Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT dated as of December 30, 2013 is by and between
WORLD ENERGY SOLUTIONS, INC., a Delaware corporation with its principal place of
business at 100 Front Street, 20th Floor, Worcester, Massachusetts 01608 (the
“Borrower”) and COMMERCE BANK & TRUST COMPANY, a Massachusetts banking
corporation with an office at 386 Main Street, Worcester, Massachusetts 01608
(the “Lender”).

W I T N E S S E T H:

BACKGROUND. The Borrower has requested the Lender to lend it up to the sum of
$2,500,000.00 on a revolving loan basis (the “Revolving Credit”) and the sum of
$6,000,000.00 on a term loan basis (the “Term Loan”) (the Revolving Credit and
the Term Loan hereinafter together referred to as the “Loans”), and the Lender
is willing to do so upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the premises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:

ARTICLE 1.0 DEFINITIONS

1.01 As used herein:

“Accounts”, “Chattel Paper”, “Collateral”, “Commercial Tort Claims”,
“Contracts”, “Deposit Accounts”, “Documents”, “Electronic Chattel Paper”,
“Equipment”, “Financial Assets”, “Fixtures”, “General Intangibles”, “Goods”,
“Instruments”, “Inventory”, “Investment Property”, “Letter-of-Credit-Rights”,
“Payment Intangibles”, “Promissory Notes”, “Supporting Obligations” and
“Tangible Chattel Paper” shall have the same respective meanings as are given to
those terms in the Uniform Commercial Code as in effect from time to time in The
Commonwealth of Massachusetts, if not otherwise defined in this Agreement.

“Actual EBITDA” shall mean the Borrower’s EBITDA tested on a rolling basis for
the prior six (6) month period.

“Affiliate” means, as to any Person, each other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
under common control with, such Person.

“Agreement” means this Loan and Security Agreement (together with any and all
schedules and exhibits attached from time to time hereto), as the same may from
time to time be amended, modified or supplemented.

“Borrowing Base” means, at any time, the amount computed on the Borrowing Base
Certificate most recently delivered to, and accepted by, the Lender in
accordance with this Agreement and equal to the lesser of:

(A) $2,500,000.00; or

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(B) The aggregate of (1) eighty percent (80%) of the billed Eligible Accounts of
the Borrower, plus (2) eighty percent (80%) of the Eligible Unbilled Accounts,
minus (3) any reductions attributable to the aggregate face amount of
outstanding Letters of Credit as required by Section 2.04(B) herein.

“Borrowing Base Certificate” means a fully completed certificate in the form of
Exhibit 1.01(A) to this Agreement, and to include the worksheets, supporting
documentation and schedules as required by the Lender, certified by the chief
financial officer of the Borrower to be correct and delivered to, and accepted
by, the Lender pursuant to Section 2.02 or Section 6.01(B)(5).

“Business Day” means a day other than a Saturday, a Sunday, and a day on which
commercial banks in Worcester, Massachusetts are authorized to close.

“Change of Control” means (A) a change in ownership, through purchase or
otherwise (including the agreement to act in concert without anything more), by
any Person or group of Persons acting in concert, directly or indirectly, in one
or more transactions, of all or substantially all of the assets of the Borrower,
except to a Subsidiary of the Borrower or (B) the failure of the Borrower to
maintain beneficial ownership, directly or indirectly, of at least 100% of the
Equity Interest in each Guarantor. For purposes of this definition, the terms
“Person” and “group” shall include the meanings for such terms as used for
purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), whether or not applicable, and “beneficial
ownership” shall include the meaning of “beneficial owner” as that term is used
in Rules 13d 3 and 13d 5 under the Exchange Act, whether or not applicable, and
a Person shall be deemed to have “beneficial ownership” of all Equity Interests
that such Person has the right to acquire (whether such right is exercisable
immediately or with the passage of time or the occurrence of a contingency).

“Closing” has the meaning given to such term in Section 3.01.

“Collateral” has the meaning given to such term in Section 4.01.

“Current Assets” means, at any time, all assets that, in accordance with GAAP,
should be classified as current assets on a consolidated balance sheet of the
Borrower and its Subsidiaries.

“Debt Service Coverage Ratio” means, during the applicable period, that quotient
equal to (a) the aggregate of (A) (1) Operating Free Cash Flow, minus
(2) unfunded capital expenditures, minus (3) dividends, divided by (B) the total
of all scheduled payments of principal and interest on all indebtedness on the
Loans, all Subordinated Indebtedness and capital equipment leases.

“Disbursement Authorization Letter” means a duly authorized and executed
disbursement authorization letter from the Borrower to the Lender in the form of
Exhibit 1.01(B) attached hereto and made a part hereof.

“EBITDA” means net income (loss) plus income tax expense, interest expense,
depreciation and amortization expense plus non-cash or non-recurring items as
approved by the Lender.

 

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“Eligible Account” means, at any time, an Account that the Lender in its
reasonable discretion, determines is eligible for inclusion in the Borrowing
Base and that conforms and continues to conform to each of the following
conditions:

(A) The Account arose from a bona fide outright sale of Goods by the Borrower or
from services performed by the Borrower, and such Goods have been shipped to the
appropriate account debtors or their designees (or the sale has otherwise been
consummated), or the services have been performed for the appropriate account
debtors;

(B) The Account is based upon an enforceable order or contract, written or oral,
for Goods shipped or held or for services performed, and the same were shipped,
held, or performed in accordance with such order or contract;

(C) The title of the Borrower to the Account and, except as to the account
debtor, to any Goods is absolute and is not subject to any prior assignment,
claim, lien, or security interest, except Permitted Liens;

(D) The amount shown on the books of the Borrower and on any invoice or
statement delivered to the Lender is owing to the Borrower, less any partial
payment that has been made thereon by anyone;

(E) The Account is not subject to any claim of reduction, counterclaim, set-off,
recoupment, or any claim for credits, allowances, or adjustments by the account
debtor because of returned, inferior, or damaged Goods or unsatisfactory
services, or for any other reason, except for customary discounts not to exceed
two percent (2%) allowed for prompt payment;

(F) The account debtor has not returned or refused to retain, or otherwise
notified the Borrower of any dispute concerning, or claimed nonconformity of,
any of the Goods or services from the sale of which the Account arose;

(G) INTENTIONALLY OMITTED;

(H) The Account is not more than sixty (60) days past due nor outstanding more
than ninety (90) days from the date of the invoice therefor;

(I) The Account does not arise out of a contract with, or order from, an account
debtor that, by its terms, forbids or makes void or unenforceable the assignment
by the Borrower to the Lender of the Account arising with respect thereto;

(J) The Borrower has not received any note, trade acceptance, draft, or other
Instrument with respect to, or in payment of, the Account, nor any Chattel Paper
with respect to the Goods giving rise to the Account, unless, if any such
Instrument or Chattel Paper has been received, the Borrower promptly notifies
the Lender and, at the latter’s request, endorses or assigns and delivers the
same to the Lender and the Lender accepts same;

(K) The Borrower has not received any notice of the death of the account debtor
or a partner thereof; nor of the dissolution, termination of existence,
insolvency, business failure, appointment of a receiver for any part of the
property of, assignment for the benefit of creditors

 

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by, or the filing of a petition in bankruptcy or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against, the account
debtor. Upon the receipt by the Borrower of any such notice, it will promptly
give the Lender written advice thereof;

(L) The account debtor is not an officer, agent, employee, shareholder,
director, Subsidiary or other Affiliate of, or a sales representative for, the
Borrower; and

(M) The Lender has not deemed such Account ineligible because of uncertainty
about the creditworthiness of the account debtor or because the Lender
determines, in its reasonable discretion, otherwise reasonably considers the
collateral value thereof to the Lender to be impaired or its ability to realize
such value to be insecure.

In addition to the foregoing, Eligible Account shall mean any amount receivable
by the Borrower under any insurance policy covering Goods which have, within the
preceding forty-five (45) days, been damaged or destroyed by fire or other
direct casualty loss, provided that a claim therefor has been made in compliance
with such insurance policy, to the extent that such claim has not been in any
way denied or contested by the insurer and provided that such insurer, if such
insurer were an account debtor of the Borrower, would be a qualified account
debtor under this Section.

The enumeration of the aforementioned conditions shall not in any way alter the
right of the Lender, in its reasonable discretion, to exclude any Account from
being an Eligible Account for any purposes hereunder.

In the event of any dispute under the foregoing criteria as to whether an
Account is or has ceased to be an Eligible Account, the decision of the Lender
shall control.

“Eligible Unbilled Account” means, at any time, an Account that satisfies all of
the conditions necessary to be an Eligible Account hereunder, with the single
exception that the Borrower has recognized the revenue with respect to such
Account on its books in accordance with GAAP but has not billed the Account to
the account debtor, and, for purposes of condition (H) of the definition of
Eligible Account, the phrase “date revenue is recognized” shall be substituted
for “date of invoice”.

“Equity Interest” means, with respect to the Borrower and the Guarantor, shares
authorized, issued and outstanding as of the date of this Agreement and so long
as any Obligations remain outstanding.

“Event of Default” has the meaning provided in Section 7.01.

“Financial Statements” means those financial statements presented to the Lender
by the Borrower and the Guarantor in connection with the underwriting of the
Loans as more particularly described in Exhibit 1.01(C) attached hereto.

“Financing Statements” means those certain Uniform Commercial Code Financing
Statements duly authorized and authenticated by the Borrower and the Guarantor,
and duly recorded or filed for the benefit of the Lender, as from time to time
supplemented or amended.

 

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“Fixed Assets” means, at any time, all assets (other than Current Assets) that
should, in accordance with GAAP, be classified as assets on a consolidated
balance sheet of the Borrower and its Subsidiaries.

“GAAP” means generally accepted accounting principles applied consistently, with
such changes or modifications thereto as may be approved in writing by the
Lender.

“Guarantor” means World Energy Securities Corp., a Massachusetts corporation
with its principal place of business at 100 Front Street, Worcester,
Massachusetts 01608, and the sole Subsidiary of the Borrower.

“Guarantor Security Agreement” means with respect to the Guarantor, a duly
authorized and executed Security Agreement dated of even date herewith in the
form of Exhibit 1.01(D) to this Agreement.

“Guaranty” means with respect to the Guarantor, a duly authorized and executed
Unlimited Guaranty dated of even date herewith in the form of Exhibit 1.01(E) to
this Agreement.

“Indebtedness” means, as to the Borrower or the Subsidiary, all items of
indebtedness, obligation or liability whether joint or several, matured or
unmatured, liquidated or liquidated, direct or contingent, including without
limitation:

(A) All indebtedness guarantied, directly or indirectly, in any manner, or
endorsed (other than for collection or deposit in the ordinary course of
business) or discounted with recourse;

(B) All indebtedness in effect guarantied, directly or indirectly, through
agreements, contingent or otherwise: (1) to purchase such indebtedness; or
(2) to purchase, sell, or lease (as lessee or lessor) property, products,
materials, or supplies or to purchase or sell services, primarily for the
purpose of enabling the debtor to make payment of such indebtedness or to insure
the owner of the indebtedness against loss; or (3) to supply funds to, or in any
other manner invest in, the debtor;

(C) All indebtedness secured by (or for which the holder of such indebtedness
has a right, contingent or otherwise, to be secured by) any mortgage, deed of
trust, pledge, lien, security interest, or other charge or encumbrance upon
property owned or acquired subject thereto, whether or not the liabilities
secured thereby have been assumed; and

(D) All indebtedness incurred as the lessee of goods or services under leases
that, in accordance with GAAP, should be reflected on the lessee’s balance
sheet.

“Intellectual Property” means trademarks, service marks, trade names, trade
styles, logos, goodwill, trade secrets, patents, applications, and licenses
acquired under any statutory, common law or registration process in any state or
nation at any time, or under any agreement executed with any person or entity at
any time. The term “license” refers not only to rights granted by agreement from
the owner of patents, trademarks, service marks and the like, but also to rights
granted by a franchisor under a franchise or similar agreement. The foregoing
enumeration is not intended as a limitation of the meaning of the word
“license”.

 

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“IP Security Agreement” means a duly authorized and executed Intellectual
Property Security Agreement by and between the Borrower and the Lender in the
form of Exhibit 1.0(F) attached hereto and made a part hereof, and the Financing
Statements to be authenticated by each Borrower and duly filed for the benefit
of the Lender, as from time to time supplemented or amended.

“Landlord’s Waiver” means the Landlord’s Consent and Waiver duly authorized and
executed by each of the Borrower, the Lender and the landlord with respect to
the premises at 100 Front Street, Worcester, Massachusetts, in the form of
Exhibit 1.01(G) attached hereto and made a part hereof, as from time to time
supplemented or amended.

“Laws” means all ordinances, statutes, rules, regulations, orders, injunctions,
writs, or decrees of any government or political subdivision or agency thereof,
or of any court or similar entity established by any thereof.

“Letters of Credit” means any and all commercial or standby letters of credit or
bank guarantees which may be issued by the Lender from time to time to third
parties for the benefit of the Borrower pursuant to Section 2.04 of this
Agreement.

“Loan Documents” includes this Agreement, the Notes, the IP Security Agreement,
the Guaranty, the Guarantor Security Agreement, the Landlord’s Waiver, the
Disbursement Authorization, the Subordination Agreement(s) and the documents,
whether deliverable at or after the Closing, required pursuant to Articles 3.0
and 4.0, as from time to time modified, extended, supplemented or amended.

“Maturity Date” means, with respect to the Term Note, December 30, 2018 or such
later date as is agreed to by the Lender in a written instrument executed by a
duly authorized officer of the Lender.

“Notes” means each and both of the Revolving Credit Note and the Term Note.

“Obligations” is intended to be used in its most comprehensive sense and means
the obligation of the Borrower or, as the context requires, the Guarantor to the
Lender of whatever kind and description, whether direct or indirect, absolute or
contingent, primary or secondary, joint or several, due or to become due, or
held or to be held by, the Lender for its own account or as agent for another or
others, whether created directly or acquired by assignment or otherwise and
howsoever evidenced, whether now existing or hereafter incurred or acquired and
whether by way of loan, guaranty, discount, letter of credit, lease or
otherwise, including without limitation, the following obligations:

(A) To pay the principal of, and interest on, the Notes in accordance with the
terms thereof and to satisfy all other liabilities to the Lender, whether
hereunder or otherwise, whether now existing or hereafter incurred, matured or
unmatured, direct or contingent, joint or several, including any extensions,
modifications, renewals thereof and substitutions therefor.

(B) To repay to the Lender all amounts advanced by the Lender hereunder or
otherwise on behalf of the Borrower or the Guarantor, including, but without
limitation, advances for principal or interest payments to prior secured
parties, mortgagees, or lienors, or for taxes, levies, insurance, rent, or
repairs to, or maintenance or storage of, any of the Collateral;

 

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(C) All obligations to reimburse the Lender in accordance with the terms of any
and all agreements between the Lender and the Borrower with respect to any
Letters of Credit and foreign exchange contracts for the amounts required to be
paid on account of any and all such Letters of Credit and foreign exchange
contracts issued by or executed by the Lender for the benefit of the Borrower.

(D) To perform and observe all covenants, agreements and undertakings of the
Borrower or the Guarantor pursuant to the terms and conditions of this
Agreement, the Notes, the other Loan Documents or any other agreement or
instrument now or hereafter delivered to the Lender by the Borrower or the
Guarantor;

(E) All obligations under any interest rate swap agreement, any cap, floor or
hedging agreement or other similar agreement, or other financial agreement or
arrangement designed to protect the Borrower against fluctuations in any
interest rate charged by the Lender under the Notes or otherwise, including any
obligations of the Borrower arising out of or in connection with any Automated
Clearing House (“ACH”) Agreement relating to the processing of ACH transactions,
together with all fees, expenses, charges and other amounts owing by or
chargeable to the Borrower under any ACH Agreement;

(F) All obligations to reimburse the Lender, on demand, in connection with
overdrafts and other amounts due to the Lender under any existing or future
agreements relating to cash management services; and

(G) All obligations to reimburse the Lender, on demand, for all of the Lender’s
expenses and costs, including without limitation the reasonable fees and
expenses of its counsel, in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the documents
required hereunder or related hereto, including, without limitation, any
proceeding brought, or threatened, to enforce payment of any of the obligations
referred to in the foregoing Paragraphs (A) through (F).

“Operating Free Cash Flow” shall mean net income (loss) plus interest plus
depreciation and amortization plus share based compensation plus deferred income
taxes plus any other non-cash items plus change in operating assets and
operating liabilities plus deferred revenue plus net capital expenditures.

“Origination Fee” means a fee of $20,000.00 to be paid to the Lender by the
Borrower at Closing.

“Perfection Certificate(s)” means a duly authorized and executed Perfection
Certificate from each of the Borrower and the Guarantor in the form of Exhibit
1.01(H) to this Agreement.

“Permitted Investments” means: (a) direct obligations of, or obligations the
principal of and interest on which are unconditionally guaranteed by, the United
States of America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in each
case maturing within one year from the date of acquisition thereof;

 

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(b) without limiting the provisions of paragraph (d) below, investments in
commercial paper maturing within one year from the date of acquisition thereof
and having, at such date of acquisition, a rating of at least “A-2” or the
equivalent thereof from Standard & Poor’s Corporation or of at least “P-2” or
the equivalent thereof from Moody’s Investors Service, Inc.; (c) investments in
certificates of deposit, bankers’ acceptances and time deposits (including
Eurodollar time deposits) maturing within one year from the date of acquisition
thereof issued or guaranteed by or placed with (i) the Lender (ii) any domestic
office of any other commercial bank of recognized standing organized under the
laws of the United States of America or any State thereof that has a combined
capital and surplus and undivided profits of not less than $1,000,000,000 and is
the principal banking Subsidiary of a bank holding company having a long-term
unsecured debt rating of at least “A-2” or the equivalent thereof from
Standard & Poor’s Corporation or at least “P-2” or the equivalent thereof from
Moody’s Investors Service, Inc.; (d) investments in commercial paper maturing
within one year from the date of acquisition thereof and issued by (i) the
holding company of the Lender or (ii) the holding company of any other
commercial bank of recognized standing organized under the laws of the United
States of America or any State thereof that has (A) a combined capital and
surplus in excess of $1,000,000,000 and (B) commercial paper rated at least
“A-2” or the equivalent thereof from Standard & Poor’s Corporation or of at
least “P-2” or the equivalent thereof from Moody’s Investors Service, Inc.;
(e) investments in repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a) above
entered into with any office of a bank or trust company meeting the
qualifications specified in clause (c) above; (f) investments in money markets
funds substantially all the assets of which are comprised of securities of the
types described in clauses (a) through (e) above.

“Permitted Liens” means:

(A) Liens for taxes, assessments, or similar charges, incurred in the ordinary
course of business, that are not yet due and payable;

(B) Pledges or deposits made in the ordinary course of business to secure
payment of worker’s compensation, or to participate in any fund in connection
with worker’s compensation, unemployment insurance, old-age pensions, or other
social security programs;

(C) Liens of mechanics, materialmen, warehousemen, carriers, or other like
liens, securing obligations incurred in the ordinary course of business that are
not yet due and payable;

(D) Good faith pledges or deposits made in the ordinary course of business to
secure performance of bids, tenders, contracts (other than for the repayment of
borrowed money) or leases, not in excess of ten percent (10%) of the aggregate
amount due thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance, or other similar bonds required in the ordinary course
of business;

(E) Encumbrances consisting of zoning restrictions, easements, or other
restrictions on the use of real property, none of which materially impairs the
use of such property by the Borrower in the operation of its business, and none
of which is violated in any material respect by existing or proposed structures
or land use;

 

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(F) Liens in favor of the Lender;

(G) Existing liens set forth or described on Exhibit 1.01(I) attached hereto and
made a part hereof;

(H) Purchase money security interests granted to secure not more than
seventy-five percent (75%) of the purchase price of assets, the purchase of
which does not violate this Agreement or any instrument required hereunder; and

(I) The following, if the validity or amount thereof is being contested in good
faith by appropriate and lawful proceedings, so long as levy and execution
thereon have been stayed and continue to be stayed and they do not, in the
aggregate, materially detract from the value of the property of the Borrower or
any Subsidiary, or materially impair the use thereof in the operation of its
business:

(1) Claims or liens for taxes, assessments, or charges due and payable and
subject to interest or penalty;

(2) Claims, liens and encumbrances upon, and defects of title to, real or
personal property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the merits;

(3) Claims or liens of mechanics, materialmen, warehousemen, carriers, or other
like liens; and

(4) Adverse judgments on appeal.

“Person” means any individual, corporation, limited liability company,
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture, court, or government or political subdivision or
agency thereof.

“Prime Rate” means that rate of interest published from time to time in The Wall
Street Journal (Eastern Edition) as the “Prime Rate” of interest.

“Projected EBITDA” shall mean the Borrower’s projected EBITDA, as approved by
the Borrower’s Board of Directors and provided to the Lender no later than
March 15 of the applicable fiscal year, and reviewed and approved by the Lender,
tested on a rolling basis for the prior six (6) month period.

“Records” means correspondence, memoranda, tapes, discs, papers, books and other
documents, or transcribed information of any type, whether expressed in ordinary
or machine readable language.

“Revolving Credit Note” means the promissory note referred to in
Section 2.03(A).

“Revolving Credit Termination Date” means, with respect to the Revolving Credit
Note, December 30, 2016, or such later date as is agreed to by the Lender in a
written instrument executed by a duly authorized officer of the Lender.

 

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“Subordinated Creditors” means the parties set forth on Exhibit 1.01(J) as the
currently existing Subordinated Creditors.

“Subordinated Indebtedness” means all Indebtedness incurred at any time by the
Borrower or any Subsidiary, the repayment of which is subordinated to the Loans
in form and manner satisfactory to the Lender. All currently existing
Subordinated Indebtedness is so specified in Exhibit 1.01(K).

“Subordination Agreement” means a duly authorized and executed Subordination
Agreement with respect to any Subordinated Indebtedness, in the form attached
hereto as Exhibit 1.01(L) and containing such provisions as are acceptable to
the Lender.

“Subsidiary” means any Affiliate that is directly, or indirectly through one or
more intermediaries, controlled by the Borrower or not less than 50% of the
voting interest of which is owned, directly or through one or more
intermediaries, by the Borrower and includes the Guarantor.

“Term Note” means the promissory note referred to in Section 2.03(B).

1.02 Accounting.

(A) Generally. All accounting terms not specifically or completely defined
herein shall be construed in conformity with, and all financial data (including
financial ratios and other financial calculations) required to be submitted
pursuant to this Agreement shall be prepared in conformity with, GAAP applied on
a consistent basis, as in effect from time to time, except as otherwise
specifically prescribed herein. To the extent any defined term states that it is
determined “on a consolidated basis”, such consolidation shall be in accordance
with GAAP applied on a consistent basis. Notwithstanding the foregoing, for
purposes of determining compliance with any covenant (including the computation
of any financial covenant) contained herein, Indebtedness of the Borrower and
its Subsidiaries shall be deemed to be carried at 100% of the outstanding
principal amount thereof, and the effects of FASB ASC 820 on financial
liabilities shall be disregarded.

(B) Changes in GAAP. If at any time any change in GAAP would affect the
computation of any financial ratio or requirement set forth in this Agreement or
any other Loan Document, and either the Borrower or the Lender shall so request,
the Lender and the Borrower shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP; provided that, until so amended, (i) such ratio or requirement shall
continue to be computed in accordance with GAAP prior to such change therein and
(ii) the Borrower shall provide to the Lender financial statements and other
documents required under this Agreement or as reasonably requested hereunder
setting forth a reconciliation between calculations of such ratio or requirement
made before and after giving effect to such change in GAAP.

 

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ARTICLE 2.0 THE LOANS

2.01 Disbursement of the Loans.

The Lender will credit the proceeds of the Revolving Credit from time to time,
at the request of the Borrower and in accordance with the provisions of
Section 2.02 of this Agreement to the Borrower’s deposit account with the
Lender.

The Lender will disburse the Term Loan in accordance with the Disbursement
Authorization Letter.

2.02 General Terms – the Revolving Credit.

Subject to the terms hereof, the Lender will lend the Borrower, or issue letters
of credit for the account of the Borrower in, from time to time until the
Revolving Credit Termination Date, such sums as the Borrower may request by
reasonable same day notice to the Lender, received by the Lender not later than
11:00 A.M. of such day, but which shall not exceed, in the aggregate principal
amount at any one time outstanding, the then existing Borrowing Base (the
“Revolving Credit Commitment”). The Borrower shall provide the Lender with a
duly executed Borrowing Base Certificate as of a date not less than two
(2) Business Days prior to its first request for an advance on the Revolving
Credit Note. The Borrower may borrow, repay without penalty or premium and
reborrow hereunder, from the date of this Agreement until the Revolving Credit
Termination Date, the lesser of the then existing Borrowing Base or the
Revolving Credit Commitment in integral multiples of $50,000.00. It is the
intention of the parties that the aggregate of amounts outstanding pursuant to
the Revolving Credit and aggregate face amount of all Letters of Credit from
time to time outstanding shall at no time exceed the amount of the then existing
Borrowing Base, and if, at any time, an excess shall for any reason exist, the
full amount of such excess, together with accrued and unpaid interest thereon as
herein provided, shall be immediately due and payable in full.

2.03 The Notes.

(A) The Revolving Credit Commitment shall be evidenced by the Revolving Credit
Note fully due and payable on the Revolving Credit Termination Date, in the form
attached hereto as Exhibit 2.03(A).

(B) The Term Loan shall be evidenced by the Term Note fully due and payable on
the Maturity Date, in the form attached hereto as Exhibit 2.03(B).

2.04 Letters of Credit.

(A) From time to time prior to the Revolving Credit Termination Date, the Lender
shall issue Letters of Credit under the Revolving Credit, on account of the
Borrower, subject to the following conditions:

 

  (1) No beneficiary shall be an Affiliate;

 

  (2) With respect to each Letter of Credit, the Borrower shall pay to the
Lender a Letter of Credit fee per annum payable quarterly in advance, upon the
maximum amount available under each outstanding Letter of Credit, at the initial
rate of 1.75% per annum and, beginning as of June 30, 2014, at a rate to be
determined semi-annually in accordance with the ratio of Actual EBITDA to
Projected EBITDA in effect as set forth on the following grid:

 

Ratio of Actual EBITDA to Projected EBITDA

   Letter of Credit Fee  

> 1.50:1.00

     1.25 % 

>1.25:1.00 but < 1.50:1.00

     1.50 % 

<1.25:1.00

     1.75 % 

 

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  (3) In addition to the Letter of Credit Fee, the Borrower shall pay to the
Lender a Letter of Credit Issuance Fee equal to 0.25% per annum, payable
quarterly, on the aggregate face amount of such Letters of Credit, together with
such other customary administrative fees and charges:

 

  (4) No such Letter of Credit shall have an expiration date which is later than
the Revolving Credit Termination Date, unless otherwise agreed to by the Bank in
its reasonable discretion, and in such case, the expiration date shall not
exceed twelve (12) months beyond the Revolving Credit Termination Date;

 

  (5) Each such Letter of Credit shall be issued pursuant to such agreements and
upon such terms and conditions as shall be required by the Bank;

 

  (6) No Event of Default shall have occurred and be continuing hereunder at the
time of issuance of such Letter of Credit; and

 

  (7) The aggregate face amount of all Letters of Credit at any time outstanding
shall not exceed $250,000.00.

(B) The Borrowing Base available from time to time shall be reduced by the
aggregate face amount of all Letters of Credit at any time outstanding.

 

2.05 Interest Rate and Payments of Interest.

(A) Interest shall be paid as follows:

(1) Except as otherwise provided under Section 2.05(B), interest on the
principal balance of each of the Loans from time to time outstanding will be
payable at the rates of interest and in the manner set forth in each of the
Notes.

(2) Interest shall be calculated on the basis of a 360-day year, counting the
actual number of days elapsed, and shall be payable monthly in arrears on the
first day of each month and at maturity, whether by acceleration or otherwise.

 

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(B) All agreements between or among the Borrower, the Guarantor and the Lender
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness evidenced by
the Notes, this Agreement, or otherwise, shall the amount paid or agreed to be
paid to the Lender for the use or the forbearance of the indebtedness evidenced
by the Notes, this Agreement, or otherwise, exceed the maximum permissible under
applicable law. As used herein, the term “applicable law” shall mean the law in
effect as of the date hereof provided, however that in the event there is a
change in the law which results in a higher permissible rate of interest, then
the Notes shall be governed by such new law as of its effective date. In this
regard, it is expressly agreed that it is the intent of the Borrower and the
Lender in the execution, delivery and acceptance of the Notes and this Agreement
to contract in strict compliance with the laws of The Commonwealth of
Massachusetts from time to time in effect. If, under or from any circumstances
whatsoever, fulfillment of any provision hereof or of the Notes or any of the
other Loan Documents or other financing instruments executed in connection
herewith at the time of performance of such provision shall be due, shall
involve transcending the limit of such validity prescribed by applicable law,
then the obligation to be fulfilled shall automatically be reduced to the limits
of such validity, and if under or from circumstances whatsoever the Lender
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balances evidenced by the Notes and not to the
payment of interest. This provision shall control every other provision of all
agreements between or among the Borrower, the Guarantor and the Lender.

2.06 Payment to the Lender.

The Lender shall send the Borrower statements of all amounts due hereunder,
which statements shall be considered correct and conclusively binding on the
Borrower absent manifest error unless the Borrower notifies the Lender to the
contrary within thirty (30) days of its receipt of any statement that it deems
to be incorrect. Alternatively, at its reasonable discretion, the Lender may
charge against any deposit account of the Borrower all or any part of any amount
due hereunder.

ARTICLE 3.0 CONDITIONS PRECEDENT

The obligation of the Lender to make the Loans and issue any Letter of Credit is
subject to the following conditions precedent:

3.01 Documents Required for the Closing.

The Borrower shall have delivered to the Lender, prior to the initial
disbursement of the Loans (the “Closing”), the following:

(A) This Agreement duly executed by the Borrower;

(B) Each of the Notes duly executed by the Borrower;

(C) The IP Security Agreement duly executed by the Borrower;

(D) The Guaranty duly executed by the Guarantor;

 

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(E) The Guarantor Security Agreement duly executed by the Guarantor;

(F) The Disbursement Authorization Letter duly executed by the Borrower;

(G) The Landlord’s Waiver duly executed by each of the Borrower, the Lender and
the Borrower’s landlord;

(H) Subordination Agreements duly executed by each of the Borrower, the Lender
and the Subordinated Creditors;

(I) Perfection Certificates duly executed by each of the Borrower and the
Guarantor;

(J) The Financing Statements and other instruments required by Article 4.0;

(K) Satisfactory review of the field examination by the Lender;

(L) A copy, certified as of the date of the Closing, of resolutions of the board
of directors of the Borrower, authorizing the execution, delivery, and
performance of this Agreement, the Notes, the other Loan Documents, and each
other document to be delivered pursuant hereto;

(M) A copy, certified as of the date of the Closing, of the bylaws of the
Borrower;

(N) A certificate (dated the date of the Closing) of the corporate secretary or
assistant secretary of the Borrower as to the incumbency and signatures of the
officers of the Borrower signing this Agreement, the Notes, the other Loan
Documents, and each other document to be delivered pursuant hereto;

(O) A copy, certified as of the most recent date practicable by the Secretary of
the State of Delaware, of the Certificate of Incorporation of the Borrower, and
all amendments thereto, together with a certificate (dated the date of the
Closing) of the corporate secretary or assistant secretary of the Borrower to
the effect that such Certificate of Incorporation have not been further amended
since the date of the aforesaid certification of the Secretary of the State of
Delaware;

(P) A copy, certified as of the most recent date practicable by the Secretary of
The Commonwealth of Massachusetts, of the Foreign Corporation Certificate of the
Borrower, and all amendments thereto, together with a certificate (dated the
date of the Closing) of the corporate secretary or assistant secretary of the
Borrower to the effect that such Foreign Corporation Certificate have not been
further amended since the date of the aforesaid certification of the Secretary
of The Commonwealth of Massachusetts;

(Q) Certificate of tax and corporate good standing dated as of the most recent
date practicable, issued by the Secretary of State of the State of Delaware as
to the tax good standing and the legal existence and good legal standing of the
Borrower;

 

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(R) Certificates, as of the most recent dates practicable, of the Secretary of
The Commonwealth of Massachusetts and of the secretary of state of each other
state in which the Borrower is qualified as a foreign corporation;

(S) A written opinion of the law firm of Mirick, O’Connell, DeMallie & Lougee,
LLP, legal counsel for the Borrower and the Guarantor, dated the date of the
Closing and addressed to the Lender, in form satisfactory to the Lender and its
counsel;

(T) A certificate, dated the date of the Closing, signed by the chief executive
officer or chief financial officer of the Borrower and to the effect that:

(1) The representations and warranties set forth in Section 5.01 are true as of
the date of the Closing; and

(2) No Event of Default hereunder, and no event which, with the giving of notice
or passage of time or both, would become such an Event of Default, has occurred
as of such date;

(U) Copies of all documents evidencing the terms and conditions of any debt
specified as Subordinated Indebtedness on Exhibit 1.01(K);

(V) Payment of the Origination Fee by the Borrower; and

(W) Any and all documents required to be executed in connection with any Letters
of Credit being issued as of the Closing.

3.02 Documents Required for Subsequent Disbursements or issuance of Letters of
Credit.

At the time of, and as a condition to, any disbursement of any part of the Loans
or issuance of any Letter of Credit to be made by the Lender subsequent to the
Closing, the Lender may require the Borrower to deliver to the Lender a
certificate, dated the date on which any such disbursement is to be made, signed
by the chief executive officer or chief financial officer of the Borrower, and
to the effect that:

(A) As of the date thereof, no Event of Default has occurred and is continuing,
and no event has occurred and is continuing that, but for the giving of notice
or passage of time or both, would be an Event of Default;

(B) No material adverse change has occurred in the financial condition, or
results of operations of the Borrower or any Subsidiary since the date of the
Financial Statements; and

(C) Each of the representations and warranties contained in Section 5.01 is true
and correct in all material respects as if made on and as of the date of such
disbursement (except for such representations and warranties made as of a
particular date).

 

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3.03 Certain Events.

At the time of, and as a condition to, the Closing and each disbursement of any
part of the Loans or issuance of a Letter of Credit to be made by the Lender at
or subsequent to the Closing:

(A) No Event of Default shall have occurred and be continuing, and no event
shall have occurred and be continuing that, with the giving of notice or passage
of time or both, would be an Event of Default;

(B) No material adverse change shall have occurred in the financial condition,
or results of operations of the Borrower or any Subsidiary since the dates of
the Financial Statements; and

(C) All of the Loan Documents shall have remained in full force and effect.

3.04 Legal Matters.

At the time of the Closing and at the discretion of the Lender, at the time of
each subsequent disbursement, all legal matters incidental thereto shall be
satisfactory to Bowditch & Dewey, LLP, legal counsel to the Lender.

ARTICLE 4.0 COLLATERAL SECURITY

4.01 Composition of the Collateral.

The property in which a security interest is granted pursuant to the provisions
of Sections 4.02 and 4.03 and pursuant to the Loan Documents is herein
collectively called the “Collateral”. The Collateral, together with all other
property of the Borrower of any kind held by the Lender, shall stand as one
general, continuing collateral security for all Obligations and may be retained
by the Lender until all Obligations have been satisfied in full.

4.02 Rights in Property Held by the Lender.

As security for the prompt satisfaction of all Obligations, the Borrower hereby
assigns, transfers, and sets over to the Lender all of its right, title, and
interest in and to, and grants the Lender a lien on and a security interest in,
all amounts that may be owing, from time to time, by the Lender to the Borrower
in any capacity, including, but without limitation, any balance or share
belonging to the Borrower, or any deposit or other account with the Lender,
which lien and security interest shall be independent of, and in addition to,
any right of set-off that the Lender has under Section 8.06 or otherwise.

4.03 Rights in Property Held Either by the Borrower or by the Lender.

As further security for the prompt satisfaction of all of the Obligations, the
Borrower hereby assigns to the Lender all of its right, title and interest in
and to, and grants the Lender a lien upon and a continuing security interest in
all assets of every type and description, wherever located, whether now owned or
hereafter acquired, together with all substitutions and replacements therefor,
accessions thereto, and proceeds (including, but without limitation, insurance
proceeds) and products thereof, including, without limitation, the following:

(A) All Inventory;

 

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(B) All Accounts, Deposit Accounts, Contracts, accounts receivable, contract
rights, and Chattel Paper, regardless whether they constitute proceeds of other
Collateral;

(C) All Investment Property, securities entitlements and Financial Assets, and
all General Intangibles (including Payment Intangibles), regardless whether they
constitute proceeds of other Collateral, including, without limitation, all the
Borrower’s rights (which the Lender may exercise or not as it in its reasonable
discretion may determine) to acquire or obtain Goods and/or services with
respect to the manufacture, processing, storage, sale, shipment, delivery or
installation of any of the Borrower’s Inventory or other Collateral; all Payment
Intangibles; and including any and all right, title and interest of the Borrower
in, to or under any and all licenses, franchises, permits and approvals obtained
or required in connection with Borrower’s business operations;

(D) All rights to payment of any insurance proceeds or awards for damages in
connection with any condemnations or takings of any interest in and to any real
or personal property, wherever located, or any conveyance in lieu thereof;

(E) All products of and accessions to any of the Collateral;

(F) All liens, guaranties, securities, rights, remedies and privileges
pertaining to any of the Collateral, including the right of stoppage in transit;

(G) All obligations owing to the Borrower of every kind and nature, and all
choses in action, all Commercial Tort Claims, all Letter-of-Credit Rights and
all Supporting Obligations;

(H) All tax refunds of every kind and nature to which the Borrower is now or
hereafter may become entitled no matter however arising, including, without
limitation, loss carry back refunds;

(I) All Intellectual Property, goodwill, trade secrets, computer programs,
source codes, licenses, customer lists, trade names, copyrights, trademarks and
patents, all domain names, internet web sites and other rights;

(J) All Chattel Paper (including Electronic Chattel Paper and Tangible Chattel
Paper), Documents and Instruments, including Promissory Notes (whether
negotiable or non-negotiable, and regardless of their being attached to Chattel
Paper) and all money, cash and coins;

(K) All Equipment, including without limitation machinery, furniture, motor
vehicles, Fixtures and all other goods used in the conduct of the business of
the Borrower;

(L) All insurance policies and all proceeds of Collateral of every kind and
nature and in whatever form, including without limitation both cash and non-cash
proceeds resulting or arising from the rendering of services by the Borrower or
the sale or other disposition by the Borrower of the Inventory or other
Collateral and including all insurance proceeds;

 

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(M) All books and records, magnetic tapes, electronic data, computer records and
discs relating to the conduct of the Borrower’s business including, without in
any way limiting the generality of the foregoing, those relating to its
Accounts;

(N) All Deposit Accounts maintained by the Borrower with any bank, trust
company, credit union, investment firm or fund, or any similar institution or
organization; and

(O) All property of the Borrower in the possession of the Lender.

4.04 Priority of Liens.

The foregoing liens shall be first and prior liens except for Permitted Liens.

4.05 Financing Statements and Certificates of Title.

(A) The Borrower will:

(1) Execute or authenticate and deliver to the Lender any writings and do all
things necessary, effectual or requested by the Lender to carry into effect the
provisions and intent of this Agreement, or to vest more fully in or assure to
the Lender (including without limitation, all steps to create and perfect) the
security interest in the Collateral granted to the Lender by this Agreement or
to comply with applicable statute or law and to facilitate the collection of the
Collateral, including the furnishing at the Borrower’s cost and expense, at such
intervals as the Lender may establish from time to time, of reports, financial
data and analyses satisfactory to the Lender. A carbon, photographic or other
reproduction of this Agreement or any financing statement prepared pursuant to
the terms hereof shall be sufficient as a financing statement for the purpose of
filing with the appropriate authorities, and the Borrower hereby appoints the
Lender as its attorney-in-fact (without requiring the Lender to act as such) to
perform all other acts that the Lender deems appropriate to protect and
preserve, the Collateral;

(2) Pay, or reimburse the Lender for paying, all costs and taxes of filing or
recording the same in all offices and registries in which it is necessary to
file or record such financing statements so as to perfect the Lender’s security
interest in and lien on all Collateral; and

(3) Take such other steps as the Lender, from time to time, may direct,
including the noting of the Lender’s lien on the Collateral and on any
Certificates of Title therefor, all too perfect to the satisfaction of the
Lender the Lender’s interest in the Collateral.

(B) In addition to the foregoing, and not in limitation thereof, to the extent
lawful, the Borrower hereby appoints the Lender as its attorney-in-fact (without
requiring the Lender to act as such) (i) to execute, authenticate, amend, file,
correct, record and/or register any financing statement in the name of the
Borrower, and to perform all other acts that the Lender, in its reasonable
discretion, deems appropriate to perfect and continue its security interest in
and lien on, and to protect or preserve, the Collateral; (ii) to enter into a
control agreement or other agreement for the purpose of perfecting or
maintaining the perfection of the security interests in and liens upon the
Collateral; and (iii) to take any other action deemed necessary or prudent by

 

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the Lender, in the reasonable exercise of its discretion, to effect, perfect,
continue or maintain the security interests in and liens upon any Collateral as
contemplated by this Agreement or the other Loan Documents.

4.06 Mortgagees’, Landlords’, and Warehousemen’s Waivers.

The Borrower will, within twenty (20) days after any request of the Lender,
cause any mortgagee of real estate owned by the Borrower, any landlord of
premises leased by the Borrower, and any warehouseman or other bailee on whose
premises any of the Collateral may be located to execute and deliver to the
Lender instruments, in form and substance satisfactory to the Lender, by which
such mortgagee, landlord or warehouseman or other bailee waives its rights, if
any, in and to all Goods composing a part of the Collateral.

ARTICLE 5.0 REPRESENTATIONS AND WARRANTIES

5.01 Original.

To induce the Lender to enter into this Agreement, the Borrower represents and
warrants to the Lender as follows:

(A) The Borrower is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Delaware; the Borrower has no
Subsidiaries other than the Subsidiaries named in Exhibit 5.01(A); each
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the Laws of its state of incorporation, all as set forth in
Exhibit 5.01(A); the Borrower and Subsidiaries have the lawful power to own
their properties and to engage in the businesses they conduct, and each is duly
qualified and in good standing as a foreign corporation in the jurisdictions
wherein the nature of the business transacted by it or property owned by it
makes such qualification necessary; the states in which the Borrower and each
Subsidiary are qualified to do business are set forth in Exhibit 5.01(A) or
otherwise disclosed to the Lender in writing; the percentage of the Borrower’s
ownership of the outstanding stock of each Subsidiary is as listed in
Exhibit 5.01(A); the addresses of all places of business of the Borrower and its
Subsidiaries are as set forth in Exhibit 5.01(A) or otherwise disclosed to the
Lender in writing; neither the Borrower nor any Subsidiary has changed its name,
been the surviving corporation in a merger, acquired any business, or changed
its principal executive office within five (5) years and one (1) month prior to
the date hereof except as set forth in Exhibit 5.01(A); and all of the
authorized, issued, and outstanding shares of capital stock of each Subsidiary
are owned by the Borrower;

(B) Neither the Borrower nor any Subsidiary is directly or indirectly controlled
by, or acting on behalf of, any Person which is an “Investment Company”, within
the meaning of the Investment Company Act of 1940, as amended;

(C) Neither the Borrower nor any Subsidiary is in default with respect to any of
its existing Indebtedness, and the making and performance of this Agreement, the
Notes, and the other Loan Documents will not (promptly or with the passage of
time, the giving of notice, or both):

(1) Violate the Certificate of Incorporation or by-laws of the Borrower or any
Subsidiary, or violate any Laws or result in a default under any contract,
agreement, or instrument to which the Borrower or any Subsidiary is a party or
by which the Borrower or any Subsidiary or its property is bound; or

(2) Result in the creation or imposition of any security interest in, or lien or
encumbrance upon, any of the assets of the Borrower or any Subsidiary except in
favor of the Lender;

 

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(D) The Borrower and the Guarantor, to the extent applicable to it, has the
power and authority to enter into and perform this Agreement, the Notes, and the
other Loan Documents, and to incur the obligations herein and therein provided
for, and has taken all actions necessary to authorize the execution, delivery,
and performance of this Agreement, the Notes, and the other Loan Documents;

(E) This Agreement, the Notes, and the other Loan Documents are, or when
delivered will be, valid, binding, and enforceable in accordance with their
respective terms;

(F) Except as disclosed in Exhibit 5.01(F) hereto, there is no pending order,
notice, claim, litigation, proceeding, or investigation against or affecting the
Borrower or any Subsidiary, whether or not covered by insurance, that would in
the aggregate involve the payment of $100,000.00 or more or would otherwise
materially or adversely affect the financial condition or business prospects of
the Borrower or any Subsidiary if adversely determined;

(G) The Borrower and its Subsidiaries have good and marketable title to all of
their assets, none of which is subject to any security interest, encumbrance or
lien, or claim of any third Person except for Permitted Liens;

(H) The Financial Statements, including any schedules and notes pertaining
thereto, have been prepared in accordance with GAAP, and fully and fairly
present the financial condition of the Borrower and its Subsidiaries at the
dates thereof and the results of operations for the periods covered thereby, and
there have been no material adverse changes in the consolidated financial
condition or business of the Borrower and its Subsidiaries from September 30,
2013, to the date hereof;

(I) As of the date hereof, the Borrower and its Subsidiaries have no material
Indebtedness of any nature, including, but without limitation, liabilities for
taxes and any interest or penalties relating thereto except to the extent
reflected (in a footnote or otherwise) and reserved against in the consolidated
balance sheet dated December 31, 2012 included in the Financial Statements or as
disclosed in, or permitted by, this Agreement; and the Borrower does not know or
have reasonable ground to know of any basis for the assertion against it or any
Subsidiary of any such claim or litigation based upon such Indebtedness as of
the date of the Closing except as disclosed on Exhibit 5.01(F) or otherwise
disclosed to the Lender in writing;

(J) Except as otherwise permitted herein, the Borrower has filed all federal,
state, and local tax returns and other reports required by any applicable Laws
to have been filed prior to the date hereof, has paid or caused to be paid all
taxes, assessments, and other governmental charges that are due and payable
prior to the date hereof, and has made adequate provision for the

 

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payment of such taxes, assessments, or other charges accruing but not yet
payable; the Borrower has no knowledge of any deficiency or additional
assessment in a materially important amount in connection with any taxes,
assessments, or charges not provided for on its books;

(K) Except to the extent that the failure to comply would not materially
interfere with the conduct of the business of the Borrower or any Subsidiary,
the Borrower and its Subsidiaries have each complied with all applicable Laws
with respect to (1) any restrictions, specifications, or other requirements
pertaining to products that it manufactures or sells or to the services it
performs; (2) the conduct of its business; and (3) the use, maintenance, and
operation of the real and personal properties owned or leased by it in the
conduct of its business;

(L) No representation or warranty by or with respect to the Borrower or any
Subsidiary contained herein or in any certificate or other document furnished by
the Borrower or any Subsidiary pursuant hereto contains any untrue statement of
a material fact or omits to state a material fact necessary to make such
representation or warranty not misleading in light of the circumstances under
which it was made;

(M) Each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by the
Borrower, any Subsidiary or the Guarantor in connection with the execution and
delivery of this Agreement, the Notes, and the other Loan Documents or the
undertaking or performance of any obligation hereunder or thereunder has been
duly obtained or effected;

(N) All existing Indebtedness of the Borrower or any Subsidiary: (1) for money
borrowed, or (2) under any security agreement, mortgage or agreement covering
the lease by the Borrower or any Subsidiary as lessee of real or personal
property is described in Exhibit 5.01(N);

(O) Except as entered into in the ordinary course of business, reflected in the
Financial Statements or otherwise described in Exhibit 5.01(O), attached hereto,
or otherwise disclosed to the Lender in writing, (a) neither the Borrower nor
any Subsidiary has any material leases, contracts, or commitments of any kind
(including, without limitation, potential “earn-out” payments; employment
agreements; collective bargaining agreements; powers of attorney; distribution
arrangements; licenses, patents or license agreements; contracts for future
purchase or delivery of goods or rendering of services; bonuses, pension, and
retirement plans; or accrued vacation pay, insurance, and welfare agreements);
(b) to the best of Borrower’s knowledge, all parties to all such material
leases, contracts, and other commitments to which the Borrower or any Subsidiary
is a party have complied with the provisions of such leases, contracts, and
other commitments; and (c) to the best of Borrower’s knowledge, no party is in
default under any thereof and no event has occurred which, but for the giving of
notice or the passage of time, or both, would constitute a default;

(P) All registered patents, trademarks and copyrights of the Borrower, the
Guarantor or any other Subsidiary, all pending applications of the Borrower, the
Guarantor or any other Subsidiary for registration of any patents, trademarks or
copyrights, and all licenses or agreements in connection with any Intellectual
Property of the Borrower, the Guarantor or any other Subsidiary are described in
Exhibit 5.01(P) attached hereto;

 

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(Q) The Borrower has not made any agreement or taken any action which may cause
anyone to become entitled to a commission or finder’s fee as a result of or in
connection with the making of the Loans;

(R) The Borrower’s consolidated federal tax returns for all years of operation,
including the year ended December 31, 2012, have been filed with the Internal
Revenue Service and have not been challenged;

(S) Any Employee Pension Benefit Plans, as defined in the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), of the Borrower and each
Subsidiary meet, as of the date hereof, the minimum funding standards of 29
U.S.C.A. 1082 (Section 302 of ERISA), and no Reportable Event or Prohibited
Transaction, as defined in ERISA, has occurred with respect to any Employee
Benefit Plans, as defined in ERISA, of the Borrower or any Subsidiary;

(T) The liens and security interests created pursuant to Sections 4.02 and 4.03
are in all cases first and prior liens except for Permitted Liens; and

(U) Neither the Borrower nor any Subsidiary, to the best knowledge of the
Borrower, owns occupies or operates, or, to the best of their knowledge has ever
owned, occupied or operated a site or vessel on which has been stored any
hazardous material or oil, without compliance with all statues, regulations,
ordinances, directives, and orders of every federal, state, municipal and other
governmental authority which has or claims jurisdiction relative thereto (the
terms “site,” “vessel” and “hazardous material,” respectively, as used herein
include the definitions of those terms in Massachusetts General Laws, Ch. 21E);
neither the Borrower nor any Subsidiary, to the best knowledge of the Borrower,
has ever disposed of, transported or arranged for the transport of any hazardous
material or oil without compliance with all such statutes, regulations,
ordinances, directives and orders in all material respects.

5.02 Survival.

All of the representations and warranties set forth in Section 5.01 shall
survive until all Obligations are satisfied in full and there remain no
outstanding commitments hereunder.

ARTICLE 6.0 COVENANTS OF THE BORROWER

6.01 Affirmative Covenants.

The Borrower does hereby covenant and agree with the Lender that, so long as any
of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply, or if appropriate cause its Subsidiaries to comply,
at all times with the following affirmative covenants:

(A) The Borrower will use the proceeds of the Loans only for the purposes set
forth in Exhibit 6.01(A), and will furnish the Lender such evidence as it may
reasonably require with respect to such use;

 

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(B) The Borrower will furnish the Lender:

(1) As soon as available, but in any event within one hundred five (105) days
after the close of each fiscal year: (a) a consolidated statement of
stockholders’ equity and a consolidated statement of operations of the Borrower
and its Subsidiaries for such fiscal year; (b) consolidated cash flows of the
Borrower and its Subsidiaries for such fiscal year; and (c) consolidated balance
sheets of the Borrower and its Subsidiaries as of the end of such fiscal
year-all such statements to be in reasonable detail, including all supporting
schedules, comments, footnotes and related management letters; the consolidated
statements and balance sheets to be audited by an independent certified public
accountant selected by Borrower and acceptable to the Lender, and certified by
such accountants to have been prepared in accordance with GAAP and to present
fairly the consolidated financial position and results of operations of the
Borrower and its Subsidiaries and to contain such accountants’ unqualified
opinion; the Lender shall have the right, from time to time to discuss the
affairs of the Borrower directly with such independent certified public
accountants and the Borrower shall have the opportunity, at its option, to be
represented at any such discussions.

(2) Promptly after the sending or making available or filing of the same and in
no event later than five (5) days after filing, copies of all reports, proxy
statements, and financial statements, including without limitation Forms 10K,
10Q and 8K, that the Borrower sends or makes available to its stockholders and
all registration statements and reports that the Borrower or the Guarantor files
with the Securities and Exchange Commission or any successor Person;

(3) Contemporaneously with each year-end financial report or filing of financial
statements with the Securities and Exchange Commission, required by the
foregoing paragraphs (1) and (2), or at such other times as the Lender requests,
a Compliance Certificate in the form attached hereto as Exhibit 6.01(B)(3), of
the chief executive officer or chief financial officer of the Borrower stating
that he has individually reviewed the provisions of this Agreement and that a
review of the activities of the Borrower during the applicable period, has been
made by him or under his supervision, with a view to determining whether the
Borrower has fulfilled all its obligations under this Agreement, and that, to
the best of his knowledge, the Borrower has observed and performed each
undertaking contained in this Agreement and is not in default in the observance
or performance of any of the provisions hereof or, if the Borrower shall be so
in default, specifying all such defaults and events of which he may have
knowledge;

(4) Whenever there are borrowings outstanding with respect to the Revolving
Credit, within twenty (20) days after the end of each calendar month, in such
form and detail as shall be satisfactory to the Lender, an aging, as of the end
of such month, of (a) the then Eligible Accounts and Eligible Unbilled Accounts,
(b) all other Accounts of the Borrower certified by the chief executive officer
or chief financial officer of the Borrower to be complete and correct;

(5) Whenever there are borrowings outstanding with respect to the Revolving
Credit, within twenty (20) days after the end of each calendar month (and at any
additional time in the discretion of the Lender or if any material deterioration
in the Borrowing Base would be disclosed thereby) a Borrowing Base Certificate
as of the end of such month, and a certificate of the chief executive officer or
chief financial officer of the Borrower stating that he has individually
reviewed the provisions of this Agreement and that a review of the

 

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activities of the Borrower during such period, has been made by him or under his
supervision, with a view to determining whether the Borrower has fulfilled all
its obligations under this Agreement, and that, to the best of his knowledge,
the Borrower has observed and performed each undertaking contained in this
Agreement and is not in default in the observance or performance of any of the
provisions hereof or, if the Borrower shall be so in default, specifying all
such defaults and events of which he may have knowledge. Each Borrowing Base
Certificate shall be effective only as accepted by the Lender (and with such
revisions, if any, as the Lender may require as a condition to such acceptance),
such acceptance to be presumed after receipt of such Borrowing Base Certificate
unless the Lender otherwise notifies the Borrower, whether thereafter,
theretofore, or contemporaneously therewith;

(6) Within twenty (20) days after the end of each fiscal quarter of the
Borrower, a written retail backlog report;

(7) As soon as available, but in any event on or before March 15 of each year,
Board-approved projections for the next fiscal year, prepared in reasonable
detail and containing such revenue projections and pro forma financial
information and in such form as is satisfactory to the Lender, together with,
upon request by the Lender, internally generated updates to Board-approved
projections if available and at reasonable intervals; and

(8) Upon the Lender’s request, from time to time, copies of any or all
agreements, contracts, or commitments referred to in Section 5.01(O) hereof;

(C) The Borrower will maintain its Inventory, Equipment, real estate, and other
properties in good condition and repair (normal wear and tear excepted), and
will pay and discharge or cause to be paid and discharged, when due, the cost of
repairs to, or maintenance of, the same, and will pay or cause to be paid in a
timely manner all rental or mortgage payments due on such real estate. The
Borrower hereby agrees that, in the event it fails to pay or cause to be paid
any such payment, it will promptly notify the Lender thereof, and the Lender
may, in its discretion, do so and on demand be reimbursed therefor by the
Borrower;

(D) The Borrower and its Subsidiaries will maintain, or cause to be maintained,
public liability insurance (subject to such deductibles for each entity as are
acceptable to the Lender in its discretion) and fire and extended coverage
insurance on all assets that are of a character usually insured by businesses
engaged in the same or similar operations, all in form and amount sufficient to
indemnify the Borrower or Subsidiary for 100% of the appraised value of any such
asset lost or damaged (subject to any deductible customary in the Borrower’s or
Subsidiary’s industry) or in an amount consistent with the amount of insurance
generally carried on comparable assets within the industry and with such
insurers as may be satisfactory to the Lender. The Borrower and its Subsidiaries
will cause all such insurance policies to contain a standard mortgage clause and
to be payable to the Lender as its interest may appear, to cause the Lender to
be named as an additional insured on all such liability policies, to deliver the
policies of insurance to the Lender, and, in the case of all policies of
insurance carried for the benefit of the Borrower or any Subsidiary by any
lessee, sublessee, subtenant, or other party having rights to occupy or use the
mortgaged property or any part thereof or interest therein under any lease,
sublease, or other agreement (whether oral, written, or otherwise evidenced), to
cause all such policies to be payable to the Lender as its interest may appear.
Such policies shall contain a

 

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provision whereby they cannot be cancelled except after twenty (20) days’
written notice to the Lender. The Borrower will furnish to the Lender such
evidence of insurance as the Lender may require. The Borrower hereby agrees
that, in the event it or any Subsidiary fails to pay or cause to be paid the
premium on any such insurance when due, the Lender, in its discretion, may do so
and be reimbursed by the Borrower therefor. The Borrower and each Subsidiary
hereby assign to the Lender any returned or unearned premiums that may be due
the Borrower or any Subsidiary upon cancellation by the insurer of any such
policy for any reason whatsoever and direct any such insurer to pay the Lender
any amounts so due. provided, however, that the Lender will pay to the Borrower
or the appropriate Subsidiary any such returned or unearned premiums within five
(5) days after the receipt thereof if there has not occurred and be continuing
an Event of Default hereunder. The Lender is hereby appointed the
attorney-in-fact of the Borrower and each Subsidiary (without requiring the
Lender to act as such) to endorse any check which may be payable to the Borrower
or any Subsidiary to collect any premiums or the proceeds of such insurance
(other than proceeds of public liability insurance), and any amount so collected
may be applied by the Lender toward satisfaction of the Loans and any other
Obligations. If the Lender receives any proceeds from insurance in the absence
of an Event of Default, it shall remit such proceeds to the Borrower or such
Subsidiary within three (3) Business Days after the Lender’s receipt of such
proceeds, provided that immediately prior to any such remittance the Lender is
provided with a Borrowing Base Certificate reflecting a current Borrowing Base
not less than the amount of the Revolving Credit then outstanding;

(E) The Borrower and its Subsidiaries will each pay or cause to be paid when
due, all taxes, assessments, and charges or levies imposed upon it or on any of
its property or which it is required to withhold and pay except where contested
in good faith by appropriate proceedings with adequate reserves therefor having
been set aside on its books; provided, however, that the Borrower and each
Subsidiary shall pay or cause to be paid all such taxes, assessments, charges or
levies forthwith whenever foreclosure on any lien that may have attached (or
security therefor) appears imminent;

(F) The Borrower will maintain:

(1) A Debt Service Coverage Ratio at all times equal to or greater than
1.20:1.0, tested as of the end of each fiscal year of the Borrower, beginning
with the fiscal year ending December 31, 2014, and

(2) A Borrowing Base such that the amount of the Borrower’s outstanding
Revolving Credit will not, at any time, exceed its Borrowing Base;

(G) The Borrower and its Subsidiaries will each, when requested to do so, make
available for inspection by duly authorized representatives of the Lender any of
its books and records and will furnish the Lender any information regarding its
business affairs and financial condition within a reasonable time after written
request therefor;

(H) The Borrower and its Subsidiaries will each take all necessary steps to
preserve its corporate existence and franchises and comply with all present and
future Laws applicable to it in the operation of its business, and all material
agreements to which it is subject;

 

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(I) The Borrower and its Subsidiaries will each collect its Accounts and sell
its Inventory only in the ordinary course of business;

(J) The Borrower and its Subsidiaries will each keep accurate and complete
Records of its Accounts, Inventory, and Equipment consistent with sound business
practices;

(K) The Borrower and its Subsidiaries will each give immediate notice to the
Lender of (1) any litigation or proceeding in which it is a party if an adverse
decision therein would require it to pay more than $100,000.00 or deliver assets
the value of which exceeds such sum (except where the claim is covered by
insurance and the insurer has acknowledged coverage); and (2) the institution of
any other suit or proceeding involving it that might materially and adversely
affect its operations, financial condition, property, or business prospects;

(L) At the request of the Lender, the Borrower will furnish the Lender with
true, correct and complete copies of federal income tax returns filed by the
Borrower, together with all schedules thereto;

(M) The Borrower and its Subsidiaries will each (1) pay immediately from the
proceeds of the initial disbursement of the Loans at the Closing, all of its
outstanding Indebtedness (other than Subordinated Indebtedness and Indebtedness
listed on Exhibit 5.01(N) to the extent shown on such Exhibit 5.01(N) to be
permitted to exist after the Closing) and cause all security therefor or in
respect thereof to be assigned to the Lender, and (2) pay when due (or within
applicable grace periods) all of its other Indebtedness due third Persons except
when the amount thereof is being contested in good faith by appropriate
proceedings and with adequate reserves therefor being set aside on its books;
provided, however, that no payment shall be made in respect to Subordinated
Indebtedness except in strict compliance with all of the terms of subordination
thereof theretofore approved in writing by the Lender. If default be made by the
Borrower or any Subsidiary in the payment of any principal (or installment
thereof) of, or interest on, any such Indebtedness, the Lender shall have the
right, in its discretion, to pay such interest or principal for the account of
the Borrower or such Subsidiary and be reimbursed by the Borrower or such
Subsidiary therefor;

(N) The Borrower and its Subsidiaries will each notify the Lender promptly if it
becomes aware of the occurrence of any Event of Default or of any fact,
condition, or event that only with the giving of notice or passage of time or
both, could become an Event of Default or if it becomes aware of any material
adverse change in the financial condition (including, without limitation,
proceedings in bankruptcy, insolvency, reorganization, or the appointment of a
receiver or trustee), or results of operations of the Borrower, any Subsidiary,
or the Guarantor or of the failure of the Borrower or any Subsidiary to observe
any of their respective undertakings hereunder or under the Loan Documents;

(O) The Borrower and its Subsidiaries will each notify the Lender thirty
(30) days in advance of any change in the location of any of its places of
business or of the establishment of any new, or the discontinuance of any
existing, place of business (it being agreed that a sales office is not a “place
of business” for purposes of this Section 6.01(O));

 

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(P) The Borrower and its Subsidiaries will each (1) fund any of its Employee
Pension Benefit Plans in accordance with no less than the minimum funding
standards of 29 U.S.C.A. 1082 (Section 302 of ERISA); (2) furnish the Lender,
promptly after the filing of the same, with copies of any reports or other
statements filed with the United States Department of Labor or the Internal
Revenue Service with respect to any such Plan; and (3) promptly advise the
Lender of the occurrence of any Reportable Event or Prohibited Transaction with
respect to any Employee Benefit Plan;

(Q) The Borrower shall provide written notice to the Lender promptly upon
becoming aware of the existence of any Commercial Tort Claims to which the
Borrower is a party;

(R) The Borrower will permit the Lender to conduct field audits periodically at
reasonable times on any premises occupied by the Borrower or on which any
Collateral is located and shall pay to the Lender the Lender’s reasonable costs
and expenses related to each once per each twelve (12) month period, provided,
however, that when an Event of Default has occurred and is continuing, the
Borrower shall pay to the Lender the Lender’s reasonable costs and expenses
related to a field examination conducted during such period;

(S) Within thirty (30) days of Closing, the Borrower will use its reasonable
best efforts to transfer to the Lender all of its deposit accounts and cash
management services and shall in any event complete such transfer within ninety
(90) days after Closing, except, if necessary, the Borrower may maintain an
account at its existing depository institution with instructions for such
depository institution to sweep any amount in such account into the Borrower’s
account maintained with the Lender; and

(T) The Borrower will maintain all of its deposit accounts and cash management
services with the Lender while any Obligations to the Lender are outstanding.

6.02 Negative Covenants.

The Borrower does hereby covenant and agree with the Lender that, so long as any
of the Obligations remain unsatisfied or any commitments hereunder remain
outstanding, it will comply, or if appropriate cause any Subsidiary to comply,
at all times with the following negative covenants, unless the Lender shall
otherwise have agreed in writing:

(A) Neither the Borrower nor any Subsidiary will enter into any merger,
consolidation, reorganization or recapitalization, reclassify its capital stock,
or allow any changes in its key management personnel, nor change its name
without first providing the Lender with ninety (90) days advance written notice
of the name change (for purposes of this Section 6.02(A), “key management” shall
mean the President, Chief Executive Officer and Chief Financial Officer of the
Borrower);

(B) Neither the Borrower nor any Subsidiary will allow any Change of Control;

(C) Neither the Borrower nor any Subsidiary sell, transfer, lease, or otherwise
dispose of all or (except in the ordinary course of business) any material part
of its assets;

 

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(D) Neither the Borrower nor any Subsidiary will sell, lease, transfer, assign,
or otherwise dispose of any of the Collateral except in the ordinary course of
business, or disposition of obsolete or worn out Equipment;

(E) Neither the Borrower nor any Subsidiary will sell or otherwise dispose of,
or for any reason cease operating, any of its divisions, franchises, or lines of
business, except for disposition of divisions, franchises and lines of business
generating less than $250,000.00 of revenue in the aggregate, upon advance
written notice to the Lender;

(F) Neither the Borrower nor any Subsidiary will mortgage, pledge, grant, or
permit to exist a security interest in, or a lien upon, any of its assets of any
kind, now owned or hereafter acquired, except for Permitted Liens, liens of the
Loan Documents, and existing liens listed on Exhibit 1.01(I) to the extent shown
on such Exhibit 1.01(I) to be permitted to exist after the Closing;

(G) Neither the Borrower nor any Subsidiary will become liable, directly or
indirectly, as guarantor or otherwise for any obligation of any other Person,
except for the endorsement of commercial paper for deposit or collection in the
ordinary course of business;

(H) Neither the Borrower nor any Subsidiary will incur, create, assume, or
permit to exist any Indebtedness except: (1) the Loans; (2) existing
Indebtedness listed on Exhibit 5.01(N) to the extent shown on such Exhibit
5.01(N) to be permitted to exist after the Closing; (3) trade indebtedness
incurred in the ordinary course of business (provided, however, that neither the
Borrower nor any Subsidiary may acquire inventory other than for cash or on open
account except as expressly approved in writing and in advance by the Lender);
(4) contingent Indebtedness permitted by Section 6.02(F); (5) lease obligations
permitted by Section 6.02(L); (6) Indebtedness secured by Permitted Liens;
(7) Subordinated Indebtedness; and (8) up to an aggregate maximum of $250,000.00
for loans to purchase equipment, relocate an office or other similar expenses
incurred in the ordinary course of business;

(I) Neither the Borrower nor any Subsidiary (other than a wholly owned
Subsidiary of the Borrower) (1) directly or indirectly make any investment other
than Permitted Investments; (2) pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock, provided that (a) the
Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
thereof, (b) the Borrower may pay dividends solely in common stock, and (c) the
Borrower may repurchase the stock of existing and former employees or
consultants pursuant to Board-approved stock repurchase agreements, so long as
(X) an Event of Default does not exist at the time of such repurchase and would
not exist after giving effect to such repurchase and (Y) such repurchase does
not exceed $250,000.00 in the aggregate in any fiscal year;

(J) Neither the Borrower nor any Subsidiary will form any subsidiary, make any
investment in (including any assignment of Inventory or other property), or make
any loan in the nature of an investment to, any Person, other than investments
of the Borrower in the Subsidiaries listed on Exhibit 5.01(A);

 

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(K) Neither the Borrower nor any Subsidiary will make any loan or advance to any
officer, shareholder, director, or employee of the Borrower or any Subsidiary
except for advances to employees for sales commissions, travel expenses and the
like incurred in the ordinary course of business aggregating no more than
$600,000.00 outstanding at any time;

(L) Neither the Borrower nor any Subsidiary will make payments on account of the
purchase or lease of Fixed Assets that, in the aggregate, in any fiscal year
(commencing with the current fiscal year) will exceed the greater of
(i) $250,000.00 or (ii) depreciation taken or to be taken with respect to Fixed
Assets during such year; as used in this paragraph, the term “lease” means a
lease reflected on a consolidated balance sheet of the Borrower and its
Subsidiaries or a lease that should be so reflected under GAAP;

(M) Neither the Borrower nor any Subsidiary will pay or commit to pay, in an
aggregate amount for any fiscal quarter (commencing with the current fiscal
quarter), in excess of $75,000.00 with respect to lease obligations not existing
as of the date of this Agreement, as used in this paragraph, the term “lease”
means a lease that is not capitalized in a consolidated balance sheet of the
Borrower and should not be so capitalized under GAAP;

(N) Neither the Borrower nor any Subsidiary will purchase or otherwise invest in
or hold securities, nonoperating real estate, or other nonoperating assets
except: (1) Permitted Investments; (2) the present investment in any such assets
held as of September 30, 2013 and reflected in the Financial Statements; and
(3) operating assets that hereafter become nonoperating assets;

(O) Neither the Borrower nor any Subsidiary will, except as permitted in
accordance with Section 6.02(I) hereof, redeem, purchase, or retire any of its
voting interest or purchase or retire for any consideration, any warrant, right,
or option pertaining thereto or other security convertible into any of the
foregoing, or permit any redemption or retirement of the outstanding voting
interest of the Borrower or of any Subsidiary;

(P) Neither the Borrower nor any Subsidiary will prepay any Subordinated
Indebtedness, Indebtedness for borrowed money except the Obligations, or
Indebtedness secured by any of its assets (except the Obligations), or enter
into or modify any agreement as a result of which the terms of payment of any of
the foregoing Indebtedness are waived or modified;

(Q) Neither the Borrower nor any Subsidiary will enter into any sale-leaseback
transaction;

(R) Neither the Borrower nor any Subsidiary will acquire or agree to acquire any
stock in, or all or substantially all of the assets of, any Person;

(S) Neither the Borrower nor any Subsidiary will furnish the Lender any
certificate or other document that will contain any untrue statement of material
fact or that will omit to state a material fact necessary to make it not
misleading in light of the circumstances under which it was furnished; and

(T) Neither the Borrower nor any Subsidiary will directly or indirectly apply
any part of the proceeds of the Loans to the purchasing or carrying of any
“margin stock” within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, or any regulations, interpretations, or rulings
thereunder.

 

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ARTICLE 7.0 DEFAULT

7.01 Events of Default.

The occurrence of any one or more of the following events shall constitute an
Event of Default hereunder:

(A) The Borrower or the Guarantor shall fail to pay when due any Obligations to
the Lender;

(B) The Borrower or the Guarantor or any other Subsidiary shall fail to observe
or perform any other obligation to be observed or performed by it hereunder or
under any of the Loan Documents, and such failure shall continue for thirty
(30) days after (1) notice of such failure from the Lender; or (2) the Lender is
notified of such failure or should have been so notified pursuant to the
provisions of Section 6.01(N), whichever is earlier;

(C) The Borrower or any Subsidiary shall fail to pay any Indebtedness due any
third Persons in excess of $10,000.00 in the aggregate, and such failure shall
continue beyond any applicable grace period, or the Borrower or any Subsidiary
shall suffer to exist any other event of default under any agreement binding the
Borrower or any Subsidiary with the exception of failures to pay or defaults
being contested in good faith in appropriate proceedings diligently conducted
and for which adequate reserves have been set aside in accordance with GAAP;

(D) Any financial statement, representation, warranty, or certificate made or
furnished by or with respect to the Borrower or the Guarantor or any other
Subsidiary to the Lender in connection with this Agreement, or as inducement to
the Lender to enter into this Agreement, or in any separate statement or
document to be delivered to the Lender hereunder, shall be materially false,
incorrect, or incomplete when made;

(E) The Borrower or the Guarantor or any other Subsidiary shall admit its
inability to pay its debts as they mature or shall make an assignment for the
benefit of itself or any of its creditors;

(F) Proceedings in bankruptcy, or for reorganization of the Borrower, the
Guarantor or any other Subsidiary, or for the readjustment of any of their
respective debts under the Bankruptcy Code, as amended, or any part thereof, or
under any other Laws, whether state or federal, for the relief of debtors, now
or hereafter existing, shall be commenced against or by the Borrower or the
Guarantor or any other Subsidiary and, except with respect to any such
proceedings instituted by the Borrower, the Guarantor or any other Subsidiary,
shall not be discharged within ninety (90) days of their commencement;

(G) A receiver or trustee shall be appointed for the Borrower or the Guarantor
or for any substantial part of their respective assets, or any proceedings shall
be instituted for the dissolution or the full or partial liquidation of the
Borrower or the Guarantor, and except with respect to any such appointments
requested or instituted by the Borrower or the Guarantor, such

 

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receiver or trustee shall not be discharged within ninety (90) days of his
appointment, and except with respect to any such proceedings instituted by the
Borrower or the Guarantor, such proceedings shall not be discharged within
ninety (90) days of their commencement, or the Borrower or the Guarantor shall
discontinue business or materially change the nature of its business, or the
Collateral becomes, in the reasonable judgment of the Lender, insufficient in
value to satisfy the Obligations, or the Lender otherwise reasonably finds
itself insecure as to the prompt and punctual payment and discharge of the
Obligations;

(H) The Borrower or the Guarantor shall suffer final judgments (which are not
covered by insurance where the insurer has acknowledged coverage) for payment of
money aggregating in excess of $100,000.00 and shall not discharge the same
within a period of thirty (30) days unless, pending further proceedings,
execution has not been commenced or, if commenced, has been effectively stayed;

(I) A judgment creditor of the Borrower or the Guarantor shall obtain possession
of any of the Collateral by any means, including (without implied limitation)
levy, distraint, replevin, or self-help;

(J) Loss by fire or other casualty to any security for the Loans which is not
insured exceeding $250,000.00 as determined by a public adjuster acceptable to
the Lender;

(K) Any obligee of Subordinated Indebtedness shall fail to comply with the
subordination provisions of the instruments evidencing such Subordinated
Indebtedness; or

(L) The Guarantor shall fail to comply fully with the requirements of the
Guaranty, or give notice of or assert the termination, discontinuance,
invalidity or unenforceability of any Guaranty;

(M) There occurs a Change of Control of the Borrower; or

(N) The Borrower shall fail to transfer to the Lender and maintain with the
Lender its deposit accounts and cash management services in accordance with
Section 6.01(S) of this Agreement.

7.02 Acceleration.

At its option, and at any time, whether immediately or otherwise, the Lender
may, upon the occurrence and during the continuance of any Event of Default,
declare all Obligations immediately due and payable without further action of
any kind including without limitation, notice, demand or presentment.

ARTICLE 8.0 THE LENDER’S RIGHTS AND REMEDIES

8.01 Account Debtors

Upon the occurrence and during the continuance of an Event of Default and at any
time thereafter, the Lender, without presentment, demand, notice, protest or
advertisement of any kind, may notify account debtors, at the Borrower’s
expense, that the Collateral has been

 

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assigned to the Lender and that payments shall be made directly to the Lender.
Upon request of the Lender, the Borrower will notify such account debtors that
their accounts must be paid to the Lender. Upon the occurrence and during the
continuance of an Event of Default and at all times thereafter, the Borrower
will hold all checks, drafts, cash and other remittances in trust for the Lender
and deliver them in kind to the Lender. The Lender shall have full power to
collect, compromise, endorse, sell or otherwise deal with the Collateral or
proceeds thereof in its own name or in the name of the Borrower.

8.02 Possession and Foreclosure of Collateral

Upon the occurrence and during the continuance of an Event of Default and at any
time thereafter, to the extent that the Borrower could legally do so, the
Lender, without presentment, demand, notice, protest or advertisement of any
kind, may enter onto, occupy and use any premises owned by the Borrower or in
which the Borrower has any interest. The Lender may take possession of all
Collateral. In the Lender’s reasonable discretion, the Lender may operate and
use the Borrower’s equipment, complete work in process and sell inventory
without being liable to the Borrower on account of any losses, damage or
depreciation that may occur as a result thereof (so long as the Lender acts in
good faith). The Lender may lease or license the Collateral to any Person for
such purposes. In any event, the Lender may sell, lease, assign and deliver the
whole or any part of the Collateral, at public or private sale, for cash, upon
credit or for future delivery, at such prices and upon such terms as the Lender
deems advisable. The Lender may sell or lease Collateral alone or in conjunction
with other property, real or personal, and allocate the sale proceeds or leases
among the items of Collateral sold without the necessity of the Collateral being
present at any such sale, or in view of prospective purchasers thereof. If
notice of sale is legally required, the Borrower agrees that five (5) days
written notice shall be deemed reasonable. Upon such sale, the Lender may become
the purchaser of the whole or any part of the Collateral sold, discharged from
all claims and free from any right of redemption. In case of any such sale by
the Lender of all or any of the Collateral on credit, or for future delivery,
such Collateral so sold may be retained by the Lender until the selling price is
paid by the purchaser. The Lender shall incur no liability in case of the
failure of the purchaser to take possession and pay for the Collateral so sold.
In case of any such failure, the said Collateral may be resold. Any Collateral
remaining unsold after being offered at public auction may be abandoned or
disposed of for no consideration in such manner as the Lender deems appropriate.

In any event, at any time and from time to time the Lender may abandon the
Collateral or any part thereof. The Borrower agrees promptly upon demand to take
possession of any and all abandoned Collateral and to remove it from any
location in the possession of or under the control of the Lender.

8.03 Use of Intellectual Property

Upon the occurrence and during the continuance of an Event of Default and at any
time thereafter, the Lender, without presentment, demand, notice, protest or
advertisement of any kind, may use all or any part of the Borrower’s
Intellectual Property which the Borrower now has or may hereafter acquire. The
Lender may license such Intellectual Property to third parties, seek
registration of such Intellectual Property in any state or nation or prosecute
pending applications for patent, trademark, or service marks in the Borrower’s
name in any state or nation.

 

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8.04 Notification of Default to Third Parties

The Lender may notify account debtors of the Borrower to pay over to the Lender
for application against the Obligations any sums due from such account debtors
to the Borrower. In addition, upon the occurrence and during the continuance of
an Event of Default and at any time thereafter, the Lender, without presentment,
demand, notice, protest or advertisement of any kind, may notify the Borrower’s
suppliers and other third parties of the default and of any and all decisions
made and actions taken by the Lender with respect to this Agreement, the
Obligations or the Collateral, without liability of any kind.

8.05 Assembly of Collateral

Upon the occurrence and during the continuance of an Event of Default and at any
time thereafter, the Lender, without presentment, demand, notice, protest or
advertisement of any kind, may require the Borrower to assemble the Collateral
in a single location at a place to be designated by the Lender and make the
Collateral at all times secure and available to the Lender.

8.06 Right of Set-Off.

The Lender may, and is hereby authorized by the Borrower, at any time and from
time to time, upon the occurrence and during the continuance of an Event of
Default, to the fullest extent permitted by applicable Laws, without advance
notice to the Borrower (any such notice being expressly waived by the Borrower),
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any other indebtedness at any time
owing by the Lender to, or for the credit or the account of, the Borrower
against any or all of the Obligations of the Borrower or the Guarantor, now or
hereafter existing, whether or not such Obligations have matured and
irrespective of whether the Lender has exercised any other rights that it has or
may have with respect to such Obligations, including without limitation any
acceleration rights. The Lender agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Lender under this Section 8.06 are in addition to the other rights and remedies
(including, without limitation, other rights of set-off) which the Lender may
have.

8.07 Exercise of Other Remedies

Upon the occurrence and during the continuance of any Event of Default and at
any time thereafter, the Lender, without presentment, demand, notice, protest or
advertisement of any kind, may exercise the remedies of a secured party afforded
by the Uniform Commercial Code and other applicable law or by the terms of any
agreement between the Borrower and the Lender.

 

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8.08 Cumulative Rights and Remedies

All rights and remedies of the Lender, whether provided for herein or in other
agreements, instruments or documents or conferred by law, are cumulative and may
be exercised alone or simultaneously.

8.09 Additional Rights and Remedies

(A) Upon the occurrence and during the continuance of an Event of Default, all
obligations on the part of the Lender to make advances on the Revolving Credit
Note, if the Lender so elects, shall cease and terminate, and, at the option of
the Lender, each of the Notes shall become immediately due and payable, and the
Lender shall thereupon be authorized and empowered to exercise any rights of
foreclosure or as otherwise provided for the realization of any security for the
Notes covered by any of the Loan Documents; but the Lender may, at its
reasonable discretion, make any advances or portions of advances, after demand
or the occurrence of any such Event of Default, without thereby waiving its
right to demand payment of the Borrower’s indebtedness evidenced by the Notes
and secured by the Loan Documents, and without becoming liable to make any other
or further advances as hereinabove contemplated by this Agreement.

(B) Upon the occurrence and during the continuance of any Event of Default, the
rights, powers, and privileges provided in this Section 8.09 and all other
remedies available to the Lender under this Agreement or at law or in equity may
be exercised by the Lender at any time and from time to time, whether or not the
indebtedness evidenced and secured by the Notes and the other Loan Documents
shall be due and payable, and whether or not the Lender shall have instituted
any foreclosure proceedings or other action for the enforcement of its rights
under the Notes or any of the other Loan Documents.

ARTICLE 9.0 ATTORNEY-IN-FACT

9.01 Attorney-In-Fact

Upon the occurrence and during the continuance of an Event of Default and at all
times thereafter, the Borrower hereby irrevocably appoints the Lender, or its
designee, as the Borrower’s true and lawful attorney-in-fact, with full power as
follows: (A) to endorse the name of the Borrower on any assignments, notes,
checks, drafts, money orders, or other instruments of payment for Collateral;
(B) to sign or endorse the name of the Borrower on any negotiable instrument,
invoice, freight or express bill, bill of lading, storage or warehouse receipts,
drafts, assignments, verifications and notices in connection with accounts;
(C) to obtain, adjust, settle and cancel, in the Borrower’s name, insurance
policies as required by Section 6.01(D) and to sign the Borrower’s name on
settlement checks or drafts; (D) in the Borrower’s name, to do any act which
this Agreement requires Borrower to do, and, (E) to give notice to the United
States Post Office to effect changes of address so that mail addressed to the
Borrower may be delivered directly to the Lender. In exercising this
power-of-attorney, the Lender shall not be liable to the extent that it acts in
good faith.

 

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ARTICLE 10.0 MISCELLANEOUS

10.01 Construction.

The provisions of this Agreement shall be in addition to those of any guaranty,
pledge or security agreement, note, or other evidence of liability now or
hereafter held by the Lender, all of which shall be construed as complementary
to each other. Nothing herein contained shall prevent the Lender from enforcing
any or all other guaranty, pledge or security agreements, notes, or other
evidences of liability in accordance with their respective terms.

10.02 Further Assurance.

From time to time, the Borrower will execute and deliver to the Lender such
additional documents and will provide such additional information as the Lender
may reasonably require to carry out the terms of this Agreement and be informed
of the status and affairs of the Borrower.

10.03 Enforcement and Waiver by the Lender.

The Lender shall have the right at all times to enforce the provisions of this
Agreement and the other Loan Documents in strict accordance with the terms
hereof and thereof, notwithstanding any conduct or custom on the part of the
Lender in refraining from so doing at any time or times. The failure of the
Lender at any time or times to enforce its rights under such provisions,
strictly in accordance with the same, shall not be construed as having created a
custom in any way or manner contrary to specific provisions of this Agreement or
as having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.

10.04 Expenses of the Lender.

The Borrower will, on demand, reimburse the Lender for all expenses, including
the reasonable fees and expenses of legal counsel for the Lender, incurred by
the Lender in connection with the preparation, administration, amendment,
modification, or enforcement of this Agreement and the other Loan Documents and
the collection or attempted collection of any of the Obligations including
without limitation by reason of enumeration, all reasonable expenses and fees of
legal counsel for the Lender incurred in connection with any bankruptcy or
insolvency action of the Borrower, the Guarantor or any other Subsidiary.

10.05 Notices.

Any notices or consents required or permitted by this Agreement shall be in
writing and shall be deemed delivered if delivered in person or by a nationally
recognized overnight courier, or if sent by certified mail, postage prepaid,
return receipt requested, facsimile transmission, as follows, unless such
address is changed by written notice hereunder:

 

(A)   If to the Borrower:   

WORLD ENERGY SOLUTIONS, INC.

100 Front Street, 20th Floor

Worcester, MA 01608

Attention: James F. Parslow,

 Chief Financial Officer

Facsimile: 508-459-8101

 

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  With a copy to:   

Paul J. D’Onfro, Esquire

Michael A. Refolo, Esquire

Mirick, O’Connell, DeMallie & Lougee, LLP

100 Front Street

Worcester, MA 01608

Facsimile: 508-983-6249

(B)   If to the Lender   

COMMERCE BANK & TRUST COMPANY

386 Main Street

Worcester, MA 01608

Attention: Senior Commercial Loan Officer

Facsimile: 508-797-6933

  With a copy to:   

George W. Tetler III, Esquire

Bowditch & Dewey, LLP

311 Main Street

P.O. Box 15156

Worcester, MA 01615-0156

Facsimile: 508-929-3052

Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner herein
provided for giving notice. Any such notice, demand, request, or other
communication shall be deemed given when mailed as aforesaid.

10.06 Waiver and Indemnification by the Borrower.

To the maximum extent permitted by applicable Laws, the Borrower:

(A) Waives (1) protest of all commercial paper at any time held by the Lender on
which the Borrower is in any way liable; (2) except as the same may herein be
specifically granted, notice of acceleration and of intention to accelerate; and
(3) notice and opportunity to be heard, after acceleration in the manner
provided in Section 7.02, before exercise by the Lender of the remedies of
self-help, set-off, or of other summary procedures permitted by any applicable
Laws or by any agreement with the Borrower, and, except where required hereby or
by any applicable Laws, notice of any other action taken by the Lender; and

(B) Defends, indemnifies and holds harmless the Lender and its officers,
attorneys, agents, and employees from all claims for loss or damage caused by
any act or omission on the

 

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part of any of them in connection with the transactions contemplated by this
Agreement or related to the banking relationship between or among the Borrower,
the Guarantor and the Lender, excepting only the Lender’s willful misconduct or
gross negligence.

10.07 Participation/Pledge.

Notwithstanding any other provision of this Agreement, the Borrower understands
that the Lender may at any time enter into participation agreements with one or
more participating banks whereby the Lender will allocate certain percentages of
its commitment to them. The Borrower acknowledges that, for the convenience of
all parties, this Agreement is being entered into with the Lender only and that
its obligations under this Agreement are undertaken for the benefit of, and as
an inducement to, any such participating bank as well as the Lender, and the
Borrower hereby grants to each such participating bank, to the extent of its
participation in the Loans, the right to set off deposit accounts maintained by
the Borrower with such bank. Notwithstanding the foregoing provisions of this
Section, any Lender may at any time pledge or assign all or any portion of such
Lender’s rights under this Agreement, the Notes, and the other Loan Documents to
a Federal Reserve bank; provided, however, that no such pledge or assignment
shall release such Lender from such Lender’s obligations hereunder or under the
Notes or any of the other Loan Documents.

10.08 WAIVER OF JURY TRIAL.

EACH OF THE LENDER AND THE BORROWER WAIVES ITS RIGHTS TO A TRIAL BY JURY WITH
RESPECT TO ANY SUIT, ACTION OR PROCEEDING, WHETHER CLAIM OR COUNTERCLAIM,
BROUGHT OR INSTITUTED BY ANY PARTY TO THIS AGREEMENT OR ANY OF THEIR SUCCESSORS
AND ASSIGNS, WHICH RELATES DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, THE LOANS,
THE OTHER LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN THE LENDER AND THE
BORROWER.

10.09 Applicable Law.

This Agreement is entered into and performable in The Commonwealth of
Massachusetts and shall be subject to and construed and enforced in accordance
with the laws of The Commonwealth of Massachusetts.

10.10 Binding Effect, Assignment, and Entire Agreement.

This Agreement shall inure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties hereto. The Borrower
has no right to assign any of its rights or obligations hereunder without the
prior written consent of the Lender. This Agreement, including the Exhibits
hereto, all of which are hereby incorporated herein by reference, and the
documents executed and delivered pursuant hereto, constitute the entire
agreement between the parties and may be amended only by a writing signed on
behalf of each party.

 

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10.11 Severability.

If any provision of this Agreement shall be held invalid under any applicable
Laws, such invalidity shall not affect any other provision of this Agreement
that can be given effect without the invalid provision, and, to this end, the
provisions hereof are severable.

10.12 Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
but one and the same instrument.

10.13 Integration Clause

This Agreement is intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Agreement. All prior or
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Agreement, and no party is relying
on any promise, agreement or understanding not set forth in this Agreement. This
Agreement may not be amended or modified except by written instrument describing
such amendment or modification executed by the Borrower and the Lender.

10.14 Governing Law; Consent to Jurisdiction.

THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS. The Borrower agrees that any suit for the enforcement of this
Agreement may be brought in the courts of The Commonwealth of Massachusetts or
any federal court sitting therein and consents to the non-exclusive jurisdiction
of such court and to service of process in any such suit being made upon the
Borrower by mail at the address identified with its signature below (unless the
Borrower has by five (5) days written notice specified another address). The
Borrower hereby waives any objection that it may now or hereafter have to the
venue of any such suit or any such court or that such suit is brought in an
inconvenient court.

THIS SPACE INTENTIONALLY LEFT BLANK;

SIGNATURES APPEAR ON THE FOLLOWING PAGE

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as a
sealed instrument as of the day and year first above written.

 

      WORLD ENERGY SOLUTIONS, INC.

/s/

    By:  

/s/ James Parslow

Witness       Name:   James Parslow       Title:   Chief Financial Officer and
Treasurer       COMMERCE BANK & TRUST COMPANY

/s/

    By:  

/s/ Thomas Moschos

Witness       Name:   Thomas Moschos       Title:   Commercial Loan Officer

 

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EXHIBIT 6.01(A)

USE OF LOAN PROCEEDS

The proceeds of the Term Loan shall be used to refinance all of the Borrower’s
outstanding indebtedness to Silicon Valley Bank and for working capital
purposes.

The proceeds of the Revolving Credit shall be used for working capital of the
Borrower.

 

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