Exhibit 10.30

 

Credit and Security Agreement
(Ex-Im Subfacility)

 

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TABLE OF CONTENTS

 

 

Page

 

 

 

1.

AMOUNT AND TERMS OF THE LINE OF CREDIT

1

 

1.1

Line of Credit; Limitations on Borrowings; Termination Date; Use of Proceeds

1

 

1.2

Borrowing Base; Mandatory Prepayment

2

 

1.3

Procedures for Line of Credit Advances

2

 

1.4

Collection of Accounts and Application to Revolving Notes

4

 

1.5

Interest and Interest Related Matters

5

 

1.6

Fees

7

 

1.7

Interest Accrual; Principal and Interest Payments; Computation

8

 

1.8

Termination, Reduction or Non-Renewal of Line of Credit by Company; Notice

9

 

1.9

Facility Subject to Ex-Im Bank Rules

9

2.

SECURITY INTEREST AND OCCUPANCY OF COMPANY’S PREMISES

10

 

2.1

Grant of Security Interest

10

 

2.2

Notifying Account Debtors and Other Obligors; Collection of Collateral

10

 

2.3

Assignment of Insurance

10

 

2.4

Company’s Premises

11

 

2.5

License

11

 

2.6

Financing Statements

11

 

2.7

Setoff

12

 

2.8

Collateral Related Matters

12

 

2.9

Notices Regarding Disposition of Collateral

12

3.

CONDITIONS PRECEDENT

12

 

3.1

Conditions Precedent to Initial Advance

12

 

3.2

Additional Conditions Precedent to All Advances

13

4.

REPRESENTATIONS AND WARRANTIES

13

5.

COVENANTS

13

 

5.1

Reporting Requirements

13

 

5.2

Financial Covenants

16

 

5.3

Other Liens and Permitted Liens

17

 

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TABLE OF CONTENTS

(continued)

 

 

Page

 

 

 

 

5.4

Indebtedness

18

 

5.5

Guaranties

18

 

5.6

Investments and Subsidiaries

19

 

5.7

Dividends and Distributions

19

 

5.8

Salaries

19

 

5.9

Books and Records; Collateral Examination; Inspection and Appraisals

19

 

5.10

Account Verification; Payment of Permitted Liens

20

 

5.11

Compliance with Laws

20

 

5.12

Payment of Taxes and Other Claims

20

 

5.13

Maintenance of Collateral and Properties

21

 

5.14

Insurance

21

 

5.15

Preservation of Existence

21

 

5.16

Delivery of Instruments, etc.

21

 

5.17

Sale or Transfer of Assets; Suspension of Business Operations

21

 

5.18

Consolidation and Merger; Asset Acquisitions

22

 

5.19

Sale and Leaseback

22

 

5.20

Restrictions on Nature of Business

22

 

5.21

Accounting

22

 

5.22

Discounts, etc.

22

 

5.23

Pension Plans

22

 

5.24

Place of Business; Name

22

 

5.25

Constituent Documents

23

 

5.26

Performance by Wells Fargo

23

 

5.27

Wells Fargo Appointed as Company’s Attorney in Fact

23

6.

EVENTS OF DEFAULT AND REMEDIES

23

 

6.1

Events of Default

23

 

6.2

Rights and Remedies

25

 

6.3

Immediate Default and Acceleration

26

7.

MISCELLANEOUS

26

 

7.1

No Waiver; Cumulative Remedies

26

 

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TABLE OF CONTENTS

(continued)

 

 

Page

 

 

 

 

7.2

Amendment; Consents and Waivers; Authentication

27

 

7.3

Execution in Counterparts; Delivery of Counterparts

27

 

7.4

Notices, Requests, and Communications; Confidentiality

27

 

7.5

Company Information Reporting; Confidentiality

28

 

7.6

Further Documents

29

 

7.7

Costs and Expenses

29

 

7.8

Indemnity

29

 

7.9

Retention of Company’s Records

30

 

7.10

Binding Effect; Assignment; Complete Agreement

30

 

7.11

Sharing of Information

31

 

7.12

Severability of Provisions

31

 

7.13

Headings

31

 

7.14

Governing Law; Jurisdiction; Venue

31

 

7.15

Incorporation of Borrower Agreement by Reference

31

 

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Credit and Security Agreement

(Ex-Im Subfacility)

 

This Credit and Security Agreement (Ex-Im Subfacility) (the “Agreement”) is
dated February 9,2009, and is entered into between Capstone Turbine Corporation,
a Delaware corporation (“Company”), and Wells Fargo Bank, National Association
(as more fully defined in Exhibit A, “Wells Fargo”), acting through its Wells
Fargo Business Credit operating division.

 

RECITALS

 

Company has asked Wells Fargo to provide it with a $7,000,000 revolving line of
credit (the “Line of Credit”) for working capital purposes, with such Line of
Credit constituting a subfacility within the Domestic Facility Agreement
(defined below). Wells Fargo is agreeable to meeting Company’s request, provided
that Company agrees to the terms and conditions of this Agreement.

 

For purposes of this Agreement, capitalized terms not otherwise defined in the
Agreement shall have the meaning given them in Exhibit A.

 

1.                                      AMOUNT AND TERMS OF THE LINE OF CREDIT

 

1.1                               Line of Credit; Limitations on Borrowings;
Termination Date; Use of Proceeds.

 

(a)                                 Line of Credit and Limitations on Borrowing.
Wells Fargo shall make Advances to Company under the Line of Credit that do not
exceed in the aggregate the lesser of (i) $7,000,000 (the “Maximum Line
Amount”), and (ii) the Borrowing Base limitations described in Section 1.2.
Within these limits, Company may periodically borrow, prepay in whole or in
part, and reborrow. Wells Fargo has no obligation to make an Advance during a
Default Period or at any time Wells Fargo believes that an Advance would result
in an Event of Default. The Line of Credit provided for in this Agreement is
subject to the limitations set forth in the Domestic Facility Agreement and is
deemed to be a subfacility within the “Line of Credit” provided for in the
Domestic Facility Agreement as set forth therein.

 

(b)                                Maturity and Termination Dates. Company may
request Advances from the date that the conditions set forth in Section 3 are
satisfied until the earlier of: (i) February 9, 2012 (the “Maturity Date”),
(ii) the date Company terminates the Line of Credit, (iii) the date Wells Fargo
terminates the Line of Credit following an Event of Default, or (iv) the date
the Domestic Facility Agreement is terminated (the earliest of such dates, the
“Termination Date”)

 

(c)                                 Use of Line of Credit Proceeds. Company
shall use the proceeds of each Advance to provide working capital to fulfill
written export orders or contracts from customers outside the United States to
purchase goods or services from Company.

 

(d)                                Revolving Notes. Company’s obligation to
repay Line of Credit Advances, regardless of how initiated under Section 1.3,
shall be evidenced by one or more revolving promissory notes (as renewed,
amended or replaced from time to time, the “Revolving Notes”).

 

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1.2                               Borrowing Base; Mandatory Prepayment.

 

(a)                                  Borrowing Base. The borrowing base (the
“Borrowing Base”) is an amount equal to:

 

(i)                                   85% or such lesser percentage of Eligible
Accounts as Wells Fargo in its sole discretion may deem appropriate; provided
that this rate may be reduced at any time by Wells Fargo’s in its sole
discretion by one percent (l%) for each percentage point by which Dilution on
the date of determination is in excess of five percent (5.0%), plus

 

(ii)                                the lesser of (i) 50% or such lesser
percentage of Eligible Inventory as Wells Fargo in its sole discretion may deem
appropriate or (ii) $2,000,000, less

 

(iii)                             the Borrowing Base Reserve, less

 

(iv)                            Indebtedness that Company owes Wells Fargo that
has not been advanced on the Revolving Notes (other than Indebtedness
constituting “Advances” under the Domestic Facility Agreement), less

 

(v)                               Indebtedness that is not otherwise described
in Section 1, including Indebtedness that Wells Fargo in its sole discretion
finds on the date of determination to be equal to Wells Fargo’s net credit
exposure with respect to any swap, derivative, foreign exchange, hedge, deposit,
treasury management or similar transaction or arrangement extended to Company by
Wells Fargo and any Indebtedness owed by Company to Wells Fargo Merchant
Services, L.L.C.

 

(b)                                 Mandatory Prepayment; Overadvances. If
unreimbursed Line of Credit Advances evidenced by the Revolving Notes exceed the
lesser of the Borrowing Base, or the Maximum Line Amount at any time, then
Company shall immediately prepay the Revolving Notes in an amount sufficient to
eliminate the excess, unless Wells Fargo has delivered to Company an
Authenticated Record consenting to the Overadvance prior to its occurrence, in
which event the Overadvance shall be temporarily permitted on such terms and
conditions as Wells Fargo in its sole discretion may deem appropriate, including
the payment of additional fees or interest, or both.

 

1.3                               Procedures for Line of Credit Advances.

 

(a)                                  Advances to Operating Account. Advances
shall be credited to Company’s demand deposit account maintained with Wells
Fargo (the “Operating Account”), unless the parties agree in a Record
Authenticated by both of them to disburse to another account.

 

(i)                                    Advances upon Company’s Request. Line of
Credit Advances may be funded upon Company’s request. No request will be deemed
received until Wells Fargo acknowledges receipt, and Company, if requested by
Wells Fargo, confirms the request in an Authenticated Record. Company shall
repay all Advances, even if the Person requesting the Advance on behalf of
Company lacked authorization.

 

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(A)                           Floating Rate Advances. If Company wants a
Floating Rate Advance, it shall make the request no later than 9:00 a.m.
Pasadena, California Time on the Business Day on which it wants the Floating
Rate Advance to be funded, which request shall specify the principal Advance
amount being requested.

 

(B)                             LIBOR Advances. If Company wants a LIBOR
Advance, it shall make the request no later than 9:00 a.m. Pasadena, California
Time three (3) Business Days prior to the Business Day on which it wants the
LIBOR Advance to be funded, which request shall specify both the principal
Advance amount and Interest Period being requested. No more than five
(5) separate LIBOR Advance Interest Periods may be outstanding at any time under
this Agreement and the Ex-Im Credit Agreement, on a combined basis. Each LIBOR
Advance shall be in multiples of $500,000 and in the minimum amount of at least
$500,000. LIBOR Advances are not available for Advances made through the Loan
Manager Service, and shall not be available during Default Periods.

 

(ii)                                Advances through Loan Manager. If Wells
Fargo has separately agreed that Company may use the Wells Fargo Loan Manager
service (“Loan Manager”), Line of Credit Advances will be initiated by Wells
Fargo and credited to the Operating Account as Floating Rate Advances as of the
end of each Business Day in an amount sufficient to maintain an agreed upon
ledger balance in the Operating Account, subject only to Line of Credit
availability as provided in Section 1.1(a). If Wells Fargo terminates Company’s
access to Loan Manager, Company may continue to request Line of Credit Advances
as provided in Section 1.3(a)(i). Wells Fargo shall have no obligation to make
an Advance through Loan Manager during a Default Period, or in an amount in
excess of Line of Credit availability, and may terminate Loan Manager at any
time in its sole discretion.

 

(b)                                 Protective Advances; Advances to Pay
Indebtedness Due. Wells Fargo may initiate a Floating Rate Advance on the Line
of Credit in its sole discretion for any reason at any time, without Company’s
compliance with any of the conditions of this Agreement, and (i) disburse the
proceeds directly to third Persons in order to protect Wells Fargo’s interest in
Collateral or to perform any of Company’s obligations under this Agreement, or
(ii) apply the proceeds to the amount of any Indebtedness then due and payable
to Wells Fargo.

 

(c)                                  LIBOR Advances.

 

(i)                                    Funding Line of Credit Advances as LIBOR
Advances for Fixed Interest Periods. Subject to the other terms and conditions
of this Agreement, Company may request a Line of Credit Advance as a LIBOR
Advance for one, three, or six month periods (each period, an “Interest Period”,
as more fully defined in Exhibit A).

 

(ii)                                Procedure for Converting Floating Rate
Advances to LIBOR Advances. Company may request that all or any part of an
outstanding Floating Rate Advance be converted to a LIBOR Advance, provided that
no Default Period is in effect, and that Wells Fargo receives the request no
later than 9:00 a.m. Pasadena, California Time three (3) Business Days prior to
the Business Day on which Company wishes the conversion to become effective.
Each request shall (i) specify the principal amount of the Floating Rate Advance
to be converted, (ii) the Business Day of conversion, and (iii) the Interest
Period desired. The request shall be

 

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confirmed in an Authenticated Record if requested by Wells Fargo. Each
conversion to a LIBOR Advance shall be in multiples of $500,000 and in the
minimum amount of at least $500,000.

 

(iii)                             Expiring LIBOR Advance Interest Periods.
Unless Company requests a new LIBOR Advance, or prepays an outstanding LIBOR
Advance at the expiration of an Interest Period, Wells Fargo shall convert each
LIBOR Advance to a Floating Rate Advance on the last day of the expiring
Interest Period. If no Default Period is in effect, Company may request that all
or part of any expiring LIBOR Advance be renewed as a new LIBOR Advance,
provided that Wells Fargo receives the request no later than 9:00 a.m. Pasadena,
California Time three (3) Business Days prior to the Business Day that
constitutes the first day of the new Interest Period. Each request shall specify
the principal amount of the expiring LIBOR Advance to be continued and Interest
Period desired, and shall be confirmed in an Authenticated Record if requested
by Wells Fargo. Each renewal of a LIBOR Advance shall be in multiples of
$500,000 and in the minimum amount of at least $500,000.

 

(iv)                            Quotation of LIBOR Advance Interest Rates. Wells
Fargo shall, with respect to any request for a new or renewal LIBOR Advance, or
the conversion of a Floating Rate Advance to a LIBOR Advance, provide Company
with a LIBOR quote for each Interest Period identified by Company on the
Business Day on which the request was made, if the request is received by Wells
Fargo no later than 9:00 a.m. Pasadena, California Time three (3) Business Days
prior to the Business Day on which Company has requested that the LIBOR Advance
be made effective. If Company does not immediately accept a LIBOR quote, the
quoted rate shall expire and any subsequent request for a LIBOR quote shall be
subject to redetermination by Wells Fargo.

 

(v)                               Taxes and Regulatory Costs. Company shall also
pay Wells Fargo with respect to any LIBOR Advance all (i) withholdings, interest
equalization taxes, stamp taxes or other taxes (except income and franchise
taxes) imposed by any domestic or foreign governmental authority that are
related to LIBOR, and (ii) future, supplemental, emergency or other changes in
the LIBOR Reserve Percentage, the assessment rates imposed by the Federal
Deposit Insurance Corporation, or similar costs imposed by any domestic or
foreign governmental authority or resulting from compliance by Wells Fargo with
any request or directive (whether or not having the force of law) from any
central bank or other governmental authority that are related to LIBOR but not
otherwise included in the calculation of LIBOR. In determining which of these
amounts are attributable to an existing LIBOR Advance, any reasonable allocation
made by Wells Fargo among its operations shall be deemed conclusive and binding.

 

1.4                               Collection of Accounts and Application to
Revolving Notes.

 

(a)                                 The Collection Account. Company has granted
a security interest to Wells Fargo in the Collateral, including all Accounts.
Except as otherwise agreed by both parties in an Authenticated Record, all
Proceeds of Accounts and other Collateral, upon receipt or collection, shall be
deposited each Business Day into the Collection Account. Funds so deposited
(“Account Funds”) are the property of Wells Fargo, and may only be withdrawn
from the Collection

 

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Account by Wells Fargo for application in accordance with Section 1.4(c) or as
otherwise provided in the Loan Documents or by applicable law.

 

(b)                                Payment of Accounts by Company’s Account
Debtors. Company shall instruct all account debtors to make payments either
directly to the Lockbox for deposit by Wells Fargo directly to the Collection
Account, or instruct them to deliver such payments to Wells Fargo by wire
transfer, ACH, or other means as Wells Fargo may direct for deposit to the
Collection Account or for direct application to the Line of Credit. If Company
receives a payment or the Proceeds of Collateral directly, Company will promptly
deposit the payment or Proceeds into the Collection Account. Until deposited, it
will hold all such payments and Proceeds in trust for Wells Fargo without
commingling with other funds or property. All deposits held in the Collection
Account shall constitute Proceeds of Collateral and shall not constitute the
payment of Indebtedness.

 

(c)                                 Application of Payments to Revolving Notes.
Wells Fargo will withdraw Account Funds deposited to the Collection Account and
pay down borrowings on the Line of Credit by applying them to the Revolving
Notes on a pro rata basis on the first Business Day following the Business Day
of deposit to the Collection Account, or, if payments are received by Wells
Fargo that are not first deposited to the Collection Account pursuant to any
treasury management service provided to Company by Wells Fargo, such payments
shall be applied to the Revolving Notes as provided in the Master Agreement for
Treasury Management Services and the relevant service description.

 

1.5                               Interest and Interest Related Matters.

 

(a)                                 Interest Rates Applicable to Line of Credit.
Except as otherwise provided in this Agreement, the unpaid principal amount of
each Line of Credit Advance evidenced by the Revolving Notes shall accrue
interest at an annual interest rate calculated as follows:

 

The “Floating Rate” for Line of Credit Advances = the greater of (i) the Prime
Rate plus the applicable Margin, or (ii) five percent (5.0%), plus the
applicable Margin, which interest rate shall change whenever the Prime Rate
changes, subject to the minimum interest rate floor;

 

Or

 

LIBOR Advance Rate pricing for one, three, or six month fixed rate Interest
Periods; the “LIBOR Advance Rate” for Line of Credit Advances = LIBOR applicable
to the selected Interest Period plus the applicable Margin;

 

Multiple Advances under the Line of Credit may simultaneously accrue interest at
both the Floating Rate and at the LIBOR Advance Rate, subject to the limitations
of Section 1.3(a)(i)

 

If Borrower’s Net Income for the most recently completed fiscal year is less
than $1.00 for such year, the Margins for the immediately succeeding fiscal year
shall be two and one-half percent (2.5%) per annum for Floating Rate Advances,
and three and one-half percent (3.5%) per annum

 

5

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for LIBOR Advances. If Borrower’s Net Income for the most recently completed
fiscal year equals or exceeds $1.00 for such year, the Margins for the
immediately succeeding fiscal year shall be two percent (2.0%) per annum for
Floating Rate Advances, and three percent (3.0%) per annum for LIBOR Advances.

 

Each Margin change shall become effective on the first calendar day of the month
following the month of receipt by Wells Fargo of the audited annual financial
statements. If Company fails to timely deliver audited annual financial
statements as agreed, the Margins shall be at the highest level set forth above
and Wells Fargo may notify Company that an Event of Default has occurred and
impose the Default Rate.

 

If amended or restated financial statements would change previously calculated
Margins, or if Wells Fargo determines that any financial statements have
materially misstated Company’s financial condition, then Wells Fargo may, using
the most accurate information available to it, recalculate the financial test or
tests governing the Margins and retroactively reduce or increase the Margins
from the date of receipt of such amended or restated financial statements and
charge Company additional interest (such that Wells Fargo receives the interest
that it should have received under this Agreement if the Company’s financial
condition had been properly reported), which may be imposed on them from the
beginning of the appropriate month to which the previous change has been made or
to the beginning of the month in which any Event of Default has occurred, as
Wells Fargo in its sole discretion deems appropriate.

 

(b)                                Minimum Interest Charge. [Intentionally
Omitted].

 

(c)                                 Default Interest Rate. Commencing on the day
an Event of Default occurs, through and including the date identified by Wells
Fargo in a Record as the date that the Event of Default has been cured or waived
(each such period a “Default Period”), or during a time period specified in
Section 1.8, or at any time following the Termination Date, in Wells Fargo’s
sole discretion and without waiving any of its other rights or remedies, the
principal amount of the Revolving Notes shall bear interest at a rate that is
three percent (3.0%) above the contractual rate set forth in Section 1.5(a) (the
“Default Rate”), or any lesser rate that Wells Fargo may deem appropriate,
starting on the first day of the month in which the Default Period begins
through the last day of that Default Period, or any shorter time period to which
Wells Fargo may agree in an Authenticated Record.

 

(d)                                Interest Accrual on Payments Applied to
Revolving Notes. Payments received by Wells Fargo shall be applied to the
Revolving Notes as provided in Section 1.4(c), but the principal amount paid
down shall continue to accrue interest through the end of the first Business Day
following the Business Day that the payment was applied to the Revolving Notes.

 

(e)                                Usury. No interest rate shall be effective
which would result in a rate greater than the highest rate permitted by law.
Payments in the nature of interest and other charges made under any Loan
Documents or any other document or agreement described in or related to this
Agreement that are later determined to be in excess of the limits imposed by
applicable usury law will be deemed to be a payment of principal, and the
Indebtedness shall be reduced by that amount so that such payments will not be
deemed usurious.

 

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1.6                               Fees.

 

(a)                                Origination Fee. [Intentionally Omitted].

 

(b)                               Unused Line Fee. [Intentionally Omitted].

 

(c)                                Facility Fees. On each anniversary date of
this Agreement of this Agreement, Company shall pay Wells Fargo a facility fee
equal to 1.5% of the Maximum Line Amount, which fee when paid shall be deemed
fully earned and non-refundable as of each such anniversary date under all
circumstances.

 

(d)                                Collateral Exam Fees. Company shall pay Wells
Fargo fees in connection with any collateral exams, audits or inspections
conducted by or on behalf of Wells Fargo at the current rates established from
time to time by Wells Fargo as its collateral exam fees (which fees are
currently $125.00 per hour per collateral examiner), together with all actual
out-of-pocket costs and expenses incurred in conducting any collateral
examination or inspection.

 

(e)                                 Collateral Monitoring Fees. Company shall
pay Wells Fargo a fee rates established from time to time by Wells Fargo as its
Collateral monitoring fees (which fees include an initial fee of $2,000 and
monthly fees which are currently $600 per month), due and payable monthly in
advance on the first day of the month and on the Termination Date.

 

(f)                                    Line of Credit Termination and/or
Reduction Fees. [Intentionally Omitted].

 

(g)                                Overadvance Fees. Company shall pay a $500
Overadvance fee for each day that an Overadvance exists which was not agreed to
by Wells Fargo in an Authenticated Record prior to its occurrence; provided that
Wells Fargo’s acceptance of the payment of such fees shall not constitute either
consent to the Overadvance or waiver of the resulting Event of Default. Company
shall pay additional Overadvance fees and interest in such amounts and on such
terms as Wells Fargo in its sole discretion may consider appropriate for any
Overadvance to which Wells Fargo has specifically consented in an Authenticated
Record prior to its occurrence.

 

(h)                                Treasury Management Fees. Company will pay
service fees to Wells Fargo for treasury management services provided pursuant
to the Master Agreement for Treasury Management Services or any other agreement
entered into by the parties, in the amount prescribed in Wells Fargo’s current
service fee schedule.

 

(i)                                    Other Fees and Charges. Wells Fargo may
impose additional fees and charges during a Default Period for (i) waiving an
Event of Default, or (ii) the administration of Collateral by Wells Fargo. All
such fees and charges shall be imposed at Wells Fargo’s sole discretion
following oral notice to Company on either an hourly, periodic, or flat fee
basis, and in lieu of or in addition to imposing interest at the Default Rate,
and Company’s request for an Advance following such notice shall constitute
Company’s agreement to pay such fees and charges.

 

(j)                                    LIBOR Advance Breakage Fees. Company may
prepay any LIBOR Advance at any time in any amount, whether voluntarily or by
acceleration; provided, however,

 

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that if the LIBOR Advance is prepaid, Company shall pay Wells Fargo upon demand
a LIBOR Advance breakage fee equal to the sum of the discounted monthly
differences for each month from the month of prepayment through the month in
which such Interest Period matures, calculated as follows for each such month:

 

(i)                                   Determine the amount of interest which
would have accrued each month on the amount prepaid at the interest rate
applicable to such amount had it remained outstanding until the last day of the
applicable Interest Period.

 

(ii)                                Subtract from the amount determined in
(i) above the amount of interest which would have accrued for the same month on
the amount prepaid for the remaining term of such Interest Period at LIBOR in
effect on the date of prepayment for new loans made for such term in a principal
amount equal to the amount prepaid.

 

(iii)                             If the result obtained in (ii) for any month
is greater than zero, discount that difference by LIBOR used in (ii) above.

 

Company acknowledges that prepayment of the Revolving Notes may result in Wells
Fargo incurring additional costs, expenses or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses or liabilities.
Company agrees to pay the above-described LIBOR Advance breakage fee and agrees
that this amount represents a reasonable estimate of the LIBOR Advance breakage
costs, expenses and/or liabilities of Wells Fargo.

 

1.7                               Interest Accrual; Principal and Interest
Payments; Computation.

 

(a)                                 Interest Payments and Interest Accrual.
Accrued and unpaid interest under the Revolving Notes on Floating Rate Advances
shall be due and payable on the first day of each month (each an “Interest
Payment Date”) and on the Termination Date, and shall be paid in the manner
provided in Section 1.4(c). Interest shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
Advance to the Interest Payment Date. Interest accruing on any LIBOR Advance
shall be due and payable on the last day of the applicable Interest Period and
on the Termination Date; provided, however, for Interest Periods in excess of
one month, interest shall nevertheless be due and payable monthly on the last
day of each month, and on the last day of the Interest Period.

 

(b)                               Payment of Revolving Notes Principal. The
principal amount of the Revolving Notes shall be paid from time to time as
provided in this Agreement, and shall be fully due and payable on the
Termination Date.

 

(c)                                 Payments Due on Non-Business Days. If an
Interest Payment Date or the Termination Date falls on a day which is not a
Business Day, payment shall be made on the next Business Day, and interest shall
continue to accrue during that time period.

 

(d)                                Computation of Interest and Fees. Interest
accruing on the unpaid principal amount of the Revolving Notes and fees payable
under this Agreement shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.

 

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(e)                                 Liability Records. Wells Fargo shall
maintain accounting and bookkeeping records of all Advances and payments under
the Line of Credit and all other Indebtedness due to Wells Fargo in such form
and content as Wells Fargo in its sole discretion deems appropriate. Wells
Fargo’s calculation of current Indebtedness shall be presumed correct unless
proven otherwise by Company. Upon Wells Fargo’s request, Company will admit and
certify in a Record the exact principal balance of the Indebtedness that Company
then believes to be outstanding. Any billing statement or accounting provided by
Wells Fargo shall be conclusive and binding unless Company notifies Wells Fargo
in a detailed Record of its intention to dispute the billing statement or
accounting within 30 days of receipt.

 

(f)                                   Pro Rata Application. All payments or
other sums received by Wells Fargo and applied to the Revolving Notes shall be
applied on a pro rata basis.

 

1.8                               Termination, Reduction or Non-Renewal of Line
of Credit by Company; Notice.

 

(a)                                 Termination or Reduction by Company after
Advance Notice. Company may terminate or reduce the Line of Credit at any time
prior to the Maturity Date, if it (i) delivers an Authenticated Record notifying
Wells Fargo of its intentions at least sixty (60) days prior to the proposed
Termination Date, (ii) pays Wells Fargo the termination or reduction fee set
forth in Section 1.6(f), and (iii) pays the Indebtedness in full or down to the
reduced Maximum Line Amount. Any reduction in the Maximum Line Amount shall be
in multiples of $500,000, with a minimum reduction of at least $500,000.

 

(b)                                Termination or Reduction by Company without
Advance Notice. If Company fails to deliver Wells Fargo timely notice of its
intention to terminate the Line of Credit or reduce the Maximum Line Amount as
provided in Section 1.8(a), Company may nevertheless terminate the Line of
Credit or reduce the Maximum Line Amount and pay the Indebtedness in full or
down to the reduced Maximum Line Amount if it pays additional interest for each
day that the notice was short of the required sixty (60) days notice, which
interest shall be in an amount that is equal to the interest calculated at the
Default Rate based on the Borrower’s average borrowings under the Line of Credit
for the two months prior to the date that Wells Fargo receives delivery of an
Authenticated Record giving it actual notice of Company’s intention to terminate
or reduce the Line of Credit.

 

(c)                                 Non-Renewal by Company; Notice. If Company
does not wish Wells Fargo to consider renewal of the Line of Credit on the next
Maturity Date, Company shall deliver an Authenticated Record to Wells Fargo at
least sixty (60) days prior to the Maturity Date notifying Wells Fargo of its
intention not to renew. If Company fails to deliver to Wells Fargo such timely
notice, then the Revolving Note shall accrue interest at the Default Rate
commencing on the sixtieth (60th) day prior to the Maturity Date and continuing
through the date that Wells Fargo receives delivery of an Authenticated Record
giving it actual notice of Company’s intention not to renew.

 

1.9                               Facility Subject to Ex-Im Bank Rules.  Company
acknowledges that Wells Fargo is willing to make the Ex-Im Subfacility available
to Company because the Ex-Im Bank is willing to guaranty payment of a
significant portion of the Indebtedness pursuant to the Master

 

9

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Guarantee Agreement (as defined in the Borrower Agreement). Accordingly, in the
event of any inconsistency between this Agreement and the Master Guarantee
Agreement or the Borrower Agreement, the provision that is the more stringent on
Company shall control with respect to Advances under this Agreement and
procedures related thereto. This Agreement is supplemental to the Borrower
Agreement.

 

2.                                     SECURITY INTEREST AND OCCUPANCY OF
COMPANY’S PREMISES

 

2.1                            Grant of Security Interest. Company hereby
pledges, assigns and grants to Wells Fargo, for the benefit of Wells Fargo and
as agent for Wells Fargo Merchant Services, L.L.C., a Lien and security interest
(collectively referred to as the “Security Interest”) in the Collateral, as
security for the payment and performance of all Indebtedness. Following request
by Wells Fargo, Company shall grant Wells Fargo, for the benefit of Wells Fargo
and as agent for Wells Fargo Merchant Services, L.L.C., a Lien and security
interest in all commercial tort claims that it may have against any Person.

 

2.2                             Notifying Account Debtors and Other Obligors;
Collection of Collateral. Wells Fargo may at any time (whether or not a Default
Period then exists) deliver a Record giving an account debtor or other Person
obligated to pay an Account, a General Intangible, or other amount due, notice
that the Account, General Intangible, or other amount due has been assigned to
Wells Fargo for security and must be paid directly to Wells Fargo. Company shall
join in giving such notice and shall Authenticate any Record giving such notice
upon Wells Fargo’s request. After Company or Wells Fargo gives such notice,
Wells Fargo may, but need not, in Wells Fargo’s or in Company’s name, demand,
sue for, collect or receive any money or property at any time payable or
receivable on account of, or securing, such Account, General Intangible, or
other amount due, or grant any extension to, make any compromise or settlement
with or otherwise agree to waive, modify, amend or change the obligations
(including collateral obligations) of any account debtor or other obligor. Wells
Fargo may, in Wells Fargo’s name or in Company’s name, as Company’s agent and
attorney-in-fact, notify the United States Postal Service to change the address
for delivery of Company’s mail to any address designated by Wells Fargo,
otherwise intercept Company’s mail, and receive, open and dispose of Company’s
mail, applying all Collateral as permitted under this Agreement and holding all
other mail for Company’s account or forwarding such mail to Company’s last known
address.

 

2.3                            Assignment of Insurance. As additional security
for the Indebtedness, Company hereby assigns to Wells Fargo and to Wells Fargo
Merchant Services, L.L.C., all rights of Company under every policy of insurance
covering the Collateral and all business records and other documents relating to
it, and all monies (including proceeds and refunds) that may be payable under
any policy, and Company hereby directs the issuer of each policy to pay all such
monies directly to Wells Fargo. At any time, whether or not a Default Period
then exists, Wells Fargo may (but need not), in Wells Fargo’s or Company’s name,
execute and deliver proofs of claim, receive payment of proceeds and endorse
checks and other instruments representing payment of the policy of insurance,
and adjust, litigate, compromise or release claims against the issuer of any
policy. Any monies received under any insurance policy assigned to Wells Fargo,
other than liability insurance policies, or received as payment of any award or
compensation for condemnation or taking by eminent domain, shall be paid to
Wells Fargo and, as determined by Wells Fargo in its sole discretion, either be
applied to prepayment of the Indebtedness or

 

10

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disbursed to Company under staged payment terms reasonably satisfactory to Wells
Fargo for application to the cost of repairs, replacements, or restorations
which shall be effected with reasonable promptness and shall be of a value at
least equal to the value of the items or property destroyed.

 

2.4                            Company’s Premises.

 

(a)                                 Wells Fargo’s Right to Occupy Company’s
Premises. Company hereby grants to Wells Fargo the right, at any time during a
Default Period and without notice or consent, to take exclusive possession of
all locations where Company conducts its business or has any rights of
possession, including the locations described on Exhibit B (the “Premises”),
until the earlier of (i) payment in full and discharge of all Indebtedness and
termination of the Line of Credit, or (ii) final sale or disposition of all
items constituting Collateral and delivery of those items to purchasers.

 

(b)                               Wells Fargo’s Use of Company’s Premises. Wells
Fargo may use the Premises to store, process, manufacture, sell, use, and
liquidate or otherwise dispose of items that are Collateral, and for any other
incidental purposes deemed appropriate by Wells Fargo in good faith.

 

(c)                                 Company’s Obligation to Reimburse Wells
Fargo. Wells Fargo shall not be obligated to pay the Company rent or other
compensation for the possession or use of any Premises, but if Wells Fargo
elects to pay rent or other compensation to the owner of any Premises in order
to have access to the Premises, then Company shall promptly reimburse Wells
Fargo all such amounts, as well as all taxes, fees, charges and other expenses
at any time payable by Wells Fargo with respect to the Premises by reason of the
execution, delivery, recordation, performance or enforcement of any terms of
this Agreement.

 

2.5                              License. Without limiting the generality of any
other Security Document, Company hereby grants to Wells Fargo a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of Company for the purpose of: (a) completing the manufacture of
any in-process materials during any Default Period so that such materials become
saleable Inventory, all in accordance with the same quality standards previously
adopted by Company for its own manufacturing and subject to Company’s reasonable
exercise of quality control; and (b) selling, leasing or otherwise disposing of
any or all Collateral during any Default Period.

 

2.6                              Financing Statements.

 

(a)                                Authorization to File. Company authorizes
Wells Fargo to file financing statements describing Collateral to perfect Wells
Fargo’s Security Interest in the Collateral, and Wells Fargo may describe the
Collateral as “all personal property” or “all assets” or describe specific items
of Collateral including commercial tort claims as Wells Fargo may consider
necessary or useful to perfect the Security Interest. All financing statements
filed before the date of this Agreement to perfect the Security Interest were
authorized by Company and are hereby re-authorized. Following the termination of
the Line of Credit and payment of all Indebtedness,

 

11

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Wells Fargo shall, at Company’s expense and within the time periods required
under applicable law, release or terminate any filings or other agreements that
perfect the Security Interest.

 

(b)                               Termination. Wells Fargo shall, at Company’s
expense, release or terminate any filings or other agreements that perfect the
Security Interest, provided that there are no suits, actions, proceedings or
claims pending or threatened against any Indemnitee under this Agreement with
respect to any Indemnified Liabilities, upon Wells Fargo’s receipt of the
following, in form and content satisfactory to Wells Fargo: (i) cash payment in
full of all Indebtedness and a completed performance by Company with respect to
its other obligations under this Agreement, (ii) evidence that the commitment of
Wells Fargo to make Advances under the Line of Credit or under any other
facility with Company has been terminated, (iii) a release of all claims against
Wells Fargo by Company relating to Wells Fargo’s performance and obligations
under the Loan Documents, and (iv) an agreement by Company, any Guarantor, and
any new lender to Company to indemnify Wells Fargo for any payments received by
Wells Fargo that are applied to the Indebtedness as a final payoff that may
subsequently be returned or otherwise not paid for any reason.

 

2.7                              Setoff. Wells Fargo may at any time, in its
sole discretion and without demand or notice to anyone, setoff any liability
owed to Company by Wells Fargo against any Indebtedness, whether or not due.

 

2.8                              Collateral Related Matters. This Agreement does
not contemplate a sale of Accounts or chattel paper, and, as provided by law,
Company is entitled to any surplus and shall remain liable for any deficiency.
Wells Fargo’s duty of care with respect to Collateral in its possession (as
imposed by law) will be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third Person, exercises reasonable care in
the selection of the bailee or third Person, and Wells Fargo need not otherwise
preserve, protect, insure or care for such Collateral. Wells Fargo shall not be
obligated to preserve rights Company may have against prior parties, to
liquidate the Collateral at all or in any particular manner or order or apply
the Proceeds of the Collateral in any particular order of application. Wells
Fargo has no obligation to clean-up or prepare Collateral for sale. Company
waives any right it may have to require Wells Fargo to pursue any third Person
for any of the Indebtedness.

 

2.9                              Notices Regarding Disposition of Collateral. If
notice to Company of any intended disposition of Collateral or any other
intended action is required by applicable law in a particular situation, such
notice will be deemed commercially reasonable if given in the manner specified
in Section 7.4 at least ten calendar days before the date of intended
disposition or other action.

 

3.                                      CONDITIONS PRECEDENT

 

3.1                               Conditions Precedent to Initial Advance. Wells
Fargo’s obligation to make the initial Advance shall be subject to the condition
that Wells Fargo shall have received this Agreement and each of the Loan
Documents, and any document, agreement, or other item described in or related to
this Agreement, and all fees and information described in Exhibit C, executed
and in form and content satisfactory to Wells Fargo.

 

12

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3.2                              Additional Conditions Precedent to All
Advances. Wells Fargo’s obligation to make any Advance (including the initial
Advance) shall be subject to the further additional conditions: (a) that the
representations and warranties described in Exhibit D are correct on the date of
the Advance, except to the extent that such representations and warranties
relate solely to an earlier date; and (b) that no event has occurred and is
continuing, or would result from the requested Advance that would result in an
Event of Default.

 

4.                                      REPRESENTATIONS AND WARRANTIES

 

To induce Wells Fargo to enter into this Agreement, Company makes the
representations and warranties described in Exhibit D. Any request for an
Advance will be deemed a representation by Company that all representations and
warranties described in Exhibit D are true, correct, and complete as of the time
of the request, unless they relate exclusively to an earlier date. Company shall
promptly deliver a Record notifying Wells Fargo of any change in circumstance
that would affect the accuracy of any representation or warranty, unless the
representation and warranty specifically relates to an earlier date.

 

5.                                       COVENANTS

 

So long as the Indebtedness remains unpaid, or the Line of Credit has not been
terminated, Company shall comply with each of the following covenants, unless
Wells Fargo shall consent otherwise in an Authenticated Record delivered to
Company.

 

5.1                              Reporting Requirements. Company shall deliver
to Wells Fargo the following information, compiled where applicable using GAAP
consistently applied, in form and content acceptable to Wells Fargo:

 

(a)                                 Annual Financial Statements. As soon as
available and in any event within ninety (90) days after Company’s fiscal year
end, Company’s audited financial statements prepared by an independent certified
public accountant acceptable to Wells Fargo, which shall include Company’s
balance sheet, income statement, and statement of retained earnings and cash
flows prepared, if requested by Wells Fargo, on a consolidated and consolidating
basis to include Company’s Subsidiaries. The annual financial statements shall
be accompanied by a certificate (the “Compliance Certificate”) in the form of
Exhibit E that is signed by Company’s chief financial officer. Each Compliance
Certificate that accompanies an annual financial statement shall also be
accompanied by (i) copies of all management letters prepared by Company’s
accountants; and (ii) a report signed by the accountant stating that in making
the investigations necessary to render the opinion, the accountant obtained no
knowledge, except as specifically stated, of any Event of Default under the
Agreement, and a detailed statement, including computations, demonstrating
whether or not Company is in compliance with the financial covenants of this
Agreement.

 

(b)                                10-Q Financial Reports. As soon as available
and in any event within forty-five (45) days after the end of each fiscal
quarter of Company, Company’s 10-Q financial reports filed with the Securities
and Exchange Commission. This requirement may be satisfied by Company by posting
a link to the filing on the Company’s publicly-accessible website.

 

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(c)                                 Monthly Financial Statements. As soon as
available and in any event within thirty (30) days after the end of each month,
a Company prepared balance sheet, income statement, and statement of retained
earnings prepared for that month and for the year-to-date period then ended,
prepared, if requested by Wells Fargo, on a consolidated and consolidating basis
to include Company’s Subsidiaries, and stating in comparative form the figures
for the corresponding date and periods in the prior fiscal year, subject to
year-end adjustments. The financial statements shall be accompanied by a
Compliance Certificate in the form of Exhibit E that is signed by Company’s
chief financial officer.

 

(d)                                Collateral Reports. No later than 20 days
after each month end (or more frequently if Wells Fargo shall request it),
(i) detailed agings of Company’s accounts receivable and accounts payable, an
accounts receivable reconciliation report and a calculation of Company’s
Accounts, including an accounts receivable ineligibility report, Eligible
Accounts, Inventory and Eligible Inventory as of the end of that month or
shorter time period requested by Wells Fargo, and (ii) Company shall deliver to
Wells Fargo a current Borrowing Base Certificate for Ex-Im Bank Guaranteed Line,
the form of which is attached hereto as Exhibit G.

 

(e)                                Projections. No later than sixty (60) days
prior to each fiscal year end, Company’s projected balance sheet and income
statement and statement of retained earnings and cash flows for each month of
the next fiscal year, certified as accurate by Company’s chief financial officer
and accompanied by a statement of assumptions and supporting schedules and
information. Wells Fargo acknowledges that such projections are estimates only
and not promises of performance.

 

(f)                                  Supplemental Reports. Weekly, or more
frequently if Wells Fargo requests, Wells Fargo’s standard form of “daily
collateral report”, together with receivables schedules, collection reports,
credit memos, sales reports, adjustments to accounts receivable and copies of
invoices in excess of $100,000, shipment documents and delivery receipts for
goods sold to account debtors in excess of $100,000.

 

(g)                               Customer Lists. On January 1 and July 1 of
each calendar year, an updated customer listing (with contact names and
addresses).

 

(h)                               Litigation. No later than three (3) Business
Days after discovery, a Record notifying Wells Fargo of any litigation or other
proceeding before any court or governmental agency which seeks a monetary
recovery against Company in excess of $100,000.

 

(i)                                   Intellectual Property. (i) No later than
30 Business Days after it acquires material Intellectual Property Rights, a
Record notifying Wells Fargo of Company’s acquisition of such rights;
(ii) except for transfers permitted under Section 5.17, no later than 15
Business Days before it disposes of material Intellectual Property Rights, a
Record notifying Wells Fargo of Company’s intention to dispose of such rights,
along with copies of all proposed documents and agreements concerning the
disposal of such rights as requested by Wells Fargo; (iii) promptly upon
discovery, a Record notifying Wells Fargo of (A) any Infringement of Company’s
Intellectual Property Rights by any Person, (B) claims that Company is
Infringing another Person’s Intellectual Property Rights and (C) any threatened
cancellation, termination or

 

14

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material limitation of Company’s Intellectual Property Rights; and (iv) promptly
upon receipt, copies of all registrations and filings with respect to Company’s
Intellectual Property Rights.

 

(j)                                   Defaults. No later than three days after
learning of the probable occurrence of any Event of Default, a Record notifying
Wells Fargo of the Event of Default and the steps being taken by Company to cure
the Event of Default.

 

(k)                                 Disputes. Promptly upon discovery, a Record
notifying Wells Fargo of (i) any disputes or claims by Company’s customers
exceeding $20,000 individually or $75,000 in the aggregate during any fiscal
year; (ii) credit memos not previously reported in Section 5.l(f); and (iii) any
goods returned to or recovered by Company outside of the ordinary course of
business or in the ordinary course of business but with a value in an amount in
excess of $50,000.

 

(1)                                 Changes in Officers and Directors. Promptly
following occurrence, a Record notifying Wells Fargo of any change in the
persons constituting Company’s Officers and Directors.

 

(m)                              Collateral. Promptly upon discovery, a Record
notifying Wells Fargo of any loss of or material damage to any Collateral having
a fair market value, individually or in the aggregate, of $50,000 or more, or of
any substantial adverse change in (i) any Collateral having a fair market value,
individually or in the aggregate, of $50,000 or more, or (ii) the prospect of
such Collateral’s payment.

 

(n)                                Commercial Tort Claims. Promptly upon
discovery, a Record notifying Wells Fargo of any commercial tort claims in
excess of $50,000 individually or $100,000 in the aggregate brought by Company
against any Person, including the name and address of each defendant, a summary
of the facts, an estimate of Company’s damages, copies of any complaint or
demand letter submitted by Company, and such other information as Wells Fargo
may reasonably request.

 

(o)                                Reports to Owners. Promptly upon
distribution, copies of all financial statements, reports and proxy statements
which Company shall have sent to its Owners. This requirement may be satisfied
by Company by posting a link to the filings attaching such documents on the
Company’s publicly-accessible website.

 

(p)                                Tax Returns of Company. No later than 15
Business Days after they are required to be filed, copies of Company’s signed
and dated state and federal income tax returns and all related schedules, and
copies of any extension requests.

 

(q)                                Violations of Law. No later than three
(3) Business Days after discovery of any violation, a Record notifying Wells
Fargo of Company’s violation of any law, rule or regulation, the non-compliance
with which could have a Material Adverse Effect on Company.

 

(r)                                   Pension Plans. (i) Promptly upon
discovery, and in any event within 30 days after Company knows or has reason to
know that any Reportable Event with respect to any Pension Plan has occurred, a
Record authenticated by Company’s chief financial officer notifying Wells Fargo
of the Reportable Event in detail and the actions which Company proposes

 

15

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to take to correct the deficiency, together with a copy of any related notice
sent to the Pension Benefit Guaranty Corporation; (ii) promptly upon discovery,
and in any event within 10 days after Company fails to make a required quarterly
Pension Plan contribution under Section 412(m) of the IRC, a Record
authenticated by Company’s chief financial officer notifying Wells Fargo of the
failure in detail and the actions that Company will take to cure the failure,
together with a copy of any related notice sent to the Pension Benefit Guaranty
Corporation; and (iii) promptly upon discovery, and in any event within 10 days
after Company knows or has reason to know that it may be liable or may be
reasonably expected to have liability for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan under Sections 4201
or 4243 of ERISA, a Record authenticated by Company’s chief financial officer
notifying Wells Fargo of the details of the event and the actions that Company
proposes to take in response.

 

(s)                                 Other Reports. From time to time, with
reasonable promptness, all customer lists, receivables schedules, inventory
reports, collection reports, deposit records, equipment schedules, invoices to
account debtors, shipment documents and delivery receipts for goods sold, and
such other materials, reports, records or information as Wells Fargo may
request.

 

5.2                              Financial Covenants. Company agrees to comply
with the financial covenants described below, which shall be calculated using
GAAP consistently applied, except as they may be otherwise modified by the
following capitalized definitions:

 

(a)                                 Minimum Book Net Worth. Company shall
maintain a Book Net Worth, determined as of the following test dates, in an
amount not less than the amount set forth for each such test date (numbers
appearing between “< >” are negative):

 

Test Date

 

Minimum Book Net Worth

 

December 31,2008

 

$

61,000,000

 

January 31, 2009

 

$

57,000,000

 

February 28, 2009

 

$

52,700,000

 

March 31,2009

 

$

51,000,000

 

April 30, 2009

 

$

48,150,000

 

May 31, 2009

 

$

45,300,000

 

June 30,2009

 

$

46,000,000

 

July 31, 2009

 

$

43,900,000

 

August 31, 2009

 

$

41,300,000

 

September 30,2009

 

$

44,450,000

 

October 31,2009

 

$

42,100,000

 

November 30, 2009

 

$

39,850,000

 

December 31,2009

 

$

44,600,000

 

January 31, 2010

 

$

42,250,000

 

February 28, 2010

 

$

40,000,000

 

March 31, 2010

 

$

45,150,000

 

 

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(b)                                 Minimum Net Income. Company shall achieve
Net Income, measured on each of the following test dates described below, for
the quarter period ending on each such test date, Net Income of not less than
the amount set forth opposite each such test date (numbers appearing between “<
>” are negative):

 

Test Date

 

Minimum Net Income

 

December 31, 2008

 

$

<10,800,000>

 

March 31, 2009

 

$

<11,000,000>

 

June 30, 2009

 

$

<5,750,000>

 

September 30, 2009

 

$

<3,200,000>

 

December 31, 2009

 

$

<1,000,000>

 

March 31, 2010

 

$

<500,000>

 

 

(c)                                 Minimum Cash to Unreimbursed Line of Credit
Advances Coverage Ratio. At all times, the sum of the outstanding “Advances”
plus the “L/C Amount” under the Domestic Facility Agreement plus the outstanding
“Advances” under the Revolving Notes shall not exceed eighty percent (80%) of
cash and Cash Equivalents of Company in which Wells Fargo has a perfected first
priority security interest. Compliance with the foregoing covenant shall be
reported as Wells Fargo shall request from time to time in its sole discretion.

 

(d)                                Capital Expenditures. Company shall not incur
or contract to incur Capital Expenditures of more than (i) $7,500,000 in the
aggregate during Company’s fiscal year ending March 31, 2009, (ii) $10,000,000
in the aggregate during Company’s fiscal year ending March 31, 2010, and
(iii) zero for each subsequent year until Company and Wells Fargo agree on
limits on Capital Expenditures for subsequent periods based on Company’s
projections for such periods.

 

5.3                              Other Liens and Permitted Liens.

 

(a)                                 Other Liens; Permitted Liens. Company shall
not create, incur or suffer to exist any Lien upon any of its assets, now owned
or later acquired, as security for any indebtedness, with the exception of the
following (each a “Permitted Lien”; collectively, “Permitted Liens”): (i) In the
case of real property, covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with Company’s
business or operations as presently conducted; (ii) Liens in existence on the
date of this Agreement that are described in Exhibit F and secure indebtedness
for borrowed money permitted under Section 5.3(b) (iii) The Security Interest
and Liens created by the Security Documents; (iv) Purchase money Liens relating
to the acquisition of Equipment not exceeding the lesser of cost or fair market
value, not exceeding $3,000,000 for any one purchase or $7,000,000 in the
aggregate during the fiscal year ending March 31, 2009, and $10,000,000 in the
aggregate during the fiscal year ending March 31, 2010, and so long as no
Default Period is then in existence and none would exist because of any such
acquisition; (v) liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Company, in conformity with GAAP;
(vi) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other
like liens arising in the ordinary course of business that are being contested
in good faith by appropriate proceedings;

 

17

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(vii) pledges or deposits in connection with workers’ compensation, unemployment
insurance and other social security legislation; (viii) deposits to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of business;
(ix) liens securing Indebtedness of Company incurred to finance capital
expenditures otherwise permitted hereunder (and, without limitation, subject to
Section 5.2(d) of this Agreement), provided that (a) such liens shall be created
concurrently or within 90 Business Days after the acquisition of the property
being financed, (b) such liens do not at any time encumber any property other
than the property financed by such Indebtedness, and (c) Indebtedness secured by
such liens does not cause or result in an Event of Default; (x) any interest or
title of a lessor under any lease entered into by the Company or any other
Subsidiary in the ordinary course of its business and covering only the assets
so leased; and (xi) liens that are junior in priority to Wells Fargo’s liens on
the Collateral that arise from judgments and attachments in connection with
court proceedings provided that the attachment or enforcement of such liens
would not result in an Event of Default hereunder and such liens are being
contested in good faith by appropriate proceedings, adequate reserves have been
set aside and no material Collateral is subject to a material risk of loss or
forfeiture and the claims in respect of such liens are fully covered by
insurance (subject to ordinary and customary deductibles) and a stay of
execution pending appeal or proceeding for review is in effect.

 

(b)                                Financing Statements. Company shall not
authorize the filing of any financing statement by any Person as Secured Party
with respect to any of Company’s assets, other than (i) filings by Wells Fargo
and (ii) filings in connection with Permitted Liens. Company shall not amend any
financing statement filed by Wells Fargo as Secured Party except as permitted by
law.

 

5.4                              Indebtedness. Company shall not incur, create,
assume or permit to exist any indebtedness or liability on account of deposits
or letters of credit issued on Company’s behalf, or advances or any indebtedness
for borrowed money of any kind, whether or not evidenced by an instrument,
except: (a) Indebtedness described in this Agreement and the Ex-Im Credit
Agreement; (b) indebtedness of Company described in Exhibit F, and extensions
and refinancings thereof (so long as the principal amount thereof is not
increased, the maturity date is not shortened, the average life is not
shortened, no additional mandatory prepayments or sinking fund payments are
required and the cash payment portion of the interest due on any such
Indebtedness is not increased); (c) indebtedness secured by Permitted Liens;
(d) Indebtedness constitution guaranties permitted by Section 5.5 hereof; and
(e) Indebtedness constituting Subordinated Debt not to exceed $7,500,000 in the
aggregate outstanding at any time.

 

5.5                              Guaranties. Company shall not assume,
guarantee, endorse or otherwise become directly or contingently liable for the
obligations of any Person (collectively, “Guarantee Obligations”), except:
(a) the endorsement of negotiable instruments by Company for deposit or
collection or similar transactions in the ordinary course of business;
(b) guaranties, endorsements and other direct or contingent liabilities in
connection with the obligations of other Persons in existence on the date of
this Agreement and described in Exhibit F; (c) Guarantee Obligations in respect
of performance bonds, surety bonds, appeal bonds or custom bonds required in the
ordinary course of business or in connection with the enforcement of rights or
claims of Company or in connection with judgments that do not result in an Event
of Default; and

 

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(d) Guarantee Obligations in the form of endorsements in the ordinary course of
business of negotiable instruments for deposit or collection.

 

5.6                              Investments and Subsidiaries. Company shall not
make or permit to exist any loans or advances to, or make any investment or
acquire any interest whatsoever in, any Person or Affiliate, including any
partnership or joint venture, nor purchase or hold beneficially any stock or
other securities or evidence of indebtedness of any Person or Affiliate, except:

 

(a)                                 Investments in direct obligations of the
United States of America or any of its political subdivisions whose obligations
constitute the full faith and credit obligations of the United States of America
and have a maturity of one year or less, commercial paper issued by U.S.
corporations rated “A-1” or “A-2” by Standard & Poor’s Ratings Services or “P-1”
or “P-2” by Moody’s Investors Service or certificates of deposit or bankers’
acceptances having a maturity of one year or less issued by members of the
Federal Reserve System having deposits in excess of $100,000,000 (which
certificates of deposit or bankers’ acceptances are fully insured by the Federal
Deposit Insurance Corporation);

 

(b)                                Travel advances or loans to Company’s
Officers and employees not exceeding at any one time an aggregate of $25,000;

 

(c)                                 Prepaid rent not exceeding one month or
security deposits; and

 

(d)                                Current investments in those Subsidiaries in
existence on the date of this Agreement which are identified on Exhibit D.

 

5.7                              Dividends and Distributions. Company shall not
declare or pay any dividends (other than dividends payable solely in stock of
Company) on any class of its stock, or make any payment on account of the
purchase, redemption or retirement of any shares of its stock, or other
securities or evidence of its indebtedness or make any distribution regarding
its stock, either directly or indirectly.

 

5.8                              Salaries. [INTENTIONALLY OMITTED].

 

5.9                              Books and Records; Collateral Examination;
Inspection and Appraisals.

 

(a)                                 Books and Records; Inspection. Company shall
keep complete and accurate books and records with respect to the Collateral and
Company’s business and financial condition and any other matters that Wells
Fargo may reasonably request, in accordance with GAAP. Company shall permit any
employee, attorney, accountant or other agent of Wells Fargo to audit, review,
make extracts from and copy any of its books and records at any time during
ordinary business hours, and to discuss Company’s affairs with any of its
Directors, Officers, employees, Owners or agents.

 

(b)                               Authorization to Company’s Agents to Make
Disclosures to Wells Fargo. Company authorizes all accountants and other Persons
acting as its agent to disclose and deliver to Wells Fargo’s employees,
accountants, attorneys and other Persons acting as its agent, at Company’s
expense, all financial information, books and records, work papers, management
reports and other information in their possession regarding Company.

 

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(c)                                 Collateral Exams and Inspections. Company
shall permit Wells Fargo’s employees, accountants, attorneys or other Persons
acting as its agent, to examine and inspect any Collateral or any other property
of Company at any time during ordinary business hours.

 

(d)                                Collateral Appraisals. Wells Fargo may also
obtain, from time to time, at Company’s expense, an appraisal of Company’s
Collateral, by an appraiser acceptable to Wells Fargo in its sole discretion.

 

5.10                        Account Verification; Payment of Permitted Liens.

 

(a)                                  Account Verification. Wells Fargo or its
agents may (i) contact account debtors and other obligors at any time to verify
Company’s Accounts; and (ii) require Company to send requests for verification
of Accounts or send notices of assignment of Accounts to account debtors and
other obligors.

 

(b)                                Covenant to Pay Permitted Liens. Company
shall pay when due, subject to applicable cure periods, each account payable due
to any Person holding a Permitted Lien (as a result of such payable) on any
Collateral.

 

5.11                        Compliance with Laws.

 

(a)                                  General Compliance with Applicable Law; Use
of Collateral. Company shall (i) comply, and cause each Subsidiary to comply,
with the requirements of applicable laws and regulations, the non-compliance
with which would have a Material Adverse Effect on its business or its financial
condition and (ii) use and keep the Collateral, and require that others use and
keep the Collateral, only for lawful purposes, without violation of any federal,
state or local law, statute or ordinance.

 

(b)                                 Compliance with Federal Regulatory Laws.
Company shall (i) prohibit, and cause each Subsidiary to prohibit, any Person
that is an Owner or Officer from being listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained by the
Office of Foreign Assets Control (“OFAC”), the Department of the Treasury or
included in any Executive Orders, (ii) not permit the proceeds of the Line of
Credit or any other financial accommodation extended by Wells Fargo to be used
in any way that violates any foreign asset control regulations of OFAC or other
applicable law, (iii) comply, and cause each Subsidiary to comply, with all
applicable Bank Secrecy Act laws and regulations, as amended from time to time,
and (iv) otherwise comply with the USA Patriot Act and Wells Fargo’s related
policies and procedures.

 

(c)                                Compliance with Environmental Laws. Company
shall (i) comply, and cause each Subsidiary to comply, with the requirements of
applicable Environmental Laws and obtain and comply with all permits, licenses
and similar approvals required by them, and (ii) not generate, use, transport,
treat, store or dispose of any Hazardous Substances in such a manner as to
create any material liability or obligation under the common law of any
jurisdiction or any Environmental Law.

 

5.12                       Payment of Taxes and Other Claims. Company shall pay
or discharge, when due, and cause each Subsidiary to pay or discharge, when due,
(a) all taxes, assessments and

 

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governmental charges levied or imposed upon it or upon its income or profits,
upon any properties belonging to it (including the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior
to the date on which penalties attach, (b) all federal, state and local taxes
required to be withheld by it, and (c) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a Lien upon any properties of
Company, although Company shall not be required to pay any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith by appropriate proceedings and for which proper reserves have been
made.

 

5.13                        Maintenance of Collateral and Properties.

 

(a)                                  Company shall keep and maintain the
Collateral and all of its other properties necessary or useful in its business
in good condition, repair and working order (normal wear and tear excepted) and
will from time to time replace or repair any worn, defective or broken parts,
although Company may discontinue the operation and maintenance of any properties
if Company believes that such discontinuance is desirable to the conduct of its
business and not disadvantageous in any material respect to Wells Fargo. Company
shall take all commercially reasonable steps necessary to protect and maintain
its Intellectual Property Rights.

 

(b)                               Company shall defend the Collateral against
all Liens, claims and demands of all third Persons claiming any interest in the
Collateral, other than Permitted Liens. Company shall keep all Collateral free
and clear of all Liens except Permitted Liens. Company shall take all
commercially reasonable steps necessary to prosecute any Person Infringing its
Intellectual Property Rights and to defend itself against any Person accusing it
of Infringing any Person’s Intellectual Property Rights.

 

5.14                       Insurance. Company shall at all times maintain
insurance with insurers acceptable to Wells Fargo, in such amounts and on such
terms (including deductibles) as Wells Fargo in its sole discretion may require
and including, as applicable and without limitation, business interruption
insurance (including force majeure coverage), hazard coverage on an “all risks”
basis for all tangible Collateral, and theft and physical damage coverage for
Collateral consisting of motor vehicles. All insurance policies must contain an
appropriate lender’s interest endorsement or clause, and name Wells Fargo as an
additional insured.

 

5.15                      Preservation of Existence. Company shall preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.

 

5.16                      Delivery of Instruments, etc. Upon request by Wells
Fargo, Company shall promptly deliver to Wells Fargo in pledge all instruments,
documents and chattel paper in excess of $50,000 individually and $75,000 in the
aggregate and constituting Collateral, endorsed or assigned by Company.

 

5.17                      Sale or Transfer of Assets; Suspension of Business
Operations. Company shall not sell, lease, assign, transfer or otherwise dispose
of (a) the stock of any Subsidiary, (b) all or a substantial part of its assets,
or (c) any Collateral or any interest in Collateral (whether in one transaction
or in a series of transactions) to any other Person other than the sale of

 

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Inventory in the ordinary course of business, the disposition of Collateral no
longer useful in its business, and other Collateral having a fair market value
not in excess of $100,000 in the aggregate for each fiscal year and shall not
liquidate, dissolve or suspend business operations. Company shall not transfer
any part of its ownership interest in any Intellectual Property Rights and shall
not permit its rights as licensee of Licensed Intellectual Property to lapse,
except that Company may transfer such rights or permit them to lapse if it has
reasonably determined that such Intellectual Property Rights are no longer
useful in its business. If Company transfers any Intellectual Property Rights
for value, Company shall pay the Proceeds to Wells Fargo for application to the
Indebtedness. Company shall not license any other Person to use any of Company’s
Intellectual Property Rights, except that Company may grant licenses in the
ordinary course of its business in connection with sales of Inventory or the
provision of services to its customers.

 

5.18                       Consolidation and Merger; Asset Acquisitions. Company
shall not consolidate with or merge into any other entity, or permit any other
entity to merge into it, or acquire (in a transaction analogous in purpose or
effect to a consolidation or merger) all or substantially all of the assets of
any other entity.

 

5.19                       Sale and Leaseback. Company shall not enter into any
arrangement, directly or indirectly, with any other Person pursuant to which
Company shall sell or transfer any real or personal property, whether owned now
or acquired in the future, and then rent or lease all or part of such property
or any other property which Company intends to use for substantially the same
purpose or purposes as the property being sold or transferred.

 

5.20                       Restrictions on Nature of Business. Company will not
engage in any line of business materially different from that presently engaged
in by Company, and will not purchase, lease or otherwise acquire assets not
related to its business.

 

5.21                       Accounting. Company will not adopt any material
change in accounting principles except as required by GAAP, consistently
applied. Company will not change its fiscal year.

 

5.22                       Discounts, etc. During a Default Period and after
notice from Wells Fargo, (i) Company will not grant any discount, credit or
allowance to any customer of Company or accept any return of goods sold, and
(ii) Company will not modify, amend, subordinate, cancel or terminate any
Account.

 

5.23                      Pension Plans. Except as disclosed to Wells Fargo in a
Record prior to the date of this Agreement, neither Company nor any ERISA
Affiliate will (a) adopt, create, assume or become party to any Pension Plan,
(b) become obligated to contribute to any Multiemployer Plan, (c) incur any
obligation to provide post-retirement medical or insurance benefits with respect
to employees or former employees (other than benefits required by law) or
(d) amend any Plan in a manner that would materially increase its funding
obligations.

 

5.24                       Place of Business; Name. Company will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business Premises without providing 30 days advance written
notice to Wells Fargo. Company will not permit any tangible

 

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Collateral or any records relating to the Collateral to be located in any state
or area in which, in the event of such location, a financing statement covering
such Collateral would be required to be, but has not in fact been, filed in
order to perfect the Security Interest. Company will not change its name or
jurisdiction of organization.

 

5.25                       Constituent Documents. Company will not amend its
Constituent Documents in any manner that is materially adverse to Wells Fargo
(as determined by Wells Fargo in Wells Fargo’s reasonable discretion). No later
than 10 days after any change to Company’s Constituent Documents, Company shall
(i) notify Wells Fargo in writing of such change, and (ii) provide copies of
such changes to Wells Fargo.

 

5.26                        Performance by Wells Fargo. If Company fails to
perform or observe any of its obligations under this Agreement at any time,
Wells Fargo may, but need not, perform or observe them on behalf of Company and
may, but need not, take any other actions which Wells Fargo may reasonably deem
necessary to cure or correct this failure; and Company shall pay Wells Fargo
upon demand the amount of all costs and expenses (including reasonable
attorneys’ fees and legal expense) incurred by Wells Fargo in performing these
obligations, together with interest on these amounts at the Default Rate.

 

5.27                       Wells Fargo Appointed as Company’s Attorney in Fact.
To facilitate Wells Fargo’s performance or observance of Company’s obligations
under this Agreement, Company hereby irrevocably appoints Wells Fargo and Wells
Fargo’s agents, as Company’s attorney in fact (which appointment is coupled with
an interest) with the right (but not the duty) to create, prepare, complete,
execute, deliver, endorse or file on behalf of Company any instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and any other agreements or any Record required to be obtained,
executed, delivered or endorsed by Company in accordance with the terms of this
Agreement.

 

6.                                      EVENTS OF DEFAULT AND REMEDIES

 

6.1                               Events of Default. An “Event of Default” means
any of the following:

 

(a)                                 Company fails to pay any the amount of any
Indebtedness on the date that it becomes due and payable;

 

(b)                                Company fails to observe or perform any
covenant or agreement of Company set forth in this Agreement, or in any of the
Loan Documents, or in any other document or agreement described in or related to
this Agreement or to any Indebtedness, or any covenant in Section 5.2 becomes
inapplicable due to the lapse of time, and Company and Wells Fargo fail to come
to an agreement, acceptable to Wells Fargo in its sole discretion, to amend the
covenant to apply to future periods;

 

(c)                                 An Overadvance arises as the result of any
reduction in the Borrowing Base, or arises in any manner or on terms not
otherwise approved of in advance by Wells Fargo in a Record that it has
Authenticated;

 

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(d)                                An event of default or termination event
(however defined) occurs under any swap, derivative, foreign exchange, hedge or
any similar transaction or arrangement entered into between Company and Wells
Fargo;

 

(e)                                 A Change of Control or Material Adverse
Effect shall occur;

 

(f)                                   Company or any Guarantor becomes insolvent
or admits in a Record an inability to pay debts as they mature, or Company or
any Guarantor makes an assignment for the benefit of creditors; or Company or
any Guarantor applies for or consents to the appointment of any receiver,
trustee, or similar officer for the benefit of Company or any Guarantor, or for
any of their properties; or any receiver, trustee or similar officer is
appointed without the application or consent of Company or such Guarantor; or
any judgment, writ, warrant of attachment or execution or similar process is
issued or levied against a substantial part of the property of Company or any
Guarantor;

 

(g)                                Company or any Guarantor files a petition
under any chapter of the United States Bankruptcy Code or under the laws of any
other jurisdiction naming Company or such Guarantor as debtor; or any such
petition is instituted against Company or any such Guarantor; or Company or any
Guarantor institutes (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency, reorganization, debt arrangement, dissolution,
liquidation or similar proceeding under the laws of any jurisdiction; or any
such proceeding is instituted (by petition, application or otherwise) against
Company or any such Guarantor;

 

(h)                                Any representation or warranty made by
Company in this Agreement or by any Guarantor in any Guaranty, or by Company (or
any of its Officers) or any Guarantor in any agreement, certificate, instrument
or financial statement or other statement delivered to Wells Fargo in connection
with this Agreement or pursuant to such Guaranty is untrue or misleading in any
material respect when delivered to Wells Fargo;

 

(i)                                    A final, non-appealable arbitration
award, judgment, or decree or order for the payment of money in an amount in
excess of $50,000 which is not insured or subject to indemnity, is entered
against Company which is not immediately stayed or appealed;

 

(j)                                    Company is in default with respect to any
bond, debenture, note or other evidence of material indebtedness issued by
Company that is held by any third Person other than Wells Fargo, or under any
instrument under which any such evidence of indebtedness has been issued or by
which it is governed, or under any material lease or other contract, and the
applicable grace period, if any, has expired, regardless of whether such default
has been waived by the holder of such indebtedness;

 

(k)                                 Company liquidates, dissolves, terminates or
suspends its business operations or otherwise fails to operate its business in
the ordinary course, or merges with another Person; or sells or attempts to sell
all or substantially all of its assets;

 

(l)                                    Company fails to pay any indebtedness or
obligation owed to Wells Fargo which is unrelated to the Line of Credit or this
Agreement as it becomes due and payable;

 

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(m)                              Any Guarantor repudiates or purports to revoke
the Guarantor’s Guaranty, or fails to perform any obligation under such
Guaranty, or any individual Guarantor dies or becomes incapacitated, or any
other Guarantor ceases to exist for any reason;

 

(n)                                Company engages in any act prohibited by any
Subordination Agreement, or makes any payment on Subordinated Indebtedness (as
defined in the Subordination Agreement) that the Subordinated Creditor was not
contractually entitled to receive;

 

(o)                                Any event or circumstance occurs that Wells
Fargo in good faith believes may impair the prospect of payment of all or part
of the Indebtedness, or Company’s ability to perform any of its material
obligations under any of the Loan Documents, or any other document or agreement
described in or related to this Agreement, or there occurs any material adverse
change in the business or financial condition of Company;

 

(p)                                (i) Company hires an Officer or appoints a
Director who has been convicted of any felony offense under state or federal
law, or (ii) any Director, Officer, or Designated Person is indicted for a
felony offence under state or federal law if, with respect to this clause (ii),
(x) such indictment has not been dismissed within 15 days of the indictment of
such Director, Officer, or Designated Person, or (y) such Director, Officer, or
Designated Person has not been relieved of his or her duties as a Director,
Officer, or Designated Officer, as applicable, within 15 days of such
indictment;

 

(q)                                Any Reportable Event, which Wells Fargo in
good faith believes to constitute sufficient grounds for termination of any
Pension Plan or for the appointment of a trustee to administer any Pension Plan,
has occurred and is continuing 30 days after Company gives Wells Fargo a Record
notifying it of the Reportable Event; or a trustee is appointed by an
appropriate court to administer any Pension Plan; or the Pension Benefit
Guaranty Corporation institutes proceedings to terminate or appoint a trustee to
administer any Pension Plan; or Company or any ERISA Affiliate files for a
distress termination of any Pension Plan under Title IV of ERISA; or Company or
any ERISA Affiliate fails to make any quarterly Pension Plan contribution
required under Section 412 (m) of the IRC, which Wells Fargo in good faith
believes may, either by itself or in combination with other failures, result in
the imposition of a Lien on Company’s assets in favor of the Pension Plan; or
any withdrawal, partial withdrawal, reorganization or other event occurs with
respect to a Multiemployer Plan which could reasonably be expected to result in
a material liability by Company to the Multiemployer Plan under Title IV of
ERISA; or

 

(r)                                   Any “Event of Default” occurs under any of
the Domestic Loan Documents.

 

6.2                               Rights and Remedies. During any Default
Period, Wells Fargo may in its discretion exercise any or all of the following
rights and remedies:

 

(a)                                  Wells Fargo may terminate the Line of
Credit and decline to make Advances, and terminate any services extended to
Company under the Master Agreement for Treasury Management Services;

 

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(b)                                Wells Fargo may declare the Indebtedness to
be immediately due and payable and accelerate payment of the Revolving Notes,
and all Indebtedness shall immediately become due and payable, without
presentment, notice of dishonor, protest or further notice of any kind, all of
which Company hereby expressly waives;

 

(c)                                 Wells Fargo may, without notice to Company,
apply any money owing by Wells Fargo to Company to payment of the Indebtedness;

 

(d)                                Wells Fargo may exercise and enforce any
rights and remedies available upon default to a secured party under the UCC,
including the right to take possession of Collateral, proceeding with or without
judicial process (without a prior hearing or notice of hearing, which Company
hereby expressly waives) and sell, lease or otherwise dispose of Collateral for
cash or on credit (with or without giving warranties as to condition, fitness,
merchantability or title to Collateral, and in the event of a credit sale,
Indebtedness shall be reduced only to the extent that payments are actually
received), and Company will upon Wells Fargo’s demand assemble the Collateral
and make it available to Wells Fargo at any place designated by Wells Fargo
which is reasonably convenient to both parties;

 

(e)                                 Wells Fargo may exercise and enforce its
rights and remedies under any of the Loan Documents and any other document or
agreement described in or related to this Agreement;

 

(f)                                   Wells Fargo may for any reason apply for
the appointment of a receiver of the Collateral, to which appointment Company
hereby consents; and

 

(g)                                Wells Fargo may exercise any other rights and
remedies available to it by law or agreement.

 

6.3                              Immediate Default and Acceleration. Following
the occurrence of an Event of Default described in Section 6.1(f) or (g), the
Line of Credit shall immediately terminate and all of Company’s Indebtedness
shall immediately become due and payable without presentment, demand, protest or
notice of any kind.

 

7.                                      MISCELLANEOUS

 

7.1                               No Waiver; Cumulative Remedies. No delay or
any single or partial exercise by Wells Fargo of any right, power or remedy
under the Loan Documents, or under any other document or agreement described in
or related to this Agreement, shall constitute a waiver of any other right,
power or remedy under the Loan Documents or granted by Company to Wells Fargo
under other agreements or documents that are unrelated to the Loan Documents. No
notice to or demand on Company in any circumstance shall entitle Company to any
additional notice or demand in any other circumstances. The remedies provided in
the Loan Documents or in any other document or agreement described in or related
to this Agreement are cumulative and not exclusive of any remedies provided by
law. Wells Fargo may comply with applicable law in connection with a disposition
of Collateral, and such compliance will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.

 

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7.2                             Amendment; Consents and Waivers; Authentication.
No amendment or modification of any Loan Documents, or any other document or
agreement described in or related to this Agreement, or consent to or waiver of
any Event of Default, or consent to or waiver of the application of any covenant
or representation set forth in any of the Loan Documents, or any other document
or agreement described in or related to this Agreement, or any release of Wells
Fargo’s Security Interest in any Collateral, shall be effective unless it has
been agreed to by Wells Fargo and memorialized in a Record that:
(a) specifically states that it is intended to amend or modify specific Loan
Documents, or any other document or agreement described in or related to this
Agreement, or waive any Event of Default or the application of any covenant or
representation of any terms of specific Loan Documents, or any other document or
agreement described in or related to this Agreement, or is intended to release
Wells Fargo’s Security Interest in specific Collateral; and (b) is Authenticated
by the signature of an authorized employee of both parties, or by an authorized
employee of Wells Fargo with respect to a consent or waiver. The terms of an
amendment, consent or waiver memorialized in any Record shall be effective only
to the extent, and in the specific instance, and for the limited purpose to
which Wells Fargo has agreed.

 

7.3                             Execution in Counterparts; Delivery of
Counterparts. This Agreement and all other Loan Documents, or any other document
or agreement described in or related to this Agreement, and any amendment or
modification to them may be Authenticated by the parties in any number of
counterparts, each of which, once authenticated and delivered in accordance with
the terms of this Section 7.3, will be deemed an original, and all such
counterparts, taken together, shall constitute one and the same instrument.
Delivery by fax or by encrypted e-mail or e-mail file attachment of any
counterpart to any Loan Document Authenticated by an authorized signature will
be deemed the equivalent of the delivery of the original Authenticated
instrument. Company shall send the original Authenticated counterpart to Wells
Fargo by first class U.S. mail or by overnight courier, but Company’s failure to
deliver a Record in this form shall not affect the validity, enforceability, and
binding effect of this Agreement or the other Loan Documents, or any other
document or agreement described in or related to this Agreement.

 

7.4                              Notices, Requests, and Communications;
Confidentiality. Except as otherwise expressly provided in this Agreement:

 

(a)                                 Delivery of Notices, Requests and
Communications. Any notice, request, demand, or other communication by either
party that is required under the Loan Documents, or any other document or
agreement described in or related to this Agreement, to be in the form of a
Record (but excluding any Record containing information Company must report to
Wells Fargo under Section 5.1) may be delivered (i) in person, (ii) by first
class U.S. mail, (iii) by overnight courier of national reputation, or (iv) by
fax, or the Record may be sent as an Electronic Record and delivered (v) by an
encrypted e-mail, or (vi) through Wells Fargo’s Commercial Electronic Office®
(“CEO”) portal or other secure electronic channel to which the parties have
agreed.

 

(b)                                Addresses for Delivery. Delivery of any
Record under this Section 7.4 shall be made to the appropriate address set forth
on the last page of this Agreement (which either party may modify by a Record
sent to the other party), or through Wells Fargo’s CEO portal or other secure
electronic channel to which the parties have agreed.

 

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(c)                                Date of Receipt. Each Record sent pursuant to
the terms of this Section 7.4 will be deemed to have been received on (i) the
date of delivery if delivered in person, (ii) the date deposited in the mail if
sent by mail, (iii) the date delivered to the courier if sent by overnight
courier, (iv) the date of transmission if sent by fax, or (v) the date of
transmission, if sent as an Electronic Record by electronic mail or through
Wells Fargo’s CEO portal or similar secure electronic channel to which the
parties have agreed; except that any request for an Advance or any other notice,
request, demand or other communication from Company required under Section 1,
and any request for an accounting under Section 9-210 of the UCC, will not be
deemed to have been received until actual receipt by Wells Fargo on a Business
Day by an authorized employee of Wells Fargo.

 

(d)                                Confidentiality of Unencrypted E-mail.
Company acknowledges that if it sends or receives an Electronic Record to or
from Wells Fargo without encryption by e-mail or as an e-mail file attachment,
there is a risk that the Electronic Record may be received by unauthorized
Persons, and that by so doing it will be deemed to have accepted this risk and
the consequences of any such unauthorized disclosure.

 

7.5                              Company Information Reporting; Confidentiality.
Except as otherwise expressly provided in this Agreement:

 

(a)                                 Delivery of Company Information Records. Any
information that Company is required to deliver under Section 5.1 in the form of
a Record may be delivered to Wells Fargo (i) in person, or by (ii) first class
U.S. mail, (iii) overnight courier of national reputation, or (iv) fax, or the
Record may be sent as an Electronic Record (v) by encrypted e-mail, or
(vi) through the file upload service of Wells Fargo’s CEO portal or other secure
electronic channel to which the parties have agreed.

 

(b)                                Addresses for Delivery. Delivery of any
Record to Wells Fargo under this Section 7.5 shall be made to the appropriate
address set forth on the last page of this Agreement (which Wells Fargo may
modify by a Record sent to Company), or through Wells Fargo’s CEO portal or
other secure electronic channel to which the parties have agreed.

 

(c)                                 Date of Receipt. Each Record sent pursuant
to this Section will be deemed to have been received on (i) the date of delivery
to an authorized employee of Wells Fargo, if delivered in person, or by U.S.
mail, overnight courier, fax, or e-mail; or (ii) the date of transmission, if
sent as an Electronic Record through Wells Fargo’s CEO portal or similar secure
electronic channel to which the parties have agreed.

 

(d)                                Authentication of Company Information
Records. Company shall Authenticate any Record delivered (i) in person, or by
U.S. mail, overnight courier, or fax, by the signature of the Officer or
employee of Company who prepared the Record; (ii) as an Electronic Record sent
via encrypted e-mail, by the signature of the Officer or employee of Company who
prepared the Record by any file format signature that is acceptable to Wells
Fargo, or by a separate certification signed and sent by fax; or (iii) as an
Electronic Record via the file upload service of Wells Fargo’s CEO portal or
similar secure electronic channel to which the parties have agreed, through such
credentialing process as Wells Fargo and Company may agree to under the CEO
agreement.

 

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(e)                                 Certification of Company Information
Records. Any Record (including any Electronic Record) Authenticated and
delivered to Wells Fargo under this Section 7.5 will be deemed to have been
certified as materially true, correct, and complete by Company and each Officer
or employee of Company who prepared and Authenticated the Record on behalf of
Company, and may be legally relied upon by Wells Fargo without regard to method
of delivery or transmission.

 

(f)                                   Confidentiality of Company Information
Records Sent by Unencrypted E-mail. Company acknowledges that if it sends an
Electronic Record to Wells Fargo without encryption by e-mail or as an e-mail
file attachment, there is a risk that the Electronic Record may be received by
unauthorized Persons, and that by so doing it will be deemed to have accepted
this risk and the consequences of any such unauthorized disclosure. Company
acknowledges that it may deliver Electronic Records containing Company
information to Wells Fargo by e-mail pursuant to any encryption tool acceptable
to Wells Fargo and Company, or through Wells Fargo’s CEO portal file upload
service without risk of unauthorized disclosure.

 

7.6                              Further Documents. Company will from time to
time execute, deliver, endorse and authorize the filing of any instruments,
documents, conveyances, assignments, security agreements, financing statements,
control agreements and other agreements that Wells Fargo may reasonably request
in order to secure, protect, perfect or enforce the Security Interest or Wells
Fargo’s rights under the Loan Documents, or any other document or agreement
described in or related to this Agreement (but any failure to request or assure
that Company executes, delivers, endorses or authorizes the filing of any such
item shall not affect or impair the validity, sufficiency or enforceability of
the Loan Documents, or any other document or agreement described in or related
to this Agreement, and the Security Interest, regardless of whether any such
item was or was not executed, delivered or endorsed in a similar context or on a
prior occasion).

 

7.7                              Costs and Expenses. Company shall pay on demand
all costs and expenses, including reasonable attorneys’ fees, incurred by Wells
Fargo in connection with the Indebtedness, this Agreement, the Loan Documents,
or any other document or agreement described in or related to this Agreement,
and the transactions contemplated by this Agreement, including all such costs,
expenses and fees incurred in connection with the negotiation, preparation,
execution, delivery, amendment, administration, performance, collection and
enforcement of the Indebtedness and all such documents and agreements and the
creation, perfection, protection, satisfaction, foreclosure or enforcement of
the Security Interest.

 

7.8                              Indemnity. In addition to its obligation to pay
Wells Fargo’s expenses under the terms of this Agreement, Company shall
indemnify, defend and hold harmless Wells Fargo, its parent Wells Fargo &
Company, and any of its affiliates and successors, and all of their present and
future Officers, Directors, employees, attorneys and agents (each an
“Indemnitee”) from and against any of the following (collectively, “Indemnified
Liabilities”):

 

(a)                                 Any and all transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason of
the execution and delivery of the Loan Documents, or any other document or
agreement described in or related to this Agreement or the making of the
Advances;

 

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(b)                               Any claims, loss or damage to which any
Indemnitee may be subjected if any representation or warranty contained in
Exhibit D proves to be incorrect in any respect or as a result of any violation
of the covenants contained in Section 5.11; and

 

(c)                                Any and all other liabilities, losses,
damages, penalties, judgments, suits, claims, costs and expenses of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel)
in connection with this Agreement and any other investigative, administrative or
judicial proceedings, whether or not such Indemnitee shall be designated a party
to such proceedings, which may be imposed on, incurred by or asserted against
any such Indemnitee, in any manner related to or arising out of or in connection
with the making of the Advances and the Loan Documents, or any other document or
agreement described in or related to this Agreement, or the use or intended use
of the proceeds of the Advances, with the exception of any Indemnified Liability
caused by the gross negligence or willful misconduct of an Indemnitee.

 

If any investigative, judicial or administrative proceeding described in this
Section is brought against any Indemnitee, upon the Indemnitee’s request,
Company, or counsel designated by Company and satisfactory to the Indemnitee,
will resist and defend the action, suit or proceeding to the extent and in the
manner directed by the Indemnitee, at Company’s sole cost and expense. Each
Indemnitee will use its best efforts to cooperate in the defense of any such
action, suit or proceeding. If this agreement to indemnify is held to be
unenforceable because it violates any law or public policy, Company shall
nevertheless make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities to the extent permissible under applicable
law. Company’s obligations under this Section shall survive the termination of
this Agreement and the discharge of Company’s other obligations under this
Agreement.

 

7.9                             Retention of Company’s Records. Wells Fargo
shall have no obligation to maintain Electronic Records or retain any documents,
schedules, invoices, agings, or other Records delivered to Wells Fargo by
Company in connection with the Loan Documents, or any other document or
agreement described in or related to this Agreement for more than 30 days after
receipt by Wells Fargo. If there is a special need to retain specific Records,
Company must notify Wells Fargo of its need to retain or return such Records
with particularity, which notice must be delivered to Wells Fargo in accordance
with the terms of this Agreement at the time of the initial delivery of the
Record to Wells Fargo.

 

7.10                      Binding Effect; Assignment; Complete Agreement. The
Loan Documents, or any other document or agreement described in or related to
this Agreement, shall be binding upon and inure to the benefit of Company and
Wells Fargo and their respective successors and assigns, except that Company
shall not have the right to assign its rights under this Agreement or any
interest in this Agreement without Wells Fargo’s prior consent, which must be
confirmed in a Record Authenticated by Wells Fargo. To the extent permitted by
law, Company waives and will not assert against any assignee any claims,
defenses or set-offs which Company could assert against Wells Fargo. This
Agreement shall also bind all Persons who become a party to this Agreement as a
borrower. This Agreement, together with the Loan Documents, or any other
document or agreement described in or related to this Agreement, comprises the
complete and integrated agreement of the parties on the subject matter of this
Agreement and supersedes all prior agreements, whether oral or evidenced in a
Record. To the extent that any provision of this

 

30

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Agreement contradicts other provisions of the Loan Documents other than this
Agreement, or any other document or agreement described in or related to this
Agreement, this Agreement shall control.

 

7.11                     Sharing of Information. Wells Fargo may share any
Confidential Information that it may have regarding Company and its Affiliates
with its accountants, lawyers, and other advisors, with Ex-Im Bank, and with
each business unit and line of business within Wells Fargo and each direct and
indirect subsidiary of Wells Fargo & Company; provided that Wells Fargo shall
advise such accountants, lawyers, other advisors, business units, line of
business, and subsidiaries of the confidential nature of such Confidential
Information and that all such Confidential Information is subject to the terms
of this Agreement (including this Section 7.11).

 

7.12                      Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining terms of this Agreement.

 

7.13                     Headings. Section and subsection headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.

 

7.14                      Governing Law; Jurisdiction; Venue. The Loan Documents
(other than real estate related documents, if any) shall be governed by and
construed in accordance with the substantive laws (other than conflict laws) of
the State of California. The parties to this Agreement (a) consent to the
personal jurisdiction of the state and federal courts located in the State of
California in connection with any controversy related to this Agreement;
(b) waive any argument that venue in any such forum is not convenient; (c) agree
that any litigation initiated by Wells Fargo or Company in connection with this
Agreement or the other Loan Documents may be venued in either the state or
federal courts located in the City of Los Angeles, County of Los Angeles, State
of California; and (d) agree that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

7.15                      Incorporation of Borrower Agreement by Reference. This
Agreement shall constitute the “Loan Agreement” under the Borrower Agreement,
and the Line of Credit shall constitute the “Loan Facility” under the Borrower
Agreement. The terms of the Borrower Agreement are hereby incorporated herein by
this reference. In the event that any provision of this Agreement conflicts with
or is inconsistent with any provision of the Borrower Agreement, the provision
that is more burdensome or restrictive as to Company shall control.

 

[signatures on the following page]

 

31

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COMPANY AND WELLS FARGO have executed this Agreement through their authorized
officers as of the date set forth above.

 

 

WELLS FARGO BANK,

CAPSTONE TURBINE CORPORATION

NATIONAL ASSOCIATION

 

 

 

By:

/s/ John Curry

 

By:

/s/ Darren Jamison

Name:

John Curry

 

Name:

Darren Jamison

Its:

Vice President

 

Its:

CEO

 

 

 

 

Wells Fargo Bank, National Association

Capstone Turbine Corporation

245 S. Los Robles Avenue, Suite 700

21211 Nordhoff Street

Pasadena, CA 91101

Chatsworth, California 91311

Fax: 626.844.9063

Fax: 818.734.5380

Attention: Capstone Turbine Account Officer

Attention:

email:  curry.john@wellsfargo.com

e-mail:

 

Federal Employer Identification No.

 

 

 

Organizational Identification No.

 

S-1

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Exhibit A to Credit and Security Agreement (Ex-Im Subfacility)

 

DEFINITIONS

 

“Account Funds” is defined in Section 1.4(a).

 

“Accounts” shall have the meaning given it under the UCC.

 

“Advance” and “Advances” means an advance or advances under the Line of Credit.

 

“Affiliate” or “Affiliates” means Capstone Turbine International, Inc. and any
other Person controlled by, controlling or under common control with Company,
including any Subsidiary of Company. For purposes of this definition, “control,”
when used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise.

 

“Agreement” means this Credit and Security Agreement.

 

“Authenticated” means (a) to have signed; or (b) to have executed or to have
otherwise adopted a symbol, or have encrypted or similarly processed a Record in
whole or in part, with the present intent of the authenticating Person to
identify the Person and adopt or accept a Record.

 

“Book Net Worth” means the aggregate of the common and preferred shareholder’s
equity in Company, determined in accordance with GAAP, and calculated without
regard to (a) any change in the valuation of goodwill made in accordance with
FASB Accounting Standard 142, and (b) any non-cash effects of accounting for
stock based compensation in accordance with FASB pronouncement SFAS 123(r).

 

“Borrower Agreement” means the Borrower Agreement, dated on or about the date
hereof, made by Company in favor of Ex-Im Bank and Wells Fargo, as the same may
hereafter be amended, modified, supplemented or restated from time to time.

 

“Borrowing Base” is defined in Section 1.2(a).

 

“Borrowing Base Reserve” means, as of any date of determination, an amount or a
percent of a specified category or item that Wells Fargo establishes in its sole
discretion from time to time to reduce availability under the Borrowing Base
(a) to reflect events, conditions, contingencies or risks which affect the
assets, business or prospects of Company, or the Collateral or its value, or the
enforceability, perfection or priority of Wells Fargo’s Security Interest in the
Collateral, as the term “Collateral” is defined in this Agreement, or (b) to
reflect Wells Fargo’s judgment that any collateral report or financial
information relating to Company and furnished to Wells Fargo may be incomplete,
inaccurate or misleading in any material respect.

 

A-1

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“Business Day” means a day on which the Federal Reserve Bank of New York is open
for business and, if such day relates to a LIBOR Advance, a day on which
dealings are carried on in the London interbank eurodollar market.

 

“Buyer” shall have the meaning provided for such term in the Borrower Agreement.

 

“Capital Expenditures” means for a period, any expenditure of money during such
period for the lease, purchase or other acquisition of any capital asset, or for
the lease of any other asset whether payable currently or in the future.

 

“Cash Equivalents” means (i) marketable direct obligations issued or
unconditionally guaranteed by the United States government and backed by the
full faith and credit of the United States government; (ii) domestic and
eurodollar certificates of deposit and time deposits, bankers’ acceptances and
floating rate certificates of deposit issued by any commercial bank organized
under the laws of the United States, any state thereof, the District of
Columbia, any foreign bank, or its branches or agencies, the long-term
indebtedness of which institution at the time of acquisition is rated A- (or
better) by S&P or A3 (or better) by Moody’s, and which certificates of deposit
and time deposits are fully protected against currency fluctuations for any such
deposits with a term of more than ninety (90) days; (iii) shares of money
market, mutual or similar funds having assets in excess of $100,000,000 and the
investments of which are limited to (a) investment grade securities (i.e.,
securities rated at least Baa by Moody’s or at least BBB by S&P) and
(b) commercial paper of United States and foreign banks and bank holding
companies and their subsidiaries and United States and foreign finance,
commercial industrial or utility companies which, at the time of acquisition,
are rated A-1 (or better) by S&P or P-1 (or better) by Moody’s (all such
institutions being, “Qualified Institutions”); and (iv) commercial paper of
Qualified Institutions; provided that the maturities of such Cash Equivalents
shall not exceed three hundred sixty-five (365) days from the date of
acquisition thereof.

 

“CEO” is defined in Section 7.4(a).

 

“Change of Control” means the occurrence of any of the following events:

 

(a)                                 Any Person or “group” (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) who does not
have an ownership interest in Company on the date of the initial Advance is or
becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that any such Person, entity or group
will be deemed to have “beneficial ownership” of all securities that such
Person, entity or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than twenty percent (20%) of the voting power of all classes
of ownership of Company;

 

(b)                                During any consecutive two-year period,
individuals who at the beginning of such period constituted the board of
Directors of Company (together with any new Directors whose election to such
board of Directors, or whose nomination for election by the Owners of Company,
was approved by a vote of two thirds of the Directors then still in office who
were either Directors at the beginning of such period or whose election or
nomination for election was

 

A-2

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previously so approved) cease for any reason to constitute a majority of the
board of Directors of Company then in office.

 

“Collateral” means all of Company’s Accounts, chattel paper and electronic
chattel paper, deposit accounts, documents, Equipment, General Intangibles,
goods, instruments, Inventory, Investment Property, letter-of-credit rights,
letters of credit, all sums on deposit in any Collection Account, and any items
in any Lockbox; together with (a) all substitutions and replacements for and
products of such property; (b) in the case of all goods, all accessions; (c) all
accessories, attachments, parts, Equipment and repairs now or subsequently
attached or affixed to or used in connection with any goods; (d) all warehouse
receipts, bills of lading and other documents of title that cover such goods now
or in the future; (e) all collateral subject to the Lien of any of the Security
Documents; (f) any money, or other assets of Company that come into the
possession, custody, or control of Wells Fargo now or in the future;
(g) Proceeds of any of the above Collateral; (h) books and records of Company,
including all mail or e-mail addressed to Company; and (i) all of the above
Collateral, whether now owned or existing or acquired now or in the future or in
which Company has rights now or in the future.

 

“Collateral Pledge Agreement” means each Collateral Pledge Agreement entered
into between Company and Wells Fargo.

 

“Collection Account” means “Collection Account” as defined in the Master
Agreement for Treasury Management Services and related Lockbox and Collection
Account Service Description or Collection Account Service Description, whichever
is applicable..

 

“Compliance Certificate” is defined in Section 5.1(a) and is in the form of
Exhibit E.

 

“Company” is defined in the Recitals.

 

“Constituent Documents” means with respect to any Person, as applicable, that
Person’s certificate of incorporation, articles of incorporation, by-laws,
certificate of formation, articles of organization, limited liability company
agreement, management agreement, operating agreement, shareholder agreement,
partnership agreement or similar document or agreement governing such Person’s
existence, organization or management or concerning disposition of ownership
interests of such Person or voting rights among such Person’s owners.

 

“Country Limitation Schedule” shall have the meaning provided for such term in
the Borrower Agreement.

 

“Debt” means of a Person as of a given date, all items of indebtedness or
liability which in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of a balance sheet for such Person
and shall also include the aggregate payments required to be made by such Person
at any time under any lease that is considered a capitalized lease under GAAP.

 

“Default Period” is defined in Section 1.5(c).

 

“Default Rate” is defined in Section 1.5(c).

 

A-3

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“Designated Person” means any of Darren R. Jamison or Edward I. Reich.

 

“Dilution” means, as of any date of determination, a percentage, based upon the
prior six (6) months, which is the result of dividing (a) actual bad debt
write-downs, discounts, advertising allowances, credits, and any other items
with respect to the Accounts determined to be dilutive by Wells Fargo in its
sole discretion during this period, by (b) Company’s net sales during such
period (excluding extraordinary items) plus the amount of clause (a).

 

“Director” means a director if Company is a corporation, or a governor or
manager if Company is a limited liability company.

 

“Dollars” or “$” shall mean the lawful currency of the United States.

 

“Domestic Facility Agreement” means the Credit and Security Agreement, dated as
of February 9, 2009, between Company and Wells Fargo.

 

“Domestic Loan Documents” means the “Loan Documents” as defined in the Domestic
Facility Agreement.

 

“Electronic Record” means a Record that is created, generated, sent,
communicated, received, or stored by electronic means, but does not include any
Record that is sent, communicated, or received by fax.

 

“Eligible Accounts” means all unpaid Accounts of Company owing by account
debtors located outside of the United States of America arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any Accounts having any of the following characteristics:

 

(a)                                  that does not arise from the sale of Items
in the ordinary course of business;

 

(b)                                 that is not subject to a valid, perfected
first priority Lien in favor of Wells Fargo;

 

(c)                                  as to which any covenant, representation or
warranty contained in the Loan Documents with respect to such Account has been
breached;

 

(d)                                that is not owned by a Company or that is
subject to any right, claim or interest of another Person other than the Lien in
favor of Wells Fargo;

 

(e)                                  with respect to which an invoice has not
been sent;

 

(f)                                    that arises from the sale of defense
articles or defense services;

 

(g)                                 that is due and payable from a Buyer located
in a country with which Ex-Im Bank is prohibited from doing business as
designated in the Country Limitation Schedule;

 

(h)                                 that does not comply with the requirements
of the Country Limitation Schedule;

 

(i)                                     that is not paid within ninety (90) days
from the invoice date; provided that, in the case of [Banking Production
Centre], Accounts owed by [Banking Production Centre] that are

 

A-4

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not paid within one hundred fifty (150) days from the invoice date shall not be
Eligible Accounts;

 

(j)                                     that arises from a sale of goods to or
performance of services for an employee of Company, a stockholder of Company, a
subsidiary of Company, a Person with a controlling interest in Company or a
Person which shares common controlling ownership with Company;

 

(k)                                  that is backed by a letter of credit unless
the Items covered by the subject letter of credit have been shipped;

 

(1)                                  that Wells Fargo or Ex-Im Bank, in its
reasonable judgment, deems uncollectible for any reason;

 

(m)                               that is due and payable in a currency other
than Dollars, except as may be approved in writing by Ex-Im Bank;

 

(n)                                 that is due and payable from a military
Buyer, except as may be approved in writing by Ex-Im Bank;

 

(o)                                 that does not comply with the terms of sale
set forth in Section 7 of the Loan Authorization Notice;

 

(p)                                 that is due and payable from a Buyer who
(A) applies for, suffers, or consents to the appointment of, or the taking of
possession by, a receiver, custodian, trustee or liquidator of itself or of all
or a substantial part of its property or calls a meeting of its creditors,
(B) admits in writing its inability, or is generally unable, to pay its debts as
they become due or ceases operations of its present business, (C) makes a
general assignment for the benefit of creditors, (D) commences a voluntary case
under any state or federal bankruptcy laws (as now or hereafter in effect),
(E) is adjudicated as bankrupt or insolvent, (F) files a petition seeking to
take advantage of any other law providing for the relief of debtors,
(G) acquiesces to, or fails to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (H) takes any
action for the purpose of effecting any of the foregoing;

 

(q)                                 that arises from a bill-and-hold, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;

 

(r)                                    for which the Items giving rise to such
Account have not been shipped and delivered and accepted by the Buyer or the
services giving rise to such Account have not been performed by Company and
accepted by the Buyer or the Account otherwise does not represent a final sale;

 

(s)                                  that portion of the Account that is subject
to any offset, deduction, defense, dispute, or counterclaim or where the Buyer
is also a creditor or supplier of Company or that portion of the Account that is
contingent in any respect or for any reason unless Wells Fargo has received a
satisfactory non-offset letter;

 

(t)                                    for which Company has made any agreement
with the Buyer for any deduction therefrom, except for discounts or allowances
made in the ordinary course of business for prompt

 

A-5

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payment, all of which discounts or allowances are reflected in the calculation
of the face value of each respective invoice related thereto;

 

(u)                                 for which any of the Items giving rise to
such Account have been returned, rejected or repossessed;

 

(v)                                 to the extent it includes any finance
charges, service charges, taxes, discounts, credits, allowances and Retainages;

 

(w)                               that arises from the sale of Items containing
less than fifty one percent (51%) U.S. Content;

 

(x)                                   that arises from the sale of Items
containing any Foreign Content not incorporated into such Items in the United
States;

 

(y)                                 that arises from the sale of any Items to be
used in the construction, alteration, operation or maintenance of nuclear power,
enrichment, reprocessing, research or heavy water production facilities;

 

(z)                                   that does not meet the requirements set
forth in the definition of “Eligible-Related Accounts Receivable” in the
Borrower Agreement;

 

(aa)                            that is not subject to a duly perfected security
interest in Wells Fargo’s favor or which are subject to any Lien in favor of any
Person other than Wells Fargo;

 

(bb)                          that has been restructured, extended, amended or
modified;

 

(cc)                            that is owing by an account debtor, regardless
of whether otherwise eligible, to the extent that the balance of such Accounts
exceeds fifteen (15%) of the aggregate amount of all Eligible Accounts;

 

(dd)                          that is owed by an account debtor, regardless of
whether otherwise eligible, if twenty-five percent (25%) or more of the total
amount due under Accounts from such debtor is ineligible under clauses (i), (s),
or (bb) above;

 

(ee)                            that is included as an “Eligible Account” under
the Domestic Facility Agreement;

 

(ff)                                Accounts arising from the sale of warranty
or service contracts, maintenance service, warranty service or replacement
parts;

 

(gg)                          that portion of Accounts constituting (i) Proceeds
of copyrightable material unless such copyrightable material shall have been
registered with the United States Copyright Office, or (ii) Proceeds of
patentable inventions unless such patentable inventions have been registered
with the United States Patent and Trademark Office; and

 

(hh)                          that are otherwise deemed ineligible for any
reason by Wells Fargo or Ex-Im Bank in their sole discretion.

 

A-6

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For sake of clarity, any Accounts that are deemed to be “Eligible Accounts”
under the Domestic Facility Agreement shall not be Eligible Accounts under this
Agreement, and any Eligible Accounts under this Agreement shall not be deemed to
be “Eligible Accounts” under the Domestic Facility Agreement.

 

“Eligible Inventory” means all export-related Inventory of Company, valued at
the lower of cost or market in accordance with GAAP; but excluding Inventory
having any of the following characteristics:

 

(a)                                  Inventory that is: in-transit; located at
any warehouse, job site or other premises not approved by Wells Fargo in an
Authenticated Record delivered to Company; not subject to a perfected first
priority Lien in Wells Fargo’s favor; covered by any negotiable or
non-negotiable warehouse receipt, bill of lading or other document of title; on
consignment from any consignor; or on consignment to any consignee or subject to
any bailment unless the consignee or bailee has executed an agreement with Wells
Fargo;

 

(b)                                 Supplies, packaging, maintenance parts or
sample Inventory, or customer supplied parts or Inventory;

 

(c)                                  Work-in-process Inventory;

 

(d)                                 Finished goods Inventory;

 

(e)                                  Inventory that is damaged, defective,
obsolete, slow moving or not currently saleable in the normal course of
Company’s operations, or the amount of such Inventory that has been reduced by
shrinkage;

 

(f)                                    Inventory that Company has returned, has
attempted to return, is in the process of returning or intends to return to the
vendor of the Inventory;

 

(g)                                 Inventory that is perishable or live;

 

(h)                                 Inventory manufactured by Company pursuant
to a license unless the applicable licensor has agreed in a Record that has been
Authenticated by licensor to permit Wells Fargo to exercise its rights and
remedies against such Inventory;

 

(i)                                     Inventory that is subject to a Lien in
favor of any Person other than Wells Fargo;

 

(j)                                     Inventory stored at locations holding
less than 10% of the aggregate value of Company’s Inventory;

 

(k)                                  Inventory that is deemed to be “Eligible
Inventory” under the Domestic Facility Agreement;

 

(1)                                  Inventory containing less than fifty-one
percent (51%) U.S. Content;

 

A-7

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(m)          Inventory containing any Foreign Content not incorporated into such
Inventory in the United States;

 

(n)           Inventory that was previously exported;

 

(o)           Inventory that consists of proprietary software;

 

(p)           Inventory consisting of defense articles or goods; and

 

(q)           Inventory otherwise deemed ineligible by Wells Fargo or Ex-Im Bank
in their sole discretion.

 

For sake of clarity, any Inventory that is deemed to be “Eligible Inventory”
under the Domestic Facility Agreement shall not be Eligible Inventory under this
Agreement, and any Eligible Inventory under this Agreement shall not be deemed
to be “Eligible Inventory” under the Domestic Facility Agreement.

 

“Environmental Law” means any federal, state, local or other governmental
statute, regulation, law or ordinance dealing with the protection of human
health and the environment.

 

“Equipment” shall have the meaning given it under the Uniform Commercial Code in
effect in the state whose laws govern this Agreement.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

“ERISA Affiliate” means any trade or business (whether or not incorporated) that
is a member of a group which includes Company and which is treated as a single
employer under Section 414 of the IRC.

 

“Event of Default” is defined in Section 6.1.

 

“Ex-Im Bank” means the Export-Import Bank of the United States, and its
successors and assigns.

 

“Ex-Im Bank Guaranty” means that certain Master Guarantee Agreement between
Wells Fargo and the Export-Import Bank of the United States, as the same may
hereafter be amended, modified, supplemented or restated from time to time.

 

“Export Order” means a written export order or contract for the purchase by the
Buyer from the Company of any of the Items.

 

“Floating Rate” is defined in Section 1.5(a).

 

“Floating Rate Advance” means an Advance bearing interest at the Floating Rate.

 

A-8

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“Foreign Content” means, with respect to any Item, all of the labor, materials
and services which are not of United States origin or manufacture, or which are
not incorporated into such Item in the United States.

 

“GAAP” means generally accepted accounting principles, applied on a basis
consistent with the accounting practices applied in the financial statements
described on Exhibit D.

 

“General Intangibles” shall have the meaning given it under the UCC.

 

“Guarantor” means Capstone Turbine International, Inc., and any other Person now
or in the future guaranteeing any Indebtedness through the issuance of a
Guaranty.

 

“Guaranty” means an unconditional continuing guaranty executed by a Guarantor in
favor of Wells Fargo (if more than one, the “Guaranties”).

 

“Hazardous Substances” means pollutants, contaminants, hazardous substances,
hazardous wastes, petroleum and fractions thereof, and all other chemicals,
wastes, substances and materials listed in, regulated by or identified in any
Environmental Law.

 

“Indebtedness” is used in its most comprehensive sense and means any debts,
obligations and liabilities of Company to Wells Fargo, whether incurred in the
past, present or future, whether voluntary or involuntary, and however arising,
and whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and including without limitation all obligations
arising under any swap, derivative, foreign exchange, hedge, deposit, treasury
management or similar transaction or arrangement however described or defined
that Company may enter into at any time with Wells Fargo or with Wells Fargo
Merchant Services, L.L.C., whether or not Company may be liable individually or
jointly with others, or whether recovery upon such Indebtedness may subsequently
become unenforceable.

 

“Indemnified Liabilities” is defined in Section 7.8.

 

“Indemnitee” is defined in Section 7.8.

 

“Infringement” or “Infringing” when used with respect to Intellectual Property
Rights means any infringement or other violation of Intellectual Property
Rights.

 

“Intellectual Property Rights” means all actual or prospective rights arising in
connection with any intellectual property or other proprietary rights, including
all rights arising in connection with copyrights, patents, service marks, trade
dress, trade secrets, trademarks, trade names or mask works.

 

“Interest Payment Date” is defined in Section 1.7(a).

 

“Interest Period” means the period that commences on (and includes) the Business
Day on which either a LIBOR Advance is made or continued or on which a Floating
Rate Advance is converted to a LIBOR Advance, and ending on (but excluding) the
Business Day numerically corresponding to that date that falls the number of
months afterward as selected by Company

 

A-9

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pursuant to Section 1.3(c), during which period the outstanding principal amount
of the LIBOR Advance shall bear interest at the LIBOR Advance Rate;
provided, however, that:

 

(a)             If an Interest Period would otherwise end on a day which is not
a Business Day, then it shall end on the next Business Day, unless that day is
the first Business Day of a month, in which case the Interest Period shall end
on the last Business Day of the preceding month;

 

(b)             No Interest Period applicable to an Advance may end later than
the Maturity Date; and

 

(c)             In no event shall Company select Interest Periods with respect
to LIBOR Advances which would result in the payment of a LIBOR Advance breakage
fee under this Agreement in order to make required principal payments.

 

“Inventory” shall have the meaning given it under the UCC.

 

“Investment Property” shall have the meaning given it under the UCC.

 

“Items” means the finished goods or services which are intended for export from
the United States, as specified in Section 4(A) of the Loan Authorization
Notice.

 

“Joint Application” means the Joint Application for Working Capital Guarantee
made by Company and Wells Fargo to Ex-Im Bank in connection with this Agreement.

 

“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/8th of one percent (1%)) determined pursuant to the following formula:

 

LIBOR =

Base LIBOR

 

 

100% - LIBOR Reserve Percentage

 

 

(a)           “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by Wells Fargo as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Wells Fargo for the purpose of
calculating effective rates of interest for loans making reference to it, on the
first day of an Interest Period for delivery of funds on that date for a period
of time approximately equal to the number of days in that Interest Period and in
an amount approximately equal to the principal amount to which that Interest
Period applies. Company understands and agrees that Wells Fargo may base its
quotation of the Inter-Bank Market Offered Rate upon such offers or other market
indicators of the Inter-Bank Market as Wells Fargo in its discretion deems
appropriate including the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

(b)           “LIBOR Reserve Percentage” means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Wells Fargo for expected changes in such reserve
percentage during the applicable Interest Period.

 

A-10

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“LIBOR Advance” means an Advance bearing interest at the LIBOR Advance Rate.

 

“LIBOR Advance Rate” is defined in Section 1.5(a).

 

“Licensed Intellectual Property” is defined in Exhibit D.

 

“Lien” means any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device, including the interest of each lessor under any capitalized lease and
the interest of any bondsman under any payment or performance bond, in, of or on
any assets or properties of a Person, whether now owned or subsequently acquired
and whether arising by agreement or operation of law.

 

“Line of Credit” is defined in the Recitals.

 

“Loan Authorization Notice” means the Loan Authorization Notice executed and
delivered in connection with this Agreement.

 

“Loan Documents” means this Agreement, the Revolving Notes, the Domestic
Facility Agreement, the Ex-Im Bank Guaranty, the Borrower Agreement, the Joint
Application, the Loan Authorization Notice, the Master Agreement for Treasury
Management Services, each Guaranty, each Subordination Agreement, each Patent
and Trademark Security Agreement, and the Security Documents, together with
every other agreement, note, document, contract or instrument to which Company
now or in the future may be a party and which may be required by Wells Fargo in
connection with, or as a condition to, the execution of this Agreement. Any
documents or other agreements entered into between Company and Wells Fargo that
relate to any swap, derivative, foreign exchange, hedge, or similar product or
transaction, or which are entered into with an operating division of Wells Fargo
other than Wells Fargo Business Credit, shall not be included in this
definition.

 

“Loan Manager” means the treasury management service defined in the Master
Agreement for Treasury Management Services and related Loan Manager Service
Description.

 

“Lockbox” means “Lockbox” as defined in the Master Agreement for Treasury
Management Services and related Lockbox and Collection Account Service
Description.

 

“Margin” means a rate per annum, expressed as a percentage, as more fully
described in Section 1.5(a).

 

“Master Agreement for Treasury Management Services” means the Master Agreement
for Treasury Management Services, the related Acceptance of Services, and the
Service Description governing each treasury management service used by Company.

 

“Material Adverse Effect” means any of the following:

 

(r)                                    A material adverse effect on the
business, operations, results of operations, assets, liabilities or financial
condition of Company;

 

A-11

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(s)             A material adverse effect on the ability of Company to perform
its obligations under the Loan Documents, or any other document or agreement
related to this Agreement;

 

(t)              A material adverse effect on the ability of Wells Fargo to
enforce the Indebtedness or to realize the intended benefits of the Security
Documents, including a material adverse effect on the validity or enforceability
of any Loan Document or of any rights against any Guarantor, or on the status,
existence, perfection, priority (subject to Permitted Liens) or enforceability
of any Lien securing payment or performance of the Indebtedness; or

 

(u)             Any claim against Company or threat of litigation which if
determined adversely to Company would cause Company to be liable to pay an
amount exceeding $500,000 or would result in the occurrence of an event
described in clauses (a), (b) and (c) above.

 

“Maturity Date” is defined in Section 1.1(b).

 

“Maximum Line Amount” is defined in Section 1.1(a).

 

“Multiemployer Plan” means a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) to which Company or any ERISA Affiliate contributes
or is obligated to contribute.

 

“Net Income” means fiscal year-to-date after-tax net income from continuing
operations, including extraordinary losses but excluding extraordinary gains,
all as determined in accordance with GAAP.

 

“OFAC” is defined in Section 5.11(b).

 

“Officer” means with respect to Company, an officer if Company is a corporation,
a manager if Company is a limited liability company, or a partner if Company is
a partnership.

 

“Operating Account” is defined in Section 1.3(a), and maintained in accordance
with the terms of Wells Fargo’s Commercial Account Agreement in effect for
demand deposit accounts.

 

“Overadvance” means the amount, if any, by which the unpaid principal amount of
the Revolving Note is in excess of the then-existing Borrowing Base.

 

“Owned Intellectual Property” is defined in Exhibit D.

 

“Owner” means with respect to Company, each Person having legal or beneficial
title to an ownership interest in Company or a right to acquire such an
interest.

 

“Patent and Trademark Security Agreement” means each Patent and Trademark
Security Agreement entered into between Company and Wells Fargo.

 

“Pension Plan” means a pension plan (as defined in Section 3(2) of ERISA)
maintained for employees of Company or any ERISA Affiliate and covered by Title
IV of ERISA.

 

“Permitted Lien” and “Permitted Liens” are defined in Section 5.3(a)

 

A-12

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“Person” means any individual, corporation, partnership, joint venture, limited
liability company, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision of a
governmental entity.

 

“Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA)
maintained for employees of Company or any ERISA Affiliate.

 

“Premises” is defined in Section 2.4(a).

 

“Prime Rate” means at any time the rate of interest most recently announced by
Wells Fargo at its principal office as its Prime Rate, with the understanding
that the Prime Rate is one of Wells Fargo’s base rates, and serves as the basis
upon which effective rates of interest are calculated for those loans making
reference to it, and is evidenced by its recording in such internal publication
or publications as Wells Fargo may designate. Each change in the rate of
interest shall become effective on the date each Prime Rate change is announced
by Wells Fargo.

 

“Proceeds” shall have the meaning given it under the UCC.

 

“Record” means information that is inscribed on a tangible medium or that is
stored in an electronic or other medium and is retrievable in perceivable form,
and includes all information that is required to be reported by Company to Wells
Fargo pursuant to Section 5.1.

 

“Reportable Event” means a reportable event (as defined in Section 4043 of
ERISA), other than an event for which the 30-day notice requirement under ERISA
has been waived in regulations issued by the Pension Benefit Guaranty
Corporation.

 

“Retainage” shall mean that portion of the purchase price of an Export Order
that a Buyer is not obligated to pay until the end of a specified period of time
following the satisfactory performance under such Export Order.

 

“Revolving Notes” is defined in Section 1.1(d).

 

“Security Documents” means this Agreement, the Collateral Pledge Agreement, the
Patent and Trademark Security Agreement(s), the Domestic Facility Agreement, the
Borrower Agreement, and any other document delivered to Wells Fargo from time to
time to secure the Indebtedness.

 

“Security Interest” is defined in Section 2.1.

 

“Subordinated Creditor(s)” means any Person now or in the future subordinating
indebtedness of Company held by that Person to the payment of the Indebtedness.

 

“Subordinated Debt” means any Debt, contingent equity, earnout or other
obligations of Company that is unsecured and has subordination terms, covenants,
pricing and other terms which have been approved in an Authenticated Record from
Wells Fargo and with respect to which the holder thereof has executed and
delivered to Wells Fargo a Subordination Agreement.

 

A-13

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“Subordination Agreement” means any agreement between Wells Fargo and the
holder(s) of Subordinated Debt pursuant to which such Subordinated Debt is
subordinated in right of payment, liens, security and remedies to all of the
Indebtedness and all of Wells Fargo’s rights, liens and remedies, in form and
substance satisfactory to Wells Fargo (if more than one, the “Subordination
Agreements”).

 

“Subsidiary” means any Person of which more than 50% of the outstanding
ownership interests having general voting power under ordinary circumstances to
elect a majority of the board of directors or the equivalent of such Person,
irrespective of whether or not at the time ownership interests of any other
class or classes shall have or might have voting power by reason of the
happening of any contingency, is at the time directly or indirectly owned by
Company, by Company and one or more other Subsidiaries, or by one or more other
Subsidiaries.

 

“Termination Date” is defined in Section 1.1(b).

 

“UCC” means the Uniform Commercial Code in effect in the state designated in
this Agreement as the state whose laws shall govern this Agreement, or in any
other state whose laws are held to govern this Agreement or any portion of this
Agreement.

 

“Unused Amount” is defined in Section 1.6(b).

 

“U.S. Content” means, with respect to any Item, all of the labor, materials and
services which are of United States origin or manufacture, and which are
incorporated into such Item in the United States.

 

“Wells Fargo” means Wells Fargo Bank, National Association in its broadest and
most comprehensive sense as a legal entity, and is not limited in its meaning to
the Wells Fargo Business Credit operating division, or to any other operating
division of Wells Fargo.

 

A-14

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Exhibit B to Credit and Security Agreement (Ex-Im Subfacility)

PREMISES

 

The Premises referred to in the Credit and Security Agreement have an address
of:

 

21211 Nordhoff Street, Chatsworth, CA 91311

16640 Stagg Street, Van Nuys, CA 91406

10101-C Avenue D, Brooklyn, NY 11236

495 Boulevard #3, Elmwood Park, NJ 07407

 

B-1

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Exhibit C to Credit and Security Agreement (Ex-Im Subfacility)

 

Conditions Precedent

 

Wells Fargo’s obligation to make an initial Advance shall be subject to the
condition that Wells Fargo shall have received the following, executed and in
form and content satisfactory to Wells Fargo. The following descriptions are
limited descriptions for reference purposes only and should not be construed as
limiting in any way the subject matter that Wells Fargo requires each document
to address.

 

A.                                   Loan Documents to be Executed by Company:

 

(1)                                 The Revolving Notes.

 

(2)                                 The Credit and Security Agreement.

 

(3)                                 The Master Agreement for Treasury Management
Services, the Acceptance of Services, and the related Service Description for
each deposit or treasury management related product or service that Company will
subscribe to, including without limitation the Loan Manager Service Description
and the Lockbox and Collection Account Service Description.

 

(4)                                 The Collateral Pledge Agreement, pursuant to
which Company grants Wells Fargo a security interest in the shares of stock more
fully described in the Collateral Pledge Agreement, together with the stock
certificates and stock powers, as security for the full and prompt payment of
Company’s Indebtedness..

 

(5)                                 The Patent and Trademark Security Agreement.

 

(6)                                 The Domestic Facility Agreement and all
related documents, agreements, and instruments.

 

(7)                                 The Borrower Agreement and other related
documents, instruments and certificates required by Ex-Im Bank.

 

B.                                   Loan Documents to be Executed by Third
Parties:

 

(1)                                 Certificates of Insurance required under
this Agreement, with all hazard insurance containing a lender’s interest
endorsement in Wells Fargo’s favor and with all liability insurance naming Wells
Fargo as additional insured.

 

(2)                                 Any documents, agreements or instruments
requiring the execution by a third party (including, but not limited to, the
Export-Import Bank of the United States).

 

C.                                    Documents Related to the Premises

 

(1)                                 Any leases pursuant to which Company is
leasing the Premises from a lessor.

 

C-1

--------------------------------------------------------------------------------

 

D.                                   Federal Tax, State Tax, Judgment, UCC and
Intellectual Property Lien Searches

 

(1)                                 Current searches of Company in appropriate
filing offices showing that (i) no Liens have been filed and remain in effect
against Company and Collateral except Permitted Liens or Liens held by Persons
who have agreed in an Authenticated Record that upon receipt of proceeds of the
initial Advances, they will satisfy, release or terminate such Liens in a manner
satisfactory to Wells Fargo, and (ii) Wells Fargo has filed all UCC financing
statements necessary to perfect the Security Interest, to the extent the
Security Interest is capable of being perfected by filing.

 

(2)                                 Current searches of Third Persons in
appropriate filing offices with respect to any of the Collateral that is in the
possession of a Person other than Company that is held for resale, showing that
(i) UCC financing statements sufficient to protect Company’s and Wells Fargo’s
interests in such Collateral have been filed, and (ii) no other secured party
has filed a financing statement against such Person and covering property
similar to Company’s, other than Company, or if there exists any such secured
party, evidence that each such party has received notice from Company and Wells
Fargo sufficient to protect Company’s and Wells Fargo’s interests in Company’s
goods from any claim by such secured party.

 

E.                                      Constituent Documents:

 

(1)                                 The Certificate of Authority of Company,
which shall include as part of the Certificate or as exhibits to the
Certificate, (i) the Resolution of Company’s Directors and, if required, Owners,
authorizing the execution, delivery and performance of those Loan Documents and
other documents or agreements described in or related to this Agreement to which
Company is a party, (ii) an Incumbency Certificate containing the signatures of
Company’s Officers or agents authorized to execute and deliver those
instruments, agreements and certificates referenced in (i) above, as well as
Advance requests, on Company’s behalf, (iii) Company’s Constituent Documents,
(iv) a current Certificate of Good Standing or Certificate of Status issued by
the secretary of state or other appropriate authority for Company’s state of
organization, certifying that Company is in good standing and in compliance with
all applicable organizational requirements of the state of organization, and
(v) a Secretary’s Certificate of Company’s secretary or assistant secretary
certifying that the Certificate of Authority of Company is true, correct and
complete.

 

(2)                                 The Certificate of Authority of Corporate
Guarantor, which shall include as part of the Certificate or as exhibits to the
Certificate, (i) the Resolution of Guarantor’s Directors and, if required,
Owners, authorizing the execution, delivery and performance of the Guaranty of
Corporation, (ii) an Incumbency Certificate containing the signatures of
Guarantor’s Officers or agents authorized to execute and deliver the Guaranty by
Corporation on Guarantor’s behalf, (iii) Guarantor’s Constituent Documents,
(iv) a current Certificate of Good Standing or Certificate of Status issued by
the secretary of state or other appropriate authority for

 

C-2

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Guarantor’s state of organization, certifying that Guarantor is in good standing
and in compliance with all applicable organizational requirements of the state
of organization, and (v) a Secretary’s Certificate of Guarantor’s secretary or
assistant secretary certifying that the Certificate of Authority of Corporate
Guarantor and all attached exhibits are true, correct and complete.

 

(3)                                 Evidence that Company is licensed or
qualified to transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by it makes
such licensing or qualification necessary.

 

(4)                                 An Officer’s Certificate of an appropriate
Officer of Company confirming, in his or her capacity as an Officer, the
representations and warranties set forth in this Agreement.

 

(5)                                 A Customer Identification Information
Form and such other forms and verification as Wells Fargo may need to comply
with the U.S.A. Patriot Act.

 

F.                                     Miscellaneous Matters or Documents:

 

(1)                                 Final approval of the Agreement by Ex-Im
Bank.

 

(2)                                 Payment of fees and reimbursable costs and
expenses due under this Agreement through the date of initial Advance, including
all legal expenses incurred through the date of the closing of this Agreement.

 

(3)                                 Evidence that after making the initial
Advance, establishing all reserves under the Borrowing Base, paying all trade
payables older than sixty (60) days from invoice date, and paying all book
overdrafts and closing costs and fees (including any fees deemed paid), the
combined availability under the Line of Credit under this Agreement and the
“Line of Credit” under the Domestic Facility Agreement is not less than
$750,000.

 

(4)                                 Any documents or other agreements entered
into by Company and Wells Fargo that relate to any swap, derivative, foreign
exchange, hedge, deposit, treasury management or similar product or transaction
extended to Company by Wells Fargo not already provided pursuant to the
requirements of (A) through (E) above.

 

(5)                                 Such other documents as Wells Fargo in its
sole discretion may require.

 

C-3

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Exhibit D to Credit and Security Agreement (Ex-Im Subfacility)

 

REPRESENTATIONS AND WARRANTIES

 

Company represents and warrants to Wells Fargo as follows:

 

(a)                                 Existence and Power; Name; Chief Executive
Office; Inventory and Equipment Locations; Federal Employer Identification
Number and Organizational Identification Number. Company is a corporation,
organized, validly existing and in good standing under the laws of the State of
Delaware and is licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary,
except where failure to do so could not reasonably be expected to have a
Material Adverse Effect. Company has all requisite power and authority to
conduct its business, to own its properties and to execute and deliver, and to
perform all of its obligations under, those Loan Documents and any other
documents or agreements that it has entered into with Wells Fargo related to
this Agreement. During the last five (5) years of its existence, Company has
done business solely under the names set forth below in addition to its correct
legal name. Company’s chief executive office and principal place of business is
located at the address set forth below, and all of Company’s records relating to
its business or the Collateral are kept at that location. All Inventory and
Equipment is located at that location or at one of the other locations set forth
below. Company’s name, Federal Employer Identification Number and Organization
Identification Number are correctly set forth at the end of the Agreement next
to Company’s signature.

 

Trade Names

 

Capstone

Capstone Microturbine

 

Chief Executive Office / Principal Place of Business

 

21211 Nordhoff Street, Chatsworth, California 91311

 

Other Inventory and Equipment Locations

 

Aard Stamping, 42075 Avenida Alvarado, Temecula, CA 92590

 

Accurate Electronics, 20700 Lassen Street, Chatsworth, CA 91311

 

Alliance Metal Products, 20620 Superior Street, Unit #4, Chatsworth, CA 91311

 

D-1

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AMANET, 16525 Sherman Way#C-11, Van Nuys, CA 91406

 

American Aikoku Alpha, Inc., 520 Lake Cook Rd, Ste. 180, Deerfield, IL 60015

 

Asigma, 2930 San Luis Rey Road, Oceanside CA 92054

 

Auer Precision Co., 1050 W. Birchwood, Mesa, AZ 85210

 

Axiomtek, 18138 Rowland, City of Industry, CA 91748

 

Bebco Industries, 4725 Lawndale, Lamarque, TX 77568

 

Cliffdale Mfg. Company, 20409 Prairie Street, Chatsworth, CA 91311

 

Delafield, 152 Flower Avenue, Duarte, CA 91010

 

Dry Coolers, 3232 Adventure Ln., Oxford, MI 48371

 

Electro Controls, Inc., 1625 Ferguson Ct., Sidney, OH 45365

 

Elgiloy Specialty Metals, 1565 Fleetwood Drive, Elgin, IL 68123

 

EM Corporation, 1 John Downey Drive, New Britain, CT 06051

 

Enercon Engineering, Inc., No. 1 Altofrer Lane, East Peoria, IL 61611

 

Erico, Inc., 34600 Solon Road, Solon, OH 44139

 

Frost Magnatics, Inc., 49643 Hartwell Road, Oakhurst, CA 93644

 

Fuses Unlimited, 9248 Eton Avenue, Chatsworth, CA 91311

 

Ovison Manufacturing, 750 W. Southern Ave., Tempe, AZ 85282

 

Extrude Hone, 8800 Somerset Blvd., Paramount, CA 90723

 

J&F Machine, Inc., 10563 Progress Way, Cypress, CA 90630

 

Karel Manufacturing, 280 Campillo Ave, Suite G, Calexico, CA 92231

 

Mc Donald Packaging, 2601 Garnsey Street, Santa Ana, CA 92707-3338

 

Pacific Transformer, 5399 E. Hunter Avenue, Anaheim, CA 92807

 

Parker Energy Systems, 95 Edgewood Avenue, New Brittain, CT 06051

 

D-2

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Polymax, 1224 W 130th St., Gardena, CA 90247

 

Precision Resources, 13916 Cordary Avenue, Hawthorne, CA 90250

 

RND Enterprises, 42122 8th Street East, Lancaster, CA 93535

 

Robinson FIN Machines, 13670 Highway 68 South, Kenton, OH 43326

 

Schneider’s Mfg. Co, Inc., 11122 Pernrose Street, Sun Valley, CA 91352

 

Semikron, 11 Executive Drive, Hudson, NH 03051

 

Sermatech Int’l, 7615 Fairview, Houston, TX 77041

 

Sermatech Int’l Tech, 24 Landry Street, Biddeford, ME 04005

 

T.H.T Machining, Inc., 3617 West Cambridge Suite 1B, Phoenix, AZ 85009

 

Arbo Box, Inc., 12468 Putnam Street, Whittier, CA 90602

 

Trend Technologies LLC, 4626 Eucalyptus Ave., Chino, CA 91710

 

Triumph Components — Arizonia, 6733 Westhills Road, Chandler AZ 85226

 

Turbocam, 5 Faraday Drive, Dover NH 03820

 

CKE/Verdesis, 1000 Lucernce Road, Lucernemines, PA 15754

 

Victron, 6600 Stevenson Blvd., Fremont, CA 94538

 

Weldmac, 1533 North Johnson, El Cajon, CA 92020

 

Windings, Inc., 208 North Valley Street, P.O. Box 566, New Ulm, MN 56073-0566

 

F Building, 2-26-5 Nishihara, Shibuya-ku, Tokyo, JAPAN

 

1Room 1105, No.317, Xian Xia Road, Far East Int’l Plaza, Changning District
Shanghai, China 200051

 

Via Fatebenefratelli 15, Milano, Italy 20121

 

Suite 4, Floor 6, City Gate East, Toll House Hill, Nottingham, England NG1 5SF

 

Campos Eliseos 154-101, 11580 Polanco, Mexico

 

D-3

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(b)                                Organization. The Organizational Chart below
shows the ownership structure of all Subsidiaries of Company.

 

Holder

 

Type of
Rights/Stock

 

No. of Shares
(after exercise of
all rights to
acquire shares)

 

% Interest (on a
fully diluted
basis)

 

Capstone Turbine Corporation

 

Common

 

1000

 

100

%

 

(c)                                 Authorization of Borrowing; No Conflict as
to Law or Agreements. The execution, delivery and performance by Company of the
Loan Documents and any other documents or agreements described in or related to
this Agreement, and all borrowing under the Line of Credit have been authorized
and do not (i) require the consent or approval of Company’s Owners; (ii) require
the authorization, consent or approval by, or registration, declaration or
filing with (except for the filing of any financing statements or similar
documents), or notice to, any governmental agency or instrumentality, whether
domestic or foreign, or any other Person, except to the extent obtained,
accomplished or given prior to the date of this Agreement; (iii) violate any
provision of any law, rule or regulation (including Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or
decree presently in effect having applicability to Company or of Company’s
Constituent Documents; (iv) result in a breach of or constitute a default or
event of default under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which Company is a party or by which
it or its properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than the Security Interest) upon or
with respect to any of the properties now owned or subsequently acquired by
Company.

 

(d)                                Legal Agreements. This Agreement, the other
Loan Documents, and any other document or agreement described in or related to
this Agreement, will constitute the legal, valid and binding obligations of
Company, enforceable against Company in accordance with their respective terms.

 

(e)                                 Subsidiaries. Except as disclosed below,
Company has no Subsidiaries.

 

Subsidiaries

 

Capstone Turbine International, Inc., a Delaware corporation

 

(f)                                   Financial Condition; No Adverse Change.
Company has furnished to Wells Fargo its audited financial statements for its
fiscal year ended March 31, 2008, and unaudited financial statements for the
fiscal-year-to-date period ended September 30, 2008, and those statements fairly
present Company’s financial

 

D-4

--------------------------------------------------------------------------------

 

condition as of those dates and the results of Company’s operations and cash
flows for the periods then ended and were prepared in accordance with GAAP.
Since the date of the most recent financial statements, there has been no
Material Adverse Effect.

 

(g)                                Litigation. Except as disclosed below, there
are no actions, suits or proceedings pending or, to Company’s knowledge,
threatened against or affecting Company or any of its Affiliates or the
properties of Company or any of its Affiliates before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to Company or any of its Affiliates,
would have a Material Adverse Effect on the financial condition, properties or
operations of Company or any of its Affiliates.

 

Litigation

 

In December 2001, a purported stockholder class action lawsuit was filed in the
United States District Court for the Southern District of New York (the
“District Court”) against the Company, two of its then officers, and the
underwriters of the Company’s initial public offering. The suit purports to be a
class action filed on behalf of purchasers of the Company’s common stock during
the period from June 28, 2000 to December 6, 2000. An amended complaint was
filed on April 19, 2002. The Plaintiffs allege that the underwriter defendants
agreed to allocate stock in the Company’s June 28, 2000 initial public offering
and November 16, 2000 secondary offering to certain investors in exchange for
excessive and undisclosed commissions and agreements by those investors to make
additional purchases of stock in the aftermarket at pre-determined prices. The
Plaintiffs allege that the prospectuses for these two public offerings were
false and misleading in violation of the securities laws because they did not
disclose these arrangements.

 

(h)                                Intellectual Property Rights.

 

(i)                                    Owned Intellectual Property. Set forth
below is a complete list of all patents, applications for patents, trademarks,
applications to register trademarks, service marks, applications to register
service marks, mask works, trade dress and copyrights for which Company is the
owner of record (the “Owned Intellectual Property”). Except as set forth below,
(A) Company owns the Owned Intellectual Property free and clear of all
restrictions (including covenants not to sue any Person), court orders,
injunctions, decrees, writs or Liens, whether by agreement memorialized in a
Record Authenticated by Company or otherwise, (B) no Person other than Company
owns or has been granted any right in the Owned Intellectual Property, (C) all
Owned Intellectual Property is valid, subsisting and enforceable, and
(D) Company has taken all commercially reasonable action necessary to maintain
and protect the Owned Intellectual Property.

 

D-5

--------------------------------------------------------------------------------

 

(i)                                    Agreements with Employees and
Contractors. Company has entered into a legally enforceable agreement with each
Person that is an employee or subcontractor obligating that Person to assign to
Company, without additional compensation, any Intellectual Property Rights
created, discovered or invented by that Person in the course of that Person’s
employment or engagement with Company (except to the extent prohibited by law),
and further obligating that Person to cooperate with Company, without additional
compensation, to secure and enforce the Intellectual Property Rights on behalf
of Company, unless the job description of the Person is such that it is not
reasonably foreseeable that the employee or subcontractor will create, discover,
or invent Intellectual Property Rights.

 

(ii)                                 Intellectual Property Rights Licensed from
Others. Set forth below is a complete list of all agreements under which Company
has licensed Intellectual Property Rights from another Person (“Licensed
Intellectual Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing
accounting, word processing and similar administrative tasks (“Off-the-shelf
Software”) and a summary of any ongoing payments Company is obligated to make
with respect thereto. Except as set forth below or in any other Record, copies
of which have been given to Wells Fargo, Company’s licenses to use the Licensed
Intellectual Property are free and clear of all restrictions, Liens, court
orders, injunctions, decrees, or writs, whether by agreed to in a Record
Authenticated by Company or otherwise. Except as disclosed below, Company is not
contractually obligated to make royalty payments of a material nature, or pay
fees to any owner of, licensor of, or other claimant to, any Licensed
Intellectual Property Rights (excluding Off-the-shelf Software”).

 

(iii)                              Other Intellectual Property Needed for
Business. Except for Off-the-shelf Software and as disclosed below, the Owned
Intellectual Property and the Licensed Intellectual Property constitute all
Intellectual Property Rights used or necessary to conduct Company’s business as
it is presently conducted or as Company reasonably foresees conducting it.

 

(iv)                             Infringement. Except as disclosed below,
Company has no knowledge of, and has not received notice either orally or in a
Record alleging, any Infringement of another Person’s Intellectual Property
Rights (including any claim set forth in a Record that Company must license or
refrain from using the Intellectual Property Rights of any Person) nor, to
Company’s knowledge, is there any threatened claim or any reasonable basis for
any such claim.

 

D-6

--------------------------------------------------------------------------------

 

PATENTS AND PATENT APPLICATIONS

 

1.                Capstone Issued U.S. Patents

 

No

 

Issue No.

 

Description

 

App. Ser. No.

 

Filing Date

 

Issue Date

 

1.

 

D433,997

 

Turbogenerator

 

29/111,104

 

9/20/99

 

11/21/00

 

2.

 

5,427,455

 

Compliant Foil Hydrodynamic Fluid Film Radial Bearing

 

229,205

 

4/18/94

 

6/27/95

 

3.

 

5,497,615

 

Gas Turbine Generator Set

 

180,881

 

3/21/94

 

3/12/96

 

4.

 

5,529,398

 

Compliant Foil Hydrodynamic Fluid Film Thrust Bearing

 

08/363,540

 

12/23/94

 

6/25/96

 

5.

 

5,685,156

 

Catalytic Combustion System

 

650,625

 

5/20/96

 

11/11/97

 

6.

 

5,697,848

 

Compound Shaft with Flexible Disk Coupling

 

440,541

 

5/12/95

 

12/16/97

 

7.

 

5,752,380

 

Liquid Fuel Pressurization and Control System

 

730,941

 

10/16/96

 

5/19/98

 

8.

 

5,791,868

 

Thrust Load Compensating System for a Compliant Foil Hydrodynamic Fluid Film
Thrust Bearing

 

663,732

 

6/14/96

 

8/11/98

 

9.

 

5,819,524

 

Gaseous Fuel Compression and Control S&M

 

730,945

 

10/16/96

 

10/13/98

 

10.

 

5,827,040

 

Hydrostatic Augmentation of a Compliant Foil Hydrodynamic Fluid Film Thrust
Bearing

 

662,250

 

6/14/96

 

10/27/98

 

11.

 

5,850,732

 

Low Emissions Combustion System for a Gas Turbine Engine

 

855,210

 

5/13/97

 

12/22/98

 

12.

 

5,850,733

 

Gaseous Fuel Compression and Control S&M

 

85,817

 

5/27/98

 

12/22/98

 

13.

 

5,873,235

 

Liquid Fuel Pressurization and Control Method

 

990,467

 

12/15/97

 

2/23/99

 

14.

 

5,894,720

 

Low Emissions Combination System For A Gas Turbine Engine Employing Flame
Stabilization Within The Injector Tube

 

09/168,299

 

10/7/98

 

4/20/99

 

15.

 

5,899,673

 

Helical Flow Compressor/Turbine Permanent Magnet Motor/Generator

 

08/730,946

 

10/16/96

 

5/4/99

 

16.

 

5,903,116

 

Turbogenerator/Motor Controller

 

08/924,966

 

9/8/97

 

5/11/99

 

17.

 

5,915,841
See Re39190

 

Compliant Foil Fluid Film Radial Bearing

 

09/002,690

 

1/5/98

 

6/29/99

 

18.

 

5,918,985
See Re38373

 

Compliant Foil Fluid Thrust Film Bearing With a Tilting Pad Underspring

 

08/933,695

 

9/19/97

 

7/6/99

 

19.

 

5,964,663

 

Double Diaphragm Compound Shaft

 

08/934,430

 

9/19/97

 

10/12/99

 

20.

 

5,966,926

 

Liquid Fuel Injector Purge System

 

08/864,279

 

5/28/97

 

10/19/99

 

21.

 

6,016,658

 

Low Emissions Combustion System

 

09/182,966

 

10/8/98

 

1/25/00

 

22.

 

6,020,713

 

Turbogenerator/Motor Pulse Width Modulated Controller

 

09/002,890

 

1/5/98

 

2/1/00

 

23.

 

6,023,135

 

Turbogenerator/Motor Control System

 

09/080,892

 

5/18/98

 

2/8/00

 

24.

 

6,031,294

 

Turbogenerator/Motor Controller With Ancillary Energy Storage/Discharge

 

09/003,078

 

1/5/98

 

2/29/00

 

25.

 

6,037,687

 

Double Diaphragm Compound Shaft

 

09/224,208

 

12/30/98

 

3/14/00

 

26.

 

6,049,195

 

Split Generator Winding Inverter

 

09/356,065

 

7/19/99

 

4/11/00

 

 

D-7

--------------------------------------------------------------------------------

 

No

 

Issue No.

 

Description

 

App. Ser. No.

 

Filing Date

 

Issue Date

 

27.

 

6,062,016

 

Gas Turbine Engine Fixed Speed Light-Off

 

08/837,600

 

4/21/97

 

5/16/00

 

28.

 

6,065,281

 

Liquid Fuel Injector and Injector System

 

09/357,523

 

7/19/99

 

5/23/00

 

29.

 

6,070,404

 

Gaseous Fuel Compression and Control Method

 

09/086,615

 

5/27/98

 

7/6/00

 

30.

 

6,082,112

 

Liquid Fuel Injector

 

09/357,519

 

7/19/99

 

7/4/00

 

31.

 

6,093,975

 

Turbogenerator/Motor Control

 

09/181,388

 

10/27/98

 

7/25/00

 

32.

 

6,094,799

 

Method of Making Double Diaphragm Compound Shaft

 

09/224,206

 

12/30/98

 

8/1/00

 

33.

 

6,155,780

 

Ceramic Radial Flow Turbine Heat Shield

 

09/374,916

 

8/13/99

 

12/5/00

 

34.

 

6,158,892

 

Fluid Film Thrust Bearing Having Integral Compliant Foils

 

09/383,067

 

8/25/99

 

12/12/00

 

35.

 

6,169,334

 

Command and Control S&M for Multiple Turbogenerators

 

09/181,389

 

10/27/98

 

1/2/01

 

36.

 

6,178,751

 

Liquid Fuel Injector System

 

09/356,479

 

7/19/99

 

1/30/01

 

37.

 

6,190,048

 

Compliant Foil Fluid Film Radial Bearing

 

09/195,354

 

11/18/98

 

2/20/01

 

38.

 

6,192,668

 

M&A for Compressing Gaseous Fuel In a Turbine Engine

 

09/420,494

 

10/19/99

 

2/27/01

 

39.

 

6,194,794

 

Integrated Reciprocating Engine Generator Set and Turbogenerator System and
Method

 

09/359,815

 

7/23/99

 

2/27/01

 

40.

 

6,213,234

 

Vehicle Powered by a Fuel Cell/Gas

 

09/202,968

 

—

 

4/10/01

 

41.

 

6,239,520

 

Permanent Magnet Rotor Cooling S&M

 

09/558,406

 

4/24/00

 

5/29/01

 

42.

 

6,265,786

 

Turbogenerator Power Control System

 

09/181,213

 

10/27/98

 

7/24/01

 

43.

 

6,274,945

 

Combustion Control Method and System

 

09/459,719

 

12/13/99

 

8/14/01

 

44.

 

6,281,596

 

Automatic Turbogenerator Restarting M&S

 

09/444,487

 

11/19/99

 

8/28/01

 

45.

 

6,281,601

 

Turbogenerator Power Control S&M

 

09/360,043

 

7/23/99

 

8/28/01

 

46.

 

6,325,142

 

Turbogenerator Power Control System

 

09/316,896

 

5/22/99

 

12/4/01

 

47.

 

6,361,271

 

Crossing Spiral Compressor/Pump

 

09/444,014

 

11/19/99

 

3/26/02

 

48.

 

6,381,944

 

M&A for Compressing Gaseous Fuel in a Turbine Engine

 

09/772,537

 

1/29/01

 

5/7/02

 

49.

 

6,405,522

 

S&M for Modular Control of a Multi-Fuel Low Emissions Turbogenerator

 

09/453,825

 

12/1/99

 

6/18/02

 

50.

 

6,410,992

 

S&M for Dual Mode Control of a Turbogenerator/Motor

 

09/644,527

 

8/23/00

 

6/25/02

 

51.

 

6,425,732

 

Shrouded Rotary Compressor

 

09/643,625

 

8/22/00

 

7/30/02

 

52.

 

6,437,468

 

Permanent Magnet Rotor Cooling System and Method

 

09/829,778

 

4/10/01

 

8/20/02

 

53.

 

6,438,937

 

S&M for Modular Control of a Multi-Fuel Low Emissions

 

09/972,672

 

10/5/01

 

8/27/02

 

 

D-8

--------------------------------------------------------------------------------

 

No

 

Issue No.

 

Description

 

App. Ser. No.

 

Filing Date

 

Issue Date

 

 

 

 

 

Turbogenerator

 

 

 

 

 

 

 

54.

 

6,453,658

 

Multi-Stage Multi-Plane Combustion System for a Gas Turbine Engine

 

09/512,986

 

2/24/00

 

9/24/02

 

55.

 

6,468,051

 

Helical Flow Compressor/Turbine Permanent Magnet Motor/ Generator

 

09/800,900

 

3/7/01

 

10/22/02

 

56.

 

6,487,096

 

Power Controller

 

09/207,817

 

12/8/98

 

11/26/02

 

57.

 

6,489,692

 

Method and Apparatus for Controlling Rotation of A Magnetic Rotor

 

09/459,426

 

12/13/99

 

12/3/02

 

58.

 

6,495,929

 

Turbogenerator Power Control System

 

09/829,035

 

4/9/01

 

12/17/02

 

59.

 

6,522,030

 

Multiple Power Generator Connection Method and System

 

09/624,315

 

7/24/00

 

2/18/03

 

60.

 

6,539,720

 

Generated System Bottoming Cycle

 

09/985,789

 

11/6/01

 

4/1/03

 

61.

 

6,552,440

 

Automatic Turbogenerator Restarting Method & System

 

09/900,246

 

7/6/01

 

4/22/03

 

62.

 

6,612,112

 

Transient Turbine Exhaust Temperature Control For A Turbogenerator

 

10/012,770

 

11/5/01

 

9/2/03

 

63.

 

6,629,064

 

Apparatus and Method for Distortion Compensation

 

09/265,729

 

3/9/99

 

9/30/03

 

64.

 

6,634,176

 

Turbine Exhaust Vortex Disrupter

 

09/977,445

 

10/15/01

 

10/21/03

 

65.

 

6,639,328

 

Microturbine/Capacitor Power Distribution System

 

10/033,826

 

12/19/01

 

10/28/03

 

66.

 

6,657,332

 

Turbogenerator Cooling System

 

09/984,501

 

10/30/01

 

12/2/03

 

67.

 

6,657,348

 

Rotor Shield For Magnetic Rotary Machine

 

09/985,439

 

11/2/01

 

12/2/03

 

68.

 

6,664,653

 

Command and Control System and Method for Controlling Operational Sequencing of
Multiple Turbogenerators Using a Selected Control Mode

 

09/689,577

 

10/12/00

 

12/16/03

 

69.

 

6,664,654

 

System and Method for Dual Mode Control of a Turbogenerator/Motor

 

10/158,095

 

5/29/02

 

12/16/03

 

70.

 

6,675,583

 

Combustion Method

 

09/969,491

 

11/2/01

 

1/13/04

 

71.

 

6,683,389

 

Hybrid Electric Vehicle DC Power Generation System

 

09/938,101

 

8/23/01

 

1/27/04

 

72.

 

6,684,642

 

Gas Turbine Engine Having a Multi-Stage Multi-Plane Combustion System

 

10/171,684

 

6/17/02

 

2/3/04

 

73.

 

6,702,463

 

Compliant Foil Thrust Bearing

 

09/714,349

 

11/15/00

 

3/9/04

 

74.

 

6,709,243

 

Rotary Machine With Reduced Axial Thrust Loads

 

09/696,316

 

10/25/00

 

3/23/04

 

75.

 

6,713,892

 

Automatic Turbogenerator Restarting Method and System

 

09/900,635

 

7/6/01

 

3/30/04

 

76.

 

6,720,685

 

Turbogenerator Cooling System (Div Of 09/984,501)

 

10/339,247

 

1/9/03

 

4/13/04

 

77.

 

6,732,531

 

Combustion System for a Gas Turbine Engine With Variable

 

10/101,032

 

3/18/02

 

5/11/04

 

 

D-9

--------------------------------------------------------------------------------

 

No

 

Issue No.

 

Description

 

App. Ser. No.

 

Filing Date

 

Issue Date

 

 

 

 

 

Airflow Pressure Actuated Premix Injector

 

 

 

 

 

 

 

78.

 

6,747,372

 

Distributed Control Method for Multiple Connected Generators

 

10/007,219

 

11/2/01

 

6/8/04

 

79.

 

6,748,742

 

Power Offsetting Compressor System

 

10/008,047

 

11/7/01

 

6/15/04

 

80.

 

6,751,941

 

Foil Bearing Rotary Flow Compressor With Control Valve

 

10/080,179

 

2/19/02

 

6/22/04

 

81.

 

6,784,565

 

Turbogenerator With Electrical Brake

 

10/077,121

 

2/15/02

 

8/31/04

 

82.

 

6,787,933

 

Power Generation System Having Transient Ride-Through/Load-Leveling Capabilities

 

10/043,694

 

1/10/2002

 

9/7/2004

 

83.

 

6,804,946

 

Combustion System With Shutdown Fuel Purge

 

10/720,145

 

11/25/03

 

10/19/04

 

84.

 

6,812,586

 

Distributed Power System

 

10/066,349

 

1/30/02

 

11/2/04

 

85.

 

6,812,587

 

Continuous Power Supply With Back-Up Generation

 

10/300,936

 

11/21/02

 

11/2/04

 

86.

 

6,815,932

 

Detection of Islanded Behavior and Anti-Islanding Protection of a Generator in
Grid-Connected Mode

 

09/975,148

 

10/12/01

 

11/9/04

 

87.

 

6,864,595

 

Detection of Islanded Behavior and Anti-Islanding Protection of a Generator in
Grid-Connected Mode

 

10/812,979

 

3/31/04

 

3/8/05

 

88.

 

6,870,279

 

Method And System For Control Of Turbogenerator Power And Temperature

 

10/037,916

 

1/2//02

 

3/22/05

 

89.

 

6,951,110

 

Annular Recuperator Design

 

09/966,514

 

9/27/01

 

10/4/05

 

90.

 

6,958,550

 

Method and System For Control of Turbogenerator Power and Temperature

 

10/887,297

 

7/9/04

 

10/25/05

 

91.

 

6,960,840

 

Integrated Turbine Power Generation System With Catalytic Reactor

 

10/706,070

 

11/13/03

 

11/1/05

 

92.

 

7,065,873

 

Recuperator Assembly and Procedures

 

10/917,118

 

8/12/04

 

6/27/06

 

93.

 

7,092,262

 

Pre-charge Circuit and Method

 

10/813,550

 

3/31/04

 

8/15/06

 

94.

 

7,112,036

 

Rotor and Bearing System For A Turbomachine

 

10/862,136

 

6/4/04

 

9/26/06

 

95.

 

7,147,050

 

Recuperator Construction For a Gas Turbine Engine

 

10/917,107

 

8/12/04

 

12/12/06

 

96.

 

7,415,764

 

Recuperator Assembly And Procedures

 

11/336,718

 

1/20/06

 

8/26/08

 

97.

 

RE38,373

 

Compliant Foil Fluid Thrust Film Bearing With a Tilting Pad Underspring (Reissue
of 5,918,985)

 

09/900,775

 

7/6/01

 

12/30/03

 

98.

 

RE39,190

 

Compliant Foil Fluid Film Radial Bearing (Reissue of 5,915,841.)

 

09/895,568

 

—

 

7/18/06

 

 

D-10

--------------------------------------------------------------------------------

 

II.                        CAPSTONE PENDING U.S. PATENT APPLICATIONS

 

Description

 

App. Ser. No.

 

Filing Date

 

Turbgenerator/Motor Controller (Reissue)

 

09/853,852

 

5/11/01

 

Emergency Elevator System Interface Package

 

11/517,957

 

9/8/06

 

Compliant Foil Fluid Film Radial Bearing Or Seal

 

11/740,798

 

4/26/2007

 

 

III.                    CAPSTONE ISSUED FOREIGN PATENTS

 

Issue No.

 

Description

 

Country

 

App. Ser. No.

 

0746680

 

Gas Turbine Engine Generator Set

 

Europe

 

95909213.1

 

69527283.7 in DE

 

(U.S. 5,497,615)

 

 

 

 

 

0 799 388

 

Compliant Foil Hydrodynamic Fluid Film Thrust Bearing

 

Europe

 

95937420.8

 

69519684.7 in DE

 

(U.S. 5,529,398)

 

 

 

 

 

0 756 672

 

Compliant Foil Hydrodynamic Fluid Radial Bearing

 

Europe

 

95914005.4

 

69522683.5 in DE

 

(U.S. 5,427,455)

 

 

 

 

 

1001180

 

Compliant Foil Hydrodynamic Fluid Film Thrust Bearing (divisional)

 

Europe

 

00200446.3

 

69532538.8 in DE

 

(U.S. 5,529,398)

 

 

 

 

 

3725548

 

Compliant Foil Hydrodynamic Fluid Film Thrust Bearing

 

Japan

 

0520429/96

 

 

 

(U.S. 5,529,398)

 

 

 

 

 

0903466

 

Double Diaphragm Compound Shaft

 

Europe

 

98307606.8

 

69824801.5 in DE

 

(U.S. 5,964,663)

 

 

 

 

 

0878665

 

Low Emissions Combustion System For a Gas Turbine Engine

 

Europe

 

98303693.0

 

 

 

(U.S. 5,850,732)

 

 

 

 

 

122912

 

Low Emissions Combustion System For A Gas Turbine Engine

 

Israel

 

122912

 

 

 

(U.S. 5,850,732)

 

 

 

 

 

112275

 

Gas Turbine Engine Generator Set

 

Israel

 

112275

 

 

 

(U.S. 5,497,615)

 

 

 

 

 

117546

 

Compliant Foil Hydrodynamic Fluid Film Thrust Bearing

 

Israel

 

117546

 

 

 

(U.S. 5,529,398)

 

 

 

 

 

113289

 

Compliant Foil Hydrodynamic Fluid Radial Bearing

 

Israel

 

113289

 

 

 

(U.S. 5,427,455)

 

 

 

 

 

118216

 

Compound Shaft

 

Israel

 

118216

 

 

 

(U.S. 5,697,848)

 

 

 

 

 

121531

 

Gaseous Fuel Compression And Control System

 

Israel

 

121531

 

 

D-11

--------------------------------------------------------------------------------

 

Issue No.

 

Description

 

Country

 

App. Ser. No.

 

 

 

(U.S. 5,819,524)

 

 

 

 

 

124664

 

Compliant Foil Fluid Film Thrust Bearing
(U.S. 5,918,985)

 

Israel

 

124664

 

125679

 

Double Diaphragm Compound Shaft
(U.S. 5,964,663)

 

Israel

 

125679

 

127021

 

Compliant Foil Film Radial Bearing
(U.S. 5,915,841)

 

Israel

 

127021

 

125905

 

Turbogenerator/motor Controller With ancillary Energy Storage/Discharge (B2)
(U.S. 6,031,294)

 

Israel

 

125905

 

137542

 

Turbogenerator/motor Controller (B1)
(U.S. 5,903,116)

 

Israel

 

137542

 

121532

 

Helical Flow Compression Turbine With Permanent Magnet Motor/Generator
(U.S. 5,899,673)

 

Israel

 

121532

 

3598437

 

Compliant Foil Hydrodynamic Fluid Film Radial Bearing
(U.S. 5,427,455)

 

Japan

 

7-526958

 

1075724

 

Power Controller (B3)
(U.S. 6,487,096)

 

Europe

 

98962993.6

 

0903510 GB and Fr.; 69830961.8-08 Germ.

 

Compliant Foil Fluid Film Thrust Bearing with Tilting Pad Underspring
(U.S. 5,918,985)

 

Europe

 

98307596.1

 

0927831 GB and Fr.; 69832579.6-08 Germ.

 

Compliant Foil Fluid Film Radial Bearing
(U.S. 5,915,841)

 

Europe

 

98310805.1

 

0901218 GB and Fr.; 69832860.4-08 Germ.

 

Turbogenerator/Motor Controller (B1)
(U.S. 5,903,116)

 

Europe

 

98307247.1

 

1130322 GB and FR; 60125441.4 Germany

 

Multi-Stage Multi-Plane Combustion System for a Gas Turbine Engine
(U.S. 6,453,658)

 

Europe

 

01301676.1

 

1337761 in GB, FR and IT; 60125583.6 in Germany

 

Compliant Foil Thrust Bearing
(U.S. 6,702,463)

 

Europe

 

01996693.6

 

2,242,947

 

Double Diaphragm Compound Shaft
(U.S. 5,964,663)

 

Canada

 

2,242,947

 

2,254,034

 

Compliant Foil Fluid Film Radial Bearing

 

Canada

 

2,254,034

 

 

D-12

--------------------------------------------------------------------------------

 

Issue No.

 

Description

 

Country

 

App. Ser. No.

 

 

 

(U.S. 5,915,841)

 

 

 

 

 

0963035 Germany 69936424.8

 

Turbogenerator/Motor Control System
(U.S. 6,023,135)

 

Europe

 

99303642.5

 

2,238,356

 

Compliant Foil Fluid Film Thrust Bearing with Tilting Pad Underspring
(U.S. 5,918,985)

 

Canada

 

2,238,356

 

 

IV.                      CAPSTONE PENDING FOREIGN PATENT APPLICATIONS

 

Description

 

Country

 

App. Ser. No.

 

Filing Date

 

Command and Control System and Method For Multiple Turbogenerators
(U.S. 6,169,334)

 

Canada

 

2,279,047

 

7/29/99

 

Helical Flow Compressor/Turbine Permanent Magnet Motor/Generator
(U.S. 6,468,051)

 

Japan

 

2000-117024

 

4/19/99

 

Turbogenerator/Motor Controller (B1)
(U.S. 5,903,116)

 

Canada

 

2,246,769

 

9/8/98

 

Compliant Foil Fluid Film Thrust Bearing With a Tilting Pad Underspring
(U.S. 5,918,985)

 

Japan

 

10-250675

 

9/4/98

 

Compliant Foil Fluid Film Radial Bearing
(U.S. 5,915,841)

 

Japan

 

10-347079

 

12/7/98

 

Multi-Stage Multi-Plane Combustion System For a Gas Turbine Engine
(U.S. 6,453,658)

 

Japan

 

2001-45027

 

2/21/01

 

Multiple Power Generator Connection Method and System
(U.S. 6,522,030)

 

Europe

 

01923202.4

 

4/6/01

 

Power Controller (B3) (Div. of #131)
(U.S. 6,487,096)

 

Europe

 

05025283.2

 

11/18/05

 

Compliant Foil Fluid Film Radial Bearing Or Seal

 

PCT

 

PCT/US08/57716

 

3/20/2008

 

 

TRADEMARK APPLICATIONS AND REGISTRATIONS BY COUNTRY

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

CAPSTONE

 

Australia

 

—

 

755,739

 

Registered

 

February 23, 2018

 

 

D-13

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq17i001.jpg]

 

Australia

 

—

 

755,737

 

Registered

 

February 23, 2018

 

CAPSTONE

 

Brazil

 

824/638,859

 

824/638,859

 

Registered

 

November 20, 2017

 

CAPSTONE

 

Bulgaria

 

41,473

 

37,397

 

Registered

 

July 28, 2008(1)

 

CAPSTONE

 

Bulgaria

 

42,775

 

34,967

 

Registered

 

July 28, 2008

 

[g117172kq17i001.jpg]

 

Bulgaria

 

42,776

 

34,968

 

Registered

 

July 28, 2008

 

CAPSTONE

 

Canada

 

870,563

 

TMA 563,894

 

Registered

 

June 21, 2017

 

[g117172kq17i001.jpg]

 

Canada

 

870,564

 

TMA 504,764

 

Registered

 

November 30, 2013

 

CAPSTONE

 

China (PRC)

 

9,800,017,341

 

1,291,874

 

Registered

 

July 06, 2009

 

CAPSTONE

 

China (PRC)

 

9,800,017,342

 

1,284,494

 

Registered

 

June 13, 2009

 

CAPSTONE

 

China (PRC)

 

9,800,017,343

 

1,299,981

 

Registered

 

July 27, 2009

 

CAPSTONE

 

China (PRC)

 

9,800,017,344

 

1,301,274

 

Registered

 

August 06, 2009

 

[g117172kq17i001.jpg]

 

China (PRC)

 

9,800,017,340

 

1,284,495

 

Registered

 

June 13, 2009

 

CAPSTONE

 

CTM

 

637,082

 

637,082

 

Registered

 

September 23, 2017

 

CAPSTONE

 

CTM

 

745,109

 

745,109

 

Registered

 

February 13, 2018

 

 

--------------------------------------------------------------------------------

(1)        Bulgaria — Renewals have been issued for these registrations.

 

D-14

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq17i001.jpg]

 

CTM

 

524,306

 

524,306

 

Registered

 

April 29, 2017

 

CAPSTONE

 

Czech Republic

 

128,183

 

212,315

 

Registered

 

December 05, 2017

 

CAPSTONE

 

Czech Republic

 

128,352

 

218,818

 

Registered

 

December 11, 2017

 

CAPSTONE

 

Czech Republic

 

128,353

 

218,819

 

Registered

 

December 11, 2017

 

CAPSTONE

 

Czech Republic

 

130,446

 

228,042

 

Registered

 

February 25, 2018

 

[g117172kq17i001.jpg]

 

Czech Republic

 

130,447

 

228,043

 

Registered

 

February 25, 2018

 

CAPSTONE

 

Estonia

 

9,800,433

 

29,393

 

Registered

 

September 03, 2009

 

CAPSTONE

 

Estonia

 

EE9,702,761

 

28,852

 

Registered

 

May 26, 2009

 

CAPSTONE

 

Estonia

 

EE9,702,762

 

28,853

 

Registered

 

May 26, 2009

 

[g117172kq17i001.jpg]

 

Estonia

 

9,800,434

 

29,394

 

Registered

 

September 03, 2009

 

CAPSTONE

 

Hungary

 

M9,704,089

 

157,005

 

Registered

 

November 06, 2017

 

CAPSTONE

 

Hungary

 

M9,800,530

 

155,108

 

Registered

 

February 16, 2018

 

[g117172kq17i001.jpg]

 

Hungary

 

M9,800,529

 

155,107

 

Registered

 

February 16, 2018

 

CAPSTONE

 

India

 

769,311

 

769,311

 

Registered

 

September 23, 2017

 

[g117172kq17i001.jpg]

 

India

 

769,314

 

769,314

 

Registered

 

September 23, 2017

 

CAPSTONE

 

Indonesia

 

D00.2002.142
59.14414

 

543,704

 

Registered

 

July 04, 2012

 

CAPSTONE

 

Israel

 

115,027

 

115,027

 

Registered

 

September 23, 2018

 

CAPSTONE

 

Israel

 

115,028

 

115,028

 

Registered

 

September 23, 2018

 

 

D-15

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

CAPSTONE

 

Israel

 

115,029

 

115,029

 

Registered

 

September 23, 2018

 

CAPSTONE

 

Israel

 

117,832

 

117,832

 

Registered

 

February 15, 2019

 

[g117172kq17i001.jpg]

 

Israel

 

112,062

 

112,062

 

Registered

 

April 30, 2018

 

[g117172kq17i001.jpg]

 

Israel

 

112,063

 

112,063

 

Registered

 

April 30, 2018

 

CAPSTONE

 

Japan

 

05-077077

 

3,179,900

 

Registered

 

July 31, 2016

 

CAPSTONE

 

Japan

 

10-017382

 

4,414,046

 

Registered

 

September 01, 2010

 

CAPSTONE

 

Japan

 

9-174425

 

4,413,826

 

Registered

 

September 01, 2010

 

CAPSTONE (in Katakana) [g117172kq17i002.jpg]

 

Japan

 

62-4732

 

2,221,178

 

Registered

 

April 23, 2010

 

[g117172kq17i001.jpg]

 

Japan

 

9-112736

 

4,378,971

 

Registered

 

April 21, 2010

 

CAPSTONE

 

Malaysia

 

98/02655

 

9,802,655

 

Registered

 

September 16, 2017

 

CAPSTONE

 

Malaysia

 

98/02658

 

9,802,658

 

Registered

 

March 04, 2018

 

CAPSTONE

 

Malaysia

 

98/02659

 

9,802,659

 

Registered

 

September 04, 2017

 

CAPSTONE

 

Malaysia

 

98/02660

 

9,802,660

 

Registered

 

March 04, 2018

 

[g117172kq17i001.jpg]

 

Malaysia

 

98/02656

 

9,802,656

 

Registered

 

March 04, 2018

 

 

D-16

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq19i001.jpg]

 

Malaysia

 

98/02657

 

9,802,657

 

Registered

 

March 04, 2018

 

CAPSTONE

 

Mexico

 

324,506

 

576,585

 

Registered

 

March 04, 2008(2)

 

CAPSTONE

 

Mexico

 

324,507

 

579,612

 

Registered

 

March 04, 2008

 

CAPSTONE

 

Mexico

 

324,508

 

577,332

 

Registered

 

March 04, 2008

 

CAPSTONE

 

Mexico

 

324,509

 

582,024

 

Registered

 

March 04, 2008

 

[g117172kq19i001.jpg]

 

Mexico

 

324,510

 

578,232

 

Registered

 

March 04, 2008

 

[g117172kq19i001.jpg]

 

Mexico

 

324,512

 

582,025

 

Registered

 

March 04, 2008

 

CAPSTONE

 

New Zealand

 

289,011

 

289,011

 

Registered

 

February 26, 2015

 

CAPSTONE

 

New Zealand

 

289,012

 

289,012

 

Registered

 

February 26, 2015

 

CAPSTONE

 

New Zealand

 

289,013

 

289,013

 

Registered

 

September 04, 2014

 

CAPSTONE

 

New Zealand

 

289,014

 

289,014

 

Registered

 

September 16, 2014

 

CAPSTONE

 

New Zealand

 

311,548

 

311,548

 

Registered

 

June 24, 2016

 

[g117172kq19i001.jpg]

 

New Zealand

 

289,015

 

289,015

 

Registered

 

February 26, 2015

 

[g117172kq19i001.jpg]

 

New Zealand

 

289,016

 

289,016

 

Registered

 

February 26, 2015

 

CAPSTONE

 

Nigeria

 

84672/04

 

RTM 66760

 

Registered

 

February 04, 2011

 

CAPSTONE

 

Nigeria

 

84673/04

 

RTM 66750

 

Registered

 

February 04, 2011

 

 

--------------------------------------------------------------------------------

(2)

 

Mexico — Renewal petitions and change of legal address have been filed with the
Mexican Intellectual Property Office.

 

D-17

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq19i001.jpg]

 

Nigeria

 

84670/04

 

RTM 66752

 

Registered

 

February 04, 2011

 

[g117172kq19i001.jpg]

 

Nigeria

 

84671/04

 

RTM 66761

 

Registered

 

February 04, 2011

 

CAPSTONE

 

Poland

 

Z-180,350

 

125,456

 

Registered

 

November 20, 2017

 

CAPSTONE

 

Poland

 

Z-184,099

 

128,663

 

Registered

 

March 02, 2018

 

[g117172kq19i001.jpg]

 

Poland

 

Z-183,816

 

130,098

 

Registered

 

February 24, 2018

 

CAPSTONE

 

Republic of Korea

 

97/52389

 

430,990

 

Registered

 

November 25, 2008(3)

 

CAPSTONE

 

Republic of Korea

 

97/52390

 

438,925

 

Registered

 

January 22, 2009

 

CAPSTONE

 

Republic of Korea

 

98/1917

 

54,995

 

Registered

 

May 17, 2009

 

CAPSTONE

 

Republic of Korea

 

98/9567

 

59,573

 

Registered

 

February 15, 2010

 

[g117172kq19i001.jpg]

 

Republic of Korea

 

97/45930

 

427,401

 

Registered

 

October 28, 2008

 

[g117172kq19i001.jpg]

 

Republic of Korea

 

97/45931

 

430,962

 

Registered

 

November 25, 2008

 

CAPSTONE

 

Romania

 

47,388

 

34,319

 

Registered

 

December 09, 2017

 

CAPSTONE

 

Romania

 

50,051

 

35,291

 

Registered

 

March 16, 2018

 

 

--------------------------------------------------------------------------------

(3)

 

Republic of Korea — Renewal applications have been filed for the two pertinent
registrations in the Republic of Korea. Delay has been caused due to Korea’s
change of classification of goods into a separate international class number.
Waller Lansden Dortch & Davis is awaiting renewal certificates and next renewal
deadlines from local counsel.

 

D-18

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq19i001.jpg]

 

Romania

 

50,052

 

35,292

 

Registered

 

March 16, 2018

 

CAPSTONE

 

Russian Federation

 

97,718,654

 

174,403

 

Registered

 

December 05, 2017

 

CAPSTONE

 

Russian Federation

 

97,718,655

 

173,434

 

Registered

 

December 05, 2017

 

CAPSTONE

 

Russian Federation

 

97,718,656

 

173,435

 

Registered

 

December 05, 2017

 

CAPSTONE

 

Russian Federation

 

98,702,564

 

176,654

 

Registered

 

February 18, 2018

 

[g117172kq19i001.jpg]

 

Russian Federation

 

98,702,573

 

176,655

 

Registered

 

February 18, 2018

 

CAPSTONE

 

Slovak Republic

 

0499-98

 

191,841

 

Registered

 

February 27, 2018

 

CAPSTONE

 

Slovak Republic

 

3643-97

 

189,134

 

Registered

 

December 11, 2017

 

CAPSTONE

 

Slovak Republic

 

3655-97

 

188,650

 

Registered

 

December 11, 2017

 

CAPSTONE

 

Slovak Republic

 

3656-97

 

188,651

 

Registered

 

December 11, 2017

 

[g117172kq19i001.jpg]

 

Slovak Republic

 

0500-98

 

191,068

 

Registered

 

February 27, 2018

 

CAPSTONE

 

Slovenia

 

Z-9771850

 

9,771,850

 

Registered

 

December 11, 2017

 

CAPSTONE

 

Slovenia

 

Z-9870250

 

9,870,250

 

Registered

 

February 26, 2018

 

[g117172kq19i001.jpg]

 

Slovenia

 

Z-9870249

 

9,870,249

 

Registered

 

February 26, 2018

 

CAPSTONE

 

South Africa

 

98/02522

 

98/02522

 

Registered

 

February 20, 2018

 

CAPSTONE

 

South Africa

 

98/02523

 

98/02523

 

Registered

 

February 20, 2018

 

CAPSTONE

 

South Africa

 

98/02524

 

98/02524

 

Registered

 

February 20, 2018

 

CAPSTONE

 

South Africa

 

98/02525

 

98/02525

 

Registered

 

February 20, 2018

 

 

D-19

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

[g117172kq19i001.jpg]

 

South Africa

 

2004/03561

 

2004/03561

 

Registered

 

March 08, 2014

 

[g117172kq19i001.jpg]

 

South Africa

 

98/02526

 

98/02526

 

Registered

 

February 20, 2018

 

[g117172kq19i001.jpg]

 

South Africa

 

98/02527

 

98/02527

 

Registered

 

February 20, 2018

 

CAPSTONE

 

Switzerland

 

04728/2002

 

502,265

 

Registered

 

May 27, 2012

 

CAPSTONE

 

Ukraine

 

98/020713

 

20,994

 

Registered

 

February 23, 2018

 

[g117172kq19i001.jpg]

 

Ukraine

 

98/020714

 

20,655

 

Registered

 

February 23, 2018

 

CAPSTONE

 

USA

 

74/732,798

 

2,058,307

 

Registered

 

April 29, 2017

 

CAPSTONE

 

USA

 

75/306,958

 

2,248,687

 

Registered

 

June 01, 2009

 

CAPSTONE

 

USA

 

75/351,980

 

2,201,317

 

Registered

 

November 03, 2018

 

CAPSTONE

 

USA

 

75/357,665

 

2,487,869

 

Registered

 

September 11, 2011

 

[g117172kq19i002.jpg]

 

USA

 

78/166,520

 

2,993,044

 

Registered

 

September 06, 2015

 

[g117172kq19i003.jpg]

 

USA

 

78/975,666

 

2,940,243

 

Registered

 

April 12, 2015

 

CAPSTONE MICROTURBINE

 

USA

 

78/166,522

 

2,956,871

 

Registered

 

May 31, 2015

 

[g117172kq19i004.jpg]

 

USA

 

78/970,583

 

—

 

Pending

 

—

 

[g117172kq19i001.jpg]

 

USA

 

75/191,384

 

2,144,240

 

Registered

 

March 17, 2018

 

 

D-20

--------------------------------------------------------------------------------

 

Trademark

 

Jurisdiction

 

Application
Number

 

Reg.
Number

 

Status

 

Renewal Deadline

 

SAFE RETURN SYSTEM

 

USA

 

78/947,172

 

—

 

Pending

 

—

 

SRS

 

USA

 

78/947,412

 

—

 

Pending

 

—

 

 

INTELLECTUAL PROPERTY RIGHTS LICENSED FROM THIRD PARTIES

 

1.               Licensing Agreement, dated as of April 14, 2008, between the
Company and United Technologies Corporation, Pratt & Whitney, which grants the
Company a non-exclusive, non-transferable license, without the right to
sub-license, to use the patents and/or technical information related to material
and material properties listed on Exhibit A attached thereto and the related
Technical Support (as defined therein) for the design of the C200, as agreed
upon in that certain Development and License Agreement, dated as of September 7,
2007, between the parties thereto. All fees for such license have been paid in
full in advance.

 

2.               Amended and Restated License Agreement, dated as of August 2,
2000 (“Solar License Agreement”), between the Company and Solar Turbines
Incorporated (“Solar”), which grants the Company a non-exclusive,
non-transferable license, without the right to sub-license to use the Solar
Intellectual Property (as defined therein) as set forth therein. The Company
pays to Solar a royalty for each Licensed Product (as defined in the Solar
License Agreement) manufactured by the Company in accordance with the Solar
License Agreement pursuant to the following schedule:

 

-

 

0-100kW:

 

$

100.00

 

-

 

101kW-200kW:

 

$

200.00

 

-

 

201kW-300kW:

 

$

300.00

 

-

 

301kW-400kW:

 

$

400.00

 

-

 

401kW-500kW:

 

$

500.00

 

 

i                                             Bulgaria — Renewals have been
issued for these registrations.

ii                                          Mexico — Renewal petitions and
change of legal address have been filed with the Mexican Intellectual Property
Office.

iii                                       Republic of Korea — Renewal
applications have been filed for the two pertinent registrations in the Republic
of Korea. Delay has been caused due to Korea’s change of classification of goods
into a separate international class number. Waller Lansden Dortch & Davis is
awaiting renewal certificates and next renewal deadlines from local counsel.

 

 

(j)

Taxes. Company and its Affiliates have paid or caused to be paid to the proper
authorities when due all federal, state and local taxes required to be withheld
by each of them except for those taxes being contested in good faith by
appropriate

 

D-21

--------------------------------------------------------------------------------

 

proceedings and for which appropriate reserves have been maintained under GAAP.
Company and its Affiliates have filed all federal, state and local tax returns
which to the knowledge of the Officers of Company or any Affiliate, as the case
may be, are required to be filed, and Company and its Affiliates have paid or
caused to be paid to the respective taxing authorities all taxes as shown on
these returns or on any assessment received by any of them to the extent such
taxes have become due except for those taxes being contested in good faith by
appropriate proceedings and for which appropriate reserves have been maintained
under GAAP.

 

(k)                                  Titles and Liens. Company has good and
absolute title to all Collateral free and clear of all Liens other than
Permitted Liens. No financing statement naming Company as debtor is on file in
any office except to perfect only Permitted Liens.

 

(1)                                  No Defaults. Company is in compliance with
all provisions of all agreements, instruments, decrees and orders to which it is
a party or by which it or its property is bound or affected, the breach or
default of which could have a Material Adverse Effect.

 

(m)                               Submissions to Wells Fargo. All financial and
other information provided to Wells Fargo by or on behalf of Company in
connection with Company’s request for the credit facilities contemplated hereby
is (i) true and correct in all material respects, (ii) does not omit any
material fact that would cause such information to be misleading, and (iii) as
to projections, valuations or proforma financial statements, present a good
faith opinion as to such projections, valuations and proforma condition and
results.

 

(n)                                 Financing Statements. Company has previously
authorized the filing of financing statements sufficient when filed to perfect
the Security Interest and other Liens created by the Security Documents. When
such financing statements are filed, Wells Fargo will have a valid and perfected
security interest in all Collateral capable of being perfected by the filing of
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing has been filed with respect to such
Collateral.

 

(o)                                 Rights to Payment. Each right to payment and
each instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all future Collateral, will be when
arising or issued) the valid, genuine and legally enforceable obligation,
subject to no defense, setoff or counterclaim of the account debtor or other
obligor named in that instrument.

 

(p)                                 Employee Benefit Plans.

 

(i)                                      Maintenance and Contributions to Plans.
Except as disclosed below, neither Company nor any ERISA Affiliate (A) maintains
or has maintained any Pension Plan, (B) contributes or has contributed to any
Multiemployer Plan, or (C) provides or has provided post-retirement

 

D-22

--------------------------------------------------------------------------------

 

medical or insurance benefits to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC, or
applicable state law).

 

(ii)                                  Knowledge of Plan Noncompliance with
Applicable Law. Except as disclosed below, neither Company nor any ERISA
Affiliate has (A) knowledge that Company or the ERISA Affiliate is not in full
compliance with the requirements of ERISA, the IRC, or applicable state law with
respect to any Plan, (B) knowledge that a Reportable Event occurred or continues
to exist in connection with any Pension Plan, or (C) sponsored a Plan that it
intends to maintain as qualified under the IRC that is not so qualified, and no
fact or circumstance exists which may have a material adverse effect on such
Plan’s tax-qualified status.

 

(iii)                               Funding Deficiencies and Other Liabilities.
Neither Company nor any ERISA Affiliate has liability for any (A) accumulated
funding deficiency (as defined in Section 302 of ERISA and Section 412 of the
IRC) under any Plan, whether or not waived, (B) withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan under Section 4201 or
4243 of ERISA, or (C) event or circumstance which could result in financial
obligation to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).

 

Employee Benefit Plans

 

None.

 

(q)                                 Environmental Matters.

 

(i)                                     Hazardous Substances on Premises. Except
as disclosed below, there are not present in, on or under the Premises any
Hazardous Substances in such form or quantity as to create any material
liability or obligation for either Company or Wells Fargo under the common law
of any jurisdiction or under any Environmental Law, and no Hazardous Substances
have ever been stored, buried, spilled, leaked, discharged, emitted or released
in, on or under the Premises in such a way as to create a liability which would
have a Material Adverse Effect.

 

(ii)                                  Disposal of Hazardous Substances. Except
as disclosed below, Company has not disposed of Hazardous Substances in such a
manner as to create any liability under any Environmental Law which would have a
Material Adverse Effect.

 

D-23

--------------------------------------------------------------------------------

 

(iii)          Claims and Proceedings with Respect to Environmental Law
Compliance. Except as disclosed below, there have not existed in the past, nor
are there any threatened or impending requests, claims, notices, investigations,
demands, administrative proceedings, hearings or litigation relating in any way
to the Premises or Company, alleging material liability under, violation of, or
noncompliance with any Environmental Law or any license, permit or other
authorization issued pursuant thereto.

 

(iv)          Compliance with Environmental Law; Permits and Authorizations.
Except as disclosed below, Company (A) conducts its business at all times in
compliance with applicable Environmental Law where the failure to be so in
compliance could reasonably be expected to have a Material Adverse Effect, (B)
possesses valid licenses, permits and other authorizations required under
applicable Environmental Law for the lawful and efficient operation of its
business, none of which are scheduled to expire, or withdrawal, or material
limitation within the next 12 months, and (C) has not been denied insurance on
grounds related to potential environmental liability.

 

(v)           Status of Premises. Except as disclosed below, the Premises are
not and never have been listed on the National Priorities List, the
Comprehensive Environmental Response, Compensation and Liability Information
System or any similar federal, state or local list, schedule, log, inventory or
database.

 

(vi)          Environmental Audits, Reports, Permits and Licenses. Company has
delivered to Wells Fargo all environmental assessments, audits, reports,
permits, licenses and other documents describing or relating in any way to the
Premises or Company’s businesses.

 

Environmental Matters

 

Environmental Reports

 

Review of Site Conditions, dated February 11, 2005 for 16640 Stagg Street, Van
Nuys, California, by TRC

 

Environmental Site Assessment Report, dated February 27, 2006 for 16640 Stagg
Street, Van Nuys, California, by TRC

 

Indoor Air Quality Investigation, dated April 17, 2006 for 16640 Stagg Street,
Van Nuys, California, by Environmics Southwest, LLC

 

Personal Breathing Zone Sampling, dated July 25, 2006 for 16640 Stagg Street,
Van Nuys, California, by Environmics Southwest, LLC

 

D-24

--------------------------------------------------------------------------------

 

Exhibit E to Credit and Security Agreement (Ex-Im Subfacility)

COMPLIANCE CERTIFICATE

 

To:

Wells Fargo Bank, National Association

Date:

[                                     , 200    ]

Subject:

Financial Statements

 

In accordance with our Credit and Security Agreement (Ex-Im Subfacility) dated
February 9, 2009 (as amended from time to time, the “Credit Agreement”),
attached are the financial statements of Capstone Turbine Corporation (the
“Company”) dated [                       , 200   ] (the “Reporting Date”) and
the year-to-date period then ended (the “Current Financials”). All terms used in
this certificate have the meanings given in the Credit Agreement.

 

A.            Preparation and Accuracy of Financial Statements. I certify that
the Current Financials have been prepared in accordance with GAAP, subject to
year-end audit adjustments, and fairly present Company’s financial condition as
of the Reporting Date.

 

B.            Name of Company; Merger and Consolidation. I certify that:

 

(Check one)

 

o            Company has not, since the date of the Credit Agreement, changed
its name or jurisdiction of organization, nor has it consolidated or merged with
another Person.

 

o            Company has, since the date of the Credit Agreement, either changed
its name or jurisdiction of organization, or both, or has consolidated or merged
with another Person, which change, consolidation or merger: o was consented to
in advance by Wells Fargo in an Authenticated Record, and/or o is more fully
described in the statement of facts attached to this Certificate.

 

C.            Events of Default. I certify that:

 

(Check one)

 

o            I have no knowledge of the occurrence of an Event of Default under
the Credit Agreement, except as previously reported to Wells Fargo in a Record.

 

o            I have knowledge of an Event of Default under the Credit Agreement
not previously reported to Wells Fargo in a Record, as more fully described in
the statement of facts attached to this Certificate, and further, I acknowledge
that Wells Fargo may under the terms of the Credit Agreement impose the Default
Rate at any time during the resulting Default Period.

 

E-1

--------------------------------------------------------------------------------

 

D.            Litigation Matters. I certify that:

 

(Check one)

 

o            I have no knowledge of any material adverse change to the
litigation exposure of Company or any of its Affiliates or of any Guarantor.

 

o            I have knowledge of material adverse changes to the litigation
exposure of Company or any of its Affiliates or of any Guarantor not previously
disclosed in Exhibit D, as more fully described in the statement of facts
attached to this Certificate.

 

E.             Financial Covenants. I further certify that:

 

(Check and complete each of the following)

 

1.             Minimum Book Net Worth. Pursuant to Section 5.2(a) of the Credit
Agreement, as of the Reporting Date, Company’s Book Net Worth was
$[                       ], which o satisfies o does not satisfy the requirement
that such amount be not less than the applicable amount set forth in the table
below (numbers appearing between “< >” are negative) on the Reporting Date:

 

Test Date

 

Minimum Book Net Worth

 

December 31, 2008

 

$

61,000,000

 

January 31, 2009

 

$

57,000,000

 

February 28, 2009

 

$

52,700,000

 

March 31, 2009

 

$

51,000,000

 

April 30, 2009

 

$

48,150,000

 

May 31, 2009

 

$

45,300,000

 

June 30, 2009

 

$

46,500,000

 

July 31, 2009

 

$

43,900,000

 

August 31, 2009

 

$

41,300,000

 

September 30, 2009

 

$

44,450,000

 

October 31, 2009

 

$

42,100,000

 

November 30, 2009

 

$

39,850,000

 

December 31, 2009

 

$

44,600,000

 

January 31, 2010

 

$

42,250,000

 

February 28, 2010

 

$

40,000,000

 

March 31, 2010

 

$

45,150,000

 

 

2.             Minimum Net Income. Pursuant to Section 5.2(b) of the Credit
Agreement, as of the Reporting Date, Company’s Net Income was
[$                 ], which o satisfies o does not satisfy the requirement that
Net Income be not less than the amount set forth in the table below (numbers
appearing between “< >” are negative) on the Reporting Date:

 

Test Date

 

Minimum Net Income

 

December 31, 2008

 

$

<10,800,000

> 

 

E-2

--------------------------------------------------------------------------------

 

Test Date

 

Minimum Net Income

 

March 31, 2009

 

$

<11,000,000

> 

June 30, 2009

 

$

<5,750,000

> 

September 30, 2009

 

$

<3,200,000

> 

December 31, 2009

 

$

<1,000,000

> 

March 31, 2010

 

$

<500,000

> 

 

3.             Minimum Cash to Unreimbursed Line of Credit Advances Coverage
Ratio. Pursuant to Section 5.2(c) of the Credit Agreement, as of the Reporting
Date, at all times, Company has o has not o been in compliance with the
requirement that the percentage of the unreimbursed “Advances” plus the “L/C
Amount” under the Domestic Facility Agreement plus outstanding Advances under
the Revolving Notes to the amount of cash plus Cash Equivalents of Company in
which Wells Fargo has a perfected first priority security interest be not
greater than 80%.

 

4.             Capital Expenditures. Pursuant to Section 5.2(d) of the Credit
Agreement, for the year-to-date period ending on the Reporting Date, Companies
have expended or contracted to expend during the fiscal year
ended                    , 200      , for Capital Expenditures,
$                     in the aggregate, which o satisfies o does not satisfy the
requirement that such expenditures not exceed $7,500,000 in the aggregate during
the fiscal year ended March 31, 2009, $10,000,000 in the aggregate during the
fiscal year ended March 31, 2010, and zero for each subsequent fiscal year.

 

Attached are statements of all relevant facts and computations in reasonable
detail sufficient to evidence Company’s compliance with the financial covenants
referred to above, which computations were made in accordance with GAAP.

 

 

Capstone Turbine Corporation

 

 

 

By:

 

 

 

Its: Chief Financial Officer

 

E-3

--------------------------------------------------------------------------------

 

Exhibit F to Credit and Security Agreement (Ex-Im Subfacility)

 

PERMITTED LIENS

 

Creditor

 

Collateral

 

Jurisdiction

 

Filing Date

 

Filing No.

 

 

 

 

 

 

 

 

 

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10826789

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10826805

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10826953

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10826979

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10827001

GE Business Credit Corporation

 

Various equipment

 

Delaware

 

Original Filing Date: 8/13/01
Continuation Filing Date: 2/15/06

 

10827035

Crown Credit Company

 

Daewoo Lift Truck, G25P-186, SN: DZ-00140

 

Delaware

 

7/28/03

 

31940421

 

F-1

--------------------------------------------------------------------------------

 

Creditor

 

Collateral

 

Jurisdiction

 

Filing Date

 

Filing No.

 

 

 

 

 

 

 

 

 

General Electric Capital Corporation

 

Various equipment

 

Delaware

 

1/11/06

 

60109413

 

INDEBTEDNESS

 

None.

 

GUARANTIES

 

None.

 

F-2

--------------------------------------------------------------------------------

 

Exhibit G to Credit and Security Agreement (Ex-Im Subfacility)

 

Borrowing Base Certificate for Ex-Im Guaranteed Line

 

(See attached form)

 

--------------------------------------------------------------------------------

 

BORROWING BASE CERTIFICATE (“BBC”) FOR EXPORT LINE

Exhibit B to Ex-Im Working Capital Guarantee Credit Agreement

 

To: John Curry, VP, Wells Fargo Business Credit

Tel:  626-685-9918   Fax: 626-844-9063   curry.john@wellsfargo.com

To: Edmund Catolico, VP, Wells Fargo HSBC Trade Bank

Tel:  415-396-6166   Fax: 415-975-6558   edmund.catolico@wellsfargo.com

 

As of Date (“Reporting Date”):

 

 

Borrower: Capstone Turbine Corporation

 

In accordance with the Ex-Im Working Capital Guarantee Credit Agreement dated as
of December XX, 2008 (the “Credit Agreement”) and subsequent Amendment, set
forth below is the calculation of the Borrowing Base and Availability as of the
date shown above (the “Reporting Date”).  All terms used in this certificate
have the meanings given to them in the Credit Agreement.  Unless otherwise
indicated, all amounts are as of the Reporting Date.

 

Per Section 2.04 of the Ex-Im Borrower Agreement, the Borrowing Base Certificate
must be supported by Export Orders from Borrower’s Buyers.  This can be
submitted monthly in summary form per tab 2 below or by submitting written
export orders.

 

At the end of each calendar quarter, Borrower is to submit with this Borrowing
Base Certificate copies of invoices and corresponding export orders that
represent at least 10% of the total number of invoices and export orders and at
least 10% of the dollar amount of total export-related A/R.  These copies should
be faxed or e-mailed in PDF format to Edmund Catolico at 415.975.6558 or
edmund.catolico@wellsfargo.com.

 

 

 

Amount

A.    Eligible Export-Related Accounts Receivable

 

 

 

 

 

A. Beginning Gross Export A/R from prior month

 

 

 

 

 

a. Add Export Sales: enter positive figure

 

 

 

 

 

b. Less Export Payments received: enter positive figure

 

 

 

 

 

c.     Less Credit memos or other adjustments: enter positive figure

 

 

 

 

 

Total of Control Balance = A + a - b - c

 

 

 

 

 

G/L Balance

 

 

 

 

 

A/R Aging Balance

 

 

 

 

 

1. Export A/R Beginning Balance (Use lower of Control, G/L or A/R Aging
balance).

 

 

 

 

 

2. Ineligible Export-Related Accounts Receivable

 

 

 

 

 

aa. That is due and payable more than ninety (90) days from the earlier of the
invoice or shipment date (i.e. selling terms)

 

 

 

 

 

ab. For Accounts owed by Banking Production Center (“BPC”) with selling terms of
90 day or less, that is not paid within one hundred twenty (120) calendar days
from invoice date;

 

 

 

 

 

ac. Accounts owed by an account debtor, regardless of whether otherwise
eligible, to the extent that the balance of such Accounts exceeds fifteen
percent (15%) of the aggregate amount of all Eligible Export-Related and
Domestic Accounts;

 

 

 

 

 

ad. Accounts owned by an account debtor, regardless of whether otherwise
eligible, if 25% or more of the total amount due under Accounts from such debtor
is ineligible under clauses (aa), (ab) or (ac) above (cross aging);

 

 

 

 

 

b. That portion of Accounts that is subject to any offset, deduction, defense,
dispute, or counterclaim or the Buyer is also a creditor or supplier of the
Borrower or the Account Receivable is contingent in any respect or for any
reason;

 

 

 

 

 

c. That portion of Accounts that have not been shipped to the Buyer or when the
Items are services, such services have not been performed or when the Export
Order specifies a timing for invoicing the Items other than shipment or
performance and the Items have not been invoiced in accordance with such terms
of the Export Order, or the Accounts Receivable otherwise do not represent a
final sale;

 

 

 

 

 

d. That portion of Accounts for which an invoice has not been sent to the
applicable account debtor

 

 

 

 

 

e. That portion of Accounts that is disputed or subject to a claim of offset or
a contra account or credit memos for amounts previously billed and collected;

 

 

 

 

 

f. Any Account that is due and payable from a Buyer who (A) applies for,
suffers, or consents to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a substantial
part of its property or calls a meeting of its creditors, (B) admits in writing
its inability, or is generally unable, to pay its debts as they become due or
ceases operations of its present business, (C) makes a general assignment for
the benefit of creditors, (D) commences a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (E) is adjudicated as
bankrupt or insolvent, (F) files a petition seeking to take advantage of any
other law providing for the relief of debtors, (G) acquiesces to, or fails to
have dismissed, any petition which is filed against it in any involuntary case
under such bankruptcy laws, or (H) takes any action for the purpose of effecting
any of the foregoing;

 

 

 

 

 

g. Any Account owed by an Owner, Subsidiary, Affiliate, Officer or employee of
the Borrower

 

 

 

 

 

h. Any Account not subject to a valid, perfected first priority security
interest in the Lender’s favor

 

 

 

 

 

i. That portion of Accounts that has been restructured, extended, amended or
modified

 

 

 

 

 

j. That portion of Accounts that constitutes adverstising, finance charges,
service charges or sales or excise taxes

 

 

 

--------------------------------------------------------------------------------

 

k. Accounts that are due and payable from a Buyer located in a country with
which Ex-Im Bank is prohibited from doing business as designated in the Country
Limitation Schedule which can be viewed on the website at exim.gov under
“Apply”. Those countries with an “X” for financing under one year are
ineligible.

 

 

 

 

 

l. Accounts that do not comply with the requirements of the Country Limitation
Schedule (“CLS”). Some countries which are open for short-term Ex-Im support
have restrictions outlined in the footnotes which may make these receivables
ineligible.

 

 

 

 

 

m. Accounts that arise from the sale of Items containing less than fifty percent
(50%) US Content;

 

 

 

 

 

n. Accounts that the Lender or Ex-Im Bank deems uncollectible or unacceptable
for any reason

 

 

 

 

 

o. Accounts denominated in any currency other than United States dollars, unless
otherwise approved in writing by Ex-Im Bank

 

 

 

 

 

p. Accounts with respect to which the Borrower has not instructed the Account
debtor to pay the Account to the Borrower’s Account

 

 

 

 

 

q. Accounts owed by debtors located in countries not acceptable to the Lender or
Ex-Im Bank in their sole discretion

 

 

 

 

 

r. Accounts which are not otherwise “Eligible Export-Related Accounts
Receivable”, as such term is defined in the Borrower Agreement

 

 

 

 

 

s. Any Account that does not arise from the sale of Items in the ordinary course
of the Borrower’s business

 

 

 

 

 

t. Any Account as to which any covenant, representation or warranty contained in
the Loan Documents with respect to such Account Receivable has been breached;

 

 

 

 

 

u. Any Account that is not owned by the Borrower or is subject to any right,
claim or interest of another Person other than the Liens in favor of the Lender;

 

 

 

 

 

v. Any Account that arises from the sale of defense articles or defense
services;

 

 

 

 

 

w. Any Account that is backed by a letter of credit unless the Items covered by
the subject letter of credit have been shipped or if a service milestone, the
service has been performed in accordance with the terms of the letter of credit;

 

 

 

 

 

x. Any Account that is due and payable from a military Buyer, except as may be
approved in writing by Ex-Im Bank

 

 

 

 

 

y. Any Account that does not comply with the terms of sale set forth in
Section 7 of the Loan Authorization Agreement

 

 

 

 

 

z. Any Account that arises from a bill and hold, guaranteed sale, sale and
return, sale on approval, consignment or any other repurchase or return basis or
is evidenced by chattel paper

 

 

 

 

 

za. Any Account for which the Borrower has made any agreement with the Buyer for
any deduction therefrom, except for discounts or allowances made in the ordinary
course of business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto

 

 

 

 

 

zb. Any Account for which any of the Items giving rise to such Account
Receivable have been returned, rejected or repossessed;

 

 

 

 

 

zc. Any Account arising from retainage, i.e. where the retention payment is
subject to further performance.

 

 

 

 

 

zd. Accounts otherwise deemed unacceptable to the Lender and Ex-Im Bank in their
sole discretion (under 20k invoices and down payments)

 

 

 

 

 

ze. Total ineligibles (sum of 2.a through 2.ze)

 

 

 

 

 

3. Total Eligible Export-Related Accounts Receivable (line 1 less line 2.ze)

 

 

 

 

 

Amount

B.    Eligible Total Inventory

 

 

 

 

 

4. Total raw materials at the lower of cost or market value as determined in
accordance with GAAP.

 

 

 

 

 

4.a Total Work-In-Process inventory at the lower of cost or market value as
determined in accordance with GAAP.

 

 

 

 

 

4.b. Total Finished Goods inventory at the lower of cost or market value as
determined in accordance with GAAP.

 

 

 

 

 

4.c. Total eligible inventory, or total raw materials

 

 

 

 

 

5. Ineligible Inventory

 

 

 

 

 

(i) that is not subject to a valid, perfected first priority Lien in favor of
the Lender or is subject to a security interest in favor of any Person other
than the Lender;

 

 

 

 

 

(ii) that is located at an address that has not been approved by the Lender in
writing;

 

 

 

 

 

(iii) that is placed by the Borrower on consignment or held by the Borrower on
consignment from another Person;

 

 

 

 

 

(iv) that is in-transit, covered by any negotiable or non-negotiable warehouse
receipt, bill of lading or other document of title; in the possession of a
processor or bailee, or located on premises leased or subleased to the Borrower,
or on premises subject to a mortgage in favor of a Person other than the Lender,
unless such processor or bailee or mortgagee or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
the Lender shall require to evidence the subordination or other limitation or
extinguishment of such Person’s rights with respect to such Inventory and the
Lender’s fight to gain access thereto;

 

 

 

 

 

(v) that is produced in violation of the Fair Labor Standards Act or subject to
the “hot goods” provisions contained in 29 U.S.C. § 215 or any successor statute
or section;

 

 

 

 

 

(vi) as to which any covenant, representation or warranty with respect to such
Inventory contained in the Loan Documents has been breached;

 

 

 

 

 

(vii) that is not located in the United States;

 

 

 

 

 

(viii) that is sample or demonstration Inventory; that is packaging, labels, or
office supplies

 

 

 

 

 

(ix) that consists of proprietary software (i.e. software designed solely for
the Borrower’s internal use and not intended for resale);

 

 

 

 

 

(x) that is damaged, slow moving, obsolete, returned, defective, recalled or
unfit for further processing or not currently saleable in the normal course of
the Borrower’s operations;

 

 

 

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(xi) that the Borrower has returned, has attempted to return, is in the process
of returning or intends to return to the vendor thereof;

 

 

 

 

 

(xii) Inventory otherwise deemed ineligible by the Lender in its discretion.

 

 

 

 

 

(xiii) Total inventory ineligibles

 

 

 

 

 

5.a Total Eligible Inventory (line 5 minus line 5.xiii)

 

 

 

 

 

5.b Export Sales Percentage calculated on a rolling twelve month basis, updated
quarterly and calculated on the tab below. Note: export sales do not include
sales to “foreign” companies located in the U.S.

 

 

 

 

 

5.c Export Sales Percentage times Total Eligible Inventory derives
Export-Related Inventory before deducting specific ineligibles relating to
export inventory. (5.a times 5.b)

 

 

 

 

 

5.d. Ineligible Export-Related Inventory

 

 

 

 

 

(i). that has been previously exported from the United States

 

 

 

 

 

(ii). that is not supported by an Export Order

 

 

 

 

 

(iii). that is to be incorporated into Items destined for shipment to a country
as to which Ex-Im Bank is prohibited from doing business as designated in the
Country Limitation Schedule or that the Borrower has knowledge will be
re-exported by a foreign Buyer to a country in which Ex-Im Bank is prohibited
from doing business

 

 

 

 

 

(iv) that is to be incorporated into Items destined for shipment to a Buyer
located in a country in which Ex-Im Bank coverage is not available for
commercial reasons as designated in the Country Limitation Schedule, unless and
only to the extent that such Items are to be sold to such country on terms of a
letter of credit confirmed by a bank acceptable to Ex-Im Bank

 

 

 

 

 

(v) that is to be incorporated into Items whose sale would result in an Account
which would not be an Eligible Export-Related Account

 

 

 

 

 

(vi) that contains less than fifty percent (50%) of U.S. Content

 

 

 

 

 

(vii) that constitues nuclear articles or defense articles/services or is
destined to be sold to a military buyer

 

 

 

 

 

(viii) Total ineligibles (sum of 5.d.i through 5.d.vii)

 

 

 

 

 

6. Total Eligible Export-Related Inventory (line 5.c less line 5.d.vii)

 

 

 

 

 

Amount

D. Borrowing Base (“BB”)

 

 

 

 

 

7. Export Collateral Base: The sum of:

 

 

 

 

 

(a) 85% of Eligible Export Accounts Receivable from line 3.

 

 

 

 

 

(b) 50% of Eligible Export-Related Inventory from line 6

 

 

 

 

 

(c) The lesser of 7.b or $2,000,000 is the inventory figure in the BB

 

 

 

 

 

8. Total Export Collateral Base (lines 7.a plus 7.c)

 

 

 

 

 

 

 

Amount

E. Availability

 

 

 

 

 

9. Final Export Collateral Base

 

 

 

 

 

10. Outstanding Principal Balance

 

 

 

 

 

11. Availability: line 9 less line 10

 

 

 

 

 

12. Maximum Line Amount

 

 

 

 

 

13. Maximum Line Amount less sum of Advances

 

 

 

 

 

14. The lesser of lines 11 and 13 is Export Availability. A negative figure
indicates that additional collateral be supplied or outstanding Advances be
reduced.

 

 

 

The Borrower represents and warrants that this Borrowing Base Certificate and
related schedules are a true and correct statement regarding the status of the
matters set forth herein. The Borrower further represents and warrants that no
Default or Event of Default has occurred and is continuing. The Borrower
acknowledges that any Ex-Im Advances made to the Borrower under the Credit
Agreement will be based upon the Lender’s reliance on the information contained
herein.

 

Capstone Turbine Corporation

 

 

 

 

 

Signed by:

 

Date Signed & Submitted:

 

 

 

Title of Signer:

 

 

 

 

 

Note: Ex-Im Bank prohibits or restricts its support of short-term transactions
for various countries shown in its Country Limitation Schedule (“CLS”). The most
current CLS can be viewed on Ex-Im Bank’s website at www.exim.gov under Apply.

 

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