Attached files
| file | filename |
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| 8-K - COMPOSITE TECHNOLOGY CORP | v181358_8k.htm |
| 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-10.3 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-3.htm |
| EX-10.2 - COMPOSITE TECHNOLOGY CORP | v181358_ex10-2.htm |
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Partners
for Growth
Loan
and Security Agreement
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Borrower:
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Composite
Technology Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Borrower:
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CTC
Cable Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Borrower:
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CTC
Renewables Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Date:
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April
12, 2010
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THIS LOAN AND SECURITY
AGREEMENT (“Agreement”) is entered into on the above date between
PARTNERS FOR GROWTH II, L.P. (“PFG”), whose address is 180 Pacific Avenue, San
Francisco, CA 94111 and the borrower(s) named above (jointly and severally, the
“Borrower”), whose chief executive office is located at the above address
(“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”) being
signed by the parties concurrently, is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are
set forth in Section 7 below.)
1.
LOANS.
1.1 Loans.
PFG will make a loan to Borrower (the “Loan”) in the amount shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing.
1.2 Interest. All
Loans and all other monetary Obligations shall bear interest at the rates shown
on the Schedule, except where expressly set forth to the contrary in this
Agreement. Interest shall be payable monthly, on the first day of
each month for interest accrued during the prior month.
1.3 Fees. Borrower
shall pay PFG the fees shown on the Schedule, which are in addition to all
interest and other sums payable to PFG and are not refundable.
1.4 Loan
Requests. To obtain a Loan, Borrower shall make a request to
PFG by facsimile or telephone. Loan requests may also be made by
Borrower by email, but the same shall not be deemed made until PFG acknowledges
receipt of the same by email or otherwise in writing. Loan requests received
after 12:00 Noon Pacific time will not be considered to have been received by
PFG until the next Business Day. PFG may rely on any telephone
request for a Loan given by a person whom PFG believes in good faith is an
authorized representative of Borrower, and Borrower will indemnify PFG for any
loss PFG suffers as a result of that reliance.
1.5 Late
Fee. If any payment of accrued interest for any month is not
made within three (3) Business Days after the date a bill therefor is sent by
PFG to Borrower, or if any payment of principal or any other payment is not made
within three Business Days after the date due, Borrower shall pay PFG a late
payment fee equal to 5% of the amount of such late payment in the first such
instance of late payment and 10% of the amount of each future late payment
occurring thereafter. The provisions of this paragraph shall not be
construed as PFG’s consent to Borrower’s failure to pay any amounts when due,
and PFG’s acceptance of any such late payments shall not restrict PFG’s exercise
of any remedies arising out of any such failure.
1.6 Borrower
Requests under Agreement; Agented Loan Arrangement. Each
Borrower hereby designates Composite Technology Corporation as the agent (the
“Agent”) of that Borrower to discharge the duties and responsibilities of the
Agent as provided in this Section 1.6. Except as otherwise permitted
by PFG, loans, requests for PFG consent and other actions hereunder shall be
made solely by the Agent as agent for each Borrower. Each Borrower shall be
directly indebted to PFG for each Loan distributed to any Borrower by the Agent,
together with all accrued interest thereon, as if that amount had been advanced
directly by PFG to a Borrower (whether or not the subject Loan was based upon
the assets of the Borrower which actually received such distribution), in
addition to which each Borrower shall be liable to PFG for all Obligations under
this Agreement, whether or not the proceeds of the Loan are distributed to any
particular Borrower. PFG shall have no responsibility to inquire as to the
distribution of Loans made by PFG through the Agent as described herein and PFG
may rely on any telephone request for a Loan given by a person whom PFG believes
in good faith is an authorized representative of Agent, and each Borrower will
indemnify PFG for any loss PFG suffers as a result of that
reliance.
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2. SECURITY
INTEREST.
2.1 Grant
of Security Interest. To secure the payment and performance of
all of the Obligations when due, Borrower hereby grants to PFG a continuing
security interest in, and pledges to PFG, all of the following (collectively,
the “Collateral”): all right, title and interest of Borrower in and
to all of the following, whether now owned or hereafter arising or acquired and
wherever located: all Accounts; all Inventory; all Equipment; all Deposit
Accounts; all General Intangibles (including without limitation all Intellectual
Property); all Investment Property; all Other Property; and any and all claims,
rights and interests in any of the above, and all guaranties and security for
any of the above, and all substitutions and replacements for, additions,
accessions, attachments, accessories, and improvements to, and
proceeds (including proceeds of any insurance policies, proceeds of
proceeds and claims against third parties) of, any and all of the above, and all
Borrower’s books relating to any and all of the above.
3. REPRESENTATIONS,
WARRANTIES AND COVENANTS OF BORROWER.
In order
to induce PFG to enter into this Agreement and to make Loans, Borrower
represents and warrants to PFG as follows, and Borrower covenants that the
following representations will continue to be true, and that Borrower will at
all times comply with all of the following covenants, throughout the term of
this Agreement and thereafter until all Obligations have been paid and performed
in full:
3.1 Corporate
Existence and Authority. Borrower is and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to
be qualified and licensed to do business in all jurisdictions in which any
failure to do so would result in a Material Adverse Change. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower’s articles or certificate
of incorporation, as appropriate, or Borrower’s by-laws, or any law or
any material agreement or instrument of Borrower or relating to its
property, and (iv) do not constitute grounds for acceleration of any material
indebtedness or obligation under any agreement or instrument of Borrower or
relating to its property.
3.2 Name;
Trade Names and Styles. As of the date hereof, the name of
Borrower set forth in the heading to this Agreement is its correct name, as set
forth in its Articles or Certificate of Incorporation, as
appropriate. Listed in the Representations are all prior names of
Borrower and all of Borrower’s present and prior trade names as of the date
hereof. Borrower shall give PFG 15 days' prior written notice before
changing its name or doing business under any other name. Borrower
has complied, and will in the future comply, in all material respects, with all
laws relating to the conduct of business under a fictitious business name, if
applicable to Borrower.
3.3 Place
of Business; Location of Collateral. As of the date hereof,
the address set forth in the heading to this Agreement is Borrower's chief
executive office. In addition, as of the date hereof, Borrower has
places of business and Collateral is located only at the locations set forth in
the Representations. Borrower will give PFG at least 15 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral, other than Inventory in
the ordinary course of business, to a location other than Borrower’s Address or
one of the locations set forth in the Representations or one of the locations
permitted in Section 3.4(d), except that Borrower may maintain sales offices in
the ordinary course of business at which not more than a total of $25,000 fair
market value of Equipment is located.
3.4 Title
to Collateral; Perfection; Permitted Liens.
(a)
Borrower is now, and will at all times in the future be, the sole owner of all
the Collateral, except for items of Equipment which are leased to
Borrower. The Collateral now is and will remain free and clear of any
and all liens, charges, security interests, encumbrances and adverse claims,
except for Permitted Liens. PFG now has, and will continue to have, a
first-priority perfected and enforceable security interest in all of the
Collateral, subject only to the Permitted Liens, and Borrower will at all times
defend PFG and the Collateral against all claims of others.
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(b)
Borrower has set forth in the Representations all of Borrower’s Deposit
Accounts, and Borrower will give PFG five Business Days advance written notice
before establishing any new Deposit Accounts and will cause the institution
where any such new Deposit Account is maintained to execute and deliver to PFG a
control agreement in form sufficient to perfect PFG’s security interest in the
Deposit Account and otherwise satisfactory to PFG in its good faith business
judgment.
(c) In
the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting, and in which the
potential recovery exceeds $100,000, Borrower shall promptly notify PFG thereof
in writing and provide PFG with such information regarding the same as PFG shall
request (unless providing such information would waive the Borrower’s
attorney-client privilege). Such notification to PFG shall constitute
a grant of a security interest in the commercial tort claim and all proceeds
thereof to PFG, and Borrower shall execute and deliver all such documents and
take all such actions as PFG shall request in connection therewith.
(d) No
Non-trivial part of the Collateral now is or will be affixed to any real
property in such a manner, or with such intent, as to become a fixture, except
for power generation equipment affixed to Borrower's premises on the date hereof
and any replacement thereof. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any Non-trivial part of the Collateral (which, solely for the purposes
of this covenant, shall be deemed to be Collateral with a value in excess of
$250,000) and no such lease now prohibits, restrains, impairs or will prohibit,
restrain or impair Borrower's right to remove any Collateral (unless expressly
permitted by any landlord consent addressed to PFG) from the leased
premises. Whenever any Collateral is located upon premises in which
any third party has an interest, Borrower shall, whenever requested by PFG, use
commercially reasonable efforts to cause such third party to execute and deliver
to PFG, in form acceptable to PFG, such waivers and subordinations as PFG shall
specify in its good faith business judgment; provided however, that Inventory
may be held at various premises during transportation to customers without PFGs
prior written consent, to the extent it is in the ordinary course of business.
Borrower will keep in full force and effect, and will comply with all material
terms of, any lease of real property where any of the Collateral now or in the
future may be located.
3.5 Maintenance
of Collateral. Borrower will maintain the Collateral in good working
condition (ordinary wear and tear excepted), and Borrower will not use the
Collateral for any unlawful purpose. Borrower will immediately advise
PFG in writing of any material loss or damage to the Collateral.
3.6 Books
and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.
3.7 Financial
Condition, Statements and Reports. All financial statements
now or in the future delivered to PFG have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower in all material respects, in
accordance with GAAP, at the times and for the periods therein
stated. Between the last date covered by any such statement provided
to PFG and the date hereof, there has been no Material Adverse
Change.
3.8 Tax
Returns and Payments; Pension Contributions. Borrower has
timely filed, and will timely file, all required tax returns and reports, and
Borrower has timely paid, except as set forth in Schedule 3.8, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may,
however, defer payment of any of the foregoing which are contested by Borrower
in good faith, provided that Borrower (i) contests the same by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies PFG
in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
same from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts
necessary to fund all present and future pension, profit sharing and deferred
compensation plans in accordance with their terms, and Borrower has not and will
not withdraw from participation in, permit partial or complete termination of,
or permit the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any Non-trivial liability of Borrower,
including any Non-trivial liability to the Pension Benefit Guaranty Corporation
or its successors or any other governmental agency.
3.9 Compliance
with Law. Borrower has, to the best of its knowledge,
complied, and will comply, in all material respects, with all provisions of all
foreign, federal, state and local laws and regulations applicable to Borrower,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters, except where such failure to comply would have an
Immaterial effect on Borrower's operations, condition (financial or otherwise)
or the Collateral.
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3.10 Litigation. There
is no claim, suit, litigation, proceeding or investigation pending or (to best
of Borrower’s knowledge) threatened against or affecting Borrower in any court
or before any governmental agency (or any basis therefor known to Borrower)
which could reasonably be expected to result, either separately or in the
aggregate, in any Material Adverse Change. Borrower will promptly
inform PFG in writing of any claim, proceeding, litigation or investigation in
the future threatened or instituted against Borrower involving any single claim
of $100,000 or more, or involving $250,000 or more in the aggregate.
3.11 Use
of Proceeds. All proceeds of all Loans shall be used solely
for lawful business purposes. Borrower is not purchasing or carrying
any “margin stock” (as defined in Regulation U of the Board of Governors of the
Federal Reserve System) and no part of the proceeds of any Loan will be used to
purchase or carry any “margin stock” or to extend credit to others for the
purpose of purchasing or carrying any “margin stock.”
3.12 No
Default. At the date hereof, no Default or Event of Default
has occurred, and no Default or Event of Default will have occurred after giving
effect to any Loans being made concurrently herewith.
3.13 Protection and
Registration of Intellectual Property Rights. Borrower owns or
otherwise hold the right to use all intellectual property rights, including,
without limitation, all patents, copyrights, trademarks, Domain Rights (as
defined below), trade secrets and computer software, necessary for
the conduct of its business as currently conducted. Borrower shall:
(a) protect, defend and maintain the validity and enforceability of its
intellectual property, other than intellectual property that is not material to
Borrower’s business and that Borrower has determined not to maintain or to
abandon; (b) promptly advise PFG in writing of material infringements of its
intellectual property of which it has Knowledge; and (c) not allow any
intellectual property material to Borrower’s business to be abandoned, forfeited
or dedicated to the public without PFG’s written consent. If, before
the Obligations have been paid and/or performed in full, Borrower shall (i)
adopt, use, acquire or apply for registration of any trademark, service mark or
trade name, (ii) apply for registration of any patent or obtain any patent or
patent application; (iii) create or acquire any published or material
unpublished works of authorship material to the business that is or is to be
registered with the U.S. Copyright Office or any non-U.S. equivalent; or (iv)
register or acquire any domain name or domain name rights, then the provisions
of Section 2.1 shall automatically apply thereto, and Borrower shall use all
commercially reasonable efforts to give PFG advance written notice thereof and
in any event shall thereafter give PFG prompt written notice thereof (which for
purposes hereof shall be deemed to be not more than five (5) Business Days).
Borrower shall further provide PFG with all information and details relating to
the foregoing and take such further actions as PFG may reasonably request from
time to time to enable PFG to perfect or continue the perfection of PFG's
interest in such Collateral.
3.14 Domain
Rights and Related Matters. Borrower (a) is the sole record,
legal and beneficial owner of all domain names and domain name rights used in
connection with its business and that of its Subsidiaries, free and clear of any
rights or claims of any third party; (b) the information provided in the
Representations with respect to domain names and ownership thereof, domain
registry, domain servers, location and administrative contact information, web
hosting and related services and facilities (collectively, “Domain Rights”) is
true, accurate and complete and Borrower shall promptly notify PFG of any
changes to such information; (c) shall maintain all Domain Rights in full force
and effect so long as any Obligations remain outstanding; (d) shall, upon
request of PFG, notify such third parties (including domain registrars, hosting
companies and internet service providers) of PFG’s security interest in
Borrower’s Domain Rights; and (e) promptly advise PFG in writing of any disputes
or infringements of its Domain Rights.
4. ADDITIONAL
DUTIES OF BORROWER.
Borrower will at all times comply with
all of the following covenants throughout the term of this
Agreement:
4.1 Financial
and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.
4.2. Remittance
of Proceeds. All proceeds arising from the disposition of any Collateral
shall be delivered, in kind, by Borrower to PFG in the original form in which
received by Borrower not later than the following Business Day after receipt by
Borrower, to be applied to the Obligations in such order as PFG shall determine;
provided that, if no Default or Event of Default has occurred and is continuing,
Borrower shall not be obligated to remit to PFG (i) the proceeds of Accounts and
sale of Inventory arising in the ordinary course of business, or (ii) the
proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower
in good faith in an arm’s length transaction for an aggregate purchase price of
$50,000 or less (for all such transactions in any fiscal year), or (iii) the
proceeds of the DeWind Asset Sale (provided, however, that such proceeds
constitute Collateral for all purposes under this Agreement). Borrower agrees
that it will not commingle proceeds of Collateral (other than those described in
subclauses (i), (ii) and (iii) above) with any of Borrower's other funds or
property, but will hold such proceeds separate and apart from such other funds
and property and in an express trust for PFG, except as set forth above. PFG
may, in its good faith business judgment, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other
"blocked account" as PFG may specify, pursuant to a blocked account agreement in
such form as PFG may specify in its good faith business judgment upon the
occurrence of an Event of Default (whether or not noticed by
PFG). Nothing in this Section limits the restrictions on disposition
of Collateral set forth elsewhere in this Agreement.
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4.3 Insurance. Borrower
shall at all times insure all of the tangible personal property Collateral and
carry such other business insurance, with insurers previously disclosed to PFG
or otherwise reasonably acceptable to PFG, in such form and amounts as have been
previously disclosed to PFG or otherwise as are customary and in accordance with
standard practices for Borrower’s industry and locations, and Borrower shall
provide evidence of such insurance to PFG. All such insurance
policies shall name PFG as an additional loss payee, and shall contain a lenders
loss payee endorsement in form reasonably acceptable to PFG. Upon
receipt of the proceeds of any such insurance, PFG shall apply such proceeds in
reduction of the Obligations as PFG shall determine in its good faith business
judgment, except that, provided no Default or Event of Default has occurred and
is continuing, PFG shall release to Borrower insurance proceeds with respect to
Equipment totaling less than $100,000, which shall be utilized by Borrower for
the replacement of the Equipment with respect to which the insurance proceeds
were paid. PFG may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or
pay for any insurance, PFG may, but is not obligated to, obtain the same at
Borrower's expense. Borrower shall promptly deliver to PFG copies of
all material reports made to insurance companies.
4.4 Reports. Borrower,
at its expense, shall provide PFG with the written reports set forth in the
Schedule, and such other written reports with respect to Borrower (including
budgets, projections, operating plans and other financial documentation), as PFG
may reasonably specify from time to time in its good faith business
judgment.
4.5 Access
to Collateral, Books and Records. At reasonable times, and on
two (2) Business Day’s notice, PFG, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. The foregoing inspections and audits shall be at Borrower’s expense and
the charge therefor shall be $750 per person per day (or such higher amount as
shall represent PFG’s then current standard charge for the same), plus
reasonable out-of-pocket expenses; provided, however, if Borrower is in
compliance with the terms and conditions of this Agreement and no prior audit or
inspection has revealed or disclosed material discrepancies, inconsistencies or
deficiencies in Borrower’s reports, books or records (as determined by PFG in
its good faith business judgment), PFG shall conduct only one such inspection
and audit per year at Borrower’s expense and, provided, further, so long as no
Default or Event of Default has occurred and is continuing, the amount of PFG's
costs and expenses of audit and inspection to be at Borrower's expense shall be
capped at $25,000 in each such year. Notwithstanding the foregoing, Borrower
shall not be required to disclose to PFG any document or information (i) where
disclosure is prohibited by applicable law or any agreement binding on Borrower,
or (ii) is subject to attorney-client or similar privilege or constitutes
attorney work product. If Borrower is withholding any information
under the preceding sentence, it shall so advise PFG in writing, giving PFG a
general description of the nature of the information withheld.
4.6 Negative
Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without PFG's prior written consent (which shall be a matter
of its good faith business judgment and shall be conditioned on Borrower then
being in compliance with the terms of this Agreement), do any of the
following:
(i)
permit or suffer any Change in Control;
(ii)
acquire any assets, except in the ordinary course of business, or make any
Investments other than Permitted Investments;
(iii)
enter into any other transaction outside the ordinary course of
business;
(iv) sell
or transfer any Collateral (including without limitation the sale or transfer of
Collateral which is then leased back by Borrower), except for (A) the sale of
finished Inventory in the ordinary course of Borrower's business, and except for
the sale of obsolete or unneeded Equipment in the ordinary course of business,
(B) the making of Permitted Investments, (C) the granting of Permitted Liens,
and (D) the non-exclusive licensing of Intellectual Property in the ordinary
course of business;
(v) store
any Inventory or other Collateral with any warehouseman or other third party,
unless there is in place a bailee agreement in such form as PFG shall specify in
its good faith business judgment; provided, however, so long as no Default has
occurred and it is in the ordinary course of business, no bailee agreement shall
be required in respect of third parties performing stranding services for
Borrower or holding Inventory Collateral for onward shipment to Borrower's
customers;
(vi) sell
any Inventory on a sale-or-return, guaranteed sale, consignment, or other
contingent basis;
(vii)
make any loans of any money or other assets, other than Permitted
Investments;
(viii)
incur any Indebtedness, other than Permitted Indebtedness;
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(ix)
guarantee or otherwise become liable with respect to the obligations of another
party or entity, other than another Borrower;
(x) pay
or declare any dividends on Borrower's stock (except for dividends payable
solely in stock of Borrower);
(xi)
redeem, retire, purchase or otherwise acquire, directly or indirectly, any of
Borrower's stock, except as required in the ordinary course of business and
consistent with past practice in connection with redeeming or purchasing stock
of departing employees, up to a maximum aggregate of $50,000 in any fiscal
year;
(xii)
engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto;
(xiii)
transfer any Collateral (including Cash) by loan *** or to any other
Subsidiary not a Borrower; ***;
(xiv)
without at least fifteen (15) days prior written notice to PFG: (1) add any
new offices or business locations, including warehouses (unless such new offices
or business locations contain less than $10,000 in Borrower’s assets or
property), (2) change its jurisdiction of organization, (3) change its
organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of
organization;
(xv)
liquidate or dissolve or elect to liquidate or dissolve; or
(xvi)
cause or permit any Dormant Subsidiary to conduct any Non-trivial active
business or own any Non-trivial assets without providing at least thirty (30)
calendar days advance notice to PFG and taking such steps as are necessary or
appropriate in PFG’s business judgment to join any such Dormant Subsidiary to
the Loan Documents as a primary obligor and party; or
(xvii)
with respect to Agent, issue or authorize the issuance of any preferred stock;
or
(xviii)
the Board of directors shall resolve to or approve, or Borrower shall otherwise
take any steps to effect, any of the foregoing actions in clauses (i) through
(xviii), inclusive.
Transactions
permitted by the foregoing provisions of this Section are only permitted if no
Default or Event of Default would occur as a result of such
transaction.
4.7 Litigation
Cooperation. Should any third-party suit or proceeding be
instituted by or against PFG with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to PFG, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that PFG may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.
4.8 Changes. Borrower
agrees to promptly notify PFG in writing of any changes in the information set
forth in the Representations.
4.9 Further
Assurances. Borrower agrees, at its expense, on request by
PFG, to execute all documents and take all actions, as PFG, may, in its good
faith business judgment, deem necessary or useful in order to perfect and
maintain PFG's perfected first-priority security interest in the Collateral
(subject to Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement. Without limiting the foregoing, upon PFG's
request from time to time, Borrower shall cause such of its Subsidiaries as are
not a Borrower hereunder to become party to the Loan Documents as a Borrower and
otherwise take such steps as are customary to perfect liens in such
Subsidiaries' assets, including execution by Agent (or other appropriate
Borrowers or Subsidiaries) of stock pledge agreements such that Agent's direct
and indirect ownership interests in Subsidiaries are provided as security for
the Obligations.
4.10 Representations,
Warranties and Covenants Relating to Accounts.
(a) Qualification. Each Account shall at
all times represent an undisputed bona fide existing and, to Borrower's
Knowledge, unconditional obligation of the Account Debtor created by the sale,
delivery, and acceptance of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property, in the ordinary course of
Borrower's business.
(b) Documents and Legal
Compliance. All
statements made and all unpaid balances appearing in all invoices, instruments
and other documents evidencing the Accounts are and shall be true and correct in
all material respects and all such invoices, instruments and other documents and
all of Borrower's books and records are and shall be genuine and in all respects
what they purport to be. All sales and other transactions underlying
or giving rise to each Account shall comply in all material respects with all
applicable laws and governmental rules and regulations. To the best
of Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Accounts are and shall be genuine,
and all such documents, instruments and agreements are and shall be legally
enforceable in accordance with their terms.
***
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
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(c) Documents Relating to
Accounts. If
requested by PFG, Borrower shall furnish PFG with copies (or, at PFG's request,
originals) of all contracts, orders, invoices, and other similar documents, and
all shipping instructions, delivery receipts, bills of lading, and other
evidence of delivery, for any goods the sale or disposition of which gave rise
to such Accounts, and Borrower warrants the genuineness of all of the
foregoing. Borrower shall also furnish to PFG an aged accounts
receivable trial balance if required in the Schedule. In addition,
Borrower shall deliver to PFG, on its request, the originals of all instruments,
chattel paper, security agreements, guarantees and other documents and property
evidencing or securing any Accounts, in the same form as received, with all
necessary endorsements, and copies of all credit memos.
(d) Collection of
Accounts.
Borrower shall have the right to collect all Accounts, unless and until a
Default or an Event of Default has occurred and is continuing. From and after
the occurrence of any Default that is uncured during applicable cure periods,
PFG may, in its good faith business judgment, require that all proceeds of
Collateral be deposited by Borrower into a lockbox account, or such other
"blocked account" as PFG may specify, pursuant to a blocked account agreement in
such form as PFG may specify in its good faith business judgment.
(e) Disputes.
Borrower shall notify PFG promptly of all Non-trivial disputes or claims
relating to Accounts. Borrower shall not forgive (completely or
partially), compromise or settle any Account for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm’s length transactions and if
representing more than $250,000, are reported to PFG on the regular reports
provided to PFG; and (ii) no Default or Event of Default has occurred and is
continuing.
(f) Returns. Provided
no Event of Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Borrower, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs
after the occurrence and during the continuance of any Event of Default,
Borrower shall hold the returned Inventory in trust for PFG,
and immediately notify PFG of the return of the
Inventory.
(g) Verification. PFG
may, from time to time, verify directly with the respective Account Debtors the
validity, amount and other matters relating to the Accounts, by means of mail,
telephone or otherwise, either in the name of Borrower or PFG or such other name
as PFG may choose. So long as no Default has occurred and is continuing, PFG
will use good faith efforts to provide Borrower with advance notice of any such
verification and to conduct such verification(s) in such a manner as to minimize
Account Debtor concerns in connection with such contact.
5. TERM.
5.1 Maturity
Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date”), subject to
Sections 5.2, 5.3 and 5.4, below.
5.2 Early
Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) if expressly permitted in the Schedule,
by Borrower, effective three Business Days after written notice of termination
is given to PFG; or (ii) by PFG at any time after the occurrence and during the
continuance of an Event of Default, without notice, effective
immediately. If this Agreement is prepaid in whole or in part or
terminated by Borrower (to the extent permitted in the Schedule) or by PFG under
this Section 5.2, Borrower shall pay to PFG the prepayment fee in the amount set
forth in the Schedule. Any prepayment fee shall be due and payable upon each
prepayment and if the Loan is prepaid in full, on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.
5.3 Payment
of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Notwithstanding any termination of this Agreement, all of PFG's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that PFG may, in its sole discretion,
refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of PFG, nor shall any such
termination relieve Borrower of any Obligation to PFG, until all of the
Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
PFG shall promptly terminate its financing statements with respect to the
Borrower and deliver to Borrower such other documents as may be required to
fully terminate PFG's security interests.
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5.4 Survival
of Certain Obligations. Without limiting the survival of obligations
addressed otherwise in this Agreement and notwithstanding any other provision of
this Agreement, the obligations of Borrower under Sections 4.7, 8.8, 8.9 and
8.15 shall survive the termination of this Agreement.
6. EVENTS
OF DEFAULT AND REMEDIES.
6.1 Events
of Default. The occurrence of any of the following events
shall constitute an “Event of Default” under this Agreement, and Borrower shall
give PFG immediate written notice thereof:
(a) Any
warranty, representation, statement, report or certificate made or delivered to
PFG by Borrower or any of Borrower's officers, employees or agents, now or in
the future, shall be untrue or misleading in a material respect when made or
deemed to be made; or
(b)
Borrower shall fail to pay any Loan or any interest thereon or any other
monetary Obligation within three (3) Business Days after the date due;
or
(c)
Borrower (i) shall fail to comply with any of the financial covenants set forth
in the Schedule, or (ii) shall breach any of the provisions of Section 4.6
hereof, or (iii) shall fail to perform any other non-monetary Obligation which
by its nature cannot be cured, or (iv) shall fail to permit PFG to conduct an
inspection or audit as provided in Section 4.5 hereof or (v) shall fail to
provide PFG with a Report under Section 6 of the Schedule within three (3)
Business Days after the date due; or
(d)
Borrower shall fail to perform any other non-monetary Obligation, which failure
is not cured within ten (10) Business Days after the later of (i) the date due
and (ii) Borrower's Knowledge of such failure; or
(e) any
levy, assessment, attachment or seizure is made on all or any part of the
Collateral which is not cured within five (5) Business Days after the occurrence
of the same, or any lien or encumbrance (other than a Permitted Lien) is made on
all or any part of the Collateral which is not cured within 20 calendar days
after the occurrence of the same; or
(f) any
default or event of default occurs under any obligation secured by a Permitted
Lien, which is not cured within any applicable cure period or waived in writing
by the holder of the Permitted Lien; or
(g)
Borrower breaches any material contract or obligation, which has resulted or may
reasonably be expected to result in a Material Adverse Change; or
(h)
Dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, or Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or
(i) the
commencement of any proceeding against Borrower or any guarantor of any of the
Obligations under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 60 days after the date commenced; or
(j)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or
(k)
revocation or termination of, or limitation or denial of liability upon, any
pledge of any certificate of deposit, securities or other property or asset of
any kind pledged by any third party to secure any or all of the Obligations, or
any attempt to do any of the foregoing, or commencement of proceedings by or
against any such third party under any bankruptcy or insolvency law;
or
(l)
Borrower makes any payment on account of any indebtedness or obligation which
has been subordinated to the Obligations (other than as permitted in the
applicable subordination agreement), or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits his subordination
agreement without PFG's express written consent in its business discretion;
or
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(m) there
shall be a change in the record or beneficial ownership of an aggregate of more
than thirty-five percent (35%) of the outstanding shares of stock of Borrower,
in one or more transactions, compared to the ownership of outstanding shares of
stock of Borrower in effect on the date hereof, without the prior written
consent of PFG; or
(n) a
default or breach shall occur under any other Loan Document, which default or
breach shall be continuing after the later of any applicable expressly specified
cure period or five (5) Business Days; or
(o) the
Internal Revenue Service shall exercise remedies under the lien specified in
Section 7 - "Permitted Liens", clause (x), or shall otherwise proceed against
any Collateral to collect the tax Indebtedness disclosed in Exhibit A -
"Permitted Indebtedness", or Borrower shall fail to timely pay (as and when due)
any amount due to the Internal Revenue Service pursuant to a payment plan to
discharge such specified tax Indebtedness and lien; or
(p) a
Material Adverse Change shall occur.
PFG may
cease making any Loans hereunder during any of the cure periods provided above,
and thereafter if an Event of Default has occurred and is
continuing.
6.2 Remedies. Upon
the occurrence and during the continuance of any Event of Default, and at any
time thereafter, PFG, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other Loan Document; (b) With notice to
Agent, accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes PFG without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store, or remove any of the Collateral, and
remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as PFG deems it necessary,
in its good faith business judgment, in order to complete the enforcement of its
rights under this Agreement or any other agreement; provided, however, that
should PFG seek to take possession of any of the Collateral by court process,
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an incident
to such possession; (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and (iii) any requirement that
PFG retain possession of, and not dispose of, any such Collateral until after
trial or final judgment; (d) Require Borrower to assemble any or all of the
Collateral and make it available to PFG at places designated by PFG which are
reasonably convenient to PFG and Borrower, and to remove the Collateral to such
locations as PFG may deem advisable; (e) Complete the processing, manufacturing
or repair of any Collateral prior to a disposition thereof and, for such purpose
and for the purpose of removal, PFG shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes, and other Equipment and all other
property without charge; (f) Sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time PFG obtains possession of it or after
further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. PFG shall have the
right to conduct such disposition on Borrower's premises without charge, for
such time or times as PFG deems reasonable, or on PFG's premises, or elsewhere
and the Collateral need not be located at the place of
disposition. PFG may directly or through any affiliated company
purchase or lease any Collateral at any such public disposition, and if
permissible under applicable law, at any private disposition. Any
sale or other disposition of Collateral shall not relieve Borrower of any
liability Borrower may have if any Collateral is defective as to title or
physical condition or otherwise at the time of sale; (g) Demand payment of, and
collect any Accounts and General Intangibles comprising Collateral and, in
connection therewith, Borrower irrevocably authorizes PFG to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of the Collateral or proceeds thereof,
and, in PFG's good faith business judgment, to grant extensions of time to pay,
compromise claims and settle Accounts and the like for less than face value; (h)
Exercise any and all rights under any present or future control agreements
relating to Deposit Accounts or Investment Property; and (i) Demand and receive
possession of any of Borrower's federal and state income tax returns and the
books and records utilized in the preparation thereof or referring
thereto. All reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by PFG with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of PFG's rights and remedies, from
and after the occurrence and during the continuance of any Event of Default, the
interest rate applicable to the Obligations shall be the Default
Rate.
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6.3 Standards
for Determining Commercial Reasonableness. Borrower and PFG
agree that a sale or other disposition (collectively, “sale”) of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower
at least ten (10) days prior to the sale, and, in the case of a public sale,
notice of the sale is published at least five days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by PFG,
with or without the Collateral being present; (iv) The sale commences at any
time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase
price in cash or by cashier’s check or wire transfer is required; (vi) With
respect to any sale of any of the Collateral, PFG may (but is not obligated to)
direct any prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. PFG shall be free to employ other
methods of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
6.4 Power
of Attorney. Upon the occurrence and during the continuance of
any Event of Default, without limiting PFG’s other rights and remedies, Borrower
grants to PFG an irrevocable power of attorney coupled with an interest,
authorizing and permitting PFG (acting through any of its employees, attorneys
or agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but PFG agrees that if it exercises
any right hereunder, it will do so in good faith and in a commercially
reasonable manner: (a) Execute on behalf of Borrower any documents
that PFG may, in its good faith business judgment, deem advisable in order to
perfect and maintain PFG's security interest in the Collateral, or in order to
exercise a right of Borrower or PFG, or in order to fully consummate all the
transactions contemplated under this Agreement, and all other Loan Documents;
(b) Execute on behalf of Borrower, any invoices relating to any Account, any
draft against any Account Debtor and any notice to any Account Debtor, any proof
of claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's
or other lien, or assignment or satisfaction of mechanic's, materialman's or
other lien; (c) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
PFG's possession; (d) Endorse all checks and other forms of remittances received
by PFG; (e) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (f)
Grant extensions of time to pay, compromise claims and settle Accounts and
General Intangibles for less than face value and execute all releases and other
documents in connection therewith; (g) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (h)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (i) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give PFG the same rights of access and other rights with respect
thereto as PFG has under this Agreement; (j) Execute on behalf of Borrower and
file in Borrower’s name such documents and instruments as may be necessary or
appropriate to effect the transfer of Domain Rights, domain names, domain
registry administrative contacts and domain and website hosting services into
the name of PFG or its designees, and (k) Take any action or pay any sum
required of Borrower pursuant to this Agreement and any other Loan
Documents. Any and all reasonable sums paid and any and all
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by PFG with respect to the foregoing shall be added to and become part
of the Obligations, shall be payable on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the
Obligations. In no event shall PFG's rights under the foregoing power
of attorney or any of PFG's other rights under this Agreement be deemed to
indicate that PFG is in control of the business, management or properties of
Borrower.
6.5 Application
of Proceeds. All proceeds realized as the result of any sale
of the Collateral shall be applied by PFG first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by PFG in the
exercise of its rights under this Agreement, second to the interest due upon any
of the Obligations, and third to the principal of the Obligations, in such order
as PFG shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to PFG for any deficiency. If, PFG, in its good faith
business judgment, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale of Collateral, PFG shall
have the option, exercisable at any time, in its good faith business judgment,
of either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by PFG of
the cash therefor.
6.6 Remedies
Cumulative. In addition to the rights and remedies set forth
in this Agreement, PFG shall have all the other rights and remedies accorded a
secured party under the Code and under all other applicable laws, and under any
other instrument or agreement now or in the future entered into between PFG and
Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by PFG of one or more of its
rights or remedies shall not be deemed an election, nor bar PFG from subsequent
exercise or partial exercise of any other rights or remedies. The
failure or delay of PFG to exercise any rights or remedies shall not operate as
a waiver thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and
performed.
7.
DEFINITIONS. As
used in this Agreement, the following terms have the following
meanings:
“Account Debtor” means
the obligor on an Account.
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“Accounts” means all
present and future “accounts” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all accounts receivable and other sums owing to
Borrower.
"Accounts Receivable"
means amounts due to Borrower from non-Affiliates (except as specified in clause
(v) of the definition of "Eligible Accounts") for goods furnished and services
rendered in the ordinary course of business that qualify as accounts receivable
under GAAP.
“Affiliate” means,
with respect to any Person, a relative, partner, shareholder, director, officer,
or employee of such Person, or any parent or Subsidiary of such Person, or any
Person directly or indirectly through any other Person controlling, controlled
by or under common control with such Person.
“Business Day” means a
day on which PFG is open for business.
“Cash” means
unrestricted and unencumbered (except for the liens of PFG) cash or cash
equivalents in deposit accounts or investment accounts for which there is in
effect a deposit account control agreement among Borrower, PFG and the
depositary institution in respect of such accounts, unless the requirement for a
deposit account control agreement has been waived by PFG.
“Cash Equivalents”
means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having
maturities of not more than one (1) year from the date of acquisition;
(b) commercial paper maturing no more than one (1) year after its creation
and having the highest rating from either Standard & Poor’s Ratings Group or
Moody’s Investors Service, Inc., (c) certificates of deposit issued maturing no
more than one (1) year after issue; and (d) money market funds at least
ninety-five percent (95%) of the assets of which constitute Cash Equivalents of
the kinds described in clauses (a) through (c) of this definition.
“Change in Control”
means any event, transaction, or occurrence as a result of which (a) any
“person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as an amended (the “Exchange Act”)), other than
a trustee or other fiduciary holding securities under an employee benefit plan
of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
Borrower, representing thirty-five percent (35%) or more of the combined voting
power of Borrower’s then outstanding securities; or (b) during any period of
twelve consecutive calendar months, individuals who at the beginning of such
period constituted the Board of Directors of Borrower (together with any new
directors whose election by the Board of Directors of Borrower was approved by a
vote of at least three-fifths of the directors then still in office who either
were directions at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason other than death
or disability to constitute a majority of the directors then in
office.
“Code” means the
Uniform Commercial Code as adopted and in effect in the State of California from
time to time.
“Collateral” has the
meaning set forth in Section 2 above.
“Compliance
Certificate” means Borrower’s certification of its compliance with the
terms and conditions of this Agreement and such other matters as PFG may require
to be addressed in such certificate, in the form as initially set forth as Exhibit B hereto, as
such form may be amended from time to time upon advance notice from
PFG.
“continuing” and
“during the
continuance of” when used with reference to a Default or Event of Default
means that the Default or Event of Default has occurred and has not been either
waived in writing by PFG or cured within any applicable cure
period.
“Default” means any
event which with notice or passage of time or both, would constitute an Event of
Default.
“Default Rate” means
the lesser of eighteen percent (18%) per annum and the maximum rate of interest
that may lawfully be charged to a commercial borrower under applicable usury
laws.
"Deferred Revenue"
means Revenue that has been realized by Borrower but cannot be booked under GAAP
in the current accounting period.
“Deposit Accounts”
means all present and future “deposit accounts” as defined in the Code in effect
on the date hereof with such additions to such term as may hereafter be made,
and includes without limitation all general and special bank accounts, demand
accounts, checking accounts, savings accounts and certificates of
deposit.
“DeWind Escrow
Account(s) ” means those certain deposit accounts under the dominion of
U.S. Bank, NA, as Escrow Agent under that certain Escrow and Security Agreement
dated as of September 4, 2009, from which Claims of DSME are to be paid during
the Escrow Period (as each such term is defined in such Escrow and Security
Agreement).
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“Dormant Subsidiaries”
means Composite Technology Corporation’s Subsidiaries identified as Transmission
Technology Corporation, a Nevada corporation, and CTC Towers & Poles
Corporation, a Nevada corporation.
“DSME” means Daewoo
Shipbuilding & Marine Engineering Co., Ltd.
“Eligible Accounts”
means Accounts and General Intangibles arising in the ordinary course of
Borrower's business from the sale of goods or the rendition of services, or the
non-exclusive licensing of Intellectual Property. Without limiting
the fact that the determination of which Accounts are eligible under this
Agreement is a matter of PFG’s good faith business judgment, the following (the
“Minimum Eligibility
Requirements”) are the minimum requirements for a Account to be an
Eligible Account:
(i) the
Account must not be outstanding for more than 60 days from its invoice date (the
“Eligibility
Period”),
(ii) the
Account must not represent progress billings, or be due under a fulfillment or
requirements contract with the Account Debtor,
(iii) the
Account must not be subject to any Non-trivial contingencies (including Accounts
arising from sales on consignment, guaranteed sale or other terms pursuant to
which payment by the Account Debtor may be conditional),
(iv) the
Account must not be owing from an Account Debtor with whom Borrower has any
Non-trivial dispute (whether or not relating to the particular
Account),
(v) the
Account must not be owing from an Affiliate of Borrower, provided that Accounts
from Borrower *** may be considered
(subject to satisfaction of the other Minimum Eligibility Requirements) so long
as (a) there is a corresponding purchase order *** and (b) the
maximum dollar amount of such Accounts that may be considered shall be not more
than $5,000,000 in the aggregate at any time,
(vi) the
Account must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to PFG, or which, fails or goes out of a material portion of its
business,
(vii) the
Account must not be owing from the United States or any department, agency or
instrumentality thereof (unless there has been compliance, to PFG’s
satisfaction, with the United States Assignment of Claims Act),
(viii)
the Account must not be owing from an Account Debtor located outside the United
States or Canada (unless pre-approved by PFG in its discretion in writing, or
backed by a letter of credit satisfactory to PFG, or FCIA insured satisfactory
to PFG),
(ix) with
respect to Borrower ***, in additional to
meeting the Minimum Eligibility Requirements of the other clauses of this
definition, each such Account shall be backed by an irrevocable letter of credit
from a top tier international bank reasonably acceptable to PFG in order to be
considered for eligibility; and
(x) the
Account must not be owing from an Account Debtor to whom Borrower is or may be
liable for goods purchased from such Account Debtor or otherwise (but, in such
case, the Account will be deemed not eligible only to the extent of any amounts
owed by Borrower to such Account Debtor).
If more
than 50% of the Accounts owing from an Account Debtor are outstanding for a
period longer than their Eligibility Period (without regard to unapplied
credits) or are otherwise not Eligible Accounts, then all Accounts owing from
that Account Debtor will be deemed ineligible for purposes of this
Agreement.
“Equipment” means all
present and future “equipment” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all machinery, fixtures, goods, vehicles (including motor
vehicles and trailers), and any interest in any of the foregoing.
“Event of Default”
means any of the events set forth in Section 6.1 of this
Agreement.
“GAAP” means generally
accepted accounting principles consistently applied.
“General Intangibles”
means all present and future “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation all Intellectual Property, payment
intangibles, royalties, contract rights, goodwill, franchise agreements,
purchase orders, customer lists, route lists, telephone numbers, domain names,
claims, income tax refunds, security and other deposits, options to purchase or
sell real or personal property, rights in all litigation presently or hereafter
pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption
insurance), payments of insurance and rights to payment of any
kind.
***
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
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“good faith business
judgment” means honesty in fact and good faith (as defined in Section
1201 of the Code) in the exercise of PFG’s business judgment.
“including” means
including (but not limited to).
“Indebtedness” means
(a) indebtedness for borrowed money or the deferred purchase price of property
or services (other than trade payables arising in the ordinary course of
business), (b) obligations evidenced by bonds, notes, debentures or other
similar instruments, (c) reimbursement obligations in connection with letters of
credit, and (d) capital lease obligations.
"Immaterial" means, as
viewed by a rational lender in PFG's position with respect to the Loan and
Collateral, an occurrence, event, information or condition that does not rise to
a level of significance that would influence PFG to take a responsive action or
exercise a right under the Loan Documents.
“Intellectual
Property” means all present and future: (a) copyrights, copyright rights,
copyright applications, copyright registrations and like protections in each
work of authorship and derivative work thereof, whether published or
unpublished, (b) trade secret rights, including all rights to unpatented
inventions and know-how, and confidential information; (c) mask work or similar
rights available for the protection of semiconductor chips; (d) patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same; (e) trademarks, servicemarks, trade styles,
and trade names, whether or not any of the foregoing are registered, and all
applications to register and registrations of the same and like protections, and
the entire goodwill of the business of Borrower connected with and symbolized by
any such trademarks; (f) Domain Rights as described in Section 3.14 hereof, (g)
computer software and computer software products; (h) designs and design rights;
(i) technology; (j) all claims for damages by way of past, present and future
infringement of any
of the rights included above; and (k) all licenses or other rights to use any
property or rights of a type described above.
"Interest Expense"
means for any fiscal period, interest expense (whether cash or non- cash)
determined in accordance with GAAP for the relevant period ending on such date,
including, in any event, interest expense with respect to any Indebtedness of
Borrower.
“Inventory” means all
present and future “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.
“Investment” means any
beneficial ownership interest in any Person (including any stock, partnership
interest or other equity or debt securities issued by any Person), and any loan,
advance or capital contribution to any Person.
“Investment Property”
means all present and future investment property, securities, stocks, bonds,
debentures, debt securities, partnership interests, limited liability company
interests, options, security entitlements, securities accounts, commodity
contracts, commodity accounts, and all financial assets held in any securities
account or otherwise, and all options and warrants to purchase any of the
foregoing, wherever located, and all other securities of every kind, whether
certificated or uncertificated.
“Knowledge” or “best of knowledge”
and words of similar import mean either (i) the actual knowledge of any of
Borrower’s officers, including Chief Executive Officer, President, Chief
Information Officer (if any), Chief Technology Officer (or equivalent), Chief
Financial Officer and Corporate Controller, or Borrower's Vice
Presidents or General Managers supervising a business unit or division, or any
persons succeeding or performing the responsibilities of such identified
positions, or (ii) such knowledge as the persons in such identified positions
would have assuming (A) Borrower policies in accordance with generally-accepted
norms of corporate governance and (B) the actual exercise of reasonable
diligence and prudence by such persons in accordance with such
policies.
“Loan Documents”
means, collectively, this Agreement, the Representations, and all other present
and future documents, instruments and agreements between PFG and Borrower,
including, but not limited to those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor.
“Material Adverse
Change” means any of the following: (i) a material adverse change in the
business, operations, or financial or other condition of the Borrower, or (ii) a
material impairment of the prospect of repayment of any portion of the
Obligations; or (iii) a material impairment of the value or priority of PFG’s
security interests in the Collateral.
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"Obligations" means
all present and future Loans, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Borrower to
PFG, including obligations and covenants intended to survive the termination of
this Agreement, whether evidenced by this Agreement or any note or other
instrument or document, or otherwise, including indebtedness under any
obligation to purchase equity derivatives purchased or otherwise issued to PFG
from time to time, whether arising from an extension of credit, opening of a
letter of credit, banker's acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by PFG in Borrower's debts owing to
others), absolute or contingent, due or to become due, including, without
limitation, all interest, charges, expenses, fees, attorney's fees, expert
witness fees, audit fees, collateral monitoring fees, closing fees, facility
fees, termination fees, minimum interest charges and any other sums chargeable
to Borrower under this Agreement or under any other Loan Documents.
"ordinary course of
business" means a transaction or other action that is usual and customary
for a Person as demonstrated by such Person's past practice and that may be
taken without approval of a Person's Board of Directors or
stockholders.
“Other Property” means
the following as defined in the Code in effect on the date hereof with such
additions to such terms as may hereafter be made, and all rights relating
thereto: all present and future “commercial tort claims” (including without
limitation any commercial tort claims identified in the Representations),
“documents”, “instruments”, “promissory notes”, “chattel paper”, “letters of
credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and
all other goods and personal property of every kind, tangible and intangible,
whether or not governed by the Code.
“Payment” means all
checks, wire transfers and other items of payment received by PFG for credit to
Borrower’s outstanding Obligations.
“Permitted
Indebtedness” means:
(i) the
Loans and other Obligations; and
(ii)
Indebtedness existing on the date hereof and shown on Exhibit A
hereto;
(iii)
Subordinated Debt;
(iv)
other Indebtedness secured by Permitted Liens;
(v)
ordinary course trade payables; and
(vi)
reimbursement obligations in respect of letters of credit in an aggregate face
amount outstanding not to exceed $300,000 at any time outstanding, which have
been reported to PFG in writing.
“Permitted
Investments” are:
(i)
Investments (if any) shown on Exhibit A and existing on the date
hereof;
(ii)
marketable direct obligations issued or unconditionally guaranteed by the United
States or its agency or any State maturing within 1 year from its
acquisition;
(iii) commercial
paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor's Corporation or Moody's Investors
Service, Inc;
(iv)
investments by one Borrower in another Borrower, including intercompany loans
made and incurred in the ordinary course of business;
(v) ***
(vi) bank
certificates of deposit issued maturing no more than 1 year after
issue.
“Permitted Liens”
means the following:
(i)
purchase money security interests in specific items of Equipment;
(ii)
leases of specific items of Equipment;
(iii)
liens for taxes not yet payable;
(iv)
additional security interests and liens consented to in writing by PFG, which
consent may be withheld in its good faith business judgment. PFG will have the
right to require, as a condition to its consent under this subparagraph (iv),
that the holder of the additional security interest or lien sign an
intercreditor agreement on PFG’s then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of PFG, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agrees that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement;
***
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
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(v)
security interests being terminated substantially concurrently with this
Agreement;
(vi) liens
of materialmen, mechanics, warehousemen, carriers, or other similar liens
arising in the ordinary course of business and securing obligations which are
not delinquent;
(vii) liens
incurred in connection with the extension, renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (i) or (ii)
above, provided that any extension, renewal or replacement lien is limited to
the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not
increase;
(viii)
liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods;
(ix)
liens of DSME in respect of the DeWind Escrow Account(s);
(x) any
lien securing the tax Indebtedness disclosed in Exhibit A - "Permitted
Indebtedness", so long as such lien does not secure an amount in excess of
$1,100,000, and so long as Borrower is in compliance, including timely payment,
with the terms of any payment plan or settlement agreement in respect of such
tax Indebtedness;
(xi)
landlord liens that are expressly permitted by any applicable landlord consent
addressed to PFG; and
(xii)
statutory, common law or contractual liens of depository institutions or
institutions holding securities accounts (including rights of set-off) securing
only customary charges and fees in connection with such accounts.
“Person” means any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any agency
or political division thereof, or any other entity.
“Representations”
means the written Representations and Warranties provided by Borrower to PFG
referred to in the Schedule.
"Revenues" means the
total amount of money received or deemed received under GAAP by Borrower for
goods sold and services rendered in the ordinary course of
business.
“Subordinated Debt”
means debt incurred by Borrower subordinated to Borrower’s debt to PFG (pursuant
to a subordination agreement entered into between PFG, Borrower and the
subordinated creditor), on terms acceptable to PFG in its
discretion.
“Subsidiary” means,
with respect to any Person, any Person of which more than 50% of the voting
stock or other equity interests is owned or controlled, directly or indirectly,
by such Person or one or more Affiliates of such Person.
“Trivial” and “Non-trivial” mean
trivial and non-trivial, respectively, from the perspective of a reasonable
lender in PFG’s position, as determined by PFG in its good faith business
discretion, and “Non-trivial” includes a lesser level of significance that does
the term “material.”
Other
Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP, consistently applied. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meanings provided by the
Code, to the extent such terms are defined therein.
8.
GENERAL PROVISIONS.
8.1 Confidentiality. PFG agrees to a
reasonable degree of care but no less than the same degree of care that it
exercises with respect to its own proprietary information, to maintain the
confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by PFG from the Borrower, which indicates
that it is confidential, including business plans and forecasts, non-public
financial information, confidential or secret processes, formulae, devices and
contractual information, customer lists, and employee relation matters, provided
that PFG may disclose such information (i) to its officers, directors,
employees, attorneys, accountants, affiliates, participants, prospective
participants, assignees and prospective assignees, and such other Persons to
whom PFG shall at any time be required to make such disclosure in accordance
with applicable law or legal process, and (ii) in its good faith business
judgment in connection with the enforcement of its rights or remedies after an
Event of Default, or in connection with any dispute with Borrower or any other
Person relating to Borrower. The confidentiality agreement in this
Section supersedes any prior confidentiality agreement of PFG relating to
Borrower.
8.2 Interest
Computation. In computing interest on the Obligations, all
Payments received after 12:00 Noon, Pacific Time, on any day shall be deemed
received on the next Business Day.
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8.3
Payments. All
Payments may be applied, and in PFG's good faith business judgment reversed and
re-applied, to the Obligations, in such order and manner as PFG shall determine
in its good faith business judgment.
8.4 Monthly
Accountings. PFG shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding
on Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by PFG), unless Borrower
notifies PFG in writing to the contrary within 60 days after such account is
rendered, describing the nature of any alleged errors or omissions.
8.5 Notices. All
notices to be given under this Agreement shall be in writing and shall be given
either personally, or by reputable private delivery service, or by regular
first-class mail, or certified mail return receipt requested, or by fax to the
most recent fax number a party has for the other party (and if by fax, sent
concurrently by one of the other methods provided herein), or by electronic mail
to the most recent electronic mail address for Borrower provided for the chief
financial officer or financial controller executing the Representations (and if
by electronic mail, with an electronic delivery and/or read receipt), addressed
to PFG or Borrower at the addresses shown in the heading to this Agreement, in
the Representations or at any other address designated in writing by one party
to the other party. All notices shall be deemed to have been given upon delivery
in the case of notices personally delivered, or at the expiration of one
Business Day following delivery to the private delivery service, or two Business
Days following the deposit thereof in the United States mail, with postage
prepaid, or on the first Business Day of receipt during business hours in the
case of notices sent by fax or electronic mail, as provided herein.
8.6 Severability. Should
any provision of this Agreement be held by any court of competent jurisdiction
to be void or unenforceable, such defect shall not affect the remainder of this
Agreement, which shall continue in full force and effect.
8.7 Integration. This
Agreement and such other written agreements, documents and instruments as may be
executed in connection herewith are the final, entire and complete agreement
between Borrower and PFG and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
8.8 Waivers;
Indemnity. The failure of PFG at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Document shall not waive or diminish any right of PFG later to demand
and receive strict compliance therewith. Any waiver of any default
shall not waive or affect any other default, whether prior or subsequent, and
whether or not similar. None of the provisions of this Agreement or
any other Loan Document shall be deemed to have been waived by any act or
knowledge of PFG or its agents or employees, but only by a specific written
waiver signed by an authorized officer of PFG and delivered to
Borrower. Borrower waives the benefit of all statutes of limitations
relating to any of the Obligations or this Agreement or any other Loan Document,
and Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, General
Intangible, document or guaranty at any time held by PFG on which Borrower is or
may in any way be liable, and notice of any action taken by PFG, unless
expressly required by this Agreement. Borrower hereby agrees to indemnify PFG
and its affiliates, subsidiaries, parent, directors, officers, employees,
agents, and attorneys, and to hold them harmless from and against any and all
claims, debts, liabilities, demands, obligations, actions, causes of action,
penalties, costs and expenses (including reasonable attorneys' fees), of every
kind, which they may sustain or incur based upon or arising out of any of the
Obligations, or any relationship or agreement between PFG and Borrower, or any
other matter, relating to Borrower or the Obligations; provided that this
indemnity shall not extend to damages proximately caused by the
indemnitee’s own gross negligence or willful
misconduct. Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.
8.9 No
Liability for Ordinary Negligence. Neither PFG, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing PFG shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of PFG, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing PFG, but nothing herein shall relieve PFG from liability
for its own gross negligence or willful misconduct.
8.10 Amendment. The
terms and provisions of this Agreement may not be waived or amended, except in a
writing executed by Borrower and a duly authorized officer of PFG.
8.11 Time
of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.
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8.12 Attorneys’
Fees and Costs. Borrower shall reimburse PFG for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by PFG, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any reasonable attorneys' fees and costs
PFG incurs in order to do the following: prepare and negotiate this Agreement
and all present and future documents relating to this Agreement; obtain legal
advice in connection with this Agreement or Borrower; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
Account Debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce PFG’s security interest in, the Collateral; and otherwise
represent PFG in any litigation relating to Borrower. If either PFG or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to
which PFG may be entitled pursuant to this Paragraph shall immediately become
part of Borrower's Obligations, shall be due on demand, and shall bear interest
at a rate equal to the highest interest rate applicable to any of the
Obligations.
8.13 Benefit
of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and PFG; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of PFG, and any prohibited assignment shall be
void. No consent by PFG to any assignment shall release Borrower from
its liability for the Obligations.
8.14 Joint
and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
8.15 Limitation
of Actions. Any claim or cause of
action by Borrower, on the one hand, or PFG, on the other hand (each a "party")
against another party, its directors, officers, employees, agents, accountants
or attorneys, based upon, arising from, or relating to this Loan Agreement, or
any other Loan Document, or any other transaction contemplated hereby or thereby
or relating hereto or thereto, or any other matter, cause or thing whatsoever,
incurred, done, omitted or suffered to be done by the other party, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by a party by the commencement of an action or proceeding
in a court of competent jurisdiction by (a) the filing of a complaint within one
year after the earlier to occur of (i) the first act, occurrence or omission
upon which such claim or cause of action, or any part thereof, is based, or (ii)
the date this Agreement is terminated, and (b) the service of a summons and
complaint on an officer of such other party, or on any other person authorized
to accept service on behalf of such other party, within thirty (30) days
thereafter. Each party agrees that such one-year period is a
reasonable and sufficient time to investigate and act upon any such claim or
cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by the written consent of PFG and
Agent. This provision shall survive any termination of this Loan
Agreement or any other Loan Document.
8.16 Loan
Monitoring. At reasonable times and upon reasonable advance
notice to Borrower, PFG shall have the right to visit personally with Borrower
up to four times per calendar year at its principal place of business or such
other location as the parties may mutually agree, for the purpose of meeting
with Borrower’s management in order to remain as up-to-date with Borrower’s
business as is practicable and to maintain best practices in terms of lender
loan monitoring and diligence. Reasonable out-of-pocket costs, including travel
and lodging for up to two PFG staff for two of the four visits shall be at
Borrower’s expense and reimbursed in the same manner as other PFG expenses under
this Agreement.
8.17 Paragraph
Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and PFG acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against PFG or Borrower under any rule of construction or
otherwise.
8.18 Governing
Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of PFG and Borrower shall
be governed by the laws of the State of California. As a material
part of the consideration to PFG to enter into this Agreement, Borrower (i)
agrees that all actions and proceedings relating directly or indirectly to this
Agreement shall, at PFG's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be San Francisco County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
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8.19 Mutual
Waiver of Jury Trial. BORROWER AND PFG EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT
OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN PFG AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF PFG OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH PFG OR BORROWER, IN ALL
OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE. WITHOUT INTENDING IN ANY WAY TO LIMIT
THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY, if the above waiver of the right to a trial by jury is not
enforceable, the parties hereto agree that any and all disputes or controversies
of any nature between them arising at any time shall be decided by a reference
to a private judge, mutually selected by the parties (or, if they cannot agree,
by the Presiding Judge of the San Francisco County, California Superior Court)
appointed in accordance with Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive
jurisdiction of the federal courts), sitting without a jury, in San Francisco
County, California; and the parties hereby submit to the jurisdiction of such
court. The reference proceedings shall be conducted pursuant to and
in accordance with the provisions of Code of Civil Procedure §§ 638 through
645.1, inclusive. The private judge shall have the power, among
others, to grant provisional relief, including without limitation, entering
temporary restraining orders, issuing preliminary and permanent injunctions and
appointing receivers. All such proceedings shall be closed to the
public and confidential and all records relating thereto shall be permanently
sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the San
Francisco County, California Superior Court for such relief. The
proceeding before the private judge shall be conducted in the same manner as it
would be before a court under the rules of evidence applicable to judicial
proceedings. The parties shall be entitled to discovery which shall
be conducted in the same manner as it would be before a court under the rules of
discovery applicable to judicial proceedings. The private judge shall
oversee discovery and may enforce all discovery rules and order applicable to
judicial proceedings in the same manner as a trial court judge. The
parties agree that the selected or appointed private judge shall have the power
to decide all issues in the action or proceeding, whether of fact or of law, and
shall report a statement of decision thereon pursuant to the Code of Civil
Procedure § 644(a). Nothing in this paragraph shall limit the right
of any party at any time to exercise self-help remedies, foreclose against
collateral, or obtain provisional remedies. The private judge shall
also determine all issues relating to the applicability, interpretation, and
enforceability of this paragraph.
[Signature
Page Follows]
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Borrower:
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PFG:
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|||||
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COMPOSITE
TECHNOLOGY CORPORATION
|
PARTNERS
FOR GROWTH II, L.P.
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|||||
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By
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/s/ Benton H. Wilcoxon |
By
|
/s/ Lorraine Nield | |||
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CEO
|
||||||
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Name:
|
/s/ Lorraine Nield | |||||
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By
|
/s/ Lang Jin | |||||
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Secretary
or Ass't Secretary
|
Title: Manager, Partners for Growth II, LLC | |||||
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Its
General Partner
|
||||||
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Borrower:
|
Borrower:
|
|||||
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CTC
CABLE CORPORATION
|
CTC
RENEWABLES CORPORATION
|
|||||
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By
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/s/ John Brewster |
By
|
/s/
Benton H. Wilcoxon
|
|||
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President
|
President
|
|||||
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By
|
/s/ Lang Jin |
By
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/s/ Lang Jin | |||
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Secretary
or Ass't Secretary
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Secretary
or Ass't
Secretary
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Signature Page to Loan and Security
Agreement
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Partners
For Growth
Schedule
to
Loan
and Security Agreement
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Borrower:
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Composite
Technology Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Borrower:
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CTC
Cable Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Borrower:
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CTC
Renewables Corporation
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Address:
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2026
McGaw Avenue, Irvine, CA 92614
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Date:
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April
12, 2010
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This
Schedule forms an integral part of the Loan and Security Agreement between
PARTNERS FOR GROWTH II, L.P. and the above-borrower of even date.
1. LOAN (Section
1.1):
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Loan:
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The
Loan shall consist of a term loan in the amount of $10,000,000 (the
“Credit Limit”), which shall be disbursed in its entirety within one (1)
Business Day from the date the conditions set forth in Section 9 of this
Schedule have been satisfied, waived by PFG or reflected as conditions
subsequent in a post-closing obligations letter in PFG’s customary form.
Borrowings under the Loan shall be deemed to be either Facility A
borrowings or Facility B borrowings, as follows, to be measured on a
calendar monthly basis as of the last day of each
month:
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Facility
A:
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Facility
A borrowings are those borrowings that are supported by eighty percent
(80%) of Eligible Accounts.
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Facility
B:
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Facility
B borrowings are the difference between Facility A borrowings from time to
time and the Credit Limit. For example only, if Borrower’s
Eligible Accounts as at March 31, 2010 were $5,000,000, then $4,000,000
(80% of Eligible Accounts) would be deemed to be Facility A borrowings and
the balance of $6,000,000 would be deemed Facility B borrowings. If
Borrower’s Eligible Accounts as at April 30, 2010 were $2,000,000, then
$1,600,000 (80% of Eligible Accounts) would be deemed to be Facility A
borrowings and the balance of $8,400,000 would be deemed Facility B
borrowings.
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-1-
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Partners
for Growth
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Schedule
to Loan and Security Agreement
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Repayment:
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Borrower
shall pay interest on the outstanding principal balance of the Loan
monthly until the Maturity Date, on which date the entire unpaid principal
balance of the Loan plus any and all accrued and unpaid interest and any
other outstanding monetary obligations shall be paid in full.
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Prepayment:
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The
principal of the Loan may be prepaid at any time, in whole or in part,
provided that, concurrently with the prepayment, the Borrower pays to PFG
a prepayment fee as follows: (i) three percent (3%) of principal repaid
during the first year after the date hereof, and (ii) one and one-half
percent (1.5%) of principal repaid after the first anniversary hereof and
before the Maturity Date.
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2. INTEREST.
Interest Rate (Section
1.2):
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The
Interest Rate applicable to Facility A borrowings shall be seven and
one-half percent (7.5%) per annum and the Interest Rate applicable to
Facility B borrowings shall be twelve and one-half percent
(12.5%).
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Interest
shall be calculated on the basis of a 360-day year and a year of twelve
months of 30 days each for the actual number of days elapsed. Accrued
interest for each month shall be payable monthly, on the first day of each
month for interest accrued during the prior month. To the extent that the
timing of the determination of Eligible Accounts renders the calculation
of interest due impracticable for any month, PFG may separately invoice or
credit, as the case may be, any underpaid or overpaid interest during the
following month or at the next regularly-scheduled interest payment
date.
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3. FEES (Section 1.3):
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Loan
Fee:
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$200,000,
which will be deducted from net Loan proceeds to Borrower, less any Loan
Fee deposit paid concurrently with execution of the term sheet in respect
of the Loan.
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-2-
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Partners
for Growth
|
Schedule
to Loan and Security Agreement
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4. MATURITY
DATE
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(Section 5.1):
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April
12, 2012.
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5. FINANCIAL
COVENANTS
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(Section 4.1):
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Borrower
shall comply with each of the following covenants. Compliance
shall be determined monthly as of the end of each month, except as
otherwise specifically provided below:
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Liquidity:
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Borrower shall maintain
Cash and Cash Equivalents, plus Accounts Receivable of not less than
$7,500,000. "Accounts Receivable", for purposes of this
financial covenant, may include unbilled Accounts Receivable that are
supported by irrevocable letters of credit, so long as the sole condition
to payment under such letters of credit is the passage of
time.
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Cumulative
Operating
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Income
(Losses):
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Borrower shall
maintain Operating Income (Loss) on a cumulative basis of not less than
($5,000,000). For purposes of this covenant:
(i) "Operating Income (Loss)" means Revenues minus cost
of sales and operating expenses, before deduction of Interest Expense and
income taxes and excluding any non-cash stock-based compensation expense;
and (ii) Revenues shall be adjusted (increased or decreased) by the
difference in Deferred Revenue from one monthly reporting period to the
next monthly reporting period. For instance, if deferred Revenue increased
by $1,000,000 in reporting period #2 from reporting period #1, then
Revenues for reporting period #2 would be increased by a corresponding
amount (i.e., $1,000,000), and if in reporting period #3 Deferred Revenue
decreased by $500,000, then Revenues for purposes of calculating Operating
Income (Loss) would be reduced by $500,000.
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6. REPORTING.
(Section 4.4):
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Unless
PFG shall otherwise expressly instruct Borrower at any time and from time
to time regarding PFG's desire at such time to receive any of the reports
specified below, Borrower shall provide PFG with the
following:
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(a)
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Monthly
accounts receivable agings, aged by invoice date, within twenty (20) days
after the end of each month.
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(b)
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Monthly
accounts payable agings, aged by invoice date, and outstanding or held
check registers, if any, within twenty (20) days after the end of each
month.
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-3-
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Partners
for Growth
|
Schedule
to Loan and Security Agreement
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(c)
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Monthly
deferred revenue schedules, within twenty (20) days after the end of each
month.
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(d)
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Monthly
unaudited financial statements, as soon as available, and in any event
within twenty (20) days after the end of each month.
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(e)
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Monthly
Compliance Certificates, within twenty (20) days after the end of each
month, signed by the Chief Financial Officer of Borrower, certifying that
as of the end of such month Borrower was in full compliance with all of
the terms and conditions of this Agreement, and setting forth calculations
showing compliance with the financial covenants set forth in Section 5 of
this Schedule this Agreement and such other information as PFG shall
reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.
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(f)
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A
quarterly information update certificate in the form of an update to the
Representations, within 30 days after the end of each fiscal quarter of
Borrower.
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(g)
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Annual
Board-approved operating budgets and forecasts (including income
statements, balance sheets and cash flow statements, by month) for the
upcoming fiscal year of Borrower, as and when
available.
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7. BORROWER
INFORMATION:
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Borrower
represents and warrants that the information set forth in the
Representations and Warranties of the Borrower dated April 12, submitted
to PFG (the “Representations”) is true and correct as of the date
hereof.
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8. ADDITIONAL
PROVISIONS
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(a)
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Deposit
Accounts. Concurrently, Borrower shall cause the banks
and other institutions where its Deposit Accounts are maintained to enter
into control agreements with PFG, in form and substance satisfactory to
PFG in its good faith business judgment and sufficient to perfect PFG’s
security interest in said Deposit Accounts ("Control
Agreement"). Said Control Agreements shall, inter alia, permit
PFG, in its discretion, to withdraw from said Deposit Accounts accrued
interest on the Obligations monthly if not paid when due. With respect to
the DeWind Escrow Account(s), Borrower shall (i) provide at least two (2)
Business Days notice of any impending distribution to Borrower or any
Affiliate (including but limited to Stribog, Inc.) from the DeWind Escrow
Account(s), and (ii) shall deposit proceeds of the DeWind Escrow
Account(s) only in a Borrower account for which there is a Control
Agreement in effect in favor of PFG. Borrower shall not be
required to procure control agreements for any account with an average
daily balance during any month of $10,000 or less, but shall within ten
(10) Business Days after any such account exceeds such
threshold.
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-4-
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Partners
for Growth
|
Schedule
to Loan and Security Agreement
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(b)
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Subordination of Inside
Debt. All present and future indebtedness of Borrower to
its officers, directors and shareholders (“Inside Debt”) shall, at all
times, be subordinated to the Obligations pursuant to a subordination
agreement on PFG’s standard form. Borrower represents and
warrants that there is no Inside Debt presently outstanding, except as set
forth in Exhibit A. Prior to incurring any Inside Debt in the
future, Borrower shall cause the person to whom such Inside Debt will be
owed to execute and deliver to PFG a subordination agreement on PFG’s
standard form.
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9. CONDITIONS
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In
addition to any other conditions to the Loan set out in this Agreement,
PFG will not make the Loan until PFG shall have received, in form and
substance satisfactory to PFG, such documents, and completion of such
other matters, as PFG may reasonably deem necessary or appropriate,
including that there shall be no discovery of any facts or circumstances
which would, as determined by PFG in its sole discretion, negatively
affect or be reasonably expected to negatively affect the collectability
of the Obligations, PFG’s security interest in Borrower’s Collateral or
the value thereof, including, without
limitation:
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(a)
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duly
executed original signatures of each Borrower to the Loan Documents to
which Borrower is a party, including this Agreement, a Cross-Corporate
Continuing Guaranty and Security Agreement (together with ancillary
Solvency Certificates), an Intellectual Property Security Agreement and
related Collateral Notices and Agreements;
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(b)
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Borrower’s
respective constitutional documents and a good standing certificate of
each Borrower certified by the Secretary of State of the State of Nevada
as of a date no earlier than thirty (30) days prior to the date hereof,
together with a foreign qualification certificate from the State of
California for each Borrower operating in
California;
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-5-
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Partners
for Growth
|
Schedule
to Loan and Security Agreement
|
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(c)
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an
Incumbency Certificate and Secretary's Certificate certifying and
appending borrowing resolutions for each Borrower;
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(d)
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account
control agreements as required by Section 8(a) of this Schedule, duly
executed by Borrower and each relevant depositary
institution;
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(e)
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certified
copies, dated as of a recent date, of financing statement searches, as PFG
shall request, accompanied by written evidence (including any UCC
termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in
connection with the Loan, will be terminated or
released;
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(f)
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the
Representations, duly executed by the Agent on behalf of itself and each
Borrower,
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(g)
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a
landlord consent executed in favor of PFG by the Borrower’s principal
office lessor in respect of Borrower’s premises in Irvine,
California;
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(h)
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a
duly executed warrant purchase agreement and warrants in favor of PFG to
purchase 10,000,000 shares of Borrower’s common stock in agreed form (the
“PFG Warrant”);
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(i)
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the
insurance policies and/or endorsements required pursuant to Section
4.3;
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(j)
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payment
of the Fee specified in Section 3 of this Schedule and PFG’s expenses
incurred in connection with the Loan;
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(k)
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a
duly executed Compliance Certificate dated the date
hereof;
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(l)
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evidence
of the full and indefeasible pay-off of any Indebtedness other than
Permitted Indebtedness, together with the discharge any and all associated
liens; and
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(m)
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to
the extent required in order to provide Borrower additional time to
satisfy certain conditions set forth in this Section 9, a post-closing
obligations letter agreement in PFG's customary
form.
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-6-
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Borrower:
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PFG:
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||||
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COMPOSITE
TECHNOLOGY CORPORATION
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PARTNERS
FOR GROWTH II, L.P.
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||||
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By
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/s/ Benton H. Wilcoxon |
By
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/s/ Lorraine Nield | ||
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CEO
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Name:
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/s/ Lorraine Nield | ||||
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By
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/s/ Lang Jin | ||||
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Secretary
or Ass't Secretary
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Title:
Manager, Partners for Growth II, LLC
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Its
General
Partner
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Borrower:
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Borrower:
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CTC
CABLE CORPORATION
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CTC
RENEWABLES CORPORATION
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By
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/s/ John Brewster |
By
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/s/ Benton H. Wilcoxon | |||
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President
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President
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|||||
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By
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/s/ Lang Jin |
By
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/s/ Lang Jin | |||
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Secretary
or Ass't Secretary
|
Secretary
or Ass't
Secretary
|
|||||
- Signature Page to Loan and Security Agreement
Schedule -
-7-
Exhibit A
to Loan and Security Agreement
Section
7—“Permitted Indebtedness”—Other Existing Permitted Indebtedness:
1.
Borrower has not timely paid tax related to employment taxes attributable to the
fiscal years ending 9/30/02 through 9/30/05. The principal amount
owing to the Internal Revenue Service is approximately $1,000,000.
Section
7—“Permitted Investments”—Other Existing Permitted Investments:
Section 8
Schedule – “Inside Debt”:
Exhibit B
to Loan and Security Agreement – Compliance Certificate