Exhibit 10.23
 
BUSINESS FINANCING AGREEMENT
 
Borrower:                      Akeena Solar, Inc.
                      Akeena Corp.
                      Andalay Solar, Inc.
1475 Bascom Avenue, Suite 101
Campbell, CA 95008
Lender:       BRIDGE BANK, National Association
       55 Almaden Boulevard, Suite 100
       San Jose, CA 95113

 
This BUSINESS FINANCING AGREEMENT, dated as of February 15, 2011, is made and
entered into between BRIDGE BANK, NATIONAL ASSOCIATION (“Lender”) and AKEENA
SOLAR, INC., a Delaware corporation, AKEENA CORP., a Delaware corporation and
ANDALAY SOLAR, INC., a California corporation (jointly and severally “Borrower”)
on the following terms and conditions:
 
1.  
FINANCED RECEIVABLES.

 
1.1  
Funding Requests.  Borrower may request that Lender finance Receivables by
delivering to Lender a Funding Request for the Receivables for which a request
for financing is made. Lender shall be entitled to rely on all the information
provided by Borrower to Lender on or with the Funding Request.  The Lender may
honor Funding Requests, instructions or repayments given by the Borrower (if an
individual) or by an Authorized Person.

 
1.2  
Acceptance of Receivables.  Upon acceptance by Lender of any Receivable
described in a Funding Request, Lender shall make an Advance to Borrower in an
amount up to the Advance Rate multiplied by the Receivable Amount of such
Receivable. Upon Lender’s acceptance of the Receivable and payment to Borrower
of the Advance, the Receivable shall become a “Financed Receivable.”  It shall
be a condition to each Advance that (a) all of the representations and
warranties set forth in Section 5 are true and correct on the date of such
Advance as though made at and as of each such date and (b) no Default has
occurred and is continuing, or would result from such Advance.  Lender has no
obligation to finance any Receivable and may exercise its sole discretion in
determining whether any Receivable is an Eligible Receivable before financing
such Receivable.  In no event shall the Lender be obligated to make any Advance
that results in an Overadvance or while any Overadvance is outstanding.

 
1.3  
Rights in Respect of Financed Receivables.  Effective upon Lender’s payment of
an Advance, Lender shall have the exclusive right to receive all Collections on
the Financed Receivable.  Lender shall have, with respect to any goods related
to the Financed Receivable, all the rights and remedies of an unpaid seller
under the California Uniform Commercial Code and other applicable law, including
the rights of replevin, claim and delivery, reclamation and stoppage in transit.

 
1.4  
Reserve.  The Reserve is a book balance maintained on the records of Lender and
shall not be a segregated fund and is not the property of Borrower.

 
1.5  
Due Diligence.  Lender may audit Borrower’s Receivables and any and all records
pertaining to the Collateral, at Lender’s sole discretion and at Borrowers
expense.  Lender may at any time and from time to time contact Account Debtors
and other persons obligated or knowledgeable in respect of Receivables to
confirm the Receivable Amount of such Receivables, to determine whether
Receivables constitute Eligible Receivables, and for any other purpose in
connection with this Agreement.  If any of the Collateral or Borrower's books or
records pertaining to the Collateral are in the possession of a third party,
Borrower authorizes that third party to permit Lender or its agents to have
access to perform inspections or audits thereof and to respond to Lender's
requests for information concerning such Collateral and records.

 
2.  
COLLECTIONS, CHARGES AND REMITTANCES.

 
2.1  
Collections.  Subject to the Lender’s timely receipt of accurate application
instructions from the Borrower with respect to the source and application of
Collections, Lender shall credit to Collections with respect to Financed
Receivables received by Lender to Borrower’s Account Balance within three
business days of the date good funds are received.  If no Default has occurred
and is continuing, Lender agrees to credit the Refundable Reserve with the
amount of Collections it receives with respect to Receivables other than
Financed Receivables; provided that upon the occurrence and during the
continuance of any Default, Lender may apply all Collections to the Obligations
in such order and manner as Lender may determine.  Lender has no duty to do any
act other than to turnover such amounts as required above.  If an item of
Collections is not honored or Lender does not receive good funds for any reason,
the amount shall be included in the Account Balance as if the Collections had
not been received and Finance Charges shall accrue thereon.

 

 
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2.2  
Financed Receivables Activity Report.  Within 15 days after the end of each
Monthly Period, Lender shall send to Borrower a report covering the transactions
for that Monthly Period, including the amount of all Financed Receivables, all
Collections, Adjustments, Finance Charges, and other fees and charges.  The
accounting shall be deemed correct and conclusive unless Borrower makes written
objection to Lender within 30 days after the Lender sends the accounting to
Borrower.

 
2.3  
Reconciliations.  Unless a Default has occurred and is continuing, Lender shall
refund to Borrower after each Month End, the Refundable Reserve, if positive,
calculated for such Month End, subject to Lender’s rights under Section 3.3 and
Lender’s rights of offset and recoupment.  If the Refundable Reserve is
negative, Borrower shall immediately pay such amount in the same manner as set
forth in Section 3.3 for Overadvances.

 
2.4  
Adjustments.  In the event of a breach of Sections 5 or 6, or in the event any
Adjustment or dispute is asserted by any Account Debtor, Borrower shall promptly
advise Lender and shall, subject to the Lender’s approval, resolve such disputes
and advise Lender of any Adjustments; provided that in no case will the
aggregate Adjustments made with respect to any Financed Receivable exceed 2% of
its original Receivable Amount unless Borrower has obtained the prior written
consent of Lender.  Unless the Advance for the disputed Financed Receivable is
repaid in full, Lender shall have the right, at any time, to take possession of
any rejected, returned, or recovered personal property. If such possession is
not taken by Lender, Borrower is to resell it for Lender’s account at Borrower’s
expense with the proceeds made payable to Lender. While Borrower retains
possession of any returned goods, Borrower shall segregate said goods and mark
them as property of Lender.

 
2.5  
Remittances; Lockbox Account Collection Services.  Borrower shall
(i) immediately notify, transfer and deliver to Lender all Collections Borrower
receives, (ii) deliver to Lender a detailed cash receipts journal on Friday of
each week until the lockbox is operational, and (iii) immediately enter into a
collection services agreement acceptable to Lender (the “Lockbox Agreement”).
Borrower shall use the lockbox address as the remit to and payment address for
all of Borrower’s Collections and it will be considered an immediate Event of
Default if this does not occur or the lockbox is not operational within 45 days
of the date of this Agreement.  All Collections received to the lockbox or
otherwise received by Lender will be deposited to a non-interest bearing cash
collateral account maintained with Lender and Borrower will not have access to
that account.

 
3.  
RECOURSE AND OVERADVANCES.

 
3.1  
Recourse.  Advances and the other Obligations shall be with full recourse
against Borrower. If any Advance is not repaid in full within 90 days from the
earlier of (a) invoice date, or (b) the date on which such Advance is made,
Borrower shall immediately pay the outstanding amount thereof to Lender.

 
3.2  
Overadvances.  Upon any occurrence of an Overadvance, Borrower shall immediately
pay down the Advances so that, after giving effect to such payments, no
Overadvance exists.

 
3.3  
Borrower’s Payment.  When any Overadvance or other amount owing to Lender
becomes due, Lender shall inform Borrower of the manner of payment which may be
any one or more of the following in Lender’s sole discretion: (a) in cash
immediately upon demand therefore; (b) by delivery of substitute invoices and a
Funding Request acceptable to Lender which shall thereupon become Financed
Receivables; (c) by deduction from or offset against the Refundable Reserve that
would otherwise be due and payable to Borrower; (d) by deduction from or offset
against the amount that otherwise would be forwarded to Borrower in respect of
any further Advances that may be made by Lender; or (e) by any combination of
the foregoing as Lender may from time to time choose.

 
4.  
FEES AND FINANCE CHARGES.

 
4.1  
Finance Charges.  Lender may, but is not required to, deduct the amount of
accrued Finance Charge from Collections received by Lender.  On each Month End
Borrower shall pay to Lender any accrued and unpaid Finance Charge as of such
Month End.  Lender may deduct the accrued Finance Charges in calculating the
Refundable Reserve.

 
4.2  
Fees.

 
 
(a)
Processing Fee.  At the time each Advance is made, Borrower shall pay to Lender
the Processing Fee with respect to such Advance.

 
 
(b)
Termination Fee.  In the event this Agreement is terminated prior to the first
anniversary of the date of this Agreement other than because Lender is providing
replacement financing to Borrower, Borrower shall pay the Termination Fee to
Lender.

 

 
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(c)
Facility Fee.  Borrower shall pay the Facility Fee to Lender promptly upon the
execution of this Agreement and annually thereafter.

 
 
(d)
Recovery Fee.  If Borrower fails to remit any Collections to Lender as provided
in Section 2.5, Borrower shall in each case pay to Lender the Recovery Fee for
such Collections.

 
 
(e)
Due Diligence Fee.  Borrower shall pay the Due Diligence Fee to Lender promptly
upon the execution of this Agreement and annually thereafter.

 
5.  
REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants:

 
5.1  
With respect to each Financed Receivable:

 
(a)  
It is the owner with legal right to sell, transfer and assign it;

 
(b)  
The correct Receivable Amount is on the Funding Request and is not disputed;

 
(c)  
Such Financed Receivable is an Eligible Receivable;

 
(d)  
Lender has the right to endorse and/ or require Borrower to endorse all payments
received on Financed Receivables and all proceeds of Collateral; and

 
(e)  
No representation, warranty or other statement of Borrower in any certificate or
written statement given to Lender contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statement contained
in the certificates or statement not misleading.

 
5.2  
Borrower is duly existing and in good standing in its state of formation and
qualified and licensed to do business in, and in good standing in, any state in
which the conduct of its business or its ownership of property requires that it
be qualified.

 
5.3  
The execution, delivery and performance of this Agreement has been duly
authorized, and does not conflict with Borrower’s organizational documents, nor
constitute an Event of Default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound.

 
5.4  
Borrower has good title to the Collateral and all inventory is in all material
respects of good and marketable quality, free from material defects.

 
5.5  
Borrower’s name, form of organization, chief executive office, and the place
where the records concerning all Financed Receivables and Collateral are kept is
set forth at the beginning of this Agreement, Borrower is located at its address
for notices set forth in this Agreement.

 
5.6  
If Borrower owns, holds or has any interest in, any copyrights (whether
registered, or unregistered), patents or trademarks, and licenses of any of the
foregoing, such interest has been specifically disclosed and identified to
Lender in writing.

 
6.  
MISCELLANEOUS PROVISIONS.  Borrower will:

 
6.1  
Maintain its corporate existence and good standing in its jurisdictions of
incorporation and maintain its qualification to do business in each jurisdiction
necessary to Borrower’s business or operations.

 
6.2  
Give Lender at least 30 days prior written notice of changes to its name,
organization, chief executive office or location of records.

 
6.3  
Pay all its taxes including gross payroll, withholding and sales taxes when due
and will deliver satisfactory evidence of payment to Lender if requested.

 
6.4  
If requested, provide to Lender a written report within 10 days, if payment of
any Financed Receivable does not occur by its due date and include the reasons
for the delay.

 
6.5  
If applicable, give Lender copies of all Forms 10-K, 10-Q and 8-K (or
equivalents) within 5 days of filing with the Securities and Exchange
Commission, while any Financed Receivable is outstanding.

 

 
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6.6  
Execute any further instruments and take further action as Lender requests to
perfect or continue Lender’s security interest in the Collateral or to affect
the purposes of this Agreement.

 
6.7  
Provide Lender with a Compliance Certificate no later than 30 days following
each month end or as requested by Lender.

 
6.8  
Immediately notify, transfer and deliver to Lender all Collections Borrower
receives.

 
6.9  
Not create, incur, assume, or be liable for any indebtedness, other than
Permitted Indebtedness.

 
6.10  
Immediately notify Lender if Borrower hereafter obtains any interest in any
copyrights, patents, trademarks or licenses that are significant in value or are
material to the conduct of its business or the value of any Financed Receivable.

 
6.11  
Provide to Lender no later than 30 days after the end of each month the
following with respect to Borrower’s financial condition and results of
operations for such month and the period then ending: balance sheet, income
statement, statement of cash flows, accounts receivable and payable aging,
deferred revenue report, and such other matters as Lender may reasonably
request.  These statements shall be prepared on a consolidated basis.

 
6.12  
Within 120 days of the fiscal year end, the annual financial statements of
Borrower, certified and dated by an authorized financial officer.  These
financial statements must be audited (with an opinion satisfactory to the
Lender) by a Certified Public Accountant acceptable to Lender.  The statements
shall be prepared on a consolidated and a consolidating basis.

 
6.13  
File its tax returns when due, and provide to Lender no later than 5 days after
filing, copies of all tax returns, prepared by a certified public accountant
acceptable to Lender, and copies of all extensions of tax return filing
deadlines.

 
6.14  
Maintain its primary depository and operating accounts with Lender and, in the
case of any deposit accounts not maintained with Lender, grant to Lender a first
priority perfected security interest in and “control” (within the meaning of
Section 9104 of the California Uniform Commercial Code) of such deposit account
pursuant to documentation acceptable to Lender, but Borrower may maintain a cash
collateral account at Comerica Bank for up to 14 days after the date Borrower
executes this Agreement without granting Lender control thereof.

 
6.15  
Notify Lender of any lawsuit, administrative proceeding, arbitration demand or
other dispute in which Borrower is a party, and which, aggregated with all other
disputes, exceeds $100,000, and provide Lender with proof of insurance coverage
for losses related to such dispute if such coverage exists, within 30 days of
receiving notice of such dispute.

 
6.16  
Provide written notice to Lender, in form and substance satisfactory to Lender
in its sole discretion, not less than 30 days prior to the grant of any license
of Borrower's Intellectual Property, identifying the proposed licensee, the
consideration paid or to be paid and the terms and conditions thereof.

 
6.17  
Promptly provide to Lender such additional information and documents regarding
the finances, properties, business or books and records of Borrower or any
guarantor or any other obligor as Lender may reasonably request.

 
7.  
SECURITY INTEREST.  To secure the prompt payment and performance to Lender of
all of the Obligations, Borrower hereby grants to Lender a continuing security
interest in the Collateral.  Borrower is not authorized to sell, assign,
transfer or otherwise convey any Collateral without Lender’s prior written
consent, except for Permitted Transfers.  Borrower agrees to sign any
instruments and documents requested by Lender to evidence, perfect, or protect
the interests of Lender in the Collateral.  Borrower agrees to deliver to Lender
the originals of all instruments, chattel paper and documents evidencing or
related to Financed Receivables and Collateral.  Borrower shall not grant or
permit any lien or security in the Collateral or any interest therein other than
Permitted Liens.

 

 
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8.  
POWER OF ATTORNEY.  Borrower irrevocably appoints Lender and its successors and
as true and lawful attorney in fact, and authorizes Lender (a) to, whether or
not there has been an Event of Default, (i) demand, collect, receive, sue, and
give releases to any Account Debtor for the monies due or which may become due
upon or with respect to the Receivables and to compromise, prosecute, or defend
any action, claim, case or proceeding relating to the Receivables, including the
filing of a claim or the voting of such claims in any bankruptcy case, all in
Lender’s name or Borrower’s name, as Lender may choose; (ii) prepare, file and
sign Borrower’s name on any notice, claim, assignment, demand, draft, or notice
of or satisfaction of lien or mechanics’ lien or similar document; (iii) notify
all Account Debtors with respect to the Receivables to pay Lender directly; (iv)
receive and open all mail addressed to Borrower for the purpose of collecting
the Receivables; (v) endorse Borrower’s name on any checks or other forms of
payment on the Receivables; (vi) execute on behalf of Borrower any and all
instruments, documents, financing statements and the like to perfect Lender’s
interests in the Receivables and Collateral; (vii) debit any Borrower’s deposit
accounts maintained with Lender for any and all Obligations due under this
Agreement; and (viii) do all acts and things necessary or expedient, in
furtherance of any such purposes, and (b) to, upon the occurrence and during the
continuance of an Event of Default, sell, assign, transfer, pledge, compromise,
or discharge the whole or any part of the Receivables.  Upon the occurrence and
continuation of an Event of Default, all of the power of attorney rights granted
by Borrower to Lender hereunder shall be applicable with respect to all
Receivables and all Collateral.

 
9.  
DEFAULT AND REMEDIES.

 
9.1  
Events of Default.  The occurrence of any one or more of the following shall
constitute an Event of Default hereunder.

 
(a)  
Failure to Pay.  Borrower fails to make a payment under this Agreement.

 
(b)  
Lien Priority.  Lender fails to have an enforceable first lien (except for any
prior liens to which Lender has consented in writing) on or security interest in
the Collateral.

 
(c)  
False Information.  Borrower (or any guarantor) has given Lender any materially
false or misleading information or representations or has failed to disclose any
material fact relating to the subject matter of this Agreement.

 
(d)  
Death.  Borrower or any guarantor dies or becomes legally incompetent, or if
Borrower is a partnership, any general partner dies or becomes legally
incompetent.

 
(e)  
Bankruptcy.  Borrower (or any guarantor) files a bankruptcy petition, a
bankruptcy petition is filed against Borrower (or any guarantor) or Borrower (or
any guarantor) makes a general assignment for the benefit of creditors.

 
(f)  
Receivers.  A receiver or similar official is appointed for a substantial
portion of Borrower’s (or any guarantor’s) business, or the business is
terminated.

 
(g)  
Judgments.  Any judgments or arbitration awards are entered against Borrower (or
any guarantor), or Borrower (or any guarantor) enters into any settlement
agreements with respect to any litigation or arbitration and the aggregate
amount of all such judgments, awards, and agreements exceeds $100,000, but if
Borrower provides Lender with notice of a dispute and proof of insurance
coverage related to a dispute as required in Section 6.15, and Lender in its
sole discretion determines that such insurance is sufficient to cover all or
part of the amount of the judgment, award or agreement related to such dispute,
then such amount shall not be included for purposes of determining whether a
default exists under this paragraph.

 
(h)  
Material Adverse Change.  A material adverse change occurs, or is reasonably
likely to occur, in Borrower’s (or any guarantor’s) business condition
(financial or otherwise), operations, properties or prospects, or ability to
repay the credit.

 
(i)  
Cross-default.  Any default occurs under any agreement in connection with any
credit Borrower (or any guarantor) or any of Borrower’s related entities or
affiliates has obtained from anyone else or which Borrower (or any guarantor) or
any of Borrower’s related entities or affiliates has guaranteed (other than
trade amounts payable incurred in the ordinary course of business and not more
than 60 days past due), and the agreement is enforced as a result of such
default.

 
(j)  
Default under Related Documents.  Any default occurs under any guaranty,
subordination agreement, security agreement, deed of trust, mortgage, or other
document required by or delivered in connection with this Agreement or any such
document is no longer in effect.

 

 
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(k)  
Other Agreements.  Borrower (or any guarantor) or any of Borrower’s related
entities or affiliates fails to meet the conditions of, or fails to perform any
obligation under any other agreement Borrower (or any guarantor) or any of
Borrower’s related entities or affiliates has with Lender or any affiliate of
Lender.

 
(l)  
Change of Control.  The holders of the capital ownership of Akeena Solar, Inc.
as of the date hereof cease to own and control, directly and indirectly, at
least 51% of the capital ownership of Akeena Solar, Inc., or Akeena Solar, Inc.
ceases to own and control 100% of the capital ownership of Andalay Solar, Inc.
or Akeena Corp.

 
(m)  
Other Breach Under Agreement.  Borrower fails to meet the conditions of, or
fails to perform any obligation under, any term of this Agreement not
specifically referred to above.

 
9.2  
Remedies. Upon the occurrence of an Event of Default, (1) without implying any
obligation to do so, Lender may cease making Advances or extending any other
financial accommodations to Borrower; (2) all or a portion of the Obligations
shall be, at the option of and upon demand by Lender, or with respect to an
Event of Default described in Section 9.1(e), automatically and without notice
or demand, due and payable in full; and (3) Lender shall have and may exercise
all the rights and remedies under this Agreement and under applicable law,
including the rights and remedies of a secured party under the California
Uniform Commercial Code, all the power of attorney rights described in Section 8
with respect to all Collateral, and the right to collect, dispose of, sell,
lease, use, and realize upon all Financed Receivables and all Collateral in any
commercial reasonable manner.

 
10.  
ACCRUAL OF INTEREST.  All interest and finance charges hereunder calculated at
an annual rate shall be based on a year of 360 days, which results in a higher
effective rate of interest than if a year of 365 or 366 days were used.  If any
amount due under Section 4.2, amounts due under Section 11, and any other
Obligations not otherwise bearing interest hereunder is not paid when due, such
amount shall bear interest at a per annum rate equal to the Finance Charge
Percentage until the earlier of (i) payment in good funds or (ii) entry of a
trial judgment thereof, at which time the principal amount of any money judgment
remaining unsatisfied shall accrue interest at the highest rate allowed by
applicable law.

 
11.  
FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Borrower will pay to Lender upon
demand all fees, costs and expenses (including fees of attorneys and
professionals and their costs and expenses) that Lender incurs or may from time
to time impose in connection with any of the following: (a) preparing,
negotiating, administering, and enforcing this Agreement or any other agreement
executed in connection herewith, including any amendments, waivers or consents
in connection with any of the foregoing, (b) any litigation or dispute (whether
instituted by Lender, Borrower or any other person) in any way relating to the
Financed Receivables, the Collateral, this Agreement or any other agreement
executed in connection herewith or therewith, (c) enforcing any rights against
Borrower or any guarantor, or any Account Debtor, (d) protecting or enforcing
its interest in the Financed Receivables or the Collateral, (e) collecting the
Financed Receivables and the Obligations, or (f) the representation of Lender in
connection with any bankruptcy case or insolvency proceeding involving Borrower,
any Financed Receivable, the Collateral, any Account Debtor, or any guarantor.
Borrower shall indemnify and hold Lender harmless from and against any and all
claims, actions, damages, costs, expenses, and liabilities of any nature
whatsoever arising in connection with any of the foregoing.

 
12.  
INTEGRATION, SEVERABILITY WAIVER, AND CHOICE OF LAW FORUM AND VENUE.

 
12.1  
This Agreement and any related security or other agreements required by this
Agreement, collectively: (a) represent the sum of the understandings and
agreements between Lender and Borrower concerning this credit; (b) replace any
prior oral or written agreements between Lender and Borrower concerning this
credit; and (c) are intended by Lender and Borrower as the final, complete and
exclusive statement of the terms agreed to by them. In the event of any conflict
between this Agreement and any other agreements required by this Agreement, this
Agreement will prevail. If any provision of this Agreement is deemed invalid by
reason of law, this Agreement will be construed as not containing such provision
and the remainder of the Agreement shall remain in full force and effect. Lender
retains all of its rights, even if it makes an Advance after a default. If
Lender waives a default, it may enforce a later default. Any consent or waiver
under, or amendment of, this Agreement must be in writing, and no such consent,
waiver, or amendment shall imply any obligation by Lender to make any subsequent
consent, waiver, or amendment.

 

 
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12.2  
THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA.  THE PARTIES HERETO AGREE THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
RELATED DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF SANTA CLARA, CALIFORNIA, OR, AT THE SOLE OPTION
OF LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS JURISDICTION OVER THE SUBJECT MATTER AND PARTIES IN
CONTROVERSY.  EACH PARTY HERETO WAIVES ANY RIGHT TO ASSERT THE DOCTRINE OF FORUM
NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION AND STIPULATES THAT THE STATE AND FEDERAL COURTS
LOCATED IN THE COUNTY OF SANTA CLARA, CALIFORNIA SHALL HAVE IN PERSONAM
JURISDICTION AND VENUE OVER EACH SUCH PARTY FOR THE PURPOSE OF LITIGATING ANY
SUCH DISPUTE, CONTROVERSY, OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT, OR ANY OTHER RELATED DOCUMENTS.  SERVICE OF PROCESS SUFFICIENT FOR
PERSONAL JURISDICTION IN ANY ACTION AGAINST THE BORROWER MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS SPECIFIED
FOR NOTICES PURSUANT TO SECTION 13.

 
13.  
NOTICES; TELEPHONIC AND TELEFAX AUTHORIZATIONS.  All notices shall be given to
Lender and Borrower at the addresses or faxes (or e-mail, if applicable) set
forth on the signature page of this agreement and shall be deemed to have been
delivered when actually received at the designated address.  Lender may honor
telephone, fax, e-mail or telefax instructions for Advances or repayments given,
or purported to be given, by any one of the Authorized Persons.  Borrower will
indemnify and hold Lender harmless from all liability, loss, and costs in
connection with any act resulting from telephone or telefax instructions Lender
reasonably believes are made by any Authorized Person.  This paragraph will
survive this Agreement's termination, and will benefit Lender and its officers,
employees, and agents.

 
14.  
DEFINITIONS AND CONSTRUCTION.

 
14.1  
Definitions.  In this Agreement:

 
“Account Balance” means at any time the aggregate of the Receivable Amounts of
all Financed Receivables at such time, as reflected on the records maintained by
Lender.
 
“Account Debtor” has the meaning in the California Uniform Commercial Code and
includes any person liable on any Receivable, including without limitation, any
guarantor of any Receivable and any issuer of a letter of credit or banker’s
acceptance assuring payment thereof.
 
“Adjustments” means all discounts, allowances, disputes, offsets, defenses,
rights of recoupment, rights of return, warranty claims, or short payments,
asserted by or on behalf of any Account Debtor with respect to any Financed
Receivable.
 
“Advance” means as to any Receivable, the advance made by Lender to Borrower in
respect of such Receivable pursuant to Section 1.2.
 
“Advance Rate” means 50% or such greater or lesser percentage as Lender may from
time to time establish in its sole discretion upon notice to Borrower.
 
“Agreement” means this Business Financing Agreement.
 
“Authorized Person” means any of Borrower (if an individual) or any one of the
individuals authorized to sign on behalf of Borrower.
 
“Cash Reserve” means for any Financed Receivable which has been paid in full
during a Monthly Period, the amount by which the amount(s) paid on such Financed
Receivable exceeds the Advance made on such Financed Receivable.
 
“Collateral” means all of Borrower’s rights and interest in any and all personal
property, whether now existing or hereafter acquired or created and wherever
located, and all products and proceeds thereof and accessions thereto, including
but not limited to the following (collectively, the “Collateral”):  (a) all
accounts (including health care insurance receivables), chattel paper (including
tangible and electronic chattel paper), inventory (including all goods held for
sale or lease or to be furnished under a contract for service, and including
returns and repossessions), equipment (including all accessions and additions
thereto), instruments (including promissory notes), investment property
(including securities and securities entitlements), documents (including
negotiable documents), deposit accounts, letter of credit rights, money, any
commercial tort claim of Borrower which is now or hereafter identified by
Borrower or Lender, general intangibles (including payment intangibles and
software), goods (including fixtures) and all of Borrower’s books and records
with respect to any of the foregoing, and the computers and equipment
 

 
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containing said books and records; and (b) any and all cash proceeds and/or
noncash proceeds thereof, including without limitation, insurance proceeds, and
all supporting obligations and the security therefore or for any right to
payment.
 
“Collections” means all payments from or on behalf of an Account Debtor with
respect to Receivables.
 
“Compliance Certificate” means a certificate in the form attached as Exhibit A
to this Agreement by an Authorized Person that, among other things, the
representations and warranties set forth in this Agreement are true and correct
as of the date such certificate is delivered.
 
“Credit Limit” means $750,000, which is intended to be the maximum amount of
Advances at any time outstanding.
 
“Default” means any Event of Default or any event that with notice, lapse of
time or otherwise would constitute an Event of Default.
 
“Due Diligence Fee” means a payment of an annual fee equal to $800 due upon the
date of this Agreement and annually upon each anniversary thereof so long as any
Advance is outstanding or available hereunder.
 
“Eligible Receivable” means a Receivable that satisfies all of the following:
 
(a)  
The Receivable has been created by Borrower in the ordinary course of Borrower’s
business and without any obligation on the part of Borrower to render any
further performance.

 
(b)  
There are no conditions which must be satisfied before Borrower is entitled to
receive payment of the Receivable, and the Receivable does not arise from COD
sales, consignments or guaranteed sales.

 
(c)  
The Account Debtor upon the Receivable does not claim any defense to payment of
the Receivable, whether well founded or otherwise.

 
(d)  
The Receivable is not the obligation of an Account Debtor who has asserted or
may be reasonably expected to assert any counterclaims or offsets against
Borrower (including offsets for any “contra accounts” owed by Borrower to the
Account Debtor for goods purchased by Borrower or for services performed for
Borrower).

 
(e)  
The Receivable represents a genuine obligation of the Account Debtor and to the
extent any credit balances exist in favor of the Account Debtor, such credit
balances shall be deducted in calculating the Receivable Amount.

 
(f)  
Borrower has sent an invoice to the Account Debtor in the amount of the
Receivable.

 
(g)  
Borrower is not prohibited by the laws of the state where the Account Debtor is
located from bringing an action in the courts of that state to enforce the
Account Debtor’s obligation to pay the Receivable. Borrower has taken all
appropriate actions to ensure access to the courts of the state where Account
Debtor is located, including, where necessary; the filing of a Notice of
Business Activities Report or other similar filing with the applicable state
agency or the qualification by Borrower as a foreign corporation authorized to
transact business in such state.

 
(h)  
The Receivable is owned by Borrower free of any title defects or any liens or
interests of others except the security interest in favor of Lender, and Lender
has a perfected, first priority security interest in such Receivable.

 
(i)  
The Account Debtor on the Receivable is not any of the following:  (i) an
employee, affiliate, parent or subsidiary of Borrower, or an entity which has
common officers or directors with Borrower, (ii) the U.S. government or any
agency or department of the U.S. government unless Lender agrees in writing to
accept the Receivable, Borrower complies with the procedures in the Federal
Assignment of Claims Act of 1940 (41 U.S.C.§15) with respect to the Receivable,
and the underlying contract expressly provides that neither the U.S. government
nor any agency or department thereof shall have the right of set-off against
Borrower; or (iii) any person or entity located in a foreign country unless
(A) the Receivable is supported by an irrevocable letter of credit issued by a
bank acceptable to Lender, and (B) if requested by Lender, the original of such
letter of credit and/or any usance drafts drawn under such letter of credit and
accepted by the issuing or confirming bank have been delivered to Lender.

 
(j)  
The Receivable is not in default (a Receivable will be considered in default if
any of the following occur:  (i) the Receivable is not paid within 90 days from
its invoice date; (ii) the Account Debtor obligated upon the Receivable suspends
business, makes a general assignment for the benefit of creditors, or fails to
pay its debts generally as they come due; or (iii) any petition is filed by or
against the Account Debtor obligated upon the Receivable under any bankruptcy
law or any other law or laws for the relief of debtors).

 

 
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(k)  
The Receivable does not arise from the sale of goods which remain in Borrower’s
possession or under Borrower’s control.

 
(l)  
The Receivable is not evidenced by a promissory note or chattel paper, nor is
the Account Debtor obligated to Borrower under any other obligation which is
evidenced by a promissory note.

 
(m)  
The Receivable is otherwise acceptable to Lender.

 
“Event of Default” has the meaning set forth in Section 9.1.
 
“Facility Fee” means a payment of an annual fee equal to 1.00 percentage points
of the Formula Account Balance due upon the date of this Agreement and each
anniversary thereof until this Agreement is terminated pursuant to Section 17
hereof.
 
“Finance Charge” means for each Monthly Period an interest amount equal to the
Finance Charge Percentage of the average daily Account Balance outstanding
during such Monthly Period.
 
“Finance Charge Percentage” means a rate per year equal to the Prime Rate plus
3.00 percentage points plus an additional 5.00 percentage points during any
period that an Event of Default has occurred and is continuing.
 
“Financed Receivable” means a Receivable for which Lender makes an Advance
pursuant to a Funding Request.
 
“Formula Account Balance” means the dollar amount resulting from dividing the
Credit Limit by the Advance Rate in effect at the time of calculation.
 
“Funding Request” means a writing signed by an Authorized Person which
accurately identifies the Receivables which Lender, at its election, is being
requested to finance, and includes for each such Receivable the correct amount
owed by the Account Debtor, the name and address of the Account Debtor, the
invoice number, the invoice date and the account code in the form of the invoice
schedule attached as Exhibit B hereto, together with copies of invoices and such
other supporting documentation as the Lender may from time to time request.
 
“Intellectual Property” means (i) copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held (“Copyrights”), (ii) trademark and servicemark rights, whether
registered or not, 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 such trademarks (“Trademarks”), (iii) patents, patent
applications and like protections including without limitation improvements,
divisions, continuations, renewals, reissues, extensions and
continuations-in-part of the same (“Patents”), (iv) mask work or similar rights
available for the protection of semiconductor chips or other products (“Mask
Works”), (v) trade secrets, and any and all intellectual property rights in
computer software and computer software products, (vi) design rights, and (vii)
amendments, renewals and extensions of any of the Copyrights, Trademarks,
Patents, or Mask Works.

“Lender” means Bridge Bank, National Association, and its successors and
assigns.
 
“Month End” means the last calendar day of each Monthly Period.
 
“Monthly Period” means each calendar month.
 
“Obligations” means all liabilities and obligations of Borrower to Lender of any
kind or nature, present or future, arising under or in connection with this
Agreement or under any other document, instrument or agreement, whether or not
evidenced by any note, guarantee or other instrument, whether arising on account
or by overdraft, whether direct or indirect (including those acquired by
assignment) absolute or contingent, primary or secondary, due or to become due,
now owing or hereafter arising, and however acquired; including, without
limitation, all Advances, Finance Charges, fees, interest, expenses,
professional fees and attorneys’ fees.
 
“Overadvance” means at any time an amount equal to the greater of the following
amounts (if any):  (a) the amount by which the total amount of the Advances
exceeds the Credit Limit and (b) the amount equal to the sum of (i) the total
outstanding amounts of all Advances made with respect to Receivables which were
not, or have ceased to be, Eligible Receivables and (ii) the amount by which the
total outstanding amount of all Advances (other than those under clause (i)
above)) exceeds the product of (x) the Advance Rate and (y) the total
outstanding Receivable Amounts of the Eligible Receivables in respect of which
such Advances were made.
 

 
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“Permitted Indebtedness” means:
 
(a)  
Indebtedness under this Agreement or that is otherwise owed to the Lender.

 
(b)  
Indebtedness existing on the date hereof and specifically disclosed on a
schedule to this Agreement.

 
(c)  
Purchase money indebtedness (including capital leases) incurred to acquire
capital assets in ordinary course of business and not exceeding $100,000 in
total principal amount at any time outstanding.

 
(d)  
Other indebtedness in an aggregate amount not to exceed $100,000 at any time
outstanding; provided that such indebtedness is junior in priority (if secured)
to the Obligations and provided that the incurrence of such Indebtedness does
not otherwise cause an Event of Default hereunder.

 
(e)  
Indebtedness incurred in the refinancing of any indebtedness set forth in (a)
through (d) above, provided that the principal amount thereof is not increased
or the terms thereof are not modified to impose more burdensome terms upon the
Borrower.

 
(f)  
Subordinated Debt.

 
(g)  
Indebtedness to trade creditors incurred in the ordinary course of Borrower’s
business.

 
(h)  
Indebtedness in an aggregate amount not to exceed $50,000 at any time
outstanding in respect of performance bonds, bid bonds, appeal bonds, surety
bonds, bankers’ acceptances and similar obligations and trade-related letters of
credit, in each case provided in the ordinary course of business and not in
connection with indebtedness for money borrowed.

 
“Permitted Liens” means:
 
(a)  
Liens securing any of the indebtedness described in clauses (a) through (d) of
the definition of Permitted Indebtedness.

 
(b)  
Liens for taxes, fees, assessments or other governmental charges or levies,
either not delinquent or being contested  in good faith by appropriate
proceedings, provided the same have no priority over any of Lender’s security
interests.

 
(c)  
Liens incurred in connection with the extension, renewal or refinancing of the
indebtedness described in clause (e) of the definition of Permitted
Indebtedness, provided that any extension, renewal or replacement lien shall be
limited to the property encumbered by the existing lien and the principal amount
of the indebtedness being extended, renewed or refinanced does not increase.

 
(d)  
Liens securing Subordinated Debt.

 
(e)  
Liens of carriers, warehousemen, suppliers, or other persons that are possessory
in nature arising in the ordinary course of business so long as such Liens
attach only to inventory.

 
(f)  
Leases or subleases of real property granted in the ordinary course of business,
and leases, subleases, non-exclusive licenses or sublicenses of property (other
than real property or intellectual property) granted in the ordinary course of
Borrower’s business.

 
(g)  
Non-exclusive licenses of Intellectual Property granted to third parties for
manufacturing purposes only in the ordinary course of Borrower’s business.

 
“Permitted Transfers” means:
 
(a)  
Licenses of Borrower's Intellectual Property for manufacturing and sales
purposes, in each case in the ordinary course of Borrower's business.

 
(b)  
The sale of finished inventory in Borrower's usual course of business.

 
“Prime Rate” means the greater of 3.25% per year or the variable per annum rate
of interest most recently announced by Lender as its "Prime Rate."  Lender may
price loans to its customers at, above, or below the Prime Rate. Any change in
the Prime Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in Lender’s Prime Rate.
 
“Processing Fee” means a fee equal to 0.50% of the Receivable Amount of each
Financed Receivable.
 

 
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“Recovery Fee” means for each item of Collections which the Borrower has failed
to remit as required by the Agreement, a fee equal to the lesser of $5,000 or 5%
of the amount of such item, but in no case less than $1,000.
 
“Receivable Amount” means as to any Receivable, the Receivable Amount due from
the Account Debtor after deducting all discounts, credits, offsets, payments or
other deductions of any nature whatsoever, whether or not claimed by the Account
Debtor.
 
“Receivables” means Borrower’s rights to payment arising in the ordinary course
of Borrower’s business, including accounts, chattel paper, instruments, contract
rights, documents, general intangibles, letters of credit, drafts, and bankers
acceptances.
 
“Refundable Reserve” means for any Month End:
 
(a)  
The sum of (i) the total of the Cash Reserves as to all Financed Receivables as
of such Month End and (ii) the amount of Collections received by Lender during
the Monthly Period with respect to Receivables other than Financed Receivables
and not previously remitted to Borrower,

 
minus
 
(b)  
The total for that Monthly Period ending on such Month End of:

 
(i)  
Processing Fee, Facility Fee, Due Diligence Fee and Recovery Fees;

 
(ii) Finance Charges;
 
(iii) Adjustments;
 
(iv) Any outstanding Overadvance Amounts;
 
(v)  
all amounts due, including professional fees and expenses, as set forth in
Section 11 for which oral or written demand has been made by Lender to Borrower
during that Monthly Period to the extent Lender has agreed to accept payment
thereof by deduction from the Refundable Reserve; and

 
(vi)  
all amounts collected by Borrower on Financed Receivables during the Monthly
Period and not remitted to Lender.

 
“Reserve” means as to any Financed Receivable the amount by which the Receivable
Amount of the Financed Receivable exceeds the Advance on that Financed
Receivable.
 
“Reserve Percentage” means 100% less the Advance Rate.
 
“Subordinated Debt” means indebtedness of Borrower that is expressly
subordinated to the indebtedness of Borrower owed to Lender pursuant to a
subordination agreement satisfactory in form and substance to Lender.
 
“Termination Fee” means a payment equal to 1.00% of the Formula Account Balance.
 
14.2  
Construction:

 
(a)  
In this Agreement: (i) references to the plural include the singular and to the
singular include the plural; (ii) references to any gender include any other
gender; (iii) the terms “include” and “including” are not limiting; (iv) the
term “or” has the inclusive meaning represented by the phrase “and/or,”
(v) unless otherwise specified, section and subsection references are to this
Agreement, and (vi) any reference to any statute, law, or regulation shall
include all amendments thereto and revisions thereof.

 
(b)  
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved using any presumption against either Borrower or Lender,
whether under any rule of construction or otherwise.  On the contrary, this
Agreement has been reviewed by each party hereto and their respective
counsel.  In case of any ambiguity or uncertainty, this Agreement shall be
construed and interpreted according to the ordinary meaning of the words used to
accomplish fairly the purposes and intentions of all parties hereto.

 
(c)  
Titles and section headings used in this Agreement are for convenience only and
shall not be used in interpreting this Agreement.

 

 
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15.  
JURY TRIAL WAIVER.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN
CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE
UNDERSIGNED PARTIES.

 
16.  
JUDICIAL REFERENCE PROVISION.

 
16.1  
In the event the Jury Trial Waiver set forth above is not enforceable, the
parties elect to proceed under this Judicial Reference Provision.

 
16.2  
With the exception of the items specified in Section 16.3 below, any
controversy, dispute or claim (each, a “Claim”) between the parties arising out
of or relating to this Agreement or any other document, instrument or agreement
between the undersigned parties (collectively in this Section, the “Loan
Documents”), will be resolved by a reference proceeding in California in
accordance with the provisions of Sections 638 et seq. of the California Code of
Civil Procedure (“CCP”), or their successor sections, which shall constitute the
exclusive remedy for the resolution of any Claim, including whether the Claim is
subject to the reference proceeding. Except as otherwise provided in the Loan
Documents, venue for the reference proceeding will be in the state or federal
court in the county or district where the real property involved in the action,
if any, is located or in the state or federal court in the county or district
where venue is otherwise appropriate under applicable law (the “Court”).

 
16.3  
The matters that shall not be subject to a reference are the following: (i)
nonjudicial foreclosure of any security interests in real or personal property,
(ii) exercise of self-help remedies (including, without limitation, set-off),
(iii) appointment of a receiver and (iv) temporary, provisional or ancillary
remedies (including, without limitation, writs of attachment, writs of
possession, temporary restraining orders or preliminary injunctions). This
reference provision does not limit the right of any party to exercise or oppose
any of the rights and remedies described in clauses (i) and (ii) or to seek or
oppose from a court of competent jurisdiction any of the items described in
clauses (iii) and (iv). The exercise of, or opposition to, any of those items
does not waive the right of any party to a reference pursuant to this reference
provision as provided herein.

 
16.4  
The referee shall be a retired judge or justice selected by mutual written
agreement of the parties. If the parties do not agree within ten (10) days of a
written request to do so by any party, then, upon request of any party, the
referee shall be selected by the Presiding Judge of the Court (or his or her
representative). A request for appointment of a referee may be heard on an ex
parte or expedited basis, and the parties agree that irreparable harm would
result if ex parte relief is not granted.  Pursuant to CCP § 170.6, each party
shall have one peremptory challenge to the referee selected by the Presiding
Judge of the Court (or his or her representative).

 
16.5  
The parties agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested, subject to change in
the time periods specified herein for good cause shown, to (i) set the matter
for a status and trial-setting conference within fifteen (15) days after the
date of selection of the referee, (ii) if practicable, try all issues of law or
fact within one hundred twenty (120) days after the date of the conference and
(iii) report a statement of decision within twenty (20) days after the matter
has been submitted for decision.

 
16.6  
The referee will have power to expand or limit the amount and duration of
discovery.  The referee may set or extend discovery deadlines or cutoffs for
good cause, including a party’s failure to provide requested discovery for any
reason whatsoever.  Unless otherwise ordered based upon good cause shown, no
party shall be entitled to “priority” in conducting discovery, depositions may
be taken by either party upon seven (7) days written notice, and all other
discovery shall be responded to within fifteen (15) days after service.  All
disputes relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding.

 
16.7  
Except as expressly set forth herein, the referee shall determine the manner in
which the reference proceeding is conducted including the time and place of
hearings, the order of presentation of evidence, and all other questions that
arise with respect to the course of the reference proceeding.  All proceedings
and hearings conducted before the referee, except for trial, shall be conducted
without a court reporter, except that when any party so requests, a court
reporter will be used at any hearing conducted before the referee, and the
referee will be provided a courtesy copy of the transcript.  The party making
such a request shall have the obligation to arrange for and pay the court
reporter.  Subject to the referee’s power to award costs to the prevailing
party, the parties will equally share the cost of the referee and the court
reporter at trial.

 

 
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16.8  
The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the State of California.  The rules
of evidence applicable to proceedings at law in the State of California will be
applicable to the reference proceeding.  The referee shall be empowered to enter
equitable as well as legal relief, enter equitable orders that will be binding
on the parties and rule on any motion which would be authorized in a court
proceeding, including without limitation motions for summary judgment or summary
adjudication. The referee shall issue a decision at the close of the reference
proceeding which disposes of all claims of the parties that are the subject of
the reference.  Pursuant to CCP § 644, such decision shall be entered by the
Court as a judgment or an order in the same manner as if the action had been
tried by the Court and any such decision will be final, binding and
conclusive.  The parties reserve the right to appeal from the final judgment or
order or from any appealable decision or order entered by the referee.  The
parties reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provision.

 
16.9  
If the enabling legislation which provides for appointment of a referee is
repealed (and no successor statute is enacted), any dispute between the parties
that would otherwise be determined by reference procedure will be resolved and
determined by arbitration.  The arbitration will be conducted by a retired judge
or justice, in accordance with the California Arbitration Act §1280 through
§1294.2 of the CCP as amended from time to time.  The limitations with respect
to discovery set forth above shall apply to any such arbitration proceeding.

 
16.10  
THE PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY
A JURY.  AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY, AND
FOR THE MUTUAL BENEFIT OF ALL PARTIES, AGREES THAT THIS REFERENCE PROVISION WILL
APPLY TO ANY CONTROVERSY, DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF
OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

 
17.  
JOINT AND SEVERAL LIABILITY OF BORROWERS; WAIVER OF CERTAIN DEFENSES.

 
(a)  Independent obligation.  Each Borrower, jointly and severally, promises to
pay and perform as and for its own indebtedness and obligation, (i) the due and
punctual payment of the obligations hereunder, in each case when and as the same
shall become due and payable, whether at maturity, pursuant to a mandatory
prepayment requirement, by acceleration, as herein provided or otherwise; and
(ii) the punctual and faithful performance, keeping, observance, and fulfillment
of all of the agreements, conditions, covenants, and other obligations of
Borrowers contained in this Agreement or otherwise with any other obligation
with respect to the obligations hereunder.  The obligations of each Borrower
under this Agreement is a direct, primary, separate, and independent obligation
of such Borrower, is not in whole or in part a surety relationship, is absolute
and unconditional, and is not dependent in whole or in part upon the obligations
of any other Borrower. Each Borrower agrees that it is jointly and severally
liable to Lender for the entire amount of the obligations hereunder, and that a
separate action may be brought against such Borrower whether such action is
brought against any other Borrower or any guarantor or whether any other
Borrower or any such guarantor is joined in such action.  Each Borrower agrees
that its liability hereunder shall be immediate and shall not be contingent upon
the exercise or enforcement by Lender of whatever remedies they may have against
any other Borrower or any guarantor, or the enforcement of any lien or
realization upon any security Lender may at any time possess.  Each Borrower
agrees that any release which may be given by Lender to the other Borrower or
any guarantor shall not also constitute a release such Borrower.  Each Borrower
consents and agrees that Lender shall be under no obligation to marshal any
assets of any other Borrower or any guarantor in favor of such Borrower or
against or in payment of any or all of the obligations hereunder.
 
(b)  Waivers.  To the maximum extent permitted by applicable law, each Borrower
hereby:

(i) Notices.  Waives: (A) notice of any Advances or other financial
accommodations made or extended under this Agreement, or the creation or
existence of any obligations hereunder; (B) notice of the amount of the
obligations hereunder, subject, however, to every Borrower's right to make
inquiry of Lender to ascertain the amount of the obligations hereunder at any
reasonable time; (C) notice of any adverse change in the financial condition of
any Borrower, of any change in value, or the release of any Collateral, or of
any other fact that might increase any Borrower's risk hereunder; (D)notice of
presentment for payment, demand, protest and notice thereof as to any
instrument; (E) notice of any Default; and (F) all other notices (except if such
notice is specifically required to be given to such Borrower under any Credit
Document to which such Borrower is a party) and demands to which such Borrower
might otherwise be entitled;

 
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(ii) Suretyship and Other Rights and Defenses.  Waives: (A) any rights to assert
against Lender any defense (legal or equitable), set-off, counterclaim, or claim
which such Borrower may now or at any time hereafter have against any other
Borrower; (B) any defense, set-off, counterclaim or claim, of any kind or
nature, arising directly or indirectly from the present or future lack of
perfection, sufficiency, validity, or enforceability of the obligations
hereunder or any security therefor; (C)any defense arising by reason of any
claim or defense based upon an election of remedies by Lender, including any
defense based upon an election of remedies by Lender under the provisions of
Section 580d and 726 of the California Code of Civil Procedure, or any similar
law of California or any other jurisdiction; (D) any defense based on any
alteration, impairment or release of the obligations hereunder or any security
therefor, whether or not resulting from any act or failure to act by Lender; and
(E) any right to require Lender to institute suit against any other Borrower or
to exhaust any rights and remedies which Lender has or may have against any
other Borrower;

(iii) Subrogation.  Waives: (A) any right of subrogation such Borrower has or
may have as against the other Borrower with respect to the obligations
hereunder; (B) any right to proceed against the other Borrower, now or
hereafter, for contribution, indemnity, reimbursement, or any other suretyship
rights and claims (irrespective of whether direct or indirect, liquidated or
contingent), with respect to the obligations hereunder; and (C) any right to
proceed or to seek recourse against or with respect to any property or asset of
the other Borrower and hereby agrees that, in light of the waivers contained in
this clause, such Borrower shall not be a "creditor" (as that term is defined in
Title II of the United States Code or otherwise) of the other Borrower, whether
for the purposes of the application of Sections 547 or 550 of Title 11 of the
United States Code or otherwise); and

(iv) Statutory Rights.  WAIVES, WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, ANY AND ALL BENEFITS OR
DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA
CIVIL CODE SECTIONS 2787 to 2855, AND CALIFORNIA CODE OF CIVIL PROCEDURE
SECTIONS 580a, 580b, 580c, 580d, and 726.
 
(c)  Consent to Alterations and Releases.  Each Borrower consents and agrees
that, without notice to or by such Borrower and without affecting or impairing
the obligations of such Borrower hereunder, Lender may, by action or inaction,
compromise or settle, extend the period of duration or the time for the payment,
or discharge the performance of, or may refuse to, or otherwise not enforce, or
may, by action or inaction, release all or any one or more parties to, any one
or more of this Agreement or may grant other indulgences to any Borrower in
respect thereof, or may agree to amend or modify in any manner and at any time
(or from time to time) any one or more of this Agreement, or may, by action or
inaction, release or substitute any guarantor, if any, of the obligations
hereunder, or may enforce, exchange, release, or waive, by action or inaction,
any security for the obligations hereunder or any guaranty of the obligations
hereunder, or any portion thereof.

18.  
TERM AND TERMINATION.  Borrower and Lender each have the right to terminate the
financing of Receivables under this Agreement at any time upon notice to the
other: provided that no such termination shall affect Lender’s security interest
in the Financed Receivables and other Collateral, and this Agreement shall
continue to be effective, and the obligations of Borrower to indemnify Lender
with respect to the expenses, damages, losses, costs and liabilities described
in Section 11 shall survive until all applicable statute of limitations periods
with respect to actions that may be brought against Lender have run, and
Lender’s rights and remedies hereunder shall survive any such termination, until
all transactions entered into and Obligations incurred hereunder or in
connection herewith have been completed and satisfied in full.  Upon any such
termination, Borrower shall, upon demand by Lender, immediately repay all
Advances then outstanding.

 
19.  
OTHER AGREEMENTS.  (i) Any security agreements, liens and/or security interests
securing payment of any obligations of Borrower owing to Lender or its
affiliates also secure the Obligations, and are valid and subsisting and are not
adversely affected by execution of this Agreement.  An Event of Default under
this Agreement constitutes a default under other outstanding agreements between
Borrower and Lender or its affiliates; (ii) Lender reserves the right to issue
press releases, advertisements, and other promotional materials describing any
successful outcome of services provided on Borrower’s behalf. Borrower agrees
that Lender shall have the right to identify Borrower by name in those
materials.

 

 
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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day
and year above written.
 
BORROWER:
LENDER:
   
AKEENA SOLAR, INC.,
By                                                                
Name:                                                                
Title:                                                                
BRIDGE BANK, NATIONAL ASSOCIATION
By                                                                       
Name:                                                                       
Title:                                                                       
   
Address for Notices:
1475 South Bascom Avenue, Suite 101
Campbell, CA 95008
Fax: (408)371-5105
Address for Notices:
55 Almaden Blvd.
San Jose, CA 95113
Fax:  (408) 423-8510

AKEENA CORP.
By                                                                
Name:                                                                
Title:                                                                
 
Address for Notices:
1475 South Bascom Avenue, Suite 101
Campbell, CA 95008
Fax: (408)371-5105

ANDALAY SOLAR, INC.
By                                                                
Name:                                                                
Title:                                                                
 
Address for Notices:
1475 South Bascom Avenue, Suite 101
Campbell, CA 95008
Fax: (408)371-5105

 
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