FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT (this "AGREEMENT") is made this 19th day of
December, 2002 by and among:
SILICON VALLEY BANK (the "LENDER"), a bank organized under the laws of
the State of California with its principal place of business at 0000
Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxxxxx and with a loan production office
located at 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxxxxx
doing business under the name "Silicon Valley East";
SATCON TECHNOLOGY CORPORATION, SATCON POWER SYSTEMS, INC., SATCON
APPLIED TECHNOLOGY, INC., SATCON ELECTRONICS, INC., AND SATCON POWER
SYSTEMS CANADA LTD. (individually and collectively, jointly and
severally, the "BORROWER"), Delaware corporations (other than Satcon
Power Systems Canada Ltd. which is organized under the laws of the
Province of Ontario, Canada) with offices located at 000 Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxxxxxxxxxxx;
BACKGROUND
Reference is made to the loan arrangement maintained between the Lender
and the Borrower, evidenced by, among other things, a certain Loan and Security
Agreement dated as of September 13, 2002 (the "LOAN AGREEMENT"). Hereinafter,
the Loan Agreement, and all documents, instruments, and agreements incidental
thereto shall be referred to collectively as the "LOAN DOCUMENTS". Capitalized
terms used in this Agreement and not otherwise defined herein shall have the
meanings as defined in the Loan Agreement.
The Borrower has defaulted under the Loan Agreement as a result of its
failure to comply with the Capitalization Event covenant set forth in Section
5c. of the Schedule by failing to cause a Capitalization Event to occur on or
before December 1, 2002, and has requested that the Lender forbear from
exercising its rights and remedies upon default under the Loan Documents until
January 15, 2003. The Lender has agreed to forbear from enforcing its rights and
remedies upon default, but only upon the terms and conditions set forth herein.
Accordingly, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and between
the Lender and the Borrower, as follows:
ACKNOWLEDGMENT OF INDEBTEDNESS
1. The Borrower hereby acknowledges and agrees that it is
unconditionally liable to the Lender for the following amounts in
accordance with the terms of the Loan Documents and this
Agreement, as of December 19, 2002:
(a) Revolving Loans:
Principal: $885,527.34
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(b) For any additional principal advances and all interest
heretofore or hereafter accruing, and all fees, penalties,
costs, expenses, and costs of collection (including
attorneys' fees and expenses) heretofore or hereafter
incurred by the Lender in connection with the Loan Documents.
(c) Hereinafter all amounts due as set forth in this Paragraph 1
and all other amounts payable pursuant to the terms of the
Loan Documents, shall be referred to collectively as the
"Obligations".
WAIVER OF CLAIMS
2. The Borrower hereby acknowledges and agrees that it has no
offsets, defenses, claims, or counterclaims against the Lender, or
its officers, directors, employees, attorneys, representatives,
parent, affiliates, predecessors, successors, or assigns with
respect to the Loan Documents, the Obligations, or otherwise, and
that if the Borrower now has, or ever did have, any offsets,
defenses, claims, or counterclaims against the Lender, or its
officers, directors, employees, attorneys, representatives,
parent, affiliates, predecessors, successors, or assigns, whether
known or unknown, at law or in equity, from the beginning of the
world through this date and through the time of execution of this
Agreement, all of them are hereby expressly WAIVED, and the
Borrower hereby RELEASES the Lender, and its officers, directors,
employees, attorneys, representatives, parent, affiliates,
predecessors, successors, and assigns from any liability therefor.
RATIFICATION OF LOAN DOCUMENTS
3. The Borrower hereby ratifies, confirms, and reaffirms all and
singular the terms and conditions of the Loan Documents. The
Borrower further acknowledges and agrees that, except as
specifically modified in this Agreement, all terms and conditions
of the Loan Documents shall remain in full force and effect.
LOCKBOX ACCOUNT; CASH MANAGEMENT
4. The Borrower has, prior to the execution of this Agreement,
established a lockbox account (the "Lockbox") with the Lender,
into which the Borrower has caused to be delivered all checks,
drafts, cash and other remittances that are proceeds of the
Collateral. Until all Obligations are paid in full and the Loan
Agreement has been effectively terminated, the Borrower shall
continue to maintain the Lockbox and cause such items to be
forwarded to the Lockbox. The Lender shall credit all such
payments (conditional upon final collection) received in the
Lockbox against the Obligations daily in such order and manner as
the Lender may determine to be appropriate.
ADVANCES
5. From and after the execution of this Agreement until the
occurrence of a Termination Event, the Lender shall, in its good
faith business judgment, make Loans or other advances to the
Borrower in accordance with the terms of the Loan Agreement so
long as Borrower remains in compliance with the term and
conditions of the Loan Agreement and this Agreement. The Borrower
acknowledges and agrees that during the term of this Agreement,
the Borrower shall not request Loans or other financial
accommodations such
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that the aggregate amount outstanding under the Loan Agreement
would exceed $2,000,000 at any one time outstanding (nothing
contained in this Section shall be deemed to limit, reduce, modify
or otherwise affect any other term or condition of the Loan
Agreement including, without limitation, the calculation of any
covenant or fee set forth therein). The Borrower acknowledges and
agrees that in the event that the Lender shall determine (in its
good faith business judgment) to make any Loans or other advances:
(a) the making of such Loan or other advance by the Lender shall
not constitute a waiver of any Event of Default under the
Loan Documents, whether now existing or hereafter arising;
(b) any such Loan or other advance which is made by the Lender
shall be made pursuant to the terms and conditions of the
Loan Agreement and shall constitute an Obligation hereunder.
REPAYMENT
6. Interest shall continue to accrue on the outstanding principal
balance of the Obligations at the rate set forth in the Loan
Documents, and the Borrower shall continue to pay all accrued
interest, together with all other amounts which are or may become
due under the Loan Documents, as and when due in accordance with
the terms of the Loan Documents, unless otherwise specifically
required by this Agreement.
SUPPLEMENTAL FINANCIAL REPORTING
7. From and after the execution of this Agreement, and in addition to
all other financial reports required to be delivered under the
Loan Agreement, the Borrower shall deliver such additional
financial information to the Lender as may be requested by the
Lender.
AMENDMENTS TO LOAN AGREEMENT
8. The Loan Agreement is hereby amended as follows:
(i) Section 2.1 of the Loan Agreement is hereby amended by
deleting the text "Notwithstanding the foregoing, the
Collateral does not include:" set forth therein and
substituting the text "The Collateral shall specifically
include" therefor.
(ii) Section 5.7 of the Loan Agreement is hereby amended by
adding the following sentence at the end of the Section:
"Silicon is hereby authorized to file such financing
statements, continuation statements or amendments to
financing statements, in any jurisdiction and with any filing
offices as Silicon may determine are necessary or advisable
to perfect the security interests granted to Silicon by the
Borrower".
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CONDITIONS PRECEDENT
9. The Borrower acknowledges and agrees that this Agreement shall not
be effective until the following conditions have been satisfied:
(i) The Lender shall have received the fully executed Warrant
to Purchase Stock and Amendment No. 1 to Registration Rights
Agreement in the form attached hereto collectively as EXHIBIT
A and specifically incorporated by reference herein.
(ii) The Lender shall have received the fully executed
Intellectual Property Security Agreements in the form
attached hereto collectively as EXHIBIT B and specifically
incorporated by reference herein.
(iii) The Lender shall have received resolutions of the
Borrower authorizing the execution, delivery and performance
of this Agreement and all transactions contemplated hereby,
in form and substance satisfactory to the Lender.
FORBEARANCE BY LENDER
10. In consideration of the Borrower's performance in accordance with
each and every term and condition of this Agreement, the Lender
shall forbear from enforcing the Lender's rights and remedies as a
result of the Borrower's default under Section 5.c of the Schedule
to the Loan Agreement and Borrower's probable default under
Section 5.a (i)(b) of the Schedule to the Loan Agreement until the
occurrence of a Termination Event. The Borrower (i) acknowledges
that such Events of Default have occurred under the Loan
Documents, and (ii) agrees that nothing contained in this
Agreement shall constitute a waiver by the Lender of such Events
of Default. This Agreement shall only constitute an agreement by
the Lender to forbear from enforcing its rights and remedies based
upon the existing Events of Default referenced above upon the
terms and conditions set forth herein. In consideration for such
agreement to forbear, the Borrower shall pay to the Lender a
forbearance fee in the amount of $50,000.00, which fee shall be
(i) deemed fully earned upon the execution of this Agreement, (ii)
retained by the Lender as a fee and not applied against the
Obligations, and (iii) payable as follows: (a) $25,000.00 upon the
execution of this Agreement, and (b) $25,000.00 on or before
January 15, 2003.
ADDITIONAL EQUITY/SUBORDINATE FINANCING
11. The Borrower has advised the Lender that it intends to obtain and
close upon additional unsecured, subordinated financing and/or
issuance and sale of securities of the Borrower in accordance with
the following timeframes:
(i) Furnish the Lender with a fully executed term sheet for
an additional $3,000,000.00 in equity or subordinated debt
financing, on terms and conditions satisfactory to the
Lender, on or before December 19, 2002; and
(ii) Cause a Capitalization Event to occur on or
before January 15, 2003.
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In the event the Borrower does not receive $4,000,000.00 from
the issuance and sale of equity securities of the Borrower
and/or the incurrence of subordinated debt financing on terms
and conditions satisfactory to the Lender on or before
January 15, 2003, the Borrower shall pay to the Lender an
additional fee of $10,000.00 on January 16, 2003 and on the
Monday of each week thereafter (the "Additional Fees") for so
long as any amounts remain outstanding under the Loan
Agreement. The Additional Fees shall be deemed earned as of
the date hereof and the acceptance of any such Additional
Fees shall not constitute an agreement on the part of the
Lender to forbear from exercising its rights and remedies
beyond the Termination Date.
TERMINATION EVENTS
12. The occurrence of any one or more of the following events shall
constitute a termination event (each a "TERMINATION EVENT") under
this Agreement:
(a) January 15, 2003;
(b) The failure of the Borrower to maintain a minimum Adjusted
Tangible Net Worth of at least $15,500,000.00 as of November
30, 2002.
(c) The failure of the Borrower to promptly, punctually, or
faithfully perform any term or condition of this Agreement as
and when due, including, without limitation, compliance with
each event set forth herein, on or before dates set forth
herein, it being expressly acknowledged and agreed that TIME
IS OF THE ESSENCE;
(d) The failure of the Borrower to pay any amount required to be
paid to the Lender under this Agreement or any of the Loan
Documents as and when due, it being expressly acknowledged
and agreed that TIME IS OF THE ESSENCE;
(e) The occurrence of any further Event of Default under the Loan
Documents.
RIGHTS UPON TERMINATION
13. Upon the occurrence of any Termination Event:
(a) The agreement of the Lender to forbear as set forth in this
Agreement shall automatically terminate and the Lender may
immediately commence enforcing its rights and remedies
pursuant to the Loan Documents, and otherwise, in such order
and manner as the Lender may determine appropriate; and
(b) All Obligations shall be immediately due and payable in full,
without demand, notice, or protest, all of which are hereby
expressly WAIVED.
REIMBURSEMENT OF COSTS AND COSTS OF COLLECTION
14. The Borrower shall immediately reimburse the Lender for any and
all costs, expenses, and costs of collection (including reasonable
attorneys' fees and expenses) incurred by the Lender in connection
with the protection, preservation, and enforcement by the
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Lender of its rights and remedies under the Loan Documents,
including, without limitation, the negotiation and preparation of
this Agreement.
WAIVERS
15. JURY TRIAL. The Borrower hereby makes the following waiver
knowingly, voluntarily, and intentionally, and understands that
the Lender, in entering into this Agreement or making any
financial accommodations to the Borrower, whether now or in the
future, is relying on such a waiver: THE BORROWER HEREBY
IRREVOCABLY WAIVES ANY PRESENT OR FUTURE RIGHT TO A JURY IN ANY
TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE LENDER BECOMES A
PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST
THE LENDER OR IN WHICH THE LENDER IS JOINED AS A PARTY LITIGANT),
WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF, ANY
RELATIONSHIP BETWEEN THE BORROWER, OR ANY OTHER PERSON, AND THE
LENDER.
ENTIRE AGREEMENT
16. This Agreement shall be binding upon the Borrower and the
Borrower's respective employees, representatives, successors, and
assigns, and shall inure to the benefit of the parties and their
successors and assigns. This Agreement and all documents,
instruments, and agreements executed in connection herewith
incorporate all of the discussions and negotiations between the
Borrower and the Lender, either expressed or implied, concerning
the matters included herein and in such other documents,
instruments and agreements, any statute, custom, or usage to the
contrary notwithstanding.
CONSTRUCTION OF AGREEMENT
17. In connection with the interpretation of this Agreement and all
other documents, instruments, and agreements incidental hereto:
(a) All rights and obligations hereunder and thereunder,
including matters of construction, validity, and performance,
shall be governed by and construed in accordance with the law
of the Commonwealth of Massachusetts and are intended to take
effect as sealed instruments.
(b) In the event of any inconsistency between the provisions of
this Agreement and any other document, instrument, or
agreement entered into by and between the Lender and the
Borrower, the provisions of this Agreement shall govern and
control.
ILLEGALITY OR UNENFORCEABILITY
18. Any determination that any provision or application of this
Agreement is invalid, illegal, or unenforceable in any respect, or
in any instance, shall not affect the validity, legality, or
enforceability of any such provision in any other instance, or the
validity, legality, or enforceability of any other provision of
this Agreement.
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INFORMED EXECUTION
19. The Borrower warrants and represents to the Lender that the
Borrower has read and understands all of the terms and conditions
of this Agreement, intends to be bound by the terms and conditions
of this Agreement, and is executing this Agreement freely and
voluntarily, without duress, after consultation with independent
counsel of its own selection.
IN WITNESS WHEREOF, this Agreement has been executed this 19th day of
December, 2002.
"BORROWER"
SATCON TECHNOLOGY CORPORATION
By:/s/ XXXXX X. XXXXXXX
-------------------------------------------
Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-----------------------------------------------
SATCON POWER SYSTEMS, INC.
By:/s/ XXXXX X. XXXXXXX
-------------------------------------------
Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-----------------------------------------------
SATCON APPLIED TECHNOLOGY, INC.
By:/s/ XXXXX X. XXXXXXX
-------------------------------------------
Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-----------------------------------------------
SATCON ELECTRONICS, INC.
By:/s/ XXXXX X. XXXXXXX
-------------------------------------------
Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-----------------------------------------------
SATCON POWER SYSTEMS CANADA LTD
By:/s/ XXXXX X. XXXXXXX
-------------------------------------------
Title:VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
-----------------------------------------------
"LENDER"
SILICON VALLEY BANK
By:/s/ XXXX X. XXXX
--------------------------------------------------
Title:VICE PRESIDENT
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