Document:

Exhibit 10.1

Exhibit 10.1

THIRD AMENDMENT TO LEASE

This THIRD AMENDMENT TO LEASE (this “Amendment”) is made and entered into as of July 27, 2010
(“Effective Date”) by and between Landlord (as defined in Exhibit A attached hereto), as successor
in interest to HECOP III, LLC, with an address c/o Direct Invest, LLC, 10 City Square,
2nd Floor, Charlestown, MA 02129, Attention: William F. Rand, III and PENNICHUCK WATER
WORKS, INC., a New Hampshire corporation, with an address of 25 Manchester Street, Merrimack, NH
03054 (“Tenant”).

RECITALS:

A. Landlord’s predecessor-in-interest and Tenant entered into that certain Indenture of Lease
dated as of April 23, 2004, as amended by that certain Amendment to Lease dated March 17, 2006 and
by that certain Second Lease Amendment dated May 6, 2008 (as so amended, the “Original Lease”),
whereby Tenant leased from Landlord and Landlord leased to Tenant the premises comprised of
approximately 19,465 rentable square feet (the “Premises”) on the third floor of the building
located at 25 Manchester Street, Merrimack, New Hampshire 03054 (the “Building”).

B. Landlord and Tenant wish to amend the Original Lease to (i) amend the Term of the Original
Lease; and (ii) amend certain other provisions of the Original Lease.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby mutually acknowledged, Landlord and Tenant agree as follows:

1. Recitals; Capitalized Terms. All of the foregoing recitals are true and correct.
Unless otherwise defined herein, all capitalized terms used in this Amendment shall have the
meanings ascribed to them in the Original Lease, and all references to the “Lease” or “the Lease”
or “herein” or “hereunder” or similar terms or to any section thereof shall mean the Original
Lease, or such section thereof, as amended by this Amendment.

2. Term. The Term of the Original Lease is hereby amended to expire on July 31, 2013
(“Expiration Date”), unless sooner terminated in accordance with the terms and conditions of the
Lease. Sections 3 and 4 of the Second Lease Amendment dated May 6, 2008 are hereby deleted and
of no further force or effect.

3. Base Rent. Effective as of August 1, 2010, the Base Rent under the Lease shall be
equal to $291,975.00 per annum, payable in monthly installments of $24,331.25 at the time and in
the manner required under the Original Lease.

 

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4. Tenant Improvement Allowance. If during the Term of the Lease, Tenant performs
alterations to the Premises, Landlord shall reimburse Tenant for the hard and soft cost of the
construction, labor, material, hardware, and equipment utilized and installed into the Premises in
connection with such alterations up to a maximum amount of $68,127.50 (the “Alteration Allowance”).
Landlord shall make payments to Tenant from the Alteration Allowance within thirty (30) days of
receipt of Tenant’s written notice accompanied by paid receipts and such other documentation as
Landlord may reasonably request (a “Payment Request Notice”), including, without limitation copies
of partial lien waivers or final lien waivers. Notwithstanding the foregoing, Landlord is not
required to make any payment from the Alteration Allowance: (i) at any time that Tenant is in
default pursuant to the Lease, or (ii) in respect of any Payment Request Notice received after
December 31, 2011, and Tenant hereby waives any entitlement to any remaining portion of the
Alteration Allowance after such date. This provision amends, supersedes and replaces any
provisions in the Original Lease on the same topic.

5. Electricity. There are four (4) meters supplied by the electric utility provider
for the Building that, in the aggregate, measure all of the electricity used and consumed by Tenant
in Tenants “usable area” within the Premises (“Tenant’s Electricity Usage”). For Tenant’s
Electricity Usage from and after August 1, 2010 through the end of the Term of the Lease, Tenant
shall pay the charges for Tenant’s Electricity Usage directly to the electric utility provider on
or before the date such charges are due. Separately, Landlord agrees to cause the electricity
supplied to the portion of the Building occupied by Intel Corporation to be measured by other
separate meter(s) so that Intel Corporation may pay for such measured electricity usage directly to
the electric utility provider.

6. Option to Extend.

(a) Provided that, at the time of such exercise, (i) the Lease is in full force and effect,
and (ii) no Event of Default shall have occurred and be continuing (either at the time of exercise
or at the commencement of the Extended Term), and (iii) Tenant shall be in occupancy of the entire
Premises for the conduct of its business and shall not have assigned the Lease or sublet the
Premises (any of which conditions described in clauses (i), (ii), and (iii) may be waived by
Landlord at any time in Landlord’s sole discretion), Tenant shall have the right and option to
extend the Term of the Lease for one (1) extended term (the “Extended Term”) of three (3) years by
giving written notice to Landlord not later than twelve (12) months and not sooner than fourteen
(14) months prior to the expiration date of the Term. The effect of the giving of such notice of
extension by Tenant shall be to automatically extend the Term of the Lease for the Extended Term,
and no instrument of renewal or extension need be executed. In the event that Tenant fails timely
to give such notice to Landlord, the Lease shall automatically terminate at the end of the original
Term and Tenant shall have no further option to extend the Term of the Lease. The Extended Term
shall commence on the day immediately succeeding the expiration date of the current Term and shall
end on the day immediately preceding the third (3rd) anniversary of the first day of the
Extended Term. The Extended Term shall be on all the terms and conditions of the Lease, except:
(x) during the Extended Term, Tenant shall have no further option to extend the Term, (y) the Base
Rent for the Extended Term shall be the greater of (A) 95% of the Fair Market Rental Value of the
Premises as of the commencement of the Extended Term, taking into account all relevant factors,
determined pursuant to Section 6(b) below and (B) the Base Rent in effect for the last year of the
prior Term, and (z) Landlord shall not be required to furnish any materials or perform any work to
prepare the Premises for Tenant’s occupancy during the Extended Term and Landlord shall not be
required to provide any work allowance or reimburse Tenant for any alterations made or to be made
by Tenant, or to grant Tenant any rent concession.

 

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(b) Promptly after receiving Tenant’s notice extending the Term of the Lease pursuant to
Section 6(a) above, Landlord shall provide Tenant with Landlord’s good faith estimate of the Fair
Market Rental Value (as defined in Section 6(c) below) of the Premises for the upcoming Extended
Term. If Tenant is unwilling to accept Landlord’s estimate of the Fair Market Rental Value as set
forth in Landlord’s notice referred to above, then the parties shall negotiate in good faith to
reach agreement thereon within thirty (30) days after the delivery of such notice by Landlord. If
the parties are unable to reach agreement thereon within thirty (30) days after the delivery of
such notice by Landlord, then either party may submit the determination of the Fair Market Rental
Value of the Premises to arbitration by giving notice to the other party naming the initiating
party’s arbitrator within ten (10) days after the expiration of such thirty (30)-day period.
Within fifteen (15) days after receiving a notice of initiation of arbitration, the responding
party shall appoint its own arbitrator by notifying the initiating party of the responding party’s
arbitrator. If the second arbitrator shall not have been so appointed within such fifteen (15) day
period, the Fair Market Rental Value of the Premises shall be determined by the initiating party’s
arbitrator. If the second arbitrator shall have been so appointed, the two arbitrators thus
appointed shall, within fifteen (15) days after the responding party’s notice of appointment of the
second arbitrator, appoint a third arbitrator. If the two initial arbitrators are unable timely to
agree on the third arbitrator, then either may, on behalf of both, request such appointment by the
nearest office of the American Arbitration Association. The Fair Market Rental Value of the
Premises for the Extended Term shall be determined by the method commonly known as Baseball
Arbitration, whereby Landlord’s selected arbitrator and Tenant’s selected arbitrator shall each set
forth its respective determination of the Fair Market Rental Value of the Premises, and the third
arbitrator must select one or the other (it being understood that the third arbitrator shall be
expressly prohibited from selecting a compromise figure). Landlord’s selected arbitrator and
Tenant’s selected arbitrator shall deliver their determinations of the Fair Market Rental Value of
the Premises to the third arbitrator within five (5) Business Days of the appointment of the third
arbitrator and the third arbitrator shall render his or her decision within ten (10) days after
receipt of both of the other two determinations of the Fair Market Rental Value of the Premises.
The third arbitrator’s decision shall be binding on both Landlord and Tenant. All arbitrators
shall be commercial real estate brokers who are independent from the parties and who have had at
least ten (10) years experience leasing comparable buildings in the Merrimack area. Each party
shall pay the fees of its own arbitrator, and the fees of the third arbitrator shall be shared
equally by the parties. If as of the commencement of the Extended Term the amount of the Base Rent
for the Extended Term has not been determined, Tenant shall pay the amount determined by Landlord
for the Premises and when the determination has actually been made, an appropriate retroactive
adjustment shall be made as of the commencement of the Extended Term if necessary. In the event
that such determination shall result in an overpayment by Tenant of any Base Rent, such overpayment
shall be paid by Landlord to Tenant promptly after such determination has been made, and if such
determination shall result in an underpayment by Tenant of any Basic Rent, Tenant shall pay any
such amounts to Landlord promptly following such determination.

(c) As used in the Lease, the term “Fair Market Rental Value” shall mean the fixed rents that
landlords of comparable buildings in the Merrimack area have agreed to accept, and sophisticated
nonaffiliated tenants of comparable buildings have agreed to pay, in current arms-length, renewal
transactions for comparable space (in terms of condition, improvements, floor location, view and
floor height) of a comparable size for uses comparable to the Permitted Use, for a term equal to
the applicable Extended Term and taking into account all other relevant factors.

 

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7. Operating Expenses. Effective as of the Effective Date of this Amendment, Section
2.4, Schedule 1 and Exhibit D of the Indenture Of Lease, which is part of the Original Lease, are
hereby deleted and of no further force or effect. Provided that Tenant shall have exercised its
option to extend the Term for the Extended Term, then, effective as of the first day of the
Extended Term, which shall be August 1, 2013, the following Section 2.4 shall be inserted and in
full force and effect:

2.4.1 Defined Terms.

Base Operating Expenses: shall mean the greater of $350,836.00 or the actual
Operating Expenses for the Building for the 2012 Operating Year, multiplied by a fraction,
the numerator of which is the rentable square feet of the Premises (currently 19,465 square
feet) and the denominator of which is the total rentable square footage in the Building
(currently 66,461 square feet).

Operating Expenses: Shall be as defined in Exhibit C to the Original
Lease, except as follows: (a) electricity charges shall be limited to consumption with
respect to common areas only, and (b) all of the wording after the first sentence in the
second to last paragraph on page C-2, together with the last paragraph on page C-2, shall
be deleted. Notwithstanding anything to the contrary contained in the Original Lease,
aggregate Controllable Operating Expenses (as hereinafter defined) included within the
Operating Expenses for each Operating Year after the 2012 Operating Year shall not exceed an
annual five percent (5%) cumulative increase over the Controllable Operating Expenses for
the 2012 Operating Year. “Controllable Operating Expenses” shall mean those Operating
Expenses within Landlord’s control, exercising prudent business practices, but shall exclude
the following: (i) Taxes, (ii) insurance premiums; (iii) costs incurred because of changes
in applicable laws after the Effective Date of this Lease; (iv) wages and benefits mandated
by Laws or by union contracts; (v) snow-plowing and expenses incurred as a result of acts of
God; (vi) increases in the cost of utilities; and, (vii) any Operating Expenses that
Landlord proves are not within its control despite exercising prudent business judgment and
competitive bidding practices. Management fees included in Operating Expenses shall not
exceed 3.5% of the gross revenue from the property.

Operating Year: shall mean each calendar year all or any part of which falls
within the Term.

 

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2.4.2 Tenant’s Payment of Operating Expenses. In the event that for any
Operating Year subsequent to the 2012 Operating Year, the Operating Expenses allocable to
the Premises on a per rentable square foot basis shall exceed the Base Operating Expenses,
Tenant shall pay to Landlord, as additional rent, the entire amount of such excess, such
amount to be apportioned for any portion of an Operating Year in which this Lease ends.
Estimated payments by Tenant on account of Operating Expenses shall be made on the first day
of each and every calendar month during the Term of this Lease, in the fashion herein
provided for the payment of Base Rent, commencing on January 1, 2013. The monthly amount so
to be paid to Landlord shall be sufficient to provide Landlord by the end of each Operating
Year a sum equal to Tenant’s required payment, as reasonably estimated by Landlord from time
to time during each Operating Year, on account of Operating Expenses for such Operating
Year. After the end of each Operating Year, Landlord shall submit to Tenant a reasonably
detailed accounting of Operating Expenses for such Operating Year, and Landlord shall
certify to the accuracy thereof. If estimated payments theretofore made for such Operating
Year by Tenant exceed Tenant’s required payment on account thereof for such Operating Year
according to such statement, Landlord shall credit the amount of overpayment against
subsequent obligations of Tenant with respect to Operating Expenses (or promptly refund such
overpayment if the Term of this Lease has ended and Tenant has no further obligation to
Landlord). If the required payments on account thereof for such Operating Year are greater
than the estimated payments (if any) theretofore made on account thereof for such Operating
Year, Tenant shall make payment to Landlord within thirty (30) days after being so advised
by Landlord, and the obligation to make such payment for any period within the Extended Term
shall survive expiration of the Extended Term.

8. Parking. Notwithstanding anything to the contrary contained in the Original Lease,
throughout the Term of the Lease and the Extended Term of the Lease (if applicable), Tenant shall
have the right to use up to seventy-five (75) parking spaces in the parking areas on the Lot on an
unassigned, unreserved basis.

9. Mortgages. The last paragraph of Section 20 of the Indenture Lease and Section 6
of the Second Lease Amendment, both of which are part of the Original Lease, are hereby deleted and
replaced with the following:

The subordination of the Lease to any future mortgage shall be conditioned upon the
delivery to Tenant of a “Subordination, Non-Disturbance and Attornment Agreement” (“SNDA”)
from such mortgagee, on such mortgagee’s standard SNDA form which provides, inter
alia, that so long as Tenant is not in default hereunder (beyond any applicable
notice and cure period) and attorns to such mortgagee or any successor-in-title thereto in
the event of a foreclosure or deed-in-lieu of foreclosure, Tenant’s rights under this Lease,
including its right of possession of the Premises, shall not be disturbed. Landlord shall
not be required to incur any out-of-pocket expense in procuring any such SNDA. Tenant
agrees to execute such SNDA satisfying the foregoing requirements and return the same to
Landlord within ten (10) Business Days after Landlord’s written request therefor, and in the
event that Tenant shall fail to execute, acknowledge and return any such SNDA within such
ten (10) Business Day period, then this Lease shall be subordinate to such future mortgage,
and to all renewals, extensions, modifications and replacements thereof, notwithstanding the
fact that such mortgagee and Tenant have not executed and exchanged such SNDA.

 

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10. Assignment and Subletting. Tenant shall have the right to assign the Lease or
sublease all or any portion of the Premises subject to and in accordance with the terms and
conditions of Section 11 of the Indenture of Lease, which is part of the Original Lease, including,
without limitation, the requirement to receive Landlord’s consent, which shall not be unreasonably
withheld or delayed.

11. Right of First Offer.

(a) Subject to the terms and conditions of this Section 11, before Landlord leases any
Available Space (as defined below) to any unrelated third party during the Term and the
Extended Term, if applicable, (together, the “Availability Period”), Landlord will first
offer such Available Space to Tenant for lease by written notice to Tenant (“Landlord’s
Offer Notice”) and Tenant will have the right to lease the offered Available Space. As used
in this Section 11, “Available Space” shall mean and refer to office space in the Building
contiguous to the Premises on the third floor that Landlord reasonably determines will be
vacant and free of any possessory right now or hereafter existing in favor of any third
party during the Availability Period. Anything to the contrary contained herein
notwithstanding, Tenant’s right of first offer hereunder is subordinate to (i) any right of
offer, right of first refusal, renewal right or similar right or option in favor of any
third party existing as of the date of this Amendment and (ii) Landlord’s right to renew or
extend the term of any lease to another tenant in occupancy of the Available Space, whether
or not pursuant to an option or right set forth in such other tenant’s lease.

(b) Landlord’s Offer Notice shall specify the location and size of the Available Space,
the Base Rent for the Available Space, the date that Landlord estimates the Available Space
will be deliverable to Tenant, the term of the Lease with respect to the Available Space,
Base Operating Expenses, tenant improvement allowances (if any), and all other material
terms and conditions which will apply to the Available Space. Tenant will notify Landlord
within five (5) Business Days of Landlord’s Offer Notice that (i) Tenant elects to lease the
Available Space on the terms set forth in Landlord’s Offer Notice, or (ii) Tenant rejects
Landlord’s offer. If Tenant elects to lease the Available Space, Landlord and Tenant agree
to enter into an amendment to this Lease memorializing the addition of the Available Space
to this Lease, but failure of the parties to execute such an amendment shall have no effect
on the effectiveness of the expansion of the Premises to include the Available Space, and
the economic terms associated therewith, as set forth above. If Tenant rejects Landlord’s
offer, or fails to notify Landlord within said five (5) Business Day period that Tenant
intends to lease such Available Space, Landlord shall be entitled to lease the Available
Space at any time to any third party on terms acceptable to Landlord in its sole discretion.

(c) Notwithstanding any contrary provision of this Section 11 or any other provision of
the Lease, any exercise by Tenant of its right to lease Available Space shall be void and of
no effect unless on the date Tenant notifies Landlord that it elects to lease Available
Space and on the commencement date of the amendment for the Available Space (i) the Lease is
in full force and effect, and (ii) no Event of Default shall have occurred and be continuing
(either at the time of exercise or upon the delivery of the Available Space), and (iii) the
originally-named Tenant shall be in occupancy of the entire Premises and there shall not
then be in effect any sublease or subleases with respect to all or any portion of the
Premises (which conditions under clauses (i), (ii) and (ii) above Landlord may waive by
written notice to Tenant at any time). Without limiting the foregoing, all of the rights
created by this Section 11 shall be personal to the originally named Tenant under this
Amendment and shall not apply in favor of or be exercisable by any assignee of this
Amendment or other successor to Tenant’s rights under this Lease nor any sublessee of all or
any portion of the Premises.

 

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12. Brokerage. Landlord and Tenant each represent and warrant to the other that
neither of them has employed or dealt with any broker, agent or finder in carrying on the
negotiations relating to this Amendment to the Lease other than Direct Invest and Cushman &
Wakefield (the “Brokers”). Tenant shall indemnify and hold Landlord harmless from and against any
claim or claims for brokerage or other commissions relating to this Amendment asserted by any
broker, agent or finder engaged by Tenant or with whom Tenant has dealt other than the Brokers.
Landlord shall indemnify and hold Tenant harmless from and against any claim or claims for
brokerage or other commissions relating to this Amendment asserted by any broker, agent or finder
engaged by Landlord or with whom Landlord has dealt.

13. Ratification. Except as expressly modified by this Amendment, the Lease shall
remain in full force and effect, and as further modified by this Amendment, is expressly ratified
and confirmed by the parties hereto. This Amendment shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, subject to the provisions of the
Lease regarding assignment and subletting.

14. Governing Law; Interpretation and Partial Invalidity. This Amendment shall be
governed and construed in accordance with the laws of the State of New Hampshire. If any term of
this Amendment, or the application thereof to any person or circumstances, shall to any extent be
invalid or unenforceable, the remainder of this Amendment, or the application of such term to
persons or circumstances other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term of this Amendment shall be valid and enforceable to the fullest
extent permitted by law. The titles for the paragraphs are for convenience only and not to be
considered in construing this Amendment. The Lease (including this Amendment) contains all of the
agreements of the parties with respect to the subject matter hereof, and supersedes all prior
dealings between them with respect to such subject matter. No delay or omission on the part of
either party to this Amendment in requiring performance by the other party or exercising any right
hereunder shall operate as a waiver of any provision hereof or any rights hereunder, and no waiver,
omission or delay in requiring performance or exercising any right hereunder on any one occasion
shall be construed as a bar to or waiver of such performance or right on any future occasion.

15. Counterparts and Authority. This Amendment may be executed in multiple
counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same document. Landlord and Tenant each warrant to the other that the person or
persons executing this Amendment on its behalf has or have authority to do so, no third party
consents are required to enter into this Amendment, and that such execution has fully obligated and
bound such party to all terms and provisions of this Amendment.

 

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IN WITNESS WHEREOF, the undersigned executed this Amendment as of the date and year first
written above.

	 	 	 	 	 
	“LANDLORD”  	DIRECT INVEST PROPERTY MANAGEMENT,
LLC on behalf of Landlord and as its duly authorized agent

By:  Direct Invest, L.L.C., its Sole Member

By:  NPV DI, L.L.C., its Managing Member

 	 
	 	By:  	/s/ William F. Rand
 	 
	 	 	Name:  	William F. Rand 	 
	 	 	Authorized Signatory 	 
	 
	“TENANT” 	 PENNICHUCK WATER WORKS, INC., a New Hampshire corporation

 	 
	 	By:  	/s/ Duane C. Montopoli
 	 
	 	 	Name:  	Duane C. Montopoli 	 
	 	 	Title:  	CEO 	 

 

8

 

	 	 	 	 	 

EXHIBIT A

Landlord

Direct Invest — Heron Cove, LLC

Direct Invest — Heron Cove 1, LLC

Direct Invest — Heron Cove 2, LLC

Direct Invest — Heron Cove 3, LLC

Direct Invest — Heron Cove 4, LLC

Direct Invest — Heron Cove 5, LLC

Direct Invest — Heron Cove 6, LLC

Direct Invest — Heron Cove 7, LLC

Direct Invest — Heron Cove 8, LLC

Direct Invest — Heron Cove 9, LLC

Direct Invest — Heron Cove 10, LLC

Direct Invest — Heron Cove 11, LLC

Direct Invest — Heron Cove 12, LLC

Direct Invest — Heron Cove 13, LLC

Direct Invest — Heron Cove 14, LLC

Direct Invest — Heron Cove 15, LLC

Direct Invest — Heron Cove 16, LLC

Direct Invest — Heron Cove 17, LLC

Direct Invest — Heron Cove 18, LLC

Direct Invest — Heron Cove 19, LLC

Direct Invest — Heron Cove 20, LLC

Direct Invest — Heron Cove 21, LLC;

All Delaware limited liability companies (collectively, the “Landlord”)

 

9Exhibit 10.1

Exhibit 10.1

August 3, 2010

Mr. Joseph F. Waterman

ICG Commerce, Inc.

211 South Gulph Road

Suite 500

King of Prussia, PA 19406

			
	Re:	 	Facility 1. $15,000,000 Committed Line of Credit 
Facility 2. $20,000,000 Term Loan

Dear Joseph:

We are pleased to inform you that PNC Bank, National Association (the “Bank”), has approved
your request for a term loan and a committed line of credit to ICG Commerce, Inc., ICG Commerce
Investments, LLC, ICG Commerce International, LLC and ICG Commerce Holdings, Inc. (individually and
collectively, the “Borrower”). We look forward to this opportunity to help you meet the financing
needs of your business. All the details regarding your line of credit are outlined in the
following sections of this letter.

1. Types of Facilities and Use of Proceeds

A. Facility 1. The first credit facility covered by this letter is a committed
revolving line of credit under which the Borrower may request and the Bank, subject to the terms
and conditions of this letter, will make advances to the Borrower from time to time until the Line
of Credit Expiration Date, in an amount in the aggregate at any time outstanding not to exceed
$15,000,000 (the “Line of Credit” or the “Revolving Credit Loan”). The “Line of Credit Expiration
Date” means August 2, 2013, or such later date as may be designated by the Bank by written notice
to the Borrower. Advances under the Line of Credit will be used for working capital, acquisitions
permitted by this Letter Agreement, and other general business purposes of the Borrower.

The Borrower may request that the Bank, in lieu of cash advances, issue standby letters of
credit (individually, a “Letter of Credit” and collectively the “Letters of Credit”) under the Line
of Credit in face amount in the aggregate at any time outstanding not to exceed $5,000,000;
provided, however, that after giving effect to the face amount of such Letter of
Credit, the sum of the aggregate outstanding advances under the Line of Credit and the aggregate
face amount of all Letters of Credit issued and outstanding shall not exceed the Line of Credit.
The availability of advances under the Line of Credit shall be reduced by the face amount of each
Letter of Credit issued and outstanding (whether or not drawn). For purposes of this Agreement,
the “face amount” of any Letter of Credit shall include any automatic increases in face amount
under the terms of such Letter of Credit, whether or not any such increase in face amount has
become effective. Unless otherwise consented to by the Bank in writing, each Letter of Credit
shall have an expiry date which is not later than twelve (12) months following the Line of Credit
Expiration Date (the “Final LC Expiration Date”). Each payment by the Bank under a Letter of
Credit shall constitute an advance of principal under the Line of Credit and shall be evidenced by
the Line of Credit Note (as defined below); provided that, if an

 

 

 

Joseph Waterman

August 3, 2010

Page 2

Event of Default
(as defined in any
Note referred to below) shall exist, such payment by the Bank shall not constitute an advance
of principal under the Line of Credit unless otherwise determined by the Bank in its discretion.
The Letters of Credit shall be governed by the terms of this letter and by one or more
reimbursement agreements, in form and content satisfactory to the Bank, executed by the Borrower in
favor of the Bank (collectively, the “Reimbursement Agreement”). Each request for the issuance of
a Letter of Credit must be accompanied by the Borrower’s execution of an application on the Bank’s
standard forms (each, an “Application”), together with all supporting documentation. Each Letter
of Credit will be issued in the Bank’s sole discretion and in a form acceptable to the Bank. This
letter is not a pre-advice for the issuance of a letter of credit and is not irrevocable.

The Borrower shall pay the Bank’s standard issuance fee on the face amount of each Letter of
Credit upon issuance, together with such other customary fees and expenses therefor as shall be
required by the Bank. In addition, the Borrower shall pay to the Bank a fee (the “Letter of Credit
Commission”), calculated daily (on the basis of a year of 360 days), on the amount available to be
drawn at such time under all Letters of Credit issued and outstanding under the Line of Credit
(including any amounts drawn thereunder and not reimbursed, and regardless of the existence or
satisfaction of any conditions or limitations on drawing) at a rate of one hundred (100) basis
points (1.00%) per annum; provided, however, that the minimum Letter of Credit
Commission payable in respect of each Letter of Credit issued and outstanding hereunder shall be
$500.00 for each year or portion of a year that such Letter of Credit is outstanding. The Letter
of Credit Commission shall be payable quarterly in arrears beginning on July 1, 2010, and
continuing on the first day of each fiscal quarter thereafter and on the Final LC Expiration Date.
Notwithstanding the foregoing, after the occurrence and during the continuance of an Event of
Default, the Letter of Credit Commission, as calculated above, shall be increased by three percent
(3%) per annum.

B. Facility 2. The second credit facility covered by this letter is a term loan in
the amount of $20,000,000 (the “Term Loan”; together with the Revolving Credit Loan, the “Loans”).
The proceeds of the Term Loan will be used to fund a one time distribution to certain shareholders
of ICG Commerce, Inc. in an aggregate amount not to exceed $32,000,000 and/or other general
business purposes of the Borrower.

2. Notes

A. Facility 1. The obligation of the Borrower to repay advances under the Line of
Credit shall be evidenced by a promissory note (the “Line of Credit Note”) in form and content
satisfactory to the Bank.

B. Facility 2. The obligation of the Borrower to repay the Term Loan shall be
evidenced by a term note (the “Term Note”; and collectively with the Line of Credit Note, the
“Notes”) in form and content satisfactory to the Bank.

This letter (the “Letter Agreement”), the Notes, the Security Agreement (as defined below),
the Pledge Agreement (as defined below), the Reimbursement Agreement and the other agreements and
documents executed and/or delivered pursuant hereto, as each may be amended,
modified, extended or renewed from time to time, will constitute the “Loan Documents.”
Capitalized terms not defined herein shall have the meaning ascribed to them in the Loan Documents.

 

 

 

 Joseph Waterman

August 3, 2010

Page 3

3. Interest Rate.

A Facility 1 and 2. Interest on the unpaid balance of the Line of Credit advances and
the Term Loan will be charged at the rates, and be payable on the dates and times, set forth in the
Notes.

4. Repayment.

A Facility 1. Subject to the terms and conditions of this Letter Agreement, the
Borrower may borrow, repay and reborrow under the Line of Credit until the Line of Credit
Expiration Date, on which date the outstanding principal balance and any accrued but unpaid
interest shall be due and payable. Interest will be due and payable as set forth in the Line of
Credit Note, and will be computed on the basis of a year of 360 days and paid on the actual number
of days that principal is outstanding.

B Facility 2. Principal on the Term Loan shall be payable in equal monthly
installments as set forth in the Term Note with a final payment of all outstanding principal and
accrued interest thereon on August 1, 2015. Interest shall be paid in arrears as set forth in the
Term Note, and will be computed on the basis of a year of 360 days and paid on the actual number of
days that principal is outstanding.

5. Security. The Borrower must cause or has previously caused a security agreement
(the “Security Agreement”) and pledge agreement (the “Pledge Agreement”) to be executed and
delivered to the Bank in form and content satisfactory to the Bank as security for the Loans
pursuant to which the Borrower is granting the Bank a first priority perfected lien on the
Borrower’s existing and future assets, wherever located, as more fully described in the Security
Agreement and the Pledge Agreement. If letter of credit rights have been assigned to the Bank, a
consent to the assignment must be executed by the issuer of the applicable letter(s) of credit.

Within sixty (60) days of the date hereof, the Borrower will deliver to the Bank a Landlord’s
Waiver for the leased premises located at 211 South Gulph Road, King of Prussia, Pennsylvania 19406
(the “King of Prussia Location”) which shall be acceptable in form and content to the Bank. If the
King of Prussia Location shall cease to be the Borrower’s primary business location, the Borrower
shall, if it leases the space for its primary location, provide to the Bank within sixty (60) days
of entering into such lease for such primary business location, a Landlord’s Waiver which shall be
in form and content acceptable to the Bank.

Hazard insurance must be maintained on all inventory, equipment and real property securing the
Loans in such amounts and with such coverages as are acceptable to the Bank, containing a standard
lender loss payable or mortgagee clause in favor of the Bank.

 

 

 

Joseph Waterman

August 3, 2010

Page 4

The Loans will be cross-collateralized and cross-defaulted with all other present and future
Obligations (as defined in the Loan Documents) of the Borrower to the Bank.

6. Covenants. Unless compliance is waived in writing by the Bank, until payment in
full of the Loans and termination of the commitment for the Line of Credit:

(a) The Borrower will promptly submit to the Bank such information as the Bank may reasonably
request relating to the Borrower’s and its Subsidiaries’ (as defined in Exhibit A) affairs
(including but not limited to annual Financial Statements (as hereinafter defined) and tax returns
for the Borrower and its Subsidiaries) and/or any security for the Loans.

(b) The Borrower (i) will not make or permit any change in its or any Subsidiary’s form of
organization or the general nature of its or their business as carried on as of the date of this
Letter Agreement, and (ii) will ensure that at least fifty one percent (51%) of the total issued
and outstanding shares of each class of capital stock of ICG Commerce, Inc. shall be owned,
directly or indirectly, by Internet Capital Group, Inc.

(c) The Borrower will notify the Bank in writing of the occurrence of any Event of Default or
an act or condition which, with the passage of time, the giving of notice or both might become an
Event of Default.

(d) If the Borrower or a guarantor (each, a “Guarantor”) of the Obligations (as defined in the
Security Agreement) shall form or acquire any Subsidiary that is not a Borrower or a Guarantor
(other than a foreign Subsidiary), the Borrower shall cause such Subsidiary to (i) execute and
deliver to the Bank a joinder on terms acceptable to the Bank pursuant to which such subsidiary
shall become a Borrower or Guarantor pursuant to a documentation acceptable to the Bank (including
a guaranty, if applicable), and pledge its assets to the Bank as security for the Obligations
pursuant to the Security Agreement, it being understood that the collateral covered by any such
Security Agreement shall be the same types of collateral covered by the Security Agreement executed
on the date hereof, (ii) execute such other documents (including if it owns any real estate, a
Mortgage) as the Bank shall request, (iii) deliver to the Bank such lien, title and other searches
and such opinions, certificates and other information as the Bank shall request and (iv) pay to the
Bank the Bank’s costs and expenses with respect to the foregoing (including reasonable legal fees
and expenses and filing and search fees). In addition, the owner of such Subsidiary shall, unless
such owner is a foreign Subsidiary, execute and deliver to the Bank a Pledge Agreement or joinder
in form and substance acceptable to the Bank pursuant to which (i) all of the equity interests in
each such domestic Subsidiary shall be pledged to the Bank as Collateral for the Obligations and
(ii) one hundred of the non-voting equity securities and sixty five percent (65%) of all of the
voting equity interests in each such foreign Subsidiary shall be pledged to the Bank as Collateral
for the Obligations.

(e) Within ninety (90) days of the date hereof, the Borrower shall deliver to the Bank
evidence satisfactory to the Bank that all classes of the preferred stock of ICG Commerce Holdings,
Inc have been cancelled, and all rights associated with such preferred stock have been terminated;

 

 

 

 Joseph Waterman

August 3, 2010

Page 5

(f) The Borrower will comply with the financial and other covenants included in Exhibit “A”
hereto.

7. Representations and Warranties. To induce the Bank to extend the Loans and upon
the making of each advance to the Borrower or issuing any Letter of Credit under the Line of
Credit, the Borrower represents and warrants as follows:

(a) The Borrower’s latest Financial Statements provided to the Bank are true, complete and
accurate in all material respects and fairly present the financial condition, assets and
liabilities, whether accrued, absolute, contingent or otherwise, and the results of the Borrower’s
and its consolidated Subsidiaries’ operations for the period specified therein. The Borrower’s
Financial Statements have been prepared in accordance with generally accepted accounting principles
consistently applied from period to period subject, in the case of interim statements, to normal
year-end adjustments. Since the date of the latest Financial Statements provided to the Bank,
neither the Borrower nor any Subsidiary has suffered any damage, destruction or loss which has
materially adversely affected its business, assets, operations, financial condition or results of
operations.

(b) There are no actions, suits, proceedings or governmental investigations pending or, to the
knowledge of the Borrower, threatened against the Borrower or any Subsidiary which could result in
a material adverse change in its or their business, assets, operations, financial condition or
results of operations and there is no basis known to the Borrower or its officers, directors or
shareholders for any such action, suit, proceedings or investigation.

(c) The Borrower and its Subsidiaries have filed all returns and reports that are required to
be filed by it or them in connection with any federal, state or local tax, duty or charge levied,
assessed or imposed upon the Borrower or any Subsidiary or its or their property, including
unemployment, social security and similar taxes and all of such taxes have been either paid or
adequate reserve or other provision has been made therefor, except for local taxes or charges (but
not federal or state taxes, etc.) the non-payment of which, individually or in the aggregate, would
not have a material adverse effect on the Borrower and its Subsidiaries or any of its or their
businesses, assets, operations, financial condition or results of operations.

(d) If not a natural person, each of the Borrower and its Subsidiaries is duly organized,
validly existing and in good standing under the laws of the state of its incorporation or
organization and has the power and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly qualified, licensed and in good standing
to do business in all jurisdictions where its ownership of property or the nature of its business
requires such qualification or licensing, except where the failure to obtain such licensing or
qualification would not have a material adverse effect on the Borrower and its Subsidiaries or any
of its or their businesses, assets, operations, financial condition or results of operation.

(e) The Borrower has full power and authority to enter into the transactions provided for in
this Letter Agreement and has been duly authorized to do so by all necessary and
appropriate action and when executed and delivered by the Borrower, this Letter Agreement and
the other Loan Documents will constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms.

 

 

 

 Joseph Waterman

August 3, 2010

Page 6

(f) There does not exist any default or violation by the Borrower or any Subsidiary of or
under any of the terms, conditions or obligations of: (i) its organizational documents; (ii) any
indenture, mortgage, deed of trust, franchise, permit, contract, agreement, or other instrument to
which it is a party or by which it is bound; or (iii) any law, regulation, ruling, order,
injunction, decree, condition or other requirement applicable to or imposed upon the Borrower or
any Subsidiary by any law or by any governmental authority, court or agency, except where any such
default or violation would not have a material adverse effect on the Borrower and its Subsidiaries
or any of its or their businesses, assets, operations, financial condition or results of operation.

8. Fees. Beginning on the first day of the quarter after the date of the Line of
Credit Note and continuing on the first day of each quarter thereafter until the Line of Credit
Expiration Date, the Borrower shall pay a commitment fee to the Bank, in arrears, at the rate of
0.25 percent (0.25%) per annum on the average daily balance of the Line of Credit which is
undisbursed and uncancelled during the preceding quarter. The commitment fee shall be computed on
the basis of a year of 360 days and paid on the actual number of days elapsed.

9. Expenses. The Borrower will reimburse the Bank for the Bank’s out-of-pocket
expenses incurred or to be incurred at any time in conducting UCC, title and other public record
searches, and in filing and recording documents in the public records to perfect the Bank’s liens
and security interests. The Borrower shall also reimburse the Bank for the Bank’s expenses
(including the reasonable fees and expenses of the Bank’s outside and in-house counsel) in
documenting and closing this transaction, in connection with any amendments, modifications or
renewals of the Loans, and in connection with the collection of all of the Borrower’s Obligations
to the Bank, including but not limited to enforcement actions relating to the Loans.

10. Depository. The Borrower will establish and maintain at the Bank the Borrower’s
primary depository accounts.

11. Conditions to Effectiveness of Letter Agreement. The Bank will not be obligated
to make the Term Loan or any advance or to issue any Letter of Credit under the Line of Credit
until the Borrower has satisfied the following conditions precedent to the satisfaction of the
Bank:

(a) Loan Documents. Execution by all parties and delivery to the Bank of this Letter
Agreement, the Notes, the Security Agreement, the Reimbursement Agreement, the Pledge Agreement and
the other required Loan Documents and such other instruments and documents as the Bank may
reasonably request (including the stock certificates of the subsidiaries of the Borrower pledged
under the Pledge Agreement duly endorsed in blank);

 

 

 

 Joseph Waterman

August 3, 2010

Page 7

(b) No Material Adverse Change. There has been no material adverse change in the
condition (financial or otherwise), operations, properties, assets or prospects of the Borrower and
its Subsidiaries since the date of the Borrower’s most recent Financial Statements delivered to the
Bank;

(c) No Material Litigation or Contingent Obligations. There are no (i) material
actions, suits, proceedings or government investigations pending or threatened against the Borrower
or any Subsidiaries, or (ii) material contingent obligations of the Borrower or any Subsidiary;

(d) No Event of Default. No Event of Default or event which with the passage of time,
provision of notice or both would constitute an Event of Default shall have occurred and be
continuing;

(e) Corporate Proceedings. The Bank shall have received a certificate from a
responsible officer of the Borrower dated as of the date hereof certifying (i) that attached
thereto is a true and complete copy of the resolutions, in form and substance satisfactory to the
Bank, of the Borrower authorizing the execution, delivery and performance of this Letter Agreement
and each of the other Loan Documents to which it is a party, and that such resolutions have not
been amended, modified, revoked or rescinded in any manner and are in full force and effect, (ii)
that attached thereto is a true and complete copy of the Borrower’s organizational documents, and
that such organizational documents have not been amended, modified, revoked or rescinded and are in
full force and effect and (iii) as to the incumbency and specimen signatures of each officer
executing the Loan Documents on behalf of the Borrower;

(f) Good Standing. The Bank shall have received a certificate of good standing,
subsistence and/or status dated a recent date from the Secretary of State or appropriate taxing or
other authorities in the jurisdiction of formation of the Borrower;

(g) Opinion of Borrower’s Counsel. The Bank shall have received a written opinion or
opinions of the Borrower’s counsel addressed to the Bank and covering such matters as the Bank may
reasonably request;

(h) Lien Searches. The Bank shall have received UCC, tax and judgment lien searches
in form and substance satisfactory to it for the Borrower;

(i) Filings. The Bank shall have evidence satisfactory to it that all necessary
actions to perfect and protect the security interests created by the Security Agreement, including,
without limitation, the filing of UCC financing statements in the appropriate jurisdiction, have
been taken;

(j) Insurance. The Bank shall have received certificates evidencing to its
satisfaction that the Borrower has obtained liability and casualty insurance with the appropriate
additional insured or lender loss payee endorsements, as applicable; and

 

 

 

 Joseph Waterman

August 3, 2010

Page 8

(k) Fees and Expenses.

(i) The Borrower shall have paid or caused to be paid to the Bank a fully-earned,
nonrefundable commitment fee of $175,000; and

(ii) The Borrower shall have paid or caused to be paid to the Bank the costs and expenses
(including, without limitation, the reasonable fees and expenses of Bank’s outside counsel)
incurred in connection with the negotiation, review, documentation and closing of this Agreement
and the other Loan Documents.

12. Additional Provisions. Before the issuance of any Letter of Credit, the Borrower
shall execute and deliver to the Bank an Application for each Letter of Credit and such other
instruments and documents as the Bank may reasonably request. The Bank will not be obligated to
make the Term Loan or any advance or to issue any Letter of Credit under the Line of Credit if any
Event of Default or event which with the passage of time, provision of notice or both would
constitute an Event of Default shall have occurred and be continuing.

Notwithstanding anything herein or in any Loan Document to the contrary (i) on the date hereof
all loans made under the Existing Note (as defined below) and outstanding on the date hereof shall
automatically become loans under the Line of Credit Note and shall be payable in accordance with
the terms thereof and any existing interest period(s) under the Existing Note shall continue as
such under the Line of Credit Note, (ii) any letters of credit issued under the Existing Loan
Documents (as defined below) that are outstanding on the date hereof, shall be considered letters
of credit issued under this Letter Agreement and the Line of Credit, (iii) any accrued interest
under the Existing Note shall be owed under the Line of Credit Note and shall be payable in
accordance with the terms thereof and (iv) any other amounts owed under the Existing Loan Documents
(including, without limitation, commitment fees, letter of credit commissions and other letter of
credit fees) shall be owed under the Loan Documents and shall be payable in accordance with the
terms hereof and thereof. As used herein, the following terms shall have the following meanings:

“Existing Loan Documents” shall mean the “Loan Documents” as such term is
defined in the letter agreement dated August 29, 2008 among the Borrower, ICG
Commerce UK, Limited and the Bank.

“Existing Note” shall mean the Amended and Restated Committed Line of Credit
Note dated February 25, 2010 made by the Borrower and ICG Commerce UK, Limited in
favor of the Bank.

Prior to execution of the final Loan Documents, the Bank may terminate this Letter Agreement
if a material adverse change occurs with respect to the Borrower, any collateral for the Loans or
any other person or entity connected in any way with the Loans, or if the Borrower fails to comply
with any of the terms and conditions of this Letter Agreement, or if the Bank reasonably determines
that any of the conditions cannot be met.

 

 

 

 Joseph Waterman

August 3, 2010

Page 9

This Letter Agreement is governed by the laws of the Commonwealth of Pennsylvania. No
modification, amendment or waiver of any of the terms of this Letter Agreement, nor any consent to
any departure by the Borrower therefrom, will be effective unless made in a writing signed by the
party to be charged, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. When accepted, this Letter Agreement and the other
Loan Documents will constitute the entire agreement between the Bank and the Borrower concerning
the Loans, and shall replace all prior understandings, statements, negotiations and written
materials relating to the Loans.

The Bank will not be responsible for any damages, consequential, incidental, special, punitive
or otherwise, that may be incurred or alleged by any person or entity, including the Borrower, as a
result of this Letter Agreement, the other Loan Documents, the transactions contemplated hereby or
thereby, or the use of proceeds of the Loans.

THE BORROWER AND THE BANK IRREVOCABLY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE ARISING OUT OF THIS LETTER AGREEMENT, THE
OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND ACKNOWLEDGE
THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

If and when a loan closing occurs, this Letter Agreement (as the same may be amended from time
to time) shall survive the closing and will serve as our loan agreement throughout the term of the
Loans.

To accept these terms, please sign the enclosed copy of this Letter Agreement as set forth
below and the Loan Documents and return them to the Bank within two (2) days from the date of this
Letter Agreement, or this Letter Agreement may be terminated at the Bank’s option without liability
or further obligation of the Bank.

Thank you for giving PNC Bank this opportunity to work with your business. We look forward to
other ways in which we may be of service to your business or to you personally.

 

 

 

Very truly yours,

PNC BANK, NATIONAL ASSOCIATION.

	 	 	 	 	 
	By:

	 	/s/ John E. Barth
 

John E. Barth

Vice President
	 	 

 

 

 

ACCEPTANCE

With the intent to be legally bound hereby, the above terms and conditions are hereby agreed to and
accepted as of this 3rd day of August, 2010.

	 	 	 	 	 
	 	BORROWER:

ICG COMMERCE, INC.

 	 
	 	By:  	/s/ Joseph Waterman
 	 
	 	 	Name:  	Joseph Waterman 	 
	 	 	Title:  	Chief Financial Officer 	 
	 
	 	ICG COMMERCE INVESTMENTS, LLC

 	 
	 	By:  	/s/ Mark B. Martell
 	 
	 	 	Name:  	Mark B. Martell 	 
	 	 	Title:  	Manager 	 
	 
	 	ICG COMMERCE INTERNATIONAL, LLC

 	 
	 	By:  	/s/ Joseph Waterman
 	 
	 	 	Name:  	Joseph Waterman 	 
	 	 	Title:  	Treasurer 	 
	 
	 	ICG COMMERCE HOLDINGS, INC.

 	 
	 	By:  	/s/ Joseph Waterman
 	 
	 	 	Name:  	Joseph Waterman 	 
	 	 	Title:  	Chief Financial Officer 	 
	 

 

 

 

EXHIBIT A

TO LETTER AGREEMENT

DATED AUGUST 3, 2010

A. FINANCIAL REPORTING COVENANTS:

(1) The Borrower will deliver to the Bank:

(a) Financial Statements for its fiscal year, within 150 days after fiscal year end, audited
and certified without qualification by a certified public accountant acceptable to the Bank.

(b) Financial Statements for each of the first three fiscal quarters, within 45 days after the
quarter end, together with year-to-date and comparative figures for the corresponding periods of
the prior year, certified as true and correct by its chief financial officer.

(c) With each delivery of Financial Statements, a certificate of the Borrower’s chief
financial officer as to the Borrower’s compliance with the financial covenants set forth below, for
the period then ended and whether any Event of Default exists, and, if so, the nature thereof and
the corrective measures the Borrower proposes to take (each, a “Compliance Certificate”). This
certificate shall set forth all detailed calculations necessary to demonstrate such compliance.

“Financial Statements” means the consolidated balance sheet and statements of income and cash
flows prepared in accordance with generally accepted accounting principles in effect from time to
time (“GAAP”) applied on a consistent basis (subject in the case of interim statements to normal
year-end adjustments).

B. FINANCIAL COVENANTS:

(1) The Borrower and its Subsidiaries will maintain as of the end of each fiscal quarter on a
consolidated basis a ratio of (a) Total Debt as of the last day of such fiscal quarter to (b)
EBITDA for the four-quarter period ending on the last day of such fiscal quarter of less than or
equal to 2.25 to 1.00.

(2) The Borrower and its Subsidiaries will maintain as of the end of each fiscal quarter on a
consolidated basis a Fixed Charge Coverage Ratio for the four-quarter period then ended of at least
1.05 to 1.00.

As used herein:

“Current Maturities” means the aggregate amount of payments of principal on all indebtedness
for borrowed money (including without limitation amortization of capitalized lease obligations)
over the prior twelve-month period, other than payments under the Line of Credit.

“EBITDA” means net income plus interest expense plus income tax expense
plus depreciation plus amortization plus non-cash expense in respect of
Class F restricted stock issued
to employees of the Borrower plus non-cash expense in respect of stock options issued
to employees of the Borrower.

 

A-1

 

“Fixed Charge Coverage Ratio” means (i) EBITDA less capital expenditures of the
Borrower divided by (ii) Current Maturities plus interest expense
plus cash taxes paid plus dividends (excluding any and all dividends paid by the
Borrower during June, July or August of 2010 in an aggregate amount not to exceed $32,000,000).

“Subsidiary”: as to the Borrower, a corporation, partnership, limited liability company or
other entity of which shares of stock or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by the Borrower.

“Total Debt” means all indebtedness for borrowed money, including but not limited to
capitalized lease obligations, reimbursement obligations in respect of letters of credit, and
guaranties of any such indebtedness, minus the lesser of (a) $7,500,000 and (b) the amount
of cash in excess of $4,500,000 as set forth on the Borrower’s Financial Statements most recently
delivered to the Bank provided that such cash is held in a deposit account maintained at
the Bank.

All of the above financial covenants shall be computed and determined in accordance with GAAP
applied on a consistent basis, including principals of consolidation where appropriate (subject to
normal year-end adjustments). Notwithstanding the foregoing, if the Borrower notifies the Bank in
writing that the Borrower wishes to amend any covenant in Exhibit A to the Letter Agreement, any
related definition and/or the definition of the terms Total Debt and/or EBITDA for purposes of
interest rate determinations under the Notes to eliminate the effect of any change in GAAP
occurring after the date hereof on the operation of such covenant and/or interest rate
determinations (or if the Bank notifies the Borrower in writing that the Bank wishes to amend any
covenant in Exhibit A to the Letter Agreement, any related definition and/or the definition of the
terms Total Debt and/or EBITDA for purposes of interest rate determinations under the Notes to
eliminate the effect of any such change in GAAP), then the Borrower’s compliance with such covenant
and/or the definition of the terms Total Debt and/or EBITDA for purposes of interest rate
determinations shall be determined on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such covenant or
definition is amended in a manner satisfactory to the Borrower and the Bank, and the Borrower shall
provide to the Bank, when it delivers its financial statements pursuant to Section A (Financial
Reporting Covenants) of Exhibit A to the Letter Agreement or otherwise, such reconciliation
statements as shall be reasonably requested by the Bank.

 

A-2

 

C. NEGATIVE COVENANTS:

(1) The Borrower will not and will not permit its Subsidiaries to create, assume, incur or
suffer to exist any mortgage, pledge, encumbrance, security interest, lien or charge of any kind
upon any of its or their property, now owned or hereafter acquired, or acquire or agree to
acquire any kind of property under conditional sales or other title retention agreements;
provided, however, that the foregoing restrictions shall not prevent the Borrower
or its Subsidiaries from:

(a) incurring liens for taxes, assessments or governmental charges or levies which shall not
at the time be due and payable or can thereafter be paid without penalty or are being contested in
good faith by appropriate proceedings diligently conducted and with respect to which it has created
adequate reserves;

(b) making pledges or deposits to secure obligations under workers’ compensation laws or
similar legislation or to secure leases; or

(c) granting purchase money security interests in, or entering into capital leases for,
personal property of the Borrower or a Subsidiary existing or created when such property is
acquired, provided that the principal amount of the indebtedness secured by each such security
interest does not exceed the purchase price of the related property and provided, further, that the
aggregate principal amount secured by all such security interests does not exceed $750,000 at any
time; or

(d) granting liens or security interests in favor of the Bank.

(2) The Borrower will not and will not permit its Subsidiaries to create, incur, guarantee,
endorse (except endorsements in the course of collection), assume or suffer to exist any
indebtedness, except:

(a) indebtedness to the Bank;

(b) open account trade debt incurred in the ordinary course of business and not past due,

(c) indebtedness in respect of which liens are permitted under subparagraph (1)(c) above, and
any refinancings thereof; provided that the amount of the refinancing indebtedness is not more than
the outstanding amount of the refinanced indebtedness, and the terms of the refinancing
indebtedness are no more favorable to the lender than the terms of the refinanced indebtedness, or

(d) guarantees incurred in the ordinary course of business by the Borrower of any obligations
of any Subsidiary incurred in the ordinary course of business.

(3) The Borrower will not and will not permit any Subsidiary to liquidate, or dissolve, or
merge or consolidate with any person, firm, corporation or other entity, or sell, lease, transfer
or otherwise dispose of all or any substantial part of its property or assets, whether now owned or
hereafter acquired (except (a) to another Borrower or, in the case of a Subsidiary that is not a
Borrower, to another Subsidiary and (b) any Subsidiary that is not a Borrower and that is not
material to the operations of the Borrower and its Subsidiaries taken as a whole may liquidate or
dissolve).

 

A-3

 

(4) The Borrower will not and will not permit its Subsidiaries to make acquisitions of all or
substantially all of the property or assets of any person, firm, corporation or other entity unless
all of the following conditions are satisfied: (a) on a pro forma basis after giving effect to
such acquisition there would be no Event of Default or other event that with the giving of notice
or the passage of time, or both, would become an Event of Default, and (b) such acquisition is
accretive to earnings and cash flow, and (c) if the EBITDA of the business to be acquired exceeds
$1,000,000, audited financial statements of such business for its most recent fiscal year or a
complete due diligence report satisfactory to the Bank will be required.

(5) If an Event of Default has occurred and is continuing, the Borrower will not declare or
pay any dividends on or make any distribution with respect to any class of its equity, or purchase,
redeem, retire or otherwise acquire any of its equity, provided, however, that (a) so long as any
Borrower remains an S corporation, a partnership or limited liability company, such Borrower may
make distributions to its shareholders, partners or members, as the case may be, in an amount equal
to the federal and state income tax of such principals of such Borrower attributable to the
earnings of such Borrower and (b) any Borrower may make distribution to any other Borrower.

 

A-4

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