Exhibit 10.2

WORLD ENERGY SOLUTIONS, INC.

Note Purchase Agreement

Dated as of October 3, 2012

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WORLD ENERGY SOLUTIONS, INC.

Note Purchase Agreement

Dated as of October 3, 2012

INDEX

 

 

     Page  

ARTICLE I

     1   

PURCHASE, SALE AND TERMS OF NOTES

     1   

1.01. The Notes

     1   

1.02. Purchase and Sale of Notes

     1   

(a) The Closing

     1   

(b) Use of Proceeds

     2   

1.03. Payments and Endorsements

     2   

1.04. Redemptions

     2   

(a) Required Redemptions

     2   

(b) Optional Redemptions With Premium

     2   

(c) Notice of Redemptions; Pro rata Redemptions

     2   

1.05. Payment on Non-Business Days

     3   

1.06. Registration, etc

     3   

1.07. Transfer and Exchange of Notes

     3   

1.08. Replacement of Notes

     4   

1.09. Subordination

     4   

(a) Payment of Senior Debt

     4   

(b) No Payment on Notes Under Certain Conditions

     5   

(c) Payments Held in Trust

     5   

(d) Subrogation

     5   

(e) Scope of Section

     5   

(f) Survival of Rights

     6   

(g) Amendment or Waiver

     6   

(h) Senior Debt Defined

     6   

1.10. Representations by the Purchaser

     6   

1.11. Disclosure of Information by the Purchaser

     7   

ARTICLE II

     7   

CONDITIONS TO PURCHASER’S OBLIGATION

     7   

2.01. Representations and Warranties

     7   

2.02. Documentation at Closing

     7   

ARTICLE III

     8   

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REPRESENTATIONS AND WARRANTIES

     8   

3.01. Organization and Standing

     8   

3.02. Corporate Action

     9   

3.03. Governmental Approvals

     9   

3.04. Litigation

     9   

3.05. Compliance with Other Instruments

     9   

3.06. Federal Reserve Regulations

     10   

3.07. Title to Assets, Patents

     10   

3.08. Financial Information

     10   

3.09. Taxes

     11   

3.10. ERISA

     11   

3.11. Transactions with Affiliates

     11   

3.12. Assumptions or Guaranties of Indebtedness of Other Persons

     11   

3.13. Investments in Other Persons

     12   

3.14. Equal Employment Opportunity

     12   

3.15. Status of Notes as Qualified Investments

     12   

3.16. Securities Act

     13   

3.17. Disclosure

     13   

3.18. No Brokers or Finders

     13   

3.19. Other Agreements of Officers

     13   

3.20. Capitalization; Status of Capital Stock

     13   

3.21. Labor Relations

     14   

3.22. Insurance

     14   

3.23. Books and Records

     14   

3.24. Foreign Corrupt Practices Act

     14   

ARTICLE IV

     14   

COVENANTS OF THE COMPANY

     14   

4.01. Affirmative Covenants of the Company

     14   

(a) Punctual Payment

     15   

(b) Payment of Taxes and Trade Debt

     15   

(c) Maintenance of Insurance

     15   

(d) Preservation of Corporate Existence

     15   

(e) Compliance with Laws

     15   

(f) Visitation Rights

     15   

(g) Keeping of Records and Books of Account

     16   

(h) Maintenance of Properties, etc

     16   

(i) Compliance with ERISA

     16   

(j) Maintenance of Interest Coverage

     16   

(k) Foreign Corrupt Practices Act

     16   

(l) Equal Employment Opportunity

     16   

(m) Status of Notes as Qualified Investments

     17   

4.02. Negative Covenants of the Company

     17   

(a) Liens

     17   

 

(ii)

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(b) Indebtedness

     18   

(c) Lease Obligations

     19   

(d) Assumptions or Guaranties of Indebtedness of Other Persons

     19   

(e) Mergers, Sale of Assets, etc

     19   

(f) Investments in Other Persons

     19   

(g) Distributions

     20   

(h) Dealings with Affiliates

     21   

(i) Maintenance of Ownership of Subsidiaries

     21   

(j) Change in Nature of Business

     21   

4.03. Reporting Requirements

     21   

ARTICLE V

     22   

EVENTS OF DEFAULT

     22   

5.01. Events of Default

     22   

5.02. Annulment of Defaults

     24   

ARTICLE VI

     24   

DEFINITIONS AND ACCOUNTING TERMS

     24   

6.01. Certain Defined Terms

     24   

6.02. Accounting Terms

     27   

ARTICLE VII

     28   

MISCELLANEOUS

     28   

7.01. No Waiver; Cumulative Remedies

     28   

7.02. Amendments, Waivers and Consents

     28   

7.03. Addresses for Notices, etc

     28   

7.04. Costs, Expenses and Taxes

     29   

7.05. Binding Effect; Assignment

     29   

7.06. Survival of Representations and Warranties

     29   

7.07. Prior Agreements

     29   

7.08. Severability

     29   

7.09. Governing Law

     29   

7.10. Headings

     30   

7.11. Sealed Instrument

     30   

7.12. Counterparts

     30   

7.13. Further Assurances

     30   

 

(iii)

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EXHIBITS

 

1.01 Form of Subordinated Notes

  

SCHEDULES

 

2.02(b) Matters to be Covered by Opinion Letter

  

3.01 Schedule of Subsidiaries

  

3.04 Schedule of Litigation

  

3.05 Schedule of Indebtedness for Money Borrowed

  

3.07 Schedule of Mortgages, Pledges, etc.

  

3.11 Schedule of Transactions with Affiliates

  

3.13 Schedule of Investments in Other Persons

  

3.15 Certificate re “Qualified Investments”

  

 

(iv)

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WORLD ENERGY SOLUTIONS, INC.

100 Front Street

Worcester, Massachusetts 01608

As of October 3, 2012

Massachusetts Capital Resource Company

420 Boylston Street

Boston, Massachusetts 02116

Re: Subordinated Notes due 2020

Gentlemen:

World Energy Solutions, Inc., a Delaware corporation (the “Company”), hereby
agrees with Massachusetts Capital Resource Company (the “Purchaser”) as follows:

ARTICLE I

PURCHASE, SALE AND TERMS OF NOTES

1.01. The Notes. The Company has authorized the issuance and sale to the
Purchaser of the Company’s Subordinated Notes, due September 30, 2020, in the
original principal amount of $4,000,000. The Subordinated Notes shall be
substantially in the form set forth in Exhibit 1.01 hereto and are herein
referred to individually as a “Note” and collectively as the “Notes”, which
terms shall also include any notes delivered in exchange or replacement
therefor.

1.02. Purchase and Sale of Notes.

(a) The Closing. The Company agrees to issue and sell to the Purchaser, and,
subject to and in reliance upon the representations, warranties, terms and
conditions of this Agreement, the Purchaser agrees to purchase, the Notes for an
aggregate purchase price of $4,000,000. Such purchase and sale shall take place
at a closing (the “Closing”) to be held at the Law Office of George W.
Thibeault, 60 State Street, Suite 700, Boston, Massachusetts 02109, on
October 3, 2012 at 10:00 A.M., or on such other date and at such time as may be
mutually agreed upon. At the Closing the Company will initially issue one Note,
payable to the order of the Purchaser, in the principal amount of $4,000,000,
against delivery to the Company of a check or a receipt of a wire transfer, in
the amount of $4,000,000, in payment of the full purchase price for the Notes.

 

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(b) Use of Proceeds. The Company agrees to use the full proceeds from the sale
of the Notes solely to assist in acquisitions and agrees that such use would
constitute a purpose which increases or maintains equal opportunity employment
in the Commonwealth of Massachusetts.

1.03. Payments and Endorsements. Payments of principal, interest and premium, if
any, on the Notes, shall be made directly by check duly mailed, wired or
delivered to the Purchaser at its address referred to in Section 7.03 hereof,
without any presentment or notation of payment, except that prior to any
transfer of any Note, the holder of record shall endorse on such Note a record
of the date to which interest has been paid and all payments made on account of
principal of such Note.

1.04. Redemptions.

(a) Required Redemptions. Beginning on and with October 31, 2016, and on the
last day of each calendar month in each year thereafter through and including
September 30, 2020, the Company will redeem, without premium, $83,333.33 in
principal amount of the Notes, or such lesser amount as may be then outstanding,
together with all accrued and unpaid interest then due on the amount so
redeemed. On the stated or accelerated maturity of the Notes, the Company will
pay the principal amount of the Notes then outstanding together with all accrued
and unpaid interest then due thereon. No optional redemption of less than all of
the Notes shall affect the obligation of the Company to make the redemptions
required by this subsection.

(b) Optional Redemptions With Premium. The Company may at any time redeem the
Notes in whole or in part (in integral multiples of $50,000) together with
interest due on the amount so redeemed through the date of redemption, and a
premium equal to the percentage of the principal amount of the Notes redeemed
under this subsection applicable to the period in which such redemption is made,
as follows:

 

Period ending

   Premium  

October 1, 2013

     5 % 

October 1, 2014

     3 % 

October 1, 2015

     1 % 

Thereafter

     0 % 

(c) Notice of Redemptions; Pro rata Redemptions. Notice of any optional
redemptions pursuant to subsection 1.04(b) shall be given to all registered
holders of the Notes at least ten (10) business days prior to the date of such
redemption. Each redemption of Notes pursuant to subsections 1.04(a) or
(b) shall be made so that the Notes then held by each holder shall be redeemed
in a principal amount which shall bear the same ratio to the total principal
amount of Notes being redeemed as the principal amount of Notes then held by
such holder bears to the aggregate principal amount of the Notes then
outstanding.

 

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1.05. Payment on Non-Business Days. Whenever any payment to be made shall be due
on a Saturday, Sunday or a public holiday under the laws of the Commonwealth of
Massachusetts, such payment may be made on the next succeeding business day, and
such extension of time shall in such case be included in the computation of
payment of interest due.

1.06. Registration, etc. The Company shall maintain at its principal office a
register of the Notes and shall record therein the names and addresses of the
registered holders of the Notes, the address to which notices are to be sent and
the address to which payments are to be made as designated by the registered
holder if other than the address of the holder, and the particulars of all
transfers, exchanges and replacements of Notes. No transfer of a Note shall be
valid unless made on such register for the registered holder or his executors or
administrators or his or their duly appointed attorney, upon surrender therefor
for exchange as hereinafter provided, accompanied by an instrument in writing,
in form and execution reasonably satisfactory to the Company. Each Note issued
hereunder, whether originally or upon transfer, exchange or replacement of a
Note or Notes, shall be registered on the date of execution thereof by the
Company and shall be dated the date to which interest has been paid on such
Notes or Note. The registered holder of a Note shall be that Person in whose
name the Note has been so registered by the Company. A registered holder shall
be deemed the owner of a Note for all purposes of this Agreement and, subject to
the provisions hereof, shall be entitled to the principal, premium, if any, and
interest evidenced by such Note free from all equities or rights of setoff or
counterclaim between the Company and the transferor of such registered holder or
any previous registered holder of such Note.

1.07. Transfer and Exchange of Notes. The registered holder of any Note or Notes
may, prior to maturity or prepayment thereof, surrender such Note or Notes at
the principal office of the Company for transfer or exchange, provided that the
principal amount of any Note or Notes to be issued in connection with such
transfer or exchange shall not be less than $100,000 unless (y) such transfer or
exchange is for the entire principal balance of the Notes then outstanding or
(z) such transfer or exchange is to one or more partners of such holder. Within
a reasonable time after notice to the Company from a registered holder of its
intention to make such exchange and without expense (other than transfer taxes,
if any) to such registered holder, the Company shall issue in exchange therefor
another Note or Note, in such denominations as requested by the registered
holder, for the same aggregate principal amount as the unpaid principal amount
of the Note or Notes so surrendered, and having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note or Notes so surrendered. Each new Note shall be made
payable to such Person or Persons, or registered assigns, as the registered
holder of such surrendered Note or Notes may designate, and such transfer or
exchange shall be made in such a manner that no gain or loss of principal or
interest shall result therefrom.

 

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1.08. Replacement of Notes. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Note and, if requested in
the case of any such loss, theft or destruction, upon delivery of an indemnity
bond or other agreement or security reasonably satisfactory to the Company, or,
in the case of any such mutilation, upon surrender and cancellation of such
Note, the Company will issue a new Note, of like tenor and amount and dated the
date to which interest has been paid, in lieu of such lost, stolen, destroyed or
mutilated Note; provided, however, if any Note of which Massachusetts Capital
Resource Company, its nominee, or any of its partners is the registered holder
is lost, stolen or destroyed, the affidavit of the President, Treasurer or any
Assistant Treasurer of the registered holder setting forth the circumstances
with respect to such loss, theft or destruction shall be accepted as
satisfactory evidence thereof, and no indemnification bond or other security
shall be required as a condition to the execution and delivery by the Company of
a new Note in replacement of such lost, stolen or destroyed Note other than the
registered holder’s written agreement to indemnify the Company.

1.09. Subordination. The Company, for itself, its successors and assigns,
covenants and agrees, and the Purchaser and each successor holder of the Notes
by his or its acceptance thereof, likewise covenants and agrees, that
notwithstanding any other provision of this Agreement or the Notes, the payment
of the principal of and interest on each and all of the Notes shall be
subordinated in right of payment, to the extent and in the manner hereinafter
set forth, to the prior payment in full of all Senior Debt (as hereinafter
defined) at any time outstanding. The provisions of this Section 1.09 shall
constitute a continuing representation to all Persons who, in reliance upon such
provisions, become the holders of or continue to hold Senior Debt, and such
provisions are made for the benefit of the holders of Senior Debt, and such
holders are hereby made obligees hereunder the same as if their names were
written herein as such, and they or any of them may proceed to enforce such
provisions against the Company or against the holder of any Note without the
necessity of joining the Company as a party.

(a) Payment of Senior Debt. In the event of any insolvency or bankruptcy
proceedings, or any receivership, liquidation, reorganization or other similar
proceedings in connection therewith, relative to the Company or to its property,
or, in the event of any proceedings for voluntary liquidation, dissolution or
other winding up of the Company or distribution or marshalling of its assets or
any composition with creditors of the Company, whether or not involving
insolvency or bankruptcy, then and in any such event all Senior Debt shall be
paid in full before any payment or distribution of any character, whether in
cash, securities or other property, shall be made on account of the Notes; and
any such payment or distribution, except securities which are subordinated and
junior in right of payment to the payment of all Senior Debt then outstanding in
terms of substantially the same tenor as this Section 1.09, which would, but for
the provisions hereof, be payable or deliverable in respect of the Notes shall
be paid or delivered directly to the holders of Senior Debt (or their duly
authorized representatives), in the proportions in which they hold the same,
until all Senior Debt shall have been paid in full, and every holder of the
Notes by becoming a holder thereof shall have designated and appointed the
holder or holders of Senior Debt (and their duly authorized representatives) as
his or its agents and attorney-in-fact to demand, sue for, collect and receive
such Senior Debt holder’s ratable share of all such payments and distributions
and to file any necessary proof of claim therefor and to take all such other
action in the name of the holders of the Notes or otherwise, as such Senior Debt
holders (or their authorized representatives) may

 

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determine to be necessary or appropriate for the enforcement of this
Section 1.09. The Purchaser and each successor holder of the Notes by its or his
acceptance thereof agrees to execute, at the request of the Company, a separate
agreement with any holder of Senior Debt on the terms set forth in this
Section 1.09, and to take all such other action as such holder or such holder’s
representative may request in order to enable such holder to enforce all claims
upon or in respect of such holder’s ratable share of the Notes.

(b) No Payment on Notes Under Certain Conditions. In the event that any default
occurs in the payment of the principal of or interest on any Senior Debt
(whether as a result of the acceleration thereof by the holders of such Senior
Debt or otherwise) and during the continuance of such default for a period up to
ninety (90) days and thereafter if judicial proceedings shall have been
instituted with respect to such defaulted payment, or (if a shorter period)
until such payment has been made or such default has been cured or waived in
writing by such holder of Senior Debt then and during the continuance of such
event no payment of principal or interest on the Notes shall be made by the
Company or accepted by any holder of the Notes who has received notice from the
Company or from a holder of Senior Debt of such events.

(c) Payments Held in Trust. In case any payment or distribution shall be paid or
delivered to any holder of the Notes before all Senior Debt shall have been paid
in full, despite or in violation or contravention of the terms of this
subordination, such payment or distribution shall be held in trust for and paid
and delivered ratably to the holders of Senior Debt (or their duly authorized
representatives), until all Senior Debt shall have been paid in full.

(d) Subrogation. Subject to the payment in full of all Senior Debt and until the
Notes shall be paid in full, the holders of the Notes shall be subrogated to the
rights of the holders of Senior Debt (to the extent of payments or distributions
previously made to such holders of Senior Debt pursuant to the provisions of
subsections (a) and (c) of this Section 1.09) to receive payments or
distributions of assets of the Company applicable to the Senior Debt. No such
payments or distributions applicable to the Senior Debt shall, as between the
Company and its creditors, other than the holders of Senior Debt and the holders
of the Notes, be deemed to be a payment by the Company to or on account of the
Notes; and for the purposes of such subrogation, no payments or distributions to
the holders of Senior Debt to which the holders of the Notes would be entitled
except for the provisions of this Section 1.09 shall, as between the Company and
its creditors, other than the holders of Senior Debt and the holders of the
Notes, be deemed to be a payment by the Company to or on account of the Senior
Debt.

(e) Scope of Section. The provisions of this Section 1.09 are intended solely
for the purpose of defining the relative rights of the holders of the Notes, on
the one hand, and the holders of the Senior Debt, on the other hand. Nothing
contained in this Section 1.09 or elsewhere in this Agreement or the Notes is
intended to or shall impair, as between the Company, its creditors other than
the holders of Senior Debt, and the holders of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay to the holders of the Notes
the principal of and interest on the Notes as and when the same shall

 

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become due and payable in accordance with the terms thereof, or to affect the
relative rights of the holders of the Notes and creditors of the Company other
than the holders of the Senior Debt, nor shall anything herein or therein
prevent the holder of any Note from accepting any payment with respect to such
Note or exercising all remedies otherwise permitted by applicable law upon
default under such Note, subject to the rights, if any, under this Section 1.09
of the holders of Senior Debt in respect of cash, property or securities of the
Company received by the holders of the Notes.

(f) Survival of Rights. The right of any present or future holder of Senior Debt
to enforce subordination of the Notes pursuant to the provisions of this
Section 1.09 shall not at any time be prejudiced or impaired by any act or
failure to act on the part of the Company or any such holder of Senior Debt,
including, without limitation, any forbearance, waiver, consent, compromise,
amendment, extension, renewal, or taking or release of security of or in respect
of any Senior Debt or by noncompliance by the Company with the terms of such
subordination regardless of any knowledge thereof such holder may have or
otherwise be charged with.

(g) Amendment or Waiver. The provisions of this Section 1.09 may not be amended
or waived in any manner which is detrimental to any Senior Debt without the
consent of the holders of all then existing Senior Debt.

(h) Senior Debt Defined. The term “Senior Debt” shall mean (i) all Indebtedness
of the Company for money borrowed from banks or other institutional lenders,
including any extension or renewals thereof, whether outstanding on the date
hereof or thereafter created or incurred, which is not by its terms subordinate
and junior to or on a parity with the Notes and which is permitted hereby at the
time it is created or incurred, and (ii) all guaranties by the Company which are
not by their terms subordinate and junior to or on a parity with the Notes and
which are permitted hereby at the time they are made, of Indebtedness of any
Subsidiary if such Indebtedness would have been Senior Debt pursuant to the
provisions of clause (i) of this sentence had it been Indebtedness of the
Company. In making any loans which are (or the guaranties of which are) intended
to be Senior Debt, the lenders or purchasers shall be entitled to rely as to the
fact that such Indebtedness or guaranty is permitted hereby upon a certificate
by the Company’s chief financial officer purporting to show such Indebtedness or
guaranty will not result in the Company’s failure to comply with the provisions
of Article IV hereof as of the date of the loan or guarantee.

1.10. Representations by the Purchaser. The Purchaser represents that it is its
present intention to acquire the Notes for its own account and that the Notes
are being and will be acquired for the purpose of investment and not with a view
to distribution or resale thereof; subject, nevertheless, to the condition that
the disposition of the property of the Purchaser shall at all times be within
its control. The acquisition by the Purchaser of the Notes shall constitute a
confirmation of this representation.

 

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1.11. Disclosure of Information by the Purchaser. The Company understands that
the Purchaser is a special purpose limited partnership organized under
Chapter 109 of the General Laws of the Commonwealth of Massachusetts and
Chapter 816 of the Acts and Resolves of 1977 of the Commonwealth of
Massachusetts (the “Capital Resource Company Act”), and as such, in accordance
with such provisions, the Purchaser, in order to obtain certain benefits for
itself and its partners, is required to file certain reports and otherwise
disclose information relating to the business, financial affairs, and future
prospects of the Company and its affiliates (as defined in the aforesaid
legislation) with the Clerk of the Senate and the Clerk of the House of
Representatives of the General Court of the Commonwealth of Massachusetts, the
Secretary of Manpower Affairs, the Commissioner of Insurance and the Department
of Revenue of the Commonwealth of Massachusetts, and that such reports and other
information may constitute “public records” within the purview of Section 7 of
Chapter 4 of the General Laws of the Commonwealth of Massachusetts. In addition,
information relating to the business, financial affairs and future prospects of
the Company and its affiliates must be disclosed to others in order to obtain
independent confirmation that financing on substantially similar terms to
financing provided pursuant to this Agreement was not elsewhere available to the
Company. The Company hereby authorizes the Purchaser to disclose all such
information relating to the business, financial affairs and future prospects of
the Company and its affiliates as has been or may in the future be presented to
the Purchaser to all such persons as the Purchaser in good faith deems necessary
or appropriate in order to fulfill its obligations under the Capital Resource
Company Act.

ARTICLE II

CONDITIONS TO PURCHASER’S OBLIGATION

The obligation of the Purchaser to purchase and pay for the Notes at the Closing
is subject to the following conditions:

2.01. Representations and Warranties. Each of the representations and warranties
of the Company set forth in Article III hereof shall be true on the date of the
Closing.

2.02. Documentation at Closing. The Purchaser shall have received prior to or at
the Closing all of the following, each in form and substance satisfactory to the
Purchaser and its counsel:

(a) A certified copy of all charter documents of the Company; a certified copy
of the resolutions of the Board of Directors and, to the extent required, the
stockholders of the Company evidencing approval of this Agreement, the Notes,
and other matters contemplated hereby; a certified copy of the By-laws of the
Company; and certified copies of all documents evidencing other necessary
corporate or other action and governmental approvals, if any, with respect to
this Agreement, the Notes.

 

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(b) A favorable opinion of Mirick, O’Connell, DeMallie & Lougee, LLP, counsel
for the Company, as to matters set forth in Schedule 2.02(b), and as to such
other matters as the Purchaser, or its counsel, may reasonably request.

(c) A certificate of the Secretary or an Assistant Secretary of the Company
which shall certify the names of the officers of the Company, authorized to sign
this Agreement, the Notes, and the other documents or certificates to be
delivered pursuant to this Agreement by the Company, or any of its officers,
together with the true signatures of such officers. The Purchaser may
conclusively rely on such certificates until it shall receive a further
certificate of the Secretary or an Assistant Secretary of the Company canceling
or amending the prior certificate and submitting the signatures of the officers
named in such further certificate.

(d) A certificate from a duly authorized officer of the Company stating that the
representations and warranties of the Company contained in Article III hereof
and otherwise made by the Company in writing in connection with the transactions
contemplated hereby are true and correct in all material respects and that no
condition or event has occurred or is continuing or will result from execution
and delivery of this Agreement or the Notes which constitute an Event of Default
or would constitute an Event of Default but for the requirement that notice be
given or time elapse or both.

(e) A certificate, in the form attached as Schedule 3.15 hereto, shall have been
executed and delivered by a duly authorized officer of the Company.

(f) Payment for the costs and expenses identified in Section 7.04 as to which
the Purchaser gives the Company notice prior to the Closing.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants as follows:

3.01. Organization and Standing . The Company and each Subsidiary is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction in which it was organized and has all requisite corporate power
and authority for the ownership and operation of its properties and for the
carrying on of its business as now conducted and as now proposed to be
conducted. The Company and each Subsidiary is duly licensed or qualified and in
good standing as a foreign corporation authorized to do business in all
jurisdictions wherein the character of the property owned or leased, or the
nature of the activities conducted, by it makes such licensing or qualification
necessary, except where failure to be so licensed or qualified would not have a
material adverse effect on the Company or such Subsidiary. Attached hereto as
Schedule 3.01 is a schedule which correctly identifies all Subsidiaries of the
Company as of the date hereof and shows with respect to each Subsidiary its
jurisdiction of incorporation. All of the outstanding capital stock of each
Subsidiary has been duly authorized and validly issued, is fully paid and

 

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nonassessable, and is owned beneficially and of record by the Company or by
another Subsidiary as indicated in Schedule 3.01, free and clear of any lien,
right, encumbrance or restriction of any nature, including, without limitation,
any lien, right, encumbrance or restriction on transfer.

3.02. Corporate Action. The Company has all necessary corporate power and has
taken all corporate action required to make all the provisions of this
Agreement, the Notes, and any other agreements and instruments executed in
connection herewith and therewith the valid and enforceable obligations they
purport to be. The issuance of the Notes is not subject to preemptive or other
similar statutory or contractual rights (which have not been waived) and will
not conflict with any provisions of any agreement or instrument to which the
Company or any Subsidiary is a party or by which it is bound.

3.03. Governmental Approvals. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for, or in connection with, the offer,
issuance, sale, execution or delivery by the Company of, or for the performance
by it of its obligations under, this Agreement or the Notes.

3.04. Litigation. Except as set forth on Schedule 3.04, there is no litigation
or governmental proceeding or investigation pending or, to the Knowledge of the
Company, threatened against the Company or any Subsidiary affecting any of its
properties or assets, or against any officer, key employee or principal
stockholder of the Company or any Subsidiary where such litigation, proceeding
or investigation, either individually or in the aggregate, would have a material
adverse effect on the Company or any Subsidiary, nor, to the Knowledge of the
Company, has there occurred any event or does there exist any condition on the
basis of which any litigation, proceeding or investigation might properly be
instituted which would have a material adverse effect on the Company or any
Subsidiary. Neither the Company nor any Subsidiary, nor, to the Knowledge of the
Company, any officer or key employee of the Company or any Subsidiary, or
principal stockholder of the Company or any Subsidiary, is in default with
respect to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency affecting the Company or any
Subsidiary. There are no actions or proceedings pending or threatened (or any
basis therefor known to the Company) which might result, either in any case or
in the aggregate, in any material adverse change in the business, operations,
affairs or condition of the Company or any Subsidiary or in any of its
properties or assets, or which might call into question the validity of this
Agreement, the Notes, or any action taken or to be taken pursuant hereto or
thereto.

3.05. Compliance with Other Instruments. The Company and each Subsidiary is in
compliance in all respects with the terms and provisions of this Agreement and
in all material respects with the terms and provisions of its charter and
by-laws and mortgages, indentures, leases, agreements and other instruments and
of all judgments, decrees, governmental orders, statutes, rules and regulations
by which it is bound or to which its properties or assets are subject. There is
no term or provision in any of the foregoing documents and instruments which
materially adversely affects the business, assets or financial condition of the
Company or any Subsidiary. Neither the execution and

 

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delivery of this Agreement or the Notes, nor the consummation of any
transactions contemplated hereby or thereby has constituted or resulted in or
will constitute or result in a default or violation of any term or provision in
any of the foregoing documents or instruments. A schedule of Indebtedness for
borrowed money of the Company and each Subsidiary (including lease obligations
required to be capitalized in accordance with applicable Statements of Financial
Accounting Standards) is attached as Schedule 3.05.

3.06. Federal Reserve Regulations. Neither the Company nor any Subsidiary is
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Notes will be used to purchase or carry any margin security or to extend credit
to others for the purpose of purchasing or carrying any margin security or in
any other manner which would involve a violation of any of the regulations of
the Board of Governors of the Federal Reserve System.

3.07. Title to Assets, Patents. Except as is set forth in Schedule 3.07, the
Company and each Subsidiary has good and clear record and marketable title in
fee to such of its fixed assets as are real property, and title to all of its
other assets, now carried on its books including those reflected in the most
recent consolidated balance sheet of the Company and its Subsidiaries which
forms a part of Schedule 3.08 attached hereto, or acquired since the date of
such balance sheet (except personal property disposed of since said date in the
ordinary course of business) free of any mortgages, pledges, charges, liens,
security interests or other encumbrances except for liens permitted hereunder.
The Company and each Subsidiary enjoys peaceful and undisturbed possession under
all leases under which it is operating, and all said leases are valid and
subsisting and in full force and effect. The Company and each Subsidiary owns or
to its Knowledge has a valid right to use the patents, patent rights, licenses,
permits, trade secrets, trademarks, trademark rights, trade names or trade name
rights or franchises, copyrights, inventions and intellectual property rights
being used to conduct its business as now operated and as now proposed to be
operated; and to its Knowledge the conduct of its business as now operated and
as now proposed to be operated does not and will not conflict with valid
patents, patent rights, licenses, permits, trade secrets, trademarks, trademark
rights, trade names or trade name rights or franchises, copyrights, inventions
and intellectual property rights of others. To its Knowledge, neither the
Company nor any Subsidiary has any obligation to compensate any Person for the
use of any such patents or such rights nor has the Company or any Subsidiary
granted to any Person any license or other rights to use in any manner any of
such patents or such rights of the Company or any Subsidiary.

3.08. Financial Information. The consolidated financial statements of the
Company and its Subsidiaries set forth in the Company’s Form 10-K for its fiscal
year ended December 31, 2011 (the “Form 10-K”) and in its Form 10-Q for the
quarter ended June 30, 2012 (the “Form 10-Q”), both as filed with the Securities
and Exchange Commission (the “SEC”), present fairly in all material respects the
consolidated financial position of the Company and its Subsidiaries as at the
dates thereof and its results of operations for the periods covered thereby and
have been prepared in accordance with GAAP. The consolidated financial
statements included: (i) in the Form 10-K are for the two years ended
December 31, 2010 and December 31, 2011, as audited by Marcum, LLP, and (ii) in
the Form 10-Q

 

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are for the three months and six months ended June 30, 2012, being unaudited and
subject to year-end adjustments consisting of normal recurring items which will
not be material in the aggregate. Neither the Company nor any Subsidiary has any
liability contingent or otherwise not disclosed in the aforesaid financial
statements or in the notes thereto that would reasonably be expected, together
with all such other liabilities, materially affect the financial condition of
the Company or any Subsidiary, nor does the Company have any reasonable grounds
to know of any such liability. Since the date of said December 31, 2011 audited
financial statements, except as has been disclosed in the Company’s reports
filed with the SEC and which are publicly available on the SEC’s Electronic Data
Gathering, Analysis, and Retrieval (EDGAR) system (the “SEC Reports”), (i) there
has been no material adverse change in the business, assets or condition,
financial or otherwise, operations or prospects, of the Company or any
Subsidiary; (ii) neither the business, condition, operations or prospects of the
Company or any Subsidiary nor any of their properties or assets has been
adversely affected as a result of any legislative or regulatory change, any
revocation or change in any franchise, license or right to do business, or any
other event or occurrence, whether or not insured against; and (iii) neither the
Company nor any Subsidiary has entered into any material transaction or made any
distribution on its capital stock except as is set forth in the Form 10-K or
Form 10-Q.

3.09. Taxes. The Company and each Subsidiary has accurately prepared and timely
filed all federal, state and other tax returns required by law to be filed by
it, and all taxes shown to be due and all additional assessments have been paid
or provision made therefor. The Company knows of no additional assessments or
adjustments pending or threatened against the Company or any Subsidiary for any
period, nor of any basis for any such assessment or adjustment.

3.10. ERISA. No employee benefit plan established or maintained, or to which
contributions have been made, by the Company or any Subsidiary, which is subject
to part 3 of Subtitle B of Title I of The Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) had an accumulated funding deficiency (as such
term is defined in Section 302 of ERISA) as of the last day of the most recent
fiscal year of such plan ended prior to the date hereof, and no material
liability to the Pension Benefit Guaranty Corporation has been incurred with
respect to any such plan by the Company or any of its Subsidiaries.

3.11. Transactions with Affiliates. Except as set forth in Schedule 3.11
attached hereto, there are no loans, leases, royalty agreements or other
continuing transactions between the Company or any Subsidiary and any Person
owning five percent (5%) or more of any class of capital stock of the Company or
any Subsidiary or other entity controlled by such stockholder or a member of
such stockholder’s family.

3.12. Assumptions or Guaranties of Indebtedness of Other Persons. Neither the
Company nor any Subsidiary has assumed, guaranteed, endorsed or otherwise become
directly or contingently liable on (including, without limitation, liability by
way of agreement, contingent or otherwise, to purchase, to provide funds for
payment, to supply funds to or otherwise invest in the debtor or otherwise to
assure the creditor against loss) any Indebtedness of any other Person.

 

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3.13. Investments in Other Persons. Except as set forth in Schedule 3.13
attached hereto, neither the Company nor any Subsidiary has made any loan or
advance to any Person which is outstanding on the date of this Agreement, nor is
the Company or any Subsidiary obligated or committed to make any such loan or
advance, nor does the Company or any Subsidiary own any capital stock or assets
comprising the business of, obligations of, or any interest in, any Person.

3.14. Equal Employment Opportunity. The Company has reviewed its employment
practices and policies and those of each Subsidiary and, to its Knowledge, the
Company and each Subsidiary is in full compliance with (a) all applicable laws
of the United States, of the Commonwealth of Massachusetts and of each other
applicable jurisdiction, relating to equal employment opportunity (including,
without limitation, Title VII of the Civil Rights Act of 1964, as amended (42
U.S.C. §000e-17), the Age Discrimination in Employment Act of 1967, as amended
(29 U.S.C. §§621-634), the Equal Pay Act of 1963 (29 U.S.C. §206(d)), and any
rules, regulations and administrative orders and Executive Orders relating
thereto; Mass. Gen. Laws. c. 151B, Mass. Gen. Laws c. 149 §24A et seq. and §105A
et seq., and any rules or regulations relating thereto; and (b) the applicable
terms, relating to equal employment opportunity, of any contract, agreement or
grant the Company or any Subsidiary has with, from, or relating (by way of
subcontract or otherwise) to any other contract, agreement or grant of, any
federal or state governmental unit (“Government Contract”), including, without
limitation, any terms required pursuant to Federal Executive Order No. 11246 and
Massachusetts Executive Order No. 74 (both as amended). To the Company’s
Knowledge, it and each Subsidiary has kept all records required to be kept, and
has filed all reports, affirmative action plans and forms (including, without
limitation and where applicable, Form EEO-1) required to be filed pursuant to
any such applicable law or the terms of any such Government Contract. Neither
the Company nor any Subsidiary has been subject to any adverse final
determination or order, with respect to any charge of employment discrimination
made against it, by the United States Equal Employment Opportunity Commission,
the Massachusetts Commission Against Discrimination or any other governmental
unit (including, without limitation, any such governmental unit with which it
has a Government Contract), and neither the Company nor any Subsidiary is
presently, to the best of the Company’s Knowledge, subject to any formal
proceedings before, or investigations by, such commissions or governmental
units.

3.15. Status of Notes as Qualified Investments. The Company has duly authorized
the execution and delivery to the Purchaser on behalf of the Company of the
certificate attached as Schedule 3.15 hereto, setting forth such statements,
information and related data as are necessary to permit the Purchaser to
determine and demonstrate that the Notes issued pursuant to this Agreement will
constitute “qualified investments” within the meaning of that term as set forth
in the Capital Resource Company Act and that the full proceeds of the Notes will
be used for purposes which will materially increase or maintain equal
opportunity employment in the Commonwealth of Massachusetts. All such
statements, information and related data presented in such certificate that are
not based on estimates and projections of future events are materially true and
correct as of the date of such certificate and all such statements, information
and related data based upon estimates or projections of future events have been
carefully considered and prepared on behalf of the Company.

 

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3.16. Securities Act. Neither the Company nor anyone acting on its behalf has
offered any of the Notes, or similar securities, or solicited any offers to
purchase or made any attempt by preliminary conversation or negotiations to
dispose of the Notes, or similar securities, to any Person other than the
Purchaser or the institutions described in Schedule 3.15. Neither the Company
nor anyone acting on its behalf has offered or will offer to sell the Notes, or
similar securities to, or solicit offers with respect thereto from, or enter
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Notes under the registration
provisions of the Securities Act.

3.17. Disclosure. Neither this Agreement, the Form 10-K, Form10-Q, the Schedule
14A, the Certificate set forth as Schedule 3.15 hereof, nor any other agreement,
or certificate furnished to the Purchaser or its counsel by or on behalf of the
Company or any Subsidiary in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. Without limiting the foregoing, the Company has no
Knowledge or belief that there exists, or there is pending or planned, any
patent, invention, device, application or principle or any statute, rule, law,
regulation, standard or code which would materially adversely affect the
condition, financial or otherwise, or the operations of the Company or any
Subsidiary.

3.18. No Brokers or Finders. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company or any Subsidiary for any commission, fee or other
compensation as a finder or broker because of any act or omission by the Company
or any Subsidiary or any agent of the Company or any Subsidiary.

3.19. Other Agreements of Officers. To the Knowledge of the Company, no officer
or key employee of the Company or any Subsidiary is a party to or bound by any
agreement, contract or commitment, or subject to any restrictions, particularly
but without limitation in connection with any previous employment of any such
person, which materially and adversely affects, or in the future would (so far
as the Company can reasonably foresee) materially and adversely affect, the
business or operations of the Company or any Subsidiary or the right of any such
person to participate in the affairs of the Company or any Subsidiary. To the
best of the Knowledge of the Company, no officer or key employee has any present
intention of terminating his employment with the Company or any Subsidiary and
neither the Company nor any Subsidiary has any present intention of terminating
any such agreement.

3.20. Capitalization; Status of Capital Stock. The Company capitalization as of
June 30, 2012 is as set forth in the Form 10-Q. A complete list of the
“principal stockholders” of the Company and the number of shares of capital
stock of the Company owed by them is set forth in Schedule 14A (“Schedule 14A”)
as filed with the SEC in connection with the Company’s annual meeting of
stockholders

 

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held on May 17, 2012. All the outstanding shares of capital stock of the Company
have been duly authorized, are validly issued and are fully paid and
nonassessable. Except as set forth in the Form 10-K and Form 10-Q, there are, as
of the date of said Forms, no options, warrants or rights to purchase shares of
capital stock or other securities of the Company authorized, issued or
outstanding, nor is the Company obligated in any other manner to issue shares of
its capital stock or other securities. There are no restrictions on the transfer
of other shares of capital stock of the Company other than those imposed by
relevant state and federal securities laws. The offer and sale of all shares of
capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all federal and state securities laws.

3.21. Labor Relations. To the Knowledge of the Company, no labor union or any
representative thereof has made any attempt to organize or represent employees
of the Company or any Subsidiary. There are no unfair labor practice charges,
pending trials with respect to unfair labor practice charges, pending material
grievance proceedings or adverse decisions of a Trial Examiner of the National
Labor Relations Board against the Company or any Subsidiary. Furthermore, to the
Knowledge of the Company, relations with employees of the Company and each
Subsidiary are good and there is no reason to believe that any labor
difficulties will arise in the foreseeable future.

3.22. Insurance. The Company and each Subsidiary carries insurance covering its
properties and business adequate and customary for the type and scope of the
properties and business.

3.23. Books and Records. The books of account, ledgers, order books, records and
documents of the Company and each Subsidiary are materially accurate and
complete.

3.24. Foreign Corrupt Practices Act. To the Company’s Knowledge and belief
neither it nor any Subsidiary is engaged, nor has any officer, director,
employee or agent of the Company or any Subsidiary engaged, in any act or
practice which would constitute a violation of the Foreign Corrupt Practices Act
of 1977, or any rules or regulations promulgated thereunder.

ARTICLE IV

COVENANTS OF THE COMPANY

4.01. Affirmative Covenants of the Company. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that, as long as any of
the Notes are outstanding, it will perform and observe the following covenants
and provisions and will cause each Subsidiary to perform and observe such of the
following covenants and provisions as are applicable to such Subsidiary:

 

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(a) Punctual Payment. Pay the principal of, premium, if any, and interest on
each of the Notes at the times and place and in the manner provided in the Notes
and herein.

(b) Payment of Taxes and Trade Debt. Pay and discharge, and cause each
Subsidiary to pay and discharge, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
which, if unpaid, would become a material lien or charge upon any properties of
the Company or any Subsidiary, provided that neither the Company nor the
Subsidiary shall be required to pay any such tax, assessment, charge, levy or
claim which is being contested in good faith and by appropriate proceedings if
the Company or Subsidiary concerned shall have set aside on its books adequate
reserves with respect thereto.

(c) Maintenance of Insurance. Maintain, and cause each Subsidiary to maintain,
insurance with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which the Company or such Subsidiary operates.

(d) Preservation of Corporate Existence. Preserve and maintain, and cause each
Subsidiary to preserve and maintain, its corporate existence, rights, franchises
and privileges in the jurisdiction of its incorporation, and qualify and remain
qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
of its properties; provided, however, that nothing herein contained shall
prevent any merger, consolidation or transfer of assets permitted by subsection
4.02(e). Preserve and maintain, and cause each Subsidiary to preserve and
maintain, all licenses and other rights to use patents, processes, licenses,
trademarks, trade names, inventions, intellectual property rights or copyrights
owned or possessed by it and necessary to the conduct of its business.

(e) Compliance with Laws. Materially comply, and cause each Subsidiary to
materially comply, with all applicable laws, rules, regulations and orders of
any governmental authority, noncompliance with which would have a material
adverse effect on its business or condition, financial or other.

(f) Visitation Rights. Upon at least fifteen (15) days’ notice and from time to
time, permit the Purchaser, at its expense, or any agents or representatives
thereof, during normal operating hours to examine and make copies of and
extracts from the records and books of account of, and visit and inspect the
properties of, the Company and any Subsidiary, and to discuss the affairs,
finances and accounts of the Company and any Subsidiary with any of their
officers or directors and independent accountants.

 

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(g) Keeping of Records and Books of Account. Keep, and cause each Subsidiary to
keep, adequate records and books of account, in which complete entries will be
made in accordance with GAAP, reflecting all financial transactions of the
Company and such Subsidiary, and in which, for each fiscal year, all proper
reserves for depreciation, depletion, obsolescence, amortization, taxes, bad
debts and other purposes in connection with its business shall be made.

(h) Maintenance of Properties, etc. Maintain and preserve, and cause each
Subsidiary to maintain and preserve, all of its properties, necessary or useful
in the proper conduct of its business, in good repair, working order and
condition, ordinary wear and tear excepted.

(i) Compliance with ERISA. Comply, and cause each Subsidiary to comply, with all
minimum funding requirements applicable to any pension or other employee benefit
or employee contribution plans which are subject to ERISA or to the Internal
Revenue Code of 1986, as amended (the “Code”), and comply, and cause each
Subsidiary to comply, in all other material respects with the provisions of
ERISA and the Code, and the rules and regulations thereunder, which are
applicable to any such plan. Neither the Company nor any Subsidiary will permit
any event or condition to exist which could permit any such plan to be
terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.

(j) Maintenance of Interest Coverage. Maintain a ratio of Consolidated Net
Earnings Available for Interest Charges to Interest Charges of not less than 1
to 1, such ratio to be measured at the end of each fiscal quarter of the Company
as an average of the four (4) most recent fiscal quarters of the Company
commencing on and with the fiscal quarter ending December 31, 2012.

(k) Foreign Corrupt Practices Act. Comply, in all material respects, and cause
each Subsidiary to comply, in all material respects, and cause each officer,
director, employee and agent of the Company and each Subsidiary to comply, in
all material respects, at all times with the prohibitions on certain acts and
practices set forth in the Foreign Corrupt Practices Act of 1977, and any rules
or regulations promulgated thereunder.

(l) Equal Employment Opportunity. Comply, in all material respects, and cause
each Subsidiary to comply, in all material respects, with all applicable laws of
the United States, the Commonwealth of Massachusetts, and of each other
applicable jurisdiction relating to equal employment opportunity, any rules,
regulations, administrative orders and Executive Orders relating thereto and the
applicable terms, relating to equal employment opportunity, of any Government
Contract; and keep, and cause each Subsidiary to file, all reports, affirmative
action plans and forms required to be filed, pursuant to any such applicable law
or the terms of any such Government Contract; provided, however, the Company or
any Subsidiary shall not be considered to have failed to comply with the
foregoing during any period that any matter relating to the Company’s or such
Subsidiary’s employment practices is being contested by the Company or such
Subsidiary in appropriate proceedings, or thereafter, if the Company or such
Subsidiary complies with any final determination issued in such proceedings.

 

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(m) Status of Notes as Qualified Investments. In the event that any of the
statements, information and related data provided by or on behalf of the Company
or any Subsidiary and relied upon by the Purchaser in determining that the Notes
constitute “qualified investments” within the meaning of that term in the
Capital Resource Company Act shall be put in issue in any formal or informal
proceedings initiated or conducted by or on behalf of the Commonwealth of
Massachusetts, the Company shall, upon reasonable notice and at its expense,
provide, and, cause each Subsidiary to provide, such additional information,
witnesses and related data as may be reasonably necessary or appropriate to
support the representations and warranties set forth in Article III.

4.02. Negative Covenants of the Company. Without limiting any other covenants
and provisions hereof, the Company covenants and agrees that, as long as any of
the Notes are outstanding, it will comply with and observe the following
covenants and provisions, and will cause each Subsidiary to comply with and
observe such of the following covenants and provisions as are applicable to such
Subsidiary, and will not:

(a) Liens. Create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any mortgage, deed of trust, pledge,
lien, security interest or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any nature, upon or with
respect to any of its properties, now owned or hereinafter acquired, or assign
or otherwise convey any right to receive income, except that the foregoing
restrictions shall not apply to mortgages, deeds of trust, pledges, liens,
security interests or other charges or encumbrances:

(i) for taxes, assessments or governmental charges or levies on property of the
Company or any Subsidiary if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings;

(ii) imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and
other similar liens arising in the ordinary course of business;

(iii) arising out of pledges or deposits under workmen’s compensation laws,
unemployment insurance, old age pensions, or other social security or retirement
benefits, or similar legislation;

(iv) securing the performance of bids, tenders, contracts (other than for the
repayment of borrowed money), statutory obligations and surety bonds;

(v) in the nature of zoning restrictions, easements and rights or restrictions
of record on the use of real property which do not materially detract from its
value or impair its use;

 

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(vi) arising by operation of law in favor of the owner or sublessor of leased
premises and confined to the property rented;

(vii) arising from any litigation or proceeding which is being contested in good
faith by appropriate proceedings, provided, however, that no execution or levy
has been made;

(viii) described in Schedule 3.07 which secure the Indebtedness set forth in
Schedule 3.05, provided that no such lien is extended to cover other or
different property of the Company or any Subsidiary;

(ix) arising out of a purchase money mortgage or security interest on personal
property to secure the purchase price of such property (or to secure
Indebtedness incurred solely for the purpose of financing the acquisition of any
such property), provided that such purchase money mortgage or security interest
does not extend to any other or different property of the Company or any
Subsidiary;

(x) securing judgments not to exceed $100,000 in the aggregate;

(xi) arising out of letters of credit up to a maximum amount of $250,000 in the
aggregate;

(xii) arising from Senior Debt obligations of the Company; and

(xiii) relating to any refinancing, extensions or renewals of the above.

(b) Indebtedness. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any liability with
respect to Indebtedness except for:

(i) the Notes;

(ii) Indebtedness for money borrowed (including without limitation all Senior
Debt), provided that such Indebtedness for money borrowed does not result in the
Company’s failure to comply with all of the provisions of Article IV hereof;

(iii) Current Liabilities, other than for borrowed money, which are incurred in
the ordinary course of business;

(iv) Indebtedness with respect to lease obligations, provided that such lease
obligations do not violate subsection 4.02(c);

(v) Indebtedness secured by permitted liens under Section 4.02(a); and

(vi) Extensions, refinancings, modifications, amendments and restatements of any
items of listed in (i) through (v) above, provided that the principal amount
thereof is not increased or the terms thereof are not modified to impose more
burdensome terms upon the Company or its Subsidiary, as the case may be.

 

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(c) Lease Obligations. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any obligations as
lessee for the rental or hire of real or personal property in connection with
any sale and leaseback transaction.

(d) Assumptions or Guaranties of Indebtedness of Other Persons. Assume,
guarantee, endorse or otherwise become directly or contingently liable on, or
permit any Subsidiary to assume, guarantee, endorse or otherwise become directly
or contingently liable on (including, without limitation, liability by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss) any Indebtedness of any other Person, except for
guaranties by endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.

(e) Mergers, Sale of Assets, etc. Merge or consolidate with, or sell, assign,
lease or otherwise dispose of or voluntarily part with the control of (whether
in one transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereinafter acquired) or sell, assign or
otherwise dispose of (whether in one transaction or in a series of transactions)
any of its accounts receivable (whether now in existence or hereinafter created)
at a discount or with recourse, to, any Person (provided that it may settle in
its sole discretion any customer accounts receivable with such customer), or
permit any Subsidiary to do any of the foregoing, except for sales or other
dispositions of assets in the ordinary course of business and except that
(1) any Subsidiary may merge into or consolidate with or transfer assets to any
other Subsidiary, (2) any Subsidiary may merge into or transfer assets to the
Company, and (3) the Company may merge any Person into it or with or into any
Subsidiary or otherwise acquire such Person as long as the Company is the
surviving entity, such merger or acquisition does not result in the violation of
any of the provisions of this Agreement and no such violation exists at the time
of such merger or acquisition, and, provided that such merger or acquisition
does not result in the issuance (in one or more transactions) of shares of the
voting stock of the Company representing in the aggregate more than thirty
percent (30%) of the total outstanding voting stock of the Company, on a fully
diluted basis, immediately following the issuance thereof; unless simultaneously
with such transaction, the Company repays the outstanding principal, interest
and premium on all of the Notes.

(f) Investments in Other Persons. Make or permit any Subsidiary to make, any
loan or advance to any person, or purchase, otherwise acquire, or permit any
Subsidiary to purchase or otherwise acquire, the capital stock, assets
comprising the business of, obligations of, or any interest in, any Person,
except:

(i) investments by the Company or a Subsidiary in evidences of indebtedness
issued or fully guaranteed by the United States of America and having a maturity
of not more than one year from the date of acquisition;

 

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(ii) investments by the Company or a Subsidiary in certificates of deposit,
notes, acceptances and repurchase agreements having a maturity of not more than
one year from the date of acquisition issued by a bank organized in the United
States having capital, surplus and undivided profits of at least $100,000,000
and whose parent holding company has long-term debt rated Aa1 or higher, and
whose commercial paper (if rated) is rated Prime 1, by Moody’s Investors
Service, Inc.;

(iii) investments by the Company or a Subsidiary in the highest-rated commercial
paper having a maturity of not more than one year from the date of acquisition;

(iv) loans or advances from a Subsidiary to the Company; and

(v) loans to persons to assist them in becoming a “channel partner” to the
Company; provided that all of such loans shall not exceed $250,000 in any fiscal
year of the Company or more than $1,000,000 at any one time outstanding.

(g) Distributions. Declare or pay any dividends, purchase, redeem, retire, or
otherwise acquire for value any of its capital stock (or rights, options or
warrants to purchase such shares) now or hereafter outstanding, return any
capital to its stockholders as such, or make any distribution of assets to its
stockholders as such, or permit any Subsidiary to do any of the foregoing (such
transactions being hereinafter referred to as “Distributions”), except that the
Subsidiaries may declare and make payment of cash and stock dividends, return
capital and make distributions of assets to the Company; provided, however, that
nothing herein contained shall prevent the Company from:

(i) effecting a stock split or declaring or paying any dividend consisting of
shares of any class of capital stock to the holders of shares of such class of
capital stock,

(ii) issuance of shares of its capital stock upon a “cashless” exercise of
options or warrants for such capital stock,

(iii) redeeming any stock of a deceased stockholder out of insurance held by the
Company on that stockholder’s life, or

(iv) repurchase any shares of its Common Stock from former employees or service
providers to the Company in connection with their termination of service to the
Company; provided, however, that the repurchase price shall not exceed the
purchase price paid to the Company for the purchase of such shares,

if in the case of any such transaction there does not exist at the time of such
Distribution an Event of Default or an event which, but for the requirement that
notice be given or time elapse or both, would constitute an Event of Default and
provided that such Distribution can be made in compliance with the other terms
of this Agreement.

 

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(h) Dealings with Affiliates. Except as set forth in Schedule 3.11 attached
hereto, enter or permit any Subsidiary to enter into any transaction with any
holder of 5% or more of any class of capital stock of the Company, or any member
of their families or any corporation or other entity in which any one or more of
such stockholders or members of their immediate families directly or indirectly
holds five percent (5%) or more of any class of capital stock except in the
ordinary course of business and on terms not less favorable to the Company or
the Subsidiary than it would obtain in a transaction between unrelated parties.

(i) Maintenance of Ownership of Subsidiaries. Sell or otherwise dispose of any
shares of capital stock of any Subsidiary, except to the Company or another
Subsidiary, or permit any Subsidiary to issue, sell or otherwise dispose of any
shares of its capital stock or the capital stock of any Subsidiary, except to
the Company or another Subsidiary, provided, however, that nothing herein
contained shall prevent any merger, consolidation or transfer of assets
permitted by subsection 4.02(e).

(j) Change in Nature of Business. Make, or permit any Subsidiary to make, any
material change in the nature of its business as carried on at the date hereof.

4.03. Reporting Requirements. The Company will furnish to each registered holder
of any Note:

(a) as soon as possible and in any event within five (5) days after the
occurrence of each Event of Default or each event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default, the
statement of the chief financial officer of the Company setting forth details of
such Event of Default or event and the action which the Company proposes to take
with respect thereto;

(b) as soon as available and in any event within forty-five (45) days after the
end of each of the first three quarters of each fiscal year of the Company,
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such quarter and consolidated and consolidating
statements of income and retained earnings and of changes in financial position
of the Company and its Subsidiaries for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year;

(c) as soon as available and in any event within one hundred twenty (120) days
after the end of each fiscal year of the Company, a copy of the annual audit
report for such year for the Company and its Subsidiaries, including therein
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated statements of
income and retained earnings and of changes in financial position of the Company
and its Subsidiaries for such fiscal year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all
duly certified by independent public accountants;

 

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(d) at the time of delivery of each quarterly and annual statement, a
certificate, executed by the chief financial officer, stating that such officer
has caused this Agreement and the Notes, to be reviewed and has no knowledge of
any default by the Company or any Subsidiary in the performance or observance of
any of the provisions of this Agreement or the Notes or, if such officer or
accountant has such knowledge, specifying such default and the nature thereof.
Each such certificate shall set forth computations in reasonable detail
demonstrating compliance with the provisions of subsection 4.01(j) and
subsections 4.02(b) and (c);

(e) promptly upon receipt thereof, any written report submitted to the Company
by independent public accountants in connection with an annual or interim audit
of the books of the Company and its Subsidiaries made by such accountants;

(f) within sixty (60) days after the start of each fiscal year, consolidated
capital and operating expense budgets, cash flow projections and income and loss
projections for the Company and its Subsidiaries in respect of such fiscal year,
all itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;

(g) promptly after the commencement thereof, notice of all actions, suits and
proceedings before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting the Company or
any Subsidiary of the type described in Section 3.04; and

(h) promptly after sending, making available, or filing the same, such reports
and financial statements as the Company or any Subsidiary shall send or make
available to the stockholders of the Company or the Securities and Exchange
Commission and such other information respecting the business, properties or the
condition or operations, financial or otherwise, of the Company or any of its
Subsidiaries as the Purchaser may from time to time reasonably request.

ARTICLE V

EVENTS OF DEFAULT

5.01. Events of Default. If any of the following events (“Events of Default”)
shall occur and be continuing:

(a) The Company shall fail to pay any installment of principal of any of the
Notes when due and such failure shall continue for five (5) business days; or

(b) The Company shall fail to pay any interest or premium on any of the Notes
when due and such failure shall continue for five (5) business days; or

 

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(c) The Company shall default in the performance of any covenant contained in
subsection 4.01(j) or shall default for thirty (30) days in the performance of
any covenant contained in Section 4.02, which default is not cured within thirty
(30) days; or

(d) Any material representation or warranty made by the Company or any
Subsidiary in this Agreement or by the Company or any Subsidiary (or any
officers of the Company or any Subsidiary) in any certificate or instrument
delivered pursuant to this Agreement, shall prove to have been incorrect when
made in any material respect; or

(e) The Company or any Subsidiary shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement or the Notes on its part
to be performed or observed and any such failure remains unremedied for thirty
(30) days after written notice thereof shall have been given to the Company by
the registered holders of at least fifty percent (50%) of the principal amount
of the Notes then outstanding; or

(f) The Company or any Subsidiary shall fail to pay any Indebtedness for
borrowed money (other than as evidenced by the Notes) owing by the Company or
such Subsidiary (as the case may be), or any interest or premium thereon, when
due (or, if permitted by the terms of the relevant document, within any
applicable grace period), whether such Indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise, or shall fail to perform any term, covenant or agreement on its part
to be performed under any agreement or instrument (other than this Agreement or
the Notes) evidencing or securing or relating to any Indebtedness owing by the
Company or any Subsidiary, as the case may be, when required to be performed
(or, if permitted by the terms of the relevant document, within any applicable
grace period), if the effect of such failure to pay or perform is to accelerate,
or to permit the holder or holders of such Indebtedness, or the trustee or
trustees under any such agreement or instrument to accelerate, the maturity of
such Indebtedness, unless such failure to pay or perform shall be waived by the
holder or holders of such Indebtedness or such trustee or trustees; or

(g) The Company or any Subsidiary shall (i) admit in writing its inability to
pay its debts generally as they become due; (ii) commence a voluntary case under
Title 11 of the United States Code as from time to time in effect, or by its
authorizing, by appropriate proceedings of its Board of Directors or other
governing body, the commencement of such a voluntary case; (iii) file an answer
or other pleading admitting or fail to deny the material allegations of a
petition filed against it commencing an involuntary case under said Title 11, or
seek, consent to or acquiesce in the relief therein provided, or fail to
controvert timely the material allegations of any such petition; (iv) have
entered against it an order for relief in any involuntary case commenced under
said Title 11; (v) seek relief as a debtor under any applicable law, other than
said Title 11, of any jurisdiction relating to the liquidation or reorganization
of debtors or to the modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief; (vi) have entered against it an order by
a court of competent jurisdiction (a) finding it to be bankrupt or insolvent,
(b) ordering or approving its liquidation, reorganization or any modification or
alteration of the rights of its creditors, or (c) assuming custody of, or
appointing a receiver or other custodian for, all or a substantial part of its
property; or (vii) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its property; or

 

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(h) Any judgment, writ, warrant of attachment or execution or similar process
shall be issued or levied against all or substantially all of the property of
the Company or any Subsidiary and such judgment, writ, or similar process shall
not be released, vacated or fully bonded within ninety (90) days after its issue
or levy; or

(i) Any acquisition, reorganization, business combination, transfer, sale of
capital stock or other transaction or series of transactions, in which the
stockholders of the Company prior to such acquisition, reorganization, business
combination, sale of capital stock or other transaction or series of
transactions own less than fifty percent (50%) of the voting securities
outstanding after such transaction (a “Change of Control”);

then, and in any such event, the Purchaser or any other holder of the Notes may,
by notice to the Company, declare the entire unpaid principal amount of the
Notes, all interest accrued and unpaid thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Notes, all
such accrued interest and all such amounts shall become and be forthwith due and
payable (unless there shall have occurred an Event of Default under subsection
5.01(g) in which case all such amounts shall automatically become due and
payable), without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company.

5.02. Annulment of Defaults. Section 5.01 is subject to the condition that, if
at any time after the principal of any of the Notes shall have become due and
payable, and before any judgment or decree for the payment of the moneys so due,
or any thereof, shall have been entered, all arrears of interest upon all the
Notes and all other sums payable under the Notes and under this Agreement
(except the principal of the Notes which by such declaration shall have become
payable) shall have been duly paid, and every other default and Event of Default
shall have been made good or cured, then and in every such case the holders of
fifty percent (50%) or more in principal amount of all Notes then outstanding
may, by written instrument filed with the Company, rescind and annul such
declaration and its consequences; but no such rescission or annulment shall
extend to or affect any subsequent default or Event of Default or impair any
right consequent thereon.

ARTICLE VI

DEFINITIONS AND ACCOUNTING TERMS

6.01. Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):

“Agreement” means this Note Purchase Agreement as from time to time amended and
in effect between the parties.

 

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“Capital Resource Company Act” shall have the meaning assigned to that term in
Section 1.12.

“Change of Control” shall have the meaning assigned to that term in
Section 5.01(i).

“Code” shall have the meaning assigned to that term in Section 4.01(i).

“Company” means and shall include World Energy Solutions, Inc. and its
successors and assigns.

“Common Stock” includes the Company’s Voting Common Stock, $0.0001 par value per
share, as authorized on the date of this Agreement and any other securities into
which or for which any of such Voting Common Stock may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.

“Consolidated” and “consolidating” when used with reference to any term defined
herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.

“Consolidated Net Earnings Available for Interest Charges” means, for any
period, Consolidated Net Income for such period plus (a) interest paid or
accrued by the Company and its Subsidiaries with respect to all Indebtedness for
such period, (b) income and excess profit taxes for such period and all other
taxes for such period which are imposed on or measured by income after deduction
of interest charges and (c) non-recurring transaction costs incurred in
connection with acquisitions.

“Consolidated Net Income” means, for any period, the net income (or net deficit)
of the Company and its Subsidiaries for such period, after all expenses, taxes
and other proper charges, determined in accordance with generally accepted
accounting principles eliminating (i) all intercompany items, (ii) all earnings
attributable to equity interests in Persons that are not Subsidiaries unless
actually received by the Company or its Subsidiaries, (iii) all income arising
from the forgiveness, adjustment or negotiated settlement of any Indebtedness,
and (iv) any increase or decrease of income arising from any change in the
method of accounting for any item from that employed in the preparation of the
financial statements attached hereto as Schedule 3.08.

“Consolidated Net Worth” means, at any dates, the sum of (a) the par value of
all of the stock of the Company issued and outstanding, (b) the amount of any
additional paid-in-capital, and (c)

(i) the positive retained earnings, if any, of the Company and its Subsidiaries,
or

(ii) less, the amount of any deficit in the retained earnings of the Company and
its Subsidiaries

 

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as the same appears on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP as of such date, after eliminating
all intercompany items and all amounts properly attributable to (1) any write-up
in the book value of any asset resulting from a revaluation thereof after the
date of this Agreement; (2) the amount of any intangible assets including
patents, trademarks, unamortized debt discount and expense, goodwill, covenants
and agreements and the excess of the purchase price paid for assets or stock
acquired over the value assigned thereto on the books of the Company or of the
Subsidiary which shall have acquired the same; (3) earnings attributable to any
other Person unless actually received by the Company or its Subsidiaries; and
(4) changes in the method of accounting.

“Current Assets” means all assets of any corporation which would, in accordance
with GAAP, be classified as current assets of a corporation conducting a
business the same as or similar to that of such corporation, excluding, however,
(1) any assets which have been pledged, assigned, mortgaged, hypothecated or
otherwise voluntarily encumbered other than as permitted by the terms of this
Agreement to secure any Indebtedness which is not included in Current
Liabilities and (2) any receivables uncollected after ninety (90) days from the
revenue recognition date.

“Current Liabilities” means all liabilities of any corporation which would, in
accordance with GAAP, be classified as current liabilities of a corporation
conducting a business the same as or similar to that of such corporation,
including, without limitation, all rental payments due under leases required to
be capitalized in accordance with applicable Statements of Financial Accounting
Standards and fixed prepayments of, and sinking fund payments with respect to,
Indebtedness (including Indebtedness evidenced by the Notes), which payments are
required to be made within one year from the date of determination.

“Distribution” shall have the meaning assigned to that term in Section 4.02(g).

“ERISA” shall have the meaning assigned to that term in Section 3.10.

“Events of Default” shall have the meaning assigned to that term in
Section 5.01.

“Exchange Act” means the Securities Exchange Act of 1934 or any similar federal
statute, and the rules and regulations of the Securities and Exchange Commission
(or of any other Federal Agency then administering the Exchange Act) thereunder,
all as the same shall be in effect at the time.

“Form 10-Q” shall have the meaning assigned to that term in Section 3.08.

“Form 10-K” shall have the meaning assigned to that term in Section 3.08.

“GAAP” shall mean generally accepted accounting principles in the United States
as in effect on the Closing and applied on a basis consistent with those used in
the financial statements included in the Form 10-K.

“Government Contract” shall have the meaning assigned to that in Section 3.14.

 

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“Indebtedness” means all obligations, contingent and otherwise, which should, in
accordance with GAAP, be classified upon the obligor’s balance sheet as
liabilities, but in any event including, without limitation, liabilities secured
by any mortgage on property owned or acquired subject to such mortgage, whether
or not the liability secured thereby shall have been assumed, and also
including, without limitation, (i) all guaranties, endorsements and other
contingent obligations, in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet, except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business and (ii) the present value of
any lease payments due under leases required to be capitalized in accordance
with applicable Statements of Financial Accounting Standards, determined in
accordance with applicable Statements of Financial Accounting Standards; but in
no event will Indebtedness include leases which are not capital leases under
current standards.

“Interest Charges” means the interest expense of the Company and its
Subsidiaries on Indebtedness (including the current portion thereof).

“Knowledge” means the actual knowledge of the Company Chief Executive Officer or
Chief Financial Officer.

“Notes” shall have the meaning assigned to that term in Section 1.01.

“Person” means an individual, corporation, partnership, joint venture, trust, or
unincorporated organization, or a government or any agency or political
subdivision thereof.

“Purchaser” means and shall include not only the Massachusetts Capital Resource
Company but also any other holder or holders of any of the Notes.

“Schedule 14A” shall have the meaning assigned to that term in Section 3.20.

“Securities Act” means the Securities Act of 1933 or any similar Federal
statute, and the rules and regulations of the Securities and Exchange Commission
(or of any other Federal agency then administering the Securities Act)
thereunder, all as the same shall be in effect at the time.

“Senior Debt” shall have the meaning assigned to that term in Section 1.09(h).

“Subsidiary” or “Subsidiaries” means any corporation or trust of which the
Company and/or any of its other Subsidiaries (as herein defined) directly or
indirectly owns at the time all of the outstanding shares of every class of such
corporation or trust other than directors’ qualifying shares.

6.02. Accounting Terms. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles
consistent with those applied in preparation of the financial statements
attached hereto as Schedule 3.08, and all financial data submitted pursuant to
this Agreement and all financial tests to be calculated in accordance with this
Agreement shall be prepared and calculated in accordance with such principles.

 

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ARTICLE VII

MISCELLANEOUS

7.01. No Waiver; Cumulative Remedies. No failure or delay on the part of the
Purchaser, or any other holder of the Notes in exercising any right, power or
remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

7.02. Amendments, Waivers and Consents. Any provision in this Agreement or the
Notes to the contrary notwithstanding, changes in or additions to this Agreement
may be made, and compliance with any covenant or provision herein or therein set
forth may be omitted or waived, if the Company shall, in the case of the Notes,
obtain consent thereto in writing from the holder or holders of at least fifty
percent (50%) in principal amount of all Notes then outstanding; provided that
no such consent shall be effective to reduce or to postpone the date fixed for
the payment of the principal (including any required redemption) or interest
payable on any Note, without the consent of the holder thereof, or to reduce the
percentage of the Notes the consent of the holders of which is required under
this Section. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. Written
notice of any waiver or consent effected under this subsection shall promptly be
delivered by the Company to any holders who did not execute the same.

7.03. Addresses for Notices, etc. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and mailed or telegraphed or delivered to the applicable party at
the addresses indicated below:

If to the Company:

World Energy Solutions, Inc.

100 Front Street

Worcester, MA 01608

Attention: Chief Executive Officer

If to the Purchaser:

Payments should be mailed to:

Massachusetts Capital Resource Company

P. O. Box 3707

Boston, Massachusetts 02241

and all other deliveries and other communications made at or sent to:

Massachusetts Capital Resource Company

420 Boylston Street

Boston, Massachusetts 02116

Attention: President

 

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If to any other holder of the Notes: at such holder’s address for notice as set
forth in the register maintained by the Company, or, as to each of the
foregoing, at such other address as shall be designated by such Person in a
written notice to the other party complying as to delivery with the terms of
this Section. All such notices, requests, demands and other communications
shall, when mailed or telegraphed, respectively, be effective when deposited in
the mails or delivered to the telegraph company, respectively, addressed as
aforesaid.

7.04. Costs, Expenses and Taxes. The Company agrees to pay on demand the
reasonable fees and out-of-pocket expenses of the Law Office of George W.
Thibeault, counsel for the Purchaser in connection with the preparation,
execution and delivery of this Agreement, the Notes and other instruments and
documents to be delivered hereunder, as well as the reasonable fees and
out-of-pocket expenses of legal counsel, independent public accountants and
other outside experts reasonably retained by the Purchaser in connection with
the enforcement of this Agreement, the Notes, and other instruments and
documents to be delivered hereunder or thereunder.

7.05. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the Company and the Purchaser and their respective successors
and assigns, except that the Company shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Purchaser.

7.06. Survival of Representations and Warranties. All representations and
warranties made in this Agreement, the Notes, or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof and the making of the loans.

7.07. Prior Agreements. This Agreement constitutes the entire agreement between
the parties and supersedes any prior understandings or agreements concerning the
subject matter hereof.

7.08. Severability. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.

7.09. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth of Massachusetts.

 

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7.10. Headings. Article, Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

7.11. Sealed Instrument. This Agreement is executed as an instrument under seal.

7.12. Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and each of the parties hereto may execute this Agreement by signing
any such counterpart.

7.13. Further Assurances. From and after the date of this Agreement, upon the
request of the Purchaser, the Company and each Subsidiary shall execute and
deliver such instruments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement and the Notes.

BALANCE OF PAGE INTENTIONALLY LEFT BLANK

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

 

WORLD ENERGY SOLUTIONS, INC. By   /s/ Philip Adams   Philip Adams, Chief
Executive Officer MASSACHUSETTS CAPITAL RESOURCE COMPANY By   /s/ Kenneth J.
Lavery   Kenneth J. Lavery, Vice President

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Exhibit 1.01

WORLD ENERGY SOLUTIONS, INC.

SUBORDINATED NOTE DUE 2020

 

$4,000,000    October 3, 2012

For value received, World Energy Solutions, Inc., a Delaware corporation (the
“Company”), hereby promises to pay to Massachusetts Capital Resource Company or
registered assigns (hereinafter referred to as the “Payee”), on or before
September 30, 2020, the principal sum of Four Million Dollars ($4,000,000) or
such part thereof as then remains unpaid pursuant to the terms set forth in that
certain Note Purchase Agreement, dated as of October 3, 2012, between the
Company and Massachusetts Capital Resource Company (as the same may be amended
from time to time, hereinafter referred to as the “Agreement”), and to pay
interest from the date hereof on the whole amount of said principal sum
remaining from time to time unpaid at the rate of ten and one-half percent
(10.5%) per annum, such interest to be payable monthly on the last day of each
calendar month in each year, the first such payment to be due and payable on
October 31, 2012, until the whole amount of the principal hereof remaining
unpaid shall become due and payable, and to pay interest at the rate of fourteen
percent (14%) (so far as the same may be legally enforceable) on all overdue
principal (including any overdue required redemption), premium and interest. All
or a portion of the principal amount of this Note must be redeemed in the
amounts and at the times set forth in Section 1.04 of the Agreement. Principal,
premium, if any, and interest shall be payable in lawful money of the United
States of America, in immediately available funds, at the principal office of
the Payee or at such other place as the legal holder may designate from time to
time in writing to the Company. Interest shall be computed on the basis of a
360-day year and a 30-day month.

This Note is issued pursuant to and is entitled to the benefits of the
Agreement, and each holder of this Note, by his acceptance hereof, agrees to be
bound by the provisions of the Agreement, including, without limitation, that
(i) this Note is subject to prepayment, in whole or in part, as specified in
said Agreement, (ii) the principal of and interest on this Note is subordinated
to Senior Debt, as defined in the Agreement and (iii) in case of an Event of
Default, as defined in the Agreement, the principal of this Note may become or
may be declared due and payable in the manner and with the effect provided in
the Agreement.

As further provided in the Agreement, upon surrender of this Note for transfer
or exchange, a new Note or new Notes of the same tenor dated the date to which
interest has been paid on the surrender Note and in an aggregate principal
amount equal to the unpaid principal amount of the Note so surrendered will be
issued to, and registered in the name of, the transferee or transferees. The
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes.

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In case any payment herein provided for shall not be paid when due, the Company
promises to pay all cost of collection, including all reasonable attorney’s
fees.

This Note shall be governed by, and construed in accordance with, the laws of
the Commonwealth of Massachusetts and shall have the effect of a sealed
instrument.

The Company and all endorsers and guarantors of this Note hereby waive
presentment, demand, notice of nonpayment, protest and all other demands and
notices in connection with the delivery, acceptance, performance or enforcement
of this Note.

 

WORLD ENERGY SOLUTIONS, INC. By                   Philip Adams, Chief Executive
Officer