SECOND AMENDED AND RESTATED
FINANCING AND SECURITY AGREEMENT
 
Dated
 
December 11, 2006
 
By and Among
 
ARGAN INC.,
 
SOUTHERN MARYLAND CABLE, INC.,
 
VITARICH LABORATORIES, INC.,
 
GEMMA POWER, INC.,
 
GEMMA POWER SYSTEMS CALIFORNIA, INC.,
 
GEMMA POWER SYSTEMS, LLC,
 
GEMMA POWER HARTFORD, LLC
 
And
 
BANK OF AMERICA, N.A.
 
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TABLE OF CONTENTS

       
Page 
 
ARTICLE I DEFINITIONS
   
2
 
Section 1.1
   
Certain Defined Terms.
   
2
 
Section 1.2
   
Accounting Terms and Other Definitional Provisions.
   
17
           
ARTICLE II THE CREDIT FACILITIES
   
18
 
Section 2.1
   
The Revolving Credit Facility.
   
18
 
2.1.1
   
Revolving Credit Facility.
   
18
 
2.1.2
   
Procedure for Making Advances Under the Revolving Loan; Lender Protection Loans.
   
18
 
2.1.3
   
Revolving Credit Note.
   
19
 
2.1.4
   
Optional Prepayments of Revolving Loan.
   
19
 
2.1.5
   
Treasury Management.
   
19
 
2.1.6
   
Revolving Loan Account.
   
19
 
2.1.7
   
Revolving Credit Unused Line Fee.
   
20
 
2.1.8
   
The Collateral Account.
   
20
 
Section 2.2
   
The Term Loan Facilities.
   
21
 
2.2.1
   
The 2006 Term Loan Facility.
   
21
 
2.2.2
   
The Acquisition Term Loan Facility.
   
21
 
2.2.3
   
Optional Prepayments of Term Loans.
   
22
 
2.2.4
   
Mandatory Prepayments of Acquisition Term Loan.
   
22
 
2.2.5
   
The Acquisition Term Loan Fee.
   
23
 
Section 2.3
   
The Letter of Credit Facility.
   
23
 
2.3.1
   
Letters of Credit.
   
23
 
2.3.2
   
Letter of Credit Fees.
   
23
 
2.3.3
   
Terms of Letters of Credit.
   
23
 
2.3.4
   
Procedures for Letters of Credit.
   
24
 
2.3.5
   
Payments of Letters of Credit.
   
25
 
2.3.6
   
Change in Law; Increased Cost.
   
26
 
2.3.7
   
General Letter of Credit Provisions.
   
26
 
Section 2.4
   
Escrow Reserve.
   
27
 
Section 2.5
   
General Financing Provisions.
   
27
 
2.5.1
   
Borrowers’ Representatives.
   
27
 
2.5.2
   
Use of Proceeds of the Loans.
   
29
 
2.5.3
   
Computation of Interest and Fees.
   
29
 
2.5.4
   
Maximum Interest Rate.
   
29
 
2.5.5
   
Payments.
   
30
 
2.5.6
   
Liens; Setoff.
   
30
 
2.5.7
   
Requirements of Law.
   
30
 
2.5.8
   
Guaranty.
   
31
 
2.5.9
   
ACH Transactions and Swap Contracts.
   
33
           
ARTICLE III THE COLLATERAL
   
34
 
Section 3.1
   
Debt and Obligations Secured.
   
34
 
Section 3.2
   
Grant of Liens.
   
34
 
Section 3.3
   
Collateral Disclosure List.
   
35
 
Section 3.4
   
Personal Property.
   
35
 
3.4.1
   
Investment Property, Chattel Paper, Promissory Notes, etc.
   
35
 
Section 3.5
   
Record Searches.
   
36
 

 
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Section 3.6
   
Costs.
   
36
 
Section 3.7
   
Release.
   
36
 
Section 3.8
   
Inconsistent Provisions.
   
36
           
ARTICLE IV REPRESENTATIONS AND WARRANTIES
   
37
 
Section 4.1
   
Representations and Warranties.
   
37
 
4.1.1
   
Subsidiaries.
   
37
 
4.1.2
   
Existence.
   
37
 
4.1.3
   
Power and Authority.
   
37
 
4.1.4
   
Binding Agreements.
   
37
 
4.1.5
   
No Conflicts.
   
37
 
4.1.6
   
No Defaults, Violations.
   
38
 
4.1.7
   
Compliance with Laws.
   
38
 
4.1.8
   
Margin Stock.
   
38
 
4.1.9
   
Investment Company Act; Margin Stock.
   
38
 
4.1.10
   
Litigation.
   
39
 
4.1.11
   
Financial Condition.
   
39
 
4.1.12
   
Full Disclosure.
   
39
 
4.1.13
   
Indebtedness for Borrowed Money.
   
39
 
4.1.14
   
Taxes.
   
39
 
4.1.15
   
ERISA.
   
40
 
4.1.16
   
Title to Properties.
   
40
 
4.1.17
   
Patents, Trademarks, Etc.
   
40
 
4.1.18
   
Employee Relations.
   
40
 
4.1.19
   
Presence of Hazardous Materials or Hazardous Materials Contamination.
   
41
 
4.1.20
   
Perfection and Priority of Collateral.
   
41
 
4.1.21
   
Collateral Disclosure List.
   
41
 
4.1.22
   
Business Names and Addresses.
   
41
 
4.1.23
   
Equipment.
   
42
 
4.1.24
   
Inventory.
   
42
 
4.1.25
   
Accounts.
   
42
 
4.1.26
   
Solvency
   
42
 
4.1.27
   
Pro-forma Financial Statements.
   
42
 
4.1.28
   
Acquisition Agreement.
   
43
 
4.1.29
   
Certain Documents.
   
43
 
Section 4.2
   
Survival; Updates of Representations and Warranties.
   
43
           
ARTICLE V CONDITIONS PRECEDENT
   
43
 
Section 5.1
   
Conditions to the Initial Advance and Letter of Credit.
   
43
 
5.1.1
   
Organizational Documents - Borrowers.
   
43
 
5.1.2
   
Opinion of Borrowers’ Counsel.
   
44
 
5.1.3
   
Consents, Licenses, Approvals, Etc.
   
44
 
5.1.4
   
Notes.
   
44
 
5.1.5
   
Financing Documents and Collateral.
   
44
 
5.1.6
   
Other Documents, Etc.
   
44
 
5.1.7
   
Payment of Fees.
   
45
 
5.1.8
   
Collateral Disclosure List.
   
45
 
5.1.9
   
Recordings and Filings.
   
45
 
5.1.10
   
Insurance Certificate.
   
45
 
5.1.11
   
Pro-forma Balance Sheet and Projections.
   
45
 
5.1.12
   
Adverse Change.
   
45
 
Section 5.2
   
Conditions to all Extensions of Credit.
   
45
 
5.2.1
   
Compliance.
   
45
 
5.2.2
   
Default.
   
45
 

 
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5.2.3
   
Representations and Warranties.
   
46
 
5.2.4
   
Adverse Change.
   
46
 
5.2.5
   
Legal Matters.
   
46
 
Section 5.3
   
Conditions to Acquisition Term Loan and Letter of Credit.
   
46
 
5.3.1
   
Acquisition Term Note.
   
46
 
5.3.2
   
Acquisition.
   
46
 
5.3.3
   
Lien Searches.
   
47
 
5.3.4
   
Pledged Equity and Membership Interests; Stock Powers; Pledged Notes.
   
47
 
5.3.5
   
Financial Covenants.
   
47
 
5.3.6
   
Default.
   
48
 
5.3.7
   
Interest Rate Protection Agreement.
   
48
 
5.3.8
   
Compliance.
   
48
 
5.3.9
   
Other Documents, Etc.
   
48
 
5.3.10
   
Legal Matters.
   
48
           
ARTICLE VI COVENANTS OF THE BORROWERS
   
48
 
Section 6.1
   
Affirmative Covenants.
   
48
 
6.1.1
   
Financial Statements.
   
48
 
6.1.2
   
Reports to SEC and to Stockholders.
   
49
 
6.1.3
   
Recordkeeping, Rights of Inspection, Field Examination, Etc.
   
49
 
6.1.4
   
Existence.
   
50
 
6.1.5
   
Compliance with Laws.
   
50
 
6.1.6
   
Preservation of Properties.
   
51
 
6.1.7
   
Line of Business.
   
51
 
6.1.8
   
Insurance.
   
51
 
6.1.9
   
Taxes.
   
51
 
6.1.10
   
ERISA.
   
52
 
6.1.11
   
Notification of Events of Default and Adverse Developments.
   
52
 
6.1.12
   
Hazardous Materials; Contamination.
   
53
 

6.1.13
   
Disclosure of Significant Transactions.
   
53
 
6.1.14
   
Financial Covenants.
   
53
 
6.1.15
   
Collection of Receivables.
   
54
 
6.1.16
   
Assignments of Receivables.
   
54
 
6.1.17
   
Government Accounts.
   
55
 
6.1.18
   
Inventory.
   
55
 
6.1.19
   
Maintenance of the Collateral.
   
55
 
6.1.20
   
Equipment.
   
55
 
6.1.21
   
Defense of Title and Further Assurances.
   
56
 
6.1.22
   
Business Names; Locations.
   
56
 
6.1.23
   
Use of Premises and Equipment.
   
56
 
6.1.24
   
Protection of Collateral.
   
57
 
6.1.25
   
Appraisals.
   
57
 
Section 6.2
   
Negative Covenants.
   
57
 
6.2.1
   
Capital Structure, Merger, Acquisition or Sale of Assets.
   
57
 
6.2.2
   
Subsidiaries.
   
58
 
6.2.3
   
Issuance of Stock.
   
58
 
6.2.4
   
Purchase or Redemption of Securities, Dividend Restrictions.
   
58
 
6.2.5
   
Indebtedness.
   
58
 
6.2.6
   
Investments, Loans and Other Transactions.
   
59
 
6.2.7
   
Stock of Subsidiaries.
   
59
 
6.2.8
   
Subordinated Indebtedness.
   
59
 
6.2.9
   
Liens; Confessed Judgment.
   
60
 
6.2.10
   
Transactions with Affiliates.
   
60
 
6.2.11
   
Other Businesses.
   
60
 
6.2.12
   
ERISA Compliance.
   
60
 

 
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6.2.13
   
Prohibition on Hazardous Materials.
   
61
 
6.2.14
   
Method of Accounting; Fiscal Year.
   
61
 
6.2.15
   
Compensation.
   
61
 
6.2.16
   
Transfer of Collateral.
   
61
 
6.2.17
   
Sale and Leaseback.
   
61
 
6.2.18
   
Disposition of Collateral.
   
61
 
6.2.19
   
Interest Rate Protection Agreements.
   
62
 
6.2.20
   
Amendments to Acquisition Documents
   
62
           
ARTICLE VII DEFAULT AND RIGHTS AND REMEDIES
   
62
 
Section 7.1
   
Events of Default.
   
62
 
7.1.1
   
Failure to Pay.
   
63
 
7.1.2
   
Breach of Representations and Warranties.
   
63
 
7.1.3
   
Failure to Comply with Covenants.
   
63
 
7.1.4
   
Other Defaults.
   
63
 
7.1.5
   
Default Under Other Financing Documents or Obligations.
   
63
 
7.1.6
   
Receiver; Bankruptcy.
   
63
 
7.1.7
   
Involuntary Bankruptcy, etc.
   
64
 
7.1.8
   
Judgment.
   
64
 
7.1.9
   
Execution; Attachment.
   
64
 
7.1.10
   
Default Under Other Borrowings.
   
64
 
7.1.11
   
Challenge to Agreements.
   
64
 
7.1.12
   
Material Adverse Change.
   
65
 
7.1.13
   
Impairment of Position.
   
65
 
7.1.14
   
Liquidation, Termination, Dissolution, Change in Responsible Officers.
   
65
 
7.1.15
   
Swap Default.
   
65
 
Section 7.2
   
Remedies.
   
65
 
7.2.1
   
Acceleration.
   
65
 
7.2.2
   
Further Advances.
   
65
 
7.2.3
   
Uniform Commercial Code.
   
66
 
7.2.4
   
Specific Rights With Regard to Collateral.
   
66
 
7.2.5
   
Application of Proceeds.
   
67
 
7.2.6
   
Performance by Lender.
   
68
 
7.2.7
   
Other Remedies.
   
68
           
ARTICLE VIII MISCELLANEOUS
   
68
 
Section 8.1
   
Notices.
   
68
 
Section 8.2
   
Amendments; Waivers.
   
69
 
Section 8.3
   
Cumulative Remedies.
   
70
 
Section 8.4
   
Severability.
   
71
 
Section 8.5
   
Assignments by Lender.
   
71
 
Section 8.6
   
Participations by Lender.
   
71
 
Section 8.7
   
Disclosure of Information by Lender.
   
72
 
Section 8.8
   
Successors and Assigns.
   
72
 
Section 8.9
   
Continuing Agreements.
   
72
 
Section 8.10
   
Enforcement Costs.
   
72
 
Section 8.11
   
Applicable Law; Jurisdiction.
   
73
 
8.11.1
   
Applicable Law.
   
73
 
8.11.2
   
Submission to Jurisdiction.
   
73
 
8.11.3
   
Appointment of Agent for Service of Process.
   
73
 
8.11.4
   
Service of Process.
   
73
 
Section 8.12
   
Duplicate Originals and Counterparts.
   
74
 

 
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Section 8.13
   
Headings.
   
74
 
Section 8.14
   
No Agency.
   
74
 
Section 8.15
   
Date of Payment.
   
74
 
Section 8.16
   
Entire Agreement.
   
74
 
Section 8.17
   
Waiver of Trial by Jury.
   
74
 
Section 8.18
   
Liability of the Lender.
   
75
 
Section 8.19
   
Indemnification.
   
76
 

 
LIST OF EXHIBITS
 

A.
Additional Borrower Joinder Supplement

B-1.
Amended and Restated Revolving Credit Note

B-2.
Amended and Restated 2006Term Note

B-3.
Acquisition Term Note

C.
Form of Compliance Certificate

D.
Form of Stock Pledge Agreement

E.
Form of Assignment of Membership Interest

F.
Form of Pledge and Assignment Agreement

G.
Form of Letter of Credit Agreement

H-1
Pro-forma Balance Sheet

H-2
Pro-forma Financial Projections

 
LIST OF SCHEDULES
 

Schedule 1.1
Copyrights, Patents and Trademarks

Schedule 2.1.5
Investment Accounts

Schedule 4.1.10
Litigation

Schedule 4.1.13
Indebtedness for Borrowed Money

Schedule 4.1.18
Employee Relations

Schedule 4.1.20
Perfection and Priority of Collateral

Schedule 6.2.3
Issuance of Stock

Schedule 6.2.16
Transfer of Collateral

 
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SECOND AMENDED AND RESTATED
 
FINANCING AND SECURITY AGREEMENT
 
THIS SECOND AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT (this
“Agreement”) is made this 11th day of December 2006, by and among ARGAN, INC.
(formerly Puroflow Incorporated), a corporation organized under the laws of the
State of Delaware (“Argan”), SOUTHERN MARYLAND CABLE, INC., a corporation
organized under the laws of the State of Delaware (“SMC”), VITARICH
LABORATORIES, INC. (formerly AGAX/VLI Acquisition Corporation), a corporation
organized under the laws of the State of Delaware (“Vitarich”), GEMMA POWER,
INC., a corporation organized under the laws of the State of Connecticut (“GP”),
GEMMA POWER SYSTEMS CALIFORNIA, INC., a corporation organized under the laws of
the State of California (“GPSC”), GEMMA POWER SYSTEMS, LLC, a limited liability
company organized under the laws of the State of Connecticut (“GPS”), and GEMMA
POWER HARTFORD, LLC, a limited liability company organized under the laws of the
State of Connecticut (“GPH”), jointly and severally (each of Argan, SMC,
Vitarich, GP, GPSC, GPS, and GPH, a “Borrower” and collectively, the
“Borrowers”); and BANK OF AMERICA, N.A., a national banking association, its
successors and assigns (the “Lender”).
 
RECITALS
 
A. The Lender, Argan and SMC have entered into that certain Financing and
Security Agreement, dated as of August 19, 2003, as amended and restated by that
certain Amended and Restated Financing and Security Agreement, dated as of May
5, 2006, by and among Argan, SMC, Vitarich and the Lender (as thereafter amended
from time to time, the “Existing Financing Agreement”). Pursuant to the Existing
Financing Agreement, the Lender agreed to make certain loans described therein,
and other financial accommodations to Argan, SMC, and Vitarich.
 
B. The Borrowers have requested that the Lender make available a new term loan
and a new standby letter of credit facility to the Borrowers.
 
C. The Borrowers and the Lender have agreed, pursuant to this Agreement, to
amend and restate the Existing Financing Agreement in its entirety. The Lender
is willing to make the credit facilities available jointly and severally to the
Borrowers upon the terms and subject to the conditions set forth in this
Agreement.
 

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AGREEMENTS
 
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereby
agree to amend and restate the Existing Financing Agreement in its entirety as
follows:
 
ARTICLE I
DEFINITIONS
 
Section 1.1 Certain Defined Terms.
 
As used in this Agreement, the terms defined in the Preamble and Recitals hereto
shall have the respective meanings specified therein, and the following terms
shall have the following meanings:
 
“2006 Term Loan” has the meaning described in Section 2.2.1 (2006 Term Loan
Commitment).
 
“2006 Term Loan Commitment” has the meaning described in Section 2.2.1 (2006
Term Loan Commitment).
 
“2006 Term Loan Committed Amount” has the meaning described in Section 2.2.1
(2006 Term Loan Commitment).
 
“2006 Term Loan Facility” means the term loan facility established by the Lender
pursuant to Section 2.2.1 (2006 Term Loan Facility).
 
“2006 Term Note” has the meaning described in Section 2.2.1(b) (The 2006 Term
Note).
 
“Account” individually and “Accounts” collectively mean all presently existing
or hereafter acquired or created accounts, accounts receivable, health-care
insurance receivables, contract rights, notes, drafts, instruments, acceptances,
chattel paper, leases and writings evidencing a monetary obligation or a
security interest in, or a lease of, goods, all rights to payment of a monetary
obligation or other consideration under present or future contracts (including,
without limitation, all rights (whether or not earned by performance) to receive
payments under presently existing or hereafter acquired or created letters of
credit), or by virtue of property that has been sold, leased, licensed, assigned
or otherwise disposed of, services rendered or to be rendered, loans and
advances made or other considerations given, by or set forth in or arising out
of any present or future chattel paper, note, draft, lease, acceptance, writing,
bond, insurance policy, instrument, document or general intangible, and all
extensions and renewals of any thereof, all rights under or arising out of
present or future contracts, agreements or general interest in goods which gave
rise to any or all of the foregoing, including all commercial tort claims, other
claims or causes of action now existing or hereafter arising in connection with
or under any agreement or document or by operation of law or otherwise, all
collateral security of any kind (including, without limitation, real property
mortgages and deeds of trust) Supporting Obligations, letter-of-credit rights
and letters of credit given by any Person with respect to any of the foregoing,
all books and records in whatever media (paper, electronic or otherwise)
recorded or stored, with respect to any or all of the foregoing and all
equipment and general intangibles necessary or beneficial to retain, access
and/or process the information contained in those books and records, and all
Proceeds of the foregoing.
 
“Account Debtor” means any Person who is obligated on a Receivable and “Account
Debtors” mean all Persons who are obligated on the Receivables.
 
“ACH Transactions” means any cash management or related services including the
automatic clearing house transfer of funds by the Lender for the account of any
of the Borrowers pursuant to agreement or overdrafts.
 
2

--------------------------------------------------------------------------------

 
“Acquired Company” means each of Gemma Power Systems, LLC, a Connecticut limited
liability company, Gemma Power, Inc., a corporation organized under the laws of
the State of Connecticut, Gemma Power Systems California, Inc., a corporation
organized under the laws of the State of California, and Gemma Power Hartford,
LLC, a limited liability company organized under the laws of the State of
Connecticut and each of its Affiliates, Subsidiaries, successors and assigns and
“Acquired Companies” means the collective reference to each of GPS, GP, GPSC and
GPH.
 
“Acquisition” has the meaning described in Section 5.3.2.
 
“Acquisition Agreement” means each of (i) the Membership Interest Purchase
Agreement, dated as of December 8, 2006 among Argan, GPS, GP, GPSC, William F.
Griffin, Jr. and Joel M. Cannio and (ii) the Stock Purchase Agreement, dated as
of December 8, 2006 among Argan, GP, GPSC, William F. Griffin, Jr. and Joel M.
Cannio and “Acquisition Agreements” means the collective reference to each of
the Membership Interest Purchase Agreement and the Stock Purchase Agreement.
 
“Acquisition Documentation” means collectively, the Acquisition Agreements and
all schedules, exhibits and annexes thereto and all side letters and agreements
affecting the terms thereof, previously, now or hereafter executed and delivered
by Argan, each Acquired Company or any other Person in connection with the
Acquisition, in each case as amended, supplemented or otherwise from time to
time in accordance with Section 6.2.20.
 
“Acquisition Term Loan” has the meaning described in Section 2.2.2 (Acquisition
Term Loan).
 
“Acquisition Term Loan Commitment” has the meaning described in Section 2.2.2
(Acquisition Term Loan Commitment).
 
“Acquisition Term Loan Committed Amount” has the meaning described in Section
2.2.2 (Acquisition Term Loan Commitment).
 
“Acquisition Term Loan Facility” means the term loan facility established by the
Lender pursuant to Section 2.2.2 (Acquisition Term Loan Facility).
 
“Acquisition Term Loan Fee” has the meaning described in Section 2.2.5 (The
Acquisition Term Loan Fee).
 
“Acquisition Term Loan Mandatory Prepayment” has the meaning described in
Section 2.2.4(b) (The Acquisition Term Loan Mandatory Prepayment).
 
“Acquisition Term Note” has the meaning described in Section 2.2.2(b) (The
Acquisition Term Note).
 
“Additional Borrower” means each Person that has executed and delivered an
Additional Borrower Joinder Supplement that has been accepted and approved by
the Lender.
 
“Additional Borrower Joinder Supplement” means an Additional Borrower Joinder
Supplement in substantially the form attached hereto as EXHIBIT A, with the
blanks appropriately completed and executed and delivered by the Additional
Borrower and accepted by Argan on behalf of the Borrowers.
 
“Adjustment Date” has the meaning described in Section 8.5 (Assignments by
Lender).
 
3

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“Affiliate” means, with respect to any designated Person, any other Person, (a)
directly or indirectly controlling, directly or indirectly controlled by, or
under direct or indirect common control with the Person designated, (b) directly
or indirectly owning or holding ten percent (10%) or more of any equity interest
in such designated Person, or (c) ten percent (10%) or more of whose stock or
other equity interest is directly or indirectly owned or held by such designated
Person. For purposes of this definition, the term “control” (including with
correlative meanings, the terms “controlling”, “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or other equity interests or by
contract or otherwise.
 
“Agreement” means this Second Amended and Restated Financing and Security
Agreement, as amended, restated, supplemented or otherwise modified in writing
in accordance with the provisions of Section 8.2 (Amendments; Waivers).
 
“Argan” means Argan, Inc. (formerly Puroflow Incorporated), a corporation
organized under the laws of the State of Delaware, and its successors and
assigns.
 
“Assignee” means any Person to which the Lender assigns all or any portion of
its interests under this Agreement, any Commitment, and any Loan, in accordance
with the provisions of Section 8.5 (Assignments by Lender), together with any
and all successors and assigns of such Person; “Assignees” means the collective
reference to all Assignees.
 
“Assignments of Membership Interests” means the collective reference to each of
the pledge, assignment and security agreements dated as of the Closing Date from
each of the members of Gemma Power Systems, LLC and Gemma Power Hartford, LLC,
for the benefit of Lender, as the same may from time to time be amended,
restated, supplemented or otherwise modified in the form of EXHIBIT E attached
hereto.
 
“Bankruptcy Code” means Title 11 of the United States Code, as amended from time
to time, and any successor Laws.
 
“Bonded Contract” means any and all contracts of the Acquired Companies now or
hereinafter bonded by Travelers or its affiliate companies for the benefit of
any Acquired Company; “Bonded Contracts” means the collective reference to all
Bonded Contracts.
 
“Borrower” means each Person defined as a “Borrower” in the preamble of this
Agreement and each Additional Borrower; “Borrowers” means the collective
reference to all Persons defined as “Borrowers” in the preamble to this
Agreement and all Additional Borrowers.
 
“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in the State are authorized or required to close.
 
“Capital Adequacy Regulation” means any guideline, request or directive of any
central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
 
“Capital Expenditure” means an expenditure (whether payable in cash or other
property or accrued as a liability) for Fixed or Capital Assets, including,
without limitation, the entering into of a Capital Lease.
 
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“Capital Lease” means with respect to any Person any lease of real or personal
property, for which the related Lease Obligations have been or should be, in
accordance with GAAP consistently applied, capitalized on the balance sheet of
that Person.
 
“Capital Stock” means any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation) and any
and all warrants, rights or options to purchase any of the foregoing.
 
“Cash Equivalents” means (a) securities with maturities of one year or less from
the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, (b) certificates of deposit with
maturities of one (1) year or less from the date of acquisition of, or money
market accounts maintained with, the Lender, any Affiliate of the Lender, or any
other domestic commercial bank having capital and surplus in excess of One
Hundred Million Dollars ($100,000,000) or such other domestic financial
institutions or domestic brokerage houses to the extent disclosed to, and
approved by, the Lender and (c) commercial paper of a domestic issuer rated at
least either A-1 by Standard & Poor’s Corporation (or its successor) or P-1 by
Moody’s Investors Service, Inc. (or its successor) with maturities of six (6)
months or less from the date of acquisition.
 
“Chattel Paper” means a record or records (including, without limitation,
electronic chattel paper) that evidence both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, or a lease of specific goods; all Supporting
Obligations with respect thereto; any returned, rejected or repossessed goods
and software covered by any such record or records and all proceeds (in any form
including, without limitation, accounts, contract rights, documents, chattel
paper, instruments and general intangibles) of such returned, rejected or
repossessed goods; and all Proceeds of the foregoing.
 
“Closing Date” means the date set forth in the preamble hereof.
 
“Collateral” means all property of each and every Borrower subject from time to
time to the Liens of this Agreement, any of the Security Documents and/or any of
the other Financing Documents, together with any and all Proceeds thereof.
 
“Collateral Account” has the meaning described in Section 2.1.8 (The Collateral
Account).
 
“Collateral Disclosure List” has the meaning described in Section
3.3 (Collateral Disclosure List).
 
“Collection” means each check, draft, cash, money, instrument, item, and other
remittance in payment or on account of payment of the Accounts or otherwise with
respect to any Collateral, including, without limitation, cash proceeds of any
returned, rejected or repossessed goods, the sale or lease of which gave rise to
an Account, and other proceeds of Collateral; and “Collections” means the
collective reference to all of the foregoing.
 
“Commitment” means the Revolving Credit Commitment, the 2006 Term Loan
Commitment, the Acquisition Term Loan Commitment or the Letter of Credit
Commitment, as the case may be, and “Commitments” means the collective reference
to the Revolving Credit Commitment, the 2006 Term Loan Commitment, the
Acquisition Term Loan Commitment, the Letter of Credit Commitment and the
commitment for any loan, letter of credit, interest rate protection, foreign
exchange risk, cash management, and other Credit Facility now or hereafter
provided to any of the Borrowers by the Lender whether under this Agreement or
otherwise.
 
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“Committed Amount” means the Revolving Credit Committed Amount, the 2006 Term
Loan Committed Amount or the Acquisition Term Loan Committed Amount, as the case
may be, and “Committed Amounts” means collectively the Revolving Credit
Committed Amount, the 2006 Term Loan Committed Amount or the Acquisition Term
Loan Committed Amount.
 
“Compliance Certificate” means a periodic Compliance Certificate described in
Section 6.1.1 (Financial Statements).
 
“Commonly Controlled Entity” means an entity, whether or not incorporated, which
is under common control with any Borrower within the meaning of Section 414(b)
or (c) of the Internal Revenue Code.
 
“Copyrights” means and includes, in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) all
copyrights, rights and interests in copyrights, works protectable by copyright,
copyright registrations, copyright applications, and all renewals of any of the
foregoing, including without limitation, those set forth in Schedule 1.1
attached hereto, (b) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past, current or future infringements of any
of the foregoing, (c) the right to sue for past, present and future
infringements of any of the foregoing, and (d) all rights corresponding to any
of the foregoing throughout the world.
 
“Credit Facility” means the Revolving Credit Facility, the Letter of Credit
Facility or either of the Term Loan Facilities as the case may be, and “Credit
Facilities” means collectively the Revolving Credit Facility, the Letter of
Credit Facility and the Term Loan Facilities and any and all other credit
facilities now or hereafter extended under or secured by this Agreement.
 
“Current Letter of Credit Obligations” has the meaning described in Section
2.3.5 (Payments of Letters of Credit).
 
“Default” means an event which, with the giving of notice or lapse of time, or
both, could or would constitute an Event of Default under the provisions of this
Agreement.
 
“Documents” means all documents of title or receipts, whether now existing or
hereafter acquired or created, and all Proceeds of the foregoing.
 
“EBITDA” means as to the Borrowers and their Subsidiaries on a consolidated
basis for any period of determination thereof, the sum of (a) the net profit (or
loss) determined in accordance with GAAP consistently applied, plus (b) interest
expense for such period, plus (c) income tax provisions for such period, plus
(d) depreciation and amortization of assets for such period, plus (e) non-cash
stock compensation expense and plus [(f) non-cash impairment of goodwill arising
from the acquisition of Vitarich].
 
“Enforcement Costs” means all expenses, charges, costs and fees whatsoever
(including, without limitation, reasonable outside and allocated in-house
counsel attorney’s fees and expenses) of any nature whatsoever paid or incurred
by or on behalf of the Lender in connection with (a) the enforcement of any or
all of the Obligations, this Agreement and/or any of the other Financing
Documents and (b) the creation, perfection, collection, maintenance,
preservation, defense, protection, realization upon, disposition, sale or
enforcement of all or any part of the Collateral, this Agreement or any of the
other Financing Documents, including, without limitation, those costs and
expenses more specifically enumerated in Section 3.6 (Costs) and/or Section
8.10 (Enforcement Costs), and further including, without limitation, amounts
paid to lessors, processors, bailees, warehousemen, sureties, judgment creditors
and others in possession of or with a Lien against or claimed against the
Collateral.
 
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“Equipment” means all equipment, machinery, computers, chattels, tools, parts,
machine tools, furniture, furnishings, fixtures and supplies of every nature,
presently existing or hereafter acquired or created and wherever located,
whether or not the same shall be deemed to be affixed to real property and all
of such types of property leased by any of the Borrowers and all of the
Borrowers’ rights and interests with respect thereto under such leases
(including, without limitation, options to purchase), together with all
accessions, additions, fittings, accessories, special tools, and improvements
thereto and substitutions therefore and all parts and equipment which may be
attached to or which are necessary or beneficial for the operation, use and/or
disposition of such personal property, all licenses, warranties, franchises and
General Intangibles related thereto or necessary or beneficial for the
operation, use and/or disposition of the same, together with all Accounts,
Chattel Paper, Instruments and other consideration received by any Borrower on
account of the sale, lease or other disposition of all or any part of the
foregoing, and together with all rights under or arising out of present or
future Documents and contracts relating to the foregoing and all Proceeds of the
foregoing.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
 
“Escrow Account” has the meaning described in Section 2.4 (Escrow Reserve).
 
“Escrow Fund” has the meaning described in Section 2.4 (Escrow Reserve).
 
“Escrow Pledge and Assignment Agreement” means that certain pledge and
assignment agreement from the Borrowers for the benefit of the Lender, as the
same may from time to time be amended, restated, supplemented or otherwise
modified substantially in the forms attached hereto as EXHIBIT I.
 
“Escrow Release Condition” has the meaning described in Section 2.4 (Escrow
Reserve).
 
“Event of Default” has the meaning described in ARTICLE VII (Default and Rights
and Remedies).
 
“Excess Cash Flow” means for any annual period of determination, an amount equal
to EBITDA, less scheduled principal amortization on all Obligations, less
interest expense on all Obligations, less capital expenditures, less cash taxes
in each case for the Borrowers and its Subsidiaries on a consolidated basis.
 
“Excess Cash Flow Application Date” has the meaning described in Section
2.2.4(b) (Mandatory Prepayments of Acquisition Term Loan).
 
“Facilities” means the collective reference to the loan, letter of credit,
interest rate protection, foreign exchange risk, cash management, and other
credit facilities now or hereafter provided to any one or more of the Borrowers
by the Lender.
 
“Fees” means the collective reference to each fee payable to the Lender under
the terms of this Agreement or under the terms of any of the other Financing
Documents.
 
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“Financing Documents” means at any time collectively this Agreement, the Notes,
the Security Documents, the Letter of Credit Documents, and any other
instrument, agreement or document previously, simultaneously or hereafter
executed and delivered by any Borrower, and/or any other Person, singly or
jointly with another Person or Persons, evidencing, securing, guarantying or in
connection with this Agreement, any Note, any of the Security Documents, any of
the Facilities, and/or any of the Obligations.
 
“Fixed or Capital Assets” of a Person at any date means all assets which would,
in accordance with GAAP consistently applied, be classified on the balance sheet
of such Person as property, plant or equipment at such date.
 
“Fixed Charges” means as to the Borrowers and their Subsidiaries for any period
of determination, the sum of all scheduled interest expense excluding the
non-cash interest expense associated with the amortization of issuance costs for
Subordinated Indebtedness in favor of Kevin Thomas, all principal payments and
all Capital Lease payments of the Borrowers and their Subsidiaries made during
the twelve (12) months preceding the date such covenant is being tested, all in
accordance with GAAP.
 
“Fixed Charge Coverage Ratio” means, as to the Borrowers and their Subsidiaries
for any period of determination thereof, the ratio of (a) EBITDA, minus
dividends and distributions to (b) Fixed Charges.
 
“GAAP” means generally accepted accounting principles in the United States of
America in effect from time to time.
 
“General Intangibles” means all general intangibles of every nature, whether
presently existing or hereafter acquired or created, and without implying any
limitation of the foregoing, further means all books and records, commercial
tort claims, other claims (including without limitation all claims for income
tax and other refunds), payment intangibles, Supporting Obligations, choses in
action, claims, causes of action in tort or equity, contract rights, judgments,
customer lists, software, Patents, Trademarks, licensing agreements, rights in
intellectual property, goodwill (including goodwill of any Borrower’s business
symbolized by and associated with any and all Trademarks, trademark licenses,
Copyrights and/or service marks), royalty payments, licenses, letter-of-credit
rights, letters of credit, contractual rights, the right to receive refunds of
unearned insurance premiums, rights as lessee under any lease of real or
personal property, literary rights, Copyrights, service names, service marks,
logos, trade secrets, amounts received as an award in or settlement of a suit in
damages, deposit accounts, interests in joint ventures, general or limited
partnerships, or limited liability companies or partnerships, rights in
applications for any of the foregoing, books and records in whatever media
(paper, electronic or otherwise) recorded or stored, with respect to any or all
of the foregoing, all Supporting Obligations with respect to any of the
foregoing, and all Equipment and General Intangibles necessary or beneficial to
retain, access and/or process the information contained in those books and
records, and all Proceeds of the foregoing.
 
“Governmental Authority” means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
and any department, agency or instrumentality thereof.
 
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“GP” means Gemma Power, Inc., a corporation organized under the laws of the
State of Connecticut, and its successors and assigns.
 
“GPH” means Gemma Power Hartford, LLC, a limited liability company organized
under the laws of the State of Connecticut, and its successors and assigns.
 
“GPS” means Gemma Power Systems, LLC, a limited liability company organized
under the laws of the State of Connecticut, and its successors and assigns.
 
“GPSC” means Gemma Power Systems California, Inc., a corporation organized under
the laws of the State of California, and its successors and assigns.
 
“Hazardous Materials” means (a) any “hazardous waste” as defined by the Resource
Conservation and Recovery Act of 1976, as amended from time to time, and
regulations promulgated thereunder; (b) any “hazardous substance” as defined by
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended from time to time, and regulations promulgated thereunder; (c)
any substance the presence of which on any property now or hereafter owned,
acquired or operated by any of the Borrowers is prohibited by any Law similar to
those set forth in this definition; and (d) any other substance which by Law
requires special handling in its collection, storage, treatment or disposal.
 
“Hazardous Materials Contamination” means the contamination (whether presently
existing or occurring after the date of this Agreement) by Hazardous Materials
of any property owned, operated or controlled by any of the Borrowers or for
which any of the Borrowers has responsibility, including, without limitation,
improvements, facilities, soil, ground water, air or other elements on, or of,
any property now or hereafter owned, acquired or operated by any of the
Borrowers, and any other contamination by Hazardous Materials for which any of
the Borrowers is, or is claimed to be, responsible.
 
“Indebtedness” of a Person means at any date the total liabilities of such
Person at such time determined in accordance with GAAP consistently applied.
 
“Indebtedness for Borrowed Money” of a Person means at any time the sum at such
time of (a) Indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (b) any obligations of such Person in
respect of letters of credit, banker’s or other acceptances or similar
obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, (d) all liabilities
secured by any Lien on any property owned by such Person, to the extent attached
to such Person’s interest in such property, even though such Person has not
assumed or become personally liable for the payment thereof, (e) obligations of
third parties which are being guarantied or indemnified against by such Person
or which are secured by the property of such Person; (f) any obligation of such
Person under an employee stock ownership plan or other similar employee benefit
plan; (g) any obligation of such Person or a Commonly Controlled Entity to a
Multi-employer Plan; and (h) any obligations, liabilities or indebtedness,
contingent or otherwise, under or in connection with, any Swap Contract; but
excluding trade and other accounts payable in the ordinary course of business in
accordance with customary trade terms and which are not overdue (as determined
in accordance with customary trade practices) or which are being disputed in
good faith by such Person and for which adequate reserves are being provided on
the books of such Person in accordance with GAAP.
 
“Indemnified Parties” has the meaning set forth in Section
8.19 (Indemnification).
 
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“Instrument” means a negotiable instrument or any other writing which evidences
a right to payment of a monetary obligation and is not itself a security
agreement or lease and is of a type that in the ordinary course of business is
transferred by delivery with any necessary endorsement or assignment, and all
Supporting Obligations with respect to any of the foregoing and all Proceeds
with respect to any of the foregoing.
 
“Interest Rate Protection Agreement” means any interest rate or currency swap
agreements, cap, floor, and collar agreements, currency spot and forward
contracts and other similar agreements and arrangements.
 
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from
time to time, and the Income Tax Regulations issued and proposed to be issued
thereunder.
 
“Inventory” means all goods of each Borrower and all right, title and interest
of each Borrower in and to all of its now owned and hereafter acquired goods and
other personal property furnished under any contract of service or intended for
sale or lease, including, without limitation, all raw materials,
work-in-process, finished goods and materials and supplies of any kind, nature
or description which are used or consumed in any Borrower’s business or are or
might be used in connection with the manufacture, packing, shipping,
advertising, selling or finishing of such goods and other personal property and
all licenses, warranties, franchises, General Intangibles, personal property and
all documents of title or documents relating to the same, together with all
Accounts, Chattel Paper, Instruments and other consideration received by any
Borrower on account of the sale, lease or other disposition of all or any part
of the foregoing, and together with all rights under or arising out of present
or future Documents and contracts relating to the foregoing and all Proceeds of
the foregoing.
 
“Investment Property” means a security, whether certificated or uncertificated,
security entitlement, securities account, commodity contract or commodity
account and all Proceeds of, and Supporting Obligations with respect to, the
foregoing.
 
“Item of Payment” means each check, draft, cash, money, instrument, item, and
other remittance in payment or on account of payment of the Receivables or
otherwise with respect to any Collateral, including, without limitation, cash
proceeds of any returned, rejected or repossessed goods, the sale or lease of
which gave rise to a Receivable, and other proceeds of Collateral; and “Items of
Payment” means the collective reference to all of the foregoing.
 
“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions,
writs, or decrees of any Governmental Authority.
 
“Lease Obligations” of a Person means for any period the rental commitments of
such Person for such period under leases for real and/or personal property (net
of rent from subleases thereof, but including taxes, insurance, maintenance and
similar expenses which such Person, as the lessee, is obligated to pay under the
terms of said leases, except to the extent that such taxes, insurance,
maintenance and similar expenses are payable by sublessees), including rental
commitments under Capital Leases.
 
“Letter of Credit” and “Letters of Credit” shall have the meanings described in
Section 2.3.1 (Letters of Credit).
 
“Letter of Credit Agreement” means the collective reference to each letter of
credit application and agreement substantially in the form of Lender’s then
standard form of application for letter of credit or such other form as may be
approved by Lender, executed and delivered by the Borrowers in connection with
the issuance of a Letter of Credit, as the same may from time to time be
amended, restated, supplemented or modified and “Letter of Credit Agreements”
means all of the foregoing in effect at any time and from time to time.
 
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“Letter of Credit Cash Collateral” means the cash collateral described in the
Pledge and Assignment Agreement, in an amount equal to not less than one hundred
percent (100%) of the Outstanding Letter of Credit Obligations.
 
“Letter of Credit Cash Collateral Account” has the meaning described in Section
2.3.3 (Terms of Letters of Credit).
 
“Letter of Credit Commitment” means the agreement of the Lender relating to the
issuing of a Letter of Credit subject to and in accordance with the provisions
of this Agreement.
 
“Letter of Credit Documents” means any and all drafts under or purporting to be
under a Letter of Credit, any Letter of Credit Agreement, and any other
instrument, document or agreement executed and/or delivered by any Borrower or
any other Person under, pursuant to or in connection with a Letter of Credit or
any Letter of Credit Agreement.
 
“Letter of Credit Facility” means the facility established pursuant to Section
2.3 (Letter of Credit Facility).
 
“Letter of Credit Fee” and “Letter of Credit Fees” have the meanings described
in Section 2.3.2 (Letter of Credit Fees).
 
“Letter of Credit Obligations” means the collective reference to all Obligations
of each Borrower with respect to the Letters of Credit and the Letter of Credit
Agreements.
 
“Letter-of-credit right” means a right to payment or performance under a letter
of credit, whether or not the beneficiary has demanded or is at the time
entitled to demand payment or performance.
 
“Liabilities” means at any date all liabilities that in accordance with GAAP
consistently applied should be classified as liabilities on a consolidated
balance sheet of the Borrowers and their respective Subsidiaries.
 
“LIBOR Rate” shall mean a daily fluctuating rate equal to the one (1) month rate
of interest (rounded upwards, if necessary to the nearest 1/100 of 1%) appearing
on Telerate Page 3750 (or any successor page) as the one (1) month London
interbank offered rate for deposits in U.S. Dollars at approximately 11:00 A.M.
(London, time), on the second preceding business day, as adjusted from time to
time in the Lender’s sole discretion for then-applicable reserve requirements,
deposits insurance assessment rates and other regulatory costs. If for any
reason such rate is not available, the term “LIBOR Rate” shall mean the
fluctuating rate of interest equal to the one (1) month rate of interest
(rounded upwards, if necessary to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the one (1) month London interbank offered rate for deposits
in U.S. Dollars at approximately 11:00 a.m. (London Time) on the second
preceding business day, as adjusted from time to time for then-applicable
reserve requirements, deposit insurance assessment rates and other regulatory
costs; provided, however, if more than one rate is specified on Reuters Screen
LIBO page, the applicable rate shall be the arithmetic mean of all such rates.
 
“Lien” means any mortgage, deed of trust, deed to secure debt, grant, pledge,
security interest, assignment, encumbrance, judgment, lien, financing statement,
hypothecation, provision in any instrument or other document for confession of
judgment, cognovit or other similar right or other remedy, claim, charge,
control over or interest of any kind in real or personal property securing any
indebtedness, duties, obligations, and liabilities owed to, or claimed to be
owed to, a Person, all whether perfected or unperfected, avoidable or
unavoidable, based on the common law, statute or contract or otherwise,
including, without limitation, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction, excluding the precautionary filing of any financing statement by
any lessor in a true lease transaction, by any bailor in a true bailment
transaction or by any consignor in a true consignment transaction under the
Uniform Commercial Code of any jurisdiction or the agreement to give any
financing statement by any lessee in a true lease transaction, by any bailee in
a true bailment transaction or by any consignee in a true consignment
transaction.
 
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“Loan” means each of the Revolving Loan, the 2006 Term Loan or the Acquisition
Term Loan, as the case may be, and “Loans” means the collective reference to the
Revolving Loan, the 2006 Term Loan and the Acquisition Term Loan.
 
“Loan Notice” has the meaning described in Section 2.1.2 (Procedure for Making
Advances).
 
“Lockbox” has the meaning described in Section 2.1.8 (The Collateral Account).
 
“Maximum Rate” has the meaning described in Section 2.5.4 (Maximum Interest
Rate).
 
“Membership Interest” any and all interests, rights, participations or other
equivalents (however designated) of the members of a limited liability company,
any and all equivalent ownership interests in a Person and any and all warrants,
rights or options to purchase any of the foregoing.
 
“Multi-employer Plan” means a Plan that is a Multi-employer plan as defined in
Section 4001(a)(3) of ERISA.
 
“Net Worth” means the Borrowers’ consolidated shareholders’ equity, defined in
accordance with GAAP.
 
“Note” means the Revolving Credit Note, the 2006 Term Note or the Acquisition
Term Note, as the case may be, and “Notes” means collectively the Revolving
Credit Note, the 2006 Term Note and the Acquisition Term Note, and any other
promissory note which may from time to time evidence all or any portion of the
Obligations.
 
“Obligations” means all present and future indebtedness, duties, obligations,
and liabilities, whether now existing or contemplated or hereafter arising, of
any one or more of the Borrowers to the Lender under, arising pursuant to, in
connection with and/or on account of the provisions of this Agreement, each
Note, each Security Document, and/or any of the other Financing Documents, the
Loans, any Swap Contract and/or any of the Facilities including, without
limitation, the principal of, and interest on, each Note, late charges, the
Fees, Enforcement Costs, and prepayment fees (if any), letter of credit
reimbursement obligations, letter of credit fees or fees charged with respect to
any guaranty of any letter of credit; also means all other present and future
indebtedness, duties, obligations, and liabilities, whether now existing or
contemplated or hereafter arising, of any one or more of the Borrowers to the
Lender or its Affiliates of any nature whatsoever, regardless of whether such
indebtedness, duties, obligations, and liabilities be direct, indirect, primary,
secondary, joint, several, joint and several, fixed or contingent; and also
means any and all renewals, extensions, substitutions, amendments, restatements
and rearrangements of any such indebtedness, duties, obligations, and
liabilities.
 
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“Outstanding Letter of Credit Obligations” has the meaning described in Section
2.3.3 (Terms of Letters of Credit).
 
“Patents” means and includes, in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) any and
all patents and patent applications, including without limitation, those set
forth in Schedule 1.1 attached hereto, (b) any and all inventions and
improvements described and claimed in such patents and patent applications, (c)
reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any patents and patent applications, (d) income,
royalties, damages, claims and payments now or hereafter due and/or payable
under and with respect to any patents or patent applications, including, without
limitation, damages and payments for past and future infringements, (e) rights
to sue for past, present and future infringements of patents, and (f) all rights
corresponding to any of the foregoing throughout the world.
 
“PBGC” means the Pension Benefit Guaranty Corporation.
 
“Permitted Liens” means: (a) Liens for Taxes which are not delinquent or which
the Lender has determined in the exercise of its sole and absolute discretion
(i) are being diligently contested in good faith and by appropriate proceedings,
and such contest operates to suspend collection of the contested Taxes and
enforcement of a Lien, (ii) the respective Borrower has the financial ability to
pay, with all penalties and interest, at all times without materially and
adversely affecting such Borrower, and (iii) are not, and will not be with
appropriate filing, the giving of notice and/or the passage of time, entitled to
priority over any Lien of the Lender; (b) deposits or pledges to secure
obligations under workers’ compensation, social security or similar laws, or
under unemployment insurance in the ordinary course of business; (c) Liens
securing the Obligations; (d) judgment Liens to the extent the entry of such
judgment does not constitute a Default or an Event of Default under the terms of
this Agreement or result in the sale or levy of, or execution on, any of the
Collateral; (e) purchase money security interests in machinery and equipment
securing Indebtedness not in excess of $50,000 in the aggregate per each
calendar year; (f) Liens securing Indebtedness permitted by Section 6.2.5(g) and
(g) such other Liens, if any, as are set forth on Schedule 4.1.20attached hereto
and made a part hereof.
 
“Permitted Uses” means with respect to the (a) Revolving Loan, the payment of
expenses incurred in the ordinary course of any Borrower’s business, (b)
Acquisition Loan, to finance a portion of the Acquisition and (c) Letter of
Credit to support issuance of bonding to Travelers.
 
“Person” means and includes an individual, a corporation, a partnership, a joint
venture, a limited liability company or partnership, a trust, an unincorporated
association, a Governmental Authority, or any other organization or entity.
 
“Plan” means any pension plan that is covered by Title IV of ERISA and in
respect of which any Borrower or a Commonly Controlled Entity is an “employer”
as defined in Section 3 of ERISA.
 
“Pledge Agreements” means the collective reference to each of the pledge,
assignment and security agreements dated as of the Closing Date from (i) Argan
pledging its ownership interests in each of SMC and Vitarich GPS, GP, and GPSC,
and (ii) GPS pledging its ownership interests in GPH, in each such case, to and
for the benefit of Lender, as the same may from time to time be amended,
restated, supplemented or otherwise modified substantially in the forms attached
hereto as EXHIBIT D and EXHIBIT E, as the case may be.
 
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“Pledge and Assignment Agreement” means that certain pledge and assignment
agreement from Argan for the benefit of the Lender, as the same may from time to
time be amended, restated, supplemented or otherwise modified substantially in
the forms attached hereto as EXHIBIT F.
 
“Post-Default Rate” means with respect to all Obligations, the LIBOR Rate in
effect from time to time, plus four percent (4.0%) per annum.
 
“Prepayment” means a Revolving Loan Optional Prepayment or a Term Loan Optional
Prepayment, as the case may be, and “Prepayments” mean collectively all,
Revolving Loan Optional Prepayments and Term Loan Optional Prepayments.
 
“Proceeds” has the meaning described in the Uniform Commercial Code as in effect
from time to time.
 
“Pro-forma Balance Sheet” has the meaning described in Section 4.1.27 (Pro-forma
Financial Statements).
 
“Pro-forma Financial Projections” has the meaning described in Section 4.1.27
(Pro-forma Financial Statements).
 
“Receivable” means one of each Borrower’s now owned and hereafter owned,
acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments; and “Receivables” means all of each Borrower’s now or hereafter
owned, acquired or created Accounts, Chattel Paper, General Intangibles and
Instruments, and all Proceeds thereof.
 
“Registered Organization” means an organization organized solely under the law
of a single state or the United States and as to which the state or the United
States must maintain a public record showing the organization to have been
organized.
 
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA
or the regulations thereunder.
 
“Responsible Officer” means for: (a) Argan, Rainer Bosselmann, President, Arthur
Trudel, Senior Vice President and Chief Financial Officer, (b) SMC, Arthur
Trudel, Secretary, Vice President and Treasurer, (c) Vitarich, Rainer
Bosselmann, Chairman of the Board, Arthur Trudel, Vice President and Secretary,
(d) GPS and GPH, Rainer Bosselmann and Arthur Trudel, President and Chief
Financial Officer, respectively, of Argan, and (e) GP and GPSC, Rainer
Bosselmann, Chairman of the Board, Arthur Trudel, Vice President, Secretary,
Treasurer and Chief Financial Officer.
 
“Restricted Payments” has the meaning described in Section 6.2.4 (Purchase or
Redemption of Securities, Dividend Restrictions).
 
“Revolving Credit Commitment” means the agreement of the Lender relating to the
making of the Revolving Loan and advances thereunder subject to and in
accordance with the provisions of this Agreement.
 
“Revolving Credit Commitment Period” means the period of time from the Closing
Date to the Business Day preceding the Revolving Credit Termination Date.
 
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“Revolving Credit Committed Amount” has the meaning described in Section 2.1.1
(Revolving Credit Facility).
 
“Revolving Credit Expiration Date” means May 31, 2008.
 
“Revolving Credit Facility” means the facility established by the Lender
pursuant to Section 2.1 (Revolving Credit Facility).
 
“Revolving Credit Note” has the meaning described in Section 2.1.3 (Revolving
Credit Note).
 
“Revolving Credit Termination Date” means the earlier of (a) the Revolving
Credit Expiration Date, or (b) the date on which the Revolving Credit Commitment
is terminated pursuant to Section 7.2 (Remedies) or otherwise.
 
“Revolving Credit Unused Line Fee” and “Revolving Credit Unused Line Fees” have
the meanings described in Section 2.1.7 (Revolving Credit Unused Line Fee).
 
“Revolving Loan” has the meaning described in Section 2.1.1 (Revolving Credit
Facility).
 
“Revolving Loan Account” has the meaning described in Section 2.1.6 (Revolving
Loan Account).
 
“Revolving Loan Optional Prepayment” and “Revolving Loan Optional Prepayments”
have the meanings described in Section 2.1.4 (Optional Prepayment of Revolving
Loan).
 
“Roseville Contracts” means those certain Roseville Energy Park Contracts by and
between the Acquired Companies and Roseville Energy Park.
 
“Security Documents” means collectively any assignment, pledge agreement,
security agreement, mortgage, deed of trust, deed to secure debt, financing
statement and any similar instrument, document or agreement under or pursuant to
which a Lien is now or hereafter granted to, or for the benefit of, the Lender
on any real or personal property of any Person to secure all or any portion of
the Obligations, all as the same may from time to time be amended, restated,
supplemented or otherwise modified.
 
“Senior Funded Debt” means at any date, for each Borrower and its Subsidiaries,
whether secured or unsecured, the aggregate of all of the following: (a)
Indebtedness of such Person for borrowed money, including the Credit Facilities,
or for the deferred purchase price of property or services, (b) any obligations
of such Person in respect of letters of credit, banker’s or other acceptances or
similar obligations issued or created for the account of such Person, (c) Lease
Obligations of such Person with respect to Capital Leases, and (d) all
liabilities secured by any Lien on any property owned by such Person, to the
extent attached to such Person’s interest in such property, even though such
Person has not assumed or become personally liable for the payment thereof, but,
(e) excluding all debt held by the Lender that is cash secured (including, the
Letter of Credit Obligations, to the extent it continues to be cash secured) and
all Subordinated Indebtedness.
 
“SMC” means Southern Maryland Cable, Inc., a corporation organized under the
laws of the State of Delaware, and its successors and assigns.
 
“Solvent” means when used with respect to any Person that at the time of
determination:
 
(a) the assets of such Person, at a fair valuation, are in excess of the total
amount of its debts (including, without limitation, contingent liabilities); and
 
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(b) the present fair saleable value of its assets is greater than its probable
liability on its existing debts as such debts become absolute and matured; and
 
(c) it is then able and expects to be able to pay its debts (including, without
limitation, contingent debts and other commitments) as they mature; and
 
(d) it has capital sufficient to carry on its business as conducted and as
proposed to be conducted.
 
For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
 
“State” means the State of Maryland.
 
“Subordinated Indebtedness” means all Indebtedness incurred at any time by any
one or more of the Borrowers, which is in amounts, subject to repayment terms,
and subordinated to the Obligations, as set forth in one or more written
agreements, all in form and substance satisfactory to the Lender in its sole and
absolute discretion.
 
“Subsidiary” means any corporation the majority of the voting shares of which at
the time are owned directly by any Borrower and/or by one or more Subsidiaries
of any Borrower.
 
“Supporting Obligation” means a Letter-of-credit right, secondary obligation or
obligation of a secondary obligor or that supports the payment or performance of
an account, chattel paper, a document, a general intangible, an instrument or
investment property.
 
“Swap Contract” means any document, instrument or agreement between each
Borrower and Lender or any affiliate of Lender, now existing or entered into in
the future, relating to an interest rate swap transaction, forward rate
transaction, interest rate cap, floor or collar transaction, any similar
transaction, any option to enter into any of the foregoing, and any combination
of the foregoing, which agreement may be oral or in writing, including, without
limitation, any master agreement relating to or governing any or all of the
foregoing and any related schedule or confirmation, each as amended from time to
time.
 
“Taxes” means all taxes and assessments whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character (including all
penalties or interest thereon), which at any time may be assessed, levied,
confirmed or imposed by any Governmental Authority on any of the Borrowers or
any of its or their properties or assets or any part thereof or in respect of
any of its or their franchises, businesses, income or profits.
 
“Term Loan Facilities” means the facilities for the 2006 Term Loan and the
Acquisition Term Loan established by the Lender pursuant to Section 2.2 (Term
Loan Facilities).
 
“Term Loan Optional Prepayment” and “Term Loan Optional Prepayments” have the
meanings described in
Section 2.2.4 (Optional Prepayments of Term Loans).
 
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“Total Funded Debt” means all secured and unsecured Senior Funded Debt and
Subordinated Indebtedness.
 
“Trademarks” means and includes in each case whether now existing or hereafter
arising, all of each Borrower’s rights, title and interest in and to (a) any and
all trademarks (including service marks), trade names and trade styles, and
applications for registration thereof and the goodwill of the business
symbolized by any of the foregoing, including without limitation, those set
forth in Schedule 1.1 attached hereto, (b) any and all licenses of trademarks,
service marks, trade names and/or trade styles, whether as licensor or licensee,
(c) any renewals of any and all trademarks, service marks, trade names, trade
styles and/or licenses of any of the foregoing, (d) income, royalties, damages
and payments now or hereafter due and/or payable with respect thereto,
including, without limitation, damages, claims, and payments for past, present
and future infringements thereof, (e) rights to sue for past, present and future
infringements of any of the foregoing, including the right to settle suits
involving claims and demands for royalties owing, and (f) all rights
corresponding to any of the foregoing throughout the world.
 
“Travelers” means Travelers Casualty and Surety Company of America.
 
“Travelers Letter Agreement” means that certain Letter Agreement, dated the date
hereof, by and between the Lender and Travelers.
 
“Uniform Commercial Code” means, unless otherwise provided in this Agreement,
the Uniform Commercial Code as adopted by and in effect from time to time in the
State or in any other jurisdiction, as applicable.
 
“Vitarich” means Vitarich Laboratories, Inc., a corporation organized under the
laws of the State of Delaware, and its successors and assigns.
 
“Wholly Owned Subsidiary” means any domestic United States corporation, all the
shares of stock of all classes of which (other than directors’ qualifying
shares) at the time are owned directly or indirectly by a Borrower and/or by one
or more Wholly Owned Subsidiaries of a Borrower.
 
Section 1.2 Accounting Terms and Other Definitional Provisions.
 
Unless otherwise defined herein, as used in this Agreement and in any
certificate, report or other document made or delivered pursuant hereto,
accounting terms not otherwise defined herein, and accounting terms only partly
defined herein, to the extent not defined, shall have the respective meanings
given to them under GAAP, as consistently applied to the applicable Person. All
terms used herein which are defined by the Uniform Commercial Code shall have
the same meanings as assigned to them by the Uniform Commercial Code unless and
to the extent varied by this Agreement. The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and article, section, subsection, schedule and exhibit references are
references to articles, sections or subsections of, or schedules or exhibits to,
as the case may be, this Agreement unless otherwise specified. As used herein,
the singular number shall include the plural, the plural the singular and the
use of the masculine, feminine or neuter gender shall include all genders, as
the context may require. Reference to any one or more of the Financing Documents
shall mean the same as the foregoing may from time to time be amended, restated,
substituted, extended, renewed, supplemented or otherwise modified. Reference in
this Agreement and the other Financing Documents to the “Borrower”, the
“Borrowers”, “each Borrower” or otherwise with respect to any one or more of the
Borrowers shall mean each and every Borrower and any one or more of the
Borrowers, jointly and severally, unless a specific Borrower is expressly
identified.
 
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ARTICLE II
THE CREDIT FACILITIES
 
Section 2.1 The Revolving Credit Facility.
 
2.1.1 Revolving Credit Facility.
 
Subject to and upon the provisions of this Agreement, the Lender establishes a
revolving credit facility in favor of the Borrowers. The aggregate of all
advances under the Revolving Credit Facility is sometimes referred to in this
Agreement as the “Revolving Loan”.
 
The principal amount of Four Million Two Hundred Fifty Thousand Dollars
($4,250,000) is the “Revolving Credit Committed Amount”.
 
During the Revolving Credit Commitment Period, any or all of the Borrowers may
request advances under the Revolving Credit Facility in accordance with the
provisions of this Agreement; provided that after giving effect to any
Borrower’s request the aggregate outstanding principal balance of the Revolving
Loan would not exceed the Revolving Credit Committed Amount.
 
Unless sooner paid, the unpaid Revolving Loan, together with interest accrued
and unpaid thereon, and all other Obligations shall be due and payable in full
on the Revolving Credit Expiration Date.
 
2.1.2 Procedure for Making Advances Under the Revolving Loan; Lender Protection
Loans.
 
The Borrowers may borrow under the Revolving Credit Facility on any Business
Day. Advances under the Revolving Loan shall be deposited to a demand deposit
account of a Borrower with the Lender (or an Affiliate of the Lender) or shall
be otherwise applied as directed by the Borrowers, which direction the Lender
may require to be in writing. No later than 11:00 a.m. (Eastern Time) on the
date of the requested borrowing, the Borrowers shall give the Lender oral or
written notice (a “Loan Notice”) of the amount and (if requested by the Lender)
the purpose of the requested borrowing. Any oral Loan Notice shall be confirmed
in writing by the Borrowers within three (3) Business Days after the making of
the requested advance under the Revolving Loan. Each Loan Notice shall be
irrevocable.
 
In addition, each of the Borrowers hereby irrevocably authorizes the Lender at
any time and from time to time, without further request from or notice to the
Borrowers, to make advances under the Revolving Loan, which the Lender, in its
sole and absolute discretion, deems necessary or appropriate to protect the
interests of the Lender, including, without limitation, advances and reserves
under the Revolving Loan made to cover debit balances in the Revolving Loan
Account, principal of, and/or interest on, any Loan, the Obligations, and/or
Enforcement Costs, prior to, on, or after the termination of other advances
under this Agreement, regardless of whether the outstanding principal amount of
the Revolving Loan that the Lender may advance or reserve hereunder exceeds the
Revolving Credit Committed Amount. Notwithstanding the foregoing, prior to the
occurrence of any Default, the Lender will provide notice of any advances made
under the Revolving Loan pursuant to this provision.
 
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2.1.3 Revolving Credit Note.
 
The joint and several obligation of the Borrowers to pay the Revolving Loan,
with interest, shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the “Revolving
Credit Note”) substantially in the form of EXHIBIT B-1 attached hereto and made
a part hereof, with appropriate insertions. The Borrowers shall execute and
deliver to the Lender on the date hereof the Revolving Credit Note in
substitution for and not satisfaction of, the issued and outstanding Revolving
Credit Note, and the Revolving Credit Note shall be the “Revolving Credit Note”
for all purposes of the Financing Documents. The Note being substituted pursuant
to this Agreement shall be marked “Replaced” and returned to the Borrowers after
the execution of this Agreement. The Revolving Credit Note shall be dated as of
the Closing Date, shall be payable to the order of the Lender at the times
provided in the Revolving Credit Note, and shall be in the principal amount of
the Revolving Credit Committed Amount. The Revolving Credit Note shall not
operate as a novation of any of the Obligations or nullify, discharge, or
release any such Obligations under the Existing Financing Agreement or the
continuing contractual relationship of the parties hereto in accordance with the
provisions of this Agreement.
 
Each of the Borrowers acknowledges and agrees that, if the outstanding principal
balance of the Revolving Loan outstanding from time to time exceeds the face
amount of the Revolving Credit Committed Amount, the excess shall bear interest
at the Post-Default Rate for the Revolving Loan and shall be payable, with
accrued interest, ON DEMAND.
 
2.1.4 Optional Prepayments of Revolving Loan.
 
The Borrowers shall have the option at any time and from time to time to prepay
(each a “Revolving Loan Optional Prepayment” and collectively the “Revolving
Loan Optional Prepayments”) the Revolving Loan, in whole or in part without
premium or penalty.
 
2.1.5 Treasury Management.
 
The Borrowers will provide the Lender with a list of all depository and
investment accounts now or hereafter maintained with other financial
institutions and upon request of the Lender, will obtain blocked account
agreements in form and substance satisfactory to the Lender from such
institutions; provided, however, that the provisions of this Section 2.1.5 shall
not apply to deposit accounts used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of Borrowers’ employees;
provided, further, the provisions of this Section 2.1.5 shall not apply to those
certain investments of the Acquired Companies held in investment accounts, as
set forth in detail and disclosed on the Schedule 2.1.5 attached hereto.
 
2.1.6 Revolving Loan Account.
 
The Lender will establish and maintain a loan account on its books (the
“Revolving Loan Account”) to which the Lender will (a) debit (i) the principal
amount of each advance of the Revolving Loan made by the Lender hereunder as of
the date made, (ii) the amount of any interest accrued on the Revolving Loan as
and when due, and (iii) any other amounts due and payable by the Borrowers to
the Lender from time to time under the provisions of this Agreement in
connection with the Revolving Loan, including, without limitation, Enforcement
Costs, Fees, late charges, and service, collection and audit fees, as and when
due and payable, and (b) credit all payments made by the Borrowers to the Lender
on account of the Revolving Loan as of the date made. The Lender may debit the
Revolving Loan Account for the amount of any Item of Payment that is returned to
the Lender unpaid. All credit entries to the Revolving Loan Account are
conditional and shall be readjusted as of the date made if final and
indefeasible payment is not received by the Lender in cash or solvent credits.
Any and all periodic or other statements or reconciliations, and the information
contained in those statements or reconciliations, of the Revolving Loan Account
shall be final, binding and conclusive upon the Borrowers in all respects,
absent manifest error, unless the Lender receives specific written objection
thereto from the Borrowers within thirty (30) Business Days after such statement
or reconciliation shall have been sent by the Lender.
 
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2.1.7 Revolving Credit Unused Line Fee.
 
The Borrowers shall pay to the Lender a revolving credit facility fee
(collectively, the “Revolving Credit Unused Line Fees” and individually, a
“Revolving Credit Unused Line Fee”) in an amount equal to three eighths of one
percent (.375%) per annum of the average daily unused and undisbursed portion of
the Revolving Credit Committed Amount in effect from time to time accruing
during each month. The accrued and unpaid portion of the Revolving Credit Unused
Line Fee shall be paid by the Borrowers to the Lender monthly in arrears on the
last day of each month, commencing on the first such date following the date
hereof, and on the Revolving Credit Termination Date.
 
2.1.8 The Collateral Account. 
 
Upon the occurrence and during the continuance of an Event of Default and if the
Lender requests, the Borrowers will deposit, or cause to be deposited, all Items
of Payment to a bank account designated by the Lender and from which the Lender
alone has power of access and withdrawal (the “Collateral Account”). When a
Collateral Account is in existence, each deposit shall be made not later than
the next Business Day after the date of receipt of the Items of Payment. The
Items of Payment shall be deposited in precisely the form received, except for
the endorsements of the Borrowers where necessary to permit the collection of
any such Items of Payment, which endorsement the Borrowers hereby agree to make.
In the event the Borrowers fail to do so, the Borrowers hereby authorize the
Lender to make the endorsement in the name of any or all of the Borrowers.
During any period when a Collateral Account is in place, prior to such a
deposit, the Borrowers will not commingle any Items of Payment with any of the
Borrowers’ other funds or property, but will hold them separate and apart in
trust and for the account of the Lender.
 
In addition, upon the occurrence and during the continuance of an Event of
Default, if so directed by the Lender, the Borrowers shall direct the mailing of
all Items of Payment from their Account Debtors to one or more post-office boxes
designated by the Lender, or to such other additional or replacement post-office
boxes pursuant to the request of the Lender from time to time (collectively, the
“Lockbox”). The Lender shall have unrestricted and exclusive access to the
Lockbox.
 
After a Collateral Account is established, the Borrowers hereby authorize the
Lender to inspect all Items of Payment, endorse all Items of Payment in the name
of any or all of the Borrowers, and deposit such Items of Payment in the
Collateral Account. The Lender reserves the right, exercised in its sole and
absolute discretion from time to time, to provide to the Collateral Account
credit prior to final collection of an Item of Payment and to disallow credit
for any Item of Payment which is unsatisfactory to the Lender. In the event
Items of Payment are returned to the Lender for any reason whatsoever, the
Lender may, in the exercise of its discretion from time to time, forward such
Items of Payment a second time. Any returned Items of Payment shall be charged
back to the Collateral Account, the Revolving Loan Account, or other account, as
appropriate.
 
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The Lender will apply the whole or any part of the collected funds credited to
the Collateral Account against the Revolving Loan (or with respect to Items of
Payment that are not proceeds of Accounts or Inventory or after an Event of
Default, against any of the Obligations) or credit such collected funds to a
depository account of any or all of the Borrowers with the Lender (or an
Affiliate of the Lender), the order and method of such application to be in the
sole discretion of the Lender. On the first day of each month, the Borrowers
shall pay the Lender an amount equal to the additional interest which would have
accrued on the Revolving Loan during the preceding month if collections in the
Collateral Account during the month had been received two (2) Business Days
subsequent to their actual receipt; any resulting increase in the amount of
interest payable by the Borrowers shall be part of the Obligations.
 
Section 2.2 The Term Loan Facilities.
 
2.2.1 The 2006 Term Loan Facility.
 
(a) 2006 Term Loan Commitment.
 
The Lender has made a loan (the “2006 Term Loan”) to the Borrowers in the
principal amount of One Million Five Hundred Thousand Dollars ($1,500,000) (the
“2006 Term Loan Committed Amount”). The obligation of the Lender to make the
2006 Term Loan is herein called its “2006 Term Loan Commitment”. The 2006 Term
Loan has a principal outstanding balance as of November 9, 2006 of One Million
Three Hundred Seventy-Four Thousand Nine Hundred Ninety-Six Dollars and
Ninety-Nine Cents ($1,374,996.99).
 
(b) The 2006 Term Note.
 
The joint and several obligation of the Borrowers to pay the 2006 Term Loan with
interest is evidenced by a promissory note dated as of Closing Date (as from
time to time extended, amended, restated, supplemented or otherwise modified,
the “2006 Term Note”) substantially in the form of EXHIBIT B-2 attached hereto
and made a part hereof with appropriate insertions. The 2006 Term Note shall
remain in full force and effect without setoff, and the Borrowers shall continue
to pay the 2006 Term Note in accordance with the terms hereof and thereof.
 
2.2.2 The Acquisition Term Loan Facility.
 
(a) Acquisition Term Loan Commitment.
 
Subject to and upon the provisions of this Agreement, including, without
limitation, the provisions of Section 5.3 of this Agreement, the Lender agrees
to make a loan (the “Acquisition Term Loan”) to the Borrowers on the Closing
Date in the principal amount of Eight Million Dollars ($8,000,000) (the
“Acquisition Term Loan Committed Amount”). The obligation of the Lender to make
the Acquisition Term Loan is herein called its “Acquisition Term Loan
Commitment”.
 
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(b) The Acquisition Term Note.
 
The joint and several obligation of the Borrowers to pay the Acquisition Term
Loan with interest shall be evidenced by a promissory note (as from time to time
extended, amended, restated, supplemented or otherwise modified, the
“Acquisition Term Note”) substantially in the form of EXHIBIT B-3 attached
hereto and made a part hereof with appropriate insertions.
 
2.2.3 Optional Prepayments of Term Loans.
 
The Borrowers may, at their option, at any time and from time to time, prepay
(each a “Term Loan Optional Prepayment” and collectively the “Term Loan Optional
Prepayments”) the 2006 Term Loan or the Acquisition Term Loan, in whole or in
part, upon five (5) Business Days prior written notice, specifying the date and
amount of prepayment. The amount to be so prepaid, together with interest
accrued thereon to date of prepayment if the amount is intended as a prepayment
of the 2006 Term Loan or the Acquisition Term Loan in whole, shall be paid by
the Borrowers to the Lender on the date specified for such prepayment. Partial
Term Loan Optional Prepayments shall be in an amount not less than the amount of
the next principal installment under the 2006 Term Loan or the Acquisition Term
Loan, as applicable, and shall be applied first to all accrued and unpaid
interest on the principal of the 2006 Term Note or the Acquisition Term Note, as
applicable, then to the balloon payment due at maturity, if any, and then to
principal against the principal installments in the inverse order of their
maturity.
 
2.2.4 Mandatory Prepayments of Acquisition Term Loan.
 
Borrowers shall make mandatory prepayments (each an “Acquisition Term Loan
Mandatory Prepayment” and collectively the “Acquisition Term Loan Mandatory
Prepayments”) as follows:
 
(a) the Acquisition Term Loan shall be reduced by 100% of all net cash proceeds
(i) from sales and other dispositions (including involuntary dispositions) of
property and assets of any Borrower and its Subsidiaries (excluding sales of
Inventory in the ordinary course of business); provided, that, notwithstanding
the foregoing, the Borrowers shall not be required to prepay the Acquisition
Term Loan in accordance with this paragraph (a)(i) except to the extent that the
net cash proceeds from all assets sales equals or exceeds One Hundred Thousand
Dollars ($100,000) in the aggregate during any fiscal year, (ii) from the
issuance or incurrence after the Closing Date of additional Indebtedness of the
Borrowers or any of its Subsidiaries (excluding any Indebtedness incurred in
accordance with Section 6.2.5) and (iii) from the issuance after the Closing
Date of additional equity interests in the Borrowers or any of its Subsidiaries
(excluding any Indebtedness incurred in accordance with Section 6.2.6.
 
(b) if, for any fiscal year of the Borrowers, commencing January 31, 2008, the
Total Funded Debt to EBITDA ratio as of the last day of such fiscal year is
greater than or equal to 1.00 to 1.00, the Borrowers shall, on the relevant
Excess Cash Flow Application Date, apply fifty percent (50%) of such Excess Cash
Flow toward the prepayment of the Acquisition Term Loan. Each such prepayment
shall be made on a date (an “Excess Cash Flow Application Date”) no later than
five (5) Business Days after the earlier of (i) the date on which the financial
statements of the Borrowers referred to in Section 6.1.1(a) (Financial
Statements) for the fiscal year with respect to which such prepayment is made,
are required to be delivered to the Lender and (ii) the date such financial
statements are actually delivered. Borrower shall also pay to Lender on each
Excess Cash Flow Application Date accrued interest to such date on the amount
prepaid. Each Acquisition Term Loan Mandatory Prepayment shall be applied to the
principal payment due at maturity and then to principal against the principal
installments in the inverse order of their maturity.
 
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(c) if, for any reason, the Borrowers have not satisfied either of the Escrow
Release Conditions by
February 1, 2008, the Lender shall without notice apply the full amount of the
Escrow Fund toward the prepayment of the Acquisition Term Loan.
 
2.2.5 The Acquisition Term Loan Fee.
 
In consideration of the Lender making the Acquisition Term Loan, the Borrowers
shall pay to the Lender a non-refundable fee of Eighty Thousand Dollars
($80,000) on or before the Closing Date (the “Acquisition Term Loan Fee”).
 
Section 2.3 The Letter of Credit Facility.
 
2.3.1 Letters of Credit.
 
Subject to and upon the provisions of this Agreement, the Borrowers, upon the
prior approval of Lender, may obtain standby letters of credit (as the same may
from time to time be amended, supplemented or otherwise modified, each a “Letter
of Credit” and collectively, the “Letters of Credit”) from Lender on the Closing
Date for the benefit of Travelers, or other similar insurance company. The
Borrowers will not be entitled to obtain a Letter of Credit hereunder unless
after giving effect to the request, the Letter of Credit Obligations would not
exceed Ten Million Dollars ($10,000,000). The obligation of the Lender to issue
the Letter of Credit is herein called its “Letter of Credit Commitment”.
 
2.3.2 Letter of Credit Fees.
 
Prior to or simultaneously with the opening of each Letter of Credit, Borrowers
shall pay to Lender, a letter of credit fee (each a “Letter of Credit Fee” and
collectively the “Letter of Credit Fees”) in an amount equal to one percent (1%)
per annum of the face amount of the Letter of Credit. The Letter of Credit Fees
shall be paid upon the opening of each Letter of Credit and upon each
anniversary thereof, if any. In addition, Borrowers shall pay to Lender all
other reasonable and customary issuance, amendment, negotiation, processing,
transfer or other fees to the extent and as and when required by the provisions
of any Letter of Credit Agreement. All Letter of Credit Fees and all such other
additional fees are included in and are a part of the “Fees” payable by
Borrowers under the provisions of this Agreement and are a part of the
Obligations.
 
2.3.3 Terms of Letters of Credit.
 
Each Letter of Credit shall (a) be opened pursuant to a Letter of Credit
Agreement substantially in the form attached hereto as Exhibit G, and (b) expire
on a date not later than the Business Day preceding the first anniversary of its
date of issuance; provided, that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods, subject to the
Lender’s right to termination prior to any expiration date.
 
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All outstanding Letter of Credit Obligations, whether or not due or payable,
shall be secured at all times by one or more interest bearing accounts with and
in the name of Lender and over which Lender alone shall have exclusive power of
access and withdrawal (collectively, the “Letter of Credit Cash Collateral
Account”). The Letter of Credit Cash Collateral Account is to be held by Lender
as additional collateral and security for any Letter of Credit Obligations. Each
Borrower hereby assigns, pledges, grants and sets over to Lender a first
priority security interest in, and Lien on, all of the funds on deposit in the
Letter of Credit Cash Collateral Account, together with any and all proceeds and
products thereof as additional collateral and security for the Letter of Credit
Obligations. Each Borrower acknowledges and agrees that Lender shall be entitled
to fund any draw or draft on any Letter of Credit Obligations from the monies on
deposit in the Letter of Credit Cash Collateral Account without notice to or
consent of the Borrowers. The Borrowers further acknowledge and agree that
Lender’s election to fund any draw or draft on any Letter of Credit Obligation
from the Letter of Credit Cash Collateral Account shall in no way limit, impair,
lessen, reduce, release or otherwise adversely affect Borrowers obligation to
pay any Letter of Credit Obligations. At such time as all Letter of Credit
Obligations have been paid in full, Lender agrees to apply the amount of any
remaining funds on deposit in the Letter of Credit Cash Collateral Account to
the then unpaid balance of the Obligations under the other Credit Facilities in
such order and manner as Lender shall determine in its sole and absolute
discretion in accordance with the provisions of this Agreement.
 
The aggregate face amount of all Letters of Credit at any one time outstanding
and issued by Lender pursuant to the provisions of this Agreement, plus the
amount of any unpaid Letter of Credit Fees accrued or scheduled to accrue
thereon, and less the aggregate amount of all drafts issued under or purporting
to have been issued under such Letters of Credit that have been paid by Lender
and for which Lender has been reimbursed by the Borrowers in full in accordance
with Section 2.3.5 (Payments of Letters of Credit) and the Letter of Credit
Agreements, and for which Lender has no further obligation or commitment to
restore all or any portion of the amounts drawn and reimbursed, is herein called
the “Outstanding Letter of Credit Obligations”.
 
2.3.4 Procedures for Letters of Credit.
 
The Borrowers shall give Lender written notice at least five (5) Business Days
(other than the initial Letter of Credit, which Borrowers shall request in
writing, to be issued on the Closing Date) prior to the date on which Borrowers
desire Lender to issue a Letter of Credit. Such notice shall be accompanied by a
duly executed Letter of Credit Agreement specifying, among other things: (a) the
name and address of the intended beneficiary of the Letter of Credit, (b) the
requested face amount of the Letter of Credit, (c) whether the Letter of Credit
is to be revocable or irrevocable, (d) the Business Day on which the Letter of
Credit is to be opened and the date on which the Letter of Credit is to expire,
(e) the terms of payment of any draft or drafts which may be drawn under the
Letter of Credit, and (f) any other terms or provisions Borrowers desire to be
contained in the Letter of Credit. Such notice shall also be accompanied by such
other information, certificates, confirmations, and other items as Lender may
require to assure that the Letter of Credit is to be issued in accordance with
the provisions of this Agreement and a Letter of Credit Agreement. In the event
of any conflict between the provisions of this Agreement and the provisions of a
Letter of Credit Agreement, the provisions of this Agreement shall prevail and
control unless otherwise expressly provided in the Letter of Credit Agreement.
Upon (x) receipt of such notice, (y) payment of all Letter of Credit Fees and
all other Fees payable in connection with the issuance of such Letter of Credit,
and (z) receipt of a duly executed Letter of Credit Agreement, Lender shall
process such notice and Letter of Credit Agreement in accordance with its
customary procedures and open such Letter of Credit on the Business Day
specified in such notice.
 
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2.3.5 Payments of Letters of Credit.
 
Each Borrower hereby promises to pay to Lender, ON DEMAND and in United States
Dollars and authorizes Lender to debit the Letter of Credit Cash Collateral
Account, the following which are herein collectively referred to as the “Current
Letter of Credit Obligations”:
 
(a) the amount which Lender has paid or will be required to pay under each draft
or draw on a Letter of Credit, whether such demand be in advance of Lender’s
payment or for reimbursement for such payment;
 
(b) any and all reasonable charges and expenses which Lender may pay or incur
relative to the Letter of Credit and/or such draws or drafts; and
 
(c) interest on the amounts described in (a) and (b) not paid by Borrowers as
and when due and payable under the provisions of (a) and (b) above from the day
the same are due and payable until paid in full at the Post-Default Rate.
 
(d) unpaid draft or draw amounts by Borrowers described in (a) and (b) shall
accrue interest at the same rates as the Acquisition Term Loan.
 
In addition, each Borrower hereby promises to pay any and all other Letter of
Credit Obligations as and when due and payable in accordance with the provisions
of this Agreement and the Letter of Credit Agreements. The obligation of each
Borrower to pay Current Letter of Credit Obligations and all other Letter of
Credit Obligations shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which Borrowers or any other account party may have or have had against the
beneficiary of such Letter of Credit, Lender, or any other Person, including,
without limitation, any defense based on the failure of any draft or draw to
conform to the terms of such Letter of Credit, any draft or other document
proving to be forged, fraudulent or invalid, or the legality, validity,
regularity or enforceability of such Letter of Credit, any draft or other
documents presented with any draft, any Letter of Credit Agreement, this
Agreement, or any of the other Financing Documents, all whether or not Lender
had actual or constructive knowledge of the same, and irrespective of any
Collateral, security or guarantee therefor or right of offset with respect
thereto and irrespective of any other circumstances whatsoever which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Borrower for any Letter of Credit Obligations, in bankruptcy or
otherwise; provided, however, that any Borrower shall not be obligated to
reimburse Lender for any wrongful payment under such Letter of Credit made as a
result of Lender’s gross negligence or willful misconduct. The obligation of
each Borrower to pay the Letter of Credit Obligations shall not be conditioned
or contingent upon the pursuit by Lender or any other Person at any time of any
right or remedy against any Person which may be or become liable in respect of
all or any part of such obligation or against any Collateral, security or
guarantee therefor or right of offset with respect thereto.
 
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The Letter of Credit Obligations shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any portion of
the Letter of Credit Obligations is rescinded or must otherwise be restored or
returned by Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Person, or upon or as a result of the appointment of a
receiver, intervenor, or conservator of, or trustee or similar officer for, any
Person, or any substantial part of such Person’s property, all as though such
payments had not been made.
 
2.3.6 Change in Law; Increased Cost.
 
If any change in any law or regulation or in the interpretation thereof by any
court or other Governmental Authority charged with the administration thereof
shall either (a) impose, modify or deem applicable any reserve, special deposit
or similar requirement against Letters of Credit issued by Lender, or (b) impose
on Lender any other condition regarding this Agreement or any Letter of Credit,
and the result of any event referred to in clauses (a) or (b) above shall be to
increase the cost to Lender of issuing, maintaining or extending the Letter of
Credit or the cost to Lender of funding any obligation under or in connection
with the Letter of Credit (other than a cost relating to net income, franchise
or similar taxes), then, upon demand by Lender, Borrowers shall immediately pay
to Lender from time to time as specified by Lender, additional amounts which
shall be sufficient to compensate Lender for such increased cost, together with
interest on each such amount from the date demanded until payment in full
thereof at a rate per annum equal to the then highest current rate of interest
on the Revolving Loan. A certificate as to such increased cost incurred by
Lender, submitted by Lender to Borrowers, shall be conclusive, absent manifest
error.
 
2.3.7 General Letter of Credit Provisions.
 
Borrowers hereby instruct Lender to pay any draft complying with the terms of
any Letter of Credit irrespective of any instructions of any Borrower to the
contrary. Each Borrower assumes all risks of the acts and omissions of the
beneficiary and other users of any Letter of Credit. Lender and its respective
branches, Affiliates and/or correspondents shall not be responsible for and each
Borrower hereby indemnifies and holds Lender and its respective branches,
Affiliates and/or correspondents harmless from and against all liability, loss
and expense (including reasonable attorney’s fees and costs) incurred by Lender
and/or its branches, Affiliates and/or correspondents relative to and/or as a
consequence of (a) any failure by any Borrower to perform the agreements
hereunder and under any Letter of Credit Agreement, (b) any Letter of Credit
Agreement, this Agreement, any Letter of Credit and any draft, draw and/or
acceptance under or purported to be under any Letter of Credit, (c) any action
taken or omitted by Lender and/or any of its respective branches, Affiliates
and/or correspondents at the request of any Borrower, (d) any failure or
inability to perform in accordance with the terms of any Letter of Credit by
reason of any control or restriction rightfully or wrongfully exercised by any
de facto or de jure Governmental Authority, group or individual asserting or
exercising governmental or paramount powers, and/or (e) any consequences arising
from causes beyond the control of Lender and/or any of its respective branches,
Affiliates and/or correspondents.
 
Except for gross negligence or willful misconduct, Lender and its respective
branches, Affiliates and/or correspondents, shall not be liable or responsible
in any respect for any (a) error, omission, interruption or delay in
transmission, dispatch or delivery of any one or more messages or advices in
connection with any Letter of Credit, whether transmitted by cable, telegraph,
mail or otherwise and despite any cipher or code which may be employed, and/or
(b) action, inaction or omission which may be taken or suffered by it or them in
good faith or through inadvertence in identifying or failing to identify any
beneficiary or otherwise in connection with any Letter of Credit.
 
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Any Letter of Credit may be amended, modified or revoked only upon the receipt
by Lender from any Borrower and the beneficiary (including any transferee and/or
assignee of the original beneficiary), of a written consent and request
therefor.
 
If any Laws, order of court and/or ruling or regulation of any Governmental
Authority of the United States (or any state thereof) and/or any country other
than the United States permits a beneficiary under a Letter of Credit to require
Lender and/or any of its respective branches, Affiliates and/or correspondents
to pay drafts under or purporting to be under a Letter of Credit after the
expiration date of the Letter of Credit, Borrowers shall reimburse Lender, as
appropriate, for any such payment pursuant to provisions of Section 2.3.6
(Change in Law; Increased Cost).
 
Except as may otherwise be specifically provided in a Letter of Credit or Letter
of Credit Agreement, the laws of the State and the Uniform Customs and Practice
for Documentary Credits, 1993 Revision, International Chamber of Commerce
Publication No. 500 shall govern the Letters of Credit. The Laws, rules,
provisions and regulations of the Uniform Customs and Practice for Documentary
Credits are hereby incorporated by reference. In the event of a conflict between
the Uniform Customs and Practice for Documentary Credits and the laws of the
State, the Uniform Customs and Practice for Documentary Credits shall prevail.
 
Section 2.4 Escrow Reserve.
 
On the Closing Date, the Borrower shall deposit Two Million Dollars ($2,000,000)
of the Acquisition Term Loan proceeds (“Escrow Fund”) in an interest bearing
account with the Lender (the “Escrow Account”) to be established as of the
Closing Date and pledged to the Lender at all times pursuant to the Pledge and
Assignment Agreement. Provided, no Default or Event of Default has occurred or
is continuing, the Lender will release the Escrow Fund to the Borrowers upon the
satisfaction of either (each a “Escrow Release Condition”) (i) the Acquired
Companies, on a consolidated basis, will have achieved a twelve (12) month
trailing EBITDA of not less than Twelve Million Dollars ($12,000,000), tested as
of the twelve (12) month period ending December 31, 2007 or (ii) evidence
satisfactory to the Lender, that from inception through the Closing Date, the
write down by the Acquired Companies of Two Million Dollars ($2,000,000) under
the Roseville Contracts has been collected in its entirety from Roseville Energy
Park.
 
Section 2.5 General Financing Provisions.
 
2.5.1 Borrowers’ Representatives.
 
The Borrowers hereby represent and warrant to the Lender that each of them will
derive benefits, directly and indirectly, from each Loan, both in their separate
capacity and as a member of the integrated group to which each of the Borrowers
belong and because the successful operation of the integrated group is dependent
upon the continued successful performance of the functions of the integrated
group as a whole, because (a) the terms of the consolidated financing provided
under this Agreement are more favorable than would otherwise be obtainable by
the Borrowers individually, (b) this financing has enabled a certain purchase
agreement transaction and (c) Borrowers’ additional administrative and other
costs and reduced flexibility associated with individual financing arrangements
which would otherwise be required if obtainable would substantially reduce the
value to the Borrowers of the financing. The Borrowers in the discretion of
their respective managements are to agree among themselves as to the allocation
of proceeds of the Loan, provided, however, that the Borrowers shall be deemed
to have represented and warranted to the Lender at the time of allocation that
each benefit and use of proceeds is a Permitted Use.
 
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For administrative convenience, each Borrower hereby irrevocably appoints Argan
as each Borrowers attorney-in-fact, with power of substitution (with the prior
written consent of the Lender in the exercise of its sole and absolute
discretion), in the name of Argan or in the name of any Borrower or otherwise to
take any and all actions with respect to the this Agreement, the other Financing
Documents, the Obligations and/or the Collateral (including, without limitation,
the Proceeds thereof) as Argan may so elect from time to time, including,
without limitation, actions to (i) request advances under the Loan and direct
the Lender to disburse or credit the proceeds of any Loan directly to an account
of Argan any one or more of the Borrowers or otherwise, which direction shall
evidence the making of such Loan and shall constitute the acknowledgment by each
of the Borrowers of the receipt of the proceeds of such Loan, (ii) enter into,
execute, deliver, amend, modify, restate, substitute, extend and/or renew this
Agreement, any Additional Borrower Joinder Supplement, any other Financing
Documents, security agreements, mortgages, deposit account agreements,
instruments, certificates, waivers, letter of credit applications, releases,
documents and agreements from time to time, and (iii) endorse any check or other
item of payment in the name of any Borrower or in the name of Argan. The
foregoing appointment is coupled with an interest, cannot be revoked without the
prior written consent of the Lender, and may be exercised from time to time
through Argan’s duly authorized officer, officers or other Person or Persons
designated by Argan to act from time to time on behalf of Argan.
 
Each of the Borrowers hereby irrevocably authorizes the Lender to make Loans to
any one or more of the Borrowers pursuant to the provisions of this Agreement
upon the written, oral or telephone request of any one or more of the Persons
who is from time to time a Responsible Officer of a Borrower under the
provisions of the most recent certificate of corporate resolutions and/or
incumbency of the Borrowers on file with the Lender and also upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of Argan under the provisions of the most recent certificate
of corporate resolutions and/or incumbency for Argan on file with the Lender.
 
The Lender assumes no responsibility or liability for any errors, mistakes,
and/or discrepancies in the oral, telephonic, written or other transmissions of
any instructions, orders, requests and confirmations between the Lender and the
Borrowers in connection with the Credit Facilities, any Loan, any Letter of
Credit or any other transaction in connection with the provisions of this
Agreement. Without implying any limitation on the joint and several nature of
the Obligations, the Lender agrees that, notwithstanding any other provision of
this Agreement, the Borrowers may create reasonable inter-company indebtedness
between or among the Borrowers with respect to the allocation of the benefits
and proceeds of the advances and Credit Facilities under this Agreement. The
Borrowers agree among themselves, and the Lender consents to that agreement,
that each Borrower shall have rights of contribution from all of the other
Borrowers to the extent such Borrower incurs Obligations in excess of the
proceeds of the Loans received by, or allocated to purposes for the direct
benefit of, such Borrower. All such indebtedness and rights shall be, and are
hereby agreed by the Borrowers to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless the
Lender agrees in writing otherwise, shall not be exercised or repaid in whole or
in part until all of the Obligations have been indefeasibly paid in full in
cash. The Borrowers agree that all of such inter-company indebtedness and rights
of contribution are part of the Collateral and secure the Obligations. Each
Borrower hereby waives all rights of counterclaim, recoupment and offset between
or among themselves arising on account of that indebtedness and otherwise. Each
Borrower shall not evidence the inter-company indebtedness or rights of
contribution by note or other instrument, and shall not secure such indebtedness
or rights of contribution with any Lien or security. Notwithstanding anything
contained in this Agreement to the contrary, the amount covered by each Borrower
under the Obligations (including, without limitation, Section 2.5.8 (Guaranty))
shall be limited to an aggregate amount (after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Borrower in respect of the Obligations) which, together with other
amounts owing by such Borrowers to the Lender under the Obligations, is equal to
the largest amount that would not be subject to avoidance under the Bankruptcy
Code or any applicable provisions of any applicable, comparable state or other
Laws.
 
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2.5.2 Use of Proceeds of the Loans.
 
The proceeds of each advance under the Loans shall be used by the Borrowers for
Permitted Uses, and for no other purposes except as may otherwise be agreed by
the Lender in writing. The Borrowers shall use the proceeds of the Loans
promptly.
 
2.5.3 Computation of Interest and Fees.
 
All applicable Fees and interest shall be calculated on the basis of a year of
360 days for the actual number of days elapsed. Any change in the interest rate
on any of the Obligations resulting from a change in the LIBOR Rate shall become
effective as of the opening of business on the day on which such change in the
LIBOR Rate is announced.
 
2.5.4 Maximum Interest Rate.
 
In no event shall any interest rate provided for hereunder exceed the maximum
rate permissible for corporate borrowers under applicable law for loans of the
type provided for hereunder (the “Maximum Rate”). If, in any month, any interest
rate, absent such limitation, would have exceeded the Maximum Rate, then the
interest rate for that month shall be the Maximum Rate, and, if in future
months, that interest rate would otherwise be less than the Maximum Rate, then
that interest rate shall remain at the Maximum Rate until such time as the
amount of interest paid hereunder equals the amount of interest which would have
been paid if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the Obligations, the total amount of interest paid
or accrued under the terms of this Agreement is less than the total amount of
interest which would, but for this Section, have been paid or accrued if the
interest rates otherwise set forth in this Agreement had at all times been in
effect, then the Borrowers shall, to the extent permitted by applicable law, pay
the Lender, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been charged if the Maximum Rate had, at all times,
been in effect or (ii) the amount of interest which would have accrued had the
interest rates otherwise set forth in this Agreement, at all times, been in
effect over (b) the amount of interest actually paid or accrued under this
Agreement. In the event that a court determines that the Lender has received
interest and other charges hereunder in excess of the Maximum Rate, such excess
shall be deemed received on account of, and shall automatically be applied to
reduce, the Obligations other than interest, in the inverse order of maturity,
and if there are no Obligations outstanding, the Lender shall refund to the
Borrowers such excess.
 
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2.5.5 Payments.
 
All payments of the Obligations, including, without limitation, principal,
interest, Prepayments, and Fees, shall be paid by the Borrowers without setoff,
recoupment or counterclaim to the Lender in immediately available funds not
later than 12:00 p.m. (Eastern Time) on the due date of such payment. All
payments received by the Lender after such time shall be deemed to have been
received by the Lender for purposes of computing interest and Fees and otherwise
as of the next Business Day. Payments shall not be considered received by the
Lender until such payments are paid to the Lender in immediately available funds
to the Lender’s principal office in Rockville, Maryland or at such other
location as the Lender may at any time and from time to time notify the
Borrowers. Alternatively, at its sole discretion, the Lender may charge any
deposit account of the Borrowers at the Lender or any Affiliate of the Lender
with all or any part of any amount due to the Lender under this Agreement or any
of the other Financing Documents to the extent that the Borrowers shall have not
otherwise tendered payment to the Lender.
 
2.5.6 Liens; Setoff.
 
The Borrowers hereby grant to the Lender as additional collateral and security
for all of the Obligations, a continuing Lien on any and all monies, Investment
Property, and other property of the Borrowers and the proceeds thereof, now or
hereafter held or received by or in transit to, the Lender, and/or any Affiliate
of the Lender, from or for the account of, the Borrowers, and also upon any and
all deposit accounts (general or special) and credits of the Borrowers, if any,
with the Lender or any Affiliate of the Lender, at any time existing, excluding
any deposit accounts held by the Borrowers in their capacity as trustee for
Persons who are not Borrowers or Affiliates of the Borrowers. Without implying
any limitation on any other rights the Lender may have under the Financing
Documents or applicable Laws, during the continuance of an Event of Default, the
Lender is hereby authorized by the Borrowers at any time and from time to time,
without notice to the Borrowers, to set off, appropriate and apply any or all
items hereinabove referred to against all Obligations then outstanding (whether
or not then due), all in such order and manner as shall be determined by the
Lender in its sole and absolute discretion.
 
2.5.7 Requirements of Law.
 
In the event that the Lender shall have determined in good faith that (a) the
adoption of any Capital Adequacy Regulation, or (b) any change in any Capital
Adequacy Regulation or in the interpretation or application thereof or (c)
compliance by the Lender or any corporation controlling the Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any central bank or Governmental Authority, does or shall have the
effect of reducing the rate of return on the capital of the Lender or any
corporation controlling the Lender, as a consequence of the obligations of the
Lender hereunder to a level below that which the Lender or any corporation
controlling the Lender would have achieved but for such adoption, change or
compliance (taking into consideration the policies of the Lender and the
corporation controlling the Lender, with respect to capital adequacy) by an
amount deemed by the Lender, in its reasonable discretion, to be material, then
from time to time, after submission by the Lender to the Borrowers of a written
request therefore and a statement of the basis for such determination, the
Borrowers shall pay to the Lender such additional amount or amounts in order to
compensate the Lender or its controlling corporation for any such reduction.
 
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2.5.8 Guaranty.
 
(a) Each Borrower hereby unconditionally and irrevocably, guarantees to the
Lender:
 
(i) the due and punctual payment in full (and not merely the collectibility) by
the other Borrowers of the Obligations, including unpaid and accrued interest
thereon, in each case when due and payable, all according to the terms of this
Agreement, the Notes and the other Financing Documents;
 
(ii) the due and punctual payment in full (and not merely the collectibility) by
the other Borrowers of all other sums and charges which may at any time be due
and payable in accordance with this Agreement, the Notes or any of the other
Financing Documents;
 
(iii) the due and punctual performance by the other Borrowers of all of the
other terms, covenants and conditions contained in the Financing Documents; and
 
(iv) all the other Obligations of the other Borrowers.
 
(b) The obligations and liabilities of each Borrower as a guarantor under this
Section 2.5.8 shall be absolute and unconditional and joint and several,
irrespective of the genuineness, validity, priority, regularity or
enforceability of this Agreement, any of the Notes or any of the Financing
Documents or any other circumstance which might otherwise constitute a legal or
equitable discharge of a surety or guarantor. Each Borrower in its capacity as a
guarantor expressly agrees that the Lender may, in its sole and absolute
discretion, without notice to or further assent of such Borrower and without in
any way releasing, affecting or in any way impairing the joint and several
obligations and liabilities of such Borrower as a guarantor hereunder:
 
(i) waive compliance with, or any defaults under, or grant any other indulgences
under or with respect to any of the Financing Documents;
 
(ii) modify, amend, change or terminate any provisions of any of the Financing
Documents;
 
(iii) grant extensions or renewals of or with respect to the Credit Facilities,
the Notes or any of the other Financing Documents;
 
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(iv) effect any release, subordination, compromise or settlement in connection
with this Agreement, any of the Notes or any of the other Financing Documents;
 
(v) agree to the substitution, exchange, release or other disposition of the
Collateral or any part thereof, or any other collateral for the Loan or to the
subordination of any lien or security interest therein;
 
(vi) make advances for the purpose of performing any term, provision or covenant
contained in this Agreement, any of the Notes or any of the other Financing
Documents with respect to which the Borrowers shall then be in default;
 
(vii) make future advances pursuant to this Agreement or any of the other
Financing Documents;
 
(viii) assign, pledge, hypothecate or otherwise transfer the Commitments, the
Obligations, the Notes, any of the other Financing Documents or any interest
therein, all as and to the extent permitted by the provisions of this Agreement;
 
(ix) deal in all respects with the other Borrowers as if this Section 2.5.8 were
not in effect;
 
(x) effect any release, compromise or settlement with any of the other
Borrowers, whether in their capacity as a Borrower or as a guarantor under this
Section 2.5.8, or any other guarantor; and
 
(xi) provide debtor-in-possession financing or allow use of cash collateral in
proceedings under the Bankruptcy Code, it being expressly agreed by all
Borrowers that any such financing and/or use would be part of the Obligations.
 
(c) The obligations and liabilities of each Borrower, as guarantor under this
Section 2.5.8, shall be primary, direct and immediate, shall not be subject to
any counterclaim, recoupment, set off, reduction or defense based upon any claim
that a Borrower may have against any one or more of the other Borrowers, the
Lender, and/or any other guarantor and shall not be conditional or contingent
upon pursuit or enforcement by the Lender of any remedies it may have against
the Borrowers with respect to this Agreement, the Notes or any of the other
Financing Documents, whether pursuant to the terms thereof or by operation of
law. Without limiting the generality of the foregoing, the Lender shall not be
required to make any demand upon any of the Borrowers, or to sell the Collateral
or otherwise pursue, enforce or exhaust its remedies against the Borrowers or
the Collateral either before, concurrently with or after pursuing or enforcing
its rights and remedies hereunder. Any one or more successive or concurrent
actions or proceedings may be brought against each Borrower under this Section
2.5.8, either in the same action, if any, brought against any one or more of the
Borrowers or in separate actions or proceedings, as often as the Lender may deem
expedient or advisable. Without limiting the foregoing, it is specifically
understood that any modification, limitation or discharge of any of the
liabilities or obligations of any one or more of the Borrowers, any other
guarantor or any obligor under any of the Financing Documents, arising out of,
or by virtue of, any bankruptcy, arrangement, reorganization or similar
proceeding for relief of debtors under federal or state law initiated by or
against any one or more of the Borrowers, in their respective capacities as
borrowers and guarantors under this Section 2.5.8, or under any of the Financing
Documents shall not modify, limit, lessen, reduce, impair, discharge, or
otherwise affect the liability of each Borrower under this Section 2.5.8 in any
manner whatsoever, and this Section 2.5.8 shall remain and continue in full
force and effect. It is the intent and purpose of this Section 2.5.8 that each
Borrower shall and does hereby waive all rights and benefits which might accrue
to any other guarantor by reason of any such proceeding, and the Borrowers agree
that they shall be liable for the full amount of the obligations and liabilities
under this Section 2.5.8, regardless of, and irrespective to, any modification,
limitation or discharge of the liability of any one or more of the Borrowers,
any other guarantor or any obligor under any of the Financing Documents, that
may result from any such proceedings.
 
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(d) Each Borrower, as guarantor under this Section 2.5.8, hereby
unconditionally, jointly and severally, irrevocably and expressly waives:
 
(i) presentment and demand for payment of the Obligations and protest of
non-payment;
 
(ii) notice of acceptance of this Section 2.5.8 and of presentment, demand and
protest thereof;
 
(iii) notice of any default hereunder or under the Notes or any of the other
Financing Documents and notice of all indulgences;
 
(iv) notice of any increase in the amount of any portion of or all of the
indebtedness guaranteed by this Section 2.5.8;
 
(v) demand for observance, performance or enforcement of any of the terms or
provisions of this Section 2.5.8, the Notes or any of the other Financing
Documents;
 
(vi) all errors and omissions in connection with the Lender’s administration of
all indebtedness guaranteed by this Section 2.5.8, except errors and omissions
resulting from the Lender’s gross negligence or willful misconduct;
 
(vii) any right or claim of right to cause a marshalling of the assets of any
one or more of the other Borrowers;
 
(viii) any act or omission of the Lender which changes the scope of the risk as
guarantor hereunder; and
 
(ix) all other notices and demands otherwise required by law which the Borrower
may lawfully waive.
 
Within ten (10) days following any request of the Lender so to do, each Borrower
will furnish the Lender and such other persons as the Lender may direct with a
written certificate, duly acknowledged stating in detail whether or not any
credits, offsets or defenses exist with respect to this Section 2.5.8.
 
2.5.9 ACH Transactions and Swap Contracts.
 
The Borrowers may request and the Lender or its Affiliates may, in their sole
and absolute discretion, provide ACH Transactions and Swap Contracts. In the
event the Borrowers request Lender or its Affiliates to procure ACH Transactions
or Swap Contracts, then the Borrowers agree to indemnify and hold the Lender or
its Affiliates harmless from any and all obligations now or hereafter owing to
the Lender or its Affiliates. The Borrowers agree to pay the Lender or its
Affiliates all amounts owing to the Lender or its Affiliates pursuant to ACH
Transactions and Swap Contracts. In the event the Borrowers shall not have paid
to the Lender or its Affiliates such amounts, the Lender may cover such amounts
by an advance under the Revolving Loan, which advance shall be deemed to have
been requested by the Borrowers. The Borrowers acknowledge and agree that the
obtaining of ACH Transactions and Swap Contracts from the Lender or its
Affiliates (a) is in the sole and absolute discretion of the Lender or its
Affiliates and (b) is subject to all rules and regulations of the Lender or its
Affiliates.
 
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ARTICLE III
THE COLLATERAL
 
Section 3.1 Debt and Obligations Secured.
 
All property and Liens assigned, pledged or otherwise granted under or in
connection with this Agreement (including, without limitation, those
under Section 3.2 (Grant of Liens)) or any of the Financing Documents shall
secure (a) the payment of all of the Obligations, including, without limitation,
any and all Outstanding Letter of Credit Obligations, and (b) the performance,
compliance with and observance by the Borrowers of the provisions of this
Agreement and all of the other Financing Documents or otherwise under the
Obligations.
 
Section 3.2 Grant of Liens.
 
Each of the Borrowers hereby assigns, pledges and grants to the Lender, and
agrees that the Lender shall have a perfected and continuing security interest
in, and Lien on, all of the Borrowers’ Accounts, Inventory, Chattel Paper,
Documents, Instruments, Equipment, Investment Property and General Intangibles
and all of the Borrowers’ deposit accounts with any financial institution with
which any of the Borrowers maintains deposits, whether now owned or existing or
hereafter acquired or arising, all returned, rejected or repossessed goods, the
sale or lease of which shall have given or shall give rise to an Account or
Chattel Paper, all insurance policies relating to the foregoing, all books and
records in whatever media (paper, electronic or otherwise) recorded or stored,
with respect to the foregoing and all Equipment and General Intangibles
necessary or beneficial to retain, access and/or process the information
contained in those books and records, and all Proceeds and products of the
foregoing. Each of the Borrowers further agrees that the Lender shall have in
respect thereof all of the rights and remedies of a secured party under the
Uniform Commercial Code as well as those provided in this Agreement, under each
of the other Financing Documents and under applicable Laws.
 
Without implying any limitation to the foregoing, as additional Collateral and
security for the Obligations, Borrower hereby assigns to Lender all of its
respective rights, title and interest in, to, and under, the Acquisition
Agreement and all of the other Acquisition Documentation, including, without
limitation, all of the benefits of any representations and warranties provided
by the Acquired Company and any and all rights of Borrower to indemnification
from the Acquired Company or any other Person contained therein. Neither the
assignment to Lender nor any other provision contained in this Agreement or any
of the other Financing Documents shall impose on Lender any obligation or
liability of Borrower under the Acquisition Agreement and/or under any of the
other Acquisition Documentation. Borrower hereby agrees to indemnify Lender and
hold Lender harmless from any and all claims, actions, suits, losses, damages,
costs, expenses, fees, obligations and liabilities which may be incurred by or
imposed upon Lender by virtue of the assignment of and Lien on Borrower’s
rights, title and interest in, to, and under the Acquisition Agreement and the
other Acquisition Documentation. Borrower further acknowledges and agrees that
following the occurrence of an Event of Default, Lender shall be entitled to
enforce any and all rights and remedies available to Borrower under the
Acquisition Agreement and/or under any or all of the Acquisition Documentation
and/or applicable Laws with respect to the Acquisition.
 
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Section 3.3 Collateral Disclosure List.
 
On or prior to the Closing Date, each of the Borrowers shall deliver to the
Lender a list (the “Collateral Disclosure List”) which shall contain such
information with respect to such Borrower’s business and real and personal
property as the Lender may require and shall be certified by a Responsible
Officer of such Borrower, all in the form provided to the Borrowers by the
Lender. Promptly after demand by the Lender, the Borrowers, as appropriate,
shall furnish to the Lender an update of the information contained in the
Collateral Disclosure List at any time and from time to time as may be requested
by the Lender.
 
Section 3.4 Personal Property.
 
The Borrowers acknowledge and agree that it is the intention of the parties to
this Agreement that the Lender shall have a first priority, perfected Lien, in
form and substance satisfactory to the Lender and its counsel, on all of the
Borrowers’ assets of any kind and nature whatsoever, whether now owned or
hereafter acquired, subject only to the Permitted Liens, if any. In furtherance
of the foregoing:
 
3.4.1 Investment Property, Chattel Paper, Promissory Notes, etc.
 
(a) On the Closing Date and without implying any limitation on the scope of
Section 3.2 (Grant of Liens), each of the Borrowers shall deliver to the Lender
the originals of all of its letters of credit, Investment Property, Chattel
Paper, Documents and Instruments and, if the Lender so requires, shall execute
and deliver separate pledge, assignment and security agreements in form and
content acceptable to the Lender, which pledge, assignment and security
agreements shall assign, pledge and grant a Lien to the Lender on all such
Borrower’s letters of credit, Investment Property, Chattel Paper, Documents, and
Instruments.
 
(b) In the event that any of the Borrowers shall acquire after the Closing Date
any letters of credit, Investment Property, Chattel Paper, Documents, or
Instruments, each such Borrower shall promptly so notify the Lender and deliver
the originals of all of the foregoing to the Lender promptly and in any event
within ten (10) days of each acquisition.
 
(c) All letters of credit, Investment Property, Chattel Paper, Documents and
Instruments shall be delivered to the Lender endorsed and/or assigned as
required by any pledge, assignment and security agreement and/or as the Lender
may require and, if applicable, shall be accompanied by blank irrevocable and
unconditional stock or bond powers and/or notices as the Lender may require.
 
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Section 3.5 Record Searches.
 
As of the Closing Date and thereafter at the time any Financing Document is
executed and delivered by the Borrowers pursuant to this Section, the Lender
shall have received, in form and substance satisfactory to the Lender, such Lien
or record searches with respect to all of the Borrowers and/or any other Person,
as appropriate, and the property covered by such Financing Document showing that
the Lien of such Financing Document will be a perfected first priority Lien on
the property covered by such Financing Document subject only to Permitted Liens
or to such other matters as the Lender may approve.
 
Section 3.6 Costs.
 
The Borrowers agree to pay, as part of the Enforcement Costs and to the fullest
extent permitted by applicable Laws, on demand all costs, fees and expenses
incurred by the Lender in connection with the taking, perfection, preservation,
protection and/or release of a Lien on the Collateral, including, without
limitation:
 
(a) customary fees and expenses incurred in preparing Financing Documents from
time to time (including, without limitation, reasonable attorneys’ fees incurred
in connection with preparing the Financing Documents, including, any amendments
and supplements thereto);
 
(b) all filing and/or recording taxes or fees;
 
(c) all costs of Lien and record searches;
 
(d) reasonable attorneys’ fees in connection with all legal opinions required;
and
 
(e) all related costs, fees and expenses.
 
Section 3.7 Release.
 
Upon the indefeasible repayment in full in cash of the Obligations and
performance of all Obligations of the Borrowers and all obligations and
liabilities of each other Person, other than the Lender, under this Agreement
and all other Financing Documents, and the termination and/or expiration of all
of the Commitments, upon the Borrowers’ request and at the Borrowers’ sole cost
and expense, the Lender shall release and/or terminate any Financing Document
but only if and provided that there is no commitment or obligation (whether or
not conditional) of the Lender to re-advance amounts which would be secured
thereby and/or no commitment or obligation of Lender to issue any Letter of
Credit or return or restore any payment of any Current Letter of Credit
Obligations.
 
Section 3.8 Inconsistent Provisions.
 
In the event that the provisions of any Financing Document directly conflict
with any provision of this Agreement, the provisions of this Agreement govern.
 
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
 
Section 4.1 Representations and Warranties.
 
The Borrowers, for themselves and for each other, represent and warrant to the
Lender, as follows:
 
4.1.1 Subsidiaries.
 
The Borrowers have the Subsidiaries listed on the Collateral Disclosure List and
no others. Each of the Subsidiaries is a Wholly Owned Subsidiary except as shown
on the Collateral Disclosure List, which correctly indicates the nature and
amount of each Borrower’s ownership interests therein.
 
4.1.2 Existence.
 
Each Borrower (a) is a Registered Organization under the laws of the
jurisdiction stated in the Preamble of this Agreement, (b) has the power to own
its property and to carry on its business as now being conducted, and (c) is
duly qualified to do business and is in good standing in each jurisdiction in
which the character of the properties owned by it therein or in which the
transaction of its business makes such qualification necessary. Each Borrower is
organized under the laws of only one (1) jurisdiction.
 
4.1.3 Power and Authority.
 
Each Borrower has full power and authority to execute and deliver this Agreement
and the other Financing Documents and the Acquisition Documentation to which it
is a party, to make the borrowings and request Letters of Credit under this
Agreement, to close and consummate the Acquisition and to incur and perform the
Obligations whether under this Agreement, the other Financing Documents or
otherwise, all of which have been duly authorized by all proper and necessary
action. No consent or approval of owners or any creditors of any Borrower, and
no consent, approval, filing or registration with or notice to any Governmental
Authority on the part of any Borrower, is required as a condition to the
execution, delivery, validity or enforceability of this Agreement, or any of the
other Financing Documents, or the performance by any Borrower of the Obligations
or the closing and the consummation of the Acquisition.
 
4.1.4 Binding Agreements.
 
This Agreement and the other Financing Documents executed and delivered by the
Borrowers have been properly executed and delivered and constitute the valid and
legally binding obligations of the Borrowers and are fully enforceable against
each of the Borrowers in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties,
and general principles of equity regardless of whether applied in a proceeding
in equity or at law.
 
4.1.5 No Conflicts.
 
Neither the execution, delivery and performance of the terms of this Agreement
or of any of the other Financing Documents executed and delivered by any
Borrower nor the consummation of the transactions contemplated by this Agreement
will conflict with, violate or be prevented by (a) any Borrower’s organizational
or governing documents, (b) any existing mortgage, indenture, contract or
agreement binding on any Borrower or affecting its property, or (c) any Laws.
 
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4.1.6 No Defaults, Violations.
 
(a) No Default or Event of Default has occurred and is continuing.
 
(b) None of the Borrowers nor any of their respective Subsidiaries is in default
under or with respect to any obligation under any existing mortgage, indenture,
contract or agreement binding on it or affecting its property in any respect
which could be materially adverse to the business, operations, property or
financial condition of any Borrower, or which could materially adversely affect
the ability of any Borrower to perform its obligations under this Agreement or
the other Financing Documents, to which any Borrower is a party.
 
4.1.7 Compliance with Laws.
 
None of the Borrowers nor any of their respective Subsidiaries is in violation
of any applicable Laws (including, without limitation, any Laws relating to
employment practices, to environmental, occupational and health standards and
controls) or order, writ, injunction, decree or demand of any court, arbitrator,
or any Governmental Authority affecting any Borrower or any of its properties,
the violation of which, considered in the aggregate, could materially adversely
affect the business, operations or properties of any Borrower and/or any
Subsidiaries.
 
4.1.8 Margin Stock.
 
None of the proceeds of the Loans will be used, directly or indirectly, by any
Borrower or any Subsidiary for the purpose of purchasing or carrying, or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase or carry, any “margin stock” within the meaning of Regulation U (12
CFR Part 221), of the Board of Governors of the Federal Reserve System or for
any other purpose which might make the transactions contemplated in this
Agreement a “purpose credit” within the meaning of Regulation U, or cause this
Agreement to violate any other regulation of the Board of Governors of the
Federal Reserve System or the Securities Exchange Act of 1934 or the Small
Business Investment Act of 1958, as amended, or any rules or regulations
promulgated under any of such statutes.
 
4.1.9 Investment Company Act; Margin Stock.
 
None of the Borrowers nor any of their respective Subsidiaries is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
nor is it, directly or indirectly, controlled by or acting on behalf of any
Person which is an investment company within the meaning of said Act. None of
the Borrowers nor any of their respective Subsidiaries is engaged principally,
or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying “margin stock” within the meaning of
Regulation U (12 CFR Part 221), of the Board of Governors of the Federal Reserve
System.
 
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4.1.10 Litigation.
 
Except as otherwise disclosed on Schedule 4.1.10 attached hereto and made a part
hereof, there are no proceedings, actions or investigations pending or, so far
as any Borrower knows, threatened before or by any court, arbitrator or any
Governmental Authority which, in any one case or in the aggregate, if determined
adversely to the interests of any Borrower or any Subsidiary, would have a
material adverse effect on the business, properties, condition (financial or
otherwise) or operations, present or prospective, of any Borrower.
 
4.1.11 Financial Condition.
 
The consolidated financial statements of Argan dated January 31, 2006 are
complete and correct and fairly present the financial position of each of Argan,
SMC and Vitarich and their Subsidiaries and the results of their operations and
transactions in their surplus accounts as of the date and for the period
referred to and have been prepared in accordance with GAAP applied on a
consistent basis throughout the period involved. There are no liabilities,
direct or indirect, fixed or contingent, of any Borrower or any Subsidiary as of
the date of such financial statements that are not reflected therein or in the
notes thereto. There has been no adverse change in the financial condition or
operations of any Borrower or any Subsidiary since the date of such financial
statements and to the Borrowers’ knowledge no such adverse change is pending or
threatened. None of the Borrowers nor any Subsidiary has guaranteed the
obligations of, or made any investment in or advances to, any Person, except as
disclosed in such financial statements.
 
4.1.12 Full Disclosure.
 
The financial statements referred to in Sections 4.1.11 (Financial Condition)
and 4.1.28 (Pro-forma Financial Statements), the Financing Documents (including,
without limitation, this Agreement), and the statements, reports or certificates
furnished by any Borrower in connection with the Financing Documents (a) do not
contain any untrue statement of a material fact and (b) when taken in their
entirety, do not omit any material fact necessary to make the statements
contained therein not misleading. There is no fact known to any Borrower which
such Borrower has not disclosed to the Lender in writing prior to the date of
this Agreement with respect to the transactions contemplated by the Financing
Documents that materially and adversely affects or in the future could, in the
reasonable opinion of that Borrower materially adversely affect the condition,
financial or otherwise, results of operations, business, or assets of any
Borrower or any Subsidiary.
 
4.1.13 Indebtedness for Borrowed Money.
 
Except for the Obligations and except as set forth in Schedule 4.1.13 attached
hereto and made a part hereof, the Borrowers have no Indebtedness for Borrowed
Money. The Lender has received photocopies of all promissory notes evidencing
any Indebtedness for Borrowed Money set forth in Schedule 4.1.13, together with
any and all subordination agreements, other agreements, documents, or
instruments securing, evidencing, guarantying or otherwise executed and
delivered in connection therewith.
 
4.1.14 Taxes.
 
Each of the Borrowers and its Subsidiaries has filed all returns, reports and
forms for Taxes that, to the knowledge of the Borrowers, are required to be
filed, and has paid all Taxes as shown on such returns or on any assessment
received by it, to the extent that such Taxes have become due, unless and to the
extent only that such Taxes, assessments and governmental charges are currently
contested in good faith and by appropriate proceedings by a Borrower, such Taxes
are not the subject of any Liens other than Permitted Liens, and adequate
reserves therefore have been established as required under GAAP. All tax
liabilities of the Borrowers were as of the date of audited financial statements
referred to in Section 4.1.11 (Financial Condition), and are now, adequately
provided for on the books of the Borrowers and their Subsidiaries, as
appropriate. No tax liability has been asserted by the Internal Revenue Service
or any state or local authority against any Borrower for Taxes in excess of
those already paid.
 
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4.1.15 ERISA.
 
With respect to any Plan that is maintained or contributed to by any Borrower
and/or by any Commonly Controlled Entity or as to which any Borrower retains
material liability: (a) no “accumulated funding deficiency” as defined in Code
§412 or ERISA §302 has occurred, whether or not that accumulated funding
deficiency has been waived; (b) no Reportable Event has occurred other than
events for which reporting has been waived; (c) no termination of any plan
subject to Title IV of ERISA has occurred; (d) neither the Borrower nor any
Commonly Controlled Entity has incurred a “complete withdrawal” within the
meaning of ERISA §4203 from any Multi-employer Plan; (e) neither the Borrower
nor any Commonly Controlled Entity has incurred a “partial withdrawal” within
the meaning of ERISA §4205 with respect to any Multi-employer Plan; (f) no
Multi-employer Plan to which the Borrower or any Commonly Controlled Entity has
an obligation to contribute is in “reorganization” within the meaning of ERISA
§4241 nor has notice been received by the Borrower or any Commonly Controlled
Entity that such a Multi-employer Plan will be placed in “reorganization”.
 
4.1.16 Title to Properties.
 
The Borrowers have good and marketable title to all of their respective
properties, including, without limitation, the Collateral and the properties and
assets reflected in the balance sheets described in Section 4.1.11 (Financial
Condition). The Borrowers have legal, enforceable and uncontested rights to use
freely such property and assets. All of such properties, including, without
limitation, the Collateral that were purchased, were purchased for fair
consideration and reasonably equivalent value in the ordinary course of business
of both the seller and the Borrowers and not, by way of example only, as part of
a bulk sale.
 
4.1.17 Patents, Trademarks, Etc.
 
Each of the Borrowers and its Subsidiaries owns, possesses, or has the right to
use all necessary Patents, licenses, Trademarks, Copyrights, permits and
franchises to own its properties and to conduct its business as now conducted,
without known conflict with the rights of any other Person. Any and all
obligations to pay royalties or other charges with respect to such properties
and assets are properly reflected on the financial statements described in
Section 4.1.11 (Financial Condition).
 
4.1.18 Employee Relations.
 
Except as disclosed on Schedule 4.1.18 attached hereto and made a part hereof,
(a) no Borrower nor any Subsidiary thereof nor any of the Borrower’s or
Subsidiary’s employees is subject to any collective bargaining agreement, (b) no
petition for certification or union election is pending with respect to the
employees of any Borrower or any Subsidiary and no union or collective
bargaining unit has sought such certification or recognition with respect to the
employees of a Borrower, (c) there are no strikes, slowdowns, work stoppages or
controversies pending or, to the best knowledge of the Borrowers after due
inquiry, threatened between any Borrower and its employees, and (d) no Borrower
nor any Subsidiaries is subject to an employment contract, severance agreement,
commission contract, consulting agreement or bonus agreement. Hours worked and
payments made to the employees of any one or more of the Borrowers have not been
in violation of the Fair Labor Standards Act or any other applicable law dealing
with such matters. All payments due from any one or more of the Borrowers or for
which any claim may be made against a Borrower, on account of wages and employee
and retiree health and welfare insurance and other benefits have been paid or
accrued as a liability on its books. The consummation of the transactions
contemplated by the Financing Agreement or any of the other Financing Documents
or by the Acquisition Agreement or any of the other Acquisition Documentation
will not give rise to a right of termination or right of re-negotiation on the
part of any union under any collective bargaining agreement to which any
Borrower is a party or by which it is bound.
 
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4.1.19 Presence of Hazardous Materials or Hazardous Materials Contamination.
 
To the best of each Borrower’s knowledge, (a) no Hazardous Materials are located
on any real property owned, controlled or operated by any of the Borrowers or
for which any Borrower is, or is claimed to be, responsible, except for
reasonable quantities of necessary supplies for use by a Borrower in the
ordinary course of its current line of business and stored, used and disposed in
accordance with applicable Laws; and (b) no property owned, controlled or
operated by any Borrower or for which any Borrower has, or is claimed to have,
responsibility has ever been used as a manufacturing, storage, or dump site for
Hazardous Materials nor is affected by Hazardous Materials Contamination at any
other property.
 
4.1.20 Perfection and Priority of Collateral.
 
The Lender has, or upon execution and recording of this Agreement and the
Security Documents will have, and will continue to have as security for the
Obligations, a valid and perfected Lien on and security interest in all
Collateral, free of all other Liens, claims and rights of third parties
whatsoever except Permitted Liens, including, without limitation, those
described on Schedule 4.1.20 attached hereto and made a part hereof.
 
4.1.21 Collateral Disclosure List.
 
The information contained in the Collateral Disclosure List of each Borrower is
complete and correct. Each Collateral Disclosure List completely and accurately
identifies (a) the type of entity, the state of organization and the chief
executive office of the applicable Borrower (b) each other place of business of
such Borrower, (c) the location of all books and records pertaining to the
Collateral, and (d) each location, other than the foregoing, where any of the
Collateral is located.
 
4.1.22 Business Names and Addresses.
 
In the five (5) years preceding the date hereof, no Borrower has changed its
name, identity or corporate structure, has conducted business under any name
other than its current name, and has conducted its business in any jurisdiction
other than those disclosed on the Collateral Disclosure List.
 
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4.1.23 Equipment.
 
All Equipment is personalty and is not and will not be affixed to real estate in
such manner as to become a fixture or part of such real estate. No equipment is
held by any Borrower on a sale on approval basis.
 
4.1.24 Inventory.
 
The Inventory of the Borrowers is (a) of good and merchantable quality, free
from defects, (b) not stored with a bailee, warehouseman, carrier, or similar
party, (c) not on consignment, sale on approval, or sale or return, and (d)
located at the places of business set forth on the Collateral Disclosure List.
No goods offered for sale by any Borrower are consigned to or held on sale or
return terms by that Borrower.
 
4.1.25 Accounts.
 
With respect to all Accounts and to the best of the Borrowers’ knowledge (a)
they are genuine, and in all respects what they purport to be, and are not
evidenced by a judgment, an Instrument, or Chattel Paper (unless such judgment
has been assigned and such Instrument or Chattel Paper has been endorsed and
delivered to the Lender); (b) they represent bona fide transactions completed in
accordance with the terms and provisions contained in the invoices, purchase
orders and other contracts relating thereto, and the underlying transaction
therefore is in accordance with all applicable Laws; (c) the amounts shown on
the respective Borrower’s books and records, with respect thereto are actually
and absolutely owing to that Borrower and are not contingent or subject to
reduction for any reason other than regular discounts, credits or adjustments
allowed by that Borrower in the ordinary course of its business; (d) all Account
Debtors thereon have the capacity to contract; and (e) the goods sold, leased or
transferred or the services furnished giving rise thereto are not subject to any
Liens except the security interest granted to the Lender by this Agreement and
Permitted Liens.
 
4.1.26 Solvency
 
Each of the Borrowers is Solvent prior to and after giving effect to the
Acquisition and the making of the Loans.
 
4.1.27 Pro-forma Financial Statements.
 
Borrowers have furnished to Lender a Pro-forma consolidated balance sheet of
Borrowers and its Subsidiaries as of immediately after consummation of
Acquisition and the transactions incident thereto (the “Pro-forma Balance
Sheet”) together with Pro-forma financial projections for the fiscal year period
subsequent to the Acquisition (the “Pro-forma Financial Projections”). A copy of
the Pro-forma Balance Sheet and the Pro-forma Financial Projections are attached
hereto as EXHIBITS H-1 and H-2, respectively. The Pro-forma Balance Sheet has
been prepared based on the best information available to the Borrowers as of the
date of delivery thereof, and present fairly on a pro-forma basis the estimated
financial position of the Borrowers for the fiscal year period subsequent to the
Acquisition, assuming that the events specified in the first sentence of this
paragraph had actually occurred at such date or at the beginning of such period,
as the case may be. The Pro-forma Financial Projections represent Borrowers best
estimate of the future operations of each Borrower and are based on reasonable
and conservative assumptions.
 
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4.1.28 Acquisition Agreement.
 
Lender has received true and correct photocopies of the Acquisition Agreement
and each of the other Acquisition Documentation, executed, delivered and/or
furnished on or before the Closing Date in connection with the Acquisition.
Neither the Acquisition Agreement nor any of the other Acquisition Documentation
have been modified, changed, supplemented, canceled, amended or otherwise
altered or affected, except as otherwise disclosed to Lender in writing on or
before the Closing Date. The Acquisition has been effected, closed and
consummated pursuant to, and in accordance with, the terms and conditions of the
Acquisition Agreement and with all applicable Laws.
 
4.1.29 Certain Documents.
 
The Borrowers have delivered to the Lender a complete and correct copy of the
Acquisition Documentation, including any amendments, supplements or
modifications with respect thereto.
 
Section 4.2 Survival; Updates of Representations and Warranties.
 
All representations and warranties contained in or made under or in connection
with this Agreement and the other Financing Documents shall survive the Closing
Date, the making of any advance under the Loans and extension of credit made
hereunder, and the incurring of any other Obligations and shall be deemed to
have been made at the time of each request for, and again at the time of the
making of, each advance under the Loans or the issuance of each Letter of
Credit, except that the representations and warranties which relate to the
financial statements which are referred to in Section 4.1.11 (Financial
Condition), shall also be deemed to cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements).
 
ARTICLE V
CONDITIONS PRECEDENT
 
Section 5.1 Conditions to the Initial Advance and Letter of Credit.
 
The making of the initial advance under the Loans and the issuance of the Letter
of Credit is subject to the fulfillment on or before the Closing Date of the
following conditions precedent in a manner satisfactory in form and substance to
the Lender and its counsel:
 
5.1.1 Organizational Documents - Borrowers.
 
The Lender shall have received for each Borrower:
 
(a) a certificate of good standing certified by the Secretary of State, or other
appropriate Governmental Authority, of the state of formation of the Borrower;
 
(b) a certified copy from the appropriate Governmental Authority under which the
Borrower is organized, of the Borrower’s organizational documents and all
recorded amendments thereto;
 
(c) a certificate of qualification to do business certified by the Secretary of
State or other Governmental Authority of each jurisdiction in which the Borrower
conducts business;
 
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(d) a certificate dated as of the Closing Date by the Secretary or an Assistant
Secretary of the Borrower covering:
 
(i) true and complete copies of the Borrower’s organizational and governing
documents and all amendments thereto;
 
(ii) true and complete copies of the resolutions of its Board of Directors
authorizing (A) the execution, delivery and performance of the Financing
Documents and the Acquisition Documentation to which it is a party, (B) the
borrowings hereunder, and (C) the granting of the Liens contemplated by this
Agreement and the Financing Documents to which Borrower is a party, and (D) the
Acquisition if and to the extent Borrower is a party;
 
(iii) the incumbency, authority and signatures of the officers of the Borrower
authorized to sign this Agreement and the other Financing Documents to which the
Borrower is a party; and
 
(iv) the identity of the Borrower’s current directors, common stock holders and
other equity holders who, to the knowledge of any Borrower, own more than twenty
percent (20%) of the outstanding common stock, as well as their respective
percentage ownership interests.
 
5.1.2 Opinion of Borrowers’ Counsel.
 
The Lender shall have received the favorable opinion of counsel for the
Borrowers addressed to the Lender.
 
5.1.3 Consents, Licenses, Approvals, Etc.
 
The Lender shall have received copies of all consents, licenses and approvals,
required in connection with the execution, delivery, performance, validity and
enforceability of the Financing Documents and the Acquisition Documents, and
such consents, licenses and approvals shall be in full force and effect.
 
5.1.4 Notes.
 
The Lender shall have received the 2006 Term Note, the Revolving Credit Note,
and the Acquisition Note, each conforming to the requirements hereof and
executed by a Responsible Officer of each Borrower and attested by a duly
authorized representative of each Borrower.
 
5.1.5 Financing Documents and Collateral.
 
Each Borrower shall have executed and delivered the Financing Documents and the
Travelers Letter Agreement each to be executed by it, and shall have delivered
original Chattel Paper, Instruments, Investment Property, and related Collateral
and all opinions, title insurance, and other documents contemplated by ARTICLE
III (The Collateral).
 
5.1.6 Other Documents, Etc.
 
The Lender shall have received such other certificates, opinions, documents and
instruments confirmatory of or otherwise relating to the transactions
contemplated hereby as may have been reasonably requested by the Lender.
 
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5.1.7 Payment of Fees.
 
The Lender shall have received payment of any Fees due on or before the Closing
Date including, without limitation, the Acquisition Term Loan Fee.
 
5.1.8 Collateral Disclosure List.
 
Each Borrower shall have delivered the Collateral Disclosure List required under
the provisions of Section 3.3 (Collateral Disclosure List) duly executed by a
Responsible Officer of each Borrower.
 
5.1.9 Recordings and Filings.
 
Each Borrower shall have: (a) executed and delivered all Financing Documents
required to be filed, registered or recorded in order to create, in favor of the
Lender, a perfected Lien in the Collateral (subject only to the Permitted Liens)
in form and in sufficient number for filing, registration, and recording in each
office in each jurisdiction in which such filings, registrations and
recordations are required, and (b) delivered such evidence as the Lender deems
satisfactory that all necessary filing fees and all recording and other similar
fees, and all Taxes and other expenses related to such filings, registrations
and recordings will be or have been paid in full.
 
5.1.10 Insurance Certificate.
 
The Lender shall have received an insurance certificate in accordance with the
provisions of Section 6.1.8 (Insurance).
 
5.1.11 Pro-forma Balance Sheet and Projections.
 
Lender shall have received and approved Borrowers Pro-forma Balance Sheet and
Pro-forma Financial Projections, which Pro-forma Balance Sheet and Pro-forma
Financial Projections must be in form and content acceptable to Lender in its
sole and absolute discretion.
 
5.1.12 Adverse Change.
 
No material adverse change shall have occurred in the condition (financial or
otherwise), operations or business of any Borrower that would, in the good faith
judgment of the Lender, materially impair the ability of that Borrower to pay or
perform any of the Obligations since July 31, 2006.
 
Section 5.2 Conditions to all Extensions of Credit.
 
The making of all advances under the Loans is subject to the fulfillment of the
following conditions precedent in a manner satisfactory in form and substance to
the Lender and its counsel:
 
5.2.1 Compliance.
 
Each Borrower shall have complied and shall then be in compliance with all
terms, covenants, conditions and provisions of this Agreement and the other
Financing Documents that are binding upon it.
 
5.2.2 Default.
 
There shall exist no Event of Default or Default hereunder.
 
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5.2.3 Representations and Warranties.
 
The representations and warranties of each of the Borrowers contained among the
provisions of this Agreement shall be true and with the same effect as though
such representations and warranties had been made at the time of the making of,
and of the request for, each advance under the Loans or the issuance of the
Letter of Credit, except that the representations and warranties which relate to
financial statements which are referred to in Section 4.1.11 (Financial
Condition), shall also be deemed to cover financial statements furnished from
time to time to the Lender pursuant to Section 6.1.1 (Financial Statements).
 
5.2.4 Adverse Change.
 
No adverse change shall have occurred in the condition (financial or otherwise),
operations or business of any Borrower that would, in the good faith judgment of
the Lender, materially impair the ability of that Borrower to pay or perform any
of the Obligations.
 
5.2.5 Legal Matters.
 
All legal documents incident to each advance under the Loans shall be reasonably
satisfactory to counsel for the Lender.
 
Section 5.3 Conditions to Acquisition Term Loan and Letter of Credit.
 
In addition to the satisfaction of the conditions set forth in Sections 5.1 and
5.2, the making of the Acquisition Term Loan and Letter of Credit is subject to
the fulfillment of the following conditions precedent in a manner satisfactory
in form and substance to the Lender and its counsel:
 
5.3.1 Acquisition Term Note.
 
The Lender shall have received the Acquisition Term Note conforming to the
requirements hereof and executed by a Responsible Officer of each Borrower and
attested by a duly authorized representative of each Borrower.
 
5.3.2 Acquisition.
 
(a) Argan and each Acquired Company shall have complied in all material respects
with all covenants and satisfied in all material respects all conditions set
forth in the Acquisition Documentation and concurrent with the initial funding
hereunder, Argan shall have acquired all of the outstanding Capital Stock and
Membership Interest of each Acquired Company in accordance with the terms and
conditions of the Acquisition Documentation and applicable Laws (the
“Acquisition”). After giving effect to the consummation of the Acquisition,
Argan shall own 100% of the fully diluted Capital Stock and Membership Interest
of each Acquired Company. The Lender shall have received satisfactory evidence
that satisfactory arrangements shall have been made for the termination of all
Liens granted in connection with any credit facilities of the Acquired
Companies.
 
(b) Lender shall have received photocopies of all Acquisition Documentation
executed, delivered and/or furnished in connection with the Acquisition,
together with a certificate signed by a Responsible Officer of each Borrower
certifying that (i) the Acquisition Agreement and the other Acquisition
Documentation furnished to Lender are true, correct, in full force and effect
and the provisions thereof have not been in any way modified, amended or waived,
and (ii) the Acquisition has been closed and completed in accordance with the
Acquisition Agreement and the other Acquisition Documentation furnished to
Lender and in accordance with all applicable Laws.
 
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(c) Lender shall have received satisfactory evidence that, concurrent with the
initial funding hereunder, (i) the secured credit facility entered between GPS
and Sovereign Bank shall have been terminated and all amounts thereunder shall
have been paid in full and (ii) satisfactory arrangements shall have been made
for the termination of all Liens granted in connection with such credit
facility.
 
(d) Lender shall have received a reliance letter in form and substance
acceptable to Lender in its sole and absolute discretion, executed and delivered
by each Acquired Company, which reliance letter shall grant to Lender the
benefit of all of the rights, warranties, and indemnifications benefiting Argan
under and in connection with the Acquisition Agreement, the other Acquisition
Documentation and the Acquisition. In addition, Lender shall have received all
opinions of counsel for the Acquired Companies and Argan required under or in
connection with the Acquisition Agreement, the other Acquisition Documentation
and the Acquisition, which opinions must be addressed to Lender and in form and
content reasonably acceptable to Lender and its counsel and which permit Lender
to rely on the opinions expressed therein.
 
5.3.3 Lien Searches.
 
The Lender shall have received the results of a recent lien search in each of
the jurisdictions where assets of each Borrower and its Subsidiaries are
located, and such search shall reveal no liens on any of the assets of each
Acquired Company or any of its Subsidiaries except for Permitted Liens or Liens
discharged on or prior to the Closing Date pursuant to documentation
satisfactory to the Lender.
 
5.3.4 Pledged Equity and Membership Interests; Stock Powers; Pledged Notes.
 
Lender shall have received, to the extent applicable, (i) all originals of the
certificates representing the shares of Capital Stock of GP and GPSC pledged
pursuant to each of the Pledge Agreements, together with an undated stock power
or other power of transfer for each such certificate executed in blank by a duly
authorized officer of the pledgor thereof, and (ii) all originals of the
certificates representing the membership interests, if any, of the GPS and GPH
pledged pursuant to each of the Assignments of Membership Interests, together
with an undated power of transfer, if certificated, for each such certificate
executed in blank by a duly authorized officer of the pledgor thereof.
 
5.3.5 Financial Covenants.
 
(a) Senior Funded Debt to EBITDA. As of the Closing Date, the Borrowers ratio of
Senior Funded Debt to EBITDA based on the actual adjusted year-to-date
performance agreed to by Lender, on a consolidated basis, tested as of the last
day of the Borrowers’ fiscal quarter commencing October 31, 2006 shall not
exceed 1.75 to 1.00.
 
(b) Liquidity. As of the Closing Date, after giving effect to the closing of the
Acquisition, the Borrowers shall have at least Twenty Million Dollars
($20,000,000) of unrestricted and unencumbered liquidity.
 
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5.3.6 Default.
 
There shall exist no Event of Default or Default hereunder.
 
5.3.7 Interest Rate Protection Agreement. 
 
The Lender shall have received an executed Interest Rate Protection Agreement in
accordance with Section 6.2.19.
 
5.3.8 Compliance. 
 
The Lender shall have received pro-forma financial statements in form and detail
satisfactory to the Lender for the most recent month then ended, that
demonstrate that, after making the Acquisition Term Loan, Borrowers will be in
compliance with all the financial covenants set forth in Section 6.1.14 based on
a trailing twelve (12) month test.
 
5.3.9 Other Documents, Etc.
 
The Lender shall have received such other certificates, opinions, documents and
instruments confirmatory of or otherwise relating to the Acquisition Term Loan
as may have been reasonably requested by the Lender.
 
5.3.10 Legal Matters.
 
All legal documents incident to the Acquisition Term Loan shall be reasonably
satisfactory to counsel for the Lender.
 
ARTICLE VI
COVENANTS OF THE BORROWERS
 
Section 6.1 Affirmative Covenants.
 
So long as any of the Obligations (or any the Commitments therefore) shall be
outstanding hereunder, the Borrowers agree jointly and severally with the Lender
as follows:
 
6.1.1 Financial Statements.
 
The Borrowers shall furnish to the Lender:
 
(a) Annual Statements and Certificates. The Borrowers shall furnish to the
Lender as soon as available, but in no event more than one hundred twenty (120)
days after the close of the Borrowers’ fiscal years, (i) a copy of the annual
financial statement in reasonable detail satisfactory to the Lender relating to
the Borrowers and their Subsidiaries, prepared in accordance with GAAP and
examined and certified by independent certified public accountants satisfactory
to the Lender, which financial statement shall include a consolidated and
consolidating balance sheet of the Borrowers and their Subsidiaries as of the
end of such fiscal year and consolidated and consolidating statements of income,
cash flows and changes in shareholders equity of the Borrowers and their
Subsidiaries for such fiscal year, (ii) a Compliance Certificate, in
substantially the form attached to this Agreement as EXHIBIT C, as may be
amended by the Lender from time to time, containing a detailed computation of
each financial covenant in this Agreement which is applicable for the period
reported, a certification that no change has occurred to the information
contained in the Collateral Disclosure List (except as set forth in a schedule
attached to the certification), each prepared by a Responsible Officer of the
Borrowers in a format acceptable to the Lender and (iii) a management letter in
the form prepared by the Borrowers’ independent certified public accountants.
 
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(b) Quarterly Statements and Certificates. The Borrowers shall furnish to the
Lender as soon as available, but in no event more than forty five (45) days
after the close of the Borrowers’ fiscal quarters, consolidated and
consolidating balance sheets of the Borrowers and their Subsidiaries as of the
close of such period, consolidated and consolidating income, cash flows and
changes in shareholders equity statements for such period and a Compliance
Certificate, in substantially the form attached to this Agreement as EXHIBIT C,
containing a detailed computation of each financial covenant in this Agreement
which is applicable for the period reported, a certification that no change has
occurred to the information contained in the Collateral Disclosure List (except
as set forth on a schedule attached to the certification), each prepared by a
Responsible Officer of or on behalf of each Borrower in a format acceptable to
the Lender, all as prepared and certified by a Responsible Officer of the
Borrowers and accompanied by a certificate of that officer stating whether any
event has occurred which constitutes a Default or an Event of Default hereunder,
and, if so, stating the facts with respect thereto.
 
(c) Annual Budget and Projections. The Borrowers shall furnish to the Lender as
soon as available, but in no event later than thirty (30) days before the end of
each fiscal year a consolidated and consolidating budget and pro forma financial
statements on a quarterly basis for the following fiscal year.
 
(d) Additional Reports and Information. The Borrowers shall furnish to the
Lender promptly, such additional information, reports or statements as the
Lender may from time to time reasonably request, including but not limited to,
no later than five Business Days prior to the effectiveness thereof, copies of
substantially final drafts of any proposed amendment, supplement, waiver or
other modification with respect to the Acquisition Documentation.
 
6.1.2 Reports to SEC and to Stockholders.
 
The Borrowers will furnish to the Lender, promptly upon the filing or making
thereof, at least one (l) copy of all financial statements, reports, notices and
proxy statements sent by any Borrower to its stockholders, and of all regular
and other reports filed by any Borrower with any securities exchange or with the
Securities and Exchange Commission.
 
6.1.3 Recordkeeping, Rights of Inspection, Field Examination, Etc.
 
(a) Each of the Borrowers shall, and shall cause each of its Subsidiaries to,
maintain (i) a standard system of accounting in accordance with GAAP, and (ii)
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its properties, business
and activities.
 
(b) Each of the Borrowers shall, and shall cause each of its Subsidiaries to,
permit authorized representatives of the Lender to visit and inspect the
properties of the Borrowers and their Subsidiaries, to review, audit, check and
inspect the Collateral at any time with or without notice, to review, audit,
check and inspect the Borrowers’ other books of record at any time with or
without notice and to make abstracts and photocopies thereof, and to discuss the
affairs, finances and accounts of the Borrowers and their Subsidiaries, with the
officers, directors, employees and other representatives of the Borrowers and
their Subsidiaries and their respective accountants, all at such times during
normal business hours and other reasonable times and as often as the Lender may
reasonably request.
 
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(c) Each of the Borrowers hereby irrevocably authorizes and directs all
accountants and auditors employed by any of the Borrowers and/or any of their
Subsidiaries at any time prior to the repayment in full of the Obligations to
exhibit and deliver to the Lender copies of any and all of the financial
statements, trial balances, management letters, or other accounting records of
any nature of any or all of the Borrowers and/or any or all of their respective
Subsidiaries in the accountant’s or auditor’s possession, and to disclose to the
Lender any information they may have concerning the financial status and
business operations of any or all of the Borrowers and/or any or all of their
respective Subsidiaries. Further, each of the Borrowers hereby authorizes all
Governmental Authorities to furnish to the Lender copies of reports or
examinations relating to any and all of the Borrowers and/or any or all
Subsidiaries, whether made by the Borrowers or otherwise. The Lender agrees that
prior to the occurrence of a Default to give the Borrowers five (5) days prior
notice before requesting any such information from any such accountants,
auditors or Governmental Authorities.
 
(d) Any and all costs and expenses incurred by, or on behalf of, the Lender in
connection with the conduct of any of the foregoing, including, without
limitation, travel, lodging, meals, and other expenses for inspections of the
Collateral and the Borrowers’ operations for each auditor employed by the Lender
for inspections of the Collateral and the Borrowers’ operations, shall be part
of the Enforcement Costs and shall be payable to the Lender upon demand. Prior
to the occurrence of an Event of Default, the Borrowers shall not be responsible
for the cost of more than two (2) field examinations in any twelve (12) month
period. The Borrowers acknowledge and agree that such expenses may include, but
shall not be limited to, any and all reasonable out-of-pocket costs and expenses
of the Lender’s employees and agents in, and when, traveling to any of the
Borrowers’ facilities.
 
6.1.4 Existence.
 
Each of the Borrowers shall (a) maintain, and cause each of its Subsidiaries to
maintain, its existence in good standing in the jurisdiction in which it is
organized and in each other jurisdiction where it is required to register or
qualify to do business if the failure to do so in such other jurisdiction might
have a material adverse effect on the ability of the Borrower to perform the
Obligations, on the conduct of the Borrower’s operations, on the Borrower’s
financial condition, or on the value of, or the ability of the Lender to realize
upon, the Collateral and (b) remain a Registered Organization under the laws of
the jurisdiction stated in the Preamble of this Agreement.
 
6.1.5 Compliance with Laws.
 
Each of the Borrowers shall comply, and cause each of its Subsidiaries to
comply, with all applicable Laws and observe the valid requirements of
Governmental Authorities, the noncompliance with or the non-observance of which
might have a material adverse effect on the ability of the Borrowers to perform
the Obligations, on the conduct of the Borrowers’ operations, on the Borrowers’
consolidated financial condition, or on the value of, or the ability of the
Lender to realize upon, the Collateral.
 
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6.1.6 Preservation of Properties.
 
Each of the Borrowers will, and will cause each of its Subsidiaries to, at all
times (a) maintain, preserve, protect and keep its properties, whether owned or
leased, in good operating condition, working order and repair (ordinary wear and
tear excepted), and from time to time will make all proper repairs, maintenance,
replacements, additions and improvements thereto needed to maintain such
properties in good operating condition, working order and repair, and (b) do or
cause to be done all things necessary to preserve and to keep in full force and
effect its material franchises, leases of real and personal property, trade
names, Patents, Trademarks, Copyrights and permits which are necessary for the
orderly continuance of its business.
 
6.1.7 Line of Business.
 
Each of the Borrowers will continue to engage substantially in the businesses of
the marketing and manufacture of filtration related products and providing
infrastructure services to the government and the telecommunications and utility
industries.
 
6.1.8 Insurance.
 
Each of the Borrowers will, and will cause each of its Subsidiaries to, at all
times maintain with “A” or better rated insurance companies such insurance as is
required by applicable Laws and such other insurance, in such amounts, of such
types and against such risks, hazards, liabilities, casualties and contingencies
as are usually insured against in the same geographic areas by business entities
engaged in the same or similar business. Without limiting the generality of the
foregoing, each of the Borrowers will, and will cause each of its Subsidiaries
to, keep adequately insured all of its property against loss or damage resulting
from fire or other risks insured against by extended coverage and maintain
public liability insurance against claims for personal injury, death or property
damage occurring upon, in or about any properties occupied or controlled by it,
or arising in any manner out of the businesses carried on by it, all in such
amounts not less than the Lender shall reasonably determine from time to time.
Each of the Borrowers shall deliver to the Lender on the Closing Date (and
thereafter on each date there is a material change in the insurance coverage) an
insurance certificate containing a detailed list of the insurance then in effect
and stating the names of the insurance companies, the types, the amounts and
rates of the insurance, dates of the expiration thereof and the properties and
risks covered thereby. Within thirty (30) days after notice in writing from the
Lender, the Borrowers will obtain such additional insurance as the Lender may
reasonably request.
 
6.1.9 Taxes.
 
Except to the extent that the validity or amount thereof is being contested in
good faith and by appropriate proceedings, each of the Borrowers will, and will
cause each of its Subsidiaries, to pay and discharge all Taxes prior to the date
when any interest or penalty would accrue for the nonpayment thereof. Each of
the Borrowers shall furnish to the Lender at such times as the Lender may
require proof satisfactory to the Lender of the making of payments or deposits
required by applicable Laws including, without limitation, payments or deposits
with respect to amounts withheld by any of the Borrowers from wages and salaries
of employees and amounts contributed by any of the Borrowers on account of
federal and other income or wage taxes and amounts due under the Federal
Insurance Contributions Act, as amended.
 
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6.1.10 ERISA.
 
Each Borrower will, and will cause each of its Commonly Controlled Entities to,
comply with the funding requirements of ERISA with respect to Plans for its
respective employees. No Borrower will permit with respect to any Plan (a) any
prohibited transaction or transactions under ERISA or the Internal Revenue Code,
which results, or may result, in any material liability of any Borrower, or (b)
any Reportable Event if, upon termination of the plan or plans with respect to
which one or more such Reportable Events shall have occurred, there is or would
be any material liability of the Borrower to the PBGC. Upon the Lender’s
request, each Borrower will deliver to the Lender a copy of the most recent
actuarial report, financial statements and annual report completed with respect
to any Plan.
 
6.1.11 Notification of Events of Default and Adverse Developments.
 
Each of the Borrowers shall promptly notify the Lender upon obtaining knowledge
of the occurrence of:
 
(a) any Event of Default;
 
(b) any Default;
 
(c) any litigation instituted or threatened against any of the Borrowers or any
of their Subsidiaries and of the entry of any judgment or Lien (other than any
Permitted Liens) against any of the assets or properties of any of the Borrowers
or any Subsidiary where the claims against any Borrower or any Subsidiary exceed
One Hundred Thousand Dollars ($100,000) and are not covered by insurance;
 
(d) any event, development or circumstance whereby the financial statements
furnished hereunder fail in any material respect to present fairly, in
accordance with GAAP, the financial condition and operational results of any of
the Borrowers or any of their respective Subsidiaries;
 
(e) any judicial, administrative or arbitral proceeding pending against any of
the Borrowers or any of their respective Subsidiaries and any judicial or
administrative proceeding known by any of the Borrowers to be threatened against
any Borrower or any Subsidiary that, if adversely decided, could materially
adversely affect the financial condition or operations (present or prospective)
of any Borrower or any Subsidiary;
 
(f) the receipt by any of the Borrowers or any Subsidiary of any notice, claim
or demand from any Governmental Authority which alleges that any of the
Borrowers or any Subsidiary is in violation of any of the terms of, or has
failed to comply with any applicable Laws regulating its operation and business,
including, but not limited to, the Occupational Safety and Health Act and the
Environmental Protection Act; and
 
(g) any other development in the business or affairs of any of the Borrowers or
any of their respective Subsidiaries that may be materially adverse;
 
in each case describing in detail satisfactory to the Lender the nature thereof
and the action the Borrowers propose to take with respect thereto.
 
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6.1.12 Hazardous Materials; Contamination.
 
Each of the Borrowers agrees to:
 
(a) give notice to the Lender immediately upon acquiring knowledge of the
presence of any Hazardous Materials or any Hazardous Materials Contamination on
any property owned, operated or controlled by any Borrower or for which any
Borrower is, or is claimed to be, responsible (provided that such notice shall
not be required for Hazardous Materials placed or stored on such property in
accordance with applicable Laws in the ordinary course (including, without
limitation, quantity) of a Borrower’s line of business expressly described in
this Agreement), with a full description thereof;
 
(b) promptly comply with any Laws requiring the removal, treatment or disposal
of Hazardous Materials or Hazardous Materials Contamination and provide the
Lender with satisfactory evidence of such compliance;
 
(c) provide the Lender, within thirty (30) days after a demand by the Lender,
with a bond, letter of credit or similar financial assurance evidencing to the
Lender’s satisfaction that the necessary funds are available to pay the cost of
removing, treating, and disposing of such Hazardous Materials or Hazardous
Materials Contamination and discharging any Lien which may be established as a
result thereof on any property owned, operated or controlled by any Borrower or
for which any Borrower is, or is claimed to be, responsible; and
 
(d) as part of the Obligations, defend, indemnify and hold harmless the Lender
and its agents, employees, trustees, successors and assigns from any and all
claims which may now or in the future (whether before or after the termination
of this Agreement) be asserted as a result of the presence of any Hazardous
Materials or any Hazardous Materials Contamination on any property owned,
operated or controlled by any Borrower or for which any Borrower is, or is
claimed to be, responsible. Each Borrower acknowledges and agrees that this
indemnification shall survive the termination of this Agreement and the
Commitments and the payment and performance of all of the other Obligations.
 
6.1.13 Disclosure of Significant Transactions.
 
Each of the Borrowers shall deliver to the Lender a written notice describing in
detail each transaction by it involving the purchase, sale, lease, or other
acquisition or loss or casualty to or disposition of an interest in Fixed or
Capital Assets which exceeds One Hundred Fifty Thousand Dollars ($150,000), said
notices to be delivered to the Lender within thirty (30) days of the occurrence
of each such transaction.
 
6.1.14 Financial Covenants.
 
(a) Total Funded Debt to EBITDA. The Borrowers, on a consolidated basis, will
not permit the ratio of Total Funded Debt to EBITDA, tested as of the last day
of each of the Borrowers’ fiscal quarters commencing January 31, 2007, for the
rolling four (4) quarter period then ending, to be greater than (i) 2.25 to 1.00
for the quarter ending January 31, 2007 and (ii) 2.00 to 1.00 for the quarter
ending April 30, 2007 and each quarter thereafter. 
 
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(b) Fixed Charge Coverage Ratio. The Borrowers will maintain, on a consolidated
basis and tested as of the last day of each of the Borrowers’ fiscal quarters
commencing January 31, 2007, and thereafter, for the rolling four (4) quarter
period then ending, a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00.
 
(c) Senior Funded Debt to EBITDA. The Borrowers, on a consolidated basis, will
not permit the ratio of Senior Funded Debt to EBITDA, tested as of the last day
of each of the Borrowers’ fiscal quarters commencing January 31, 2007, and
thereafter, for the rolling four (4) quarter period then ending, to be greater
than (i) 1.75 to 1.00 for the quarter ending January 31, 2007 and (ii) 1.50 to
1.00 for the quarter ending April 30, 2007 and each quarter thereafter.
 
6.1.15 Collection of Receivables.
 
Until the occurrence of a Default, the Borrowers and their Subsidiaries shall at
their own expense have the privilege for the account of, and in trust for, the
Lender of collecting their Receivables and receiving in respect thereto all
Items of Payment and shall otherwise completely service all of the Receivables
including (a) the billing, posting and maintaining of complete records
applicable thereto, (b) the taking of such action with respect to the
Receivables as the Lender may request or in the absence of such request, as each
of the Borrowers and each of the Subsidiaries may deem advisable; and (c) the
granting, in the ordinary course of business, to any Account Debtor, any rebate,
refund or adjustment to which the Account Debtor may be lawfully entitled, and
may accept, in connection therewith, the return of goods, the sale or lease of
which shall have given rise to a Receivable and may take such other actions
relating to the settling of any Account Debtor’s claim as may be commercially
reasonable. The Lender may, at its option, at any time or from time to time
after and during the continuance of an Event of Default hereunder, revoke the
collection privilege given in this Agreement to any one or more of the Borrowers
and each of the Subsidiaries by either giving notice of its assignment of, and
Lien on the Collateral to the Account Debtors or giving notice of such
revocation to the Borrowers. The Lender shall not have any duty to, and the
Borrowers hereby release the Lender from all claims of loss or damage caused by
the delay or failure to collect or enforce any of the Receivables or to preserve
any rights against any other party with an interest in the Collateral. The
Lender shall be entitled at any time and from time to time after written notice
to the Borrowers to confirm and verify Receivables.
 
6.1.16 Assignments of Receivables.
 
Each Borrower will promptly, upon request, execute and deliver to the Lender
written assignments, in form and content acceptable to the Lender, of specific
Receivables or groups of Receivables; provided, however, the Lien and/or
security interest granted to the Lender under this Agreement shall not be
limited in any way to or by the inclusion or exclusion of Receivables within
such assignments. Receivables so assigned shall secure payment of the
Obligations and are not sold to the Lender whether or not any assignment
thereof, which is separate from this Agreement, is in form absolute. The
Borrowers agree that neither any assignment to the Lender nor any other
provision contained in this Agreement or any of the other Financing Documents
shall impose on the Lender any obligation or liability of any of the Borrowers
with respect to that which is assigned and the Borrowers hereby agree jointly
and severally to indemnify the Lender and hold the Lender harmless from any and
all claims, actions, suits, losses, damages, costs, expenses, fees, obligations
and liabilities which may be incurred by or imposed upon the Lender by virtue of
the assignment of and Lien on any Borrower’s rights, title and interest in, to,
and under the Collateral.
 
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6.1.17 Government Accounts.
 
The Borrowers will immediately notify the Lender if any of the Receivables in
excess of One Hundred Thousand Dollars ($100,000) and having a remaining term in
excess of six (6) months arise out of contracts with the United States or with
any other Governmental Authority, and, as appropriate, execute any documents and
take any steps required by the Lender in order that all moneys due and to become
due under such contracts shall be assigned to the Lender and notice thereof
given to the Governmental Authority under the Federal Assignment of Claims Act
or any other applicable Laws.
 
6.1.18 Inventory.
 
With respect to the Inventory, the Borrowers and their Subsidiaries will: (a)
keep correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, the Borrowers’ and Subsidiaries’ cost
therefore and the selling price thereof, all of which records shall be available
to the officers, employees or agents of the Lender upon demand for inspection
and copying thereof; (b) not store any Inventory with a bailee, warehouseman or
similar Person without the Lender’s prior written consent, which consent may be
conditioned on, among other things, delivery by the bailee, warehouseman or
similar Person to the Lender of warehouse receipts, in form acceptable to the
Lender, in the name of the Lender evidencing the storage of Inventory and the
interests of the Lender therein; and (c) permit the Lender and its agents or
representatives to inspect and examine the Inventory and to check and test the
same as to quality, quantity, value and condition upon prior notice at any time
or times hereafter during the Borrowers’ and Subsidiaries’ usual business hours
or at other reasonable times. The Borrowers and their Subsidiaries shall be
permitted to sell their Inventory in the ordinary course of business until the
occurrence of an Event of Default.
 
6.1.19 Maintenance of the Collateral.
 
The Borrowers will maintain the Collateral in good working order, saving and
excepting ordinary wear and tear, and will not permit anything to be done to the
Collateral that may materially impair the value thereof. The Lender shall not
have any duty to, and the Borrowers hereby release the Lender from all claims of
loss or damage caused by the delay or failure to collect or enforce any of the
Receivables or to, preserve any rights against any other party with an interest
in the Collateral.
 
6.1.20 Equipment.
 
The Borrowers shall (a) maintain all Equipment as personalty, (b) not affix any
Equipment to any real estate in such manner as to become a fixture or part of
such real estate, and (c) shall hold no Equipment on a sale on approval basis.
The Borrowers hereby declare their intent that, notwithstanding the means of
attachment, no goods of the Borrowers hereafter attached to any realty shall be
deemed a fixture, which declaration shall be irrevocable, without the Lender’s
consent, until all of the Obligations have been paid in full and all of the
Commitments and Letters of Credit have been terminated or have expired.
 
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6.1.21 Defense of Title and Further Assurances.
 
At their expense, the Borrowers will defend the title to the Collateral (and any
part thereof), and will immediately execute, acknowledge and deliver any
renewal, affidavit, deed, assignment, security agreement, certificate or other
document which the Lender may require in order to perfect, preserve, maintain,
continue, protect and/or extend the Lien granted to the Lender under this
Agreement or under any of the other Financing Documents and the first priority
of that Lien, subject only to the Permitted Liens. The Borrowers hereby
authorize the filing of any financing statement or continuation statement
required under the Uniform Commercial Code. The Borrowers will from time to time
do whatever the Lender may require by way of obtaining, executing, delivering,
and/or filing landlords’ or mortgagees’ waivers, notices of assignment and other
notices and amendments and renewals thereof and the Borrowers will take any and
all steps and observe such formalities as the Lender may require, in order to
create and maintain a valid Lien upon, pledge of, or paramount security interest
in, the Collateral, subject to the Permitted Liens. The Borrowers shall pay to
the Lender on demand all taxes, costs and expenses incurred by the Lender in
connection with the preparation, execution, recording and filing of any such
document or instrument. To the extent that the proceeds of any of the Accounts
or Receivables of the Borrowers are expected to become subject to the control
of, or in the possession of, a party other than the Borrowers, the Borrowers
shall cause all such parties to execute and deliver on the Closing Date security
documents or other documents as requested by the Lender and as may be necessary
to evidence and/or perfect the security interest of the Lender in those
proceeds. Each Borrower hereby irrevocably appoints the Lender as the Borrower’s
attorney-in-fact, with power of substitution, in the name of the Lender or in
the name of the Borrower or otherwise, for the use and benefit of the Lender,
but at the cost and expense of the Borrowers and without notice to the
Borrowers, to execute and deliver any and all of the instruments and other
documents and take any action which the Lender may require pursuant the
foregoing provisions of this Section 6.1.21.
 
6.1.22 Business Names; Locations.
 
Each of the Borrowers will notify and cause each of their Subsidiaries to notify
the Lender not less than thirty (30) days prior to (a) any change in the name
under which the Borrower or the applicable Subsidiary conducts its business, (b)
any change of the location of the chief executive office of the applicable
Borrower or the applicable Subsidiary, and (c) the opening of any new place of
business or the closing of any existing place of business, and (d) any change in
the location of the places where the Collateral, or any part thereof, or the
books and records, or any part thereof, are kept.
 
6.1.23 Use of Premises and Equipment.
 
The Borrowers agree that until the Obligations are fully paid and all of the
Commitments and the Letters of Credit have been terminated or have expired, the
Lender (a) after and during the continuance of an Event of Default, may use any
of the Borrowers’ owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (b) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of the Borrowers’ owned or
leased property.
 
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6.1.24 Protection of Collateral.
 
The Borrowers agree that the Lender may at any time following an Event of
Default take such steps as the Lender deems reasonably necessary to protect the
interest of the Lender in, and to preserve the Collateral, including, the hiring
of such security guards or the placing of other security protection measures as
the Lender deems appropriate, may employ and maintain at any of the Borrowers’
premises a custodian who shall have full authority to do all acts necessary to
protect the interests of the Lender in the Collateral and may lease warehouse
facilities to which the Lender may move all or any part of the Collateral to the
extent commercially reasonable. The Borrowers agree to cooperate fully with the
Lender’s efforts to preserve the Collateral and will take such actions to
preserve the Collateral as the Lender may reasonably direct. All of the Lender’s
expenses of preserving the Collateral, including any reasonable expenses
relating to the compensation and bonding of a custodian, shall be part of the
Enforcement Costs.
 
6.1.25 Appraisals.
 
Whenever a Default or an Event of Default exists, the Borrowers shall, at their
expense, provide the Lender with appraisals or updates thereof of any or all of
the Collateral from an appraiser and in form in all respects satisfactory to the
Lender.
 
Section 6.2 Negative Covenants.
 
So long as any of the Obligations or the Commitments shall be outstanding
hereunder, the Borrowers agree with the Lender as follows:
 
6.2.1 Capital Structure, Merger, Acquisition or Sale of Assets.
 
None of the Borrowers will alter or amend its capital structure, authorize any
additional class of equity, issue any stock or equity of any class, enter into
any merger or consolidation or amalgamation, windup or dissolve itself (or
suffer any liquidation or dissolution) or acquire all or substantially all the
assets of any Person, or sell, lease or otherwise dispose of any of its assets
(except Inventory disposed of in the ordinary course of business prior to an
Event of Default), provided, that, not withstanding the foregoing, Argan may
grant stock options pursuant to a stock option plan approved by its Board of
Directors. Any consent of the Lender to the disposition of any assets may be
conditioned on a specified use of the proceeds of disposition. Notwithstanding
anything set forth in this Section to the contrary, the Lender agrees that it
will not unreasonably withhold its consent to one or more of the Borrowers
creating one or more wholly owned operating Subsidiaries (collectively, the
“Operating Subsidiary”) and transferring substantially all of its assets to the
Operating Subsidiary, provided, that at the time of such transfer and after
giving effect thereto, each of the following conditions is met: (a) no Default
or Event of Default has occurred and is continuing or would occur as a result of
such event; (b) the Lender shall have received and reviewed the pro forma
projections of the Borrowers (in form and detail satisfactory to the Lender in
its reasonable discretion) taking into effect the Operating Subsidiary, which
pro forma projections demonstrate the Borrowers’ continued compliance with all
of the material terms of this Agreement throughout the term hereof; (c) the
Lender shall have received a written summary of the revised capital structure of
the Borrowers and the Operating Subsidiary; (d) Argan shall own one hundred
percent (100%) of the outstanding stock of the Operating Subsidiary; (e) the
Lender shall have received copies of all organizational documents for the
Operating Subsidiary, including without limitation an incumbency certificate and
resolution; (f) the Borrowers shall at the Borrowers’ expense cause the
Operating Subsidiary to be added as a co-obligor on this Agreement and the
Financing Documents pursuant to an Additional Borrower Joinder Supplement and
deliver such additional Financing Documents, instruments, and opinions as the
Lender may reasonably require to cause all of the assets of the Operating
Subsidiary to be subject to a first Lien security interest in favor of the
Lender.
 
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6.2.2 Subsidiaries.
 
None of the Borrowers will create or acquire any Subsidiaries other than the
Subsidiaries identified on the Collateral Disclosure List, without the prior
written consent of the Lender.
 
6.2.3 Issuance of Stock.
 
Except as set forth on Schedule 6.2.3 attached hereto, none of the Borrowers
will issue, or grant any option or right to purchase, any of its capital stock.
 
6.2.4 Purchase or Redemption of Securities, Dividend Restrictions.
 
None of the Borrowers will purchase, redeem or otherwise acquire any shares of
its capital stock or warrants now or hereafter outstanding, declare or pay any
dividends thereon (other than stock dividends), apply any of its property or
assets to the purchase, redemption or other retirement of, set apart any sum for
the payment of any dividends on, or for the purchase, redemption, or other
retirement of, make any distribution by reduction of capital or otherwise in
respect of, any shares of any class of capital stock of any Borrower, or any
warrants, permit any Subsidiary to purchase or acquire any shares of any class
of capital stock of, or warrants issued by, any Borrower, make any distribution
to stockholders or set aside any funds for any such purpose, and not prepay,
purchase or redeem any Indebtedness for Borrowed Money other than the
Obligations (collectively, “Restricted Payments”), except that, so long as at
the time and after giving effect to any Restricted Payment, no Default shall
have occurred or would result therefrom, each of SMC, Vitarich, GPS, GP, GPSC
and GPH may make Restricted Payments to Argan.
 
6.2.5 Indebtedness.
 
None of the Borrowers will create, incur, assume or suffer to exist any
Indebtedness for Borrowed Money or permit any Subsidiary to do so, except:
 
(a) the Obligations;
 
(b) current accounts payable arising in the ordinary course;
 
(c) Indebtedness secured by Permitted Liens;
 
(d) Subordinated Indebtedness;
 
(e) Indebtedness resulting from endorsement of negotiable instruments for
collection in the ordinary course of business;
 
(f) Indebtedness of the Borrowers existing on the date hereof and reflected on
the financial statements furnished pursuant to Section 4.1.11 (Financial
Condition);
 
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(g) Assumed Indebtedness of the Acquired Companies incurred pursuant to the
Acquisition and Indebtedness of the Acquired Companies incurred after the
Closing Date in the ordinary course of business, in each such case, owed to
Travelers; and
 
(h) Any extensions, renewals or replacements of Indebtedness described in
clauses (c) and (e) above, which do not increase the amount of such
Indebtedness.
 
6.2.6 Investments, Loans and Other Transactions.
 
Except as otherwise provided in this Agreement, none of the Borrowers will, or
will permit any of its Subsidiaries to, (a) make, assume, acquire or continue to
hold any investment in any real property (unless used in connection with its
business and treated as a Fixed or Capital Asset of any Borrower or any
Subsidiary) or any Person, whether by stock purchase, capital contribution,
acquisition of indebtedness of such Person or otherwise (including, without
limitation, investments in any joint venture or partnership), (b) guaranty or
otherwise become contingently liable for the Indebtedness or obligations of any
Person, or (c) make any loans or advances, or otherwise extend credit to any
Person, except:
 
(i) any loan or advance to an officer or employee of any Borrower or any
Subsidiary, provided that the aggregate amount of all such loans advances by all
of the Borrowers and their Subsidiaries (taken as a whole) outstanding at any
time shall not exceed Twenty Five Thousand Dollars ($25,000);
 
(ii) the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
 
(iii) any investment in Cash Equivalents, which are pledged to the Lender as
collateral and security for the Obligations;
 
(iv) trade credit extended to customers in the ordinary course of business;
 
(v) investments of the Acquired Companies held in investment accounts, as set
forth in detail and disclosed on the Schedule 2.1.5 attached hereto; and
 
(vi) investments in the Acquired Companies under the Acquisition Documentation.
 
6.2.7 Stock of Subsidiaries.
 
None of the Borrowers will sell or otherwise dispose of any shares of capital
stock of any Subsidiary (except in connection with a merger or consolidation of
a Wholly Owned Subsidiary into any of the Borrowers or another Wholly Owned
Subsidiary of any of the Borrowers or with the dissolution of any Subsidiary) or
permit any Subsidiary to issue any additional shares of its capital stock except
pro rata to its stockholders.
 
6.2.8 Subordinated Indebtedness.
 
None of the Borrowers will, nor will permit any Subsidiary to make:
 
(a) any payment of principal of, or interest on, any of the Subordinated
Indebtedness, if a Default or an Event of Default then exists hereunder or would
result from such payment;
 
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(b) any payment of the principal or interest due on the Subordinated
Indebtedness as a result of acceleration thereunder or a mandatory prepayment
thereunder;
 
(c) any amendment or modification of or supplement to the documents evidencing
or securing the Subordinated Indebtedness; or
 
(d) payment of principal or interest on the Subordinated Indebtedness other than
when due (without giving effect to any acceleration of maturity or mandatory
prepayment).
 
6.2.9 Liens; Confessed Judgment.
 
Each Borrower agrees that it (a) will not create, incur, assume or suffer to
exist any Lien upon any of its properties or assets, whether now owned or
hereafter acquired, or permit any Subsidiary so to do, except for Liens securing
the Obligations and Permitted Liens, (b) will not agree to, assume or suffer to
exist any provision in any instrument or other document for confession of
judgment, cognovit or other similar right or remedy, (c) will not enter into any
contracts for the consignment of goods, will not execute or suffer the filing of
any financing statements or the posting of any signs giving notice of
consignments, and will not, as a material part of its business, engage in the
sale of goods belonging to others, and (d) will not allow or suffer to exist the
failure of any Lien described in the Security Documents to attach to, and/or
remain at all times perfected on, any of the property described in the Security
Documents.
 
6.2.10 Transactions with Affiliates.
 
None of the Borrowers nor any of their Subsidiaries will enter into or
participate in any transaction with any Affiliate other than transactions in the
ordinary course of business on fair and reasonable terms no less favorable to
the Borrowers than would be obtained in a comparable arm’s length transaction
with a Person not an Affiliate, with the officers, directors, employees and
other representatives of any Borrower and/or any Subsidiary.
 
6.2.11 Other Businesses.
 
None of the Borrowers nor any of their Subsidiaries will engage directly or
indirectly in any business other than its current line of business described
elsewhere in this Agreement.
 
6.2.12 ERISA Compliance.
 
None of the Borrowers nor any Commonly Controlled Entity shall: (a) engage in or
permit any “prohibited transaction” (as defined in ERISA); (b) cause any
“accumulated funding deficiency” as defined in ERISA and/or the Internal Revenue
Code; (c) terminate any pension plan in a manner which could result in the
imposition of a lien on the property of any Borrower pursuant to ERISA; (d)
terminate or consent to the termination of any Multi-employer Plan; or (e) incur
a complete or partial withdrawal with respect to any Multi-employer Plan.
 
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6.2.13 Prohibition on Hazardous Materials.
 
None of the Borrowers shall place, manufacture or store or permit to be placed,
manufactured or stored any Hazardous Materials on any property owned, operated
or controlled by any Borrower or for which any Borrower is responsible other
than Hazardous Materials placed or stored on such property in accordance with
applicable Laws in the ordinary course of a Borrower’s business expressly
described in this Agreement.
 
6.2.14 Method of Accounting; Fiscal Year.
 
Each Borrower agrees that:
 
(a) it shall not change the method of accounting employed in the preparation of
any financial statements furnished to the Lender under the provisions of
Section 6.1.1 (Financial Statements), unless required to conform to GAAP and on
the condition that the Borrowers’ accountants shall furnish such information as
the Lender may request to reconcile the changes with the Borrowers’ prior
financial statements
 
(b) it will not change its fiscal year from a year ending on January 31.
 
6.2.15 Compensation.
 
None of the Borrowers nor any Subsidiary will pay any bonuses, fees,
compensation, commissions, salaries, drawing accounts, or other payments (cash
and non-cash), whether direct or indirect, to any stockholders, Subsidiary, or
any Affiliate, other than reasonable compensation (including bonuses) for actual
services rendered by stockholders in their capacity as officers or employees of
each Borrower or Subsidiary.
 
6.2.16 Transfer of Collateral.
 
Except as set forth on Schedule 6.2.16, none of the Borrowers nor any of their
Subsidiaries will transfer, or permit the transfer, of the Collateral or the
books and records related to any of the Collateral to a location not disclosed
on the Collateral Disclosure List, except for “mobile goods” and vehicles being
operated in the ordinary course of business.
 
6.2.17 Sale and Leaseback.
 
None of the Borrowers nor any of their Subsidiaries will directly or indirectly
enter into any arrangement to sell or transfer all or any substantial part of
its fixed assets and thereupon or within one (1) year thereafter rent or lease
the assets so sold or transferred.
 
6.2.18 Disposition of Collateral.
 
None of the Borrowers will sell, discount, allow credits or allowances,
transfer, assign, extend the time for payment on, convey, lease, assign,
transfer or otherwise dispose of the Collateral, except, prior to an Event of
Default, dispositions expressly permitted elsewhere in this Agreement, the sale
of Inventory in the ordinary course of business, and the sale of unnecessary or
obsolete Equipment.
 
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6.2.19 Interest Rate Protection Agreements. 
 
On or prior to the date upon which the Lender makes the 2006 Term Loan and the
Acquisition Term Loan, the Borrowers will obtain and at all times thereafter
maintain in full force and effect one or more Interest Rate Protection
Agreements with the Lender (and/or with a bank or other financial institution
having capital, surplus and undivided profits of at least Five Hundred Million
Dollars ($500,000,000), which effectively enables Borrowers (in a manner
satisfactory to the Lender), as of any date, to protect themselves against
fluctuations of interest rates as to a notional principal amount at least equal
to (i) Seventy-Five Percent (75%) of the original principal amount of the 2006
Term Loan and (ii) Fifty Percent (50%) of the original principal amount of the
Acquisition Term Loan; provided, however, that the Interest Rate Protection
Agreement with respect to the Acquisition Term Loan shall only be required to be
maintained for a period of thirty-six (36) months from the Closing Date. The
Borrowers will not enter into or permit to exist or acquire any Interest Rate
Protection Agreement except in the ordinary course of business to mitigate
fluctuations of interest rates in respect of outstanding Indebtedness.
 
6.2.20 Amendments to Acquisition Documents
 
(a) Amend, supplement or otherwise modify (pursuant to a waiver or otherwise)
the terms and conditions of the indemnities and licenses furnished to the
Borrowers or any of its Subsidiaries pursuant to the Acquisition Documentation
or any other document delivered in connection therewith such that after giving
effect thereto such indemnities or licenses shall, in the reasonable
determination of the Lender, be materially less favorable to the interests of
the Borrowers or the Lender with respect thereto or (b) otherwise amend,
supplement or otherwise modify the terms and conditions of the Acquisition
Documentation or any such other documents except for any such amendment,
supplement or modification that (i) becomes effective after the Closing Date and
(ii) could not reasonably be expected to have a material adverse effect.
 
6.2.21 Bonded Contracts
 
Each of Argan, SMC and Vitarich and any Subsidiary, now or hereinafter created,
owned or acquired, other than the Acquired Companies, agrees that it will not
purchase or hold goods purchased for use in a project that is the subject of any
Bonded Contract, including, inventory, materials, supplies, tools, plant and
equipment purchased for, installed in, used or acquired for use in the
performance of any such Bonded Contracts and any related subcontracts.
 
ARTICLE VII
DEFAULT AND RIGHTS AND REMEDIES
 
Section 7.1 Events of Default.
 
The occurrence of any one or more of the following events shall constitute an
“Event of Default” under the provisions of this Agreement:
 
7.1.1 Failure to Pay.

The failure of the Borrowers to pay any of the Obligations within five (5) days
of when due and payable in accordance with the provisions of this Agreement, the
Notes and/or any of the other Financing Documents.
 
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7.1.2 Breach of Representations and Warranties.
 
Any representation or warranty made in this Agreement or in any report,
statement, schedule, certificate, opinion (including any opinion of counsel for
the Borrowers), financial statement or other document furnished in connection
with this Agreement, any of the other Financing Documents, or the Obligations,
shall prove to have been false or misleading when made (or, if applicable, when
reaffirmed) in any material respect, provided, however, if any representation or
warranty referred to in this Section 7.1.2, made solely with respect to any
Acquisition Company, shall prove to have been false or misleading when made in
any material respect, so long as no Default shall have occurred or be continuing
hereunder (irrespective of such events referred to in this Section 7.1.2
immediately preceding this proviso), the Borrowers shall not be in breach of
this Section 7.1.2, if such misrepresentation or false warranty could not
reasonably be expected to have a material adverse effect on (i) the ability of
the Borrowers to perform the Obligations, (ii) the conduct of the Borrowers’
operations, (iii) the Borrowers’ consolidated financial condition, or (iii) the
value of, or the ability of the Lender to realize upon, the Collateral.
 
7.1.3 Failure to Comply with Covenants.
 
Default shall be made by the Borrower in the due observance and performance of
any covenant, condition or agreement contained in Sections 6.1.1 or 6.1.14
hereof or in Section 6.2 hereof.
 
7.1.4 Other Defaults. 
 
Default shall be made by the Borrower in the due observance or performance of
any other term, covenant or agreement herein contained (other than as set forth
in Section 7.1.3 above), which default shall remain unremedied for thirty (30)
days after written notice thereof to the Borrower by the Lender.
 
7.1.5 Default Under Other Financing Documents or Obligations.
 
A default shall occur under any of the other Financing Documents or under any
other Obligations, and such default is not cured within any applicable grace
period provided therein.
 
7.1.6 Receiver; Bankruptcy.
 
Any Borrower or any Subsidiary shall (a) apply for or consent to the appointment
of a receiver, trustee or liquidator of itself or any of its property, (b) admit
in writing its inability to pay its debts as they mature, (c) make a general
assignment for the benefit of creditors, (d) be adjudicated a bankrupt or
insolvent, (e) file a voluntary petition in bankruptcy or a petition or an
answer seeking or consenting to reorganization or an arrangement with creditors
or to take advantage of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution or liquidation law or statute, or an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, or take corporate action for the purposes of effecting any of the
foregoing, (f) by any act indicate its consent to, approval of or acquiescence
in any such proceeding or the appointment of any receiver of or trustee for any
of its property, or suffer any such receivership, trusteeship or proceeding to
continue undischarged for a period of sixty (60) days, or (g) by any act
indicate its consent to, approval of or acquiescence in any order, judgment or
decree by any court of competent jurisdiction or any Governmental Authority
enjoining or otherwise prohibiting the operation of a material portion of any
Borrower’s or any Subsidiary’s business or the use or disposition of a material
portion of any Borrower’s or any Subsidiary’s assets.
 
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7.1.7 Involuntary Bankruptcy, etc.
 
(a) An order for relief shall be entered in any involuntary case brought against
any Borrower or any Subsidiary under the Bankruptcy Code, or (b) any such case
shall be commenced against any Borrower or any Subsidiary and shall not be
dismissed within sixty (60) days after the filing of the petition, or (c) an
order, judgment or decree under any other Law is entered by any court of
competent jurisdiction or by any other Governmental Authority on the application
of a Governmental Authority or of a Person other than any Borrower or any
Subsidiary (i) adjudicating any Borrower, or any Subsidiary bankrupt or
insolvent, or (ii) appointing a receiver, trustee or liquidator of any Borrower
or of any Subsidiary, or of a material portion of any Borrower’s or any
Subsidiary’s assets, or (iii) enjoining, prohibiting or otherwise limiting the
operation of a material portion of any Borrower’s or any Subsidiary’s business
or the use or disposition of a material portion of any Borrower’s or any
Subsidiary’s assets, and such order, judgment or decree continues unstayed and
in effect for a period of thirty (30) days from the date entered.
 
7.1.8 Judgment.
 
Unless adequately insured in the opinion of the Lender, the entry of a final
judgment for the payment of money involving more than One Hundred Thousand
Dollars ($100,000) against any Borrower or any Subsidiary, and the failure by
such Borrower or such Subsidiary to discharge the same, or cause it to be
discharged, within thirty (30) days from the date of the order, decree or
process under which or pursuant to which such judgment was entered, or to secure
a stay of execution pending appeal of such judgment.
 
7.1.9 Execution; Attachment.
 
Any execution or attachment shall be levied against the Collateral, or any part
thereof, and such execution or attachment shall not be set aside, discharged or
stayed within thirty (30) days after the same shall have been levied.
 
7.1.10 Default Under Other Borrowings.
 
Default shall be made with respect to any Indebtedness for Borrowed Money of any
of the Borrowers (other than the Loans) if the default is a failure to pay at
maturity or if the effect of such default is to accelerate the maturity of such
Indebtedness for Borrowed Money or to permit the holder or obligee thereof or
other party thereto to cause such Indebtedness for Borrowed Money to become due
prior to its stated maturity.
 
7.1.11 Challenge to Agreements.
 
Any Borrower shall challenge the validity and binding effect of any provision of
any of the Financing Documents or shall state its intention to make such a
challenge of any of the Financing Documents or any of the Financing Documents
shall for any reason (except to the extent permitted by its express terms) cease
to be effective or to create a valid and perfected first priority Lien (except
for Permitted Liens) on, or security interest in, any of the Collateral
purported to be covered thereby.
 
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7.1.12 Material Adverse Change.
 
The Lender, in its sole discretion, determines in good faith that a material
adverse change has occurred in the financial condition of any of the Borrowers.
 
7.1.13 Impairment of Position.
 
The Lender, in its sole discretion, determines in good faith that an event has
occurred which impairs in any material respect the prospect of payment of any of
the Obligations and/or the value of the Collateral.
 
7.1.14 Liquidation, Termination, Dissolution, Change in Responsible Officers.
 
Any Borrower shall liquidate, dissolve or terminate its existence or shall
suspend or terminate a substantial portion of its business operations or if
Rainer Bosselmann or Arthur Trudel at any time cease to be actively involved in
the daily management of any Borrower without the prior written consent of the
Lender.
 
7.1.15 Swap Default.
 
An event occurs which gives the Lender the right or option to terminate any Swap
Contract which is secured by the Collateral.
 
7.1.16 Travelers Default.
 
Any Borrower shall receive from Travelers any notice of the occurrence of a
default under the Travelers Letter Agreement.
 
Section 7.2 Remedies.
 
Upon the occurrence of any Event of Default, the Lender may, in the exercise of
its sole and absolute discretion from time to time, at any time thereafter
exercise any one or more of the following rights, powers or remedies:
 
7.2.1 Acceleration.
 
The Lender may declare any or all of the Obligations to be immediately due and
payable, notwithstanding anything contained in this Agreement or in any of the
other Financing Documents to the contrary, without presentment, demand, protest,
notice of protest or of dishonor, or other notice of any kind, all of which the
Borrowers hereby waive.
 
7.2.2 Further Advances.
 
The Lender may from time to time without notice to the Borrowers suspend,
terminate or limit any further advances, loans or other extensions of credit
under the Commitments, under this Agreement and/or under any of the other
Financing Documents. Further, upon the occurrence of an Event of Default or
Default specified in Section 7.1.6 (Receiver; Bankruptcy) or Section 7.1.7
(Involuntary Bankruptcy, etc.), the Revolving Credit Commitment and any
agreement in any of the Financing Documents to provide additional credit and/or
to issue Letters of Credit shall immediately and automatically terminate and the
unpaid principal amount of the Notes (with accrued interest thereon) and all
other Obligations then outstanding, shall immediately become due and payable
without further action of any kind and without presentment, demand, protest or
notice of any kind, all of which are hereby expressly waived by the Borrowers.
 
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7.2.3 Uniform Commercial Code.
 
The Lender shall have all of the rights and remedies of a secured party under
the applicable Uniform Commercial Code and other applicable Laws. Upon demand by
the Lender, the Borrowers shall assemble the Collateral and make it available to
the Lender, at a place designated by the Lender. The Lender or its agents may
without notice from time to time enter upon any Borrower’s premises to take
possession of the Collateral, to remove it, to render it unusable, to process it
or otherwise prepare it for sale, or to sell or otherwise dispose of it.
 
Any written notice of the sale, disposition or other intended action by the
Lender with respect to the Collateral which is sent by regular mail, postage
prepaid, to the Borrowers at the address set forth in Section 8.1 (Notices), or
such other address of the Borrowers which may from time to time be shown on the
Lender’s records, at least ten (10) days prior to such sale, disposition or
other action, shall constitute commercially reasonable notice to the Borrowers.
The Lender may alternatively or additionally give such notice in any other
commercially reasonable manner. Nothing in this Agreement shall require the
Lender to give any notice not required by applicable Laws.
 
If any consent, approval, or authorization of any state, municipal or other
Governmental Authority or of any other Person or of any Person having any
interest therein, should be necessary to effectuate any sale or other
disposition of the Collateral, the Borrowers agree to execute all such
applications and other instruments, and to take all other action, as may be
required in connection with securing any such consent, approval or
authorization.
 
The Borrowers recognize that the Lender may be unable to effect a public sale of
all or a part of the Collateral consisting of Investment Property by reason of
certain prohibitions contained in the Securities Act of 1933, as amended, and
other applicable Federal and state Laws. The Lender may, therefore, in its
discretion, take such steps as it may deem appropriate to comply with such Laws
and may, for example, at any sale of the Collateral consisting of securities
restrict the prospective bidders or purchasers as to their number, nature of
business and investment intention, including, without limitation, a requirement
that the Persons making such purchases represent and agree to the satisfaction
of the Lender that they are purchasing such securities for their account, for
investment, and not with a view to the distribution or resale of any thereof.
The Borrowers covenant and agree to do or cause to be done promptly all such
acts and things as the Lender may request from time to time and as may be
necessary to offer and/or sell the securities or any part thereof in a manner
which is valid and binding and in conformance with all applicable Laws. Upon any
such sale or disposition, the Lender shall have the right to deliver, assign and
transfer to the purchaser thereof the Collateral consisting of securities so
sold.
 
7.2.4 Specific Rights With Regard to Collateral.
 
In addition to all other rights and remedies provided hereunder or as shall
exist at law or in equity from time to time, the Lender may (but shall be under
no obligation to), at any time after the occurrence of an Event of Default,
without notice to any of the Borrowers, and each Borrower hereby irrevocably
appoints the Lender as its attorney-in-fact, with power of substitution, in the
name of the Lender and/or in the name of any or all of the Borrowers or
otherwise, for the use and benefit of the Lender, but at the cost and expense of
the Borrowers and without notice to the Borrowers:
 
(a) request any Account Debtor obligated on any of the Accounts to make payments
thereon directly to the Lender, with the Lender taking control of the Proceeds
thereof;
 
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(b) compromise, extend or renew any of the Collateral or deal with the same as
it may deem advisable;
 
(c) make exchanges, substitutions or surrenders of all or any part of the
Collateral;
 
(d) copy, transcribe, or remove from any place of business of any Borrower or
any Subsidiary all books, records, ledger sheets, correspondence, invoices and
documents, relating to or evidencing any of the Collateral or without cost or
expense to the Lender, make such use of any Borrower’s or any Subsidiary’s
place(s) of business as may be reasonably necessary to administer, control and
collect the Collateral;
 
(e) repair, alter or supply goods if necessary to fulfill in whole or in part
the purchase order of any Account Debtor;
 
(f) demand, collect, receipt for and give renewals, extensions, discharges and
releases of any of the Collateral;
 
(g) institute and prosecute legal and equitable proceedings to enforce
collection of, or realize upon, any of the Collateral;
 
(h) settle, renew, extend, compromise, compound, exchange or adjust claims in
respect of any of the Collateral or any legal proceedings brought in respect
thereof;
 
(i) endorse or sign the name of any Borrower upon any Items of Payment,
certificates of title, Instruments, Investment Property, stock powers,
documents, documents of title, financing statements, assignments, notices or
other writing relating to or part of the Collateral and on any proof of claim in
bankruptcy against an Account Debtor;
 
(j) notify the Post Office authorities to change the address for the delivery of
mail to the Borrowers to such address or Post Office Box as the Lender may
designate and receive and open all mail addressed to any of the Borrowers; and
 
(k) take any other action necessary or beneficial to realize upon or dispose of
the Collateral or to carry out the terms of this Agreement.
 
7.2.5 Application of Proceeds.
 
Any proceeds of sale or other disposition of the Collateral will be applied by
the Lender to the payment first of any and all Enforcement Costs, and any
balance of such proceeds will be applied to the Obligations in such order and
manner as the Lender shall determine. If the sale or other disposition of the
Collateral fails to fully satisfy the Obligations, the Borrowers shall remain
liable to the Lender for any deficiency.
 
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7.2.6 Performance by Lender.
 
The Lender without notice to or demand upon the Borrowers and without waiving or
releasing any of the Obligations or any Default or Event of Default, may (but
shall be under no obligation to) at any time after any Default or Event of
Default make such payment or perform such act for the account and at the expense
of the Borrowers, and may enter upon the premises of the Borrowers for that
purpose and take all such action thereon as the Lender may consider necessary or
appropriate for such purpose and each of the Borrowers hereby irrevocably
appoints the Lender as its attorney-in-fact to do so, with power of
substitution, in the name of the Lender, in the name of any or all of the
Borrowers or otherwise, for the use and benefit of the Lender, but at the cost
and expense of the Borrowers and without notice to the Borrowers. All sums so
paid or advanced by the Lender together with interest thereon from the date of
payment, advance or incurring until paid in full at the Post-Default Rate and
all costs and expenses, shall be deemed part of the Enforcement Costs, shall be
paid by the Borrowers to the Lender on demand, and shall constitute and become a
part of the Obligations.
 
7.2.7 Other Remedies.
 
The Lender may from time to time proceed to protect or enforce its rights by an
action or actions at law or in equity or by any other appropriate proceeding,
whether for the specific performance of any of the covenants contained in this
Agreement or in any of the other Financing Documents, or for an injunction
against the violation of any of the terms of this Agreement or any of the other
Financing Documents, or in aid of the exercise or execution of any right, remedy
or power granted in this Agreement, the Financing Documents, and/or applicable
Laws. The Lender is authorized to offset and apply to all or any part of the
Obligations all moneys, credits and other property of any nature whatsoever of
any or all of the Borrowers now or at any time hereafter in the possession of,
in transit to or from, under the control or custody of, or on deposit with, the
Lender or any Affiliate of the Lender.
 
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ARTICLE VIII
MISCELLANEOUS
 
Section 8.1 Notices.
 
All notices, requests and demands to or upon the parties to this Agreement shall
be in writing and shall be deemed to have been given or made when delivered by
hand on a Business Day, or two (2) days after the date when deposited in the
mail, postage prepaid by registered or certified mail, return receipt requested,
or when sent by overnight courier, on the Business Day next following the day on
which the notice is delivered to such overnight courier, addressed as follows:
 
Borrowers:
Argan Inc.
 
One Church Street, Suite 302
 
Rockville, Maryland 20850
 
Attention: Arthur F. Trudel
 
Chief Financial Officer
   
with a copy to:
Robinson & Cole LLP
 
280 Trumbull Street
 
Harford, CT 06103
 
Attention: Eileen P. Baldwin, Esq.
   
Lender:
Bank of America, N.A.
 
1101 Wootton Parkway, 4th Floor
 
Rockville, Maryland 20852
 
Attention: Michael J. Radcliffe, SVP
   
with a copy to:
Troutman Sanders LLP
 
1660 International Drive, Suite 600
 
McLean, Virginia 22102
 
Attention: Richard M. Pollak, Esq.

 
By written notice, each party to this Agreement may change the address to which
notice is given to that party, provided that such changed notice shall include a
street address to which notices may be delivered by overnight courier in the
ordinary course on any Business Day.
 
Section 8.2 Amendments; Waivers.
 
This Agreement and the other Financing Documents may not be amended, modified,
or changed in any respect except by an agreement in writing signed by the Lender
and the Borrowers. No waiver of any provision of this Agreement or of any of the
other Financing Documents, nor consent to any departure by the Borrowers
therefrom, shall in any event be effective unless the same shall be in writing
signed by the Lender. No course of dealing between the Borrowers and the Lender
and no act or failure to act from time to time on the part of the Lender shall
constitute a waiver, amendment or modification of any provision of this
Agreement or any of the other Financing Documents or any right or remedy under
this Agreement, under any of the other Financing Documents or under applicable
Laws.
 
Without implying any limitation on the foregoing:
 
(a) Any waiver or consent shall be effective only in the specific instance, for
the terms and purpose for which given, subject to such conditions as the Lender
may specify in any such instrument.
 
(b) No waiver of any Default or Event of Default shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereto.
 
(c) No notice to or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in the same, similar or other
circumstance.
 
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(d) No failure or delay by the Lender to insist upon the strict performance of
any term, condition, covenant or agreement of this Agreement or of any of the
other Financing Documents, or to exercise any right, power or remedy consequent
upon a breach thereof, shall constitute a waiver, amendment or modification of
any such term, condition, covenant or agreement or of any such breach or
preclude the Lender from exercising any such right, power or remedy at any time
or times.
 
(e) By accepting payment after the due date of any amount payable under this
Agreement or under any of the other Financing Documents, the Lender shall not be
deemed to waive the right either to require prompt payment when due of all other
amounts payable under this Agreement or under any of the other Financing
Documents, or to declare a default for failure to effect such prompt payment of
any such other amount.
 
Section 8.3 Cumulative Remedies.
 
The rights, powers and remedies provided in this Agreement and in the other
Financing Documents are cumulative, may be exercised concurrently or separately,
may be exercised from time to time and in such order as the Lender shall
determine, subject to the provisions of this Agreement, and are in addition to,
and not exclusive of, rights, powers and remedies provided by existing or future
applicable Laws. In order to entitle the Lender to exercise any remedy reserved
to it in this Agreement, it shall not be necessary to give any notice, other
than such notice as may be expressly required in this Agreement. Without
limiting the generality of the foregoing and subject to the terms of this
Agreement, the Lender may:
 
(a) proceed against any one or more of the Borrowers with or without proceeding
against any other Person (who may be liable (by endorsement, guaranty, indemnity
or otherwise) for all or any part of the Obligations;
 
(b) proceed against any one or more of the Borrowers with or without proceeding
under any of the other Financing Documents or against any Collateral or other
collateral and security for all or any part of the Obligations;
 
(c) without reducing or impairing the obligation of the Borrowers and without
notice, release or compromise with any guarantor or other Person liable for all
or any part of the Obligations under the Financing Documents or otherwise;
 
(d) without reducing or impairing the obligations of the Borrowers and without
notice thereof:
 
(i) fail to perfect the Lien in any or all Collateral or to release any or all
the Collateral or to accept substitute Collateral;
 
(ii) approve the making of advances under the Revolving Loan under this
Agreement;
 
(iii) waive any provision of this Agreement or the other Financing Documents;
 
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(iv) exercise or fail to exercise rights of set-off or other rights; or
 
(v) accept partial payments or extend from time to time the maturity of all or
any part of the Obligations.
 
Section 8.4 Severability.
 
In case one or more provisions, or part thereof, contained in this Agreement or
in the other Financing Documents shall be invalid, illegal or unenforceable in
any respect under any Law, then without need for any further agreement, notice
or action:
 
(a) the validity, legality and enforceability of the remaining provisions shall
remain effective and binding on the parties thereto and shall not be affected or
impaired thereby;
 
(b) the obligation to be fulfilled shall be reduced to the limit of such
validity;
 
(c) if such provision or part thereof pertains to repayment of the Obligations,
then, at the sole and absolute discretion of the Lender, all of the Obligations
of the Borrowers to the Lender shall become immediately due and payable; and
 
(d) if the affected provision or part thereof does not pertain to repayment of
the Obligations, but operates or would prospectively operate to invalidate this
Agreement in whole or in part, then such provision or part thereof only shall be
void, and the remainder of this Agreement shall remain operative and in full
force and effect.
 
Section 8.5 Assignments by Lender.
 
The Lender may, without notice to or consent of the Borrowers, assign to any
Person (each an “Assignee” and collectively, the “Assignees”) all or a portion
of the Lender’s Commitments. The Lender and its Assignee shall notify the
Borrowers in writing of the date on which the assignment is to be effective (the
“Adjustment Date”). On or before the Adjustment Date, the Lender, the Borrowers
and the Assignee shall execute and deliver a written assignment agreement in a
form acceptable to the Lender, which shall constitute an amendment to this
Agreement to the extent necessary to reflect such assignment. Upon the request
of the Lender following an assignment made in accordance with this Section 8.5,
the Borrowers shall issue new Notes to the Lender and its Assignee reflecting
such assignment, in exchange for the existing Notes held by the Lender, provided
the Lender shall have used good faith efforts to obtain a confidentiality
agreement from any such Assignee.
 
In addition, notwithstanding the foregoing, the Lender may at any time pledge
all or any portion of the Lender’s rights under this Agreement, any of the
Commitments or any of the Obligations to a Federal Reserve Bank.
 
Section 8.6 Participations by Lender.
 
The Lender may at any time sell to one or more financial institutions
participating interests in any of the Lender’s Obligations or Commitments;
provided, however, that (a) no such participation shall relieve the Lender from
its obligations under this Agreement or under any of the other Financing
Documents to which it is a party, (b) the Lender shall remain solely responsible
for the performance of its obligations under this Agreement and under all of the
other Financing Documents to which it is a party, and (c) the Borrowers shall
continue to deal solely and directly with the Lender in connection with the
Lender’s rights and obligations under this Agreement and the other Financing
Documents.
 
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Section 8.7 Disclosure of Information by Lender.
 
In connection with any sale, transfer, assignment or participation by the Lender
in accordance with Section 8.5 (Assignments by Lender) or Section 8.6
(Participations by Lender), the Lender shall have the right to disclose to any
actual or potential purchaser, assignee, transferee or participant all financial
records, information, reports, financial statements and documents obtained in
connection with this Agreement and/or any of the other Financing Documents or
otherwise.
 
Section 8.8 Successors and Assigns.
 
This Agreement and all other Financing Documents shall be binding upon and inure
to the benefit of the Borrowers and the Lender and their respective successors
and assigns, except that the Borrowers shall not have the right to assign their
rights hereunder or any interest herein without the prior written consent of the
Lender.
 
Section 8.9 Continuing Agreements.
 
All covenants, agreements, representations and warranties made by the Borrowers
in this Agreement, in any of the other Financing Documents, and in any
certificate delivered pursuant hereto or thereto shall survive the making by the
Lender of the Loans, the issuance of Letters of Credit and the execution and
delivery of the Notes, shall be binding upon the Borrowers regardless of how
long before or after the date hereof any of the Obligations were or are
incurred, and shall continue in full force and effect so long as any of the
Obligations are outstanding and unpaid. From time to time upon the Lender’s
request, and as a condition of the release of any one or more of the Security
Documents, the Borrowers and other Persons obligated with respect to the
Obligations shall provide the Lender with such acknowledgments and agreements as
the Lender may require to the effect that there exists no defenses, rights of
setoff or recoupment, claims, counterclaims, actions or causes of action of any
kind or nature whatsoever against the Lender and/or any of its agents and
others, or to the extent there are, the same are waived and released.
 
Section 8.10 Enforcement Costs.
 
The Borrowers agree to pay to the Lender on demand all Enforcement Costs,
together with interest thereon from the date incurred or advanced until paid in
full at a per annum rate of interest equal at all times to the Post-Default
Rate. Enforcement Costs shall be immediately due and payable at the time
advanced or incurred, whichever is earlier. Without implying any limitation on
the foregoing, the Borrowers agree, as part of the Enforcement Costs, to pay
upon demand any and all stamp and other Taxes and fees payable or determined to
be payable in connection with the execution and delivery of this Agreement and
the other Financing Documents and to save the Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay any Taxes or fees referred to in this Section. The provisions of
this Section shall survive the execution and delivery of this Agreement, the
repayment of the other Obligations and shall survive the termination of this
Agreement.
 
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Section 8.11 Applicable Law; Jurisdiction.
 
8.11.1 Applicable Law.
 
Borrowers acknowledge and agree that the Financing Documents, including, this
Agreement, shall be governed by the Laws of the State, as if each of the
Financing Documents and this Agreement had each been executed, delivered,
administered and performed solely within the State even though for the
convenience and at the request of the Borrowers, one or more of the Financing
Documents may be executed elsewhere. The Lender acknowledges, however, that
remedies under certain of the Financing Documents that relate to property
outside the State may be subject to the laws of the state in which the property
is located.
 
8.11.2 Submission to Jurisdiction.
 
The Borrowers irrevocably submit to the jurisdiction of any state or federal
court sitting in the State over any suit, action or proceeding arising out of or
relating to this Agreement or any of the other Financing Documents. Each of the
Borrowers irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. Final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon the Borrowers and
may be enforced in any court in which the Borrowers are subject to jurisdiction,
by a suit upon such judgment, provided that service of process is effected upon
the Borrowers in one of the manners specified in this Section or as otherwise
permitted by applicable Laws.
 
8.11.3 Appointment of Agent for Service of Process.
 
The Borrowers hereby irrevocably designate and appoint CT Corporation System,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, as the
Borrowers’ authorized agent to receive on the Borrowers’ behalf service of any
and all process that may be served in any suit, action or proceeding of the
nature referred to in this Section in any state or federal court sitting in the
State. If such agent shall cease so to act, the Borrowers shall irrevocably
designate and appoint without delay another such agent in the State satisfactory
to the Lender and shall promptly deliver to the Lender evidence in writing of
such other agent’s acceptance of such appointment and its agreement that such
appointment shall be irrevocable.
 
8.11.4 Service of Process.
 
Each of the Borrowers hereby consents to process being served in any suit,
action or proceeding of the nature referred to in this Section by (a) the
mailing of a copy thereof by registered or certified mail, postage prepaid,
return receipt requested, to the Borrower at the Borrower’s address designated
in or pursuant to Section 8.1  (Notices), and (b) serving a copy thereof upon
the agent, if any, designated and appointed by the Borrower as the Borrower’s
agent for service of process by or pursuant to this Section. The Borrowers
irrevocably agree that such service (y) shall be deemed in every respect
effective service of process upon the Borrowers in any such suit, action or
proceeding, and (z) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon the Borrowers. Nothing in this Section
shall affect the right of the Lender to serve process in any manner otherwise
permitted by law or limit the right of the Lender otherwise to bring proceedings
against the Borrowers in the courts of any jurisdiction or jurisdictions.
 
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Section 8.12 Duplicate Originals and Counterparts.
 
This Agreement may be executed in any number of duplicate originals or
counterparts, each of such duplicate originals or counterparts shall be deemed
to be an original and all taken together shall constitute but one and the same
instrument.
 
Section 8.13 Headings.
 
The headings in this Agreement are included herein for convenience only, shall
not constitute a part of this Agreement for any other purpose, and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
 
Section 8.14 No Agency.
 
Nothing herein contained shall be construed to constitute the Borrowers as the
agent of the Lender for any purpose whatsoever or to permit the Borrowers to
pledge any of the credit of the Lender. The Lender shall not be responsible or
liable for any shortage, discrepancy, damage, loss or destruction of any part of
the Collateral wherever the same may be located and regardless of the cause
thereof. The Lender shall not, by anything herein or in any of the Financing
Documents or otherwise, assume any of the Borrowers’ obligations under any
contract or agreement assigned to the Lender, and the Lender shall not be
responsible in any way for the performance by the Borrowers of any of the terms
and conditions thereof, except for losses which are the direct result of the
Lender’s gross negligence or willful misconduct.
 
Section 8.15 Date of Payment.
 
Should the principal of or interest on the Notes become due and payable on other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and in the case of principal, interest shall be payable
thereon at the rate per annum specified in the Notes during such extension.
 
Section 8.16 Entire Agreement.
 
This Agreement is intended by the Lender and the Borrowers to be a complete,
exclusive and final expression of the agreements contained herein. Neither the
Lender nor the Borrowers shall hereafter have any rights under any prior
agreements pertaining to the matters addressed by this Agreement but shall look
solely to this Agreement for definition and determination of all of their
respective rights, liabilities and responsibilities under this Agreement.
 
Section 8.17 Waiver of Trial by Jury.
 
THE BORROWERS AND THE LENDER HEREBY JOINTLY AND SEVERALLY WAIVE TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO WHICH THE BORROWER AND THE LENDER MAY BE PARTIES,
ARISING OUT OF OR IN ANY WAY PERTAINING TO (A) THIS AGREEMENT, (B) ANY OF THE
FINANCING DOCUMENTS, OR (C) THE COLLATERAL. THIS WAIVER CONSTITUTES A WAIVER OF
TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS,
INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT.
 
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This waiver is knowingly, willingly and voluntarily made by the Borrowers and
the Lender, and the Borrowers and the Lender hereby represent that no
representations of fact or opinion have been made by any individual to induce
this waiver of trial by jury or to in any way modify or nullify its effect. The
Borrowers and the Lender further represent that they have been represented in
the signing of this Agreement and in the making of this waiver by independent
legal counsel, selected of their own free will, and that they have had the
opportunity to discuss this waiver with counsel.
 
Section 8.18 Liability of the Lender.
 
The Borrowers hereby agree that the Lender shall not be chargeable for any
negligence, mistake, act or omission of any accountant, examiner, agency or
attorney employed by the Lender in making examinations, investigations or
collections, or otherwise in perfecting, maintaining, protecting or realizing
upon any lien or security interest or any other interest in the Collateral or
other security for the Obligations.
 
By inspecting the Collateral or any other properties of the Borrowers or by
accepting or approving anything required to be observed, performed or fulfilled
by the Borrowers or to be given to the Lender pursuant to this Agreement or any
of the other Financing Documents, the Lender shall not be deemed to have
warranted or represented the condition, sufficiency, legality, effectiveness or
legal effect of the same, and such acceptance or approval shall not constitute
any warranty or representation with respect thereto by the Lender.
 
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Section 8.19 Indemnification.
 
The Borrowers agree to indemnify and hold harmless, Lender, the Lender’s parent
and Affiliates and the Lender’s parent’s and Affiliates’ officers, directors,
shareholders, employees and agents (each an “Indemnified Party,” and
collectively, the “Indemnified Parties”), from and against any and all claims,
liabilities, losses, damages, costs and expenses (whether or not such
Indemnified Party is a party to any litigation), including without limitation,
reasonable attorney’s fees and costs and costs of investigation, document
production, attendance at depositions or other discovery, incurred by any
Indemnified Party with respect to, arising out of or as a consequence of (a)
this Agreement or any of the other Financing Documents, including without
limitation, any failure of the Borrowers to pay when due (at maturity, by
acceleration or otherwise) any principal, interest, fee or any other amount due
under this Agreement or the other Financing Documents, or any other Event of
Default; (b) the use by the Borrowers of any proceeds advanced hereunder; (c)
the transactions contemplated hereunder; or (d) any claim, demand, action or
cause of action being asserted against (i) the Borrowers or any of their
Affiliates by any other Person, or (ii) any Indemnified Party by the Borrowers
in connection with the transactions contemplated hereunder. Notwithstanding
anything herein or elsewhere to the contrary, the Borrowers shall not be
obligated to indemnify or hold harmless any Indemnified Party from any
liability, loss or damage resulting from the gross negligence, willful
misconduct or unlawful actions of such Indemnified Party. Any amount payable to
the Lender under this Section will bear interest at the Post- Default Rate from
the due date until paid.
 
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
 
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IN WITNESS WHEREOF, each of the parties hereto have executed and delivered this
Agreement under their respective seals as of the day and year first written
above.
 

       
Borrowers:
WITNESS/ATTEST:  ARGAN, INC.   
   
   
  /s/ Arthur Trudel By:   /s/ Rainer Bosselmann    (SEAL)

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Name: Rainer Bosselmann
Title: Chairman and CEO

 

      WITNESS/ATTEST: 
SOUTHERN MARYLAND CABLE, INC
 
   
   
  /s/ Rainer Bosselmann By:   /s/ Arthur Trudel    (Seal)

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Name: Arthur Trudel
Title: CFO

 

      WITNESS/ATTEST:
VITARICH LABORATORIES, INC.
 
   
   
  /s/ Rainer Bosselmann By:   /s/ Arthur Trudel    (Seal)

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Name: Arthur Trudel
Title: CFO

 

      WITNESS/ATTEST: 
GEMMA POWER, INC.
 
   
  /s/ Rainer Bosselmann By:   /s/ Arthur Trudel    (Seal)

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Name: Arthur Trudel
Title: CFO

 

      WITNESS/ATTEST: 
GEMMA POWER SYSTEMS
CALIFORNIA, INC.
 
   
  /s/ Rainer Bosselmann By:   /s/ Arthur Trudel    (Seal)

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Name: Arthur Trudel
Title: CFO

 

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      WITNESS/ATTEST:
GEMMA POWER SYSTEMS, LLC
 
   
  /s/ Joel M. Canino By:   /s/ William F. Griffin, Jr.    (Seal)

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Name: William F. Griffin, Jr.
Title: Manager

 

      WITNESS/ATTEST: 
GEMMA POWER HARTFORD, LLC
 
   
  /s/ Joel M. Canino By:   /s/ William F. Griffin, Jr.    (Seal)

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Name: William F. Griffin, Jr.
Title: Manager

 

     
 
WITNESS:
Lender:
BANK OF AMERICA, N.A.
 
   
  By:   /s/ Michael J. Radcliffe    (Seal)

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Name: Michael J. Radcliffe
Title: Senior Vice President

 

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