Notes Payable

The following table presents the balances of our notes payables as of the dates as indicated:



		March 31,			December 31,
	Maturity Date	2013			2012
Working Capital Loan	January 16, 2014	$	—		$	—
$6.94 Million Equipment Loan	February 22, 2016	4,576,496			4,931,781
$1.50 Million Equipment Loan	October 17, 2016	1,357,500			1,443,000
$4.25 Million Equipment Loan	September 19, 2016	4,152,000			4,250,000
$7.90 Million Installment Sale Contract	July 17, 2016	6,661,448			7,130,895
Total notes payable		16,747,444			17,755,676
Current portion of notes payable		(4,438,175		)	(4,219,720		)
Notes payable, less current portion		$	12,309,269		$	13,535,956

As of March 31, 2013, the Company had a loan agreement and a series of related ancillary agreements with Branch Banking and Trust Company (“BB&T”) providing for a revolving line of credit loan for a maximum principal amount of $5.0 million, to be used as a “Working Capital Loan.” The obligations of the Company pursuant to the Working Capital Loan included the grant of a security interest by Southeast Power Corporation (“Southeast Power”) in all now owned and hereafter acquired and wherever located personal property as follows: (i) machinery and equipment, including all accessions thereto, all manufacturers’ warranties, parts and tools therefore; (ii) all vehicles owned by Southeast Power; and (iii) all proceeds (cash and non-cash) and products of the foregoing. Interest is payable monthly at an annual rate equal to one month LIBOR rate plus two and one-half percent, (2.75% as of March 31, 2013 and December 31, 2012), which will be adjusted monthly and subject to a maximum rate of 24.00% and which is due and payable on January 16, 2014. In addition, the rate of interest added to the one month LIBOR will increase from 2.50% to 2.90% in the event that the Debt to Tangible Net Worth ratio exceeds 1.60:1.00. The Debt to Tangible Net Worth was 1.01:1.00 as of March 31, 2013. There were no borrowings outstanding under the Working Capital Loan as of March 31, 2013.

As of March 31, 2013, the Company’s wholly owned subsidiary, Southeast Power, and BB&T, were parties to a $6.94 million loan agreement and related ancillary agreements (the “$6.94 Million Equipment Loan”). The obligations of Southeast Power pursuant to the $6.94 Million Equipment Loan Agreement and the Promissory Note are secured by the grant of a continuing security interest in all now owned and hereafter acquired and wherever located personal property of Southeast Power as follows: (i) machinery and equipment, including all accessions thereto, all manufacturers’ warranties, parts and tools therefore; (ii) all vehicles; and (iii) all proceeds (cash and non-cash) and products of the foregoing.

The $6.94 Million Equipment Loan will mature, and all amounts will be due and payable to BB&T in full on February 22, 2016. The Company must make monthly payments of principal and interest to BB&T in equal monthly payments of $82,619 plus accrued interest, with one final payment of all remaining principal and accrued interest due on February 22, 2016. The $6.94 Million Equipment Loan Agreement bears interest at a rate per annum equal to one month LIBOR rate plus two and one-half percent (2.75% as of March 31, 2013 and December 31, 2012), which is adjusted monthly and subject to a maximum rate of 24.00%. Borrowings outstanding under the $6.94 Million Equipment Loan were $4.6 million and $4.9 million as of March 31, 2013 and December 31, 2012, respectively.

As of March 31, 2013, Southeast Power and BB&T, were parties to a $1.50 million loan agreement (the “$1.50 Million Equipment Loan”) and related ancillary agreements which provides financing for purchases of equipment and vehicles to be owned by Southeast Power. The obligations of Southeast Power, pursuant to the $1.50 Million Equipment Loan agreement and the Promissory Note, are secured by the grant of a continuing security interest in all currently owned and hereafter acquired and wherever located personal property of Southeast Power as follows: (i) machinery and equipment, including all accessions thereto, and all manufacturers’ warranties, parts and tools therefore; (ii) all vehicles; (iii) general intangibles, including all payment intangibles, copyrights, trademarks, patents, tradenames, tax refunds, company records (paper and electronic), rights under equipment leases, warranties, and software licenses; (iv) to the extent not listed above as original collateral, all proceeds (cash and non-cash) and products of the foregoing. The $1.50 Million Equipment Loan will bear interest at a rate per annum equal to one month LIBOR plus two and one-half percent, which will be adjusted monthly and subject to a maximum rate of 24.00%. In addition, the rate of interest added to the one month LIBOR will increase from 2.50% to 2.90% in the event that the Debt to Tangible Net Worth ratio exceeds 1.60:1.00. The Debt to Tangible Net Worth was 1.01:1.00, and interest was 2.75% as of March 31, 2013 and December 31, 2012. Borrowings outstanding under the $1.50 Million Equipment Loan were $1.4 million and $1.4 million as of March 31, 2013 and December 31, 2012, respectively. All amounts will be due and payable to BB&T in full on October 17, 2016.

As of March 31, 2013, Southeast Power and BB&T, were parties to a $4.25 million loan agreement (the “$4.25 Million Equipment Loan”) and related ancillary agreements which provides financing for purchases of equipment and vehicles to be owned by Southeast Power. The obligations of Southeast Power, pursuant to the $4.25 Million Equipment Loan agreement and the Promissory Note, are secured by the grant of a continuing security interest in all currently owned and hereafter acquired and wherever located personal property of Southeast Power as follows: (i) machinery and equipment, including all accessions thereto, and all manufacturers’ warranties, parts and tools therefore; (ii) all vehicles; (iii) general intangibles, including all payment intangibles, copyrights, trademarks, patents, tradenames, tax refunds, company records (paper and electronic), rights under equipment leases, warranties, and software licenses; (iv) to the extent not listed above as original collateral, all proceeds (cash and non-cash) and products of the foregoing. The $4.25 Million Equipment Loan bears interest at a rate per annum equal to one month LIBOR plus two and one-half percent, which will be adjusted monthly and subject to a maximum rate of 24.00%. In addition, the rate of interest added to the one month LIBOR will increase from 2.50% to 2.90% in the event that the Debt to Tangible Net Worth ratio exceeds 1.60:1.00. The Debt to Tangible Net Worth was 1.01:1.00, and interest was 2.75% as of March 31, 2013 and December 31, 2012. Borrowings outstanding under the $4.25 Million Equipment Loan were $4.2 million and $4.3 million as of March 31, 2013 and December 31, 2012, respectively. All amounts will be due and payable to BB&T in full on September 19, 2016.

As of March 31, 2013, Southeast Power, the Company, and Ring Power Corporation (the “Seller”), are parties to an Installment Sale Contract (Security Agreement), as amended (the “$7.90 Million Installment Sale Contract”), and related ancillary agreements. Southeast Power agreed to purchase specific identified equipment units (the “Equipment”) from the Seller for a purchase price of $7.9 million. On July 16, 2012, the Seller assigned to Caterpillar Financial Services Corporation (“CAT”) its interest in and rights and remedies under the $7.90 Million Installment Sale Contract and related agreements, as well as the Seller’s security interest in the Equipment. BB&T and CAT entered into a Subordination Agreement with respect to the Equipment. Pursuant to the terms of the $7.90 Million Installment Sale Contract, Southeast Power agreed to pay the entire purchase price of all Equipment plus fees and finance charges by way of forty-eight (48) installment payments of $176,535, aggregating to $8,473,658, payable directly to CAT. Borrowings outstanding under the $7.90 Million Installment Sale Contract were $6.7 million and $7.1 million as of March 31, 2013 and December 31, 2012, respectively. The $7.90 Million Installment Sale Contract bears a fixed interest rate of 3.45% and is due and payable in full on July 17, 2016.

Subsequently, on April 22, 2013, the Company, Southeast Power, and the Company's wholly owned subsidiaries Bayswater Development Corporation (“Bayswater”), and Pineapple House of Brevard, Inc. (“Pineapple House”), entered into a Master Loan Agreement (the “Master Loan Agreement”) with BB&T. The Master Loan Agreement replaces all previous BB&T loan agreements and eliminates the need to restate a loan agreement each time a new note is executed or an existing loan is renewed.

The Master Loan Agreement includes similar terms and conditions as those set forth in the previous loan agreements. The Master Loan Agreement contains the same Tangible Net Worth covenant requirement of $18,000,000 and the same Debt to Tangible Net Worth ratio requirement of 2.25:1.0.

Also on April 22, 2013, Southeast Power entered into additional financing for purchases of equipment and vehicles owned by Southeast Power, through increased borrowings with BB&T totaling $6.5 million. $1.5 million of such borrowings mature on April 22, 2017 and $5.0 million mature on April 22, 2018. These borrowings, as well as the previously existing BB&T equipment loans, are guaranteed by the Company, Pineapple House, and Bayswater.

The new equipment loans bear interest at a rate per annum equal to one month LIBOR plus 2.50%, which will be adjusted monthly. In addition, the rate of interest added to the one month LIBOR will increase from 2.50% to 2.90% if the Debt to Tangible Net Worth ratio exceeds 1.6:1.0.

Accrued interest for the new $1.5 million equipment loan is payable monthly commencing on May 22, 2013, and continuing on the same day of each month thereafter, until October 22, 2013. Commencing on November 22, 2013, payments of principal in the amount of $35,714 plus accrued interest will be made each month thereafter, with one final payment of all remaining principal and accrued interest due on April 22, 2017. The Company has drawn down $1.2 million on May 2, 2013.

Accrued interest for the new $5.0 million equipment loan is payable monthly commencing on May 22, 2013, and continuing on the same day of each month thereafter, until October 22, 2013. Commencing on November 22, 2013, payments of principal in the amount of $92,593 plus accrued interest will be made each month thereafter, with one final payment of all remaining principal and accrued interest due on April 22, 2018. The Company has drawn down $4.6 million on May 2, 2013.

The obligations of Southeast Power pursuant to the new equipment loans are secured by the grant of a continuing security interest in the following now owned and hereafter acquired and wherever located personal property of Southeast Power: (i) machinery and equipment, including all accessions thereto, and all manufacturers' warranties, parts and tools therefore; (ii) all vehicles; and (iii) to the extent not listed in (i) and (ii) all proceeds (cash and non-cash) and products of the foregoing.

The Company’s debt arrangements contain various financial and other covenants including, but not limited to: minimum tangible net worth, outside debt limitation, and maximum debt to tangible net worth ratio. Other loan covenants prohibit, among other things, incurring additional indebtedness, issuing loans to other entities in excess of a certain amount, entering into a merger or consolidation. The loans also have cross-default provisions whereby any default under any loans of the Company (or its subsidiaries) with the Bank will constitute a default under all of the other loans of the Company (and its subsidiaries) with the Bank.