exv10w3






Exhibit 10.3




SIXTH LOAN MODIFICATION AND FORBEARANCE AGREEMENT




     This Sixth Loan Modification and Forbearance Agreement (this “Loan Modification Agreement”) is
entered into as of October 5, 2009 the Sixth Loan Modification Effective Date, by and between
SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located at 380 Interlocken
Crescent, Suite 600, Broomfield, Colorado 80021 (“Bank”), and ENERGY FOCUS, INC., a Delaware
corporation, formerly known as Fiberstars, Inc., a Delaware corporation, with offices located at
32000 Aurora Road, Solon, Ohio 44139.


1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness and
obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of October 27, 2008, evidenced by, among other documents, a certain Second
Amended and Restated Loan and Security Agreement dated as of October 27, 2008 between Borrower and
Bank (the “Original Loan Agreement”), as amended by a certain First Modification and Forbearance
Agreement dated as of January 31, 2009 between Borrower and Bank (the “First Amendment”), as
further modified by a certain Second Loan Modification and Forbearance Agreement, dated as of June
12, 2009 (the “Second Amendment”), as further modified by a certain Third Loan Modification and
Forbearance Agreement, dated as of July 22, 2009 (the “Third Amendment”), and as further modified
by certain Forbearance Agreements dated as of August 25, 2009 and September 13, 2009 (collectively,
the “Forbearance Agreements”, and together with the First Amendment, the Second Amendment, the
Third Amendment and the Original Loan Agreement, and as may be further amended from time to time,
the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.



2. DESCRIPTION OF COLLATERAL. Repayment of the Obligations is secured by the Collateral as
described in the Loan Agreement and as described in a certain Intellectual Property Security
Agreement between Borrower and Bank, as ratified and reaffirmed by a certain Reaffirmation of
Intellectual Property Security Agreement dated as of October 27, 2008 between Borrower and Bank
(collectively, the “IP Agreement”, and together with any other collateral security granted to Bank,
the “Security Documents”).




     Hereinafter, the Security Documents, together with all other documents evidencing or securing
the Obligations shall be referred to as the “Existing Loan Documents”.


3. ACKNOWLEDGMENT OF DEFAULTS. Borrower acknowledges and agrees that Bank is currently
forbearing from enforcing its rights and remedies under the Loan Agreement due to certain Defaults
and Events of Default that have occurred under the Loan Agreement by virtue of Borrower’s failure
to comply with the minimum Tangible Net Worth covenant contained in Section 6.9(a) of the Loan
Agreement for the compliance periods ended on November 30, 2008, December 31, 2008, January 31,
2009, February 28, 2009, March 31, 2009, April 30, 2009, May 31, 2009, June 30, 2009, July 31,
2009, August 31, 2009 and September 30, 2009 (collectively, the “Existing Defaults”). Borrower
further acknowledges and agrees that any Forbearance Period (as such term is defined in the First
Amendment, the Second Amendment, the Third Amendment and/or the Forbearance Agreements, dated as of
August 25, 2009 and September 13, 2009) have each by its terms expired, and Bank, in its sole
discretion, may immediately commence enforcing its rights and remedies under the Existing Loan
Documents. Notwithstanding the foregoing, the Bank hereby agrees as follows.



4. DESCRIPTION OF CHANGE IN TERMS.





	 	A.	 	Modifications to Loan Agreement.






	 	1	 	The Loan Agreement shall be amended by deleting the following
Section 2.1.1(a) thereof, in its entirety:




 









 












“(a) Availability. Subject to the terms and
conditions of this Agreement and to deduction of
Reserves, Bank will make Advances to Borrower up to the
Availability Amount. Amounts borrowed under the
Revolving Line may be repaid, and prior to the Revolving
Line Maturity Date, reborrowed, subject to the
applicable terms and conditions precedent herein.”




     and inserting in lieu therof the following:




“(a) Availability. Subject to the terms and
conditions of this Agreement and to deduction of
Reserves, Bank will make Advances to Borrower up to the
Availability Amount. Amounts borrowed under the
Revolving Line may be repaid, and prior to the Revolving
Line Maturity Date, reborrowed, subject to the
applicable terms and conditions precedent herein.
Notwithstanding the foregoing, the Bank shall be under
no obligation to make any additional Credit Extensions
to Borrower from and after October 1, 2009.”




	 	2	 	From and after the Sixth Loan modification Effective Date, the
sub-limits described in Sections 2.1.2 (Letters of Credit Sublimit), 2.1.3
(Foreign Exchange Sublimit) and Section 2.1.4 (Cash Management Services
Sublimit) shall be reduced from One Million Five Hundred Thousand Dollars
($1,500,000) to Zero Dollars ($0.00).
	 
	 	3	 	The Loan Agreement shall be amended by deleting the following
Section 2.5(c) thereof, in its entirety:






“(c) Termination of Pledged CD. The Pledged CD
will terminate upon the earlier to occur of (i) the
occurrence of an Event of Default (other than the
Existing Defaults) and (ii) the Revolving Line Maturity
Date. Upon termination of the Pledged CD, the entire
outstanding principal of and accrued but unpaid interest
on the Pledged CD shall be applied to the Obligations
pursuant to the terms of Section 9.4 hereof.”




and inserting in lieu thereof the following:




“(c) Termination of Pledged CD/Release of Funds.
The Pledged CD will terminate upon the earlier to occur
of (i) at Bank’s sole discretion, the occurrence of an
Event of Default (other than the Existing Defaults) and
(ii) the Revolving Line Maturity Date. Upon termination
of the Pledged CD, the entire outstanding principal of
and accrued but unpaid interest on the Pledged CD shall
be applied to the Obligations pursuant to the terms of
Section 9.4 hereof. Notwithstanding the foregoing, upon
repayment of the outstanding Credit Extensions under the
Revolving Line by Borrower, such that the total
outstanding Credit Extensions under the Revolving Line
is less than One Million Dollars ($1,000,000), Bank may,
in its sole discretion, release up to Three Hundred
Thousand Dollars ($300,000) of the Pledged CD to
Borrower’s Designated Deposit Account. Thereafter, upon
each permanent repayment of the outstanding Credit
Extensions under the Revolving Line in an aggregate
amount of Two Hundred Fifty Thousand Dollars ($250,000),



 









 







Bank may, in its sole discretion, release up to Two
Hundred Fifty Thousand Dollars ($250,000) of the Pledged
CD to Borrower’s Designated Deposit Account. Any such
release of funds of the Pledged CD to Borrower described
above shall be made after deducting any
applicable “breakage” or “early termination” fee from
such release of funds.




	 	4	 	The Loan Agreement shall be amended by deleting the following
definitions in Section 13.1 thereof, each in its entirety:






“Availability Amount” is (a) the lesser of (i) the
Revolving Line or (ii) the Borrowing Base minus
(b) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit plus
an amount equal to the Letter of Credit Reserves),
minus (c) the FX Reserve, and minus (d)
the outstanding principal balance of any Advances
(including any amounts used for Cash Management
Services).”




“Pledged CD” shall mean any and all certificates of
deposit issued to Borrower by Bank, in a minimum
principal amount of not less than One Million Three
Hundred Thousand Dollars ($1,300,000), plus any accrued
but unpaid interest thereon.”




“Revolving Line” is an Advance or Advances in an
aggregate amount of up to Two Million Dollars
($2,000,000) outstanding at any time.”




“Revolving Line Maturity Date” is October 13, 2009.”




and inserting in lieu thereof the following:




“Availability Amount” is (a) the lesser of (i) the
Revolving Line or (ii) the Borrowing Base minus
(b) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit plus
an amount equal to the Letter of Credit Reserves),
minus (c) the FX Reserve, and minus (d)
the outstanding principal balance of any Advances
(including any amounts used for Cash Management
Services); provided, however, that from
and after October 1, 2009, the Availability Amount shall
be Zero Dollars ($0.00).”




“Pledged CD” shall mean any and all certificates of
deposit issued to Borrower by Bank, in a minimum
principal amount of not less than One Million Three
Hundred Thousand Dollars ($1,300,000), as may be reduced
from time to time in accordance with Section 2.5(c)
hereof, in Bank’s sole discretion, plus any accrued but
unpaid interest thereon.”




“Revolving Line” is an Advance or Advances in an
aggregate amount of up to One Million Three Hundred
Thousand Dollars ($1,300,000) outstanding at any time.”




“Revolving Line Maturity Date” is November 13, 2009.”



 









 






	 	5	 	The Loan Agreement shall be amended by inserting the following
definition in Section 13.1 thereof, in appropriate alphabetical order:






“Sixth Loan Modification Effective Date” is the date
indicated on the signature page to the Sixth Loan
Modification and Forbearance Agreement entered into
between Bank and Borrower.”


5. FORBEARANCE BY BANK.





	 	A.	 	In consideration of, among other things, Borrower’s compliance with each and
every term of this Loan Modification Agreement, Bank hereby agrees to forbear from
exercising its rights and remedies against the Borrower as a result of the Existing
Defaults until the earlier to occur of (i) a Default or an Event of Default under the
Loan Agreement (with the sole exception of the Existing Defaults), (ii) the failure of
Borrower to promptly, punctually, or faithfully perform or comply with any term or
condition of this Loan Modification Agreement as and when required, it being expressly
acknowledged and agreed that TIME IS OF THE ESSENCE, or (iii) 3:00 pm (Denver, Colorado
time) on November 13, 2009 (the period commencing as of the date of the Third Loan
Modification Effective Date and ending on the earlier of (i), (ii) or (iii) above shall
be referred to as the “Forbearance Period”).
	 
	 	B.	 	Borrower hereby acknowledges and agrees that nothing contained in this section
or in any other section of this Loan Modification Agreement shall be deemed or
otherwise construed as a waiver by Bank of the Existing Defaults or any other Default
or Event of Default (whether now existing or hereafter arising) or of any of its rights
and remedies pursuant to the Existing Loan Documents, applicable law or otherwise.
This Loan Modification Agreement shall only constitute an agreement by Bank to forbear
from enforcing its rights and remedies based upon the Existing Defaults upon the terms
and conditions set forth herein. Upon the expiration of the Forbearance Period, the
agreement of Bank to forbear as set forth in this Loan Modification Agreement shall
automatically terminate and Bank may immediately commence enforcing its rights and
remedies pursuant to the Existing Loan Documents, applicable law or otherwise, in such
order and manner as Bank may determine appropriate.




6. TERMS OF FORBEARANCE.





	 	A.	 	From and after October 1, 2009, Borrower agrees that Bank shall have no
obligation to make any Credit Extensions to Borrower, or to issue or provide any other
extensions of credit of any kind to Borrower (including, without limitation, any
Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management
Services, or any other extension of credit or financial accommodation by Bank for
Borrower’s benefit).
	 
	 	B.	 	At all times during the Forbearance Period Borrower shall comply with all terms
and conditions contained in the Loan Agreement and other Loan Documents and shall
continue to remit all regularly scheduled payments (including, without limitation, all
principal, interest, fees, costs and other amounts) which may become due under the
Existing Loan Documents, as and when such payments are due.




7. FEES. Borrower shall pay to Bank a forbearance fee equal to Four Thousand Dollars
($4,000.00), which fee shall be due on the date hereof and shall be deemed fully earned as of the
date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred in
connection with the Existing Loan Documents and this Loan Modification Agreement.




 









 







8. RATIFICATION OF IP AGREEMENT. Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of the IP Agreement, and acknowledges, confirms and agrees that
said IP Agreement contains an accurate and complete listing of all Intellectual Property Collateral
as defined in said IP Agreement, which shall remain in full force and effect. Notwithstanding the
terms and conditions of the IP Agreement, the Borrower shall not register any Copyrights or Mask
Works in the United States Copyright Office unless it: (i) has given at least fifteen (15) days’
prior-written notice to Bank of its intent to register such Copyrights or Mask Works and has
provided Bank with a copy of the application it intends to file with the United States Copyright
Office (excluding exhibits thereto); (ii) executes a security agreement or such other documents as
Bank may reasonably request in order to maintain the perfection and priority of Bank’s security
interest in the Copyrights proposed to be registered with the United States Copyright Office; and
(iii) records such security documents with the United States Copyright Office contemporaneously
with filing the Copyright application(s) with the United States Copyright Office. Borrower shall
promptly provide to Bank a copy of the Copyright application(s) filed with the United States
Copyright Office, together with evidence of the recording of the security documents necessary for
Bank to maintain the perfection and priority of its security interest in such Copyrights or Mask
Works. Borrower shall provide written notice to Bank of any application filed by Borrower in the
United States Patent Trademark Office for a patent or to register a trademark or service mark
within thirty (30) days of any such filing.



9. RATIFICATION OF PERFECTION CERTIFICATE. Borrower hereby ratifies, confirms and
reaffirms, all and singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of October 27, 2008 executed by Borrower, and acknowledges, confirms and
agrees the disclosures and information Borrower provided to Bank in the Perfection Certificate have
not changed, as of the date hereof.



10. AUTHORIZATION TO FILE. Borrower hereby authorizes Bank to file UCC financing
statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems
appropriate, in order to further perfect or protect Bank’s interest in the Collateral, including a
notice that any disposition of the Collateral, by either the Borrower or any other Person, shall be
deemed to violate the rights of the Bank under the Code.



11. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary
to reflect the changes described above.



12. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and reaffirms all
terms and conditions of the Loan Agreement, the other Existing Loan Documents and all security or
other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.



13. NO DEFENSES OF BORROWER. Borrower hereby acknowledges and agrees that Borrower has no
offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or
otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby
expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.



14. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the existing
Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force
and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan
Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the
Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will
be released by virtue of this Loan Modification Agreement.



15. RIGHT OF SET-OFF. In consideration of Bank’s agreement to enter into this Loan
Modification Agreement, Borrower hereby reaffirms and hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether now existing or
hereafter arising upon and against all deposits, credits,


 









 






collateral and property, now or hereafter in the possession, custody, safekeeping or control of
Bank or any entity under the control of Silicon Valley Bank (including a Bank subsidiary) or in
transit to any of them. At any time after the occurrence and during the continuance of an Event of
Default, without demand or notice, Bank may set off the same or any part thereof and apply the same
to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of
any other collateral securing the loan. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS
OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.



16. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its properties,
unconditionally, the exclusive jurisdiction of any state or federal court of competent jurisdiction
in the State of California in any action, suit, or proceeding of any kind against it which arises
out of or by reason of this Loan Modification Agreement. NOTWITHSTANDING THE FOREGOING, THE BANK
SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION WHICH THE BANK DEEMS NECESSARY OR APPROPRIATE IN ORDER TO REALIZE
ON THE COLLATERAL OR TO OTHERWISE ENFORCE THE BANK’S RIGHTS AGAINST THE BORROWER OR ITS PROPERTY.



17. CONFIDENTIALITY. Bank may use confidential information for the development of
databases, reporting purposes, and market analysis, so long as such confidential information is
aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower.
The provisions of the immediately preceding sentence shall survive the termination of the Loan
Agreement.



18. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective only when it
shall have been executed by Borrower and Bank.




[The remainder of this page is intentionally left blank]




 









 








     This Loan Modification Agreement is executed under the laws of the State of California as of
the Sixth Loan Modification Effective Date.




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	BORROWER:	 	 	 	BANK:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ENERGY FOCUS, INC.	 	 	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	 

	 	Name:
	 	Nicholas G. Berchtold
	 	 	 	 	 	Name:	 	 	 	 
	 

	 	Title:
	 	V.P. Finance and CFO
	 	 	 	 	 	Title:	 	 	 	 





Sixth Loan Modification Effective Date: October 5, 2009




[Sixth Loan Modification and Forbearance Agreement Signature Page]