Document:

exhibi_10-23.htm

Exhibit 10.23

 

BUSINESS FINANCING AGREEMENT

 

	
Borrower:                      Akeena Solar, Inc.

                      Akeena Corp.

                      Andalay Solar, Inc.

1475 Bascom Avenue, Suite 101

Campbell, CA 95008

	
Lender:       BRIDGE BANK, National Association

       55 Almaden Boulevard, Suite 100

       San Jose, CA 95113

 

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

 

	
1.  

	
FINANCED RECEIVABLES.

 

	
1.1  

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

 

	
1.2  

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

 

	
1.3  

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

 

	
1.4  

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

 

	
1.5  

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

 

	
2.  

	
COLLECTIONS, CHARGES AND REMITTANCES.

 

	
2.1  

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

 

  

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2.2  

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

 

	
2.3  

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

 

	
2.4  

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

 

	
2.5  

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

 

	
3.  

	
RECOURSE AND OVERADVANCES.

 

	
3.1  

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

 

	
3.2  

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

 

	
3.3  

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

 

	
4.  

	
FEES AND FINANCE CHARGES.

 

	
4.1  

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

 

	
4.2  

	
Fees.

 

	
  

	
(a)

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

 

	
  

	
(b)

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

 

  

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(c)

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

 

	
  

	
(d)

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

 

	
  

	
(e)

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

 

	
5.  

	
REPRESENTATIONS AND WARRANTIES.  Borrower represents and warrants:

 

	
5.1  

	
With respect to each Financed Receivable:

 

	
(a)  

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

 

	
(b)  

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

 

	
(c)  

	
Such Financed Receivable is an Eligible Receivable;

 

	
(d)  

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

 

	
(e)  

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

 

	
5.2  

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

 

	
5.3  

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

 

	
5.4  

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

 

	
5.5  

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

 

	
5.6  

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

 

	
6.  

	
MISCELLANEOUS PROVISIONS.  Borrower will:

 

	
6.1  

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

 

	
6.2  

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

 

	
6.3  

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

 

	
6.4  

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

 

	
6.5  

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

 

  

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6.6  

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

 

	
6.7  

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

 

	
6.8  

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

 

	
6.9  

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

 

	
6.10  

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

 

	
6.11  

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

 

	
6.12  

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

 

	
6.13  

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

 

	
6.14  

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

 

	
6.15  

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

 

	
6.16  

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

 

	
6.17  

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

 

	
7.  

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

 

  

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8.  

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

 

	
9.  

	
DEFAULT AND REMEDIES.

 

	
9.1  

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

 

	
(a)  

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

 

	
(b)  

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

 

	
(c)  

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

 

	
(d)  

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

 

	
(e)  

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

 

	
(f)  

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

 

	
(g)  

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

 

	
(h)  

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

 

	
(i)  

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

 

	
(j)  

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

 

  

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(k)  

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

 

	
(l)  

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

 

	
(m)  

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

 

	
9.2  

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

 

	
10.  

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

 

	
11.  

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

 

	
12.  

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

 

	
12.1  

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

 

  

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12.2  

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

 

	
13.  

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

 

	
14.  

	
DEFINITIONS AND CONSTRUCTION.

 

	
14.1  

	
Definitions.  In this Agreement:

 

“Account Balance” means at any time the aggregate of the Receivable Amounts of all Financed Receivables at such time, as reflected on the records maintained by Lender.

 

“Account Debtor” has the meaning in the California Uniform Commercial Code and includes any person liable on any Receivable, including without limitation, any guarantor of any Receivable and any issuer of a letter of credit or banker’s acceptance assuring payment thereof.

 

“Adjustments” means all discounts, allowances, disputes, offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any Account Debtor with respect to any Financed Receivable.

 

“Advance” means as to any Receivable, the advance made by Lender to Borrower in respect of such Receivable pursuant to Section 1.2.

 

“Advance Rate” means 50% or such greater or lesser percentage as Lender may from time to time establish in its sole discretion upon notice to Borrower.

 

“Agreement” means this Business Financing Agreement.

 

“Authorized Person” means any of Borrower (if an individual) or any one of the individuals authorized to sign on behalf of Borrower.

 

“Cash Reserve” means for any Financed Receivable which has been paid in full during a Monthly Period, the amount by which the amount(s) paid on such Financed Receivable exceeds the Advance made on such Financed Receivable.

 

“Collateral” means all of Borrower’s rights and interest in any and all personal property, whether now existing or hereafter acquired or created and wherever located, and all products and proceeds thereof and accessions thereto, including but not limited to the following (collectively, the “Collateral”):  (a) all accounts (including health care insurance receivables), chattel paper (including tangible and electronic chattel paper), inventory (including all goods held for sale or lease or to be furnished under a contract for service, and including returns and repossessions), equipment (including all accessions and additions thereto), instruments (including promissory notes), investment property (including securities and securities entitlements), documents (including negotiable documents), deposit accounts, letter of credit rights, money, any commercial tort claim of Borrower which is now or hereafter identified by Borrower or Lender, general intangibles (including payment intangibles and software), goods (including fixtures) and all of Borrower’s books and records with respect to any of the foregoing, and the computers and equipment

 

  

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containing said books and records; and (b) any and all cash proceeds and/or noncash proceeds thereof, including without limitation, insurance proceeds, and all supporting obligations and the security therefore or for any right to payment.

 

“Collections” means all payments from or on behalf of an Account Debtor with respect to Receivables.

 

“Compliance Certificate” means a certificate in the form attached as Exhibit A to this Agreement by an Authorized Person that, among other things, the representations and warranties set forth in this Agreement are true and correct as of the date such certificate is delivered.

 

“Credit Limit” means $750,000, which is intended to be the maximum amount of Advances at any time outstanding.

 

“Default” means any Event of Default or any event that with notice, lapse of time or otherwise would constitute an Event of Default.

 

“Due Diligence Fee” means a payment of an annual fee equal to $800 due upon the date of this Agreement and annually upon each anniversary thereof so long as any Advance is outstanding or available hereunder.

 

“Eligible Receivable” means a Receivable that satisfies all of the following:

 

	
(a)  

	
The Receivable has been created by Borrower in the ordinary course of Borrower’s business and without any obligation on the part of Borrower to render any further performance.

 

	
(b)  

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

 

	
(c)  

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

 

	
(d)  

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

 

	
(e)  

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

 

	
(f)  

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

 

	
(g)  

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

 

	
(h)  

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

 

	
(i)  

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

 

	
(j)  

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

 

  

8

  

 

	
(k)  

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

 

	
(l)  

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

 

	
(m)  

	
The Receivable is otherwise acceptable to Lender.

 

“Event of Default” has the meaning set forth in Section 9.1.

 

“Facility Fee” means a payment of an annual fee equal to 1.00 percentage points of the Formula Account Balance due upon the date of this Agreement and each anniversary thereof until this Agreement is terminated pursuant to Section 17 hereof.

 

“Finance Charge” means for each Monthly Period an interest amount equal to the Finance Charge Percentage of the average daily Account Balance outstanding during such Monthly Period.

 

“Finance Charge Percentage” means a rate per year equal to the Prime Rate plus 3.00 percentage points plus an additional 5.00 percentage points during any period that an Event of Default has occurred and is continuing.

 

“Financed Receivable” means a Receivable for which Lender makes an Advance pursuant to a Funding Request.

 

“Formula Account Balance” means the dollar amount resulting from dividing the Credit Limit by the Advance Rate in effect at the time of calculation.

 

“Funding Request” means a writing signed by an Authorized Person which accurately identifies the Receivables which Lender, at its election, is being requested to finance, and includes for each such Receivable the correct amount owed by the Account Debtor, the name and address of the Account Debtor, the invoice number, the invoice date and the account code in the form of the invoice schedule attached as Exhibit B hereto, together with copies of invoices and such other supporting documentation as the Lender may from time to time request.

 

“Intellectual Property” means (i) copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held (“Copyrights”), (ii) trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks (“Trademarks”), (iii) patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same (“Patents”), (iv) mask work or similar rights available for the protection of semiconductor chips or other products (“Mask Works”), (v) trade secrets, and any and all intellectual property rights in computer software and computer software products, (vi) design rights, and (vii) amendments, renewals and extensions of any of the Copyrights, Trademarks, Patents, or Mask Works.

“Lender” means Bridge Bank, National Association, and its successors and assigns.

 

“Month End” means the last calendar day of each Monthly Period.

 

“Monthly Period” means each calendar month.

 

“Obligations” means all liabilities and obligations of Borrower to Lender of any kind or nature, present or future, arising under or in connection with this Agreement or under any other document, instrument or agreement, whether or not evidenced by any note, guarantee or other instrument, whether arising on account or by overdraft, whether direct or indirect (including those acquired by assignment) absolute or contingent, primary or secondary, due or to become due, now owing or hereafter arising, and however acquired; including, without limitation, all Advances, Finance Charges, fees, interest, expenses, professional fees and attorneys’ fees.

 

“Overadvance” means at any time an amount equal to the greater of the following amounts (if any):  (a) the amount by which the total amount of the Advances exceeds the Credit Limit and (b) the amount equal to the sum of (i) the total outstanding amounts of all Advances made with respect to Receivables which were not, or have ceased to be, Eligible Receivables and (ii) the amount by which the total outstanding amount of all Advances (other than those under clause (i) above)) exceeds the product of (x) the Advance Rate and (y) the total outstanding Receivable Amounts of the Eligible Receivables in respect of which such Advances were made.

 

  

9

  

“Permitted Indebtedness” means:

 

	
(a)  

	
Indebtedness under this Agreement or that is otherwise owed to the Lender.

 

	
(b)  

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

 

	
(c)  

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

 

	
(d)  

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

 

	
(e)  

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

 

	
(f)  

	
Subordinated Debt.

 

	
(g)  

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

 

	
(h)  

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

 

“Permitted Liens” means:

 

	
(a)  

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

 

	
(b)  

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

 

	
(c)  

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

 

	
(d)  

	
Liens securing Subordinated Debt.

 

	
(e)  

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

 

	
(f)  

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

 

	
(g)  

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

 

“Permitted Transfers” means:

 

	
(a)  

	
Licenses of Borrower's Intellectual Property for manufacturing and sales purposes, in each case in the ordinary course of Borrower's business.

 

	
(b)  

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

 

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

 

“Processing Fee” means a fee equal to 0.50% of the Receivable Amount of each Financed Receivable.

 

  

10

  

 

“Recovery Fee” means for each item of Collections which the Borrower has failed to remit as required by the Agreement, a fee equal to the lesser of $5,000 or 5% of the amount of such item, but in no case less than $1,000.

 

“Receivable Amount” means as to any Receivable, the Receivable Amount due from the Account Debtor after deducting all discounts, credits, offsets, payments or other deductions of any nature whatsoever, whether or not claimed by the Account Debtor.

 

“Receivables” means Borrower’s rights to payment arising in the ordinary course of Borrower’s business, including accounts, chattel paper, instruments, contract rights, documents, general intangibles, letters of credit, drafts, and bankers acceptances.

 

“Refundable Reserve” means for any Month End:

 

	
(a)  

	
The sum of (i) the total of the Cash Reserves as to all Financed Receivables as of such Month End and (ii) the amount of Collections received by Lender during the Monthly Period with respect to Receivables other than Financed Receivables and not previously remitted to Borrower,

 

minus

 

	
(b)  

	
The total for that Monthly Period ending on such Month End of:

 

	
(i)  

	
Processing Fee, Facility Fee, Due Diligence Fee and Recovery Fees;

 

(ii) Finance Charges;

 

(iii) Adjustments;

 

(iv) Any outstanding Overadvance Amounts;

 

	
(v)  

	
all amounts due, including professional fees and expenses, as set forth in Section 11 for which oral or written demand has been made by Lender to Borrower during that Monthly Period to the extent Lender has agreed to accept payment thereof by deduction from the Refundable Reserve; and

 

	
(vi)  

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

 

“Reserve” means as to any Financed Receivable the amount by which the Receivable Amount of the Financed Receivable exceeds the Advance on that Financed Receivable.

 

“Reserve Percentage” means 100% less the Advance Rate.

 

“Subordinated Debt” means indebtedness of Borrower that is expressly subordinated to the indebtedness of Borrower owed to Lender pursuant to a subordination agreement satisfactory in form and substance to Lender.

 

“Termination Fee” means a payment equal to 1.00% of the Formula Account Balance.

 

	
14.2  

	
Construction:

 

	
(a)  

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

 

	
(b)  

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

 

	
(c)  

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

 

  

11

  

 

	
15.  

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

 

	
16.  

	
JUDICIAL REFERENCE PROVISION.

 

	
16.1  

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

 

	
16.2  

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

 

	
16.3  

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

 

	
16.4  

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

 

	
16.5  

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

 

	
16.6  

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

 

	
16.7  

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

 

  

12

  

 

	
16.8  

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

 

	
16.9  

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

 

	
16.10  

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

 

	
17.  

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

 

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

 

(b)  Waivers.  To the maximum extent permitted by applicable law, each Borrower hereby:

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

  

13

  

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

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

(iv) Statutory Rights.  WAIVES, WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER PROVISION SET FORTH IN THIS SECTION, ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2787 to 2855, AND CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c, 580d, and 726.

 

(c)  Consent to Alterations and Releases.  Each Borrower consents and agrees that, without notice to or by such Borrower and without affecting or impairing the obligations of such Borrower hereunder, Lender may, by action or inaction, compromise or settle, extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of this Agreement or may grant other indulgences to any Borrower in respect thereof, or may agree to amend or modify in any manner and at any time (or from time to time) any one or more of this Agreement, or may, by action or inaction, release or substitute any guarantor, if any, of the obligations hereunder, or may enforce, exchange, release, or waive, by action or inaction, any security for the obligations hereunder or any guaranty of the obligations hereunder, or any portion thereof.

	
18.  

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

 

	
19.  

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

 

  

14

  

 

IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and year above written.

 

	
BORROWER:

	
LENDER:

	  	  
	
AKEENA SOLAR, INC.,

By                                                                

Name:                                                                

Title:                                                                

	
BRIDGE BANK, NATIONAL ASSOCIATION

By                                                                       

Name:                                                                       

Title:                                                                       

	  	  
	
Address for Notices:

1475 South Bascom Avenue, Suite 101

Campbell, CA 95008

Fax: (408)371-5105

	
Address for Notices:

55 Almaden Blvd.

San Jose, CA 95113

Fax:  (408) 423-8510

	
AKEENA CORP.

By                                                                

Name:                                                                

Title:                                                                

	  
	
Address for Notices:

1475 South Bascom Avenue, Suite 101

Campbell, CA 95008

Fax: (408)371-5105

	
ANDALAY SOLAR, INC.

By                                                                

Name:                                                                

Title:                                                                

	  
	
Address for Notices:

1475 South Bascom Avenue, Suite 101

Campbell, CA 95008

Fax: (408)371-5105

  

15exhibit_10-26.htm

 

Exhibit 10.26

 

CONFIDENTIAL TREATMENT

REQUESTED PURSUANT TO RULE 24b-2

Certain portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 under the Securities Exchange Act of 1934. The omitted materials have been filed separately with the Securities and Exchange Commission.

STRATEGIC OEM AGREEMENT

This Strategic OEM Agreement (“Agreement”) is between Akeena Solar, Inc., a Delaware corporation, (“Akeena Solar”) and its wholly-owned subsidiary Andalay Solar, Inc., a California corporation (“Andalay”), each having a principal place of business at 16005 Los Gatos Blvd., Los Gatos, CA 95032 (Akeena Solar and Andalay collectively “Akeena”) and Enphase Energy, a Delaware corporation, with its principal place of business at 2011 1st Street, Suite 300, Petaluma, CA 94952 (“Enphase”, and, together with Akeena, the “Parties”, each individually a “Party“).  This Agreement is effective from January 31, 2009 (“Effective Date”).

PURPOSE

WHEREAS, Enphase has proprietary micro-inverter technology and related products and components;

WHEREAS, Akeena desires Enphase to supply and manufacture Enphase’s micro-inverters and related components (the “Enphase Products”) for integration into Akeena’s proprietary Andalay solar panels;

WHEREAS, Akeena will [***] enable Enphase’s micro-inverters to be combined with Akeena’s proprietary solar modules;

WHEREAS, Akeena will sell the Andalay solar panels which integrate Enphase Product(s) (“Combined Products”) to end users;

WHEREAS, each Party desires to adapt its product to become compatible with the other’s technology while retaining all IP ownership rights and derivatives thereof in its own technology and products;

WHEREAS, Akeena and Enphase have discussed the pricing and other terms and conditions related to Akeena’s purchase of Enphase Products, as well as the Parties’ combined efforts to develop the Combined Product for commercialization by Akeena; and

WHEREAS, the Parties intend that this Agreement will govern their relationship and all Purchase Orders by Akeena for Enphase Products, as further described herein.

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

NOW, THEREFORE, the Parties hereby agree as follows:

AGREEMENT

SECTION 1.0  – Definition

Capitalized terms are defined in Attachment 1.

SECTION 2.0  – Cooperative Efforts

2.1 During the term of this Agreement, both Parties agree to:

(a) Work collaboratively in communicating with standards organizations (UL, NEC) and local permitting jurisdictions to explain the safety and reliability benefits of AC solar modules with integrated racking, wiring and grounding; and

(b) Work independently and collaboratively to [***] become compatible for an optimum Combined Product.

2.2 The cooperative efforts of each of the Parties described in this Section 2 are a material element of this Agreement.

SECTION 3.0  - Purchase and Supply

3.1 Enphase agrees to supply, and Akeena agrees to purchase (or to have Authorized Purchasers purchase) the Enphase Products described in Attachment 2 in the manner described in Attachment 2.  All Purchase Orders, whether placed by Akeena or other Authorized Purchasers, will be subject to the terms and conditions of this Agreement, including the terms set forth in Attachments 2-6.

 

3.2 Except as otherwise expressly set forth herein, nothing in this Agreement, in any Akeena forecast, or in any prior discussions or agreements between the Parties will give rise to an obligation to place any Purchase Orders.

SECTION 4.0  – Exclusivity

4.1 [***].

 

4.2 Each Party understands and agrees that a material breach of this Section 4 that remains uncured for more than thirty (30) days shall entitle Akeena to seek equitable relief, including injunction and specific performance, as a remedy for any such uncured material breach.

SECTION 5.0  – Pricing; Shipment Terms

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

SECTION 6.0 

6.1 [***].

 

6.2 [***].

 

6.3 [***].

 

6.4 [***].

 

6.5 [***].

 

6.6 [***].

SECTION 7.0  - Supply and Purchase Obligation

[***]. Enphase will acknowledge all Purchase Orders and confirm the Delivery Date within seven (7) business days after they are placed in accordance with this Agreement.  Enphase will ship all Enphase Products in accordance with each Purchase Order on or before the Delivery Date.  If a shipment of Enphase Products will be delayed by more than one day, Enphase will promptly notify Akeena. [***].

SECTION 7.0  – Energy Management and Monitoring Services

[***].

SECTION 8.0 - Cancellations and Flexibility

Akeena and other Authorized Purchasers may only cancel or revise Purchase Orders as set forth in Attachment 4.

SECTION 9.0  – Payment Terms

The terms of the payment obligations under this Agreement are set forth in Attachment 5.

SECTION 10.0  - Independent Efforts and Similar Products

Nothing in this Agreement will impair Akeena’s right to develop, manufacture, purchase or use products or services competitive with those offered by Enphase, and except as otherwise stated in Section 4, nothing in this Agreement will impair Enphase’s right to develop, manufacture, commercialize or otherwise exploit Enphase Products or similar products of Enphase or any third party.

SECTION 11.0  - Confidentiality

The terms, conditions and existence of the Agreement and related negotiations and activities will be considered confidential information of each Party governed by the terms of the mutual confidentiality agreement between them dated September 3, 2008.

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

SECTION 12.0  - Term and Termination

  12.1 This Agreement and the obligations of the Parties will continue in effect until expiration or termination of this Agreement, as set forth in this Section 12.

  12.2 [***]. A Party will have “cause” to terminate this Agreement only if it shows:  1) the other Party is or becomes insolvent or unable to pay its debts as they mature in the ordinary course of business;  2) the other Party made an assignment for the benefit of creditors or a receiver is appointed to take charge of all or any part of the Party’s assets or business;  3) the other Party becomes the subject of a bankruptcy or reorganization proceeding, whether voluntary or involuntary and such proceeding is not dismissed or stayed within sixty (60) days; or 4) the other Party breached any covenants, agreements, representations or warranty contained herein in any material respect or defaults or fails to perform any of its obligations or agreements hereunder in any material respect, which violation, default or failure is not cured within thirty (30) days after the breaching Party’s receipt of written notice of such breach provided by the non-breaching Party; provided, however, that if such breach is not reasonably capable of cure within thirty (30) days, but such breach is reasonably capable of cure within sixty (60) days, after the breaching Party’s receipt of notice of such breach, then the breaching Party shall be afforded sixty (60) days to cure said breach if the breaching Party commences to remedy the breach within thirty (30) days after the breaching Party’s receipt of written notice thereof and thereafter diligently pursues such remedy until such breach is fully cured.

  12.3 Upon the expiration or termination of this Agreement:

 

(a)           [***].

 

 

(b)           [***].

 

 

(c)           [***].

 

(d)           [***].

 

 

SECTION 13.0 - Disputes

 

 

If there is a dispute between the Parties arising under this Agreement, the Parties agree to escalate the matter for discussion and resolution by designated members of their senior management teams.  If these designated members are unable to resolve the matter within a reasonable period of time, not to exceed sixty (60) days, then the Parties will seek to resolve the dispute through a full day, non-binding mediation conducted in Santa Clara County or San Francisco County or Sonoma, California.  If the Parties are unable to resolve the dispute during such mediation, then either Party may commence litigation in the state or federal courts.  Either Party may seek equitable relief in order to protect its confidential information or intellectual property at any time (without first attempting to resolve the dispute as described above).  If any arbitration or other proceeding, or any action at law or in equity is commenced by either Party to enforce or interpret the terms of this Agreement, the prevailing Party in such proceedings or action (after appeal, if any) shall be entitled to recover from the unsuccessful Party its reasonable attorneys’ fees, costs and necessary disbursements, in addition to any other relief to which it may be entitled.

 

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

 

SECTION 14.0  - Governing Law

This Agreement and the rights and obligations of the Parties will be governed by and construed and enforced in accordance with the laws of the State of California as applied to agreements entered into and to be performed entirely within California, without regard to conflict of law principles.

 

SECTION 15.0  - Indemnification

 

 

  15.1 General Indemnity.

 

 

(a) [***].

 

 

(b) [***].

 

 

  15.2 Intellectual Property Indemnification.

 

 

(a) [***].

 

 

(b) [***].

 

 

(c) [***].

 

 

(d) [***].

 

 

  15.3 [***].

 

 

  15.4 [***].

 

 

SECTION 16.0  – Warranty

 

 

  16.1 OEM Product Warranty.  [***].

 

 

  16.2 Product Warranty Remedy.  [***].

 

 

  16.3 Other Obligations and Warranties.

 

 

(a) Regulatory Compliance.  [***].

 

 

(b) Import/Export Requirements.  [***].

 

 

(c) Formation, Good Standing and Authority.  [***].

 

 

(d) No Conflict.  [***].

 

 

(e) Consents and Approvals.  [***].

 

 

(f) Warranty Disclaimer.  [***].

 

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

 

SECTION 17.0 - LIMITATION OF LIABILITY

 

 

IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES (INCLUDING LOST PROFITS (WHETHER ACTUAL OR ANTICIPATED), LOST SAVINGS, LOSS BY REASON OF SHUTDOWN OR NON-OPERATION; INCREASED EXPENSE OF OPERATION, BORROWING OR FINANCING; LOSS OF USE OR  PRODUCTIVITY; AND INCREASED COST OF CAPITAL) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE SUPPLY, SALE OR DELIVERY OR PURCHASE OF PRODUCT HEREUNDER, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; AND, REGARDLESS OF WHETHER ANY SUCH CLAIM ARISES OUT OF BREACH OF CONTRACT, GUARANTY OR WARRANTY, TORT, PRODUCT LIABILITY, INDEMNITY, CONTRIBUTION, STRICT LIABILITY OR ANY OTHER LEGAL THEORY.  EACH PARTY HEREBY RELEASES THE OTHER FROM ANY SUCH LIABILITY.  THE FOREGOING LIMITATION OF LIABILITY SHALL REMAIN IN FULL FORCE AND EFFECT REGARDLESS OF WHETHER A PARTY’S REMEDIES HEREUNDER ARE DETERMINED TO HAVE FAILED THEIR ESSENTIAL PURPOSE.  IN NO EVENT SHALL EITHER PARTY’S [***], EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND, REGARDLESS OF WHETHER ANY SUCH LIABILITY ARISES OUT OF BREACH OF CONTRACT, GUARANTY OR WARRANTY, TORT, PRODUCT LIABILITY, INDEMNITY, CONTRIBUTION, STRICT LIABILITY OR ANY OTHER LEGAL THEORY, EXCEPT WITH RESPECT TO ANY SUCH LIABILITY ARISING UNDER: [***].

 

SECTION 18.0  - Notices

Notices under this Agreement must be in writing and will be deemed given when actually received if delivered by courier with written proof of delivery, or ten (10) days after being sent by first class mail, return receipt requested, to the other Party at the address below:

For notices to Akeena:

To the address set forth on page 1: Attention: General Counsel

For notices to Enphase:

To the address set forth on page 1: Attention:  Jude Radeski

A Party may change its address by giving the other written notice as described above.

SECTION 19.0  – No Assignment

[***].

 

 

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

SECTION 20.0  – Insurance

 

Each Party will maintain workers’ compensation and comprehensive general liability insurance (including product liability coverage) for claims for damages because of bodily injury or death and property damage in amounts sufficient to cover its obligations under this Agreement.

SECTION 21.0  - Party Relationship

 

Nothing contained in this Agreement shall be construed to make either Party the agent for the other for any purpose, and neither Party hereto shall have any right whatsoever to incur any liabilities or obligations on behalf of or binding upon the other Party.  Each Party is an independent contractor and nothing contained herein shall be construed as constituting any relationship between the Parties other than that of purchaser and seller, nor shall it be construed as creating any relationship whatsoever between Akeena and Enphase, including employer/employee, partners or joint venture parties.

 

SECTION 22.0  – Agreement Interpretation

 

Preparation of this Agreement has been a joint effort of the Parties and the resulting document shall not be construed more severely against one of the Parties than against the other.  Any rule of construction that ambiguities are to be resolved against the drafting Party shall not be employed in the interpretation of this Agreement, or any amendments hereto.

SECTION 23.0  - Force Majeure

Neither Party shall be responsible for any failure or delay in the performance of this Agreement resulting from causes beyond its reasonable control and which, with the exercise of due diligence or reasonable business practices, could not reasonably have been prevented, avoided or removed by such Party, and does not result from such Party’s negligence or the negligence of its agents, employees or subcontractors, including, but not limited to, unforeseeable events such as acts of God, acts of foreign and/or domestic governmental authorities, war, terrorism, court order, riots, natural disasters, fire, labor strikes, lockouts, and trade associations or any other agency having control over export or import provided that: (i) the Party affected by such event, as soon as reasonably practical after obtaining knowledge of the occurrence of the claimed event, gives the other Party prompt oral notice, followed by a written notice, fully describing the particulars of the occurrence; (ii) the suspension of performance is of no greater scope and of no longer duration than is required by the event; and (iii) the Party affected by such event uses reasonable efforts to mitigate or remedy its inability to perform as soon as reasonably possible.

SECTION 24.0  - Severability

If a court of competent jurisdiction holds that any provision of this Agreement is invalid or unenforceable, the remaining provisions will remain in full force and effect, and the Parties (to the extent practicable) will replace the invalid or unenforceable provision with a valid and enforceable provision that achieves the original intent and economic effect of the Agreement.

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

SECTION 25.0  - Waiver and Construction

Failure to enforce any provision of this Agreement will not be deemed a waiver of future enforcement of that or any other provision.  Section headings are for convenience only and are not to be considered in construing or interpreting this Agreement.  References to “Pages,” “Sections,” and “Attachments” are references to pages and sections of and attachments to this Agreement.  The word “herein” and words of similar meaning refer to this Agreement in its entirety and not to any particular Section or provision.  The word “Party” means a Party to this Agreement and the phrase “third party” means any person, partnership, corporation, or other entity not a Party to this Agreement.  The words “agrees to”, “will” and “shall” are used in a mandatory, not a permissive, sense, and the word “including” is intended to be exemplary, not exhaustive, and will be deemed followed by “without limitation.”

SECTION 26.0  - Entire Agreement

This Agreement, including any Attachments and any other documents referenced herein, all of which are incorporated herein by reference, constitute the entire understanding and agreement of the Parties, whether written or oral, with respect to the subject matter of this Agreement and supersede all prior and contemporaneous agreements or understandings between the Parties with respect such subject matter with the express exception of the Parties’ previously executed nondisclosure agreements.  Any different or additional terms and conditions in a Purchase Order (other than the quantity and ship to location), purchase order acknowledgment, on a web site, or otherwise, will be of no force or effect and will not become part of this Agreement unless accepted in a written amendment signed by both Parties.

SECTION 27.0  - Amendments

This Agreement may not be amended or modified except by a written amendment signed by authorized signatories of both Parties.  To the extent any terms and conditions of the Agreement conflict with the terms and conditions of any invoice, Purchase Order or purchase order acknowledgment, the terms and conditions in the Agreement will control.

SECTION 28.0  – Counterparts

This Agreement may be executed by original or facsimile signature in one or more counterparts, each of which will be deemed an original, but which collectively will constitute one and the same instrument.

SECTION 29.0  – Survival of Terms

 

All provisions of this Agreement that are expressly or by implication to come into or continue in force and effect after the expiration or termination of this Agreement shall remain in effect and be enforceable following such expiration or termination.  Except where specifically stated to the contrary herein, all remedies of the Parties are in addition to, and not in lieu of, any other remedies a Party would have in law, equity or otherwise.

 

SECTION 30.0  – Headings and Titles

 

The captions and headings of the paragraphs have been inserted as a matter of convenience and reference only and shall not control or affect the meaning or construction of this Agreement.

 

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in duplicate originals by their duly authorized representatives.

	
Akeena Solar, Inc.

	  	
Enphase Energy

	  
	  	  	  	  
	
By:

	  	  	
By:

	  	  
	  	  
	
Title:

	
CEO

	  	
Title:

	 	  
	  	  
	
Date:

	  	  	
Date:

	  	  

Andalay Solar, Inc.

	
By:

	  	  
	  
	
Title:

	  	  
	  
	
Date:

	  	  

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

 

Attachment 1

Definitions

Whenever capitalized in this Agreement:

“Affiliate” means, with respect to either Party, any other party that directly or indirectly controls, or is controlled by, or is under common control with such Party.  For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of such Party through the ownership of voting securities.

“Authorized Purchaser” means Akeena, any of its wholly-owned subsidiaries, and any of its contract manufacturers, original equipment manufacturers or other third parties contractually bound to Akeena and authorized by Akeena to purchase Enphase Products; provided that, with respect to each “Authorized Purchaser,” all purchased Enphase Products shall be used only for integration into Combined Products which shall be sold only by Akeena.  The name and contact information for each Authorized Purchaser shall be delivered to Enphase in writing.

“Delivery Date” means the date specified in a particular Purchase Order for EXW delivery of Enphase Products, as further described in Attachment 4.

“Enphase Products” means the Enphase Products specifically described in Attachment 2.

“End Use Customer” means an individual or entity that acquires the Combined Product from Akeena or other Authorized Purchaser.

“Combined Products” means the Andalay solar panels with integrated Enphase micro-inverters and other parts, ready for delivery to end users that acquire such “Combined Products.”

“Purchase Order” means written orders for Enphase Products placed by Akeena or other Authorized Purchaser in accordance with this Agreement.

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

Attachment 2

Pricing

The Enphase Products to be supplied by Enphase pursuant to this Agreement are as described below, and the purchase prices for such Enphase Products ordered by Akeena and its Authorized Purchasers will be as set forth below [***].

	
Product

	
Price

	
Availability

	
 

Micro-inverters

	  	  
	
[***]

	
[***]

	
[***]

	
 

Other Components and Services

	  	  
	
[***]

	
[***]

	
[***]

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

Attachment 3

Forecasts; Purchase Orders

Two Year Forecast

Akeena and other Authorized Purchasers will purchase a minimum of [***] (in aggregate) per calendar year of the Enphase Products (which may be a combination of Versions 1 and 2, as defined in Attachment 2) over a two (2) consecutive calendar year period beginning in January of 2009.  Akeena shall have the option to increase this minimum purchase commitment amount by up to [***] in its sole discretion (for a maximum annual minimum purchase commitment of [***]).

Purchase Orders; Quarterly Forecasts

[***]

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

Attachment 4

Purchase Orders

[***].

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

Attachment 5

Payments Terms

Payment Terms

[***].

 

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

  

  

  

Attachment 6

Cancellation Notice

Date

[XX]

Dear Sir/Madam;

Akeena confirms that they are canceling the following Enphase Product Orders:

	
PO #

	
Product

	
Quantity

	
Price

	
Cancellation

Credit

	
Extended

Price

	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	  	  
	  	  	  	  	
Total Amount

	  

 [***] Confidential information has been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request.

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