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WEST direct obligation against assets

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sludgehound   Wednesday, 10/02/13 05:56:06 PM
Re: None
Post # of 8407 
WEST direct obligation against assets

2-Oct-2013 14:25 pm ET Yanoo

Entry into a Material Definitive Agreement, Creation of a Direct Financial Ob

Item 1.01. Entry into a Material Definitive Agreement.
On September 30, 2013, Andalay Solar, Inc., a Delaware corporation (the "Company") (formerly Westinghouse Solar, Inc.) entered into a loan and security agreement ("Agreement") with Alpha Capital Anstalt (the "Lender") and Collateral Services, LLC (the "Collateral Agent") pursuant to which the Lender will provide financing, on a discretionary basis, for one year, against the Company's, accounts receivable and inventory. The maximum amount that can be borrowed under the Agreement is $500,000. The Company has the right to borrow against its accounts receivable at the rate of 80% of the Net Face Amount of Prime Accounts (as defined in the Agreement) not in excess of $200,000, 50% of the Current Market Cost (as defined in the Agreement) of raw materials that constitute Eligible Inventory (as defined in the Agreement), 65% of Current Market Cost of finished goods that constitute Eligible Inventory and 95% of cash in a blocked account, but not in the aggregate amount in excess of $300,000. The advances are secured by a lien on all of the assets of the Company. As required by the Agreement, the Company intends to enter into a deposit account control agreement with the Collateral Agent and the Company's bank. All advances under the Agreement bear interest at a per annum rate of 12% and monthly interest shall be a minimum of $500. At the time of initial funding the Company paid a loan fee of 50 shares of its Series D Preferred Shares to the Lender, in addition to other payments for legal fees of the Lender. In addition, the Company paid the collateral agent an initial fee of $5,000 and has agreed to pay an administrative fee to the collateral agent of 0.5% per month of the daily balance during the preceding month or $500 whichever is less. In the event that of a prepayment, the Company is obligated to pay to the Lender a prepayment fee in an amount equal to one percent (0.5%) of $500,000.

The Agreement contains both affirmative and negative covenants, subject to materiality and other qualifications and exceptions customary for a credit facility of this size and type. The Company's obligations under the Agreement may be accelerated upon the occurrence of an event of default in accordance with the terms of the Agreement, which includes customary events of default, including payment defaults, the inaccuracy of representations or warranties, cross-defaults related to material indebtedness, bankruptcy and insolvency related defaults, defaults relating to certain other matters, and loss of perfected lien status.

On September 30, 2013, the Company requested and received an initial borrowing under the Agreement totaling $350,000.

A copy of the form of the Agreement is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The foregoing is not a complete summary of the terms of the offering, the Agreement, described in this Item 1.01, and reference is made to the complete text of the Agreement.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosure provided above in Item 1.01 is incorporated by reference into this Item 2.03.

Item 3.02 Unregistered Sales of Equity Securities.
The disclosure provided above in Item 1.01 is incorporated by reference into this Item 3.02.

The Company is relying on an exemption from registration provided under Section 4(a)(2) of the Securities Act for the issuance of the Securities, which exemption the Company believes is available because the Securities were not offered pursuant to a general solicitation, and the status of the purchasers of the Securities as "accredited investors" as defined in Regulation D under the Securities Act.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exhibit No. Description
Form of Loan and Security Agreement by and among the Company, Alpha
Capital Anstalt and Collateral Services, LLC dated as of September 30,
4.1 2013.

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.

~ Thomas Sowell
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