On January 25, 2019, Energy Focus, Inc. (the “Company”) entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Iliad Research and Trading, L.P. (the “Lender”) to which the Company sold and issued to the Lender a Promissory Note in the principal amount of $1,257,000 (the “Note”). The Note was issued with an original issue discount of $142,000 and the Purchaser paid a purchase price of $1,100,000 for the issuance of the Note, after deduction of $15,000 of the Lender’s transaction expenses. The Note was sold to the Purchaser in a private placement transaction exempt from the registration requirements of the Securities Act of 1933, as amended.

The following is a summary of certain terms of the Note Purchase Agreement and Note and is subject to, and qualified in its entirety by, the Note Purchase Agreement and the Note in Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, which are incorporated herein by reference.

The Note has a maturity date of twenty four months from the date of purchase and bears interest at an annual rate of eight percent, compounded daily. The Company may prepay the amounts outstanding under the Note at a premium, which is fifteen percent during the first year and ten percent during the second year.

The Company has an obligation to apply to the repayment of the Note ten percent of the gross proceeds it receives from the sale of its common stock or other equity, which will be treated as a prepayment subject to the applicable prepayment premium. The failure to make such a prepayment is not an event of default under the Note, but will increase the amount then outstanding under the Note by ten percent.

Beginning six months after the date of purchase, the Lender may require the Company to redeem up to $150,000 of the Note in any calendar month. The Company has the right on three occasions to defer all redemptions that the Lender could otherwise require the Company to make during any calendar month. Each exercise of this deferral right by the Company will increase the amount outstanding under the Note by one and one-half percent.

In the event Borrower’s common stock is delisted from Nasdaq, the amount outstanding under the Note will automatically increase by fifteen percent as of the date of such delisting

Upon the occurrence of an event of default under the Note, the Lender may accelerate the date for the repayment of the amount outstanding under the Note and increase the amount outstanding by an amount ranging from five percent to fifteen percent, depending on the nature of the default. Certain insolvency and bankruptcy related events of default will result in the automatic acceleration of the amount outstanding under the Note and the outstanding amount due will be automatically increased by five percent. After the occurrence of an event of default, at the Lender may elect to have interest accrue on the Note at a rate per annum of twenty two percent, or such lesser rate as permitted under applicable law.

The representations, warranties and covenants contained in the Note Purchase Agreement and the Note (the “Note Documents”) were made solely for the benefit of the parties to the Note Documents. In addition, such representations, warranties and covenants (i) are intended as a way of allocating the risk between the parties to the Note Documents and not as statements of fact, and (ii) may apply standards of materiality in a way that is different from what may be viewed as material by shareholders of, or other investors in, the Company. Accordingly, the Note Documents are filed with this report only to provide investors with information regarding the terms of transactions, and not to provide investors with any other factual information regarding the Company. Shareholders should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Note Documents, which subsequent information may or may not be fully reflected in public disclosures.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

Please see the disclosure in Item 1.01 of this Current Report on Form 8-K, which is incorporated herein by reference.

(d) Exhibits.

ENERGY FOCUS, INC/DE Exhibit
EX-10.1 2 exhibit101notepurchaseagre.htm EXHIBIT 10.1 Exhibit NOTE PURCHASE AGREEMENTTHIS NOTE PURCHASE AGREEMENT (this “Agreement”),…
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About ENERGY FOCUS, INC. (NASDAQ:EFOI)

Energy Focus, Inc. along with its subsidiaries is engaged in the design, development, manufacturing, marketing, installation and sale of lighting systems. The Company is engaged in developing and selling of light-emitting diode (LED) lighting products for military maritime market, and general commercial and industrial markets. It produces, sources and/or markets a range of lighting technologies to serve its primary end markets. It offers military maritime products, such as Military Intellitube, military globe lights and military berth light to serve the United States navy and allied foreign navies. It offers commercial products, such as direct-wire tubular LED (TLED) replacements for linear fluorescent lamps, LED dock lights, low-bay and high-bay lighting for high-intensity discharge applications and LED retrofit kits to serve general commercial and industrial markets.