Document:

exv10w1

Exhibit 10.1

FIRST LOAN MODIFICATION AND FORBEARANCE AGREEMENT

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

1. DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other indebtedness, and
obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of October 27, 2008, evidenced by, among other documents, a certain Second
Amended and Restated Loan and Security Agreement dated as of October 27, 2008 between Borrower and
Bank (as may be 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 (together with any other collateral security granted to Bank,
the “Security Documents”).

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

3. ACKNOWLEDGMENT OF DEFAULTS. Borrower acknowledges and agrees that certain Defaults and
Events of Default have occurred under the Loan Agreement by virtue of Borrower’s failure to comply
with the minimum Tangible Net Worth covenant contained in Section 6.9(a) of the Loan Agreement for
the compliance period ending on November 30, 2008 (the “Prior Default ”). Borrower has informed Bank
that it anticipates that it will also fail to comply with the minimum Tangible Net Worth covenant
set forth in Section 6.9(a) for the compliance period ending December 31, 2008 (the “Anticipated
Default”, and together with the Prior Default, the “Existing Defaults”).

4. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modifications to Loan Agreement.

	 	1	 	The Loan Agreement shall be amended by deleting the following text appearing in Section 2.3(a)
thereof in its entirety:

	 	 	 	“(a) Interest Rate; Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to
the aggregate of the Prime Rate plus one percentage point (1.00%), which interest shall be payable
monthly.”
	 
	 	 	 	and inserting in lieu thereof the following:
	 
	 	 	 	“(a) Interest Rate; Advances. Subject to Section 2.3(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to
the aggregate of the Prime Rate plus one and one-half percentage point (1.50%), which interest
shall be payable monthly.”

 

 

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

	 	 	 	““First Loan Modification Effective Date” is the date indicated on the signature page to the First
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 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 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 February 15, 2009 (the period
commencing as of the date of the First 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 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 the execution of this Loan Modification Agreement, Borrower agrees that Bank
shall have no further obligation to make any Advances to Borrower, or to issue or provide any other
extensions of credit of any kind to Borrower (as used herein and in the Loan Agreement, any
Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash Management Services, or
any other extension of credit by Bank for Borrower’s benefit shall be referred to as a “Credit
Extension”). Notwithstanding the foregoing, during the Forbearance Period and at the request of
Borrower, Bank may, in its sole and absolute discretion, continue to make any Credit Extensions,
subject in all events to the terms and conditions of this Loan Modification Agreement, the Loan
Agreement (including but not limited to, all limitations imposed by the Borrowing Base and the
Availability Amount) and the other Existing Loan Documents. Borrower covenants and agrees that if,
in the sole and absolute discretion of Bank. Bank shall make any Credit Extensions during the
Forbearance Period, such act shall not constitute (i) a waiver of any of the Existing
Defaults, or of any other Default or Event of Default which may now exist or which, may occur after
the date of this Loan Modification Agreement under any of the Existing Loan Documents, or (ii) an
agreement on the part of Bank to make any further extensions of credit of any kind to Borrower at
a later date.
	 
	 	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 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.

9. 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.

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

11. 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.

12. 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.

13. 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.

14. RIGHT OF SET-OFF. In consideration of Bank’s agreement to enter into this Loan
Modification Agreement, Borrower herby 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.

 

 

15. 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.

16. 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
First Loan Modification Effective Date.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	BORROWER:	 	BANK:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ENERGY FOCUS, INC.	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Nicholas G. Berchtold	 	By:	 	/s/ Adam Glick	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	NICHOLAS G. BERCHTOLD
	 	 	 	Name:
	 	Adam Glick	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	CHIEF FINANCIAL OFFICER
	 	 	 	Title:
	 	Relationship Manager	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 

First Loan Modification Effective date: January 31, 2009

[First Loan Modification and Forbearance Agreement Signature Page]

 

 

SECRETARY’S CORPORATE BORROWING CERTIFICATE

	 	 	 	 	 	 	 
	Borrower:
	 	Energy Focus, Inc.
	 	
	 	Date: October 9th, 2008
	Bank:
	 	Silicon Valley Bank	 	 	 	 

     I hereby certify as follows, as of the date set forth above:

1. I am the Secretary of the Borrower.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation duly organized,
existing and in good standing under the laws of the State of Delaware.

3. Attached as Exhibit A hereto is a true, correct and complete copy of Borrower’s
Certificate of Incorporation (including amendments), as filed with the Secretary of State of the
state in which Borrower is incorporated as set forth in paragraph 2 above. Such Certificate of
Incorporation has not been amended, annulled, rescinded, revoked or supplemented, and remains in
full force and effect as of the date hereof.

4. Attached as Exhibit B hereto is a true, correct and complete copy of Borrower’s By-laws
(including amendments). Such By-Laws have not been amended, annulled, rescinded, revoked or
supplemented, and remain in full force and effect as of the date hereof.

5. The persons named below are now and have been duly qualified and acting, officers of the
Borrower, duly elected to the office as set forth opposite their respective names and the
signatures set forth opposite their respective names and offices are their respective genuine
signatures:

	 	 	 	 	 
	Name	 	Title	 	Signature
	 
	 	 	 	 
	Joseph G Kaveski

	 	Chief Executive Officer
	 	/s/ Joseph G Kaveski
	 

	 	 	 	 
	 
	 	 	 	 
	Nicholas G. Berchtold

	 	VP of Finance and Chief Financial
Officer
	 	/s/ Nicholas G. Berchtold
	 

	 	 	 	 
	 
	 	 	 	 
	Eric Hilliard

	 	VP and Chief Operating Officer
	 	/s/ Eric Hilliard
	 

	 	 	 	 

6. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a
duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized
corporate action). Such resolutions are in full force and effect as of the date hereof and have
not been in any way modified, repealed, rescinded, amended or revoked, and Bank may rely on them
until Bank receives written notice of revocation of same from Borrower.

BE IT RESOLVED, that any one (1) of the above named officers or employees of Borrower, acting for
and on behalf of Borrower, are authorized and empowered:

Borrow Money. To borrow from time to time from Silicon Valley Bank (“Bank”), on such terms as may
be agreed upon between the officers of Borrower and Bank, such sum or sums of money as in their
judgment should be borrowed.

-1-

 

Execute Loan Documents. To execute and deliver to Bank the loan documents of Borrower at such rates
of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or
any indebtedness of Borrower to Bank, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings, consolidations, or substitutions for one or more of the
loan documents, or any portion of the loan documents.

Grant Security. To grant a security interest to Bank in any of Borrower’s assets, which security
interest shall secure all of Borrower’s obligations to Bank.

Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory
notes, or other evidences of indebtedness payable to or belonging to Borrower or in which Borrower
may have an interest, and either to receive cash for the same or to cause such proceeds to be
credited to the account of Borrower with Bank, or to cause such other disposition of the proceeds
derived therefrom as they may deem advisable.

Letters of Credit. To execute letter of credit applications and other related documents pertaining
to Bank’s issuance of letters of credit.

Foreign Exchange Contracts. To execute and deliver foreign exchange contracts, either spot or
forward, from time to time, in such amount as, in the judgment of the officer or
officers herein authorized.

Issue Warrants. To issue warrants to purchase Borrower’s capital stock, for such class, series and
number, and on such terms, as an officer of Borrower shall deem appropriate. Upon such issuance the
requisite number of shares of Borrower’s capital stock will be automatically reserved for the
exercise of such Warrants.

Further Acts. In the case of lines of credit, to designate additional or alternate individuals as
being authorized to request advances thereunder, and in all cases, to do and perform such other
acts and things, to pay any and all fees and costs, and to execute and deliver such other documents
and agreements, including agreements waiving the right to a trial by jury, as they may in their
discretion deem reasonably necessary or proper in order to carry into effect the provisions of
these Resolutions.

BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these Resolutions and
performed prior to the passage of these resolutions are hereby ratified and approved, that these
Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until
written notice of their revocation shall have been delivered to and received by Bank. Any such
notice shall not affect any of Borrower’s agreements or commitments in effect at the time notice is
given.

-2-

 

     IN WITNESS WHEREOF, I have executed this Certificate on behalf of the Borrower in my capacity as
Secretary as of the 27th day of October, 2008.

	 	 	 	 	 
	 	CERTIFIED TO AND ATTESTED BY:

 	 
	 	By:  	/s/ Nicholas G. Berchtold
 	 
	 	 	Name:  	Nicholas G. Berchtold 	 
	 	 	Title:  	Secretary 	 
	 

     I, the Chief Executive Officer of Borrower, hereby certify as to paragraphs 1 through 6 above, as of
the date set forth above.

	 	 	 	 	 
	 	 	 
	 	By:  	/s/ Joseph G. Kaveski
 	 
	 	 	Name:  	Joseph G. Kaveski 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

-3-exv10w2

Exhibit 10.2

SECOND LOAN MODIFICATION AND FORBEARANCE AGREEMENT

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

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

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

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

3. ACKNOWLEDGMENT OF DEFAULTS. Borrower acknowledges and agrees
that certain Defaults and Events of Default have occurred under the Loan Agreement
by virtue of Borrower’s failure to comply with the minimum Tangible Net Worth
covenant contained in Section 6.9(a) of the Loan Agreement for the compliance
periods ended on November 30, 2008 and December 31, 2008 (the “Prior Defaults”).
Bank is currently forbearing from enforcing its rights and remedies under the Loan
Agreement due to the Prior Defaults. In addition. Borrower failed to comply with
the minimum Tangible Net Worth covenant set forth in Section 6.9(a) for the
compliance periods ended January 31, 2009, February 28, 2009, March 31, 2009 and
April 30, 2009 (the “Additional Defaults”, and together with the Prior Defaults,
the “Existing Defaults”).

4. DESCRIPTION OF CHANGE IN TERMS.

	 	A.	 	Modifications to Loan Agreement.

	 	1	 	The Loan Agreement shall be amended by deleting the following text appearing
in Section 2.3(a) thereof in its entirety:

	 	 	 	“(a) Interest Rate; Advances.
Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line
shall accrue interest at a floating per annum
rate equal to the aggregate of the Prime Rate
plus one and one-half percentage point
(1.50%), which interest shall be payable
monthly.”
	 
	 	 	 	and inserting in lieu thereof the following:
	 
	 	 	 	“(a) Interest Rate; Advances.
Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line
shall

 

 

	 	 	 	accrue interest at a floating per annum rate
equal to (i) from the Second Loan
Modification Effective Date through and
including June 30, 2009, the aggregate of the
Prime Rate plus one and one-half percentage
point (1.50%); (ii) beginning July 1, 2009
through and including September 30, 2009, the
aggregate of the Prime Rate plus two
percentage points (2.00%); and (iii)
beginning October
1, 2009 and thereafter, the aggregate of the
Prime Rate plus three percentage points
(3.00%), which interest shall in any event be
payable monthly.”

	 	2	 	The Loan Agreement shall be amended by
deleting the following text appearing in Section 2.4(e) thereof in
its entirety:

	 	 	 	“(e) Collateral Monitoring Fee. A
monthly collateral monitoring fee of Seven
Hundred Fifty Dollars ($750.00), payable in
arrears on the last day of each month;
provided, however, that
during any Streamline Period, the collateral
monitoring fee shall be $0.00 (in each case,
the collateral monitoring fee will be
prorated for any partial month); and”
	 
	 	 	 	and inserting in lieu thereof the following:
	 
	 	 	 	“(e) Collateral Monitoring Fee. A
monthly collateral monitoring fee of Seven
Hundred Fifty Dollars ($750.00), payable in
arrears on the last day of each month
(prorated for any partial month at the
beginning and upon termination of this
Agreement); and”

	 	3	 	The Loan Agreement shall be amended by
deleting the following text at the end of Section 6.2(a) in its
entirety:

	 	 	 	“Notwithstanding the foregoing, during a
Streamline Period, provided no Event of
Default has occurred and is continuing,
Borrower shall be required to provide Bank
with the reports and schedules required
pursuant to clause (a)(i)(A) above on a
monthly basis.”

	 	4	 	The Loan Agreement shall be amended by
deleting the following text appearing in Section 6.8 thereof in
its entirety:

	 	 	 	“6.8 Operating Accounts.
	 
	 		 	(a) Maintain its and its
Subsidiaries’, if any, primary
depository, operating accounts and securities
accounts with Bank and Bank’s affiliates with
all excess funds maintained at or invested
through Bank or an affiliate of Bank, which
accounts shall represent at least eighty-five
percent (85%) of the dollar value of Borrower’s
and such Subsidiaries accounts at all
financial institutions.
	 
	 		 	(b) Provide Bank five (5) days prior-written
notice before establishing any Collateral
Account at or with any bank or financial
institution other than Bank or its Affiliates.
In addition,

 

 

	 	 	 	for each Collateral Account that
Borrower at any time maintains in the United
States at financial institutions other than
Bank, in an aggregate amount in excess of One
Hundred Thousand Dollars ($100,000) at any time,
Borrower shall cause the applicable bank or
financial institution (other than Bank) at or
with which any such Collateral Account is
maintained lo execute and deliver a Control
Agreement or other appropriate instrument with
respect to such Collateral Account to perfect
Bank’s Lien in such Collateral Account in
accordance with the terms hereunder. The
provisions of the previous sentence shall not
apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage
and benefit payments to or for the benefit of
Borrower’s employees and identified to Bank by
Borrower as such.”
	 
	 	 	 	and inserting in lieu thereof
the following:
	 
	 	 	 	“6.8 Operating Accounts.
	 
	 		 	(a) Maintain all of its and its Subsidiaries
domestic depository, operating accounts and
securities accounts with Bank, with all excess
funds maintained at or invested through Bank.
	 
	 		 	(b) Provide Bank five (5) days prior-written
notice before establishing any Collateral
Account at or with any bank or financial
institution other than Bank or Bank’s
Affiliates. For each Collateral Account that
Borrower at any time maintains, Borrower shall
cause the applicable bank or financial
institution (other than Bank) at or with which
any Collateral Account is maintained to execute
and deliver a Control Agreement or other
appropriate instrument with respect to such
Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the
terms hereunder which Control Agreement may not
be terminated without the prior written consent
of Bank. The provisions of the previous
sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or
for the benefit of Borrower’s employees and
identified to Bank by Borrower as such.”

	 	5	 	The Loan Agreement shall be amended by deleting the following text appearing
in Section 6.9 thereof in its entirety:

	 	 	 	“6.9 Financial Covenants.
	 
	 	 	 	Borrower shall maintain at all times, to be
tested as of the last day of each month, on a
non-consolidated basis determined by Bank
from Borrower’s unconsolidated balance sheet:
	 
	 		 	(a) Tangible Net Worth. From the
monthly period ended September 30, 2008
through and including the monthly period
ending December 31, 2008, a Tangible Net
Worth of not less than Sixteen Million
Dollars ($16,000,000), in each case
increasing by (i) seventy-five percent (75%)
of issuances of

 

 

	 	 	 	equity or seventy-five percent (75%) of the
principal amount of Subordinated Debt issued
or incurred by the Borrower after the
Effective Date and (ii) seventy-five percent
(75%) of Borrower’s unconsolidated net
income. Increases in this Tangible Net Worth
covenant based on consideration received from
(a) the issuance of equity securities of
Borrower and Subordinated Debt shall be
effective as of the end of the fiscal month
in which such consideration is received and
(b) quarterly income shall be effective as of
the end of each fiscal quarter, and shall
continue effective thereafter.
	 
	 	 	 	Notwithstanding the foregoing, not later than
December 31, 2008, Bank shall, after
consultation with Borrower in its reasonable
discretion, revise the Tangible Net Worth
covenant described in clause (a) above for
the period beginning January 1, 2009 and for
each fiscal month thereafter.”
	 
	 	 	 	and inserting in lieu thereof
the following:
	 
	 	 	 	“6.9 Financial Covenants.
	 
	 	 	 	Borrower shall maintain at all times, to be
tested as of the last day of each month, on a
non-consolidated basis determined by Bank
from Borrower’s unconsolidated balance sheet:
	 
	 		 	(a) Tangible Net Worth. From the
monthly period ended September 30, 2008 and
for each monthly period thereafter, a
Tangible Net Worth of not less than Sixteen
Million Dollars ($16,000,000), in each case
increasing by (i) seventy-five percent (75%)
of issuances of equity or seventy-five
percent (75%) of the principal amount of
Subordinated Debt issued or incurred by the
Borrower after the Effective Date and (ii)
seventy-five percent (75%) of Borrower’s
unconsolidated net income. Increases in this
Tangible Net Worth covenant based on
consideration received from (a) the issuance
of equity securities of Borrower and
Subordinated Debt shall be effective as of
the end of the fiscal month in which such
consideration is received and (b) quarterly
income shall be effective as of the end of
each fiscal quarter, and shall continue
effective thereafter.”

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

	 	 	 	“Borrowing Base” is (a) seventy-five percent
(75%) of Eligible Accounts other than
Eligible ‘Early Buy’ Pool and Spa Accounts
plus (b) the lesser of (X) fifty
percent (50%) of Borrower’s cash at Bank or
(Y) One Million Five Hundred Thousand Dollars
($1,500,000), plus (c) the lesser of (X)
seventy-five percent (75%) of Eligible ‘Early
Buy’ Pool and Spa Accounts or (Y) Five
Hundred Thousand Dollars ($500,000), in each
case as determined by Bank from Borrower’s
most recent Borrowing Base Certificate;
provided, however, that Bank
may decrease the foregoing percentages and/or
amounts in its good faith business judgment
based on events, conditions, contingencies,
or risks

 

 

	 	 	 	which, as determined by Bank, may adversely
affect the value of the Collateral.
	 
	 	 	 	“Eligible ‘Early Buy’ Pool and Spa Accounts”
means all of Borrower’s pool and spa accounts
that are otherwise Eligible Accounts that are
(a) pre-approved by Bank in writing and (b)
due and payable ninety-one (91) to one
hundred eighty (180) days from invoice date;
provided, however, that
Eligible ‘Early Buy’ Pool and Spa Accounts do
not include pool and spa accounts that are
not paid within the earlier of (X) thirty
(30) days from the invoice due date or (Y)
one hundred eighty (180) days from the
invoice date.
	 
	 	 	 	“Liquidity Ratio” is, for any
date of measurement, the ratio of (a)
Borrower’s cash at Bank on such date; to (b)
all outstanding Indebtedness owed by Borrower
to Bank on such date.
	 
	 	 	 	“Revolving Line” is an Advance or Advances in
an aggregate amount of up to Four Million
Dollars ($4,000,000) outstanding at any time.
	 
	 	 	 	“Streamline Period” is any date in which
Borrower’s Liquidity Ratio is greater than
2.50:1.00.”
	 
	 	 	 	and inserting in lieu thereof the following:
	 
	 	 	 	““Borrowing Base” is (a) seventy-five
percent (75%) of Eligible Accounts, as
determined by Bank from Borrower’s most
recent Borrowing Base Certificate;
provided, however, that Bank
may decrease the foregoing percentage in its
good faith business judgment based on events,
conditions, contingencies, or risks which, as
determined by Bank, may adversely affect the
value of the Collateral.
	 
	 	 	 	“Revolving Line” is an Advance or Advances in
an aggregate amount of up to Two Million
Dollars ($2,000,000) outstanding at any
time.”

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

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

	 	8	 	The Compliance Certificate appearing as
Exhibit D to the Loan Agreement is hereby replaced with
the Compliance Certificate attached as Exhibit B hereto.

5. FORBEARANCE BY BANK.

	 	A.	 	In consideration of, among other things,
Borrower’s compliance with each and every term of this 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 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
June 30, 2009 (the period commencing as of the date of the First
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 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 the execution of this Loan Modification
Agreement, Borrower agrees that Bank shall have no further obligation
to make any Advances to Borrower, or to issue or provide any other
extensions of credit of any kind to Borrower (as used herein and in the
Loan Agreement, any Advance, Letter of Credit, FX Forward Contract,
amount utilized for Cash Management Services, or any other extension of
credit by Bank for Borrower’s benefit shall be referred to as a “Credit
Extension”). Notwithstanding the foregoing, during the Forbearance
Period and at the request of Borrower, Bank may, in its sole and
absolute discretion, continue to make any Credit Extensions, subject in
all events to the terms and conditions of this Loan Modification
Agreement, the Loan Agreement (including but not limited to, all
limitations imposed by the Borrowing Base and the Availability Amount)
and the other Existing Loan Documents. Borrower covenants and agrees
that if, in the sole and absolute discretion of Bank, Bank shall make
any Credit Extensions during the Forbearance Period, such act shall not
constitute (i) a waiver of any of the Existing Defaults, or of any
other Default or Event of Default which may now exist or which may
occur after the date of this Loan Modification Agreement under any of
the Existing Loan Documents, or (ii) an agreement on the part of Bank
to make any further extensions of credit of any kind to Borrower at a
later date.
	 
	 	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, 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]

 

 

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

	 	 	 	 	 	 	 	 	 	 	 	 	 
	BORROWER:	 	BANK:	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	ENERGY FOCUS, INC.	 	SILICON VALLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Nicholas G. Berchtold	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Nicholas G. Berchtold
	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	VP Finance and CFO
	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 

Second Loan Modification Effective Date: June 12, 2009

[Second Loan Modification and Forbearance Agreement Signature Page]

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