SECOND LOAN
MODIFICATION AND FORBEARANCE AGREEMENT
This Second Loan
Modification and Forbearance Agreement (this “Loan
Modification Agreement”) is entered into as of the Second
Loan Modification Effective Date, by and between SILICON VALLEY
BANK , a California corporation, with its principal place of
business at 3003 Tasman Drive, Santa Clara, California 95054 and
with a loan production office located at 380 Interlocken Crescent,
Suite 600, Broomfield, Colorado 80021 (“ Bank
”), and ENERGY FOCUS, INC., a Delaware corporation,
formerly known as Fiberstars, Inc., a Delaware corporation, with
offices located at 32000 Aurora Road, Solon, Ohio 44139.
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS . Among
other indebtedness and obligations which may be owing by Borrower
to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of October 27, 2008, evidenced by, among
other documents, a certain Second Amended and Restated Loan and
Security Agreement dated as of October 27, 2008 between
Borrower and Bank, as amended by a certain First modification and
Forbearance Agreement dated as of January 31, 2009 between
Borrower and Bank (the “First Amendment”, and as
may be further amended from time to time, the “Loan
Agreement” ). Capitalized terms used but not otherwise
defined herein shall have the same meaning as in the Loan
Agreement.
2.
DESCRIPTION OF COLLATERAL . Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement and as
described in a certain Intellectual Property Security agreement
between borrower and Bank, as ratifies and reaffirmed by a certain
Reaffirmation of Intellectual Property Security Agreement dated as
of October 27, 2008 between Borrower and Bank (collectively,
the “IP Agreement”, and together with any other
collateral security granted to Bank, the “Security
Documents” ).
Hereinafter, the
Security Documents, together with all other documents evidencing or
securing the Obligations shall be referred to as the
“Existing Loan Documents” .
3.
ACKNOWLEDGMENT OF DEFAULTS . Borrower acknowledges and
agrees that certain Defaults and Events of Default have occurred
under the Loan Agreement by virtue of Borrower’s failure to
comply with the minimum Tangible Net Worth covenant contained in
Section 6.9(a) of the Loan Agreement for the compliance
periods ended on November 30, 2008 and December 31, 2008
(the “Prior Defaults” ). Bank is currently
forbearing from enforcing its rights and remedies under the Loan
Agreement due to the Prior Defaults. In addition. Borrower failed
to comply with the minimum Tangible Net Worth covenant set forth in
Section 6.9(a) for the compliance periods ended
January 31, 2009, February 28, 2009, March 31, 2009
and April 30, 2009 (the “Additional
Defaults”, and together with the Prior Defaults, the
“Existing Defaults” ).
4.
DESCRIPTION OF CHANGE IN TERMS .
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A.
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Modifications to Loan
Agreement.
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1
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The
Loan Agreement shall be amended by deleting the following text
appearing in Section 2.3(a) thereof in its
entirety:
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“(a) Interest Rate ;
Advances . Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall accrue interest
at a floating per annum rate equal to the aggregate of the Prime
Rate plus one and one-half percentage point (1.50%), which interest
shall be payable monthly.”
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and
inserting in lieu thereof the following:
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“(a) Interest Rate ;
Advances . Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall
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accrue interest at a floating per
annum rate equal to (i) from the Second Loan Modification
Effective Date through and including June 30, 2009, the
aggregate of the Prime Rate plus one and one-half percentage point
(1.50%); (ii) beginning July 1, 2009 through and
including September 30, 2009, the aggregate of the Prime Rate
plus two percentage points (2.00%); and (iii) beginning October 1,
2009 and thereafter, the aggregate of the Prime Rate plus three
percentage points (3.00%), which interest shall in any event be
payable monthly.”
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2
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The
Loan Agreement shall be amended by deleting the following text
appearing in Section 2.4(e) thereof in its
entirety:
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“(e) Collateral Monitoring
Fee . A monthly collateral monitoring fee of Seven Hundred
Fifty Dollars ($750.00), payable in arrears on the last day of each
month; provided , however , that during any
Streamline Period, the collateral monitoring fee shall be $0.00 (in
each case, the collateral monitoring fee will be prorated for any
partial month); and”
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and
inserting in lieu thereof the following:
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“(e) Collateral Monitoring
Fee . A monthly collateral monitoring fee of Seven Hundred
Fifty Dollars ($750.00), payable in arrears on the last day of each
month (prorated for any partial month at the beginning and upon
termination of this Agreement); and”
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3
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The
Loan Agreement shall be amended by deleting the following text at
the end of Section 6.2(a) in its entirety:
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“Notwithstanding the
foregoing, during a Streamline Period, provided no Event of Default
has occurred and is continuing, Borrower shall be required to
provide Bank with the reports and schedules required pursuant to
clause (a)(i)(A) above on a monthly basis.”
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4
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The
Loan Agreement shall be amended by deleting the following text
appearing in Section 6.8 thereof in its entirety:
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“6.8 Operating
Accounts.
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(a)
Maintain its and its Subsidiaries’, if any, primary
depository, operating accounts and securities accounts with Bank
and Bank’s affiliates with all excess funds maintained at or
invested through Bank or an affiliate of Bank, which accounts shall
represent at least eighty-five percent (85%) of the dollar value of
Borrower’s and such Subsidiaries accounts at all financial
institutions.
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(b)
Provide Bank five (5) days prior-written notice before
establishing any Collateral Account at or with any bank or
financial institution other than Bank or its Affiliates. In
addition,
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for
each Collateral Account that Borrower at any time maintains in the
United States at financial institutions other than Bank, in an
aggregate amount in excess of One Hundred Thousand Dollars
($100,000) at any time, Borrower shall cause the applicable bank or
financial institution (other than Bank) at or with which any such
Collateral Account is maintained lo execute and deliver a Control
Agreement or other appropriate instrument with respect to such
Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder. The provisions of
the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as
such.”
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and
inserting in lieu thereof the following:
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“6.8 Operating
Accounts.
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(a)
Maintain all of its and its Subsidiaries domestic depository,
operating accounts and securities accounts with Bank, with all
excess funds maintained at or invested through Bank.
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(b)
Provide Bank five (5) days prior-written notice before
establishing any Collateral Account at or with any bank or
financial institution other than Bank or Bank’s Affiliates.
For each Collateral Account that Borrower at any time maintains,
Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to
perfect Bank’s Lien in such Collateral Account in accordance
with the terms hereunder which Control Agreement may not be
terminated without the prior written consent of Bank. The
provisions of the previous sentence shall not apply to deposit
accounts exclusively used for payroll, payroll taxes and other
employee wage and benefit payments to or for the benefit of
Borrower’s employees and identified to Bank by Borrower as
such.”
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5
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The
Loan Agreement shall be amended by deleting the following text
appearing in Section 6.9 thereof in its entirety:
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“6.9 Financial
Covenants.
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Borrower shall maintain at all
times, to be tested as of the last day of each month, on a
non-consolidated basis determined by Bank from Borrower’s
unconsolidated balance sheet:
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(a)
Tangible Net Worth . From the monthly period ended
September 30, 2008 through and including the monthly period
ending December 31, 2008, a Tangible Net Worth of not less
than Sixteen Million Dollars ($16,000,000), in each case increasing
by (i) seventy-five percent (75%) of issuances of
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equity or seventy-five percent (75%)
of the principal amount of Subordinated Debt issued or incurred by
the Borrower after the Effective Date and (ii) seventy-five
percent (75%) of Borrower’s unconsolidated net income.
Increases in this Tangible Net Worth covenant based on
consideration received from (a) the issuance of equity
securities of Borrower and Subordinated Debt shall be effective as
of the end of the fiscal month in which such consideration is
received and (b) quarterly income shall be effective as of the
end of each fiscal quarter, and shall continue effective
thereafter.
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Notwithstanding the foregoing, not
later than December 31, 2008, Bank shall, after consultation
with Borrower in its reasonable discretion, revise the Tangible Net
Worth coven
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