EX-10.2



 






Exhibit 10.2




 

 






TERM CREDIT AGREEMENT




Dated as of January 17, 2008



among




POWERSECURE INTERNATIONAL, INC.,

as the Borrower,




CITIBANK, N.A.,

as Administrative Agent,



and




The Other Lenders Party Hereto




 

 







 









 








TABLE OF CONTENTS




	 	 	 	 	 
	ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
	 	 	1	 
	 	 	 	 	 
	Section 1.01. Defined Terms
	 	 	1	 
	Section 1.02. Other Interpretive Provisions
	 	 	23	 
	Section 1.03. Accounting Terms
	 	 	24	 
	Section 1.04. Rounding
	 	 	25	 
	Section 1.05. Times of Day
	 	 	25	 
	Section 1.06. References to Agreements and Laws
	 	 	25	 
	 
	 	 	 	 
	ARTICLE II. THE COMMITMENTS AND CREDIT EXTENSIONS
	 	 	25	 
	 
	 	 	 	 
	Section 2.01. Term Loans
	 	 	25	 
	Section 2.02. Term Borrowings, Conversions and Continuations of Term Loans
	 	 	25	 
	Section 2.03. Prepayments
	 	 	27	 
	Section 2.04. Repayment of Term Loans
	 	 	27	 
	Section 2.05. Interest
	 	 	28	 
	Section 2.06. Computation of Interest and Fees
	 	 	28	 
	Section 2.07. Evidence of Debt
	 	 	29	 
	Section 2.08. Payments Generally
	 	 	29	 
	Section 2.09. Sharing of Payments
	 	 	31	 
	 
	 	 	 	 
	ARTICLE III. TAXES, YIELD PROTECTION AND ILLEGALITY
	 	 	31	 
	 
	 	 	 	 
	Section 3.01. Taxes
	 	 	31	 
	Section 3.02. Illegality
	 	 	33	 
	Section 3.03. Inability to Determine Rates
	 	 	34	 
	Section 3.04. Increased Costs; Reserves on Eurodollar Rate Loans
	 	 	34	 
	Section 3.05. Compensation For Losses
	 	 	35	 
	Section 3.06. Mitigation Obligations; Replacement of Lenders
	 	 	36	 
	Section 3.07. Survival
	 	 	36	 
	 
	 	 	 	 
	ARTICLE IV. CONDITIONS PRECEDENT TO CREDIT EXTENSIONS
	 	 	37	 
	 
	 	 	 	 
	Section 4.01. Conditions of Initial Credit Extension
	 	 	37	 
	Section 4.02. Conditions to all Credit Extensions
	 	 	39	 
	 
	 	 	 	 
	ARTICLE V. REPRESENTATIONS AND WARRANTIES
	 	 	39	 
	 
	 	 	 	 
	Section 5.01. Existence, Qualification and Power; Compliance with Laws
	 	 	39	 
	Section 5.02. Authorization; No Contravention
	 	 	40	 
	Section 5.03. Governmental Authorization; Other Consents
	 	 	40	 
	Section 5.04. Binding Effect
	 	 	40	 
	Section 5.05. Financial Statements; No Material Adverse Effect
	 	 	40	 
	Section 5.06. Litigation
	 	 	41	 
	Section 5.07. No Default
	 	 	41	 
	Section 5.08. Ownership of Property; Liens
	 	 	41	 
	Section 5.09. Hazardous Materials
	 	 	41	 
	Section 5.10. Insurance
	 	 	42	 






i 









 






	 	 	 	 	 
	Section 5.11. Taxes
	 	 	42	 
	Section 5.12. ERISA Compliance
	 	 	42	 
	Section 5.13. Subsidiaries
	 	 	43	 
	Section 5.14. Margin Regulations; Investment Company Act
	 	 	43	 
	Section 5.15. Disclosure
	 	 	43	 
	Section 5.16. Compliance with Laws
	 	 	43	 
	Section 5.17. Intellectual Property; Licenses, Etc.
	 	 	44	 
	Section 5.18. Businesses
	 	 	44	 
	Section 5.19. Common Enterprise
	 	 	44	 
	Section 5.20. Solvent
	 	 	44	 
	Section 5.21. Taxpayer Identification Number
	 	 	44	 
	Section 5.22. Employment and Labor Agreements
	 	 	44	 
	Section 5.23. Labor Matters
	 	 	45	 
	 
	 	 	 	 
	ARTICLE VI. AFFIRMATIVE COVENANTS
	 	 	45	 
	 
	 	 	 	 
	Section 6.01. Financial Statements
	 	 	45	 
	Section 6.02. Certificates; Other Information
	 	 	46	 
	Section 6.03. Notices
	 	 	47	 
	Section 6.04. Payment of Obligations
	 	 	48	 
	Section 6.05. Preservation of Existence, Etc.
	 	 	48	 
	Section 6.06. Maintenance of Properties
	 	 	48	 
	Section 6.07. Maintenance of Insurance
	 	 	48	 
	Section 6.08. Compliance with Laws
	 	 	49	 
	Section 6.09. Books and Records
	 	 	49	 
	Section 6.10. Inspection Rights
	 	 	49	 
	Section 6.11. Compliance with ERISA
	 	 	49	 
	Section 6.12. Use of Proceeds
	 	 	49	 
	Section 6.13. Further Assurances
	 	 	49	 
	Section 6.14. Subsidiaries and Other Assets
	 	 	49	 
	Section 6.15. Post-Closing Deliveries
	 	 	50	 
	 
	 	 	 	 
	ARTICLE VII. NEGATIVE COVENANTS
	 	 	50	 
	 
	 	 	 	 
	Section 7.01. Liens
	 	 	50	 
	Section 7.02. Investments
	 	 	52	 
	Section 7.03. Indebtedness
	 	 	53	 
	Section 7.04. Fundamental Changes
	 	 	54	 
	Section 7.05. Dispositions
	 	 	54	 
	Section 7.06. Restricted Payments
	 	 	55	 
	Section 7.07. ERISA
	 	 	55	 
	Section 7.08. Change in Nature of Business
	 	 	55	 
	Section 7.09. Transactions with Affiliates
	 	 	56	 
	Section 7.10. Burdensome Agreements
	 	 	56	 
	Section 7.11. Use of Proceeds
	 	 	56	 
	Section 7.12. Financial Covenants
	 	 	56	 
	Section 7.13. Capital Expenditures
	 	 	56	 
	Section 7.14. Fiscal Year and Accounting Methods
	 	 	56	 
	Section 7.15. Limitation on Restrictive Agreements
	 	 	56	 






ii 









 






	 	 	 	 	 
	Section 7.16. Issuance of Equity Interests
	 	 	56	 
	 
	 	 	 	 
	ARTICLE VIII. EVENTS OF DEFAULT AND REMEDIES
	 	 	57	 
	 
	 	 	 	 
	Section 8.01. Events of Default
	 	 	57	 
	Section 8.02. Remedies Upon Event of Default
	 	 	59	 
	Section 8.03. Application of Funds
	 	 	60	 
	 
	 	 	 	 
	ARTICLE IX. ADMINISTRATIVE AGENT
	 	 	61	 
	 
	 	 	 	 
	Section 9.01. Appointment and Authority
	 	 	61	 
	Section 9.02. Rights as a Lender
	 	 	61	 
	Section 9.03. Exculpatory Provisions
	 	 	61	 
	Section 9.04. Reliance by Administrative Agent
	 	 	62	 
	Section 9.05. Delegation of Duties
	 	 	62	 
	Section 9.06. Resignation of Administrative Agent
	 	 	62	 
	Section 9.07. Non-Reliance on Administrative Agent and Other Lenders
	 	 	63	 
	Section 9.08. Administrative Agent May File Proofs of Claim
	 	 	63	 
	Section 9.09. Collateral and Guaranty Matters
	 	 	64	 
	 
	 	 	 	 
	ARTICLE X. MISCELLANEOUS
	 	 	65	 
	 
	 	 	 	 
	Section 10.01. Amendments, Etc.
	 	 	65	 
	Section 10.02. Notices; Effectiveness; Electronic Communication
	 	 	66	 
	Section 10.03. No Waiver; Cumulative Remedies
	 	 	67	 
	Section 10.04. Expenses; Indemnity; Damage Waiver
	 	 	68	 
	Section 10.05. Payments Set Aside
	 	 	69	 
	Section 10.06. Successors and Assigns
	 	 	70	 
	Section 10.07. Treatment of Certain Information; Confidentiality
	 	 	73	 
	Section 10.08. Set-off
	 	 	73	 
	Section 10.09. Interest Rate Limitation
	 	 	74	 
	Section 10.10. Counterparts; Integration; Effectiveness
	 	 	74	 
	Section 10.11. Survival of Representations and Warranties
	 	 	74	 
	Section 10.12. Severability
	 	 	74	 
	Section 10.13. Replacement of Lenders
	 	 	75	 
	Section 10.14. Exceptions to Covenants
	 	 	75	 
	Section 10.15. Governing Law; Jurisdiction; Etc.
	 	 	75	 
	Section 10.16. Waiver of Right to Trial by Jury
	 	 	76	 
	Section 10.17. USA PATRIOT Act Notice
	 	 	77	 
	Section 10.18. Time of the Essence
	 	 	77	 
	Section 10.19. Existing Credit Agreement
	 	 	77	 
	Section 10.20. ENTIRE AGREEMENT
	 	 	77	 






iii 









 






SCHEDULES




	 	 	 
	1.01

	 	Inactive Subsidiaries
	2.01

	 	Term Commitments and Term Pro Rata Shares
	5.05

	 	Supplement to Interim Financial Statements
	5.08

	 	Fee Property
	5.09

	 	Environmental Matters
	5.13

	 	Subsidiaries and Other Equity Investments
	5.22

	 	Labor Agreements
	5.23

	 	Labor Matters
	7.01

	 	Existing Liens
	7.02

	 	Existing Investments
	7.03

	 	Existing Indebtedness
	10.02

	 	Administrative Agent’s Office, Certain Addresses for Notices






EXHIBITS




	 	 	 
	 
	 	Form of
	 
	 	 
	A
	 	Term Loan Notice
	B
	 	Note
	C
	 	Compliance Certificate
	D
	 	Assignment and Assumption
	E
	 	Guaranty
	F
	 	Deed of Trust







iv 









 








TERM CREDIT AGREEMENT




     This TERM CREDIT AGREEMENT (this “Agreement”) is entered into as of January 17, 2008,
among POWERSECURE INTERNATIONAL, INC., a Delaware corporation (the “Borrower”), each lender
from time to time party hereto (collectively, the “Lenders” and individually, a
“Lender”), and CITIBANK, N.A., as Administrative Agent.



     The Borrower has requested that the Lenders provide a term credit facility, and the Lenders
are willing to do so on the terms and conditions set forth herein.



     In consideration of the mutual covenants and agreements herein contained, the parties hereto
covenant and agree as follows:



ARTICLE I.




DEFINITIONS AND ACCOUNTING TERMS




     Section 1.01. Defined Terms. As used in this Agreement, the following terms shall have the
meanings set forth below:



     “Account” has the meaning set forth in the UCC.



     “Acquisition” means the acquisition by any Person of (a) a majority of the Equity
Interests of another Person, (b) all or substantially all of the assets of another Person or any
operating division of another Person or (c) all or substantially all of a line of business of
another Person, in each case whether or not involving a merger or consolidation with such other
Person.



     “Acquisition Consideration” means the consideration given by the Borrower or any of
its Subsidiaries for an Acquisition, including but not limited to the sum of (without duplication)
(a) the fair market value of any cash, property (including Equity Interests issued in respect of
such Acquisition) or services given, plus (b) the amount of any Indebtedness assumed, incurred or
guaranteed (to the extent not otherwise included) in connection with such Acquisition by the
Borrower or any of its Subsidiaries.



     “Act” has the meaning specified in Section 10.17.



     “Administrative Agent” means Citibank in its capacity as administrative agent under
any of the Loan Documents, or any successor administrative agent, and may include any Affiliate of
Citibank that performs administrative functions with respect to fundings and notices and similar
matters under the Loan Documents.



     “Administrative Agent’s Office” means the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02, or such other address or account as
the Administrative Agent may from time to time notify the Borrower and the Lenders.



     “Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.



1









 





     “Affiliate” means, with respect to any Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified. Without limiting the generality of the foregoing, a Person
shall be deemed to be Controlled by another Person if such other Person possesses, directly or
indirectly, power to vote twenty percent (20%) or more of the Equity Interests having ordinary
voting power for the election of directors, managing general partners or the equivalent.



     “Agent Parties” has the meaning specified in Section 10.02(c).



     “Aggregate Term Commitments” means the Term Commitments of all Lenders.



     “Alternate Base Rate” means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such
day as publicly announced from time to time by Citibank. as its “prime rate.” The “prime rate” is
a rate set by Citibank based upon various factors including Citibank’s costs and desired return,
general economic conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change in such rate
announced by Citibank shall take effect at the opening of business on the day specified in the
public announcement of such change.



     “Alternate Base Rate Loan” means a Term Loan that bears interest based on the
Alternate Base Rate.



     “April 8-K” means the Form 8-K of the Borrower filed with the SEC on April 20, 2007.



     “Applicable Law” means (a) in respect of any Person, all provisions of Laws applicable
to such Person, and all orders and decrees of all courts and determinations of arbitrators
applicable to such Person and (b) in respect of contracts made or performed in the State of New
York, “Applicable Law” shall also mean the Laws of the United States of America, including,
without limitation in addition to the foregoing, 12 USC Sections 85 and 86, as amended to the date
hereof and as the same may be amended at any time and from time to time hereafter, and any other
statute of the United States of America now or at any time hereafter prescribing the maximum rates
of interest on loans and extensions of credit, and the Laws of the State of New York.



     “Applicable Rate” means the following percentages per annum, based upon the Leverage
Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent
pursuant to Section 6.02(a):



	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Alternate Base
	Pricing	 	 	 	Eurodollar Rate	 	Rate for Term
	Level	 	Leverage Ratio	 	for Term Loans	 	Loans
	I

	 	Less than 1.25 to 1.00
	 	 	1.250	 	 	 	(0.250	)
	II

	 	Greater than or equal to 1.25 to
1.00 but less than 1.75 to 1.00
	 	 	1.500	 	 	 	0.000	 






2









 






	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Alternate Base
	Pricing	 	 	 	Eurodollar Rate	 	Rate for Term
	Level	 	Leverage Ratio	 	for Term Loans	 	Loans
	III

	 	Greater than or equal to 1.75 to
1.00 but less than 2.25 to 1.00
	 	 	1.750	 	 	 	0.250	 
	IV

	 	Greater than or equal to 2.25 to 1.00
	 	 	2.000	 	 	 	0.500	 






     Any increase or decrease in the Applicable Rate resulting from a change in the Leverage Ratio
shall become effective as of the first Business Day immediately following the date a Compliance
Certificate is delivered for any Fiscal Quarter pursuant to Section 6.02(a); provided,
however, that if a Compliance Certificate is not delivered when due in accordance with such
Section 6.02(a), then Pricing Level IV shall apply as of the first Business Day after the
date on which such Compliance Certificate was required to have been delivered and shall remain in
effect until the first Business Day immediately following the date such Compliance Certificate is
actually delivered to the Administrative Agent. Notwithstanding the foregoing, the Applicable Rate
in effect from and after the Closing Date through and including the date the Compliance Certificate
is delivered pursuant to Section 6.02(a) for the Fiscal Quarter ending March 31, 2007 shall
be Level 1.



     In the event that any financial statement delivered pursuant to Section 6.01(a) or
6.01(b) or any Compliance Certificate delivered pursuant to Section 6.02(a) is
shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when
such inaccuracy is discovered), and such inaccuracy, if corrected, would have lead to a higher
Applicable Rate for any period (an “Applicable Period”) than the Applicable Rate applied
for such Applicable Period, then (i) the Borrower shall immediately deliver to the Administrative
Agent a correct Compliance Certificate for such Applicable Period, (ii) the Applicable Rate shall
be determined using the Pricing Level applicable for such Applicable Period based upon the
corrected Compliance Certificate, and (iii) the Borrower shall immediately pay to the
Administrative Agent the accrued additional interest and fees owing as a result of such increased
Applicable Rate for such Applicable Period, which payment shall be promptly applied by the
Administrative Agent in accordance with the terms hereof. This paragraph shall not limit the
rights of the Administrative Agent and the Lenders under Section 2.05 and
Article VIII and other provisions of this Agreement. The obligations of the Borrower under
this paragraph shall survive termination of the Commitments and the repayment of all other
Obligations hereunder.



     “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an
Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a
Lender.



     “Asset Coverage Ratio”, as of any date of determination, for the Borrower and its
Subsidiaries, on a consolidated basis in accordance with GAAP, the ratio of (a) the sum of (i) 80%
of Book Value of Accounts as of such date, (ii) 60% of Book Value of Inventory as of such date and
(iii) 50% of Book Value of Net Fixed Assets as of such date to (b) the sum of (i) Consolidated
Funded Indebtedness as of such date minus (ii) any outstanding Term Loans on such date.



3









 





     “Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an Eligible Assignee (with the consent of any party whose consent is required by
Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of
Exhibit D or any other form approved by the Administrative Agent.



     “Attorney Costs” means and includes all reasonable fees, expenses and disbursements of
any external counsel.



     “Attributable Indebtedness” means, on any date, (a) in respect of any Capital Lease of
any Person, the capitalized amount thereof that would appear on a balance sheet of such Person
prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease
Obligation, the capitalized amount of the remaining lease payments under the relevant lease that
would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if
such lease were accounted for as a Capital Lease; provided, however, Attributable
Indebtedness shall not include any vehicle lease, whether accounted for as a Capital Lease or an
operating lease.



     “Audited Financial Statements” means the audited consolidated balance sheet of the
Borrower and its Subsidiaries for the Fiscal Year ended December 31, 2006, and the related audited
consolidated statements of income or operations, shareholders’ equity and cash flows for such
Fiscal Year, including the notes thereto.



     “Borrower” has the meaning specified in the introductory paragraph hereto.



     “Borrower Materials” means material and/or information provided by or on behalf of the
Borrower hereunder or under any other Loan Document.



     “Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the Laws of, or are in fact closed in, the state
where the Administrative Agent’s Office is located and, if such day relates to any Eurodollar Rate
Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in
the London interbank eurodollar market.



     “Capital Expenditures” means, for any period, with respect to any Person, the
aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing
(pursuant to a Capital Lease) of fixed or capital assets that are required to be capitalized under
GAAP on a consolidated balance sheet of such Person and its Subsidiaries, excluding, without
duplication, any such expenditures to the extent constituting (a) expenditures of insurance
proceeds to acquire or repair any asset, (b) leasehold improvement expenditures for which the
Borrower or a Subsidiary is reimbursed by the lessor, sublessor or sublessee, (c) vehicle leases,
or (d) PowerSecure Shared Savings Projects.



     “Capital Lease” means, as of any date, any lease of property, real or personal, the
obligations of lessee in respect of which are required in accordance with GAAP to be capitalized on
the balance sheet of the lessee.



     “Cash and Cash Equivalents” means (a) cash; (b) marketable obligations issued or
unconditionally guaranteed by the U.S. Government or issued by any of its agencies and backed



4









 







by the full faith and credit of the U.S., in each case maturing within one year from the date
of acquisition (and investments in mutual funds investing primarily in those obligations);
(c) short-term investment grade domestic and eurodollar certificates of deposit or time deposits
that are fully insured by the Federal Deposit Insurance Corporation or are issued by commercial
banks having combined capital, surplus, and undivided profits of not less than $500,000,000 (as
shown on its most recently published statement of condition); (d) commercial paper and similar
obligations rated “P-1” by Moody’s or “A-1” by S&P; (e) readily marketable tax-free municipal
bounds of a domestic issuer rated “Aaa” by Moody’s, or “AAA” by S&P, and maturing within one year
from the date of issuance (and investments in mutual funds investing primarily in those bonds);
(f) demand deposit accounts maintained in the ordinary course of business; and (g) money market
mutual funds at least 95% of the assets of which constitute the items described in clauses (a)
through (f) of this definition or a money market fund or a qualified investment fund given one of
the two highest-long-term ratings available from S&P or Moody’s.



     “Cash Management Document” means any agreement between or among the Borrower or any
Affiliate of Borrower and any Lender or, with the Borrower’s consent, any Affiliate of such Lender
related to treasury management, deposit accounts, cash management, custodial services, automated
clearinghouse or funds transfer services or arrangements or similar services or arrangement or
otherwise related to or evidencing any Cash Management Obligations.



     “Cash Management Obligations” means all obligations and liabilities of the Borrower or
any of its Subsidiaries owed to any Lender or any Affiliate thereof arising under or in connection
with any Cash Management Document.



     “Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any Law, rule, regulation or treaty, (b) any
change in any Law, rule, regulation or treaty or in the administration, interpretation or
application thereof by any Governmental Authority or (c) the making or issuance of any request,
guideline or directive (whether or not having the force of Law) by any Governmental Authority.



     “Change of Control” means, with respect to any Person, an event or series of events by
which:




     (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act, but excluding any employee benefit plan of such person or its subsidiaries,
and any person or entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan), other than the Equity Investors, becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or
group shall be deemed to have “beneficial ownership” of all securities that such person or
group has the right to acquire (such right, an “option right”), whether such right
is exercisable immediately or only after the passage of time), directly or indirectly, of
50% or more of the Voting Equity Interests of such Person (and taking into account all such
securities that such person or group has the right to acquire pursuant to any option right);
or




     (b) during any period of 12 consecutive months, a majority of the members of the board
of directors or other equivalent governing body of such Person ceases to be



5









 







composed of individuals (i) who were members of that board or equivalent governing body
on the first day of such period, (ii) whose election or nomination to that board or
equivalent governing body was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a majority of that board or
equivalent governing body or (iii) whose election or nomination to that board or other
equivalent governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a majority of that
board or equivalent governing body (excluding, in the case of both clause (ii) and
clause (iii), any individual whose initial nomination for, or assumption of office as, a
member of that board or equivalent governing body occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of one or more
directors by any person or group other than a solicitation for the election of one or more
directors by or on behalf of the board of directors); or




     (c) any Person or two or more Persons acting in concert shall have acquired by contract
or otherwise, or shall have entered into a contract or arrangement that, upon consummation
thereof, will result in its or their acquisition of the power to exercise, directly or
indirectly, a controlling influence over the management or policies of the Borrower, or
control over the Voting Equity Interests of the Borrower on a fully-diluted basis (and
taking into account all such Interests that such Person or group has the right to acquire
pursuant to any option right) representing 50% or more of the combined voting power of such
Interests.



     “Citibank” means Citibank, N.A., and its successors and assigns.



     “Closing Date” means the first date all the conditions precedent in
Section 4.01 are satisfied or waived in accordance with Section 4.01 (or, in the
case of Section 4.01(b), waived by the Person entitled to receive the applicable payment).



     “Code” means the Internal Revenue Code of 1986.



     “Collateral” means any collateral in which a Lien is granted by any Person to the
Administrative Agent to secure the Secured Obligations pursuant to the Collateral Documents.



     “Collateral Documents” means the Deed of Trust and any document related thereto.



     “Compliance Certificate” means a certificate substantially in the form of
Exhibit C, with such changes, or in such other form, as agreed to by the Administrative
Agent.



     “Consolidated EBITDA” means, for any period, for the Borrower and its Subsidiaries on
a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated
Interest Charges, (c) the amount of taxes, based on or measured by income, deducted in determining
such Consolidated Net Income, (d) the amount of depreciation and amortization expense deducted in
determining such Consolidated Net Income, (e) all non-cash charges or losses which do not represent
a cash charge or loss in such period or in a future period, and (f) without duplication,
non-recurring charges consisting of Founders Severance Payments and relocation expenses not to
exceed $14,200,000 in aggregate amount (in each case with respect to the items set forth in
clauses (b) through (f) above, only to the extent included in



6









 







calculating such Consolidated Net Income and without duplication), minus the following
to the extent included in calculating such Consolidated Net Income: (a) Federal, state, local and
foreign income tax credits of the Borrower and its Subsidiaries for such period, (b) Consolidated
Interest Income, and (c) all non-cash items increasing Consolidated Net Income for such period.



     “Consolidated Funded Indebtedness” means, on any date of determination, the
outstanding principal amount of all Indebtedness of the Borrower and its Subsidiaries of the type
described in clauses (a), (b), (d), (e) and (f) of the definition of “Indebtedness”, and,
without duplication, any Guarantees of the foregoing, in each case, determined on a consolidated
basis in accordance with GAAP.



     “Consolidated Interest Charges” means, with respect to any period, total interest
expense, whether paid or accrued (including the interest component of Capital Leases), of the
Borrower and Subsidiaries, including, without limitation, all commissions, discounts and other fees
and charges owed with respect to letters of credit and net costs under interest rate contracts and
foreign exchange contracts.



     “Consolidated Interest Income” means, with respect to any period, total interest
income of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with
GAAP for such period.



     “Consolidated Net Income” means, for any period, for the Borrower and its Subsidiaries
on a consolidated basis, the net income of the Borrower and its Subsidiaries (excluding
extraordinary gains and extraordinary losses) for that period in accordance with GAAP,
provided that there shall be excluded (a) the income (or loss) of any Person (other than a
Subsidiary of the Borrower whose net income is consolidated into the net income of the Borrower in
accordance with GAAP) in which the Borrower or any of its Subsidiaries has an ownership interest,
except to the extent that any such income is actually received by the Borrower or such Subsidiary
in the form of dividends or similar distributions, and (b) the net income of any Subsidiary of the
Borrower to the extent that the declaration or payment of Dividends or similar distributions by
such Subsidiary is at the time restricted or not permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or requirement of Law applicable to such
Subsidiary.



     “Consolidated Lease Expense” means, for any period, the aggregate amount of fixed and
contingent rentals payable by the Borrower and its Subsidiaries for such period with respect to
lease of real and personal property, determined on a consolidated basis in accordance with GAAP.



     “Contractual Obligation” means, as to any Person, any provision of any security issued
by such Person or of any agreement, instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.



     “Control” means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person, whether through the ability to
exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings
correlative thereto.



7









 





     “Credit Extension” means a Term Borrowing.



     “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.



     “Deed of Trust” means the fee deed of trust executed by PowerSecure, substantially in
the form of Exhibit F.



     “Default” means any event or condition that constitutes an Event of Default or that,
with the giving of any notice, the passage of time, or both, would be an Event of Default.



     “Default Rate” means an interest rate per annum equal to the lesser of (a) the Highest
Lawful Rate and (b) the sum of (i) the Alternate Base Rate plus (ii) the Applicable Rate,
if any, applicable to Alternate Base Rate Loans plus (c) 2% per annum; provided,
however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest
rate per annum equal to the lesser of (a) the Highest Lawful Rate and (b) the sum of (i) the
interest rate (including any Applicable Rate) otherwise applicable to such Loan plus
(ii) 2% per annum.



     “Defaulting Lender” means any Lender that (a) has failed to fund any portion of the
Term Loans required to be funded by it hereunder within one Business Day of the date required to be
funded by it hereunder, (b) has otherwise failed to pay over to the Administrative Agent or any
other Lender any other amount required to be paid by it hereunder within one Business Day of the
date when due, unless the subject of a good faith dispute, or (c) has been deemed insolvent or
become the subject of a bankruptcy or insolvency proceeding.



     “Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by any Person, including
any sale, assignment, transfer or other disposal, with or without recourse, of any notes or
accounts receivable or any rights and claims associated therewith.



     “Disqualified Equity Interests” means any Equity Interests of the Borrower or any of
its Subsidiaries that, either by their terms or by the terms of any security into which they are
convertible or for which they are exchangeable, or upon the happening of any event or condition
(including the passage of time), (a) matures or is mandatorily redeemable (other than solely for
Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result
of a change of control or asset sale so long as any rights of the holders thereof upon the
occurrence of a change of control or asset sale event shall be subject to the prior repayment in
full of the Term Loans and all other Obligations that are accrued and payable and the termination
of the Commitments), (b) is redeemable at the option of the holder thereof (other than solely for
Qualified Equity Interests), in whole or in part, (c) provides for the scheduled payments of
dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness, or any
other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to
the date which is six months after the Term Maturity Date.



8









 





     “Dividends” means any dividend or other distribution (whether in cash, securities or
other property) with respect to any capital stock or other Equity Interest of the Borrower or any
Subsidiary.



     “Dollar” and “$” mean Lawful money of the United States.



     “Domestic Subsidiary” means any Subsidiary that is organized under the Laws of any
political subdivision of the United States.



     “Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved
Fund; and (d) any other Person (other than a natural person) approved by (i) the Administrative
Agent, and (ii) unless an Event of Default has occurred and is continuing, the Borrower (each such
approval not to be unreasonably withheld or delayed); provided that notwithstanding the
foregoing, “Eligible Assignee” shall not include any Loan Party, the Sponsor or any of their
respective Affiliates or Subsidiaries.



     “Environmental Complaint” has the meaning specified in Section 5.09.



     “Environmental Laws” means any and all Federal, state, local, and foreign statutes,
Laws, regulations, ordinances, rules, judgments, orders, decrees, permits, licenses, agreements
with any Governmental Authority or governmental restrictions relating to pollution and the
protection of the environment or the release of any Hazardous Materials into the environment.



     “Equity Interests” means, with respect to any Person, all of the shares of capital
stock of (or other ownership or profit interests in) such Person, all of the warrants, options or
other rights for the purchase or acquisition from such Person of shares of capital stock of (or
other ownership or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person
or warrants, rights or options for the purchase or acquisition from such Person of such shares (or
such other interests), and all of the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting, and whether or not
such shares, warrants, options, rights or other interests are outstanding on any date of
determination.



     “Equity Issuance” means the sale or issuance by the Borrower or any of its
Subsidiaries of any of its Equity Interests in a public offering or in a private placement or sale.



     “ERISA” means the Employee Retirement Income Security Act of 1974.



     “ERISA Affiliate” means any trade or business (whether or not incorporated) under
common control with the Borrower within the meaning of Section 414(b) or (c) of the Code (and
Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the
Code).



     “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a
withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2)
of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e)
of ERISA; (c) a complete or partial withdrawal by the Borrower or any



9









 







ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in
reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or
condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not
delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.



     “Eurodollar Rate” means, for any Interest Period with respect to a Eurodollar Rate
Loan, the rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”),
as published by Reuters (or other commercially available source providing quotations of BBA LIBOR
as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London
time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for
delivery on the first day of such Interest Period) with a term equivalent to such Interest Period.
If such rate is not available at such time for any reason, then the “Eurodollar Rate” for such
Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate
at which deposits in Dollars for delivery on the first day of such Interest Period in same day
funds in the approximate amount of the Eurodollar Rate Loan being made, continued or converted by
Citibank, N.A. and with a term equivalent to such Interest Period would be offered by Citibank,
N.A.’s London Branch to major banks in the London interbank eurodollar market at their request at
approximately 4:00 p.m. (London time) two Business Days prior to the commencement of such Interest
Period.



     “Eurodollar Rate Loan” means a Term Loan that bears interest at a rate based on the
Eurodollar Rate.



     “Event of Default” has the meaning specified in Section 8.01.



     “Exchange Act” means the Securities Exchange Act of 1934.



     “Excluded Taxes” means, with respect to the Administrative Agent, any Lender, or any
other recipient of any payment to be made by or on account of any obligation of the Borrower
hereunder, (a) taxes imposed on or measured by its overall net income (however denominated), and
franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the Laws of which such recipient is organized or in which its principal
office is located or, in the case of any Lender, in which its applicable Lending Office is located,
(b) any branch profits taxes imposed by the United States or any similar tax imposed by any other
jurisdiction in which the Borrower is located and (c) in the case of a Foreign Lender (other than
an assignee pursuant to a request by the Borrower under Section 10.13), any withholding tax
that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a
party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any)
was entitled, at the time of designation of a new Lending Office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax pursuant to
Section 3.01(a).



10









 





     “Existing Credit Agreement” means that certain Credit Agreement, dated as of
August 23, 2007, among the Borrower, Citibank, as administrative agent, and the lenders party
thereto.



     “Existing Credit Agreement Collateral Documents” means the Collateral Documents as
defined in the Existing Credit Agreement.



     “Existing Credit Agreement Obligations” has the meaning specified in
Section 10.19.



     “Extraordinary Receipt” means any cash received by or paid to or for the account of
any Person not in the ordinary course of business, including tax refunds, pension plan reversions,
proceeds of insurance (other than proceeds of business interruption insurance to the extent such
proceeds constitute compensation for lost earnings), condemnation awards (and payments in lieu
thereof), indemnity payments and any purchase price adjustments; provided, however, that an
Extraordinary Receipt shall not include cash receipts from proceeds of insurance, condemnation
awards (or payments in lieu thereof) or indemnity payments to the extent that such proceeds, awards
or payments (a) in respect of loss or damage to equipment, fixed assets or real property are
applied (or in respect of which expenditures were previously incurred) to replace or repair the
equipment, fixed assets or real property in respect of which such proceeds were received in
accordance with the terms of Section 2.03(f) or (b) are received by any Person in respect
of any third party claim against such Person and applied to pay (or to reimburse such Person for
its prior payment of) such claim and the costs and expenses of such Person with respect thereto.



     “Federal Funds Rate" means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve
Bank on the Business Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such
rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%)
charged to Citibank on such day on such transactions as determined by the Administrative Agent.



     “Fiscal Quarter(s)” means the three-calendar-month periods ending on March 31,
June 30, September 30, and December 31 of each calendar year.



     “Fiscal Year” means the twelve-calendar-month period beginning January 1 of each year
and ending December 31 of each year.



     “Fixed Charge Coverage Ratio” means, as of the date of determination, for the Borrower
and its Subsidiaries on a consolidated basis in accordance with GAAP, the ratio of (a) the sum of
(i) Consolidated EBITDA, plus (ii) Consolidated Lease Expense minus (iii) cash Taxes to (b) the sum
of (i) Consolidated Interest Charges, (ii) scheduled payments of principal of Consolidated Funded
Indebtedness, (iii) Consolidated Lease Expense, and (iv) Restricted Payments, in each case for the
period of four consecutive Fiscal Quarters ending on such date.



11









 





     “Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction
other than that in which the Borrower is resident for tax purposes. For purposes of this
definition, the United States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction.



     “Foreign Subsidiary” means each Subsidiary of the Borrower that is not a Domestic
Subsidiary



     “Founders Severance Payments” means the payments to be made to W. Phillip Marcum and
A. Bradly Gabbard pursuant to the Separation Agreement and Release and Employment Agreements.



     “FRB” means the Board of Governors of the Federal Reserve System of the United States.



     “Fund” means any Person (other than a natural person) that is (or will be) engaged in
making, purchasing, holding or otherwise investing in commercial loans and similar extensions of
credit in the ordinary course of its business.



     “GAAP” means generally accepted accounting principles in the United States set forth
in the opinions and pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board or such other principles as may be approved by a significant segment of the
accounting profession in the United States, that are applicable to the circumstances as of the date
of determination, consistently applied.



     “Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government (including any supra-national bodies such as the European Union or the European Central
Bank).



     “Guarantee” means, as to any Person, any (a) any obligation, contingent or otherwise,
of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other
obligation payable or performable by another Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (ii) to purchase or lease property, securities or services for the purpose of
assuring the obligee in respect of such Indebtedness or other obligation of the payment or
performance of such Indebtedness or other obligation, (iii) to maintain working capital, equity
capital or any other financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in
respect of such Indebtedness or other obligation of the payment or performance thereof or to
protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any
assets of such Person securing any Indebtedness or other obligation of any other Person, whether



12









 







or not such Indebtedness or other obligation is assumed by such Person (or any right,
contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien). The amount
of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the
related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if
not stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a
corresponding meaning.



     “Guarantors” means each Domestic Subsidiary other than any Inactive Subsidiary.



     “Guaranty” means any Guaranty executed by any Guarantor in favor of the Administrative
Agent, substantially in the form of Exhibit E.



     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.



     “Highest Lawful Rate” means at the particular time in question the maximum rate of
interest which, under Applicable Law, any Lender is then permitted to charge on the Obligations.
If the maximum rate of interest which, under Applicable Law, any Lender is permitted to charge on
the Obligations shall change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, from time to time as of the effective time of each change in the Highest
Lawful Rate without notice to the Borrower.



     “Inactive Subsidiaries” means those Subsidiaries of the Borrower listed on
Schedule 1.01.



     “Indebtedness” means, as to any Person at a particular time, without duplication, all
of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:




     (a) all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;




     (b) all direct or contingent obligations of such Person arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and
similar instruments;




     (c) net obligations of such Person under any Swap Contract;




     (d) all obligations of such Person to pay the deferred purchase price of property or
services (other than trade accounts payable in the ordinary course of business);




     (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property
owned or being purchased by such Person (including indebtedness arising under



13









 







conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;




     (f) Attributable Indebtedness in respect of Capital Leases and Synthetic Lease
Obligations;




     (g) Disqualified Equity Interests;




     (h) Founders Severance Payments; and




     (i) all Guarantees of such Person in respect of any of the foregoing.



     For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a joint venturer, unless
such Indebtedness is expressly made non-recourse to such Person. The amount of any net obligation
under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of
such date.



     “Indemnified Taxes” means Taxes other than Excluded Taxes.



     “Information” has the meaning specified in Section 10.07.



     “Interest Payment Date” means, (a) as to any Term Loan other than a Alternate Base
Rate Loan, the last day of each Interest Period applicable to such Loan and the Term Maturity Date;
provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds
three months, the respective dates that fall every three months after the beginning of such
Interest Period shall also be Interest Payment Dates; and (b) as to any Alternate Base Rate Loan,
the last Business Day of each March, June, September and December and the Term Maturity Date.



     “Interest Period” means, as to each Eurodollar Rate Loan, the period commencing on the
date such Eurodollar Rate Loan is disbursed or converted to or continued as a Eurodollar Rate Loan
and ending on the date one, two, three or six (or nine or twelve, if consented to by all Lenders)
months thereafter, as selected by the Borrower in its Term Loan Notice; provided that:




     (a) any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day;




     (b) any Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of the calendar month at the end
of such Interest Period; and




     (c) no Interest Period shall extend beyond the Term Maturity Date.



     “Investment” means, as to any Person, any direct or indirect acquisition or investment
by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other



14









 







securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or
assumption of debt of, or purchase or other acquisition of any other debt or equity participation
or interest in, another Person, including any partnership or joint venture interest in such other
Person and any arrangement pursuant to which the investor guarantees Indebtedness of such other
Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions)
of assets of another Person that constitute a business unit. For purposes of covenant compliance,
the amount of any Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.



     “IP Rights” has the meaning specified in Section 5.17.



     “IRS” means the United States Internal Revenue Service.



     “Laws” means, collectively, all international, foreign, federal, state and local
statutes, treaties, rules, regulations, ordinances, codes and applicable administrative or judicial
precedents or authorities, including the interpretation or administration thereof by any
Governmental Authority charged with the enforcement, interpretation or administration thereof, and
all applicable administrative orders, directed and enforceable duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority.



     “Lender” has the meaning specified in the introductory paragraph hereto.



     “Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other office or offices as
a Lender may from time to time notify the Borrower and the Administrative Agent.



     “Leverage Ratio” means, as of the date of determination, for the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP, the ratio of (a) Consolidated Funded
Indebtedness as of such date to (b) Consolidated EBITDA for the period of four consecutive Fiscal
Quarters ending on such date. For purposes of calculating the Leverage Ratio as at any date,
Consolidated EBITDA shall be calculated on a pro forma basis (as certified by the
Borrower to the Administrative Agent and as approved by an Administrative Agent) assuming that all
Acquisitions and Dispositions completed during the period of four consecutive Fiscal Quarters
ending on such date had been made on the first day of such period.



     “Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), charge, or preference, priority or other security interest
or preferential arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, and any financing lease having substantially the same economic
effect as any of the foregoing).



     “Litigation” means any proceeding, claim, lawsuit, arbitration and/or investigation by
or before any Governmental Authority or arbitrator, including, without limitation, proceedings,
claims, lawsuits, and/or such investigations conducted by or before any Governmental Authority or
arbitrator or pursuant to any environmental, occupational, safety and health, antitrust, unfair
competition, securities, tax or other Law, or under or pursuant to any contract, agreement or other
instrument.



15









 





     “Loan Documents” means this Agreement, the Notes, the Guaranties, each Request for
Credit Extension, each Compliance Certificate, each Collateral Document, and any other agreement
executed, delivered or performable by any Loan Party in connection herewith or as security for the
Obligations, excluding any Swap Contract.



     “Loan Parties” means, collectively, the Borrower and each Guarantor.



     “Material Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries, taken as a whole; (b) a material
adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party
of any Loan Document to which it is a party; (c) a material adverse effect upon the Collateral or
upon the Liens granted in the Collateral; (d) a material adverse effect on the ability of the
Borrower or any other Loan Party to perform its obligations under the Loan Documents; or (e) a
material adverse effect on the rights and remedies of the Administrative Agent or the Lenders under
the Loan Documents.



     “Moody’s” means Moody’s Investors Service, Inc., or any successor rating agency.



     “Mortgaged Property” means the real property and improvements thereon subject to the
Deed of Trust.



     “Multiemployer Plan” means any employee benefit plan of the type described in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to
make contributions, or during the preceding five plan years, has made or been obligated to make
contributions.



     “Net Cash Proceeds” means, with respect to a Disposition or issuance of any
Indebtedness by any Person, the cash proceeds received by such Person in connection with such
transaction (including any cash received in respect of non-cash proceeds, but only and as when
received) after deducting therefrom the aggregate, without duplication, of the following amounts to
the extent properly attributable to such transaction or to any asset that may be the subject
thereof: (a) all reasonable and customary legal, investment banking, brokerage and accounting fees
and expenses incurred in connection with such Disposition or issuance, (b) all taxes paid or
payable by such Person to be payable in cash in connection with such Disposition or issuance,
(c) payments made by such Person to retire Indebtedness (other than the Credit Extensions) where
payment of such Indebtedness is required in connection with such Disposition or issuance, (d) any
amounts required to be deposited into escrow in connection with the closing of such Disposition or
issuance (until any such amounts are released therefrom to such Person) and (e) the amount of any
reserve for adjustments in respect of the sale price of such asset or assets established in
accordance with GAAP (until any such reserve is reversed).



     “Net Equity Proceeds” means, with respect to the sale or issuance after the Closing
Date by the Borrower or any of its Subsidiaries of any of its Equity Interests, the excess of:
(a) the gross cash proceeds received by the Borrower or such other entity from such sale, exercise
or issuance over (b) all reasonable and customary underwriting commissions and legal, investment



16









 







banking, brokerage and accounting and other professional fees, sales commissions and
disbursements actually incurred in connection with such sale, issuance or exercise.



     “Net Fixed Assets” means, as of any date of determination, the cost of fixed assets of
the Borrower and its Subsidiaries minus depreciation expense incurred with respect thereto as of
such date of determination, determined on a consolidated basis in accordance with GAAP.



     “Net Recovery Proceeds” means, with respect to any Recovery Event or Extraordinary
Receipts, the gross cash proceeds (net of reasonable fees, costs and taxes actually incurred and
paid in connection with such Recovery Event or Extraordinary Receipt and any required permanent
payment of Indebtedness (other than Indebtedness secured pursuant to the Collateral Documents)
which is secured by the property that is the subject of such Recovery Event) received by the
respective Person in connection with such Recovery Event or Extraordinary Receipt.



     “Note” means a promissory note made by the Borrower in favor of a Lender evidencing
Term Loans made by such Lender, substantially in the form of Exhibit B.



     “Obligations” means all advances to, and debts, liabilities, obligations, covenants
and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any
Loan, under any treasury management arrangements with any Lender, whether direct or indirect
(including those acquired by assumption), absolute or contingent, due or to become due, now
existing or hereafter arising and including interest and fees that accrue after the commencement by
or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws
naming such Person as the debtor in such proceeding, regardless of whether such interest and fees
are allowed claims in such proceeding.



     “Off-Balance Sheet Liabilities” means with respect to any Person as of any date of
determination thereof, without duplication and to the extent not included as a liability on the
consolidated balance sheet of such Person and its Subsidiaries in accordance with GAAP: (a) with
respect to any asset securitization transaction (including any accounts receivable purchase
facility) (i) the unrecovered investment of purchasers or transferees of assets so transferred, and
(ii) any other payment, recourse, repurchase, hold harmless, indemnity or similar obligation of
such Person or any of its Subsidiaries in respect of assets transferred or payments made in respect
thereof, other than limited recourse provisions that are customary for transactions of such type
and that neither (x) have the effect of limiting the loss or credit risk of such purchasers or
transferees with respect to payment or performance by the obligors of the assets so transferred nor
(y) impair the characterization of the transaction as a true sale under applicable Laws (including
Debtor Relief Laws); (b) the monetary obligations under any financing lease or so-called
“synthetic,” tax retention or off-balance sheet lease transaction which, upon the application of
any Debtor Relief Law to such Person or any of its Subsidiaries, would be characterized as
indebtedness; (c) any other monetary obligation arising with respect to any other transaction which
(i) upon the application of any Debtor Relief Law to such Person or any of its Subsidiaries, would
be characterized as indebtedness or (ii) is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the consolidated balance sheet of such
Person and its Subsidiaries (for purposes of this clause (c), any transaction



17









 







structured to provide tax deductibility as interest expense of any dividend, coupon or other
periodic payment will be deemed to be the functional equivalent of a borrowing).



     “Organization Documents” means, (a) with respect to any corporation, the certificate
or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents
with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement; and (c) with respect
to any partnership, joint venture, trust or other form of business entity, the partnership, joint
venture or other applicable certificate or agreement of formation or organization and any
agreement, instrument, filing or notice with respect thereto filed in connection with its formation
or organization with the applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or organization of such
entity.



     “Other Taxes” means all present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising from any payment made hereunder or
under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement or any other Loan Document.



     “Participant” has the meaning specified in Section 10.06(d).



     “PBGC” means the Pension Benefit Guaranty Corporation.



     “Pension Plan” means any “employee pension benefit plan” (as such term is defined in
Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and
is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any
ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple
employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time
during the immediately preceding five plan years.



     “Permitted Acquisition” means any Acquisition that satisfied each of the following
requirements:




     (a) both before and after giving effect to such Acquisition and any financing requested
to be made in connection therewith, no Default exists or will exist or would result
therefrom;




     (b) such Acquisition shall not be opposed by the board of directors or governing body
of the Person or assets being acquired;




     (c) no Loan Party shall, as a result of or in connection with any such acquisition,
assume or incur any direct or contingent liabilities (whether relating to environmental,
tax, litigation, or other matters) that could reasonably be expected, as of the date of such
acquisition, to result in the existence or occurrence of a Material Adverse Effect;




     (d) the applicable requirements set forth in Section 6.14 are satisfied within
the time required therein; and



18









 






     (e) the Person or assets subject to such Acquisition is or are (i) in the same or
related line of business as that conducted by the Borrower and its Subsidiaries on the date
hereof or (ii) in a business that is ancillary and in furtherance of the line of business as
that conducted by the Borrower and its Subsidiaries on the date hereof.



     “Person” means any natural person, corporation, limited liability company, trust,
joint venture, association, company, partnership, Governmental Authority or other entity.



     “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of
ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412
of the Code or Title IV of ERISA, any ERISA Affiliate.



     “Post-Closing Letter” means that certain letter agreement of even date herewith,
executed by Borrower and Administrative Agent, and setting forth the required time of delivery of
certain items otherwise required under Section 4.01 to be delivered to the Administrative
Agent on the Closing Date.



     “PowerSecure” means PowerSecure, Inc., a Delaware corporation and wholly-owned
Subsidiary of the Borrower.



     “PowerSecure Shared Savings Projects” means projects whereby PowerSecure builds and
provides on-site power units and equipment on property of its customers, and PowerSecure retains
ownership of such units and equipment, which projects shall be approved by the Required Lenders
(such approval not to be unreasonably withheld or delayed).



     “Premises” has the meaning set forth in Section 5.09.



     “Property” means the real property to be purchased by PowerSecure located at
1609 Heritage Commerce Court, Wake Forest, Wake County, North Carolina, the commercial building
located thereon, together with all fixtures and other improvements located thereon.



     “Qualified Equity Interests” means any Equity Interests that are not Disqualified
Equity Interests.



     “Recovery Event” means any settlement of or payment in respect of any property
insurance or casualty insurance claim or any condemnation proceeding in or deed in lieu thereof
relating to any Collateral.



     “Register” has the meaning specified in Section 10.06(c).



     “Related Parties” means, with respect to any Person, such Person’s Affiliates and the
partners, directors, officers, employees, agents and advisors of such Person and of such Person’s
Affiliates.



     “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA,
other than events for which the 30 day notice period has been waived.



19









 





     “Request for Credit Extension” means with respect to the Term Borrowing or a
conversion or continuation of Term Loans, a Term Loan Notice.



     “Required Lenders” means, as of any date of determination, (a) when there is only one
Lender, Citibank or its successor and assigns, and (b) where there is more than one Lender, two or
more Lenders having at least 66-2/3% of the Aggregate Term Commitments or, if the commitment of
each Lender to make Term Loans have been terminated pursuant to Section 8.02 or otherwise,
Lenders holding in the aggregate more than 66-2/3% of the Total Outstandings; provided that
the Term Commitment of, and the portion of the Total Outstandings held or deemed held by, any
Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.



     “Responsible Officer” means the chief executive officer, president, chief financial
officer, treasurer, assistant treasurer or controller of the Borrower and, solely for purposes of
notices given pursuant to Article II, any other officer or employee of the Borrower so
designated by any of the foregoing officers in a notice to the Administrative Agent. Any document
delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively
presumed to have been authorized by all necessary corporate, partnership and/or other action on the
part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on
behalf of the Borrower.



     “Restricted Payment” means, collectively, (a) Dividends, (b) any payment (whether in
cash, securities or other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital
stock or other Equity Interest or on account of any return of capital to the Borrower’s
stockholders, partners or members (or the equivalent Person thereof), and (c) any payment of
principal, interest, premium or penalty on any Indebtedness or any defeasance, redemption,
purchase, repurchase, or other acquisition or retirement for value, in whole or in part, of any
Indebtedness (including, without limitation, the setting aside of assets or the deposit of funds
therefor).



     “S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc., or any
successor rating agency.



     “SEC” means the Securities and Exchange Commission, or any Governmental Authority
succeeding to any of its principal functions.



     “Secured Creditor” means any of (a) Secured Party, (b) Administrative Agent,
(c) Lenders, (d) any Lender or Affiliate of any Lender that is a party to any Swap Contract
(provided that such Lender was a Lender at the time such Swap Contract was entered into) with
Borrower or any Affiliate of Borrower, (e) any Lender or Affiliate of any Lender that is owed any
Cash Management Obligation (provided that such Lender was a Lender at the time such Cash Management
Obligation arose), and (f) the beneficiaries of each indemnification obligation undertaken by any
Loan Party under any Loan Document.



     “Secured Obligations” means, collectively, (a) the Obligations, (b) all Swap
Obligations owed to any Lender or an Affiliate of such Lender (provided at the time of execution of
the Swap



20









 







Contract related to such Swap Obligations or prior thereto such Lender is a party to the
Credit Agreement), (c) all Cash Management Obligations, (d) any and all out-of-pocket expenses
(including, without limitation, expenses and reasonable counsel fees and expenses of any Secured
Creditor) incurred by any Secured Creditor in enforcing its rights under this Agreement or under
any other Loan Document, and (e) all present and future amounts in respect of the foregoing that
would become due but for the operation of any provision of Debtor Relief Laws, and all present and
future accrued and unpaid interest, including, without limitation, post-petition interest if any
Loan Party voluntarily or involuntarily becomes subject to any Debtor Relief Laws.



     “Securities Act” means the Securities Act of 1933.



     “Solvent” means, with respect to any Person, as of any date of determination, that the
fair value of the assets (tangible and intangible) of such Person (at fair valuation) is, on the
date of determination, greater than the total amount of liabilities (including contingent and
unliquidated liabilities) of such Person as of such date, that the present fair saleable value of
such assets of such Person will, as of such date, be greater than the amount that will be required
to pay the probable liability of such Person on its debts as such debts become absolute and matured
considering all financing alternatives and potential asset sales reasonably available to such
Person, and that, as of such date, such Person will be able to pay all liabilities of such Person
as such liabilities mature and such Person does not have unreasonably small capital with which to
carry on its business. In computing the amount of contingent or unliquidated liabilities at any
time, such liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that can reasonably be expected to
become an actual or matured liability discounted to present value at rates believed to be
reasonable by such Person.



     “Subsidiary” of a Person means a corporation, partnership, joint venture, limited
liability company or other business entity of which a majority of the Voting Equity Interests
(other than securities or interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.
Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall
refer to a Subsidiary or Subsidiaries of the Borrower; provided, however, for
purposes hereof, the Trust shall not be a Subsidiary.



     “Subsidiary Loan Party” means any Loan Party that is a Subsidiary.



     “Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit
derivative transactions, forward rate transactions, commodity swaps, commodity options, forward
commodity contracts, equity or equity index swaps or options, bond or bond price or bond index
swaps or options or forward bond or forward bond price or forward bond index transactions, interest
rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions, currency options,
spot contracts, or any other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and



21









 




(b) any and all transactions of any kind, and the related confirmations, which are subject to
the terms and conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master
Agreement, or any other master agreement (any such master agreement, together with any related
schedules, a “Master Agreement”), including any such obligations or liabilities under any
Master Agreement.




     “Swap Obligations” means any and all obligations under or in connection with or
otherwise owed by the Borrower to any Lender or any Affiliate of a Lender in respect of a Swap
Contract.



     “Swap Termination Value” means, in respect of any one or more Swap Contracts, after
taking into account the effect of any legally enforceable netting agreement relating to such Swap
Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in subsection (a), the amount(s) determined as the mark-to-market
value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily
available quotations provided by any recognized dealer in such Swap Contracts (which may include a
Lender or any Affiliate of a Lender).



     “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a
so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or
possession of property creating obligations that do not appear on the balance sheet of such Person
but which, upon the insolvency or bankruptcy of such Person, would be characterized as the
indebtedness of such Person (without regard to accounting treatment).



     “Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental Authority, including
any interest, additions to tax or penalties applicable thereto.



     “Term Borrowing” means a borrowing by the Borrower consisting of Term Loans of the
same Type and having the same Interest Period made by each of the Lenders pursuant to
Section 2.01.



     “Term Commitment” means, as to each Lender, its obligation to make a Term Loan to the
Borrower pursuant to Section 2.01, in aggregate principal amount not to exceed the amount
set forth opposite such Lender’s name on Schedule 2.01, as such amount may be adjusted from
time to time in accordance with this Agreement.



     “Term Loan” has the meaning specified in Section 2.01.



     “Term Loan Notice” means a notice of (a) the Term Borrowing, (b) a conversion of Term
Loans from one Type to the other, or (c) a continuation of Term Loans as the same Type, pursuant to
Section 2.02(a), which, if in writing, shall be substantially in the form of
Exhibit A.



     “Term Maturity Date” means (a) January 16, 2015, or (b) such earlier date as (i) the
Obligations become due and payable pursuant to this Agreement (whether by acceleration,



22









 







prepayment in full, scheduled reduction or otherwise) or (ii) there shall exist an Event of
Default under Section 8.01(f).



     “Term Pro Rata Share” means, with respect to each Lender at any time, a fraction
(expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the
amount of the Term Commitment of such Lender at such time and the denominator of which is the
amount of the Aggregate Term Commitments at such time; provided that if the commitment of
each Lender to make Term Loans have been terminated pursuant to Section 8.02 or otherwise,
then the Term Pro Rata Share of each Lender shall be a fraction (expressed as a percentage, carried
out to the ninth decimal place), the numerator of which is the Total Outstandings owed to such
Lender and the denominator of which is the Total Outstandings owed to all Lenders. The initial
Term Pro Rata Share of each Lender is set forth opposite the name of such Lender on
Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a
party hereto, as applicable.



     “Total Outstandings” means, with respect to the Term Loans on any date, the aggregate
outstanding principal amount of all Term Loans after giving effect to any prepayments or repayments
of Term Loans occurring on such date.



     “Trust” means Marcum Midstream 1995-2 Business Trust, a Delaware statutory trust.



     “Type” means, with respect to a Term Loan, its character as a Alternate Base Rate Loan
or a Eurodollar Rate Loan.



     “UCC” means the Uniform Commercial Code of Texas or, where applicable to specific
Collateral, any other relevant state.



     “Unfunded Pension Liability” means the excess of a Pension Plan’s benefit liabilities
under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan’s assets,
determined in accordance with the assumptions used for funding the Pension Plan pursuant to
Section 412 of the Code for the applicable plan year.



     “United States” and “U.S.” mean the United States of America.



     “Voting Equity Interests” of any Person means Equity Interests of any class or classes
having ordinary voting power for the election of at least a majority of the members of the board of
directors, managing general partners or the equivalent governing body of such Person, irrespective
of whether, at the time, Equity Interests of any other class or classes or such entity shall have
or might have voting power by reason of the happening of any contingency.



     Section 1.02. Other Interpretive Provisions. With reference to this Agreement and each other
Loan Document, unless otherwise specified herein or in such other Loan Document:



     (a) The definitions of terms herein shall apply equally to the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation.” The word
“will” shall be construed to have the same meaning and effect as the word “shall.”
Unless the context



23









 







requires otherwise, (i) any definition of or reference to any agreement, instrument or other
document (including any Organization Document) shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications set forth herein or
in any other Loan Document), (ii) any reference herein to any Person shall be construed to include
such Person’s successors and assigns, (iii) the words “herein,” “hereof” and
“hereunder” and words of similar import when used in any Loan Document, shall be construed
to refer to such Loan Document in its entirety and not to any particular provision thereof,
(iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in
which such references appear, (v) any reference to any Law shall include all statutory and
regulatory provisions consolidating, amending replacing or interpreting such Law and any reference
to any Law or regulation shall, unless otherwise specified, refer to such Law or regulation as
amended, modified or supplemented from time to time, and (vi) the words “asset” and
“property” shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities, accounts and
contract rights.



     (b) In the computation of periods of time from a specified date to a later specified date, the
word “from” means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to and
including.”



     (c) Section headings herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any other Loan
Document.



     (d) For purposes of Section 8.01, a breach of a financial covenant contained in
Section 7.12 shall be deemed to have occurred as of any date of determination thereof by
the Administrative Agent or as of the last date of any specified measuring period, regardless of
when the financial statements or the Compliance Certificate reflecting such breach are delivered to
the Administrative Agent and the Lenders.



     Section 1.03. Accounting Terms.



     (a) All accounting terms not specifically or completely defined herein shall be construed in
conformity with, and all financial data (including financial ratios and other financial
calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity
with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except as
otherwise specifically prescribed herein.



     (b) If at any time any change in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall
so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to
amend such ratio or requirement to preserve the original intent thereof in light of such change in
GAAP (subject to the approval of the Required Lenders); provided that, until so
amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP



24









 







prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent
and the Lenders financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.



     Section 1.04. Rounding. Any financial ratios required to be maintained by the Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate component by the other
component, carrying the result to one place more than the number of places by which such ratio is
expressed herein and rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).



     Section 1.05. Times of Day. Unless otherwise specified, all references herein to times of day
shall be references to Central time (daylight or standard, as applicable).



     Section 1.06. References to Agreements and Laws. Unless otherwise expressly provided herein,
(a) references to Organization Documents, agreements (including the Loan Documents) and other
contractual instruments shall be deemed to include all subsequent amendments, restatements,
extensions, supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are not prohibited by any
Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions
and rulings consolidating, amending, replacing, supplementing or interpreting such Law.



ARTICLE II.




THE COMMITMENTS AND CREDIT EXTENSIONS




     Section 2.01. Term Loans. Subject to the terms and conditions herein, each Lender severally
agrees to make a term loan (each such loan, a “Term Loan”) to the Borrower on the Closing
Date in the amount of its Term Commitment. Term Loans may not be repaid and then reborrowed.



     Section 2.02. Term Borrowings, Conversions and Continuations of Term Loans.



     (a) The Term Borrowing, each conversion of Term Loans from one Type to the other, and each
continuation of Eurodollar Rate Loans shall be made upon the Borrower’s irrevocable notice to the
Administrative Agent, which may be given by telephone. Each such notice must be received by the
Administrative Agent not later than 11:00 a.m. (i) three Business Days prior to the requested date
of any Term Borrowing of, conversion to or from, or continuation of, Eurodollar Rate Loans, and
(ii) on the requested date of any Term Borrowing of Alternate Base Rate Loans. Each telephonic
notice by the Borrower pursuant to this Section 2.02(a) must be confirmed promptly by
delivery to the Administrative Agent of a written Term Loan Notice, appropriately completed and
signed by a Responsible Officer of the Borrower. Each conversion to or continuation of Eurodollar
Rate Loans shall be in a principal amount of $500,000 or a whole multiple of $50,000 in excess
thereof. Each conversion to Alternate Base Rate Loans shall be in a principal amount of $100,000
or a whole multiple of $50,000 in excess thereof. Each Term Loan Notice (whether telephonic or
written), shall specify (i) whether the Borrower



25









 







is requesting the Term Borrowing, a conversion of Term Loans from one Type to the other, or a
continuation of Eurodollar Rate Loans, (ii) the requested date of the Term Borrowing, conversion or
continuation (which shall be a Business Day), (iii) the principal amount of Term Loans to be
borrowed, converted or continued, (iv) the Type of Term Loans to be borrowed or to which existing
Term Loans are to be converted, and (v) if applicable, the duration of the Interest Period with
respect thereto. If the Borrower fails to specify a Type of Term Loan in a Term Loan Notice, or if
the Borrower fails to give a timely notice requesting a conversion or continuation, then the
applicable Term Loans shall be made as, or converted to, Alternate Base Rate Loans. Any such
automatic conversion to Alternate Base Rate Loans shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable Eurodollar Rate Loans. If the
Borrower requests the Term Borrowing of, conversion to, or continuation of Eurodollar Rate Loans in
any such Term Loan Notice, but fails to specify an Interest Period, it will be deemed to have
specified an Interest Period of one month.



     (b) Following receipt of a Term Loan Notice, the Administrative Agent shall promptly notify
each Lender of the amount of its Term Pro Rata Share of the Term Loans, and if no timely notice of
a conversion or continuation is provided by the Borrower, the Administrative Agent shall notify
each Lender of the details of any automatic conversion to Alternate Base Rate Loans described in
the preceding subsection. In the case of the Term Borrowing, each Lender shall make the amount of
its Term Loan available to the Administrative Agent in immediately available funds at the
Administrative Agent’s Office not later than 1:00 p.m. on the Business Day specified in the Term
Loan Notice. Upon satisfaction of the applicable conditions set forth in Section 4.02
(and, if such Term Borrowing is the initial Credit Extension, Section 4.01), the
Administrative Agent shall make all funds so received available to the Borrower in like funds as
received by the Administrative Agent either by (i) crediting the account of the Borrower on the
books of Citibank with the amount of such funds or (ii) wire transfer of such funds, in each case
in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent
by the Borrower.



     (c) Except as otherwise provided herein, a Eurodollar Rate Loan may be continued or converted
only on the last day of an Interest Period for such Eurodollar Rate Loan. During the existence of
a Default, no Term Loans may be converted to or continued as Eurodollar Rate Loans without the
consent of the Required Lenders.



     (d) The Administrative Agent shall promptly notify the Borrower and the Lenders of the
interest rate applicable to any Interest Period for Eurodollar Rate Loans upon determination of
such interest rate. The determination of the Eurodollar Rate by the Administrative Agent shall be
conclusive in the absence of manifest error. At any time that Alternate Base Rate Loans are
outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in
Citibank’s prime rate used in determining the Alternate Base Rate promptly following the public
announcement of such change.



     (e) After giving effect to all Term Borrowings, all conversions of Term Loans from one Type to
the other, and all continuations of Term Loans as the same Type, there shall not be more than five
Interest Periods in effect at any one time with respect to all Term Loans.



26









 





     Section 2.03. Prepayments.



     (a) The Borrower may, upon notice to the Administrative Agent, at any time or from time to
time voluntarily prepay Term Loans in whole or in part without premium or penalty; provided
that (i) such notice must be received by the Administrative Agent not later than 12:00 noon
(A) three Business Days prior to any date of prepayment of Eurodollar Rate Loans and (B) on the
date of prepayment of Alternate Base Rate Loans; (ii) any prepayment of Eurodollar Rate Loans shall
be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof; and
(iii) any prepayment of Alternate Base Rate Loans shall be in a principal amount of $300,000 or a
whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount
thereof then outstanding. Each such notice shall specify the date and amount of such prepayment
and the Type(s) of Term Loans to be prepaid. The Administrative Agent will promptly notify each
Lender of its receipt of each such notice, and of the amount of such Lender’s Term Pro Rata Share
of such prepayment. If such notice is given by the Borrower, the Borrower shall make such
prepayment and the payment amount specified in such notice shall be due and payable on the date
specified therein. Each such prepayment shall be applied to the Term Loans of the Lenders in
accordance with their respective Term Pro Rata Shares of such Loan. Any voluntary prepayments of
the Term Loans shall be made and applied as provided in Section 2.03(f).



     (b) Concurrently with the receipt of Net Cash Proceeds from the Disposition by (i) PowerSecure
of the Property or (ii) the Borrower of the Equity Interests of PowerSecure, the Borrower shall
prepay the Term Loans in an aggregate principal amount equal to 100% of such Net Cash Proceeds or
Net Equity Interests, as applicable, together with all other outstanding amount of the Obligations
hereunder. Such mandatory prepayment shall be made and applied as provided in
Section 2.03(d).



     (c) The Borrower shall make mandatory prepayments of the Term Loans in an amount equal to 100%
of the Net Recovery Proceeds of any Recovery Event or Extraordinary Receipt in respect of the
Property; provided, however, in the event the Borrower or one of its Subsidiaries
receives Net Recovery Proceeds on account of a Recovery Event in respect of the Property, the
Borrower or such Subsidiary may apply such proceeds to the purchase price of replacement property
in respect of the Property within 120 days of such Recovery Event to the extent required pursuant
to Section 7.05(g). Each such mandatory prepayment shall be made and applied as provided
in Section 2.03(d).



     (d) Any mandatory prepayment required pursuant to Section 2.03(b) or (c) and
any voluntary prepayment of Term Loans made pursuant to Section 2.03(a) shall (i) in
addition include any additional amounts required pursuant to Section 3.05, (ii) not be
subject to any notice and minimum payment provisions, and (iii) be applied (A) pro
rata, in the case of a voluntary prepayment pursuant to Section 2.03(a), to all of
the unpaid scheduled installments and (B) in the inverse order of maturity, in the case of any
mandatory prepayment pursuant to Section 2.03(b) or (c).



     Section 2.04. Repayment of Term Loans. To the extent not otherwise required to be paid
earlier as provided herein, the Borrower shall repay the principal of the Term Loans (a) on the
last Business Day of each calendar quarter, commencing March 31, 2008, in the installment



27









 







amount of $32,300, and (b) on the Term Maturity Date, in the amount of the outstanding
aggregate principal amount of the Term Loans.



     Section 2.05. Interest.



     (a) Subject to the provisions of subsection (b) below, (i) each Eurodollar Rate Loan shall
bear interest on the outstanding principal amount thereof for each Interest Period at a rate per
annum equal to the lesser of (y) the Highest Lawful Rate and (z) the Eurodollar Rate for such
Interest Period plus the Applicable Rate for Eurodollar Rate Loans; and (ii) each Alternate
Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable
borrowing date at a rate per annum equal to the lesser of (y) the Highest Lawful Rate and (z) the
Alternate Base Rate plus the Applicable Rate for Alternate Base Rate Loans.




(b) (i) If any amount of principal of any Term Loan is not paid when due (without
regard to any applicable grace periods), whether at stated maturity, by acceleration or
otherwise, such amount shall thereafter bear interest at a fluctuating interest rate
per annum at all times equal to the lesser of (y) the Default Rate and (z) the Highest
Lawful Rate, to the fullest extent permitted by Applicable Laws.




     (ii) If any amount (other than principal of any Term Loan) payable by the Borrower under
any Loan Document is not paid when due (after giving effect to any applicable grace
periods), whether at stated maturity, by acceleration or otherwise, then upon the request of
the Required Lenders, such amount shall thereafter bear interest at a fluctuating interest
rate per annum at all times equal to the lesser of (y) the Default Rate and (z) the Highest
Lawful Rate, to the fullest extent permitted by Applicable Laws.




     (iii) Upon the request of the Required Lenders, while any Event of Default exists, the
Borrower shall pay interest on the principal amount of all outstanding Term Loans at a
fluctuating interest rate per annum at all times equal to the lesser of (y) the Default Rate
and (z) the Highest Lawful Rate, to the fullest extent permitted by Applicable Laws.




     (iv) Accrued and unpaid interest on past due amounts (including interest on past due
interest) shall be due and payable upon demand.



     (c) Interest on each Term Loan shall be due and payable in arrears on each Interest Payment
Date applicable thereto and at such other times as may be specified herein. Interest hereunder
shall be due and payable in accordance with the terms hereof before and after judgment, and before
and after the commencement of any proceeding under any Debtor Relief Law.



     Section 2.06. Computation of Interest and Fees. All computations of interest for Alternate
Base Rate Loans when the Alternate Base Rate is determined by Citibank’s “prime rate” shall be made
on the basis of a year of 365 or 366 days, and actual days elapsed. Subject to
Section 10.09, all other computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more fees or interest, as applicable, being
paid than if computed on the basis of a 365-day year). Interest shall accrue on the Term Loan for
the day on which the Term Loan is made, and shall not accrue on the Term Loan, or any portion



28









 







thereof, for the day on which the Term Loan or such portion is paid. Each determination by
the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.



     Section 2.07. Evidence of Debt. The Credit Extensions made by each Lender shall be evidenced
by one or more accounts or records maintained by such Lender and by the Administrative Agent in the
ordinary course of business. The accounts or records maintained by the Administrative Agent and
each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made
by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or
any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower
hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict
between the accounts and records maintained by any Lender and the accounts and records of the
Administrative Agent in respect of such matters, the accounts and records of the Administrative
Agent shall control in the absence of manifest error. Upon the request of any Lender made through
the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the
Administrative Agent) a Note which shall evidence such Lender’s Term Loans in addition to such
accounts or records. Each Lender may attach schedules to its Note and endorse thereon the date,
Type (if applicable), amount and maturity of its Term Loan and payments with respect thereto.



     Section 2.08. Payments Generally.



     (a) General. All payments to be made by the Borrower shall be made without condition
or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly
provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent,
for the account of the respective Lenders to which such payment is owed, at the Administrative
Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date
specified herein. The Administrative Agent will promptly distribute to each Lender its Term Pro
Rata Share (or other applicable share as provided herein) of such payment in like funds as received
by wire transfer to such Lender’s Lending Office. All payments received by the Administrative
Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any
applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower
shall come due on a day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing interest or fees.




(b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless
the Administrative Agent shall have received notice from a Lender prior to the proposed
date of any Term Borrowing of Eurodollar Rate Loans (or, in case of any Term Borrowing
of Alternate Base Rate Loans, prior to 12:00 noon on the date of such Term Borrowing)
that such Lender will not make available to the Administrative Agent such Lender’s
share of such Borrowing, the Administrative Agent may assume that such Lender has made
such share available on such date in accordance with Section 2.02 (or, in the
case of a Borrowing of Alternate Base Rate Loans, that such Lender has made such share
available in accordance with and at the time required by Section 2.02) and may,
in reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the Term
Borrowing available to the



29









 







Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to
the Administrative Agent forthwith on demand such corresponding amount in immediately
available funds with interest thereon, for each day from and including the date such amount
is made available to the Borrower to but excluding the date of payment to the Administrative
Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal
Funds Rate and a rate determined by the Administrative Agent in accordance with banking
industry rules on interbank compensation and (B) in the case of a payment to be made by the
Borrower, the interest rate applicable to Alternate Base Rate Loans. If the Borrower and
such Lender shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount
of such interest paid by the Borrower for such period. If such Lender pays its share of the
Term Borrowing to the Administrative Agent, then the amount so paid shall constitute such
Lender’s Term Loan included in such Term Borrowing. Any payment by the Borrower shall be
without prejudice to any claim the Borrower may have against a Lender that shall have failed
to make such payment to the Administrative Agent.




     (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the
Administrative Agent shall have received notice from the Borrower prior to the date on which
any payment is due to the Administrative Agent for the account of the Lenders hereunder that
the Borrower will not make such payment, the Administrative Agent may assume that the
Borrower has made such payment on such date in accordance herewith and may, in reliance upon
such assumption, distribute to the Lenders the amount due. In such event, if the Borrower
has not in fact made such payment, then each of the Lenders severally agrees to repay to the
Administrative Agent forthwith on demand the amount so distributed to such Lender, in
immediately available funds with interest thereon, for each day from and including the date
such amount is distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules on interbank compensation.



     A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount
owing under this subsection (b) shall be conclusive, absent manifest error.



     (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the
Administrative Agent funds for any Term Loan to be made by such Lender as provided in the foregoing
provisions of this Article II, and such funds are not made available to the Borrower by the
Administrative Agent because the conditions to the Credit Extension set forth in Article IV
are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall
return such funds (in like funds as received from such Lender) to such Lender, without interest.



     (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make
Term Loans, and to make payments pursuant to Section 10.04(c) are several and not joint.
The failure of any Lender to make any Term Loan or to make any payment under
Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its
corresponding obligation to do so on such date, and no Lender shall be responsible for the failure
of any other Lender to so make its Term Loan or to make its payment under Section 10.04(c).



30









 





     (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain
the funds for any Term Loan in any particular place or manner or to constitute a representation by
any Lender that it has obtained or will obtain the funds for any Term Loan in any particular place
or manner.



     Section 2.09. Sharing of Payments. If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or interest on the Term
Loan made by it resulting in such Lender’s receiving payment of a proportion of the aggregate
amount of such Term Loan and accrued interest thereon greater than its Term Pro Rata Share thereof
as provided herein, then the Lender receiving such greater proportion shall (a) notify the
Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the
Term Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the
benefit of all such payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Term Loans and other
amounts owing them, provided that:



     (a) if any such participations or subparticipations are purchased and all or any portion of
the payment giving rise thereto is recovered, such participations or subparticipations shall be
rescinded and the purchase price restored to the extent of such recovery, without interest; and



     (b) the provisions of this Section shall not be construed to apply to (x) any payment made by
the Borrower pursuant to and in accordance with the express terms of this Agreement or (y) any
payment obtained by a Lender as consideration for the assignment of or sale of a participation in
its Term Loan to any assignee or participant, other than to the Borrower or any Subsidiary thereof
(as to which the provisions of this Section shall apply).



     Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so
under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to
such participation as fully as if such Lender were a direct creditor of such Loan Party in the
amount of such participation.



ARTICLE III.




TAXES, YIELD PROTECTION AND ILLEGALITY




     Section 3.01. Taxes.



     (a) Payments Free of Taxes. Any and all payments by or on account of any obligation
of the Borrower hereunder or under any other Loan Document shall be made free and clear of and
without reduction or withholding for any Indemnified Taxes or Other Taxes, provided that if the
Borrower shall be required by Applicable Law to deduct any Indemnified Taxes (including any Other
Taxes) from such payments, then (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional sums payable under
this Section) the Administrative Agent or the Lender, receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall timely pay the



31









 







full amount deducted to the relevant Governmental Authority in accordance with Applicable Law.



     (b) Payment of Other Taxes by the Borrower. Without limiting the provisions of
subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental
Authority in accordance with Applicable Law.



     (c) Indemnification by the Borrower. The Borrower shall indemnify the Administrative
Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) paid by the Administrative Agent or such
Lender, and any penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority, except to the extent that such penalties, interest
or expenses are determined by a court of competent jurisdiction by final judgment to have resulted
from the Administrative Agent’s or such Lender’s gross negligence or willful misconduct. A
certificate as to the amount of such payment or liability delivered to the Borrower by a Lender
(with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on
behalf of a Lender, shall be conclusive absent manifest error.



     (d) Evidence of Payment. As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.



     (e) Status of Lenders. Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the Law of the jurisdiction in which the Borrower is resident
for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments
hereunder or under any other Loan Document shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by Applicable Law or reasonably requested by
the Borrower or the Administrative Agent, such properly completed and executed documentation
prescribed by Applicable Law as will permit such payments to be made without withholding or at a
reduced rate of withholding. In addition, any Lender, if requested by the Borrower or the
Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or
reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements.



     Without limiting the generality of the foregoing, in the event that the Borrower is resident
for tax purposes in the United States, any Foreign Lender shall deliver to the Borrower and the
Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior
to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the request of the Borrower or the Administrative Agent, but only if such
Foreign Lender is legally entitled to do so), whichever of the following is applicable:



32









 






     (i) duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility
for benefits of an income tax treaty to which the United States is a party,




     (ii) duly completed copies of Internal Revenue Service Form W-8ECI,




     (iii) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under section 881(c) of the Code, (x) a certificate to the effect that
such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the
Code, (B) a “10 percent shareholder” of the Borrower within the meaning of
section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in
section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service
Form W-8BEN, or




     (iv) any other form prescribed by Applicable Law as a basis for claiming exemption from
or a reduction in United States Federal withholding tax duly completed together with such
supplementary documentation as may be prescribed by Applicable Law to permit the Borrower to
determine the withholding or deduction required to be made.



     (f) Treatment of Certain Refunds. If the Administrative Agent or any Lender
determines, in its reasonable discretion, that it has received a refund of any Taxes or Other Taxes
as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid
additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such
refund (but only to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund),
net of all out-of-pocket expenses of the Administrative Agent or such Lender, and without interest
(other than any interest paid by the relevant Governmental Authority with respect to such refund),
provided that the Borrower, upon the request of the Administrative Agent or such Lender,
agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the
event the Administrative Agent or such Lender is required to repay such refund to such Governmental
Authority. This subsection shall not be construed to require the Administrative Agent or any
Lender to make available its tax returns (or any other information relating to its taxes that it
deems confidential) to the Borrower or any other Person.



     Section 3.02. Illegality. If any Lender determines that any Law has made it unlawful, or that
any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable
Lending Office to make, maintain or fund Eurodollar Rate Loans, or to determine or charge interest
rates based upon the Eurodollar Rate or any Governmental Authority has imposed material
restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars
in the London interbank market, then, on notice thereof by such Lender to the Borrower through the
Administrative Agent, any obligation of such Lender to make or continue Eurodollar Rate Loans or to
convert Alternate Base Rate Loans to Eurodollar Rate Loans shall be suspended until such Lender
notifies the Administrative Agent and the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from
such Lender (with a copy to the Administrative Agent), prepay or, if



33









 







applicable, convert all Eurodollar Rate Loans of such Lender to Alternate Base Rate Loans,
either on the last day of the Interest Period therefor, if such Lender may Lawfully continue to
maintain such Eurodollar Rate Loans to such day, or immediately, if such Lender may not Lawfully
continue to maintain such Eurodollar Rate Loans. Upon any such prepayment or conversion, the
Borrower shall also pay accrued interest on the amount so prepaid or converted.



     Section 3.03. Inability to Determine Rates. If the Required Lenders reasonably determine that
for any reason in connection with any request for a Eurodollar Rate Loan or a conversion to or
continuation thereof that (a) Dollar deposits are not being offered to banks in the London
interbank Eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate
Loan, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Rate Loan, or (c) the Eurodollar
Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Loan does not
adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative
Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the
Lenders to make or maintain Eurodollar Rate Loans shall be suspended until the Administrative Agent
(upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice,
the Borrower may revoke any pending request for a Term Borrowing of, conversion to or continuation
of Eurodollar Rate Loans or, failing that, will be deemed to have converted such request into a
request for a Term Borrowing of Alternate Base Rate Loans in the amount specified therein.



     Section 3.04. Increased Costs; Reserves on Eurodollar Rate Loans.



     (a) Increased Costs Generally. If any Change in Law shall:




     (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan,
insurance charge or similar requirement against assets of, deposits with or for the account
of, or credit extended or participated in by, any Lender (except any reserve requirement
contemplated by Section 3.04(e));




     (ii) subject any Lender to any tax of any kind whatsoever with respect to this
Agreement or any Eurodollar Rate Loan made by it hereunder, or change the basis of taxation
of payments to such Lender in respect thereof (except for Indemnified Taxes or Other Taxes
covered by Section 3.01 and the imposition of, or any change in the rate of, any
Excluded Tax payable by such Lender); or




     (iii) impose on any Lender or the London interbank market any other condition, cost or
expense affecting this Agreement or Eurodollar Rate Loans made by such Lender hereunder;


and the result of any of the foregoing shall be to increase the cost to such Lender of making or
maintaining any Eurodollar Rate Loan hereunder (or of maintaining its obligation to make any such
Term Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or any other amount) then, upon request of such Lender, the
Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender
for such additional costs incurred or reduction suffered.




34









 








     (b) Capital Requirements. If any Lender determines that any Change in Law affecting
such Lender or any Lending Office of such Lender or such Lender’s holding company, if any,
regarding capital requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of
this Agreement, the Term Commitments of such Lender or the Term Loans made by such Lender to a
level below that which such Lender or such Lender’s holding company could have achieved but for
such Change in Law (taking into consideration such Lender’s policies and the policies of such
Lender’s holding company with respect to capital adequacy), then from time to time the Borrower
will pay to such Lender such additional amount or amounts as will compensate such Lender or such
Lender’s holding company for any such reduction suffered.



     (c) Certificate for Reimbursement. A certificate of a Lender setting forth the amount
or amounts necessary to compensate such Lender or its holding company, as specified in
subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate
within 30 days after receipt thereof.



     (d) Delay in Request. Failure or delay on the part of any Lender to demand
compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of
such Lender’s right to demand such compensation, provided that the Borrower shall not be
required to compensate a Lender pursuant to the foregoing provisions of this Section for any
increased costs incurred or reductions suffered more than nine months prior to the date that such
Lender, notifies the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Lender’s intention to claim compensation therefor (except that, if the
Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month
period referred to above shall be extended to include the period of retroactive effect thereof).



     (e) Reserves on Eurodollar Rate Loans. The Borrower shall pay to each Lender, as long
as such Lender shall be required to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency
liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Loan
equal to the actual costs of such reserves allocated to such Term Loan by such Lender (as
determined by such Lender in good faith, which determination shall be conclusive), which shall be
due and payable on each date on which interest is payable on such Loan, provided the
Borrower shall have received at least 10 days’ prior notice (with a copy to the Administrative
Agent) of such additional interest from such Lender. If a Lender fails to give notice 10 days
prior to the relevant Interest Payment Date, such additional interest shall be due and payable 10
days from receipt of such notice.



     Section 3.05. Compensation For Losses. Upon demand of any Lender (with a copy to the
Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and
hold such Lender harmless from any loss, cost or expense incurred by it as a result of:



35









 





     (a) any continuation, conversion, payment or prepayment of any Eurodollar Rate Loan on a day
other than the last day of the Interest Period for such Loan (whether voluntary, mandatory,
automatic, by reason of acceleration, or otherwise);



     (b) any failure by the Borrower (for a reason other than the failure of such Lender to make a
Term Loan) to prepay, borrow, continue or convert any Eurodollar Rate Loan on the date or in the
amount notified by the Borrower; or



     (c) any assignment of a Eurodollar Rate Loan on a day other than the last day of the Interest
Period therefor as a result of a request by the Borrower pursuant to Section 10.13;


including any loss or expense arising from the liquidation or reemployment of funds obtained by it
to maintain such Term Loan or from fees payable to terminate the deposits from which such funds
were obtained. The Borrower shall also pay any customary administrative fees charged by such
Lender in connection with the foregoing.



For purposes of calculating amounts payable by the Borrower to the Lenders under this
Section 3.05, each Lender shall be deemed to have funded each Eurodollar Rate Loan made by
it at the Eurodollar Rate for such Term Loan by a matching deposit or other borrowing in the London
interbank eurodollar market for a comparable amount and for a comparable period, whether or not
such Eurodollar Rate Loan was in fact so funded.




     Section 3.06. Mitigation Obligations; Replacement of Lenders.



     (a) Designation of a Different Lending Office. If any Lender requests compensation
under Section 3.04, or the Borrower is required to pay any additional amount to any Lender
or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if
any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable
efforts to designate a different Lending Office for funding or booking its Term Loan hereunder or
to assign its rights and obligations hereunder to another of its offices, branches or affiliates,
if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 3.01 or 3.04, in the future, or eliminate the
need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would
not subject such Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or assignment.



     (b) Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 3.01, the
Borrower may replace such Lender in accordance with Section 10.13.



     Section 3.07. Survival. All of the Borrower’s obligations under this Article III
shall survive termination of the Aggregate Term Commitments and repayment of all other Obligations
hereunder.



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ARTICLE IV.




CONDITIONS PRECEDENT TO CREDIT EXTENSIONS




     Section 4.01. Conditions of Initial Credit Extension. The obligation of each Lender to make
its initial Credit Extension hereunder is subject to satisfaction of the following conditions:



     (a) The Administrative Agent’s receipt of the following, each of which shall be originals or
telecopies (followed promptly by originals) unless otherwise specified, each properly executed by a
Responsible Officer of the signing Loan Party, each dated the Closing Date (or, in the case of
certificates of governmental officials, a recent date before the Closing Date), unless otherwise
specified in the Post-Closing Letter, and each in form and substance satisfactory to the
Administrative Agent and each of the Lenders:




     (i) executed counterparts of this Agreement, each Guaranty and the Deed of Trust,
sufficient in number for distribution to the Administrative Agent, each Lender and the
Borrower;




     (ii) a Note executed by the Borrower in favor of the Lender, in a principal amount
equal to the Lender’s Term Commitment;




     (iii) certificates showing the existence of all insurance policies required by
Section 6.07, naming the Administrative Agent as loss payee and additional insured.




     (iv) such certificates of resolutions or other similar action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party which is not a natural
Person as the Administrative Agent may require evidencing the identity, authority and
capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in
connection with this Agreement and the other Loan Documents to which such Loan Party is a
party;




     (v) such documents and certifications as the Administrative Agent may require to
evidence that each Loan Party is duly organized or formed, and that each such Loan Party is
validly existing, in good standing and qualified to engage in business in each jurisdiction
where its ownership, lease or operation of properties or the conduct of its business
requires such qualification, except to the extent that failure to do so could not reasonably
be expected to have a Material Adverse Effect;




     (vi) favorable opinions of counsel to the Loan Parties addressed to the Administrative
Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents
as the Required Lenders may request;




     (vii) a certificate of a Responsible Officer or Secretary of each Loan Party either
(A) attaching copies of all consents, licenses and approvals required in connection with the
execution, delivery and performance by such Loan Party and the validity against such Loan
Party of the Loan Documents to which it is a party, and such consents, licenses and
approvals shall be in full force and effect, or (B) stating that no such consents, licenses
or approvals are so required;



37









 






     (viii) a certificate signed by a Responsible Officer of the Borrower certifying that
the conditions specified in Sections 4.02(a) and (b) have been satisfied,
and that to the knowledge of the Responsible Officer there has been no event or circumstance
since the date of the Audited Financial Statements that has had or could be reasonably
expected to have, either individually or in the aggregate, a Material Adverse Effect;




     (ix) a solvency certificate signed by the treasurer of the Borrower, in form and
substance satisfactory to the Administrative Agent;




     (x) an asset appraisal and environmental assessment report with respect to the
Mortgaged Property, in form and substance satisfactory to the Administrative Agent, and in
compliance with the requirements of any applicable Laws;




     (xi) a fully paid ALTA lender’s policy of title insurance in an amount required by the
Administrative Agent, showing no exceptions that would materially impair the value of the
Mortgaged Property, containing customary endorsements and otherwise in form and substance
satisfactory to the Administrative Agent, insuring the Deed of Trust to be a valid,
perfected, first priority Lien on the Mortgaged Property, together with a current survey in
form and substance and containing a certification to the Administrative Agent satisfactory
to the Administrative Agent;




     (xii) amendments to the Existing Credit Agreement and the Existing Credit Agreement
Collateral Documents to permit the Indebtedness under this Credit Agreement and to cause the
Existing Credit Agreement Collateral Documents to secure, pari passu, the Existing Credit
Agreement Obligations and the Secured Obligations; and




     (xiii) such other assurances, certificates, documents, consents or opinions as the
Administrative Agent or the Required Lenders reasonably may require.



     (b) The Administrative Agent shall have received on or before the Closing Date a fee in the
amount of the product of (A) 1.00% and (B) the Aggregate Term Commitments. Any fees required to be
paid on or before the Closing Date shall have been paid.



     (c) Unless waived by the Administrative Agent, the Borrower shall have paid all Attorney Costs
of the Administrative Agent to the extent invoiced prior to the Closing Date, plus such additional
amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or
to be incurred by it through the closing proceedings (provided that such estimate shall not
thereafter preclude a final settling of accounts between the Borrower and the Administrative
Agent).



     (d) The Closing Date shall have occurred on or before January 31, 2008.



     Without limiting the generality of the provisions of Section 9.04, for purposes of
determining compliance with the conditions specified in this Section 4.01, each Lender that
has signed this Agreement shall be deemed to have consented to, approved or accepted or to be
satisfied with, each document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its objection thereto.



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     Section 4.02. Conditions to all Credit Extensions. The obligation of each Lender to honor any
Request for Credit Extension is subject to the following conditions precedent:



     (a) The representations and warranties of the Borrower and each other Loan Party contained in
Article V or any other Loan Document, or which are contained in any document furnished at
any time under or in connection herewith or therewith that are subject to materiality or Material
Adverse Effect qualifications shall be true and correct in all respects and the representations and
warranties of the Borrower and each other Loan Party contained in Article V or any other
Loan Documents, or which are contained in any document furnished at any time under or in connection
herewith or therewith that are not subject to materiality or Material Adverse Effect
qualifications, shall be true and correct in all material respects on and as of the date of such
Credit Extension, except to the extent that such representations and warranties specifically refer
to an earlier date, in which case they shall be true and correct in all material respects as of
such earlier date, and except that for purposes of this Section 4.02, the representations
and warranties contained in subsections (a) and (b) of Section 5.05 shall be deemed to
refer to the most recent statements furnished pursuant to subsections (a) and (b), respectively, of
Section 6.01.



     (b) No Default shall exist, or would result from such proposed Credit Extension or from the
application of the proceeds thereof.



     (c) The proposed Credit Extension will not violate any restriction on the authority to incur
such Indebtedness under the Borrower’s Organization Documents and is permitted under the terms of
the Borrower’s Organization Documents pursuant to authority granted the manager of the Borrower
with respect thereto prior to the Closing Date.



     (d) The Administrative Agent shall have received a Request for Credit Extension in accordance
with the requirements hereof.



     Each Request for Credit Extension (other than a Term Loan Notice requesting only a conversion
of Loans to the other Type or a continuation of Eurodollar Rate Loans) submitted by the Borrower
shall be deemed to be a representation and warranty that the conditions specified in
Sections 4.02(a) and (b) have been satisfied on and as of the date of the
applicable Credit Extension.



ARTICLE V.




REPRESENTATIONS AND WARRANTIES




     The Borrower represents and warrants to the Administrative Agent and the Lenders that:



     Section 5.01. Existence, Qualification and Power; Compliance with Laws. Each Loan Party
(a) is a corporation, partnership or limited liability company duly organized or formed, validly
existing and in good standing (to the extent applicable) under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority and all requisite
governmental licenses, authorizations, consents and approvals to own its assets and carry on its
business and execute, deliver and perform its obligations under the Loan Documents to which it is a
party, (c) is duly qualified and is licensed and in good standing under the Laws of



39









 







each jurisdiction where its ownership, lease or operation of properties or the conduct of its
business requires such qualification or license and (d) is in compliance with all Laws; except in
each case referred to in clause (c) or this clause (d), to the extent that failure to do so could
not reasonably be expected to have a Material Adverse Effect.



     Section 5.02. Authorization; No Contravention. The execution, delivery and performance by
each Loan Party of each Loan Document to which such Person is party, have, to the extent
applicable, been duly authorized by all necessary corporate or other organizational action, and do
not and will not (a) contravene the terms of any of such Person’s Organization Documents;
(b) conflict with or result in any breach or contravention of, or the creation of any Lien under,
or require any payment to be made under (i) any Contractual Obligation to which such Person is a
party or affecting such Person or the properties of such Person or any of its Subsidiaries or
(ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to
which such Person or its property is subject; or (c) violate any Law; except in the case of
clauses (b) and (c) above to the extent that such conflict, breach, contravention, Lien, payment or
violation could not reasonably be expected to have a Material Adverse Effect.



     Section 5.03. Governmental Authorization; Other Consents. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any Governmental Authority or any
other Person not already obtained is necessary or required in connection with the execution,
delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other
Loan Document other than (a) those necessary to perfect the Liens in the Collateral for the benefit
of the Lenders, (b) those otherwise obtained, taken, given or made prior to or as of the Closing
Date, and (c) filing of Form 8-K with the SEC as required to disclose the existence and terms of
this Agreement and the transactions contemplated hereby.



     Section 5.04. Binding Effect. This Agreement has been, and each other Loan Document, when
delivered hereunder, will have been, duly executed and delivered by each Loan Party that is party
thereto. This Agreement constitutes, and each other Loan Document when so delivered will
constitute, a legal, valid and binding obligation of such Loan Party, enforceable against each Loan
Party that is party thereto in accordance with its terms, subject as to enforcement to any Debtor
Relief Laws and to general equitable principles.



     Section 5.05. Financial Statements; No Material Adverse Effect.



     (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently
applied throughout the period covered thereby, except as otherwise expressly noted therein;
(ii) fairly present in all material respects the financial condition of the Borrower and its
Subsidiaries as of the date thereof and their results of operations for the period covered thereby
in accordance with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities,
direct or contingent, of the Borrower and its Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Indebtedness, as and to the extent required to be
reported in connection with GAAP.



     (b) The unaudited quarterly consolidated balance sheet of the Borrower and its Subsidiaries
dated September 30, 2007, and the related statements of income or operations,



40









 







shareholders’ equity and cash flows for the period ended on that date (i) were prepared in
accordance with GAAP consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein, and (ii) fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries) as of the date thereof and their results of
operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the
absence of footnotes and to normal year-end audit adjustments. Schedule 5.05 sets forth
all material indebtedness and other liabilities, direct or contingent, of the Borrower and its
Subsidiaries not disclosed on the financial statements referred to in this subsection (b),
including liabilities for taxes, material commitments and indebtedness.



     (c) Since the date of the Audited Financial Statements, there has been no event or
circumstance, either individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect, except as set forth in the Borrower’s April 8-K.



     (d) The consolidated forecasted balance sheet and statements of income and cash flows of the
Borrower and its Subsidiaries previously delivered to the Administrative Agent were prepared in
good faith on the basis of the assumptions stated therein, which assumptions were believed to be
reasonable in light of the conditions known to be existing at the time of delivery of such
forecasts, and represented, at the time of delivery, the Borrower’s good faith and reasonable
estimate of its future financial performance. The aforementioned forecast is not a guaranty of
future performance, and actual results may differ from those in the forecast.



     (e) Neither the Borrower nor any other Loan Party has any Off-Balance Sheet Liabilities.



     Section 5.06. Litigation. There is no Litigation pending or, to the knowledge of the
Borrower, threatened, at Law, in equity, in arbitration or before any Governmental Authority, by or
against the Borrower or any other Loan Party or against any of their properties or revenues that
(a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the
transactions contemplated hereby, or (b) either individually or in the aggregate, if determined
adversely, could reasonably be expected to have a Material Adverse Effect.



     Section 5.07. No Default. Neither the Borrower nor any Subsidiary is in default under or with
respect to any Contractual Obligation that could, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No Default has occurred and is
continuing or would result from the consummation of the transactions contemplated by this Agreement
or any other Loan Document.



     Section 5.08. Ownership of Property; Liens. Except as provided in Schedule 5.08,
neither the Borrower nor any Subsidiary owns fee simple title to any real property. The Borrower
and each Subsidiary has valid leasehold interests in all real property necessary or used in the
ordinary conduct of its business. The property of the Borrower and its Subsidiaries is subject to
no Liens, other than Liens permitted by Section 7.01.



     Section 5.09. Hazardous Materials. Neither the Borrower nor any of its Subsidiaries has used
Hazardous Materials on or affecting any premises at which the Borrower or any of its Subsidiaries
has a place of business (collectively and singly the “Premises”) in any manner



41









 







which violates any Environmental Laws governing the use, storage, treatment, handling,
manufacture, transportation or disposal of Hazardous Materials, which violation could reasonably be
expected to have a Material Adverse Effect. Except as disclosed on Schedule 5.09, the
Borrower has not received any notice of any violations of Environmental Laws which could reasonably
be expected to have a Material Adverse Effect (“Environmental Complaint”) (and, within five
(5) days of receipt of any Environmental Complaint the Borrower shall give the Administrative Agent
a copy thereof), and to the best of Borrower’s knowledge, after due inquiry, there have been no
actions commenced or threatened by any Person for non-compliance with any Environmental Laws which
could reasonably be expected to have a Material Adverse Effect.



     Section 5.10. Insurance. The properties and businesses of the Borrower and its Subsidiaries
are insured with financially sound and reputable insurance companies not Affiliates of the
Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried
by companies of similar size engaged in similar businesses and owning similar properties in
localities where the Borrower or the applicable Subsidiary operates.



     Section 5.11. Taxes. The Borrower and its Subsidiaries have filed all Federal, state and
other material tax returns and reports required to be filed, and have paid all Federal, state and
other material taxes, assessments, fees and other governmental charges levied or imposed upon them
or their properties, income or assets otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings diligently conducted and for which adequate
reserves have been provided in accordance with GAAP. There is no proposed tax assessment against
the Borrower or any Subsidiary that would, if made, have a Material Adverse Effect. Neither any
Loan Party nor any Subsidiary thereof is party to any tax sharing agreement.



     Section 5.12. ERISA Compliance.



     (a) Each Plan is in compliance in all material respects with the applicable provisions of
ERISA, the Code and other Federal or state Laws. Each Plan that is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with respect thereto and, to
the best knowledge of the Borrower, nothing has occurred which would prevent, or cause the loss of,
such qualification. The Borrower and each ERISA Affiliate have made all required contributions to
each Plan subject to Section 412 of the Code, and no application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Code has been made with respect
to any Plan.



     (b) There are no pending or, to the best knowledge of the Borrower, threatened claims, actions
or other Litigation, or action by any Governmental Authority, with respect to any Plan that could
be reasonably be expected to have a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to any Plan that has
resulted or could reasonably be expected to result in a Material Adverse Effect.



     (c) (i) No ERISA Event has occurred or is reasonably expected to occur, (ii) no Pension Plan
has any Unfunded Pension Liability, (iii) neither the Borrower nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under Title IV of ERISA with



42









 







respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of
ERISA), (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability (and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, and (v) neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Sections 4069 or 4212(c) of ERISA.



     Section 5.13. Subsidiaries. As of the Closing Date, the Borrower has no Subsidiaries other
than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding
Equity Interests in such Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by a Loan Party in the amounts specified on Part (a) of Schedule 5.13. The
Borrower has no equity investments in any other corporation or entity other than those specifically
disclosed in Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the
Borrower have been validly issued and are fully paid and nonassessable.



     Section 5.14. Margin Regulations; Investment Company Act.



     (a) The Borrower is not engaged and will not engage, principally or as one of its important
activities, in the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the FRB), or extending credit for the purpose of purchasing or carrying
margin stock.



     (b) None of the Borrower, any Person Controlling the Borrower, or any Subsidiary is or is
required to be registered as an “investment company” under the Investment Company Act of 1940.



     Section 5.15. Disclosure. Other than as described in the April 8-K, the Borrower has
disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or
other restrictions to which it or any of its Subsidiaries is subject, and all other matters known
to it, that, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect. No report, financial statement, certificate or other information furnished
(whether in writing or orally) by or on behalf of any Loan Party to the Administrative Agent or any
Lender in connection with the transactions contemplated hereby and the negotiation of this
Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or
supplemented by other information so furnished) contains any material misstatement of fact or omits
to state any material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with respect to
projected financial information, the Borrower represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time in light of the facts,
circumstances and conditions then known to the Borrower, and are not intended to be a guaranty of
future financial performance.



     Section 5.16. Compliance with Laws. Each of the Borrower and each Subsidiary is in compliance
in all material respects with the requirements of all Laws and all orders, writs, injunctions and
decrees applicable to it or to its properties, except in such instances in which (a) such
requirement of Law or order, writ, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted or (b) the failure to comply therewith, either



43









 







individually or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.



     Section 5.17. Intellectual Property; Licenses, Etc. The Borrower and its Subsidiaries own, or
possess the right to use, all of the material trademarks, service marks, trade names, copyrights,
patents, patent rights, franchises, licenses and other intellectual property rights (collectively,
“IP Rights”) that are necessary for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best knowledge of the Borrower, no slogan or
other advertising device, product, process, method, substance, part or other material now employed,
or now contemplated to be employed, by the Borrower or any Subsidiary infringes upon any rights
held by any other Person. No claim or Litigation regarding any of the foregoing is pending or, to
the best knowledge of the Borrower, threatened, which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.



     Section 5.18. Businesses. The Borrower is presently engaged directly or through wholly-owned
Subsidiaries in the business of providing energy management and conservation solutions through (a)
the design and installation of power generation systems and services that manage load curtailment
and peak demand conditions, enhance system reliability and provide customers with energy power and
(b) providing utilities with legal and regulatory consulting, energy system engineering and
construction, and energy conservation services.



     Section 5.19. Common Enterprise. The Borrower and its Subsidiaries are engaged in the
businesses set forth in Section 5.18 as of the Closing Date. These operations require
financing on a basis such that the credit supplied can be made available from time to time to the
Borrower and various of its Subsidiaries, as required for the continued successful operation of the
Borrower and its Subsidiaries as a whole. The Borrower has requested the Lender to make credit
available hereunder primarily for the purposes set forth in Section 6.12 and generally for
the purposes of financing the operations of the Borrower and its Subsidiaries. The Borrower and
each of its Subsidiaries expects to derive benefit (and the Board of Directors (or other similar
governing body) of the Borrower and each of its Subsidiaries has determined that such Subsidiary
may reasonably be expected to derive benefit), directly or indirectly, from a portion of the credit
extended by the Lenders hereunder, both in its separate capacity and as a member of the group of
companies, since the successful operation and condition of the Borrower and each of its
Subsidiaries is dependent on the continued successful performance of the functions of the group as
a whole. The Borrower acknowledges that, but for the agreement by each of the Guarantors to
execute and deliver the Guaranty, the Administrative Agent and the Lenders would not have made
available the credit facilities established hereby on the terms set forth herein.



     Section 5.20. Solvent. The Borrower is, and the Borrower and its Subsidiaries are on a
consolidated basis, Solvent.



     Section 5.21. Taxpayer Identification Number. The Borrower’s true and correct U.S. taxpayer
identification number is set forth on Schedule 10.02.



     Section 5.22. Employment and Labor Agreements. Except as listed on Schedule 5.22,
there are no collective bargaining agreements covering any employees of the Borrower or any of its
Subsidiaries.



44









 





     Section 5.23. Labor Matters. Except as disclosed on Schedule 5.23, there are no
strikes or other labor disputes against the Borrower or any of its Subsidiaries or, to the best of
Borrower’s knowledge, after due inquiry, threatened against the Borrower or any of its
Subsidiaries, which could reasonably be expected to have a Material Adverse Effect. Hours worked
by and payment made to employees of the Borrower or, to the best of the Borrower’s knowledge, after
due inquiry, any of the Borrower’s Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters which could reasonably be
expected to have a Material Adverse Effect. all payments due from the Borrower on account of
employee health and welfare insurance which could reasonably be expected to have a Material Adverse
Effect if not paid have been paid or, if not due, accrued as a liability on the books of the
Borrower.



ARTICLE VI.




AFFIRMATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder, any Term Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, the Borrower shall, and shall (except in the case of
the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.11)
cause each Subsidiary to:



     Section 6.01. Financial Statements. Deliver to the Administrative Agent, in form and detail
reasonably satisfactory to the Administrative Agent and the Required Lenders:



     (a) as soon as available, but in any event within 90 days after the end of each Fiscal Year of
the Borrower (commencing with the Fiscal Year ended 2007), a consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such Fiscal Year, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows for such Fiscal Year,
setting forth in the case in comparative form the figures for the previous Fiscal Year, all in
reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited
and accompanied by a report and opinion of an independent certified public accountant of nationally
recognized standing reasonably acceptable to the Required Lenders (and the Lenders hereby confirm
that Hein & Associates LLP, the Borrower’s current independent certified public accountant, is
acceptable to the Required Lenders), which report and opinion shall be prepared in accordance with
generally accepted auditing standards and shall not be subject to any “going concern” or like
qualifications or exceptions as to the scope of such audit or with respect to the absence of any
material misstatement;



     (b) as soon as available, but in any event within 45 days after the end of the first three
Fiscal Quarters of each Fiscal Year (and within 90 days after the end of the fourth Fiscal Quarter
of each Fiscal Year) of the Borrower (commencing with the Fiscal Quarter ended December 31, 2007),
a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end
of such Fiscal Quarter, and the related consolidated and consolidating statements of income or
operations, and consolidated cash flows for such Fiscal Quarter (other than consolidated cash
flows, which shall be on a year-to-date basis) and for the portion of the Borrower’s Fiscal Year
then ended, setting forth, to the extent the information is available to the Borrower, in each case
in comparative form the figures for the corresponding Fiscal Quarter of



45









 







the previous Fiscal Year and the corresponding portion of the previous Fiscal Year, all in
reasonable detail, such consolidated statements to be certified by a Responsible Officer of the
Borrower as fairly presenting the financial condition, results of operations and cash flows of the
Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes and such consolidating statements to be certified by a
Responsible Officer of the Borrower to the effect that such statements are fairly stated in all
material respects when considered in relation to the consolidated financial statements of the
Borrower and its Subsidiaries;



     (c) as soon as available, and in any event within 45 days after the end of each Fiscal Quarter
of each Fiscal Year, a listing and aging of the Borrower’s Accounts (other than unbilled Accounts)
as of the end of such Fiscal Quarter, with aging of Accounts on the basis of current, 30, 60 and
over 90 days from the due date thereof.



     (d) as soon as available, but in any event within 30 days after the end of each Fiscal Year of
the Borrower, forecasts prepared by management of the Borrower, in form satisfactory to the
Administrative Agent, of consolidated balance sheets and statements of income or operations of the
Borrower and its Subsidiaries on a quarterly basis for the immediately following Fiscal Year
(including the Fiscal Year in which the Revolving Maturity Date and Term Maturity Date occur).



     As to any information contained in materials furnished pursuant to Section 6.02(d),
the Borrower shall not be separately required to furnish such information under clause (a) or (b)
above, but the foregoing shall not be in derogation of the obligation of the Borrower to furnish
the information and materials described in clauses (a) and (b) above at the times specified
therein.



     Section 6.02. Certificates; Other Information. Deliver to the Administrative Agent, in form
and detail satisfactory to the Administrative Agent:



     (a) concurrently with the delivery of the financial statements referred to in
Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a
Responsible Officer of the Borrower;



     (b) promptly after any request by the Administrative Agent or any Lender, copies of any
detailed and final audit reports, management letters or recommendations submitted to the board of
directors (or the audit committee of the board of directors) of the Borrower by independent
accountants in connection with the accounts or books of the Borrower or any Subsidiary, or any
audit of any of them;



     (c) promptly after the same are available, copies of each annual report, proxy or financial
statement or other report or communication sent to the stockholders of the Borrower, and copies of
all annual, regular, periodic and special reports and registration statements which the Borrower
may file or be required to file with the SEC under Section 13 or 15(d) of the Exchange Act, and not
otherwise required to be delivered to the Administrative Agent pursuant hereto;



46









 





     (d) promptly, and in any event within five Business Days after receipt thereof by any Loan
Party or any Subsidiary thereof, copies of each notice or other correspondence received from the
SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any investigation or
possible investigation or other inquiry by such agency regarding financial or other operational
results of any Loan Party or any Subsidiary thereof; and



     (e) promptly, such additional information regarding the business, financial or corporate
affairs of the Borrower or any Subsidiary, or compliance with the terms of the Loan Documents, as
the Administrative Agent, at the request of any Lender, may from time to time reasonably request.



     Documents required to be delivered pursuant to Section 6.01(a) or (b) or
Section 6.02(c) (to the extent any such documents are included in materials otherwise filed
with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been
delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on
the Borrower’s website on the Internet at the website address listed on Schedule 10.02; or
(ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet
website, if any, to which each Lender and the Administrative Agent have access (whether a
commercial, third-party website or whether sponsored by the Administrative Agent); provided
that: (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent if
it or any Lender requests the Borrower to deliver such paper copies until a written request to
cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the
Borrower shall notify the Administrative Agent (by telecopier or electronic mail) of the posting of
any such documents and provide to the Administrative Agent by electronic mail electronic versions
(i.e., soft copies) of such documents. Notwithstanding anything contained herein, in every
instance, the Borrower shall be required to provide paper copies of the Compliance Certificates
required by Section 6.02(a) to the Administrative Agent. Except for such Compliance
Certificates, the Administrative Agent shall have no obligation to request the delivery or to
maintain copies of the documents referred to above, and in any event shall have no responsibility
to monitor compliance by the Borrower with any such request for delivery, and each Lender shall be
solely responsible for requesting from the Administrative Agent delivery to it of such documents.



     Section 6.03. Notices. Notify the Administrative Agent and each Lender:



     (a) promptly of the occurrence of any Default;



     (b) promptly of any matter that has resulted or could reasonably be expected to result in a
Material Adverse Effect, including (i) any breach or non-performance of, or any default under, a
material Contractual Obligation of the Borrower or any Subsidiary; (ii) any dispute, Litigation, or
suspension between the Borrower or any Subsidiary and any Governmental Authority; or (iii) the
commencement of, or any material development in, any Litigation affecting the Borrower or any
Subsidiary, including pursuant to any applicable Environmental Laws;



47









 





     (c) of the occurrence of any ERISA Event within 10 Business Days after the Borrower or an
ERISA Affiliate is notified or otherwise becomes aware of such ERISA Event; and



     (d) promptly of any material change in accounting policies or financial reporting practices by
the Borrower or any Subsidiary.



     Each notice pursuant to this Section shall be accompanied by a statement of a Responsible
Officer of the Borrower setting forth details of the occurrence referred to therein and stating
what action the Borrower has taken and proposes to take with respect thereto. Each notice pursuant
to Section 6.03(a) shall describe with particularity any and all provisions of this
Agreement and any other Loan Document that have been breached.



     Section 6.04. Payment of Obligations. Pay and discharge as the same shall become due and
payable, all its obligations and liabilities, including (a) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings diligently conducted and adequate reserves in
accordance with GAAP are being maintained by the Borrower or such Subsidiary; (b) all lawful claims
which, if unpaid, would by Law become a Lien upon any material portion of its property; and (c) all
Indebtedness (other than Indebtedness, individually or in the aggregate, not exceeding $200,000 in
principal amount), as and when due and payable, but subject to any applicable grace and/or cure
periods and further subject to any subordination provisions contained in any instrument or
agreement evidencing such Indebtedness.



     Section 6.05. Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force
and effect its legal existence and good standing under the Laws of the jurisdiction of its
organization except in a transaction permitted by Section 7.04 or 7.05; (b) take
all reasonable action to maintain all rights, privileges, permits, licenses and franchises
necessary in the normal conduct of its business, except in a transaction permitted by
Section 7.04 or 7.05; and (c) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.



     Section 6.06. Maintenance of Properties. (a) Maintain, preserve and protect all of its
material properties and equipment necessary in the operation of its business in good working order
and condition, ordinary wear and tear excepted; (b) make all necessary repairs thereto and renewals
and replacements thereof except where the failure to do so could not reasonably be expected to have
a Material Adverse Effect; and (c) use the standard of care typical in the industry in the
operation and maintenance of its facilities.



     Section 6.07. Maintenance of Insurance. Maintain with financially sound and reputable
insurance companies not Affiliates of the Borrower, insurance with respect to its properties and
business against loss or damage of the kinds customarily insured against by Persons engaged in the
same or similar business, of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons and as otherwise required pursuant to the Collateral
Documents, and providing for not less than 30 days’ prior notice to the Administrative Agent of
termination, lapse or cancellation of such insurance.



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     Section 6.08. Compliance with Laws. Comply in all material respects with the requirements of
all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or
property, except in such instances in which (a) such requirement of Law or order, writ, injunction
or decree is being contested in good faith by appropriate proceedings diligently conducted or a
bona fide dispute exists with respect thereto; or (b) the failure to comply therewith could not
reasonably be expected to have a Material Adverse Effect.



     Section 6.09. Books and Records. (a) Maintain proper books of record and account, in which
full, true and correct entries in conformity with GAAP consistently applied shall be made of all
financial transactions and matters involving the assets and business of the Borrower or such
Subsidiary, and (b) maintain such books of record and account in material conformity with all
applicable material requirements of any Governmental Authority having regulatory jurisdiction over
the Borrower or such Subsidiary.



     Section 6.10. Inspection Rights. Permit representatives and independent contractors of the
Administrative Agent to, visit and inspect any of its properties, to examine its corporate,
financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers, and independent public accountants, at
the expense of the Borrower, and at such reasonable times during normal business hours, upon no
less than two Business Days advance notice to the Borrower; provided, however, that
when an Event of Default exists and while the same is continuing the Administrative Agent or any
Lender (or any of their respective representatives or independent contractors) may do any of the
foregoing at any time during normal business hours and without advance notice.



     Section 6.11. Compliance with ERISA. Do, and cause each of its ERISA Affiliates to do, each
of the following: (a) maintain each Plan in compliance in all material respects with the
applicable provisions of ERISA, the Code and other Federal or state Law; (b) cause each Plan which
is qualified under Section 401(a) of the Code to maintain such qualification; unless the failure to
maintain such qualification would not violate the applicable provisions of ERISA, the Code and
other Federal or state Law to the extent, individually or in the aggregate, such violations could
not reasonably be expected to have a Material Adverse Effect, and (c) make all required
contributions to any Plan subject to Section 412 of the Code.



     Section 6.12. Use of Proceeds. Use the proceeds of the Credit Extensions to acquire the
Property.



     Section 6.13. Further Assurances. Within five Business Days of a request by the
Administrative Agent, the Borrower shall or shall cause any of the Guarantors or other Subsidiaries
whose Equity Interests are being pledged hereunder to execute and deliver such further documents
and do such other acts and things as the Administrative Agent may reasonably request in order to
effect fully the purposes of this Agreement and the other Loan Documents and to provide for payment
of the Obligations in accordance with the terms of this Agreement and the other Loan Documents.



     Section 6.14. Subsidiaries and Other Assets. Within ten Business Days after the time that any
Person becomes a Domestic Subsidiary as a result of an Acquisition, the creation of such Subsidiary
or otherwise, then, unless such Domestic Subsidiary is merged into the



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Borrower or a Subsidiary Loan Party (with the Borrower or such Subsidiary Loan Party being the
surviving Person) prior to the expiration of such ten Business Day period, (a) such Subsidiary
shall execute a Guaranty of the Obligations, a Security Agreement, and any related Collateral
Documents reasonably required by the Administrative Agent, to secure the Secured Obligations, and
(b) 100% of such Subsidiary’s Equity Interest shall be pledged to secure the Secured Obligations,
and (c) the Lenders shall receive such board resolutions, officer’s certificates, corporate and
other documents and opinions of counsel as the Administrative Agent shall reasonably request in
connection with the actions described in subsections (a) and (b) above. Within thirty days after
the time that any Person becomes a Foreign Subsidiary as a result of the creation of such
Subsidiary or otherwise, (a) 65% of such Subsidiary’s Equity Interest shall be pledged to secure
the Obligations and (b) the Lenders shall receive such board resolutions, officer’s certificates,
corporate and other documents and opinions of counsel as the Administrative Agent shall reasonably
request in connection with such pledge.



     Section 6.15. Post-Closing Deliveries. Without limiting the generality of Section 6.13
of this Agreement, deliver to the Administrative Agent the items described in the Post-Closing
Letter on or before the applicable date set forth in the Post-Closing Letter.



ARTICLE VII.




NEGATIVE COVENANTS




     So long as any Lender shall have any Commitment hereunder, any Term Loan or other Obligation
hereunder shall remain unpaid or unsatisfied, the Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly, without the prior written consent of the Required Lenders:



     Section 7.01. Liens. Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other than the following:



     (a) Liens pursuant to any Loan Document;



     (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals or
extensions thereof, provided that (i) the property covered thereby is not supplemented,
(ii) the amount secured or benefited thereby is not increased, and (iii) any renewal or extension
of the obligations secured or benefited thereby is permitted by Section 7.03(b);



     (c) Liens for taxes not yet due and payable or which are being contested in good faith and by
appropriate proceedings diligently conducted, if adequate reserves with respect thereto are
maintained on the books of the applicable Person in accordance with GAAP;



     (d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens
arising in the ordinary course of business which are not overdue for a period of more than 30 days
or which are being contested in good faith and by appropriate proceedings diligently conducted, if
adequate reserves with respect thereto are maintained on the books of the applicable Person;



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     (e) pledges or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation, other than any Lien
imposed by ERISA;



     (f) deposits to secure the performance of bids, trade contracts and leases (other than
Indebtedness), statutory obligations, surety bonds, performance bonds and other obligations of a
like nature incurred in the ordinary course of business;



     (g) easements, rights-of-way, restrictions and other similar encumbrances affecting real
property which, in the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the applicable Person;



     (h) judgment Liens which would not constitute an Event of Default;



     (i) Liens securing Indebtedness permitted under Section 7.03(e); provided that
(i) such Liens do not at any time encumber any property other than the property financed by such
Indebtedness and (ii) the Indebtedness secured thereby does not exceed the cost or fair market
value, whichever is lower, of the property being acquired on the date of acquisition;



     (j) licenses (with respect to intellectual property Collateral and other property), leases or
subleases granted to third parties in accordance with any applicable terms of the Loan Documents
and not interfering in any material respect with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries or resulting in a material diminution in the value of any
Collateral as security for the Secured Obligations;



     (k) any (i) interest or title of a lessor or sublessor under any lease not prohibited by this
Agreement, (ii) Lien or restriction that the interest or title of such lessor or sublessor may be
subject to, or (iii) subordination of the interest of the lessee or sublessee under such lease to
any Lien or restriction referred to in the preceding clause (ii), so long as the holder of such
Lien or restriction agrees to recognize the rights of such lessee or sublessee under such lease;



     (l) Liens arising from filing UCC financing statements relating solely to leases not
prohibited by this Agreement;



     (m) any zoning or similar law or right reserved to or vested in any Governmental Authority to
control or regulate the use of any real property;



     (n) Liens arising out of conditional sale or title retention, consignment or similar
arrangements for the sale of good entered into by the Borrower or any of its Subsidiaries in the
ordinary course of business and not prohibited by this Agreement;



     (o) Liens in favor of Caterpillar Financial Services Corporation related to generators and
related equipment for PowerSecure Shared Savings Projects and sold to the Borrower or any of its
Subsidiaries and any renewals and extensions thereof, provided that the aggregate principal amount
of Indebtedness secured thereby does not exceed $7,500,000;



51









 





     (p) Liens with respect to vehicle leases of the Borrower and its Subsidiaries entered into in
the ordinary course of business;



     (q) Liens with respect to operating leases of copiers, fax machines and similar office
equipment in the ordinary course of business; and



     (r) Liens granted pursuant to the Existing Credit Agreement Collateral Documents.



     Section 7.02. Investments. Make any Investments, except:



     (a) Investments not otherwise permitted by subsections (b) through (l) below existing on the
date hereof and listed on Schedule 7.02;



     (b) Investments held by the Borrower or such Subsidiary in the form of Cash and Cash
Equivalents and Investments by the Borrower or such Subsidiary in accounts at Citibank;



     (c) Investments received in connection with the bankruptcy or reorganization of, or settlement
of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary
course of business;



     (d) Investments as Capital Expenditures;



     (e) Investments of any Subsidiary in the Borrower or any Subsidiary Loan Party or Investments
by the Borrower in any Subsidiary Loan Party;



     (f) Investments constituting (i) accounts receivable arising, (ii) trade debt granted, or
(iii) deposits made in connection with the purchase price of goods or services, in each
case, in the ordinary course of business;



     (g) Investments consisting of (i) any deferred portion of the sales price or (ii) non-cash
consideration, in each case, received by the Borrower or any Subsidiary in connection with any
Disposition permitted under Section 7.05;



     (h) Investments in respect of loans and advances made by the Borrower and its Subsidiaries in
the ordinary course of business to their respective directors, officers and employees, so long as
the aggregate principal amount thereof at any one time outstanding does not exceed $50,000 in the
aggregate for all such Persons;



     (i) Investments pursuant to Swap Contracts permitted pursuant to Section 7.03(d);



     (j) Investments in the ordinary course of business consisting of endorsements for collection
or deposit;



     (k) Investments in the form of Permitted Acquisitions; and



     (l) Investments not otherwise permitted pursuant to clauses (a) through (k) above made by the
Borrower and its Subsidiaries in an aggregate amount not to exceed $100,000 at any time
outstanding.



52









 





     Section 7.03. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness,
except:



     (a) Indebtedness under the Loan Documents;



     (b) Indebtedness outstanding on the date hereof and listed on Schedule 7.03 and any
refinancings, refundings, renewals or extensions thereof; provided that the amount of such
Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension
except by an amount equal to a reasonable premium or other reasonable amount paid, and fees and
expenses reasonably incurred in connection with such refinancing and by an amount equal to any
existing commitments unutilized thereunder (each a “Permitted Refinancing”);



     (c) Guarantees of the Borrower or any Subsidiary Loan Party in respect of Indebtedness of the
Borrower or any Subsidiary Loan Party otherwise permitted hereunder;



     (d) obligations (contingent or otherwise) of the Borrower or any Subsidiary existing or
arising under any Swap Contract with any Lender (or Affiliate thereof) for the purpose of directly
mitigating risks associated with respect to the Term Loans outstanding under this Agreement;



     (e) Indebtedness (i) evidencing the deferred purchase price of newly acquired property or
incurred to finance the acquisition of other assets of the Borrower or its Subsidiaries (pursuant
to purchase money mortgages or otherwise, whether owed to the seller or a third party) used in the
ordinary course of business of the Borrower or its Subsidiaries and any Indebtedness assumed in
connection with such acquisition (provided that such Indebtedness is incurred within 180
days of the acquisition of such property other assets) and contingent obligations of the borrower
and its Subsidiaries in respect of such Indebtedness, (ii) in respect of Capital Leases and
contingent obligations of the Borrower and its Subsidiaries in respect of such Indebtedness and
(iii) any Permitted Refinancing of Indebtedness referred to in clauses (i) and (ii);
provided that the aggregate principal amount of all Indebtedness outstanding pursuant to
this Section 7.03(e) shall not at any time exceed $100,000;



     (f) Indebtedness of (i) the Borrower or any Subsidiary Loan Party owing to the Borrower or any
Subsidiary Loan Party and (ii) the Borrower or any of its Subsidiaries owing to a Subsidiary which
is not a Loan Party so long as the repayment obligations of the Borrower or any Subsidiary Loan
Party are subordinated to the repayment in full of the Obligations on terms and conditions that are
reasonably satisfactory to the Administrative Agent;



     (g) the Founders Severance Payments;



     (h) other unsecured Indebtedness, either (i) the Net Cash Proceeds of which are applied in
accordance with Section 2.06(c) of the Existing Credit Agreement or (ii) not otherwise
permitted pursuant to clauses (a) through (g) above incurred by the Borrower and its Subsidiaries
not to exceed $100,000 in aggregate amount at any time outstanding; and



     (i) Indebtedness in respect of the Existing Credit Agreement and any other Loan Documents (as
defined in the Existing Credit Agreement).



53









 





     Section 7.04. Fundamental Changes. Merge, dissolve, liquidate, consolidate with or into
another Person, or Dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any
Person, except that, so long as no Default exists or would result therefrom:



     (a) any Subsidiary may merge with (i) the Borrower, provided that the Borrower shall
be the continuing or surviving Person, or (ii) any one or more other Subsidiaries, provided
that when any Subsidiary Loan Party is merging with another Subsidiary, the Subsidiary Loan Party
shall be the continuing or surviving Person; and



     (b) any Subsidiary may Dispose of all or substantially all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or to another Subsidiary; provided that if the
transferor in such a transaction is a Subsidiary Loan Party, then the transferee must either be the
Borrower or a Subsidiary Loan Party.



     Section 7.05. Dispositions. Make any Disposition or enter into any agreement to make any
Disposition, except:



     (a) Dispositions of inventory or obsolete, damaged, worn out or surplus property in the
ordinary course of business;



     (b) Dispositions by the Borrower or any Subsidiary to the Borrower or any Subsidiary Loan
Party (including any Disposition effected pursuant to a merger, consolidation, liquidation or
dissolution permitted under Section 7.04);



     (c) Dispositions to the extent constituting a Restricted Payment permitted by
Section 7.06;



     (d) Dispositions of overdue accounts receivable arising in the ordinary course of business,
but only in connection with the collection or compromise thereof;



     (e) Dispositions of Cash and Cash Equivalents in the ordinary course of business;



     (f) Dispositions not otherwise permitted in clauses (a) through (e) above, provided,
that (i) at the time of such Disposition no Default exists or would result from such Disposition
and (ii) the aggregate Book Value of all property disposed of in reliance on this clause (f) in any
Fiscal Year shall not exceed $150,000;



     (g) so long as there exists no Default immediately before and after giving effect to any such
transaction, Dispositions not otherwise permitted in clauses (a) through (f) above, the Net Cash
Proceeds of which are used within 120 days of such Disposition to purchase assets useful in the
business of the Borrower and its Subsidiaries, provided that (i) the aggregate amount of Net Cash
Proceeds outstanding and pending reinvestment pursuant to this clause (g) shall not exceed $50,000
and (ii) if such Net Cash Proceeds are not used within such 120 days to purchase assets useful in
the business of the Borrower and its Subsidiaries, then such Net Cash Proceeds shall be applied in
accordance with Section 2.05(d) of the Existing Credit Agreement; and



54









 





     (h) Disposition by the Borrower of assets and Equity Interests as disclosed to the
Administrative Agent in writing prior to the Closing Date;



provided, however, that any Disposition pursuant to clauses (a) through (h) shall
be for fair market value.



     Notwithstanding anything to the contrary herein, in no event should there be any Disposition
of the Mortgaged Property without the consent of each Lender.



     Section 7.06. Restricted Payments. Declare or make, directly or indirectly, any Restricted
Payment, or incur any obligation (contingent or otherwise) to do so, except so long as no Default
shall have occurred and be continuing at the time of any action described below or would result
therefrom:



     (a) each Subsidiary may declare and pay Dividends to the Borrower or any Subsidiary Loan
Party;



     (b) the Borrower and each Subsidiary may declare and make Dividends payable solely in the
common stock or other common Equity Interests of such Person;



     (c) the Borrower and each Subsidiary may purchase, redeem or otherwise acquire Equity
Interests issued by it with the proceeds received from the substantially concurrent issue of new
shares of its common stock or other common Equity Interests;



     (d) the Borrower and each Subsidiary may make regularly scheduled payments of principal and
interest on Indebtedness;



     (e) the Borrower may declare and pay Dividends; and



     (f) the Borrower may repurchase its common Equity Interests pursuant to stock option plans
approved by its Board of Directors.



     Section 7.07. ERISA. At any time engage in a transaction which could be subject to
Section 4069 or 4212(c) of ERISA, or permit any Plan to (a) engage in any non-exempt “prohibited
transaction” (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other
Applicable Laws; or (c) incur any material “accumulated funding deficiency” (as defined in
Section 302 of ERISA), which, with respect to each event listed above, could be reasonably expected
to have a Material Adverse Effect.



     Section 7.08. Change in Nature of Business. Engage in any material line of business
substantially different from those lines of business conducted by the Borrower and its Subsidiaries
on the date hereof and business activities that are ancillary or related thereto; provided
that the Borrower shall not conduct any business other than performance of its obligations under
the Loan Documents or own any material assets other than (a) Equity Interests in Subsidiaries,
(b) Cash and Cash Equivalents, and (c) other supplies, equipment and similar assets not in excess
of $250,000.



55









 





     Section 7.09. Transactions with Affiliates. Enter into any transaction of any kind with any
Affiliate of the Borrower (other than a Subsidiary Loan Party), other than arm’s-length
transactions with Affiliates that are otherwise permitted hereunder and which are on fair and
reasonable terms substantially as favorable to the Borrower or any Subsidiary as would be
obtainable by the Borrower or such Subsidiary in a comparable arm’s-length transaction with a
Person other than an Affiliate.



     Section 7.10. Burdensome Agreements. Enter into any Contractual Obligation (other than this
Agreement or any other Loan Document) that (a) limits the ability (i) of any Subsidiary to make
Restricted Payments to the Borrower or to otherwise transfer property to the Borrower, (ii) of any
Subsidiary to Guarantee the Indebtedness of the Borrower, or (iii) of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist Liens on property of such Person;
provided, however, that this clause (iii) shall not prohibit any negative pledge
incurred or provided in favor of any holder of Indebtedness permitted under Section 7.03(e)
solely to the extent any such negative pledge relates to the property financed by or the subject of
such Indebtedness; or (b) requires the grant of a Lien to secure an obligation of such Person if a
Lien is granted to secure another obligation of such Person.



     Section 7.11. Use of Proceeds. Use the proceeds of any Credit Extension, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to purchase or carry margin stock
(within the meaning of Regulation U of the Board) or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally incurred for such purpose.



     Section 7.12. Financial Covenants.



     (a) Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio as of the end
of any Fiscal Quarter of the Borrower to be less than 1.75 to 1.00.



     (b) Leverage Ratio. Permit the Leverage Ratio as of the end of any Fiscal Quarter of
the Borrower to exceed 2.75 to 1.00.



     (c) Asset Coverage Ratio. Permit the Asset Coverage Ratio at any time to be less than
1.25 to 1.00.



     Section 7.13. Capital Expenditures. Make or become legally obligated to make any Capital
Expenditure in an aggregate amount during any Fiscal Year in excess of $2,000,000.



     Section 7.14. Fiscal Year and Accounting Methods. Change its Fiscal Year or its method of
accounting other than (a) changes as required by GAAP or (b) changes required by Applicable Law.



     Section 7.15. Limitation on Restrictive Agreements. Enter into any agreement or instrument
that prohibits the Borrower from entering into any amendment, supplement, modification or
restatement of this Agreement.



     Section 7.16. Issuance of Equity Interests. Make any Equity Issuance except:



56









 





     (a) Equity Interests in respect of any initial capitalization of a Subsidiary;



     (b) Qualified Equity Interests of Subsidiaries issued to the Borrower and, if required under
this Agreement or any other Loan Document, pledged to the Administrative Agent;



     (c) an Equity Issuance in which the Net Equity Proceeds thereof are applied as required
pursuant to Section 2.05(e) of the Existing Credit Agreement;



     (d) Equity Interests under the Borrower’s 1998 Stock Incentive Plan, as amended and restated,
including but not limited to granting stock options, issuing restricted stock and restricted stock
units, and issuing shares of common Equity Interests underlying stock options and restricted stock
units; and



     (e) shares of common Equity Interests underlying outstanding warrants.



     Notwithstanding anything in this Article VII or elsewhere in this Agreement to the
contrary, in no event shall the Borrower permit (a) any Inactive Subsidiary to conduct any business
and (b) the Inactive Subsidiaries to own assets in excess of $100,000 in aggregate value.



ARTICLE VIII.




EVENTS OF DEFAULT AND REMEDIES




     Section 8.01. Events of Default. Any of the following shall constitute an Event of Default:



     (a) Non-Payment. The Borrower or any other Loan Party fails to pay (i) when due and
payable and as required to be paid herein, any amount of principal of any Term Loan, or (ii) within
three Business Days after the same becomes due, any interest on any Term Loan, or any commitment or
other fee due hereunder, or (iii) within five days after the Borrower receives written notice from
the Administrative Agent specifying the amount is due and payable, any other amount payable
hereunder or under any other Loan Document; or



     (b) Specific Covenants. Any Loan Party fails to perform or observe any term, covenant
or agreement contained in (i) any of Section 6.03(a), 6.10, 6.12, or
Article VII (other than Section 7.01) required to be performed or observed by it or
(ii) Section 7.01 required to be performed or observed by it, and, in the case of
clause (ii) only, such failure continues for 15 days after the earlier of (A) the Borrower’s
knowledge and (B) the Borrower receives written notice thereof specifying such default from the
Administrative Agent; or



     (c) Other Defaults. The Borrower or any other Loan Party fails to perform or observe
any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any
Loan Document on its part to be performed or observed and such failure continues for 30 days after
the earlier of (i) the Borrower’s knowledge and (ii) the Borrower receives written notice thereof
specifying the default from the Administrative Agent; or



     (d) Representations and Warranties. Any representation, warranty, certification or
statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party



57









 







herein, in any other Loan Document, or in any document delivered in connection herewith or
therewith shall be incorrect or misleading in any material respect when made or deemed made; or



     (e) Cross-Default. (i) The Borrower or any other Loan Party (A) fails to make any
payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or
otherwise) in respect of any Indebtedness or Guarantee (other than Indebtedness hereunder,
Indebtedness under Swap Contracts) having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to all creditors under any combined or
syndicated credit arrangement) of more than $200,000 after the giving of any required notice and
the expiration of any applicable grace period, or (B) fails to observe or perform any other
agreement or condition relating to any such Indebtedness or Guarantee or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other event occurs, in
each case, the effect of which default or other event is to cause, or to permit the holder or
holders of such Indebtedness or the beneficiary or beneficiaries of such Guarantee (or a trustee or
agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, after the
giving of any required notice and the expiration of any applicable grace period, such Indebtedness
to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically
or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made,
prior to its stated maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded; (ii) there occurs under any Swap Contract an Early Termination Date (as
defined in such Swap Contract) resulting from (A) any event of default under such Swap Contract as
to which the Borrower or any other Loan Party is the Defaulting Party (as defined in such Swap
Contract) or (B) any Termination Event (as so defined) under such Swap Contract as to which the
Borrower or any Subsidiary is an Affected Party (as so defined) and, in either event, the Swap
Termination Value owed by the Borrower or such other Loan Party as a result thereof is greater than
$100,000 and the amount of the Swap Termination Value remains unpaid for a period of 10 days; or
(iii) the Borrower or any other Loan Party shall default in the payment when due, or in the
performance or observance, of any material obligation or material condition of any Contractual
Obligation (other than any Indebtedness) the result of which could reasonably be expected to have a
Material Adverse Effect, unless, but only as long as, the existence of any such default is being
contested by the Borrower or such other Loan Party in good faith by appropriate proceedings and
adequate reserves in respect thereof have been established on the books of the Borrower or such
other Loan Party to the extent required by GAAP; or



     (f) Insolvency Proceedings, Etc. The Borrower or any other Loan Party institutes or
consents to the institution of any proceeding under any Debtor Relief Law in which such Person is
the debtor, or makes an assignment for the benefit of creditors; or applies for or consents to the
appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar
officer for it or for all or any material part of its property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the
application or consent of such Person and the appointment continues undischarged or unstayed for 60
calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all
or any material part of its property is instituted without the consent of such Person and continues
undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such
proceeding; or



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     (g) Inability to Pay Debts; Attachment. (i) The Borrower or any other Loan Party
becomes unable or admits in writing its inability or fails generally to pay its debts as they
become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or
levied against all or any material part of the property of any such Person and is not released,
vacated or fully bonded within 30 days after its issue or levy; or



     (h) Judgments. There is entered against the Borrower or any other Loan Party (i) a
final judgment or order for the payment of money in an aggregate amount exceeding $200,000 (to the
extent not covered by independent third-party insurance or surety bond as to which the insurer or
surety does not dispute coverage), or (ii) any one or more non-monetary final judgments that have,
or could reasonably be expected to have, individually or in the aggregate, a Material Adverse
Effect and, in either case, (A) enforcement proceedings are commenced by any creditor upon such
judgment or order or (B) such judgment or order shall continue unsatisfied, undischarged and
unstayed for a period of 30 days; or



     (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer
Plan which has resulted or could reasonably be expected to result in liability of the Borrower
under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC, or (ii) the Borrower
or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under
a Multiemployer Plan in an aggregate amount in excess of $100,000; or



     (j) Invalidity of Loan Documents. Any material provision of any Loan Document, at any
time after its execution and delivery and for any reason other than as expressly permitted
hereunder or under such other Loan Documents or satisfaction in full of all the Obligations, ceases
to be in full force and effect; or any Loan Party or any other Person contests in any manner the
validity or enforceability of any provision of any Loan Document; or any Loan Party denies that it
has any or further liability or obligation under any Loan Document, or purports to revoke,
terminate or rescind any provision of any Loan Document other than in accordance with its terms;



     (k) Change of Control. There occurs any Change of Control; or



     (l) Existing Credit Agreement. An Event of Default (as defined in the Existing Credit
Agreement) shall occur.



     Section 8.02. Remedies Upon Event of Default. If any Event of Default occurs and is
continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the
Required Lenders, take any or all of the following actions:



     (a) declare the commitment of each Lender to make Term Loans to be terminated, whereupon such
commitments and obligation shall be terminated;



     (b) declare the unpaid principal amount of all outstanding Term Loans, all interest accrued
and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan
Document to be immediately due and payable, without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived by the Borrower; and



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     (c) exercise on behalf of itself and the Lenders all rights and remedies available to it, the
Lender under the Loan Documents or Applicable Law;



provided, however, that upon the occurrence of an actual or deemed entry of an
order for relief with respect to the Borrower under the Bankruptcy Code of the United States, the
obligation of each Lender to make Term Loans shall automatically terminate, the unpaid principal
amount of all outstanding Term Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, without further act of the Administrative Agent or any
Lender.



     Section 8.03. Application of Funds. After the exercise of remedies provided for in
Section 8.02 (or after the Loans have automatically become immediately due and payable as
set forth in the proviso to Section 8.02), any amounts received on account of the
Obligations shall be applied by the Administrative Agent in the following order, subject to
Section 10.19:



     First, to payment of that portion of the Secured Obligations constituting fees,
indemnities, expenses and other amounts (including Attorney Costs and amounts payable under
Article III) payable to the Administrative Agent in its capacity as such;



     Second, to payment of that portion of the Secured Obligations constituting fees,
indemnities and other amounts (other than principal and interest) payable to the Lenders (including
Attorney Costs and amounts payable under Article III), ratably among them in proportion to
the amounts described in this clause Second payable to them;



     Third, to payment of that portion of the Secured Obligations constituting accrued and
unpaid interest on the Loans, ratably among the Lenders in proportion to the respective amounts
described in this clause Third payable to them;



     Fourth, to payment of that portion of the Secured Obligations constituting unpaid
principal of the Loans and Swap Obligations, ratably among the Guarantied Parties (as defined in
the Guaranties) and the Secured Creditors (as defined in the Security Agreement) in proportion to
the respective amounts described in this clause Fourth held by them;



     Fifth, to payment of Cash Management Obligations, ratably among the Guarantied Parties
and the Secured Creditors in proportion to the respective amounts described in this clause
Fifth held by them;



     Sixth, to payment of any other Secured Obligations, ratably among the Guarantied
Parties and the Secured Creditors in proportion to the respective amounts described in this clause
Sixth  held by them; and



     Last, the balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by Law.



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ARTICLE IX.




ADMINISTRATIVE AGENT




     Section 9.01. Appointment and Authority. Each of the Lenders hereby irrevocably appoints
Citibank to act on its behalf as the Administrative Agent hereunder and under the other Loan
Documents and authorizes the Administrative Agent to take such actions on its behalf and to
exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto. The provisions of this
Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the
Borrower nor any other Loan Party shall have rights as a third party beneficiary of any of such
provisions.



     Section 9.02. Rights as a Lender. The Person serving as the Administrative Agent hereunder
shall have the same rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders”
shall, unless otherwise expressly indicated or unless the context otherwise requires, include the
Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and
its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any
other advisory capacity for and generally engage in any kind of business with the Borrower or any
Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder
and without any duty to account therefor to the Lenders.



     Section 9.03. Exculpatory Provisions. The Administrative Agent shall not have any duties or
obligations except those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Administrative Agent:



     (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing;



     (b) shall not have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan
Documents that the Administrative Agent is required to exercise as directed in writing by the
Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Loan Documents), provided that the Administrative Agent shall
not be required to take any action that, in its opinion or the opinion of its counsel, may expose
the Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law;
and



     (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any
duty to disclose, and shall not be liable for the failure to disclose, any information relating to
the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as
the Administrative Agent or any of its Affiliates in any capacity.



     The Administrative Agent shall not be liable for any action taken or not taken by it (i) with
the consent or at the request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary, or as the Administrative Agent shall believe in



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good faith shall be necessary, under the circumstances as provided in Sections 10.01
and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice
describing such Default is given to the Administrative Agent by the Borrower or a Lender.



     The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire
into (i) any statement, warranty or representation made in or in connection with this Agreement or
any other Loan Document, (ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance
of any of the covenants, agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this
Agreement, any other Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the Administrative Agent.



     Section 9.04. Reliance by Administrative Agent. The Administrative Agent shall be entitled to
rely upon, and shall not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing (including any electronic message,
Internet or intranet website posting or other distribution) believed by it to be genuine and to
have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed by it to have been
made by the proper Person, and shall not incur any liability for relying thereon. In determining
compliance with any condition hereunder to the making of a Term Loan that by its terms must be
fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition
is satisfactory to such Lender unless the Administrative Agent shall have received notice to the
contrary from such Lender prior to the making of such Term Loan. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.



     Section 9.05. Delegation of Duties. The Administrative Agent may perform any and all of its
duties and exercise its rights and powers hereunder or under any other Loan Document by or through
any one or more sub-agents (which may be other Affiliates of Citibank) appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of
its duties and exercise its rights and powers by or through their respective Related Parties. The
exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties
of the Administrative Agent and any such sub-agent, and shall apply to their respective activities
in connection with the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.



     Section 9.06. Resignation of Administrative Agent. The Administrative Agent may at any time
give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of
resignation, the Required Lenders shall have the right, with approval of the Borrower so long as no
Event of Default is in existence (which approval shall not be unreasonably withheld or delayed), to
appoint a successor, which shall be a bank with an office



62









 







in the United States, or an Affiliate of any such bank with an office in the United States.
If no such successor shall have been so appointed by the Required Lenders and shall have accepted
such appointment within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may on behalf of the Lenders and, so long as no
Event of Default is in existence, with approval of the Borrower (which approval shall not be
unreasonably withheld or delayed), appoint a successor Administrative Agent meeting the
qualifications set forth above; provided that if the Administrative Agent shall notify the
Borrower and the Lenders that no qualifying Person has accepted such appointment, then such
resignation shall nonetheless become effective in accordance with such notice and (1) the retiring
Administrative Agent shall be discharged from its duties and obligations hereunder and under the
other Loan Documents (except that in the case of any Collateral held by the Administrative Agent on
behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall
continue to hold such Collateral until such time as a successor Administrative Agent is appointed)
and (2) all payments, communications and determinations provided to be made by, to or through the
Administrative Agent shall instead be made by or to each Lender directly, until such time as the
Required Lenders appoint a successor Administrative Agent as provided for above in this Section.
Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor
shall succeed to and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Administrative Agent, and the retiring Administrative Agent shall be
discharged from all of its duties and obligations hereunder or under the other Loan Documents (if
not already discharged therefrom as provided above in this Section). The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the retiring Administrative
Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article
and Section 10.04 shall continue in effect for the benefit of such retiring Administrative
Agent, its sub-agents and their respective Related Parties in respect of any actions taken or
omitted to be taken by any of them while the retiring Administrative Agent was acting as
Administrative Agent.



     Section 9.07. Non-Reliance on Administrative Agent and Other Lenders. Each Lender
acknowledges that it has, independently and without reliance upon the Administrative Agent or any
other Lender or any of their Related Parties and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon the Administrative
Agent or any other Lender or any of their Related Parties and based on such documents and
information as it shall from time to time deem appropriate, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any other Loan Document or any
related agreement or any document furnished hereunder or thereunder.



     Section 9.08. Administrative Agent May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to any Loan Party, the Administrative Agent
(irrespective of whether the principal of any Term Loan shall then be due and payable as herein
expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall
have made any demand on the Borrower) shall be entitled and empowered, by intervention in such
proceeding or otherwise



63









 





     (a) to file and prove a claim for the whole amount of the principal and interest owing and
unpaid in respect of the Term Loans and all other Obligations that are owing and unpaid and to file
such other documents as may be necessary or advisable in order to have the claims of the Lenders
and the Administrative Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and their respective agents
and counsel and all other amounts due the Lenders and the Administrative Agent under
Section 10.04) allowed in such judicial proceeding; and



     (b) to collect and receive any monies or other property payable or deliverable on any such
claims and to distribute the same;



and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Lender to make such payments to the
Administrative Agent and, in the event that the Administrative Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its
agents and counsel, and any other amounts due the Administrative Agent under Section 10.04.



     Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or
consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement,
adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the
Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.



     Section 9.09. Collateral and Guaranty Matters. The Lenders irrevocably authorize the
Administrative Agent, at its option and in its discretion,



     (a) to release any Lien on any property granted to or held by the Administrative Agent under
any Loan Document (i) upon termination of the Aggregate Term Commitments and payment in full of all
Obligations (other than contingent indemnification obligations), (ii) that is sold or to be sold as
part of or in connection with any sale permitted hereunder or under any other Loan Document, or
(iii) subject to Section 10.01, if approved, authorized or ratified in writing by the
Required Lenders;



     (b) to subordinate any Lien on any property granted to or held by the Administrative Agent
under any Loan Document to the holder of any Lien on such property that is permitted by
Section 7.01(i); and



     (c) to release on behalf of the Administrative Agent and the Lenders any Guarantor from its
obligations under its Guaranty and under the other Loan Documents (i) upon termination of the
Aggregate Term Commitments and payment in full of all Secured Obligations (other than contingent
indemnification obligations) and the expiration or termination of all Letters of Credit, (ii) if
such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder or
(iii) subject to Section 10.01, if approved, authorized or ratified in writing, by the
Lenders required for such action.



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     Upon request by the Administrative Agent at any time, the Required Lenders will confirm in
writing the Administrative Agent’s authority to release or subordinate its interest in particular
types or items of property, or to release any Guarantor from its obligations under its Guaranty
pursuant to this Section 9.09.



ARTICLE X.




MISCELLANEOUS




     Section 10.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party
therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or
the applicable Loan Party, and acknowledged by the Administrative Agent, and each such waiver or
consent shall be effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, waiver or consent shall:



     (a) waive any condition set forth in Section 4.01(a) without the written consent of
each Lender;



     (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated
pursuant to Section 8.02) without the written consent of such Lender;



     (c) postpone any date fixed by this Agreement or any other Loan Document for any payment
(excluding mandatory prepayments) of principal, interest, fees or other amounts due to the Lenders
(or any of them) hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby;



     (d) reduce the principal of, or the rate of interest specified herein on, any Term Loan, or
(subject to clause (iv) of the second proviso to this Section 10.01) any fees or other
amounts payable hereunder or under any other Loan Document without the written consent of each
Lender directly affected thereby; provided, however, that only the consent of the
Required Lenders shall be necessary (i) to amend the definition of “Default Rate” or to waive any
obligation of the Borrower to pay interest at the Default Rate or (ii) to amend the Leverage Ratio
(or any defined term used therein) even if the effect of such amendment would be to reduce the rate
of interest on any Term Loan or to reduce any fee payable hereunder;



     (e) change Section 2.[___] or Section 8.03 in a manner that would alter the pro
rata sharing of payments required thereby without the written consent of each Lender directly
affected thereby;



     (f) change any provision of this Section, the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any consent hereunder,
without the written consent of each Lender;



     (g) release any Guarantor from its Guaranty without the written consent of each Lender, unless
otherwise permitted pursuant to clause (i) or (ii) of Section 9.09(c); or



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     (h) release all or substantially all of the Collateral without the written consent of each
Lender, unless otherwise permitted by Section 9.09(a);



and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by
the Administrative Agent in addition to the Lenders required above, affect the rights or duties of
the Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything
to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be
increased or extended without the consent of such Lender.



     Section 10.02. Notices; Effectiveness; Electronic Communication.



     (a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in subsection (b) below), all
notices and other communications provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed by certified or registered mail or sent by telecopier as
follows, and all notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, as follows:




     (i) if to the Borrower or the Administrative Agent to the address, telecopier number,
electronic mail address or telephone number specified for such Person on
Schedule 10.02; and




     (ii) if to any other Lender, to the address, telecopier number, electronic mail address
or telephone number specified in its Administrative Questionnaire; and


Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall
be deemed to have been given when received; notices sent by telecopier shall be deemed to have been
given when sent (except that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next Business Day for the recipient).
Notices delivered through electronic communications to the extent provided in subsection (b) below,
shall be effective as provided in such subsection (b).




     (b) Electronic Communications. Notices and other communications to the Lenders
hereunder may be delivered or furnished by electronic communication (including e-mail and Internet
or intranet websites) pursuant to procedures approved by the Administrative Agent, provided
that the foregoing shall not apply to notices to any Lender pursuant to Article II if such
Lender has notified the Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent or the Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures approved by it, provided that approval of such
procedures may be limited to particular notices or communications.



     Unless the Administrative Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement
from the intended recipient (such as by the “return receipt requested” function, as available,
return e-mail or other written acknowledgement), provided that if such



66









 







notice or other communication is not sent during the normal business hours of the recipient,
such notice or communication shall be deemed to have been sent at the opening of business on the
next Business Day for the recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the intended recipient at its
e-mail address as described in the foregoing clause (i) of notification that such notice or
communication is available and identifying the website address therefor.



     (c) In no event shall the Administrative Agent or any of its Related Parties (collectively,
the “Agent Parties”) have any liability to the Borrower, any Lender or any other Person for
losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or
otherwise) arising out of the Borrower’s or the Administrative Agent’s transmission of Borrower
Materials through the Internet, except to the extent that such losses, claims, damages, liabilities
or expenses are determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of such Agent Party;
provided, however, that in no event shall any Agent Party have any liability to the
Borrower, any Lender or any other Person for indirect, special, incidental, consequential or
punitive damages (as opposed to direct or actual damages).



     (d) Change of Address, Etc. Each of the Borrower and the Administrative Agent may
change its address, telecopier or telephone number for notices and other communications hereunder
by notice to the other parties hereto. Each other Lender may change its address, telecopier or
telephone number for notices and other communications hereunder by notice to the Borrower and the
Administrative Agent. In addition, each Lender agrees to notify the Administrative Agent from time
to time to ensure that the Administrative Agent has on record (i) an effective address, contact
name, telephone number, telecopier number and electronic mail address to which notices and other
communications may be sent and (ii) accurate wire instructions for such Lender.



     (e) Reliance by Administrative Agent and Lenders. The Administrative Agent and the
Lenders shall be entitled to rely and act upon any notices (including telephonic Term Loan Notices)
purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed by any other form of
notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any
confirmation thereof. The Borrower shall indemnify the Administrative Agent, each Lender and the
Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the
reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All
telephonic notices to and other telephonic communications with the Administrative Agent may be
recorded by the Administrative Agent, and each of the parties hereto hereby consents to such
recording.



     Section 10.03. No Waiver; Cumulative Remedies. No failure by any Lender or the Administrative
Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by Law.



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     Section 10.04. Expenses; Indemnity; Damage Waiver.



     (a) Costs and Expenses. The Borrower shall pay within 30 days after demand thereof
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates
(including the reasonable fees, charges and disbursements of counsel for the Administrative Agent),
in connection with the syndication of the credit facilities provided for herein, the preparation,
negotiation, execution, delivery and administration of this Agreement and the other Loan Documents
or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), and (ii) all out-of-pocket
expenses incurred by the Administrative Agent or any Lender (including the reasonable fees, charges
and disbursements of any counsel for the Administrative Agent or any Lender), in connection with
the enforcement or protection of its rights (A) in connection with this Agreement and the other
Loan Documents, including its rights under this Section or (B) in connection with the Term Loans
made, including all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Term Loans.



     (b) INDEMNIFICATION BY THE BORROWER. THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE
AGENT (AND ANY SUB-AGENT THEREOF), EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING
PERSONS (EACH SUCH PERSON BEING CALLED AN “INDEMNITEE”) AGAINST, AND HOLD EACH INDEMNITEE
HARMLESS FROM, ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES AND RELATED EXPENSES (INCLUDING THE
REASONABLE FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE), INCURRED BY ANY
INDEMNITEE OR ASSERTED AGAINST ANY INDEMNITEE BY ANY THIRD PARTY OR BY THE BORROWER OR ANY OTHER
LOAN PARTY ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF (I) THE EXECUTION OR DELIVERY OF
THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR
THEREBY, THE PERFORMANCE BY THE PARTIES HERETO OF THEIR RESPECTIVE OBLIGATIONS HEREUNDER OR
THEREUNDER, THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, OR, IN THE CASE OF
THE ADMINISTRATIVE AGENT (AND ANY SUB-AGENT THEREOF) AND ITS RELATED PARTIES ONLY, THE
ADMINISTRATION OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, (II) ANY TERM LOAN OR THE USE OR
PROPOSED USE OF THE PROCEEDS THEREFROM, (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF
HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS
SUBSIDIARIES, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING
RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY, WHETHER
BROUGHT BY A THIRD PARTY OR BY THE BORROWER OR ANY OTHER LOAN PARTY, AND REGARDLESS OF WHETHER ANY
INDEMNITEE IS A PARTY THERETO, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN
PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE; PROVIDED
THAT SUCH INDEMNITY SHALL NOT, AS TO



68









 







ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR
RELATED EXPENSES (X) ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL JUDGMENT TO HAVE
RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE OR (Y) RESULT FROM A
CLAIM BROUGHT BY THE BORROWER OR ANY OTHER LOAN PARTY AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH
OF SUCH INDEMNITEE’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, IF THE BORROWER OR
SUCH LOAN PARTY HAS OBTAINED A FINAL JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A COURT
OF COMPETENT JURISDICTION.



     (c) Reimbursement by Lenders. To the extent that the Borrower for any reason fails to
indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it
to the Administrative Agent (or any sub-agent thereof) or any Related Party of the Administrative
Agent, each Lender severally agrees to pay to the Administrative Agent (or any such sub-agent), or
such Related Party, such Lender’s applicable Term Pro Rata Share (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount,
provided that the unreimbursed expense or indemnified loss, claim, damage, liability or
related expense, was incurred by or asserted against the Administrative Agent (or any such
sub-agent) in its capacity as such, or against any Related Party of the Administrative Agent acting
for the Administrative Agent (or any such sub-agent) in connection with such capacity. The
obligations of the Lenders under this subsection (c) are subject to the provisions of
Section 2.08(d).



     (d) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
Applicable Law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to
direct or actual damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the transactions
contemplated hereby or thereby, any Term Loan or the use of the proceeds thereof. No Indemnitee
referred to in subsection (b) above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it through
telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Loan Documents or the transactions contemplated hereby or thereby unless
such damages are determined by a court of competent jurisdiction by final judgment to have resulted
from the gross negligence or willful misconduct of such Indemnitee.



     (e) Payments. All amounts due under this Section shall be payable not later than 30
days after demand therefor.



     (f) Survival. The agreements in this Section shall survive the resignation of the
Administrative Agent, the replacement of any Lender, the termination of the Aggregate Term
Commitments and the repayment, satisfaction or discharge of all the other Obligations.



     Section 10.05. Payments Set Aside. To the extent that any payment by or on behalf of the
Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any
Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any



69









 







part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside
or required (including pursuant to any settlement entered into by the Administrative Agent or such
Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection
with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such
recovery, the obligation or part thereof originally intended to be satisfied shall be revived and
continued in full force and effect as if such payment had not been made or such setoff had not
occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its
applicable share (without duplication) of any amount so recovered from or repaid by the
Administrative Agent, plus interest thereon from the date of such demand to the date such payment
is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The
obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in
full of the Obligations and the termination of this Agreement.



     Section 10.06. Successors and Assigns.



     (a) Successors and Assigns Generally. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that neither the Borrower nor any other Loan Party may assign or
otherwise transfer any of its rights or obligations hereunder or under any other Loan Document
(except as expressly contemplated by Section 7.04) without the prior written consent of the
Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its
rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the
provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of subsection (f) of this Section (and any other attempted
assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby, Participants to the extent provided in
subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy
or claim under or by reason of this Agreement.



     (b) Assignments by Lenders. Any Lender may at any time assign to one or more Eligible
Assignees all or a portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Term Loan at the time owing to it); provided that




     (i) except in the case of an assignment of the entire remaining amount of the assigning
Lender’s Commitment and the Term Loan at the time owing to it or in the case of an
assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a
Lender, the aggregate amount of the Commitment (which for this purpose includes the Term
Loan outstanding thereunder) or, if the Commitment is not then in effect, the principal
outstanding balance of the Term Loan of the assigning Lender subject to each such
assignment, determined as of the date the Assignment and Assumption with respect to such
assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the
Assignment and Assumption, as of the Trade Date, shall not be less than $500,000 unless each
of the Administrative Agent and, so long as



70









 







no Event of Default has occurred and is continuing, the Borrower otherwise consents
(each such consent not to be unreasonably withheld or delayed);




     (ii) each partial assignment shall be made as an assignment of a proportionate part of
all the assigning Lender’s rights and obligations with respect to its Term Loan;




     (iii) any assignment of a Commitment must be approved by the Administrative Agent
unless the Person that is the proposed assignee is itself a Lender (whether or not the
proposed assignee would otherwise qualify as an Eligible Assignee); and




     (iv) the parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500
(which fee shall not be reimburseable by any Loan Party), and the Eligible Assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire.


Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c)
of this Section, from and after the effective date specified in each Assignment and Assumption, the
Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Assumption, be released from its obligations under this Agreement (and, in the
case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall continue to be
entitled to the benefits of Sections 3.01, 3.04, 3.05, and 10.04
with respect to facts and circumstances occurring prior to the effective date of such assignment).
Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee
Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that
does not comply with this subsection shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with subsection (d) of
this Section.




     (c) Register. The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amount of the Term Loan owing to, each Lender
pursuant to the terms hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat
each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register
shall be available for inspection by the Borrower at any reasonable time and from time to time upon
reasonable prior notice. In addition, at any time that a request for a consent for a material or
substantive change to the Loan Documents is pending, any Lender wishing to consult with other
Lenders in connection therewith may request and receive from the Administrative Agent a copy of the
Register.



71









 





     (d) Participations. Any Lender may at any time, without the consent of, or notice to,
the Borrower or the Administrative Agent, sell participations to any Person (other than a natural
person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Term Loan owing to it);
provided that (i) such Lender’s obligations under this Agreement shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent and the Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender’s rights and obligations
under this Agreement.



     Any agreement or instrument pursuant to which a Lender sells such a participation shall
provide that such Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, waiver or other modification described in the first proviso to
Section 10.01 that directly affects such Participant. Subject to subsection (e) of this
Section, the Borrower agrees that each Participant shall be entitled to the benefits of
Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent
permitted by Law, each Participant also shall be entitled to the benefits of Section 10.08
as though it were a Lender, provided such Participant agrees to be subject to
Section 2.09 as though it were a Lender.



     (e) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 3.01 or 3.04 than the applicable Lender
would have been entitled to receive with respect to the participation sold to such Participant,
unless the sale of the participation to such Participant is made with the Borrower’s prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to
the benefits of Section 3.01 unless the Borrower is notified of the participation sold to
such Participant and such Participant agrees, for the benefit of the Borrower, to comply with
Section 3.01(e) as though it were a Lender.



     (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement (including under its Note, if any) to
secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender
from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as
a party hereto.



     (g) Electronic Execution of Assignments. The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Assumption shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of which shall be of the
same legal effect, validity or enforceability as a manually executed signature or the use of a
paper-based recordkeeping system, to the extent and as provided for in any Applicable Law,
including the Federal Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform
Electronic Transactions Act.



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     Section 10.07. Treatment of Certain Information; Confidentiality. Each of the Administrative
Agent and the Lender agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its Affiliates’ and to its Affiliates’ respective
partners, directors, officers, employees, agents, advisors and representatives who are, or are
expected to be, engaged in evaluating, approving, structuring or administering the credit facility
provided herein (it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the National Association of
Insurance Commissioners), (c) to the extent required by Applicable Laws or regulations or by any
subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the
exercise of any remedies hereunder or under any other Loan Document or any action or proceeding
relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or
thereunder, (f) subject to an agreement containing provisions substantially the same as those of
this Section, to (i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or (ii) any actual or
prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such
Information (x) becomes publicly available other than as a result of a breach of this Section or
(y) becomes available to the Administrative Agent, any Lender, or any of their respective
Affiliates on a nonconfidential basis from a source other than the Borrower.



     For purposes of this Section, “Information” means all information received from the
Borrower or any Subsidiary relating to the Borrower or any Subsidiary or any of their respective
businesses, other than any such information that is available to the Administrative Agent or any
Lender on a nonconfidential basis prior to disclosure by the Borrower or any Subsidiary,
provided that, in the case of information received from the Borrower or any Subsidiary
after the date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information as provided in
this Section shall be considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.



     Section 10.08. Set-off. If an Event of Default shall have occurred and be continuing, each
Lender and each of their Affiliates is hereby authorized at any time and from time to time, without
prior notice to the Borrower or any other Loan Party, to the fullest extent permitted by Applicable
Law, to set off and apply any and all deposits (general or special, time or demand, provisional or
final, in whatever currency) at any time held and other obligations (in whatever currency) at any
time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower
or any other Loan Party against any and all of the obligations of the Borrower or such Loan Party
now or hereafter existing under this Agreement or any other Loan Document to such Lender,
irrespective of whether or not such Lender shall have made any demand under this Agreement or any
other Loan Document and although such obligations of the Borrower or such Loan Party may be
contingent or unmatured or are owed to a branch or office of such Lender different from the branch
or office holding such deposit or obligated on such indebtedness. The rights of each Lender and
their Affiliates under this Section are in addition to other rights and remedies (including other
rights of setoff) that such Lender or their Affiliates



73









 







may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly
after any such setoff and application, provided that the failure to give such notice shall
not affect the validity of such setoff and application.



     Section 10.09. Interest Rate Limitation. Notwithstanding anything to the contrary contained
in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not
exceed the Highest Lawful Rate. If the Administrative Agent or any Lender shall receive interest
in an amount that exceeds the Highest Lawful Rate, the excess interest shall be applied to the
principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In
determining whether the interest contracted for, charged, or received by the Administrative Agent
or a Lender exceeds the Highest Lawful Rate, such Person may, to the extent permitted by Applicable
Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of interest throughout the
contemplated term of the Obligations hereunder.



     Section 10.10. Counterparts; Integration; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement and the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received counterparts hereof
that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an
executed counterpart of a signature page of this Agreement by telecopy shall be effective as
delivery of a manually executed counterpart of this Agreement.



     Section 10.11. Survival of Representations and Warranties. All representations and warranties
made hereunder and in any other Loan Document or other document delivered pursuant hereto or
thereto or in connection herewith or therewith shall survive the execution and delivery hereof and
thereof. Such representations and warranties have been or will be relied upon by the
Administrative Agent and each Lender, regardless of any investigation made by the Administrative
Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and
shall continue in full force and effect as long as any Term Loan or any other Obligation hereunder
shall remain unpaid or unsatisfied.



     Section 10.12. Severability. If any provision of this Agreement or the other Loan Documents
is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of
the remaining provisions of this Agreement and the other Loan Documents shall not be affected or
impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the
illegal, invalid or unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the illegal, invalid or unenforceable provisions. The
invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.



74









 





     Section 10.13. Replacement of Lenders. If any Lender requests compensation under
Section 3.04, or if the Borrower is required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section 3.01, if any
Lender is a Defaulting Lender or if any other circumstance exists hereunder that gives the Borrower
the right to replace a Lender as a party hereto, then the Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and
delegate, without recourse (in accordance with and subject to the restrictions contained in, and
consents required by, Section 10.06), all of its interests, rights and obligations under
this Agreement and the related Loan Documents to an assignee that shall assume such obligations
(which assignee may be another Lender, if a Lender accepts such assignment), provided that:



     (a) the Borrower shall have paid to the Administrative Agent the assignment fee specified in
Section 10.06(b), unless the assignment is to replace a Defaulting Lender;



     (b) such Lender shall have received payment of an amount equal to the outstanding principal of
its Term Loan, accrued interest thereon, accrued fees and all other amounts payable to it hereunder
and under the other Loan Documents (including any amounts under Section 3.05) from the
assignee (to the extent of such outstanding principal and accrued interest and fees) or the
Borrower (in the case of all other amounts);



     (c) in the case of any such assignment resulting from a claim for compensation under
Section 3.04 or payments required to be made pursuant to Section 3.01, such
assignment will result in a reduction in such compensation or payments thereafter; and



     (d) such assignment does not conflict with Applicable Laws.



     A Lender shall not be required to make any such assignment or delegation if, prior thereto, as
a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.



     Section 10.14. Exceptions to Covenants. Neither the Borrower nor any Subsidiary shall be
deemed to be permitted to take any action or fail to take any action which is permitted as an
exception to any of the covenants contained herein or which is within the permissible limits of any
of the covenants contained herein if such action or omission would result in the breach of any
other covenant contained herein.



     Section 10.15. Governing Law; Jurisdiction; Etc.



     (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE;
PROVIDED THAT EACH PARTY HERETO SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.



     (b) THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING
IN NEW YORK, NEW YORK AND OF THE UNITED STATES DISTRICT



75









 







COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN
SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT
SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST THE BORROWER OR
ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.



     (c) THE BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.



     (d) THE PARTIES HERETO AND EACH OTHER LOAN PARTY AGREE THAT N.Y. GEN. OBLIG. LAWS §5-1401 AND
§5-1402 SHALL APPLY TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.



     Section 10.16. Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING
UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF
THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.



76









 





     Section 10.17. USA PATRIOT Act Notice. Each Lender that is subject to the Act (as hereinafter
defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies
the Borrower that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56
(signed into Law October 26, 2001)) (the “Act”), it is required to obtain, verify and
record information that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow such Lender or the Administrative Agent, as
applicable, to identify the Borrower in accordance with the Act.



     Section 10.18. Time of the Essence. Time is of the essence of the Loan Documents.



     Section 10.19. Existing Credit Agreement. The parties hereto acknowledge that the Liens now
or hereafter granted pursuant to the Collateral Documents and the Secured Obligations with respect
to this Agreement and the other Loan Documents and the Liens (as defined in the Existing Credit
Agreement) and the Secured Obligations (as defined in the Existing Credit Agreement and defined
herein as the “Existing Credit Agreement Obligations”) are pari passu and of equal ranking,
and notwithstanding anything herein (including Section 8.03) or in the Existing Credit
Agreement to the contrary, and proceeds received from the Collateral and the Guaranties (as defined
in each of this Agreement and the Existing Credit Agreement) shall be applied to the Secured
Obligations and the Existing Credit Agreement Obligations pro rata in proportion to the respective
outstanding amounts of the Secured Obligations and the Existing Credit Agreement Obligations.



     Section 10.20. ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.








REMAINDER OF PAGE LEFT INTENTIONALLY BLANK








77









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.



	 	 	 	 	 
	 	POWERSECURE INTERNATIONAL, INC.

 	 
	 	By:   	/s/ Christopher T. Hutter 	 
	 	 	Christopher T. Hutter 	 
	 	 	Chief Financial Officer 	 
	 



Signature Page






 









 








	 	 	 	 	 
	 	CITIBANK, N.A., as Administrative Agent

 	 
	 	By:   	/s/ Gary D. Pitcock 	 
	 	 	Gary D. Pitcock 	 
	 	 	Vice President 	 
	 
	 	CITIBANK, N.A., as a Lender

 	 
	 	By:   	/s/ Gary D. Pitcock 	 
	 	 	Gary D. Pitcock 	 
	 	 	Vice President 	 
	 



Signature Page





 









 








SCHEDULE 2.01




TERM COMMITMENTS

AND TERM PRO RATA SHARES




	 	 	 	 	 	 	 	 	 
	 	 	Term	 	Term
	                         Lender	 	Commitment	 	Pro Rata Share
	 
	Citibank, N.A.
	 	$	2,584,000	 	 	 	100.000000000	%
	Total
	 	$	2,584,000	 	 	 	100.000000000	%






Schedule 2.01