Laurus is willing to agree to establish a period of forbearance,
on the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing, and the respective
agreements, warranties and covenants contained herein, the parties hereto hereby
agree, covenant and warrant as follows:
SECTION 1. DEFINITIONS
1.1. Interpretation. All capitalized terms used herein (including the
recitals hereto) shall have the respective meanings assigned thereto in the
Financing Agreements, as applicable, unless otherwise defined herein.
1.2. Additional Definitions. As used herein, the following terms shall have
the respective meanings given to them below:
(a) "Approved Assets" shall mean those assets of EME which Laurus, in
writing, approves for sale in connection with the Surplus Asset Sale.
(b) "Designated Defaults" shall mean the Events of Default as more
particularly identified on Exhibit A hereto, existing on or before the
Forbearance Effective Date and continuing thereafter.
(c) "Event of Default" shall have the meaning given to such term under the
Financing Agreements.
(d) "Financing Agreements" shall mean collectively, the Securities Purchase
Agreement, the Term Note, the Related Agreements (as such term is defined in the
Securities Purchase Agreement), the Security Agreement, the Revolving Note, the
Minimum Borrowing Note, the Ancillary Agreements (as such term is defined in the
Security Agreement) and all other agreements, documents and instruments at any
time executed and/or delivered in connection therewith or this Agreement.
(e) "Forbearance Default" shall have the meaning set forth in Section
3.2(c) of this Agreement.
(f) "Forbearance Effective Date" shall have the meaning given to such term
in Section 6 of this Agreement.
(g) "Forbearance Period" shall have the meaning set forth in Section 3.2(a)
of this Agreement.
(h) "Haines City Property Mortgage" shall mean the Mortgage Deed,
Assignment of Rents and Leases and Security Agreement dated as of March 30, 2005
by EME Modular in favor of Laurus covering the real property and improvements
thereon of EME Modular located in Polk County, Florida.
(i) "Haines City Property Refinancing" shall mean mortgage financing
obtained by any Company or any entity controlled by or affiliated with John
Stanton, secured by the real property covered by the Haines City Property
Mortgage resulting in Net Cash Proceeds of at least $1,800,000.
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(j) "Net Cash Proceeds" shall mean proceeds received in cash from (a) any
Sale of property, net of (i) the customary out-of-pocket cash costs, fees and
expenses paid or required to be paid in connection therewith, (ii) taxes paid or
reasonably estimated to be payable as a result thereof and (iii) any amount
required to be paid or prepaid on indebtedness (other than the Obligations)
secured by the property subject thereto or (b) any incurrence of indebtedness,
net of brokers', advisors' and investment banking fees and other customary
out-of-pocket underwriting discounts, commissions and other customary
out-of-pocket cash costs, fees and expenses, in each case incurred in connection
with such transaction.
(k) "Surplus Asset Sale" shall mean the sale of Approved Assets by EME that
results in Net Cash Proceeds of at least $250,000.
SECTION 2. ACKNOWLEDGMENT
2.1. Acknowledgment of Obligations. Each Company hereby acknowledges,
confirms and agrees that as of the close of business on the date hereof, (a)
EFTI is indebted to Laurus under the Term Note in the principal amount of
$1,300,000, (b) the Companies are indebted to Laurus under the Minimum Borrowing
Note in the principal amount of $1,000,000, and (c) the Companies are indebted
to Laurus under the Revolving Note in the principal amount of $4,324,159.15,
together with interest accrued thereon, and fees, costs, expenses and other
charges payable to Laurus pursuant to the terms of the Financing Agreements
(collectively, "the Amount") and (b) the Amount is a valid and unconditional
obligation of each Company to Laurus and is due and owing without offset,
defense or counterclaim of any kind, nature or description whatsoever.
2.2. Acknowledgment of Security Interests. Each Company hereby
acknowledges, confirms and agrees that Laurus has an enforceable and perfected
first-priority liens upon and security interests in the Collateral heretofore
granted to Laurus pursuant to the Financing Agreements or otherwise granted to
or held by Laurus, subject only to those liens and security interest listed on
Schedule 1 to this Agreement. Each Company hereby expressly waives any and all
rights to contest and/or challenge in any manner whatsoever Laurus' perfected
first-priority liens upon and security interests in the Collateral and will
execute any and all documents, instruments and agreements as shall be required
by Laurus from time to time to further evidence, acknowledge and confirm the
same.
2.3. Binding Effect of Documents. Each Company hereby acknowledges,
confirms and agrees that: (a) each Financing Agreement to which it is a party
has been duly executed and delivered to Laurus by such Company, and each is in
full force and effect as of the date hereof, (b) the agreements and obligations
of each Company contained in the Financing Agreements and this Agreement
constitute the legal, valid and binding obligations of each Company, enforceable
against it in accordance with their respective terms, and no Company has any
valid defense to the enforcement of such obligations and (c) Laurus is and shall
be entitled to the rights, remedies and benefits provided for in the Financing
Agreements, this Agreement and applicable law; it being understood that, during
the Forbearance Period (as hereinafter defined), Laurus has agreed to forbear
from exercising certain of its rights and remedies under the terms and
conditions of this Agreement.
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SECTION 3. FORBEARANCE IN RESPECT OF CERTAIN EVENTS OF DEFAULT
3.1. Acknowledgment of Default. Each Company hereby acknowledges and agrees
that the Designated Defaults have occurred and are continuing, each of which
entitles Laurus to exercise its rights and remedies under the Financing
Agreements, applicable law or otherwise and each Company hereby represents and
warrants that as of the date hereof no other Events of Default under the
Financing Agreements exist. Laurus has not waived, presently does not intend to
waive and may never waive such Designated Defaults and nothing contained herein
or the transactions contemplated hereby shall be deemed to constitute in any
manner whatsoever any such waiver. Each Company hereby acknowledges and agrees
that Laurus has the presently exercisable right to declare the Obligations to be
immediately due and payable under the terms of the Financing Agreements, but
Laurus has agreed not to exercise such right during the Forbearance Period.
3.2. Forbearance.
(a) In reliance upon the representations, warranties and covenants of each
Company contained in this Agreement, during the period (the "Forbearance
Period") commencing on the Forbearance Effective Date (as hereinafter defined)
and ending on the earlier to occur of (i) December 31, 2008 and (ii) the
occurrence of and written notice from Laurus of any Forbearance Default, Laurus
will forbear from exercising its rights and remedies under the Financing
Agreements and applicable law in respect of or arising out of the Designated
Defaults. Notwithstanding the foregoing, nothing contained herein shall impair
in any manner whatsoever Laurus' right to administer the credit facility and/or
to collect, receive and/or apply proceeds of each Company's accounts receivable
and/or any other Collateral to the Obligations, in each case, in accordance with
the terms of the Financing Agreements and this Agreement.
(b) Upon the termination of the Forbearance Period, the agreement of Laurus
to forbear shall automatically and without further action terminate and be of no
further force and effect, it being expressly agreed that the effect of such
termination will be to permit Laurus to exercise such rights and remedies
immediately, including, but not limited to (i) ceasing to make any further Loans
and (ii) the acceleration of all Obligations; in either case, without any
further notice, passage of time or forbearance of any kind.
(c) The occurrence of any one or more of the following events after the
Forbearance Effective Date shall constitute a Forbearance Default: (i) the
occurrence of any Event of Default under any Financing Agreement, other than a
Designated Default; (ii) any representation or warranty of any Company herein
shall be false, misleading or incorrect in any material respect; (iii) other
than Designated Defaults, any Company's failure to comply with the covenants,
conditions and agreements contained herein or in any other agreement, document
or instrument at any time executed and/or delivered by any Company with, to or
in favor of Laurus; (iv) except as provided on Exhibit B, any Person, other than
Laurus, shall proceed on a material unstayed levy, attachment or similar
execution-type process against any Company or any Company's property or assets
or (v) for any reason whatsoever, other than for reasonable cause, the
Consultant (as defined below) shall not (A) be continuously employed by EME or
(B) have the authority, duties and responsibilities required pursuant to Section
4.1 below.
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3.3. Reservation of Rights. Subject to the terms and condition of this
Agreement, Laurus has not waived any of such rights or remedies, and no delay on
its part in exercising any such rights or remedies, should be construed as a
waiver of any such rights or remedies.
3.4. Payment Obligations During Forbearance Period. As of the Forbearance
Effective Date (a) principal payments as respects the Term Note shall be payable
in accordance with Section 4.19 of this Agreement and the Obligations shall be
subject to mandatory prepayments as set forth in this Agreement and (b) in
accordance with Section 4.3, interest shall continue to accrue and be payable.
SECTION 4. AMENDMENTS AND SUPPLEMENTARY AGREEMENTS
4.1. Consultant. Concurrent with the execution of this Agreement, EME
agrees to retain a consulting firm selected by EME and acceptable to Laurus (the
"Consultant"). The Consultant shall have the authority and duties comparable to
a chief operating officer and shall be responsible for the oversight of EME's
restructuring efforts and daily operations, including, without limitation,
approval of all expenditures. The Consultant shall report directly to EME's
board of directors. The Companies shall fully cooperate with the Consultant and
shall authorize the Consultant to provide such information and reports from time
to time with respect to the Companies and their financial condition, business,
assets, liabilities and prospects, as Laurus shall from time to time request.
All fees and expenses of the Consultant shall be solely the responsibility of
EME and in no event shall Laurus have any liability or responsibility for the
payment of any such fees or expenses, nor shall Laurus have any obligation or
liability to EME or any other person by reason of any acts or omissions of the
Consultant.
4.2. Acceleration. The acceleration by Laurus of the Obligations made prior
to the Forbearance Effective Date is hereby rescinded by Laurus and the
Obligations shall be due and payable in accordance with the terms of the
Financing Agreements and this Agreement.
4.3. Interest Rate Provisions. During the Forbearance Period, interest on
the Obligations shall continue to be paid in accordance with the terms of the
Financing Agreements. Laurus agrees on and after the Forbearance Effective Date
not to charge interest at the Default Rate with respect to the Obligations
during the Forbearance Period. The portion of the interest which previously
accrued on the Obligations that constituted the Default Rate shall be paid by
the issuance of warrants for common stock of EFTI by EFTI to Laurus on terms and
conditions acceptable to Laurus. The portion of the interest which previously
accrued and is unpaid on the Obligations that constituted the non-Default Rate
shall be paid one-half at the time of execution of this Agreement and the other
half being brought current on or before October 20,2007 and made with the
October payment.
4.4. Supplement to Security Agreement. To the extent any Company possesses
any commercial tort claims, such Company shall, on or before the date that is
two (2) days after the receipt from Laurus of the proposed supplement document,
execute and deliver to Laurus a supplement to the Security Agreement granting
Laurus a Lien on all commercial tort claims and proceeds therefrom, subject only
to the payment of costs and reasonable attorneys' fees relating to such claims,
held by such Company, such supplement to be in form and substance satisfactory
to Laurus in all respects.
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4.5. PPR Stock Pledge. On or before the Forbearance Effective Date, EME
shall reissue the stock certificate representing all of the issued and
outstanding stock of PPR held by EME and deliver to Laurus such stock
certificate, together with an undated stock power executed in blank.
4.6. Suntrust UCC Terminations. On or before the date that is fourteen (14)
days after the Forbearance Effective Date, Companies shall deliver to Laurus
evidence of termination of those certain UCC-1 financing statements filed by
Suntrust Bank and listed on Schedule 2 hereto.
4.7. Subordination. On or before ten (10) days after the Forbearance
Effective Date, each entity listed on Schedule 3 hereto holding any indebtedness
of any Company, shall have executed and delivered to Laurus a subordination
agreement, in form and substance satisfactory to Laurus pursuant to which any
and all indebtedness owing from and any and all security interests granted by,
any Company to such entity shall be subordinated to any and all indebtedness
owing from, and any and all security interests granted by, any Company, to
Laurus. Laurus to provide to Company the subordination agreement forms as soon
as reasonably possible after the Forbearance Effective Date.
4.8. Termination of Revolving Facility. Companies agree that Companies
shall have no right to request any further Loans and Laurus shall have no
obligation to make any further Loans.
4.9. Surplus Asset Sale. On or before November 15, 2007, Companies shall
consummate the Surplus Asset Sale and Companies shall remit to Laurus the Net
Cash Proceeds thereof in an amount of not less than $250,000 which amount shall
be applied by Laurus to the Obligations in accordance with the Financing
Agreements and this Agreement.
4.10. Haines City Property Refinancing. On or before November 30, 2007, EME
Modular shall consummate the Haines City Property Refinancing and remit to
Laurus the Net Cash Proceeds thereof in an amount of not less than $1,800,000
which amount shall be applied by Laurus to the Obligations in accordance with
the Financing Agreements and this Agreement. Upon receipt of such proceeds,
Laurus shall release the Haines City Property Mortgage.
4.11. Pledge of EFTI Indebtedness and Wavier of Laurus Claims. On or before
the date that is five (5) days after the Forbearance Effective Date, EFTI shall
pledge and deliver to Laurus all of the documents, instruments and agreements,
including, without limitation, any promissory note(s), evidencing any
indebtedness by Solardiesel Corporation, a Florida corporation ("Solardiesel"),
to EFTI, together with any required instrument of transfer or assignment
executed in blank. Other than this pledge, Laurus acknowledges that it claims no
security interests or rights or claims of rights under the Financing Agreements,
this Agreement or other document to the Solardiesel stock, assets, including
without limitation, any and all actual and/or potential business interests or
opportunities. Upon payment of the $1,000,000 described in Section 4.12, Laurus
will give a written acknowledgement and estoppel document in form reasonably
satisfactory to Companies of this fact to EFTI.
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4.12. EFTI Mandatory Prepayment. On or before January 20, 2008, EFTI shall
remit to Laurus, in addition to any other mandatory prepayment required pursuant
to this Agreement, including, without limitation, in connection with the Haines
City Property Refinancing and Surplus Asset Sale, an amount of not less than
$1,000,000, which amount shall be applied by Laurus to the Obligations in
accordance with the Financing Agreements and this Agreement.
4.13. No Payment of Overhead Expenses. Notwithstanding anything to the
contrary contained in the Financing Agreements, EME, EME Modular and PPR shall
not, after the Forbearance Effective Date, make any payments to, or on behalf
of, any other Company, its parent, any Subsidiary or affiliate.
4.14. Control Agreements. On or before the date that is thirty (30) days
after the Forbearance Effective Date, Companies shall deliver to Laurus control
agreements, in form and substance satisfactory to Laurus for each Deposit
Account maintained by Company.
4.15. Application of Payments. All payments received by Laurus in repayment
of the principal amount of the Obligations shall be applied first to the
outstanding principal amount of the Term Note and then to outstanding Loans.
4.16. Intercompany Transactions. Notwithstanding anything to the contrary
contained in any Financing Agreement, no Company shall make a loan or any
advance to WESCO or Solardiesel.
4.17. Agreements Deemed Agreements Under Security Agreement. For purposes
of the Security Agreement and the Securities Purchase Agreement, the agreements
of the Companies contained in this Article IV shall be deemed to be, and shall
be, agreements under the Security Agreement and the Securities Purchase
Agreement. Without limiting the foregoing sentence, if any Company breaches any
provision contained in this Article IV or should any representation, warranty or
covenant contained in Article V be untrue, then such event shall, without the
necessity of any further action by any party, automatically constitute an Event
of Default and a Forbearance Default.
4.18. Amendments to Financing Agreements. Subject to the satisfaction of
the conditions precedent set forth in Section 6 below, the Financing Documents
are hereby amended as follows:
(a) The "Maturity Date" is extended from March 30, 2008 to December 30,
2008.
(b) The monthly principal payments required pursuant to Section 1.3 of the
Term Note are no longer required.
(c) The notice addresses for Laurus and Companies in Section 29 of the
Security Agreement and Section 11.8 of the Securities Purchase Agreement are
amended to provide as follows:
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If to Laurus: Laurus Master Fund, Ltd.
c/o Laurus Capital Management, L.L.C.
335 Madison Avenue, 10th Floor
New York, New York 10017
Attention: Portfolio Services
Telephone: (212) 541-5800
Facsimile: (212) 541-4434
With a copy to: Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Attention: Scott J. Giordano, Esq.
Telephone: (212) 407-4000
Facsimile: (212) 407-4990
If any Company or
Company Agent: EarthFirst Technologies, Inc.
c/o Pangea Ultima
3000 Bayport Drive, Suite 910
Tampa, Florida 33607
Attention: John Stanton and Domenic Massari
Telephone: (813) 865-1122
Facsimile: (813) 865-1135
SECTION 5. REPRESENTATIONS AND WARRANTIES
Each Company hereby represents warrants and covenants with and to Laurus as
follows:
5.1. Representations in Financing Agreements. Each of the representations
and warranties made by or on behalf of each Company to Laurus in any of the
Financing Agreements was true and correct when made and in all material respects
is (except for the representation and warranty set forth in the applicable
Financing Agreements relating to the non-existence of an Event of Default, and,
with regard thereto, this exception only applies to the Designated Defaults)
true and correct on and as of the date of this Agreement with the same full
force and effect as if each of such representations and warranties had been made
by such Company on the date hereof and in this Agreement.
5.2. Binding Effect of Documents. This Agreement and the Financing
Agreements have been duly executed and delivered to Laurus by each Company and
are in full force and effect, as modified hereby.
5.3. No Conflict, Etc. The execution and delivery and performance of this
Agreement by each Company will not violate applicable law or any contractual
obligation of such Company.
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5.4. Affiliate Transactions. Except for those entities set forth on
Schedule 3 hereto, no Company owes any indebtedness for borrowed money to any
Affiliate of such Company.
5.5. John Stanton Companies. Schedule 3 hereto lists each entity owned by,
in whole or in part, controlled by or affiliated with, John Stanton that holds
any indebtedness of any Company.
SECTION 6. CONDITIONS TO EFFECTIVENESS OF CERTAIN PROVISIONS OF THIS AGREEMENT
The effectiveness of the terms and provisions of Section 3.2 of this
Agreement (the "Forbearance Effective Date") shall be subject to the receipt by
Laurus of each of the following, in form and substance satisfactory to Laurus:
(a) an original (or copy, as determined by Laurus) of this Agreement, duly
authorized, executed and delivered by each Company;
(b) payment by Companies to Laurus of all costs and expenses payable under
Section 7.2 hereof, which amounts may be charged by Laurus to Companies' loan
account; and
(c) payment of the first one half of the interest due under Section 4.3.
SECTION 7. PROVISIONS OF GENERAL APPLICATION
7.1. Effect of this Agreement. Except as modified pursuant hereto, no other
changes or modifications to the Financing Agreements are intended or implied and
in all other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by each Company as of the effective date hereof. To the
extent of conflict between the terms of this Agreement and the Financing
Agreements, the terms of this Agreement shall control.
7.2. Costs and Expenses. Each Company shall jointly and severally pay all
costs, fees and expenses of Laurus (including the costs, fees and expenses of
Laurus' counsel) incurred by Laurus in connection with the negotiation,
preparation, administration and enforcement of this Agreement and the Financing
Agreements.
7.3. Further Assurances. The parties hereto shall execute and deliver such
additional documents and take such additional action as may be necessary or
desirable to effectuate the provisions and purposes of this Agreement.
7.4. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of each of the parties hereto and their respective successors and
assigns; provided that no Company may assign any of its rights or delegate any
of its responsibilities hereunder without the prior written consent of Laurus.
7.5. Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other document furnished in connection
with this Agreement shall survive the execution and delivery of this Agreement
and the other documents, and no investigation by Laurus or any closing shall
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affect the representations and warranties or the right of Laurus to rely upon
them.
7.6. Release.
(a) In consideration of the agreements of Laurus contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, each Company, on behalf of itself and its successors,
assigns, and other legal representatives, hereby absolutely, unconditionally and
irrevocably releases, remises and forever discharges Laurus, and its successors
and assigns, and its present and former shareholders, affiliates, subsidiaries,
divisions, predecessors, directors, officers, attorneys, employees, agents and
other representatives (Laurus and all such other Persons being hereinafter
referred to collectively as the "Releasees" and individually as a "Releasee"),
of and from all demands, actions, causes of action, suits, covenants, contracts,
controversies, agreements, promises, sums of money, accounts, bills, reckonings,
damages and any and all other claims, counterclaims, defenses, rights of
set-off, demands and liabilities whatsoever (individually, a "Claim" and
collectively, "Claims") of every name and nature, known or unknown, suspected or
unsuspected, both at law and in equity, which any Company or any of its
successors, assigns, or other legal representatives may now or hereafter own,
hold, have or claim to have against the Releasees or any of them for, upon, or
by reason of any circumstance, action, cause or thing whatsoever which arises at
any time on or prior to the day and date of this Agreement, including, without
limitation, for or on account of, or in relation to, or in any way in connection
with any Financing Agreement, this Agreement or any transactions thereunder,
hereunder or related thereto or hereto, including without limitation any claims
or causes of action based on "lender liability" and/or "deepening insolvency."
(b) Each Company understands, acknowledges and agrees that the release set
forth above may be pleaded as a full and complete defense and may be used as a
basis for an injunction against any action, suit or other proceeding which may
be instituted, prosecuted or attempted in breach of the provisions of such
release.
(c) Each Company agrees that no fact, event, circumstance, evidence or
transaction which could now be asserted or which may hereafter be discovered
shall affect in any manner the final, absolute and unconditional nature of the
release set forth above.
7.7. Covenant Not to Sue or Commence Bankruptcy Related Proceedings. Each
Company, on behalf of itself and its successors, assigns, and other legal
representatives, hereby absolutely, unconditionally and irrevocably covenants
and agrees with and in favor of each Releasee that it will not (a) sue (at law,
in equity, in any regulatory proceeding or otherwise) any Releasee on the basis
of any Claim released, remised or discharged by such Company pursuant to Section
7.6 above, (b) apply for, consent to or suffer to exist the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (c) make a general
assignment for the benefit of creditors, (d) commence a voluntary case under any
state or federal bankruptcy laws or similar laws (as now or hereafter in
effect), (e) be adjudicated a bankrupt or insolvent, (f) file a petition seeking
to take advantage of any other law providing for the relief of debtors, (g)
acquiesce to without challenge (within ten (10) days of the filing thereof)
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and/or otherwise fail to dismiss (within forty-five (45) days from the filing
thereof) any petition filed against it in any involuntary case under such
bankruptcy or similar laws, and/or (h) take any action for the purpose of
effecting any of the foregoing. If any Company or any of its successors, assigns
or other legal representations violates the foregoing covenant, each Company,
for itself and its successors, assigns and legal representatives, agrees that
such occurrence shall constitute a Forbearance Default, and it shall jointly and
severally pay, all such damages as any Releasee may sustain in connection with
such violation, together with all attorneys' fees and costs incurred by any
Releasee as a result of such violation.
7.8. Severability. Any provision of this Agreement held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement
7.9. Relief From Automatic Stay. In the event any case is commenced by or
against any Company under any state or federal bankruptcy or similar laws (as
now or hereafter in effect), each Company hereby acknowledges and consents that
(i) Laurus is entitled to immediate relief from any automatic stay imposed and
(ii) it will not oppose any motion filed by or on behalf of Laurus seeking
relief from any automatic stay.
7.10. Reviewed by Attorneys. Each Company represents and warrants to Laurus
that it (a) understands fully the terms of this Agreement and the consequences
of the execution and delivery of this Agreement, (b) has been afforded an
opportunity to have this Agreement reviewed by, and to discuss this Agreement
with such attorneys and other Persons as such Company may wish, and (c) has
entered into this Agreement and executed and delivered all documents in
connection herewith and therewith of its own free will and accord and without
threat, duress or other coercion of any kind by any Person. The parties hereto
acknowledge and agree that neither this Agreement, the Financing Agreements nor
the other documents, instruments and agreements executed pursuant hereto and
thereto shall be construed more favorably in favor of one than the other based
upon which party drafted the same, it being acknowledged that all parties hereto
contributed substantially to the negotiation and preparation of this Agreement,
the Financing Agreements and the other documents, instruments and agreements
executed pursuant hereto and thereto or in connection herewith or therewith.
7.11. Governing Law: Consent to Jurisdiction and Venue. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN ANY OF THE FINANCING AGREEMENTS, IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT
AND THE OTHER FINANCING AGREEMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING CONFLICTS OF
LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. EACH COMPANY
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR
AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY COMPANY AND LAURUS PERTAINING
TO THIS AGREEMENT OR ANY FINANCING AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATED TO HERETO OR THERETO; PROVIDED, THAT LAURUS AND EACH COMPANY ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT
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NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LAURUS FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT
THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF LAURUS.
EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY HEREBY WAIVES
ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH
COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED
MAIL ADDRESSED TO EFTI (AS AGENT FOR ITSELF AND EACH OTHER COMPANY) AT THE
ADDRESS SET FORTH FOR EFTI IN THE FINANCING AGREEMENTS AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF EFTI'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
7.12. Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LAURUS AND EACH APPLICABLE COMPANY ARISING OUT OF,
CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN
THEM IN CONNECTION WITH THIS AGREEMENT OR ANY FINANCING AGREEMENT OR THE
TRANSACTIONS RELATED HERETO OR THERETO.
7.13. Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of counterparts, but all of such counterparts shall together
constitute but one and the same agreement. Any signature delivered by facsimile
transmission or PDF file shall be deemed to be an original signature hereto.
7.14. Amendment. No amendment, modification, rescission, waiver or release
of any provision of this Agreement shall be effective unless the same shall be
in writing and signed by the parties hereto.
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7.15. Nonapplicability of 11 U.S.C. 544, 547 (b) and 548. Each Company, its
officers, directors, employees, and advisors, including and through the
signatories hereto on behalf of such Company, and such Company's
successors-in-interest, including but not limited to any bankruptcy estate
representative, hereby unconditionally and irrevocably warrants, represents and
agrees for all purposes that (a) the liens and security interests, to the extent
not previously provided or perfected under the Financing Agreements, are being
received by Laurus in good faith, for reasonably equivalent value and for good,
sufficient and contemporaneous consideration and new value within the meaning of
11 U.S.C. 547(c) and applicable provisions of 11 U.S.C. 548, 544 and
non-bankruptcy law, (b) said liens and security interests are not and shall not
be avoidable for any reason in any insolvency proceeding or otherwise, and (c)
said parties shall neither take nor assent to any action in any bankruptcy
proceeding the effect of which would be to avoid said liens or security
interests or to otherwise in any way undermine or challenge any of the liens,
claims, interests and rights of Laurus.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement is executed and delivered as of the day
and year first above written.
EARTHFIRST TECHNOLOGIES, INCORPORATED
By:/s/
----------------------------------
Name:
Title:
ELECTRIC MACHINERY ENTERPRISES, INC.
By:/s/
----------------------------------
Name:
Title:
PRIME POWER RESIDENTIAL, INC.
By:/s/
----------------------------------
Name:
Title:
EARTHFIRST RESOURCES, INC.
By:/s/
----------------------------------
Name:
Title:
WORLD ENVIRONMENTAL SOLUTIONS COMPANY, INC.
By:/s/
----------------------------------
Name:
Title:
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EARTHFIRST INVESTMENTS, INC.
By:/s/
----------------------------------
Name:
Title:
EM ENTERPRISE RESOURCES, INC.
By:/s/
----------------------------------
Name:
Title:
EM MODULAR STRUCTURES, INC.
By:/s/
----------------------------------
Name:
Title:
LAURUS MASTER FUND, LTD.
By:/s/
----------------------------------
Name:
Title:
15
EXHIBIT A
EVENTS OF DEFAULT
The following Events of Default occurring before the Forbearance Effective Date:
1. The failure by the Companies to make payment of the Obligations when
due.
2. The entry of judgments in excess of $50,000 being rendered against
EFTI that has not been vacated, discharged, stayed or bonded within
thirty (30) days from the entry thereof.
3. The failure of the Company Agent to deliver the financial information
required by Section 11 of the Security Agreement and other provisions
of the Financing Agreements.
4. The filing of a federal tax lien.
5. The failure by the Companies to maintain in favor of Laurus a first
priority perfected security interest in the Collateral.
6. The creation and operation of an EFTI subsidiary, EarthFirst Americas,
Inc., a Florida corporation which subsequently changed its name to
SolarDiesel, Inc. and the failure to make EarthFirst Americas,
Inc./SolarDiesel, Inc. parties subject to the Financing Agreements.
Subsequently, Laurus has acknowledged that SolarDiesel, Inc. is not
subject to the terms and provisions of the Financing Agreements.
7. The Stock Purchase and Shareholders Agreement with Ultra Green Energy
Corporation and the transactions contemplated therein as summarized in
Exhibit 10 in EFTI's 10-QSB filing for the period ending June 30,
2007.
8. The Memorandum of Agreement with Orion Industrial Corporation and the
transactions contemplated therein as summarized in Exhibit 10.2 in
EFTI's 10-QSB filing for the period ending June 30, 2007.
9. Failure under the Financing Agreements to timely file Registration
Statement(s), the failure to have such Statement(s) declared effective
and continue to be effective as to all Registrable Securities.
10. The opening of new bank accounts without prior approval.
11. Failure to notify Laurus of any commercial tort claims.
12. Disposed of Collateral.
13. Failure to make payments directly to Lockboxes.
14. Failure to provide copies of all statements, reports, etc. filed with
SEC.
15. Failure to setup and maintained Disclosure Controls and Financial
Reporting Controls.
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16. The resignation or termination of any key employees of any Subsidiary.
17. The filing of material litigation against various Companies.
18. Incurred indebtedness in excess of $100,000 individually or $250,000
in the aggregate.
19. Institution of the following lawsuits against EME:
a. Airgroup Corporation v. EME (judgment entered - motion to set
aside judgment pending); and
b. Anixter Brothers v. EME; and
c. Brandon Janitorial v. EME; and
d. Computer Cable Connection v. EME; and
e. Electric Supply v. EME (judgment entered); and
f. Express Personnel v. EME; and
g. GE Supply v. EME; and
h. Graybar Electric v. EME; and
i. Henry Gonzalez Plumbing v. EME; and
j. MCS v. EME; and
k. Multicom, Inc. v. EME; and
l. Neff Rental v. EME; and
m. S & R Telecommunications v. EME; and
n. Tampa Service Co. v. EME; and
o. West Publishing v. EME; and
p. World Electric Supply v. EME.
20. Entry of Judgment against EFTI in favor of Turner Industries in the
approximate amount of $40,000.00.
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EXHIBIT B
1. Institution of the following lawsuits against EME:
a. Airgroup Corporation v. EME (judgment entered - motion to set
aside judgment pending); and
b. Anixter Brothers v. EME; and
c. Brandon Janitorial v. EME; and
d. Computer Cable Connection v. EME; and
e. Electric Supply v. EME (judgment entered); and
f. Express Personnel v. EME; and
g. GE Supply v. EME; and
h. Graybar Electric v. EME; and
i. Henry Gonzalez Plumbing v. EME; and
j. MCS v. EME; and
k. Multicom, Inc. v. EME; and
l. Neff Rental v. EME; and
m. S & R Telecommunications v. EME; and
n. Tampa Service Co. v. EME; and
o. West Publishing v. EME; and
p. World Electric Supply v. EME.
2. Entry of Judgment against EFTI in favor of Turner Industries in the
approximate amount of $40,000.00.
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