Comverge 8K Loan and Security Agreement | SEC 29 Nov 10

Exhibit 10.1

FOURTH AMENDMENT

LOAN AND SECURITY AGREEMENT

This Fourth Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of November 23, 2010, by and among SILICON VALLEY BANK, a California corporation (“Bank”), COMVERGE, INC., a Delaware corporation (“Comverge”), ENERWISE GLOBAL TECHNOLOGIES, INC., a Delaware corporation (“Enerwise”), COMVERGE GIANTS, LLC, a Delaware limited liability company (“Giants”), PUBLIC ENERGY SOLUTIONS, LLC, a New Jersey limited liability company (“PES”), PUBLIC ENERGY SOLUTIONS NY, LLC, a Delaware limited liability company (“PES-NY”), CLEAN POWER MARKETS, INC., a Pennsylvania corporation (“CPM”) and ALTERNATIVE ENERGY RESOURCES, INC. a Delaware corporation (“AER”) (each of Comverge, Enerwise, Giants, PES, PES-NY, CPM and AER are hereinafter referred to individually as a “Borrower” and collectively as “Borrowers”).

Recitals

A. Bank and Borrowers have entered into that certain Loan and Security Agreement dated as of November 7, 2008, as amended by that certain First Amendment to Loan and Security Agreement dated October 23, 2009, that certain Second Amendment to Loan and Security Agreement dated February 5, 2010 and that certain Third Amendment to Loan and Security Agreement with an effective date of June 30, 2010 (as the same may from time to time be further amended, modified, supplemented or restated, the “Loan Agreement”).

B. Bank and Borrowers have entered into that certain Consent Agreement dated as of November 5, 2010 (the “Consent Agreement”), pursuant to which Bank consented to the PFG Financing (as defined in the Consent Agreement).

C. Bank has extended credit to Borrowers for the purposes permitted in the Loan Agreement.

D. Borrowers have requested that Bank amend the Loan Agreement to, among other things, modify the availability provisions and the financial covenants.

E. Bank has agreed to so amend the Loan Agreement, but only to the extent, in accordance with the terms, subject to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now, Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1. Definitions. Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2. Amendments to Loan Agreement.

2.1 Section 2.1.1 (Revolving Advances). Section 2.1.1(a) of the Loan Agreement hereby is deleted in its entirety and replaced with the following:

(a) Availability. Subject to the terms and conditions of this Agreement, Bank shall make Advances not exceeding the Availability Amount. Amounts borrowed hereunder may be repaid and, prior to the Revolving Loan Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.

2.2 Section 2.1.2 (Letters of Credit). The third sentence of Section 2.1.2(a) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

The aggregate amount available to be used for the issuance of Letters of Credit may not exceed the Availability Amount.

2.3 Section 6.2 (Financial Statements, Reports, Certificates). Section 6.2(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

(b) Within thirty (30) days after the last day of each month, deliver to Bank a duly completed Borrowing Base Certificate signed by a Responsible Officer, with aged listings of accounts receivable and accounts payable (by invoice date).

2.4 Section 6.7 (Financial Covenants). Section 6.7 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

6.7 Financial Covenants. Borrowers shall maintain at all times, to be tested as of the last day of each month, unless otherwise noted, on a consolidated basis with respect to Borrowers:

(a) Tangible Net Worth. A Tangible Net Worth, measured as of the last day of each fiscal quarter during the following periods, of at least the following:

Period	Minimum Tangible Net Worth
Quarter ending December 31, 2010	$50,000,000 plus the Applicable Equity Proceeds
Quarter ending March 31, 2011	$45,000,000 plus the Applicable Equity Proceeds
Quarter ending June 30, 2011	$38,000,000 plus the Applicable Equity Proceeds
Quarter ending September 30, 2011	$40,000,000 plus the Applicable Equity Proceeds
Quarter ending December 31, 2011	$42,000,000 plus the Applicable Equity Proceeds

(b) Adjusted Quick Ratio. A ratio of Quick Assets to Current Liabilities, measured as of the last day of each month, of at least (i) 1.50 to 1.00 through June 30, 2011 and (ii) 1.25 to 1.00 as of July 31, 2011 through December 31, 2011.

Bank shall set the 2012 levels for the above financial covenants upon the receipt by Bank of Borrower’s Board of Directors-approved financial projections for 2012.

2.5 Section 13 (Definitions). The following terms and their respective definitions set forth in Section 13.1 are deleted in their entirety and replaced with the following:

“Adjusted Quick Ratio” is a ratio of (i) Quick Assets to (ii) Current Liabilities, minus the current portion of Deferred Revenue.

“Applicable Equity Proceeds” means an amount equal to fifty percent (50%) of all proceeds received by Borrowers from the sale of equity securities by any Borrower after the date of the Fourth Amendment.

“Availability Amount” means (i) the lesser of the Revolving Loan or the amount of the Borrowing Base, minus (ii) the amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit Reserve, and minus (iii) the outstanding principal balance of any Advances.

“Current Liabilities” are the aggregate amount of Borrower’s Total Liabilities that mature within one (1) year, including, without limitation, the current portion of accrued liabilities related to Comverge’s contract with PJM Interconnection.

“Borrowing Base” is (i) seventy-five percent (75%) of Eligible Accounts, as determined by Bank from Borrowers’ most recent Borrowing Base Certificate, plus (ii) at all times during which Borrower maintains a minimum balance of unrestricted cash and Cash Equivalents with Bank of not less than Twenty Million Dollars ($20,000,000), the sum of (A) ninety percent (90%) of unrestricted cash and Cash Equivalents at Bank, plus (B) twenty-five percent (25%) of gross unbilled accounts receivable related to PJM Interconnection, and minus (iii) the outstanding principal balance under the Term Loan; provided, however, that Bank may decrease the foregoing percentages in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.

“Quick Assets” are, on any date, Borrowers’ consolidated, unrestricted cash and Cash Equivalents, to the extent that each of the foregoing is maintained with Bank and Bank Affiliates, plus Borrowers’ billed and unbilled Accounts.

“Tangible Net Worth” is, on any date, Borrowers’ consolidated Net Worth minus (a) any amounts attributable to (i) goodwill, (ii) intangible items including unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, (iii) notes, accounts receivable and other obligations owing to Borrower from its officers, and (iv) reserves not already deducted, plus (b) Subordinated Debt.

2.6 Section 13 (Definitions). A new clause (j) is hereby added to the definition of “Permitted Indebtedness” in Section 13.1 of the Loan Agreement as follows:

(j) Borrowers’ Indebtedness to Partners For Growth III, L.P. under the Loan and Security Agreement, dated as of November 5, 2010, by and between Borrowers and Partners For Growth III, L.P. (the “PFG Loan Agreement”).

2.7 Section 13 (Definitions). Clause (f) of the definition of “Permitted Investments” in Section 13.1 of the Loan Agreement is hereby amended by deleting it in its entirety and replacing it with the following:

(f) Investments of Subsidiaries in or to other Subsidiaries or any Borrower and Investments by any Borrower in Subsidiaries; provided, however, that in no event shall Investments by Borrower in non-Borrower Subsidiaries exceed $250,000 in the aggregate in any calendar year; provided, however, on a one-time basis during the term of this Agreement, Borrower may make an Investment of up to $1,000,000 in a new non-U.S. Subsidiary without Bank’s consent;

2.8 Section 13 (Definitions). A new clause (k) is hereby added to the definition of “Permitted Liens” in Section 13.1 of the Loan Agreement as follows:

(k) Liens in favor of Partners For Growth III, L.P. pursuant to the PFG Loan Agreement, provided that Partners for Growth III, L.P. executes a Subordination Agreement in a form mutually acceptable to Bank and Partners for Growth III, L.P. on or before the date such Liens are created.

2.9 Section 13 (Definitions). The following term and its respective definition are hereby added to Section 13.1:

“Fourth Amendment” means that certain Fourth Amendment to Loan and Security Agreement dated as of November __, 2010 among Bank and Borrowers.

2.10 Section 13 (Definitions). Section 13.1 is hereby amended by deleting the following terms and their respective definitions in their entirety:

“Formula Period”

“Non-Formula Period”

“Tier One Minimum Cash Requirement”

“Tier Two Minimum Cash Requirement”

“Tier Two Non-Formula Period”

2.11 Exhibit C (Borrowing Base Certificate). Exhibit C of the Loan Agreement is hereby deleted in its entirety and replaced with Exhibit C attached hereto.

2.12 Exhibit E (Compliance Certificate). Exhibit E of the Loan Agreement is hereby deleted in its entirety and replaced with Exhibit E attached hereto.

3. Limitation of Amendments.

3.1 The amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or in connection with any Loan Document.

3.2 This Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties, covenants and agreements set forth in the Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in full force and effect.

4. Representations and Warranties. To induce Bank to enter into this Amendment, Borrowers hereby represent and warrant to Bank as follows:

4.1 Immediately after giving effect to this Amendment (a) the representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date and except as indicated in Section 4.3 below), and (b) no Event of Default has occurred and is continuing;

4.2 Borrowers have the power and authority to execute and deliver this Amendment and to perform their obligations under the Loan Agreement, as amended by this Amendment;

4.3 The organizational documents of Borrowers most recently delivered to Bank remain true, accurate and complete and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, have been duly authorized;

4.5 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrowers, (b) any contractual restriction with a Person binding on Borrowers, (c) any order, judgment or decree of any court or other governmental or public body or authority, or subdivision thereof, binding on Borrowers, or (d) the organizational documents of Borrowers;

4.6 The execution and delivery by Borrowers of this Amendment and the performance by Borrowers of their obligations under the Loan Agreement, as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on Borrowers, except as already has been obtained or made; and

4.7 This Amendment has been duly executed and delivered by Borrowers and is the binding obligation of Borrowers, enforceable against Borrowers in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5. Integration. This Amendment, the Consent Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Amendment, the Consent Agreement and the Loan Documents merge into this Amendment and the Loan Documents.

6. Counterparts. This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument.

7. Effectiveness. This Amendment shall be deemed upon (a) the due execution and delivery to Bank of this Amendment by each party hereto, (b) Borrowers’ payment of a loan modification fee of $50,000, (c) the execution and delivery to Bank of a Subordination Agreement between Bank and Partners For Growth III, L.P. in a form mutually acceptable to both parties, and (d) payment of Bank’s reasonable legal fees and expenses in connection with the negotiation and preparation of this Amendment.

[Signature page follows.]

In Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first written above.

BORROWERS:

COMVERGE, INC.

By /s/ Daniel A. Pfeffer

Name: Daniel A. Pfeffer