PLEDGE AND SECURITY AGREEMENT (Limited Liability Company Membership Interests)
EXHIBIT 10.11
Execution Version
(Limited Liability Company Membership Interests)
This PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of June 10, 2013, by PRINCIPAL SOLAR, INC., a Delaware corporation ("PSI"), VIS ▇▇▇▇▇, INC., a Tennessee corporation ("VS") and ASTROSOL, INC., a Tennessee corporation ("AstroSol", and together with PSI and VS, individually and collectively, the "Grantor" or "Grantors"), in favor of BRIDGE BANK, NATIONAL ASSOCIATION, a national banking association ("Secured Party"), with reference to the following facts:
A. Pursuant to that certain Loan and Security Agreement, dated as of June 10, 2013, among Powerhouse One, LLC, a Tennessee limited liability company ("PHI"), Lincoln Farm I, LLC, a Tennessee limited liability company ("LFI"), Lincoln Farm II, LLC, a Tennessee limited liability company ("LF2"), Lincoln Farm III, LLC, a Tennessee limited liability company ("LF3"), Lincoln Farm IV, LLC, a Tennessee limited liability company ("LF4", and together with PHI , LFI , LF2, and LF3, are individually and collectively, the "Borrower"), and Lender (the "Loan Agreement"), Lender has made or will make loans in an aggregate principal amount not to exceed $5,050,000 (collectively, the "Loan") to Borrower.
B. As an essential inducement to and as a condition to Lender's making of the Loan, and in consideration therefor, Grantor has agreed to execute this Agreement.
C. Grantor will obtain substantial direct and indirect benefits from the Loan.
NOW, THEREFORE, in consideration of the foregoing recitals, and to induce and in consideration for the making of the Loan, Grantor hereby agrees as follows:
1. DEFINITIONS. Capitalized terms used but not defined in this Agreement shall have the definitions given thereto in the Loan Agreement as though set forth herein in full. Unless otherwise defined herein or in the Loan Agreement, capitalized terms used herein that are defined in the UCC shall have the meanings assigned to them in the UCC. However, if a term is defined in Article 9 of the UCC differently than in another Article of the UCC, the term has the meaning specified in Article 9 of the UCC. The following terms shall have the meanings respectively set forth below:
"Certificates" means all certificates, instruments or other documents now or hereafter representing or evidencing the Membership Interest.
"Collateral" means, collectively, (a) the Membership Interest, and (b) all Collateral Proceeds.
"Collateral Proceeds" means, collectively, all cash payments, dividends, distributions, payments in kind, principal, interest, fees, commissions, reimbursements and other payments of any kind and all conversions, substitutions, exchanges, and replacements, made pursuant to the LLC Governing Documents, or otherwise arising out of or resulting from the Membership Interest.
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"Event of Default" shall mean (i) an "Event of Default", as such term is defined in the Loan Agreement, and (ii) a default by Granter under any provision of this Agreement which default is not cured within five Business Days following written notice thereof by Secured Party.
"Issuer" means Powerhouse One, LLC, a Tennessee limited liability company.
"LLC Agreement" means that certain Operating Agreement of Issuer, dated as of August 9, 2010, as amended through that certain Second Amendment to the Operating Agreement of Powerhouse One, LLC, dated as of June 10, 2013 (as the same may be amended, restated, supplemented or otherwise modified from time to time), having Granter as a member.
"LLC Certificate" means those certain Articles of Organization of Issuer filed with the Secretary of State of the jurisdiction of Issuer's formation.
"LLC Governing Documents" means, collectively, the LLC Agreement and the LLC Certificate.
"Membership Interest" means, collectively, all of the following:
(a) all existing and future income, compensation, distributions, accounts, accounts receivable, chattel paper, instruments, documents, general intangibles, indebtedness and other rights to payment and contract rights owing to Granter from Issuer or with respect to Granter's equity interests in Issuer, wherever located and whether now owned or hereafter acquired or arising, including all payments, dividends or other distributions, whether in cash, property or otherwise, at any time owing or payable to Granter;
(b) all existing and future rights and interests of Granter in, to and under Issuer and the LLC Agreement, including (i) all voting and management rights and all rights to grant or withhold consents and approvals, (ii) all rights of access and inspection to and use of all books and records, including computer software and computer software programs, of Issuer, and (iii) all other rights, interests, property or claims to which Granter may be entitled in its capacity as a member of Issuer; and
(c) any and all additions, modifications, amendments, substitutions, and replacements to or for the foregoing and all proceeds and products of any of the foregoing.
"Obligations" means any and all indebtedness and other obligations, whether now existing or hereafter arising and of any nature whatsoever, of (a) Borrower to Secured Party under the Loan Agreement and each of the other Loan Documents to which Borrower is a party, including, without limitation, Borrower's obligation to repay the Loan, and (b) Granter under this Agreement. The Obligations include, without limitation, all principal, interest, fees and expenses, and all interest that accrues on all or any part of any of the Obligations after the filing of any petition or pleading by or against Borrower or Granter in any bankruptcy, insolvency or other similar proceeding.
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"Person" means any individual, corporation, partnership, joint venture, association, joint stock company, trust, trustee, estate, limited liability company, unincorporated organization, real estate investment trust, government or any agency or political subdivision thereof, or any other form of entity.
"UCC" means the New York Uniform Commercial Code, as amended.
2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the prompt payment in full in cash, and the prompt and full performance, of the obligations, Grantor hereby pledges to Secured Party and grants to Secured Party a security interest in and to all Collateral for the benefit of Secured Party, together with all products, proceeds, dividends, redemption payments, liquidation payments, cash, instruments and other property, and any and all rights, titles, interests, privileges, benefits and preferences incidental to the Collateral. The security interest and pledge created hereby shall continue in effect so long as any Obligation is owed to Secured Party. This Agreement is a continuing and irrevocable agreement and Grantor, to the maximum extent permitted by law, hereby waives any right to revoke this Agreement.
3. REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants to Secured Party as follows:
3.1 The execution, delivery, and performance by Grantor of this Agreement is within its powers, has been duly authorized, and is not in conflict with, and does not constitute a breach of any provision contained in its Charter Documents, nor will such action constitute a default or an event of default under any material agreement to which it is a party or by which it is bound. No Grantor is in default under any material agreement to which it is a party or by which it is bound.
3.2 With respect to the Collateral generally:
(a) Grantor has and at all times shall have good and marketable title to all Collateral in which Grantor is purporting to grant a security interest to Secured Party, and the Collateral is not and shall not be subject to any Lien (other than in favor of Secured Party); and
(b) Grantor has the right and power to pledge and grant to Secured Party a security interest in the Collateral on the terms set forth in this Agreement.
3.3 With respect to the Membership Interest:
(a) The Membership Interest of the Grantors collectively constitute 100% of the issued and outstanding equity interest in Issuer, consisting of 100,000 limited liability membership interest units, with 85,000 (85%) owned by PSI, 3,765 (3.765%) owned by VS and 11,235 (1l.235%) owned by AstroSol, (each percentage, the "Ownership Percentage" of the respective Grantor);
(b) Issuer is managed exclusively by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ as Chief Operating Manager and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as Operating Manager, and there are no other managers of Issuer;
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(c) True and correct copies of the LLC Governing Documents are attached hereto as Exhibit A, and have not been terminated, amended or modified. Each of the LLC Governing Documents is in full force and effect and Grantor is a duly constituted member of Issuer pursuant to the LLC Governing Documents. The Membership Interest has been validly issued and is non-assessable and fully paid,
(d) Grantor has full right, power and authority to enter into this Agreement (including the provisions enabling Secured Party or its nominee, upon the occurrence and during the continuance of an Event of Default to exercise the voting and other rights of the Membership interest as provided herein) under the terms of the LLC Agreement and under applicable law, without the consent, approval or authorization of, or notice to, any Person, including any regulatory authority or any Person having any interest in Issuer;
(e) Grantor is the sole, direct, legal and beneficial owner of the Membership Interest. The security interest granted to Secured Party under this Agreement is a first-priority security interest;
(f) Grantor is not in default under the LLC Agreement; and
(g) Grantor hereby irrevocably waives any and all provisions of the LLC Governing Documents that (A) prohibit, restrict, condition or otherwise affect the grant under this Agreement of any lien, security interest or encumbrance on any of the Collateral or any enforcement action which may be taken with respect to any such lien, security interest or encumbrance, (B) are inconsistent with the terms of this Agreement, or (C) might cause Secured Party to become obligated to any Person in any manner as a result of the grant of a security interest in the Collateral in favor of Secured Party.
4. COVENANTS.
4.1 Grantor hereby covenants that it shall not, without the prior written consent of Secured Party: (a) cause, permit, execute, consent to, vote in favor of, suffer or seek to obtain any modification, amendment, dissolution or termination of Issuer or the LLC Governing Documents; (b) approve or consent to any transfer of a material portion of the assets held by Issuer; or (c) waive or release any material obligation of any party to the LLC Governing Documents, or permit or agree to any act or omission to act on the part of any such party or parties thereunder which reduces, changes, or otherwise adversely affects Secured Party's rights under this Agreement.
4.2 Grantor further covenants and agrees: (a) to comply in all material respects with all provisions and covenants contained in the LLC Governing Documents; (b) to cause to be paid directly to Secured Party (rather than to Grantor) all Collateral Proceeds and all other distributions, dividends and payments of money or property by issuer on account of any of the Collateral except as permitted under the Loan Agreement; (c) to deliver to Secured Party a copy of each notice of default delivered to Grantor under the LLC Governing Documents; (d) to not make any distributions to its member or members during the existence of an Event of Default and, instead, to hold all Collateral, including Collateral Proceeds, in trust for Secured Party and
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turn over to Secured Party upon its request all Collateral Proceeds and all other distributions, dividends and payments of money or property by Issuer on account of any of the Collateral, in each case during the existence of an Event of Default; and (e) to permit Secured Party to exercise its powers hereunder.
4.3 Grantor shall cause Issuer to comply with all of the covenants and obligations imposed upon Issuer pursuant to the Loan Documents.
4.4 Grantor represents, warrants, covenants and agrees that: (a) the Membership interest is (and will remain) evidenced by a Certificate, is (and will remain) a security under UCC Section 8103, is not (and will not be) held in a securities account, and is not(and will not be) investment securities (as defined in the Investment Company Act of 1940, as amended); (b) Grantor will comply with all requirements of the UCC to effectuate the pledge of the Collateral as required in the Agreement; (c) Grantor's ownership of the Ownership Percentage of the equity interests in Issuer is indicated in the LLC Governing Documents, and Grantor has not assigned or encumbered such interests (except to Secured Party pursuant to the Agreement); (d) Grantor holds no indebtedness or right to payment from Issuer except by virtue of the Membership interest under the LLC Governing Documents; and (e) Grantor is not in default under the terms of the LLC Governing Documents.
4.5 Concurrently herewith Grantor shall deliver to Secured Party all Certificates, representing the Membership Interest endorsed in blank, in a manner satisfactory to Secured Party in all respects, together with undated transfer powers endorsed in blank in the form attached hereto as Exhibit B.
5. RIGHTS OF SECURED PARTY.
5.1 FILINGS TO PERFECT SECURITY. Secured Party may (and is hereby authorized to) me with any filing office such financing statements, amendments, addenda, continuations, terminations, assignments and other records (whether or not executed by Grantor) as Secured Party may deem necessary in its sole discretion to perfect and to maintain perfected security interests in the Collateral. Such documents may designate Secured Party as the secured party and Grantor as the debtor, identify Secured Party's security interest in the Collateral, and contain any other items required by law or deemed necessary by Secured Party. Upon Secured Party's request, Grantor shall execute any such documents (whether or not required by law).
Any such filings made by Secured Party prior to Grantor's execution of this Agreement are hereby authorized, ratified and confirmed by Grantor.
5.2 POWER OF ATTORNEY. Grantor appoints Secured Party its true attorney-in-fact to perform any or all of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Secured Party and its officers, employees and agents, or any of them:
(a) After the occurrence and during the continuance of an Event of Default, to perform any obligation of Grantor hereunder in the name of Grantor, or
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(b) After the occurrence and during the continuance of an Event of Default, to endorse or sign the name of Grantor on all instruments given in payment or in part payment of any Collateral and all documents of satisfaction, discharge, or receipt required or requested in connection therewith;
(c) To file or take any action or institute any case or proceeding (i) that, after the occurrence and during the continuance of an Event of Default, Secured Party may deem necessary or appropriate to collect or otherwise realize upon any or all of the Collateral, or effect a transfer thereof, or (ii) that may be necessary or appropriate to protect and preserve the right, title, and interest of Secured Party in and to the Collateral and the security intended to be afforded hereby;
(d) After the occurrence and during the continuance of an Event of Default, to ask, demand, collect, receive, receipt for, and ▇▇▇ for any and all sums or properties that may be or become due, payable, or distributable in respect of the Collateral or that constitute a part thereof (including all payments required under Section 4.2 hereof), with full power to settle, adjust, or compromise any claim thereunder or therefor as fully as Grantor could do. Regardless of any provision of this Agreement or the Loan Documents to the contrary, Secured Party shall not be considered to have accepted any property other than cash in satisfaction of any obligation of Grantor to Secured Party unless and until Secured Party has given express, written notice of Secured Party's election thereof;
(e) To prepare, execute, me, record or deliver financing statements, continuation statements, termination statements, statements of assignment, and applications for registration or like papers to perfect, preserve or release Secured Party's interest in the Collateral;
(f) To verify facts concerning the Collateral by inquiry of members, officers or other representatives of Grantor or Issuer; and
(g) Following the occurrence and during the continuance of any Event of Default, to exercise all rights, powers and remedies which Grantor would have, but for this Agreement, under the Collateral; provided, however, that Secured Party shall be under no obligation whatsoever to take any of the foregoing actions, and Secured Party shall not have any liability or responsibility for any act or omission (other than Secured Party's willful misconduct) taken with respect thereto. Grantor hereby agrees to repay immediately upon demand all costs and expenses incurred or expended by Secured Party in exercising any right or taking any action under this Agreement, together with interest from the date, of expenditure at the rate at which interest accrues on the Loan, plus 5% per annum (but in no event more than the maximum rate of interest permitted by applicable law).
5.3 ALL COLLATERAL PROCEEDS MUST BE PAID TO SECURED PARTY. After the occurrence and during the continuance of an Event of Default, until the Obligations have been paid and performed in full, Grantor shall cause Issuer and every other Person having control over such payment to pay all Collateral Proceeds directly to Secured Party at such account or
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6. FURTHER ASSURANCES. Grantor agrees that at any time, and from time to time, at its own expense Grantor will promptly execute, deliver and me or record all further financing statements, instruments and documents, and will take all further actions, including causing the issuers of, or obligors on any of the Collateral to so execute, deliver, file or take other actions, that Secured Party may request in order to perfect and protect any pledge or security interest granted hereby or to enable Secured Party to exercise and enforce its rights and remedies hereunder with respect to any Collateral and to preserve, protect and maintain the Collateral and the value thereof, including payment of all taxes, assessments and other charges imposed on or relating to the Collateral. Grantor hereby consents and agrees that the issuers of, or obligors on, the Collateral, or any registrar or transfer agent or trustee for any of the Collateral, shall be entitled to accept the provisions of this Agreement as conclusive evidence of the right of Secured Party to effect any transfer or exercise any right hereunder, notwithstanding any other notice or direction to the contrary given by Grantor or any other Person to such issuers or such obligors or to any such registrar or transfer agent or trustee.
7. VOTING RIGHTS.
7.1 VOTING RIGHTS PRIOR TO EVENT OF DEFAULT. So long as no Event of Default has occurred and is continuing and Secured Party has not given the Enforcement Notice referred to in Section 7.2 below, Grantor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Membership Interest, or any part thereof, for any purpose not prohibited by the terms of this Agreement, the Loan Agreement, or the other Loan Documents; provided, however, that Grantor shall not exercise, or refrain from exercising, any such right if it would result in an Event of Default.
7.2 VOTING RIGHTS DURING EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default, at the option of Secured Party, exercisable by giving written notice to Grantor of its election to exercise this option (the "Enforcement Notice"), all rights of Grantor to exercise the voting and other consensual rights which it would otherwise be entitled to exercise pursuant to Section 7.1 above shall cease, and all such rights shall thereupon become vested in Secured Party who shall have the sole right to exercise such voting and other consensual rights.
7.3 IRREVOCABLE PROXY. Grantor hereby revokes all previous proxies with regard to the Membership Interest and appoints Secured Party as its proxyholder to attend and vote at any and all meetings of the members of Issuer, and any adjournments thereof, held on or after the date of the giving of this proxy and prior to the termination of this proxy and to execute any and all written consents of members of Issuer executed on or after the date of the giving of this proxy and prior to the termination of this proxy, with the same effect as if Grantor had personally attended the meetings or had personally voted its shares or equity interests, as applicable, or had personally signed the written consents; provided, however, that the
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proxyholder shall have rights hereunder only at its option upon the occurrence and during the continuance of an Event of Default. Grantor hereby authorizes Secured Party to substitute another Person as the proxyholder and, upon the occurrence or during the continuance of any Event of Default, hereby authorizes and directs the proxyholder to file this proxy and the substitution instrument with the secretary of the appropriate entity. This proxy is coupled with an interest and is irrevocable until such time as all Obligations have been paid and performed in full.
8. TRANSFERS AND OTIIER LIENS; CERTAIN PERMITTED TRANSFERS.
8.1 Grantor agrees that it will not (a) except to a party who is a Grantor under this Agreement, sell, assign, exchange, transfer or otherwise dispose of, or contract to sell, assign, exchange, transfer or otherwise dispose of, or grant any option with respect to, any of the Collateral or any distributions thereunder, (b) create or permit to exist any lien upon or with respect to any of the Collateral, or (c) take any action with respect to the Collateral which is inconsistent with the provisions or purposes of this Agreement, the LLC Governing Documents, the Loan Agreement, or any of the other Loan Documents.
8.2 Grantor shall not enforce Section H (Transfer and Assignability of Interests) of Article II of the LLC Agreement against any other member of Issuer if such member is the holder of a Membership Interest as a result of Secured Party exercising its rights under this Agreement (including the Secured Party and transferees of the Secured Party).
9. SECURED PARTY MAY PERFORM OBLIGATIONS. If Grantor fails to perform any Obligation contained herein, Secured Party may, but without any obligation to do so and without notice to or demand upon Grantor, perform the same and take such other action as Secured Party may deem necessary or desirable to protect the Collateral or Secured Party's security interest therein, Secured Party being hereby authorized (without limiting the general nature of the authority hereinabove conferred) to pay, purchase, contest and compromise any lien which in the judgment of Secured Party appears to be prior or superior to Secured Party's security interest, and in exercising any such powers and authority to pay expenses, employ counsel and pay attorneys' fees. Grantor hereby agrees to repay immediately upon demand all sums so expended by Secured Party, together with interest from the date of expenditure at the rate at which interest accrues on the Loan plus 5% per annum (but in no event more than the maximum rate of interest permitted under applicable law). To the maximum extent permitted by law, Secured Party shall not be under any duty or obligation to (i) preserve, maintain or protect the Collateral or any of Grantor's rights or interests therein, (ii) exercise any voting rights with respect to the Collateral, whether or not an Event of Default has occurred or is continuing, or (iii) make or give any notices of default, presentments, demands for performance, notices of nonperformance or dishonor, protests, notices of protest or notice of any other nature whatsoever in connection with the Collateral on behalf of Grantor or any other Person having any interest therein; and Secured Party does not assume and shall not be obligated to perform the obligations of Grantor with respect to the Collateral.
10. NO ASSIGNMENT OF DUTIES. This Agreement constitutes an assignment of the Collateral only and not an assignment of any duties or obligations of Grantor with respect thereto, and by its acceptance hereof and whether or not Secured Party shall have exercised any
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of its rights or remedies hereunder, Secured Party does not undertake to perform or discharge, and shall not be responsible or liable for the performance or discharge of, any such duties or responsibilities. Grantor agrees that, notwithstanding the exercise by Secured Party of any of its rights hereunder, Grantor shall remain liable for the full and prompt performance of all of Grantor's obligations and liabilities under the LLC Governing Documents. Under no circumstances shall Secured Party be deemed to be a member of Issuer by virtue of the provisions of this Agreement unless expressly agreed to in writing by Secured Party. Without limiting the generality of the foregoing, Secured Party shall have no fiduciary duty to Grantor or any other members in Issuer, whether by virtue of the security interests and liens hereunder, or any enforcement action concerning such security interests and liens, unless and until Secured Party elects (in its sole discretion) in writing to be admitted to Issuer as a substituted member.
11. REASONABLE CARE. Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially similar to that which Secured Party accords its own property, it being understood that Secured Party shall not have any responsibility for (a) ascertaining or taking action with respect to maturities, calls, conversions, exchanges, tenders or other matters relative to any Collateral, whether or not Secured Party has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against any Person with respect to any Collateral.
12. EVENTS OF DEFAULT AND REMEDIES.
12.1 RIGHTS UPON EVENT OF DEFAULT. Upon the occurrence and during the continuance of an Event of Default, Secured Party may pursue any remedy available under this Agreement or at law (including under the provisions of the UCC) or in equity to collect, enforce or satisfy any Obligations then owing, whether by acceleration or otherwise, all of which remedies may be pursued by Secured Party separately, successively or simultaneously, with or without notice to Grantor, and at the sole option of and in the sole discretion of Secured Party, including the following specific remedies:
(a) to file suit and obtain judgment and, in conjunction with any action, to seek any ancillary remedies provided by law, including levy of attachment and garnishment;
(b) to notify Issuer and any and all other obligors on any Collateral; to renew, extend, modify, amend, accelerate, accept partial payments on, make allowances and adjustments and issue credits with respect to, release, settle, compromise, compound, collect or otherwise liquidate, on terms acceptable to Secured Party, in whole or in part, the Collateral and any amounts owing thereon or any guaranty or security therefor; to enter into any other agreement relating to or affecting the Collateral; to give all consents, waivers and ratifications with respect to the Collateral and exercise all other rights, powers and remedies and otherwise act with respect to the Collateral as if Secured Party were the owner thereof (Grantor hereby irrevocably constituting and appointing Secured Party the proxy and attorney-in-fact of Grantor, with full power and authority of substitution, to do so);
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(c) to enforce payment and prosecute any action or proceeding with respect to any and all of the Collateral and take or bring, in Secured Party's name or in the name of Grantor, all steps, actions, suits or proceedings deemed by Secured Party necessary or desirable to effect collection of or to realize upon the Collateral;
(d) in accordance with applicable law, to take possession of the Collateral with or without judic'lal process (Grantor hereby grants to Secured Party the right, for this purpose, to enter into or on any premises where the Collateral may be located);
(e) to endorse, in the name of Grantor, all checks, notes, drafts, money orders, instruments and other evidences of payment relating to the Collateral;
(f) to transfer any or all of the Collateral into the name of Secured Party or its nominee or nominees;
(g) in its sole discretion, and in such order and manner as Secured Party may deem appropriate, to apply against the Obligations any and all sums deposited with it or held by it;
(h) in accordance with applicable law, to foreclose the liens and security interests created under this Agreement or under any other agreement relating to the Collateral by any available judicial procedure or without judicial process, and to sell, assign or otherwise dispose of the Collateral or any part thereof, either at public or private sale or at any broker's board or securities exchange, in whole or in parts (without omitting the generality of the foregoing, the Membership Interest may be sold in its entirety to one buyer or in parts to more than one buyer), for cash, on credit or on future delivery, or otherwise, with or without representations or warranties, and upon such terms as shall be acceptable to Secured Party; and
(i) with or without taking possession, to sell or otherwise dispose of the Collateral at public or private sale in accordance with the UCC.
12.2 NO WAIVER. No delay or omission by Secured Party to exercise any right or remedy accruing upon any Event of Default will: (a) impair any right or remedy; (b) waive any default or operate as an acquiescence to the Event of Default; or (c) affect any subsequent default of the same or of a different nature.
12.3 NOTICE OF FORECLOSURE SALE. Secured Party shall give Granter such notice of any private or public sale of the Collateral as may be required by the UCC. Any sale of the Collateral shall be held at such time or times and at such place or places as Secured Party may determine in the exercise of its sole and absolute discretion. Secured Party may bid (which bid may be, in whole or in part, in the form of cancellation of Obligations) for and purchase for the account of Secured Party or any nominee of Secured Party the whole or any part of the Collateral. Secured Party shall not be obligated to make any sale of the Collateral if it shall determine not to do so regardless of the fact that notice of sale of the Collateral may have been given.
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12.4 PRIVATE SALES. Upon the occurrence and during the continuance of an Event of Default, whether or not any of the Collateral has been effectively registered under the Securities Act of 1933, as amended, or other applicable laws, Secured Party may, in its sole and absolute discretion, sell all or any part of the Collateral at private sale in such manner and under such circumstances as Secured Party may deem necessary or advisable in order that the sale may be lawfully conducted. Without limiting the foregoing, Secured Party may (a) approach and negotiate with a limited number of potential purchasers, and (b) restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or resale thereof. In the event that any of the Collateral is sold at private sale, Grantor agrees that if the Collateral is sold for a price which Secured Party in good faith believes to be reasonable, then (1) the sale shall be deemed to be commercially reasonable in all respects, (2) Grantor shall not be entitled to a credit against the Obligations in an amount in excess of the purchase price, and (3) Secured Party shall not incur any liability or responsibility to Grantor in connection therewith, notwithstanding the possibility that a substantially higher price might have been realized at a public sale. Grantor recognizes that a ready market may not exist for Collateral which is not regularly traded on a recognized securities exchange or in another recognized market, and that a sale by Secured Party of any such Collateral for an amount substantially less than a pro rata share of the fair market value of the issuer's assets minus liabilities may be commercially reasonable in view of the difficulties that may be encountered in attempting to sell Collateral that is privately traded.
12.5 WARRANTIES. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.
12.6 TITLE OF PURCHASERS. Upon consummation of any sale of Collateral pursuant to this Section 12, Secured Party shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the Collateral sold absolutely free from any claim or right on the part of Grantor, and Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. To the extent permitted by law, if the sale of all or any part of the Collateral is made on credit or for future delivery, Secured Party shall not be required to apply any portion of the sale price to the Obligations until such amount actually is received by Secured Party, and any Collateral so sold may be retained by Secured Party until the sale price is paid in full by the purchaser or purchasers thereof. Secured Party shall not incur any liability in case any such purchaser or purchasers shall fail to pay for the Collateral so sold, and, in case of any such failure, the Collateral may be sold again upon like notice.
12.7 DISPOSITION OF PROCEEDS OF SALE. Subject to any contrary provisions of the UCC, the cash proceeds resulting from the collection, liquidation, sale or other disposition of the Collateral shall be applied, first, to the costs and expenses (including attorneys' fees) of retaking, holding, storing, processing and preparing for sale, selling, collecting and liquidating the Collateral, and the like; and second, to the satisfaction of the Obligations in such order and manner as Secured Party in its sole and absolute discretion may determine.
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12.8 NO LIMITATIONS ON PARTIES TO WHOM COLLATERAL MAY BE SOLD. Granter hereby acknowledges and agrees that Secured Party shall not be limited in any way with respect to the parties to which the Collateral may be sold, whether at a public or private sale or at any broker's board or securities exchange, or otherwise. Granter specifically acknowledges and agrees that Secured Party may, without any liability whatsoever to Granter or the issuer of the Collateral, contact one or more competitors of Granter or the issuer of the Collateral or any other party or parties which may desire to obtain a controlling interest in the issuer, regarding a sale of the Collateral, and Secured Party may sell all or any portion of the Collateral to any one or more of such competitors or other parties, as Secured Party deems appropriate in its capacity as a secured party and without regard to the impact such a sale may have on Granter, the issuer of the Collateral or the management or operations of either.
13. REGISTRATION AND FILING. Granter has recorded, or caused to be recorded, on the books and records of Issuer, all entries necessary to reflect completely and accurately the pledge of the Membership Interest to Secured Party. A copy of this Agreement will be included in the books and records of Issuer so long as the Membership Interest remains pledged to Secured Party.
14. CONTINUING EFFECT. This Agreement shall remain in full force and effect and continue to be effective should any petition be filed by or against Granter for liquidation or reorganization, should Granter become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of Granter's assets, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by Secured Party, whether as a "voidable preference," "fraudulent conveyance," or otherwise, all as though such payment or performance had not been made. In the event that any payment or any part thereof is rescinded, reduced, restored or returned, the Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
15. COVENANT NOT TO DILUTE MEMBERSHIP INTEREST. Granter represents, warrants and covenants to Secured Party that it will not at any time cause or permit Issuer to issue any additional equity interests, or any options or other rights to acquire any additional equity interests, if the effect thereof would be to dilute in any way the Membership Interest or the interest of Secured Party in the Membership ▇▇▇▇▇▇.▇▇.
16. WAWER. Subject to the rights specifically reserved to Granter under this Agreement, Granter hereby waives, to the maximum extent permitted by applicable law: (i) all rights under any law limiting remedies, including, recovery of a deficiency in respect of the Collateral and all defenses based on any loss of Granter's right to recover any amount from Issuer, whether by right of subrogation or otherwise; (ii) all rights under any law of reimbursement or subrogation, all rights under any law to enforce any remedy that Secured Party may have against Issuer and all rights under any law to partic'lpate in any security held by Secured Party until the Obligations have been indefeasibly satisfied in full in cash; (iii) all suretyship and guarantor's defenses generally; (iv) any equities or rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any law that prevents or delays the enforcement of this Agreement or any portion hereof, and Granter, for
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itself and for any and all Persons who may claim on its behalf, hereby waives the benefit of all such laws; (v) any combination of the foregoing; and (vi) any other fact or circumstance whether or not similar to the foregoing. Grantor further agrees that upon the occurrence and during the continuation of an Event of Default, Secured Party may elect to nonjudi.cially or judicially foreclose against any real or personal property security it holds for the Obligations or any part thereof, or to exercise any other remedy against Issuer, any security or any guarantor, even if the effect of that action is to deprive Grantor of the right to collect reimbursement from Issuer for any sums paid by Grantor to Secured Party. Except as otherwise provided by law, any sale of, or any other realization upon, any Collateral by Secured Party in accordance with the terms hereof and the other Loan Documents, shall operate to divest all rights, title, interest, claim and demand, either at law or in equity, of Grantor or Issuer, as the case may be, therein and thereto, and shall be a perpetual bar both at law and in equity against Grantor or Issuer, as the case may be, and against any and all Persons claiming or attempting to claim the Collateral so sold or realized upon, or any portion thereof, from, through and under Grantor or Issuer, as the case may be.
17. INDEMNITY. Grantor agrees to indemnify and hold harmless Secured Party from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind or nature, and to reimburse Secured Party for all costs and expenses, including attorneys' fees and expenses and/or costs and expenses associated with, arising out of or in connection with this Agreement or the exercise by Secured Party of any right or remedy granted to it hereunder, other than arising from the gross negligence or willful misconduct of Secured Party. To the maximum extent permitted by law, in no event shall Secured Party be liable for any matter or thing in connection with this Agreement other than to account for monies actually received by it in accordance with the terms hereof.
18. NOTICES. All notices, demands or other communications relating to this Agreement shall be given, and shall be deemed received, in accordance with Section 10 of the Loan Agreement. Secured Party's initial address and facsimile number for notice shall be as set forth in the Loan Agreement; Grantor's initial address and facsimile number for notice is set forth below its signature hereto.
19. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of Secured Party and Grantor; provided that Grantor may not assign or delegate any of its duties, obligations or liabilities under this Agreement without the prior written consent of Secured Party in its sole discretion.
20. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
20.1 This Agreement and all Loan Documents unless otherwise specified therein shall be governed by, and construed in accordance with, the internal laws of the State of New York, without regard to principles of conflicts of law (other than New York General Obligations Law Sections 5-1401 and 5-1402).
20.2 Grantor hereby agrees that any lawsuit regarding any dispute, controversy, claim or cause of action arising out of or relating to this Agreement, the Loan Documents or any of the transactions contemplated therein may be instituted and prosecuted in the State or Federal courts located in the County of Santa ▇▇▇▇▇, State of California and hereby submits to the
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jurisdiction of such courts. Nothing contained in this Agreement or any other Loan Document, however, shall be deemed to constitute, or to imply the existence of, any agreement by Secured Party to bring any such action only in said courts or to restrict in any way any of Secured Party's remedies or rights to enforce the terms of this Agreement or any other Loan Document as, when and where Secured Party shall deem appropriate, in its sole discretion.
20.3 GRANTOR AND SECURED PARTY EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM, INCLUDING BUT NOT LIMITED TO CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
20.4 WITHOUT INTENDING IN ANY WAY TO LIMIT GRANTOR'S AND SECURED PARTY'S AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY, if the jury waiver set forth above in this Section is not enforceable, then any Claim shall be decided by judic'lal reference pursuant to California Code of Civil Procedure Section 638 et seq. before a referee sitting without a jury, such referee to be mutually acceptable to the parties or, if no agreement is reached, by a referee appointed by the Presiding Judge of the California Superior Court for Santa ▇▇▇▇▇ County. This Section shall not restrict a party from exercising remedies under the Code or from exercising pre-judgment remedies under applicable law.
21. CONSTRUCTION. In addition to definitions set forth above, in this Agreement: (a) "Borrower" means both the named Borrower and any other Person at any time primarily liable for all or any part of the Obligations; (b) if there are multiple Borrowers, "Borrower" means all and any one or more of them; (c) if more than one Person has signed this Pledge as Grantor, "Grantor" means all and any two or more of them, as well as each of them individually; and (d) "Secured Party" means both the named Secured Party and any other or future owners or holders, including pledgees and partic.Ipants, of the Obligations or any portion thereof or interest therein. In addition, the provisions of Section I .3 of the Loan Agreement shall apply to the construction of this Agreement as if set forth herein in full, mutatis mutandis.
22. EXHIBITS. All exhibits referred to in this Agreement and attached hereto are incorporated herein.
23. COUNTERPARTS. This Agreement may be executed in counterparts, which together shall constitute one agreement. Further, orig_inal counterpart signature pages may be compiled together in one or more orig'inal documents. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or in electronic format (e.g., "pdf' or "tif') shall be equally as effective as delivery of an original executed counterpart of this Agreement.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF. the parties have caused this Agreement to be duly executed as of the date first above written.
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By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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| Title: Chief Executive Officer | |
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Principal Solar, Inc
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇. CEO
e-mail: mg@principa\▇▇▇▇▇.▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
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VIS ▇▇▇▇▇, INC.,
a Tennessee corporation
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
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Telecopy/Facsimile:
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IN WITNESS WHEREOF. the parties have caused this Agreement to be duly executed as of the date first above written.
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ASTROSOL, INC.,
a Tennessee corporation
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| By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ | |
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
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EXHIBIT A
COPIES OF LLC CERTIFICATE AND LLC AGREEMENT
[Attached]
EXHIBIT B
FORM OF TRANSFER POWER
[Attached]
MEMBERSHIP INTEREST TRANSFER POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________________________, ______________ of the membership interests of Powerhouse One, LLC, a Tennessee limited liability company (the "Company"), standing in its name on the books of the Company, represented by Certificate(s) No. 1 herewith, and does hereby irrevocably constitute and appoint ___________________________________ attorney to transfer said membership interests on the books of the Company with full power of substitution in the premises.
Dated: ___________________________________
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PRINCIPAL SOLAR, INC
a Delaware corporation
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| By: ___________________________________ | |
| Name: _________________________________ | |
| Its: ____________________________________ |
MEMBERSHIP INTEREST TRANSFER POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________________________, ______________ of the membership interests of Powerhouse One, LLC, a Tennessee limited liability company (the "Company"), standing in its name on the books of the Company, represented by Certificate(s) No. 1 herewith, and does hereby irrevocably constitute and appoint ___________________________________ attorney to transfer said membership interests on the books of the Company with full power of substitution in the premises.
Dated: ___________________________________
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VIS ▇▇▇▇▇, INC
a Tennessee corporation
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| By: ___________________________________ | |
| Name: _________________________________ | |
| Its: ____________________________________ |
MEMBERSHIP INTEREST TRANSFER POWER
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________________________, ______________ of the membership interests of Powerhouse One, LLC, a Tennessee limited liability company (the "Company"), standing in its name on the books of the Company, represented by Certificate(s) No. 1 herewith, and does hereby irrevocably constitute and appoint ___________________________________ attorney to transfer said membership interests on the books of the Company with full power of substitution in the premises.
Dated: ___________________________________
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ASTROSOL, INC
a Tennessee corporation
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| By: ___________________________________ | |
| Name: _________________________________ | |
| Its: ____________________________________ |