Attached files
| file | filename |
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| EX-10.4 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-4.htm |
| EX-10.6 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-6.htm |
| EX-10.5 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-5.htm |
| EX-10.1 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-1.htm |
| EX-10.3 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-3.htm |
| EX-10.2 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported) April 12,
2010)
COMPOSITE
TECHNOLOGY CORPORATION
(Exact
name of registrant as specified in its charter)
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Nevada
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000-10999
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59-2025386
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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2026
McGaw Avenue
Irvine,
California
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92614
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (949) 428-8500
(Former
name or former address, if changed since last report.)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material
pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
¨ Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Forward
Looking Statements
This Form 8-K and other reports filed
by Composite Technology Corporation (the “Registrant” or “Company”) from time to
time with the Securities and Exchange Commission (collectively the “Filings”)
contain or may contain forward looking statements and information that are based
upon beliefs of, and information currently available to, the Registrant’s
management as well as estimates and assumptions made by the Registrant’s
management. When used in the Filings, the words “anticipate”, “believe”,
“estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms
and similar expressions as they relate to the Registrant or the Registrant’s
management identify forward looking statements. Such statements reflect the
current view of the Registrant with respect to future events and are subject to
risks, uncertainties, assumptions, and other factors (including the risks
contained in the section of the Registrant’s Form 10-K entitled “Risk Factors”)
relating to the Registrant’s industry, the Registrant’s operations and results
of operations, and any businesses that may be acquired by the Registrant. Should
one or more of these risks or uncertainties materialize, or should the
underlying assumptions prove incorrect, actual results may differ significantly
from those anticipated, believed, estimated, expected, intended, or
planned.
Although
the Registrant believes that the expectations reflected in the forward looking
statements are reasonable, the Registrant cannot guarantee future results,
levels of activity, performance, or achievements. Except as required by
applicable law, including the securities laws of the United States, the
Registrant does not intend to update any of the forward looking statements to
conform these statements to actual results.
Item
1.01 Entry
into a Material Definitive Agreement
The
following discussion provides only a brief description of the applicable
documents described below. The discussion is qualified in its
entirety by the full text of the loan agreement and other documents, which are
attached to this Current Report on Form 8-K as exhibits 10.1 through
10.6.
Loan
and Security Agreement
On April
12, 2010, Composite Technology Corporation, CTC Cable Corporation and CTC
Renewables Corporation (jointly and severally, “Composite” or the “Company”)
entered into a Loan and Security Agreement (“Loan Agreement”) with Partners for
Growth II, L.P.(“PFG”). Pursuant to the terms and subject to the
conditions set forth in the Loan Agreement, PFG will provide a senior secured
term loan in the amount of $10,000,000 (“Loan”) to the Company, which will be
secured in all assets of the Company. The borrowings pursuant to the Loan
Agreement shall be either Facility A borrowings, which are those borrowings that
are supported by 80% of the Company’s eligible accounts not outstanding for more
than 60 days from its invoice date, or Facility B borrowings which are the
difference between Facility A borrowings and $10,000,000. The interest rate
applicable to the Facility A borrowings will be 7.5% and the interest rate
applicable to the Facility B borrowings will be 12.5%. Pursuant to the Loan
Agreement, the accrued interest, calculated on the basis of a 360-day year,
shall be payable monthly and the principal balance and any accrued and unpaid
interest and other outstanding monetary obligations will be due on the maturity
date of April 12, 2012. The principal of the Loan may be prepaid, subject to a
prepayment penalty of 3% of principal prepaid in the first year and 1.5% of the
principal prepaid in the second year.
Pursuant
to the Loan Agreement, PFG has been paid a commitment fee of $200,000, less any
loan fee deposit paid concurrently with execution of the term sheet, at closing.
The Company will have financial covenants as follows: maintain cash, cash
equivalents and accounts receivables of not less than $7,500,000 determined
monthly and maintain adjusted operating income (loss) on a cumulative basis of
not less than ($5,000,000). Additionally, the Company will have monthly
financial reporting obligations. The Company’s deposit accounts will be subject
to control agreements with PFG, which shall permit PFG, in its discretion, to
withdraw from the deposit accounts accrued interest on the obligations monthly
if not paid when due. With respect to the Company’s DeWind escrow accounts, the
Company will provide notice at least two business days of impending distribution
to the Company or any affiliate from the DeWind escrow account and deposit
proceeds from the DeWind escrow accounts only in the Company’s account for which
there is a control agreement with PFG, unless such account has an average
daily balance during the month of $10,000 or less. All present and future
indebtedness of the Company will be subordinated pursuant to PFG’s standard form
of subordination agreement.
Pursuant
to the Loan Agreement, the Company shall not, without PFG’s prior consent,
permit any change in control, acquire assets, except in the ordinary course of
business, or make any investments other than permitted investments, enter into
any other transaction outside of the ordinary course of business, or sell or
transfer any Collateral with limited exceptions.
In
addition, on April 12, 2010, the Company entered into a
Cross-Corporate Continuing Guaranty and Security Agreement (“Guaranty”)
with Stribog, Inc. (“Guarantor”) and
PFG pursuant to which the Company and Guarantor guaranteed the Company’s
complete payment and performance of its obligations under the Loan
Agreement.
Intellectual
Property Agreement
On April
12, 2010, the Company also entered into an Intellectual Property Security
Agreement with PFG under which the Company granted to PFG a security interest in
all of its right, title and interest in the Company’s intellectual
property.
Warrants
In
addition, on April 12, 2010, the Company entered into a Warrant Purchase
Agreement with PFG and issued (i) warrants in favor of PFG to purchase 5,000,000
shares of the Company’s common stock at $0.29 per share, exerciseable until
April 12, 2013 and (ii) warrants favor of PFG to purchase 5,000,000 shares of
the Company’s common stock at $1.00 per share, exerciseable until April 12,
2015. Both warrants may be exercised in a “cashless”
manner. The Company valued the warrants at $0.1579 per warrant for
the 3 year warrants and $0.1403 for the five year warrants for a total value of
$1,494,000. It used the Black-Scholes Merton option pricing model to
value the fair value of the warrants issued using the following
assumptions. The market price was $0.27, the 10 day volume weighted
average price used to price the warrants. The volatility was
estimated at 95%, the life of the warrants was either 3 or 5 years, the risk
free rate was 1.65% and 2.60% for the three and five year warrants respectively
and a dividend yield of 0%.
Copies of
the Loan Agreement, the Guaranty, the Intellectual Property Security Agreement,
Warrant Purchase Agreement and Warrants are filed as Exhibits 10.1 through
10.6 respectively, to this Form 8-K and are incorporated herein by
reference. The descriptions of the material terms of the Loan Agreement,
Guaranty, Intellectual Property Agreement, Warrant Agreement and Warrants
are qualified in their entirety by reference to such exhibits.
Item
2.03. Creation of a Direct Financial Obligation
As described more fully under Item
1.01, pursuant to the terms and subject to the conditions set forth in the Loan
Agreement, PFG provided a senior secured term loan in the amount of $10,000,000
to the Company, secured in all assets of the Company, on April 12,
2010. The loan is due on April 12, 2012 but repayment may be
accelerated upon an event of default which could include, among other things:
(a) any representation made to PFG by Company shall be untrue or misleading in a
material respect; (b) Company shall fail to pay any amounts when they
are due; (c) Company shall fail to comply with applicable covenants;
(d) any cross default occurs under any certain third party obligations; (e)
Company breaches any material contract which may result in a material adverse
change; (f) a change in the ownership of more than thirty-five percent
(35%) of the outstanding shares of stock of Company, compared to the ownership
of outstanding shares of stock of Company in effect on the date of the Loan
Agreement without the prior written consent of PFG occurs; or (g) a material
adverse change shall occur.
Item
3.02. Unregistered Sales of Equity Securities
On April
12, 2010, the Company issued (i) warrants in favor of PFG to purchase 5,000,000
shares of the Company’s common stock at $0.29 per share and (ii) warrants favor
of PFG to purchase 5,000,000 shares of the Company’s common stock at $1.00 per
share. The Company relied upon the exemption from registration
as set forth in Section 4(2) of the Securities Act for the issuance of these
securities. The recipient represented that it took its securities for investment
purposes without a view to distribution and had access to information concerning
the Company and its business prospects, as required by the Securities Act. In
addition, there was no general solicitation or advertising for the acquisition
of these securities.
Item
9.01 Financial
Statements and Exhibits
(c) Exhibits.
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Exh. No.
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Description
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10.1
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Loan
and Security Agreement by and among the Registrant, CTC Cable Corporation,
CTC Renewables Corporation and Partners for Growth II, L.P. dated as of
April 12, 2010.*
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10.2
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Cross
Corporate Guaranty and Security Agreement by and among the Registrant, CTC
Cable Corporation, CTC Renewables Corporation, and Stribog, Inc. and
Partners for Growth II, L.P. dated as of April 12,
2010.
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10.3
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Intellectual
Property Security Agreement by and among the Registrant, CTC Cable
Corporation, CTC Renewables Corporation and Partners for Growth II, L.P.
dated as of April 12, 2010.
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10.4
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Warrant
Purchase Agreement by and between the Registrant and Partners for Growth
II, L.P. dated as of April 12, 2010.*
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10.5
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Form
of Warrant*
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10.6
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Form
of Warrant*
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*
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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COMPOSITE
TECHNOLOGY CORPORATION
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(Registrant)
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Date:
April 16, 2010
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/s/ Benton H Wilcoxon
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Benton
H Wilcoxon, Chief Executive Officer
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