Document:

Exhibit 10(a)

 

 

LOAN AGREEMENT

by and between

MAINE & MARITIMES CORPORATION

as Borrower,

and

BANK OF AMERICA, N.A.

as Lender,

with respect to

Loan of up to $1,700,000

Dated as of June 13, 2006

LOAN AGREEMENT

This Agreement dated as
of June 13, 2006, is between Bank of America, N.A. (the “Bank”) and Maine &
Maritimes Corporation (the “Borrower”).

1.                                       FACILITY NO. 1:  LINE OF CREDIT AMOUNT AND TERMS

1.1                                 Line of Credit Amount.

(a)                                  During
the availability period described below, the Bank will provide a line of credit
to the Borrower.  The amount of the line
of credit (the “Facility No. 1 Commitment”) is One Million Seven Hundred
Thousand Dollars ($1,700,000).

(b)                                 This
is a non-revolving line of credit.  Any
amount borrowed, even if repaid before the expiration date of the line of
credit, permanently reduces the remaining available line of credit.

(c)                                  The
Borrower agrees not to permit the principal balance outstanding to exceed the
Facility No. 1 Commitment.  If the
Borrower exceeds this limit, the Borrower will immediately pay the excess to
the Bank upon the Bank’s demand.

1.2                                 Availability Period.

The line of credit is
available between the date of this Agreement and December 31, 2006, or such
earlier date as the availability may terminate as provided in this Agreement
(the “Facility No. 1 Expiration Date”). 
The principal amount outstanding as of the Facility No. 1 Expiration
Date shall then be repaid, together with interest, as set forth in Section 1.3
below.

1.3           Repayment
Terms.

(a)                                  The
Borrower will pay interest on June 30, 2006, and then on the last day of each
month thereafter until payment in full of any principal outstanding under this
facility.

(b)                                 The
Borrower will repay the principal amount outstanding on the Facility No. 1
Expiration Date in equal installments of One Hundred Forty Thousand Dollars
($140,000) each, beginning on January 31, 2007, and on the last day of each
month thereafter, and ending on December 31, 2007 (the “Repayment Period”).  In any event, on the last day of the
Repayment Period, the Borrower will repay the remaining principal balance plus
any interest then due.

(c)                                  The
Borrower may prepay the loan in full or in part at any time.  The prepayment will be applied to the most remote
payment of principal due under this Agreement.

1.4                                 Interest Rate.

(a)                                  The interest
rate is a rate per year equal to the Bank’s Prime Rate plus One percent (1%).

(b)                                 The Prime
Rate is the rate of interest publicly announced from time to time by the Bank
as its Prime Rate.  The Prime Rate is set
by the Bank based on various factors, including the Bank’s costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. 
The Bank may price loans to its customers at, above, or below the Prime
Rate.  Any change in the Prime Rate shall
take effect at the opening of business on the day specified in the public
announcement of a change in the Bank’s Prime Rate.

 

2.                                       FEES AND EXPENSES

2.1                                 Fees.

(a)                                  Loan
Fee.  The Borrower agrees to pay a
loan fee in the amount of Seventy Five Thousand Dollars ($75,000).  Twenty Five Thousand Dollars of such fee was
paid upon acceptance of the term sheet; the remainder is due on the date of
this Agreement.

(b)                                 Waiver
Fee.  If the Bank, at its discretion,
agrees to waive or amend any terms of this Agreement, the Borrower will, at the
Bank’s option, pay the Bank a fee for each waiver or amendment in an amount
advised by the Bank at the time the Borrower requests the waiver or
amendment.  Nothing in this paragraph
shall imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower.  The Bank may
impose additional requirements as a condition to any waiver or amendment.

(c)                                  Late
Fee.  To the extent permitted by law,
the Borrower agrees to pay a late fee in an amount not to exceed four percent
(4%) of any payment that is more than fifteen (15) days late.  The imposition and payment of a late fee
shall not constitute a waiver of the Bank’s rights with respect to the default.

2.2                                 Expenses.

The Borrower agrees to
immediately repay the Bank for expenses that include, but are not limited to,
filing, recording and search fees, appraisal fees, title report fees, and
documentation fees.

2.3                                 Reimbursement Costs.

(a)                                  The
Borrower agrees to reimburse the Bank for any expenses it incurs in the
preparation of this Agreement and any agreement or instrument required by this
Agreement.  Expenses include, but are not
limited to, reasonable attorneys’ fees, including any allocated costs of the
Bank’s in-house counsel to the extent permitted by applicable law.

(b)                                 The
Borrower agrees to reimburse the Bank for the cost of periodic field
examinations of the Borrower’s books, records and collateral, and appraisals of
the collateral, at such intervals as the Bank may reasonably require.  The actions described in this paragraph may
be performed by employees of the Bank or by independent appraisers.

3.                                       COLLATERAL

3.1                                 Personal Property.

The personal property
listed below now owned or owned in the future by the parties listed below will
secure the Borrower’s obligations to the Bank under this Agreement or, if the
collateral is owned by a guarantor, will secure the guaranty, if so indicated
in the security agreement.  The collateral
is further defined in security agreement(s) executed by the owners of the
collateral. In addition, all personal property collateral owned by the Borrower
securing this Agreement shall also secure all other present and future
obligations of the Borrower to the Bank (excluding any consumer credit covered
by the federal Truth in Lending law, unless the Borrower has otherwise agreed
in writing or received written notice thereof). 
All personal property collateral securing any other present or future
obligations of the Borrower to the Bank shall also secure this Agreement.

(a)           Equipment and
fixtures owned by (i) Borrower and (ii) Maricor Technologies, Inc.

(b)           Inventory owned by
(i) Borrower and (ii) Maricor Technologies, Inc.

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(c)           Receivables
owned by (i) Borrower and (ii) Maricor Technologies, Inc.

4.                                      DISBURSEMENTS, PAYMENTS AND COSTS

4.1                                Disbursements and Payments.

(a)                                  Each payment
by the Borrower will be made in U.S. Dollars and immediately available funds by
direct debit to a deposit account as specified below or, for payments not
required to be made by direct debit, by mail to the address shown on the
Borrower’s statement or at one of the Bank’s banking centers in the United
States.

(b)                                 Each
disbursement by the Bank and each payment by the Borrower will be evidenced by
records kept by the Bank.  In addition,
the Bank may, at its discretion, require the Borrower to sign one or more
promissory notes.

4.2                                Telephone and Telefax Authorization.

(a)                                  The
Bank may honor telephone or telefax instructions for advances or repayments or
for the designation of optional interest rates given, or purported to be given,
by any one of the individuals authorized to sign loan agreements on behalf of
the Borrower, or any other individual designated by any one of such authorized
signers.

(b)                                 Advances
will be deposited in and repayments will be withdrawn from account number
9429289418 owned by the Borrower, or such other of the Borrower’s accounts with
the Bank as designated in writing by the Borrower.

(c)                                  The
Borrower will indemnify and hold the Bank harmless from all liability, loss,
and costs in connection with any act resulting from telephone or telefax
instructions the Bank reasonably believes are made by any individual authorized
by the Borrower to give such instructions. 
This paragraph will survive this Agreement’s termination, and will
benefit the Bank and its officers, employees, and agents.

4.3                                Direct Debit (Pre-Billing).

(a)                                  The Borrower
agrees that the Bank will debit deposit account number 9429289418 owned by the
Borrower, or such other of the Borrower’s accounts with the Bank as designated
in writing by the Borrower (the “Designated Account”) on the date each
payment of principal and interest and any fees from the Borrower becomes due
(the “Due Date”).

(b)                                 Prior
to each Due Date, the Bank will mail to the Borrower a statement of the amounts
that will be due on that Due Date (the “Billed Amount”).  The bill will be mailed a specified number of
calendar days prior to the Due Date, which number of days will be mutually agreed
from time to time by the Bank and the Borrower. 
The calculations in the bill will be made on the assumption that no new
extensions of credit or payments will be made between the date of the billing
statement and the Due Date, and that there will be no changes in the applicable
interest rate.

(c)                                  The
Bank will debit the Designated Account for the Billed Amount, regardless of the
actual amount due on that date (the “Accrued Amount”).  If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be
treated as follows:

(i)                                     If
the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the discrepancy.  The Borrower will not be in default by reason
of any such discrepancy.

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(ii)                                  If
the Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the discrepancy.

Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without compounding.  The Bank will not pay the Borrower interest
on any overpayment.

(d)                                 The
Borrower will maintain sufficient funds in the Designated Account to cover each
debit.  If there are insufficient funds
in the Designated Account on the date the Bank enters any debit authorized by
this Agreement, the Bank may reverse the debit.

4.4                                Banking Days.

Unless
otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to
close, or are in fact closed, in the state where the Bank’s lending office is
located, and, if such day relates to amounts bearing interest at an offshore
rate (if any), means any such day on which dealings in dollar deposits are
conducted among banks in the offshore dollar interbank market.  All payments and disbursements which would be
due on a day which is not a banking day will be due on the next banking day.  All payments received on a day which is not a
banking day will be applied to the credit on the next banking day.

4.5                                Interest Calculation.

Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed.  This
results in more interest or a higher fee than if a 365-day year is used.  Installments of principal which are not paid
when due under this Agreement shall continue to bear interest until paid.

4.6                                Default Rate.

Upon
the occurrence of any default or after maturity or after judgment has been
rendered on any obligation under this Agreement, all amounts outstanding under
this Agreement, including any interest, fees, or costs which are not paid when
due, will at the option of the Bank bear interest at a rate which is 4.0
percentage point(s) higher than the rate of interest otherwise provided under
this Agreement.  This may result in
compounding of interest.  This will not
constitute a waiver of any default.

5.                                      CONDITIONS

Before the Bank is required to extend any credit to
the Borrower under this Agreement, it must receive any documents and other
items it may reasonably require, in form and content acceptable to the Bank,
including any items specifically listed below.

5.1                                Authorizations.

If the Borrower or
any guarantor is anything other than a natural person, evidence that the
execution, delivery and performance by the Borrower and/or such guarantor of
this Agreement and any instrument or agreement required under this Agreement
have been duly authorized.

5.2                                Governing Documents.

If
required by the Bank, a copy of the Borrower’s organizational documents.

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5.3                                Security Agreements; Guarantees.

Signed original
security agreements covering the personal property collateral which the Bank
requires and duly authorized and executed Guaranties from each Loan Party
providing a Guaranty.

5.4                                Perfection and Evidence of Priority.

Evidence that the
security interests and liens in favor of the Bank are valid, enforceable,
properly perfected in a manner acceptable to the Bank and prior to all others’
rights and interests, except those the Bank consents to in writing.  All title documents for motor vehicles which
are part of the collateral must show the Bank’s interest.

5.5                                Payment of Fees.

Payment
of all fees and other amounts due and owing to the Bank, including without
limitation payment of all accrued and unpaid expenses incurred by the Bank as
required by the paragraph entitled “Reimbursement Costs.”

5.6                                Repayment of Other Credit Agreement.

Evidence that the existing
loan agreement with Katahdin Trust Company with respect to a bridge loan in the
principal amount of $400,000 has been or will be repaid and cancelled on or
before the first disbursement under this Agreement.

5.7                                Good Standing.

Certificates
of good standing for the Borrower and each guarantor from its state of
formation and from any other state in which the Borrower or such guarantor is
required to qualify to conduct its business.

5.8                                Legal Opinion.

A
written opinion from the Borrower’s legal counsel, covering such matters as the
Bank may require.  The legal counsel and
the terms of the opinion must be acceptable to the Bank.

5.9                                Insurance.

Evidence
of insurance coverage, as required in the “Covenants” section of this
Agreement.

6.                                      REPRESENTATIONS AND WARRANTIES

When
the Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties.  Each request for an extension of credit
constitutes a renewal of these representations and warranties as of the date of
the request:

6.1                                Formation.

If
the Borrower is anything other than a natural person, it is duly formed and
existing under the laws of the state or other jurisdiction where organized.

6.2                                Authorization.

This Agreement, and any
instrument or agreement required hereunder, are within the Borrower’s powers,
have been duly authorized, and do not conflict with any of its organizational
papers.

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6.3                                Enforceable Agreement.

This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.

6.4                                Good Standing.

In
each state in which the Borrower does business, it is properly licensed, in
good standing, and, where required, in compliance with fictitious name
statutes.

6.5                                No Conflicts.

This
Agreement does not conflict with any law, agreement, or obligation by which the
Borrower is bound.

6.6                                Financial Information.

All
financial and other information that has been or will be supplied to the Bank
fairly presents the Borrower’s (and any guarantor’s) financial condition in all
material respects, including all material contingent liabilities.  Since the date of the most recent financial
statement provided to the Bank, there has been no material adverse change in
the business condition (financial or otherwise), operations, properties or
prospects of the Borrower (or any guarantor). 
If the Borrower is comprised of the trustees of a trust, the foregoing
representations shall also pertain to the trustor(s) of the trust.

6.7                                Lawsuits.

There
is no lawsuit, tax claim or other dispute pending or threatened against the
Borrower which, if lost, would reasonably be expected to have a Material
Adverse Effect , except as have been disclosed in writing to the Bank.

6.8                                Collateral.

All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
those which have been approved by the Bank in writing and except for the
following:

(a)  Liens pursuant to this Agreement or any
agreement relating hereto;

(b)  Liens existing on the date hereof and listed
on Schedule 6.8 and any renewals or extensions thereof, provided that (i) the
property covered thereby is not changed, (ii) the amount secured or benefited
thereby is not increased, and (iii) the direct or any contingent obligor with
respect thereto is not changed;

(c)  Liens for taxes not yet due 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;

(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 and appeal 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)  Liens securing judgments for the payment of
money not constituting an Event of Default under Section 9.7; and

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(i)  Liens securing Indebtedness in respect of
capital leases, Synthetic Lease Obligations and purchase money obligations for
fixed or capital assets; provided, however, that the aggregate amount of all
such Indebtedness at any one time outstanding shall not exceed $500,000; and
further 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.

6.9                                Permits, Franchises.

The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights,
copyrights, and fictitious name rights necessary to enable it to conduct the
business in which it is now engaged.

6.10                          Other Obligations.

The
Borrower is not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation, except as have been disclosed in writing to the Bank.

6.11                          Tax Matters.

The
Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year and all taxes due have been paid, 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 Borrower or any Subsidiary that would, if made, have a
Material Adverse Effect.

6.12                          No Event of Default.

There
is no event which is, or with notice or lapse of time or both would be, a
default under this Agreement.

6.13                          Insurance.

The
Borrower has obtained, and maintained in effect, the insurance coverage required
in the “Covenants” section of this Agreement.

6.14                          ERISA Plans.

(a)                                  Each Plan
(other than a multiemployer plan) is in compliance in all material respects
with the applicable provisions of ERISA, the Code and other federal or state
law.  Each Plan has received a favorable
determination letter from the IRS and to the best knowledge of the Borrower,
nothing has occurred which would cause the loss of such qualification.  The Borrower has fulfilled its obligations,
if any, under the minimum funding standards of ERISA and the Code with respect
to each Plan, and has not incurred any liability with respect to any Plan under
Title IV of ERISA.

(b)                                 There
are no claims, lawsuits or actions (including by any governmental authority),
and there has been no prohibited transaction or violation of the fiduciary
responsibility rules, with respect to any Plan which has resulted or could
reasonably be expected to result in a material adverse effect.

(c)                                  With
respect to any Plan subject to Title IV of ERISA:

(i)                                     No
reportable event has occurred under Section 4043(c) of ERISA for which the PBGC
requires 30-day notice.

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(ii)                                  No
action by the Borrower or any ERISA Affiliate to terminate or withdraw from any
Plan has been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.

(iii)                               No termination
proceeding has been commenced with respect to a Plan under Section 4042 of
ERISA, and no event has occurred or condition exists which might constitute
grounds for the commencement of such a proceeding.

(d)                                 The
following terms have the meanings indicated for purposes of this Agreement:

(i)                                     “Code”
means the Internal Revenue Code of 1986, as amended from time to time.

(ii)                                  “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended from time
to time.

(iii)                               “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.

(iv)                              “PBGC”
means the Pension Benefit Guaranty Corporation.

(v)                                 “Plan”
means a pension, profit-sharing, or stock bonus plan intended to qualify under
Section 401(a) of the Code, maintained or contributed to by the Borrower or any
ERISA Affiliate, including any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA.

7.                                      COVENANTS

The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:

7.1                                Use of Proceeds.

(a)           To use the proceeds of Facility No. 1
only (a) to repay the loan from Katahdin Trust Company referenced in Section
5.6, and (b) for working capital and other general corporate purposes.

(b)           The proceeds of the credit extended
under this Loan Agreement may not be used directly or indirectly to purchase or
carry any “margin stock” as that term is defined in Regulation U of the Board
of Governors of the Federal Reserve System, or extend credit to or invest in
other parties for the purpose of purchasing or carrying any such “margin stock,”
or to reduce or retire any indebtedness incurred for such purpose.

7.2                                Financial Information.

To
provide the following financial information and statements in form and content
acceptable to the Bank, and such additional information as requested by the
Bank from time to time (provided, however, that any such information provided
to Bank pursuant to any other loan documents to which Bank is party shall be
deemed to be a submission of such information under this Agreement and Borrower
need not provide duplicate copies of such materials to Bank for each such loan
agreement):

(a)                                  as
soon as available, but in any event within 120 days after the end of each
fiscal year of Borrower, a consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as at the end of such fiscal year, and the
related consolidated and consolidating statements of income or operations,
shareholders’ equity and cash flows for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and prepared 

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in accordance with GAAP, such consolidated statements to be audited and
accompanied by (i) a report and opinion of Vitale, Caturano and Co., Ltd., or
another Registered Public Accounting Firm of nationally recognized standing
reasonably acceptable to the Bank, which report and opinion shall be prepared
in accordance with generally accepted auditing standards and applicable
Securities Laws and shall not be subject to any “going concern” or like
qualification or exception or any qualification or exception as to the scope of
such audit and (ii) when and to the extent required by the SEC, an attestation
report of such Registered Public Accounting Firm as to the Borrower’s internal
controls pursuant to Section 404 of Sarbanes-Oxley expressing a conclusion to
which the Bank does not object and such consolidating statements to be
certified by a Responsible Officer of Borrower to the effect that such
statements are fairly stated in all material respects when considered in
relation to the consolidated financial statements of Borrower and its
Subsidiaries, provided, however, that so long as Borrower is subject to section
13 of the Securities Exchange Act of 1934, as amended, the requirement as to
consolidated financial statements (but not the other requirements) shall be
satisfied with respect to Borrower by delivery within such 120-day period of
the annual report of Borrower on Form 10-K for such fiscal year, together with
all documents from the preceding fiscal year which are incorporated therein by
reference, and have theretofore not been delivered, as filed by Borrower with
the SEC;

(b)                                 as
soon as available, but in any event within 60 days after the end of each of the
first three fiscal quarters of each fiscal year of Borrower, a consolidated and
consolidating balance sheet of Borrower and its Subsidiaries as at the end of
such fiscal quarter, and the related consolidated and consolidating statements
of income or operations, shareholders’ equity and cash flows for such fiscal
quarter and for the portion of Borrower’s fiscal year then ended, setting forth
in each case in comparative form the figures for the corresponding fiscal
quarter of 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 Borrower as fairly presenting the
financial condition, results of operations, shareholders’ equity and cash flows
of 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 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, provided, however, that so long as Borrower is
subject to section 13 of the Securities Exchange Act of 1934, as amended, the
requirement with respect to consolidated financial statements (but not the
other requirements) shall be satisfied with respect to Borrower by delivery
within such 60-day period of the report of Borrower on Form 10-Q for such
quarter, as filed by Borrower with the SEC; and

(c)                                  as
soon as available, but in any event at least 60 days after the end of each
fiscal year of Borrower, forecasts prepared by management of Borrower, in form
satisfactory to the Bank, of consolidated balance sheets and statements of
income or operations and cash flows of Borrower and its Subsidiaries on a
monthly basis for the immediately following fiscal year.

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(d)           (i) 
concurrently with the delivery of the financial statements referred to
in Section 7.2(a), a certificate of its independent certified public
accountants certifying such financial statements and stating that in making the
examination necessary therefor no knowledge was obtained of any Default or, if
any such Default shall exist, stating the nature and status of such event;

(ii) 
concurrently with the delivery of the financial statements referred to
in Sections 7.2(a) and (b), a duly completed Compliance Certificate signed by a
Responsible Officer of Borrower;

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

(iv)  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
Borrower, and copies of all annual, regular, periodic and special reports and
registration statements which Borrower may file or be required to file with the
Securities and Exchange Commission under Section 13 or 15(d) of the Securities
Exchange Act of 1934, and not otherwise required to be delivered to Bank
pursuant hereto;

(v)  promptly
after the furnishing thereof, copies of any statement or report furnished to
any holder of debt securities of any Loan Party or any Subsidiary thereof
pursuant to the terms of any indenture, loan or credit or similar agreement and
not otherwise required to be furnished to the Bank pursuant to any other clause
of this Section 7.2; and

(vi)  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 Securities and Exchange Commission  (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.

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

7.3                                Debt to Capital Ratio.

Not allow Consolidated
Total Indebtedness for Borrowed Money to exceed the percentage of Consolidated
Total Capital indicated for each period specified below:

	
  Period

  	
   

  	
  Maximum Percentage

  	
   

  
	
  Quarter ending
  03/31/06 through quarter ending 3/31/07

  	
   

  	
  57

  	
  %

  
	
  Thereafter

  	
   

  	
  55

  	
  %

  

This ratio will be calculated at the end of each
quarter, commencing with the quarter ending March 31, 2006, using the results
of the twelve-month period ending with that reporting period.

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7.4                                Interest Coverage Ratio.

Maintain on a
consolidated basis an Interest Coverage Ratio of at least the ratio indicated
for each period specified below:

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  Three months
  ending 3/31/06

  	
   

  	
  2.00:1.0

  	
   

  
	
  Six months
  ending 6/30/06

  	
   

  	
  1.00:1.0

  	
   

  
	
  Nine months
  ending 9/30/06

  	
   

  	
  1.00:1.0

  	
   

  
	
  Twelve months
  ending 12/31/06

  	
   

  	
  2.00:1.0

  	
   

  
	
  Twelve months
  ending 3/31/07

  	
   

  	
  1.75:1.0

  	
   

  
	
  Twelve months ending
  6/30/07 and Each trailing twelve month period thereafter, On a quarterly
  basis

  	
   

  	
  2.50:1.0

  	
   

  

 

This ratio will be
calculated at the end of each quarter, commencing with the quarter ending March
31, 2006.

7.5                                Financial Covenant Definitions.

“Capital Lease” means a lease which
has been or should be capitalized on the books of the lessee in accordance with
GAAP.

“Consolidated EBIT”
means, for the Borrower and its Subsidiaries, net income, less income or plus
loss from discontinued operations and extraordinary items, plus income taxes,
plus interest expense.

“Consolidated
Interest Expense” means, for any specified period, the
total consolidated interest charges of the Borrower and its Subsidiaries for
such period, determined in accordance with GAAP, plus (i) the allowance for
borrowed funds used during construction for such period, minus (ii) interest on
customer deposits for such period.

“Consolidated
Total Capital” means, at a particular date, the total of
the amounts that, in conformity with GAAP, would be included on a consolidated
balance sheet of the Borrower and its Subsidiaries as of such date in respect
of (i) Consolidated Total Indebtedness for Borrowed Money (excluding Debt of
other Persons guaranteed by the Borrower or a Subsidiary), and (ii) (iii)
Common Shareholders’ Equity.

“Consolidated Total Indebtedness for
Borrowed Money” means at any particular date, the total amount
of (i) Debt of the Borrower and its Subsidiaries, excluding intercompany items,
that, in conformity with GAAP, would be included on a consolidated balance
sheet of the Borrower and its Subsidiaries (a) in respect of money borrowed,
(b) in respect of obligations evidenced by a note, bond, debenture or other
like written obligation to pay money, (c) in respect of obligations under
Capital Leases, and (d) in respect of obligations under conditional sales or
other title retention agreements, and (ii) Debt of other Persons of the nature
described in clauses (a) through (d) above which is guaranteed by the Borrower
or a Subsidiary or with respect to which the Borrower or a Subsidiary is
contingently liable.  In no event shall
the term include preferred stock.

“Interest Coverage Ratio”
means the ratio of Consolidated EBIT to (Consolidated Interest Expense plus
preferred dividends).

 11
 

 

7.6                                Maintenance of Assets.

(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; provided that in the event of any conflict with the
terms of Section 7.8, the latter shall prevail.

(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.

(c)                                  Use
the standard of care typical in the industry in the operation and maintenance
of its facilities.

(d)                                 To
maintain and preserve all rights, privileges, and franchises the Borrower now
has.

7.7                                Loans.

Not
to make any loans, advances or other extensions of credit to any individual or
entity, except for:

(a)                                  Existing
extensions of credit disclosed to the Bank in writing.

(b)                                 Extensions
of credit to the Borrower’s current subsidiaries on terms that are fair and
reasonable,  substantially as favorable
to Borrower or such subsidiary as would be obtainable by Borrower or such
subsidiary at the time in a comparable arm’s length transaction with a Person
other than an Affiliate (provided, however, that Bank acknowledges that such
intra-company loans may bear low or no interest).

(c)                                  Extensions
of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business to
non-affiliated entities.

7.8                                Additional Negative Covenants.

Not
to, without the Bank’s written consent, such consent not to be unreasonably
withheld or delayed:

(a)                                  (this
applies to Borrower and its Subsidiary Maine Public Service Company) 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)  Maine Public Service Company may merge with
(i) Borrower, provided that Borrower shall be the continuing or surviving
Person, or (ii) any one or more other Subsidiaries of Borrower, provided that a
wholly-owned Subsidiary of Borrower shall be the continuing or surviving
Person; and  (b)  Maine Public Service Company may Dispose of
all or substantially all of its assets (upon voluntary liquidation or
otherwise) to Borrower or to a wholly-owned Subsidiary of Borrower.

(b)                                 Acquire
or purchase a business or its assets where either of the following conditions
applies: (a) the acquisition is for a consideration, including assumption of
direct or contingent debt, in excess of One Hundred Thousand Dollars ($100,000)
in the aggregate; or (b) the Borrower has not obtained the prior, effective
written consent or approval to such acquisition of the board of directors or
equivalent governing body of the business being acquired.

(c)                                  Engage
in any business activities substantially different from the Borrower’s present
business.

(d)                                 (this
applies to Borrower and its Subsidiary Maine Public Service Company) make any
Disposition or enter into any agreement to make any Disposition, except:

 12
 

 

(i)  Dispositions of obsolete or
worn out property, whether now owned or hereafter acquired, in the ordinary
course of business;

(ii)  Dispositions of inventory
in the ordinary course of business;

(iii)  Dispositions of equipment
or real property to the extent that (i) such property is exchanged for credit
against the purchase price of similar replacement property or (ii) the proceeds
of such Disposition are reasonably promptly applied to the purchase price of
such replacement property;

(iv)  Dispositions of property by
Maine Public Service Company to Borrower or to a wholly-owned Subsidiary of
Borrower; and

(v)  Dispositions permitted by
Section 7.8(a).

Any Disposition pursuant to clauses (i) through (v) shall be for fair
market value.

(e)                                  Voluntarily
suspend its business.

7.9                                Notices to Bank.

To
promptly notify the Bank in writing of:

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

(b)                             The
occurrence of any ERISA Event.

(c)                              The
occurrence of any Internal Control Event.

(d)                                 Any
event of default under this Agreement, or any event which, with notice or lapse
of time or both, would constitute an event of default.

(e)                                  Any
change in the Borrower’s name, legal structure, place of business, or chief
executive office if the Borrower has more than one place of business.

(f)                                    Any
actual contingent liabilities of the Borrower (or any Guarantor) arising on or
after December 31, 2005, and any such contingent liabilities which are
reasonably foreseeable, where such liabilities are in excess of the Threshold
Amount in the aggregate.

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

7.10                          Insurance.

(a)                                  Insurance.  To maintain with financially sound and
reputable insurance companies not Affiliates of 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 (after giving effect to any self-insurance
compatible with the following 

 13
 

 

standards) as are customarily carried under similar circumstances by
such other Persons and providing for not less than 30 days’ prior notice to
Bank of termination, lapse or cancellation of such insurance.

(b)                                 Evidence
of Insurance.  Upon the request of
the Bank, to deliver to the Bank a copy of each insurance policy, or, if
permitted by the Bank, a certificate of insurance listing all insurance in
force.

7.11                          Compliance with Laws.

To
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, write, injunction or decree is being contested in good faith by
appropriate proceedings diligently conducted; or (b) the failure to comply
therewith could not reasonably be expected to have a Material Adverse
Effect.  The Bank shall have no
obligation to make any advance to the Borrower except in compliance with all
applicable laws and regulations and the Borrower shall fully cooperate with the
Bank in complying with all such applicable laws and regulations.

7.12                          ERISA Plans.

Promptly
during each year, to pay and cause any subsidiaries to pay contributions
adequate to meet at least the minimum funding standards under ERISA with
respect to each and every Plan; file each annual report required to be filed
pursuant to ERISA in connection with each Plan for each year; and notify the
Bank within ten (10) days of the occurrence of any Reportable Event that might
constitute grounds for termination of any capital Plan by the Pension Benefit
Guaranty Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan.  Capitalized terms in this paragraph, that are
not otherwise defined herein,  shall have
the meanings defined within ERISA.

7.13                          ERISA Plans - Notices.

With
respect to a Plan subject to Title IV of ERISA, to give prompt written notice
to the Bank of:

(a)                                  The
occurrence of any reportable event under Section 4043(c) of ERISA for which the
PBGC requires 30-day notice.

(b)                                 Any action
by the Borrower or any ERISA Affiliate to terminate or withdraw from a Plan or
the filing of any notice of intent to terminate under Section 4041 of ERISA.

(c)                                  The
commencement of any proceeding with respect to a Plan under Section 4042 of
ERISA.

7.14                          Books and Records.

To
(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
Borrower or such Subsidiary, as the case may be; and (b) maintain such books of
record and account in material conformity with all applicable requirements of
any Governmental Authority having regulatory jurisdiction over Borrower or such
Subsidiary, as the case may be.  Borrower
shall maintain at all times books and records pertaining to the Collateral in
such detail, form and scope as Bank shall reasonably require.

7.15                          Audits.

To
allow the Bank and its agents 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, all at the expense

 14
 

 

of
Borrower and at such reasonable times during normal business hours and as often
as may be reasonably desired, upon reasonable advance notice to Borrower;
provided, however, that when an Event of Default exists Bank or its agents may
do any of the foregoing at the expense of Borrower at any time during normal
business hours and without advance notice. 
If any of the Borrower’s properties, books or records are in the
possession of a third party, the Borrower authorizes that third party to permit
the Bank or its agents to have access to perform inspections or audits and to
respond to the Bank’s requests for information concerning such properties,
books and records.

7.16                          Perfection of Liens.

To
help the Bank perfect and protect its security interests and liens, and
reimburse it for related costs it reasonably incurs to protect its security
interests and liens.

7.17                          Cooperation.

To
take any action reasonably requested by the Bank to carry out the intent of
this Agreement.

8.                                      HAZARDOUS SUBSTANCES

8.1                                Indemnity Regarding Hazardous Substances.

The
Borrower will indemnify and hold harmless the Bank from any loss or liability
the Bank incurs in connection with or as a result of this Agreement, which
directly or indirectly arises out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of a hazardous substance.  This
indemnity will apply whether the hazardous substance is on, under or about the
Borrower’s property or operations or property leased to the Borrower.  The indemnity includes but is not limited to
reasonable attorneys’ fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff).  The
indemnity extends to the Bank, its parent, subsidiaries and all of their
directors, officers, employees, agents, successors, attorneys and assigns.

8.2                                Compliance Regarding Hazardous Substances.

The
Borrower represents and warrants that the Borrower has complied and will comply
in the future with all  Laws,  or other requirements of any Governmental
Authority relating to or imposing liability or standards of conduct concerning
protection of health or the environment or hazardous substances, except to the
extent that the failure so to comply does not have, and could not reasonably be
expected to have, a Material Adverse Effect.

8.3                                Notices Regarding Hazardous Substances.

Until
full repayment of the loan, the Borrower will promptly notify the Bank in
writing of any threatened or pending investigation of the Borrower or its
operations by any governmental agency under any current or future law,
regulation or ordinance pertaining to any hazardous substance.

8.4                                Site Visits, Observations and Testing.

The
Bank and its agents and representatives will have the right at any reasonable
time, after giving reasonable notice to the Borrower, to enter and visit any
locations where the collateral securing this Agreement (the “Collateral”) is
located for the purposes of observing the Collateral, taking and removing
environmental samples, and conducting tests. 
The Borrower shall reimburse the Bank on demand for the costs of any
such environmental investigation and testing. 
The Bank will make reasonable efforts during any site visit, observation
or testing conducted pursuant this paragraph to avoid interfering with the
Borrower’s use of the Collateral.  The
Bank is under no duty to observe the Collateral or to conduct tests, and any
such acts by the Bank will be solely for the purposes of protecting the Bank’s
security and 

 15
 

 

preserving
the Bank’s rights under this Agreement. 
No site visit, observation or testing or any report or findings made as
a result thereof (“Environmental Report”) (i) will result in a waiver of any
default of the Borrower; (ii) impose any liability on the Bank; or (iii) be a
representation or warranty of any kind regarding the Collateral (including its
condition or value or compliance with any laws) or the Environmental Report (including
its accuracy or completeness).  In the
event the Bank has a duty or obligation under applicable laws, regulations or
other requirements to disclose an Environmental Report to the Borrower or any
other party, the Borrower authorizes the Bank to make such a disclosure.  The Bank may also disclose an Environmental
Report to any regulatory authority, and to any other parties as necessary or
appropriate in the Bank’s judgment.  The
Borrower further understands and agrees that any Environmental Report or other
information regarding a site visit, observation or testing that is disclosed to
the Borrower by the Bank or its agents and representatives is to be evaluated
(including any reporting or other disclosure obligations of the Borrower) by
the Borrower without advice or assistance from the Bank.

8.5                                Definition of Hazardous Substances.

“Hazardous
substances” means any substance, material or waste that is or becomes
designated or regulated as “toxic,” “hazardous,” “pollutant,” or “contaminant”
or a similar designation or regulation under any current or future federal,
state or local law (whether under common law, statute, regulation or otherwise)
or judicial or administrative interpretation of such, including without
limitation petroleum or natural gas.

8.6                                Continuing Obligation.

The Borrower’s
obligations to the Bank under this Article, except the obligation to give
notices to the Bank, shall survive termination of this Agreement and repayment
of the Borrower’s obligations to the Bank under this Agreement.

9.                                      DEFAULT AND REMEDIES

If
any of the following events of default (each an “Event of Default” or “event
of default”) occurs, the Bank may do one or more of the following: declare
the Borrower in default, stop making any additional credit available to the
Borrower, and require the Borrower to repay its entire debt immediately and
without prior notice.  If an event which,
with notice or the passage of time, will constitute an event of default has
occurred and is continuing, the Bank has no obligation to make advances or
extend additional credit under this Agreement. 
In addition, if any event of default occurs, the Bank shall have all
rights, powers and remedies available under any instruments and agreements
required by or executed in connection with this Agreement, as well as all
rights and remedies available at law or in equity.  If an event of default occurs under the
paragraph entitled “Insolvency; Receiver,” below, with respect to the Borrower,
then the entire debt outstanding under this Agreement will automatically be due
immediately.

9.1                                Failure to Pay.

The
Borrower fails to pay (i) when and as required to be paid, any amount of
principal due hereunder, or (ii) within three days after the same becomes due,
any interest due hereunder, or any fee due hereunder, or (iii) within five days
after the same becomes due, any other amount payable hereunder.

9.2                                Other Bank Agreements.

Any default occurs under any other agreement
the Borrower (or any Obligor) or any of the Borrower’s related entities or
Affiliates has with the Bank or any Affiliate of the Bank , and such default
remains uncured beyond any applicable cure period.  For purposes of this Agreement, “Obligor”
shall mean any guarantor, any party pledging collateral to the Bank, or, if the
Borrower is comprised of the trustees of a trust, any trustor.

 16

 

9.3                                Cross-default.

Borrower, its Subsidiary
Maine Public Service Company, any Guarantor or any Subsidiary with respect to
an obligation of such Subsidiary that has been guaranteed by Borrower (but no
other Subsidiaries) (A) fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Indebtedness, preferred stock or Guarantee (other than
Indebtedness hereunder) 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 the Threshold
Amount, or (B) fails to observe or perform any other agreement or condition
relating to any such Indebtedness, preferred stock or Guarantee or contained in
any instrument or agreement evidencing, securing or relating thereto, or any
other event occurs, the effect of which default or other event is to cause, or
to permit the holder or holders of such Indebtedness or preferred stock 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, with the
giving of notice if required, such Indebtedness or preferred stock 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 or preferred stock to be made, prior to its stated
maturity, or such Guarantee to become payable or cash collateral in respect
thereof to be demanded.

9.4                                False Information.

Any representation,
warranty, certification or statement of fact made or deemed made by or on
behalf of the Borrower or any Obligor herein, or in any document delivered in
connection herewith shall be incorrect, false or misleading in any material
respect when made or deemed made.

9.5                                Insolvency; Receiver.

Any
Loan Party or any of its Subsidiaries institutes or consents to the institution
of any proceeding under any Debtor Relief Law, 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  (i) Borrower or any Subsidiary 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.

9.6                                Termination; Dissolution.

All
or a substantial portion of the Borrower’s or any Obligor’s business is
terminated, or, Borrower or any Obligor is liquidated or dissolved.

9.7                                Lien Priority.

The
Bank fails to have an enforceable first lien (except for any prior liens to
which the Bank has consented in writing) on or security interest in any property
given as security for this Agreement (or any Guaranty).

 17
 

 

9.8                                Lawsuits.

Any
lawsuit or lawsuits are filed on behalf of one or more trade creditors against
the Borrower or any Obligor in an aggregate amount of the Threshold Amount or
more in excess of any insurance coverage.

9.9                                Judgments.

There
is entered against Borrower or any Subsidiary (i) a final judgment or order for
the payment of money in an aggregate amount exceeding the Threshold Amount (to
the extent not covered by independent third-party insurance as to which the
insurer 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)
there is a period of 10 consecutive days during which a stay of enforcement of
such judgment, by reason of a pending appeal or otherwise, is not in effect.

9.10                          Material Adverse Effect.

There occurs any event or
circumstance that has a Material Adverse Effect.

9.11                          Government Action.

Any
Government Authority takes action that the Bank believes would have a
Materially Adverse Effect.

9.12                          Default under Related Documents.

Any
default occurs under any Guaranty, subordination agreement, security agreement,
deed of trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document becomes no longer in effect
without Bank’s consent, or any Guarantor purports to revoke or disavow the
guaranty.

9.13                          ERISA Plans.

Any one or more of the
following events occurs with respect to a Plan of the Borrower subject to Title
IV of ERISA, provided such event or events could reasonably be expected, in the
judgment of the Bank, to subject the Borrower to any tax, penalty or liability
(or any combination of the foregoing) which, in the aggregate, could have a
material adverse effect on the financial condition of the Borrower:

(a)                                  A
reportable event shall occur under Section 4043(c) of ERISA with respect to a
Plan.

(b)                                 Any Plan
termination (or commencement of proceedings to terminate a Plan) or the full or
partial withdrawal from a Plan by the Borrower or any ERISA Affiliate.

9.14                          Other Breach Under Agreement.

A
default occurs under any other term or condition of this Agreement not
specifically referred to in this Article. 
This includes any failure by the Borrower (or any other party named in
the Covenants section) to comply with any financial covenants set forth in this
Agreement, whether such failure is evidenced by financial statements delivered
to the Bank or is otherwise known to the Borrower or the Bank.  If, in the Bank’s opinion, the breach is
capable of being remedied, the breach will not be considered an event of
default under this Agreement for a period of thirty (30) days after the date on
which the Bank gives written notice of the breach to the Borrower.

 18
 

 

10.                                ENFORCING THIS AGREEMENT; MISCELLANEOUS

10.1                          GAAP.

Except
as otherwise stated in this Agreement, all financial information provided to
the Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.

10.2                          Governing Law; Jurisdiction; Etc. 

(a)           GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF MAINE.

(b)           SUBMISSION TO JURISDICTION.  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 MAINE SITTING IN
CUMBERLAND COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE STATE OF
MAINE, 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 MAINE 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 BANK
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)           WAIVER OF VENUE.  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)           SERVICE
OF PROCESS.  EACH PARTY HERETO
IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES
IN SECTION 10.11.  NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.

10.3         Waiver of Right to Trial by Jury.    EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY).  EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO 

 19
 

 

HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

10.4         USA PATRIOT Act Notice.    The Bank hereby notifies 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 Borrower, which
information includes the name and address of Borrower and other information
that will allow the Bank to identify Borrower in accordance with the Act.

10.5         Treatment of Certain Information;
Confidentiality.  The Bank agrees to
maintain the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its Affiliates and to its and its
Affiliates’ respective partners, directors, officers, employees, agents,
advisors and representatives (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 Borrower and its obligations, (g) with the
consent of 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 bank or its Affiliates on a nonconfidential basis from a
source other than Borrower.  For purposes
of this Section, “Information” means all information received from Borrower or
any Subsidiary relating to Borrower or any Subsidiary or any of their
respective businesses, other than any such information that is available to the
Bank on a nonconfidential basis prior to disclosure by Borrower or any
Subsidiary, provided that, in the case of information received from 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.    The
Bank acknowledges that (a) the Information may include material non-public
information concerning the Borrower or a Subsidiary, as the case may be, (b) it
has developed compliance procedures regarding the use of material non-public
information and (c) it will handle such material non-public information in
accordance with applicable Law, including Federal and state securities Laws.

10.6         Successors and
Assigns.

This Agreement is binding
on the Borrower’s and the Bank’s successors and assignees.  The Borrower agrees that it may not assign
this Agreement without the Bank’s prior consent.  The Bank may sell participations in or assign
this loan, and may exchange information about the Borrower (including, without
limitation, any information regarding any hazardous substances) with actual or
potential participants or assignees.  If
a participation is sold or the loan is assigned, the purchaser will have the
right of set-off against the Borrower.

10.7         Severability;
Waivers.

If
any part of this Agreement is not enforceable, the rest of the Agreement may be
enforced.  The Bank retains all rights,
even if it makes a loan after default. 
If the Bank waives a default, it may enforce a later default.  Any consent or waiver under this Agreement
must be in writing.

 20
 

 

10.8         Attorneys’ Fees.

The
Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees
incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver, “workout”
or restructuring under this Agreement. 
In the event of a lawsuit or arbitration proceeding, the prevailing
party is entitled to recover costs and reasonable attorneys’ fees incurred in
connection with the lawsuit or arbitration proceeding, as determined by the
court or arbitrator.  In the event that
any case is commenced by or against the Borrower under the Bankruptcy Code
(Title 11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank
related to the preservation, protection, or enforcement of any rights of the
Bank in such a case.  As used in this
paragraph, “attorneys’ fees” includes the allocated costs of the Bank’s in-house
counsel.

10.9         One Agreement.

This
Agreement and any related security or other agreements required by this
Agreement, collectively:

(a)                                  represent
the sum of the understandings and agreements between the Bank and the Borrower
concerning this credit;

(b)                                 replace
any prior oral or written agreements between the Bank and the Borrower
concerning this credit; and

(c)                                  are
intended by the Bank and the Borrower as the final, complete and exclusive
statement of the terms agreed to by them.

In
the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.  Any reference in any related document to a “promissory
note” or a “note” executed by the Borrower and dated as of the date of this
Agreement shall be deemed to refer to this Agreement, as now in effect or as
hereafter amended, renewed, or restated.

10.10       Indemnification.

The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement or any document required hereunder, (b)
any credit extended or committed by the Bank to the Borrower hereunder, and (c)
any litigation or proceeding related to or arising out of this Agreement, any
such document, or any such credit.  This
indemnity includes but is not limited to reasonable attorneys’ fees (including
the allocated cost of in-house counsel). 
This indemnity extends to the Bank, its parent, subsidiaries and all of
their directors, officers, employees, agents, successors, attorneys, and
assigns.  This indemnity will survive
repayment of the Borrower’s obligations to the Bank.  All sums due to the Bank hereunder shall be
obligations of the Borrower, due and payable immediately without demand.

10.11       Notices.

Unless otherwise provided
in this Agreement or in another agreement between the Bank and the Borrower,
all notices required under this Agreement shall be personally delivered or sent
by first class mail, postage prepaid, or by overnight courier, to the addresses
on the signature page of this Agreement, or sent by facsimile to the fax
numbers listed on the signature page, or to such other addresses as the Bank
and the Borrower may specify from time to time in writing.  Notices and other communications shall be effective (i) if mailed, upon the earlier
of receipt or five (5) days after deposit in the U.S. mail, first class,
postage prepaid, (ii) if telecopied, when transmitted, or (iii) if
hand-delivered, by courier or otherwise (including telegram, lettergram or
mailgram), when delivered.

 21
 

 

10.12       Headings.

Article
and paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.

10.13       Counterparts.

This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.

10.14       Limitation of Interest and Other
Charges.

If, at any time, the rate of interest, together
with all amounts which constitute interest and which are reserved, charged or
taken by the Bank as compensation for fees, services or expenses incidental to
the making, negotiating or collection of the loan evidenced hereby, shall be
deemed by any competent court of law, governmental agency or tribunal to exceed
the maximum rate of interest permitted to be charged by the Bank to the
Borrower under applicable law, then, during such time as such rate of interest
would be deemed excessive, that portion of each sum paid attributable to that
portion of such interest rate that exceeds the maximum rate of interest so
permitted shall be deemed a voluntary prepayment of principal.  As used herein, the term “applicable law”
shall mean the law in effect as of the date hereof; provided, however, that in
the event there is a change in the law which results in a higher permissible
rate of interest, then this Agreement shall be governed by such new law as of
its effective date.

10.15       Definitions.

As used in this Agreement, the following terms shall
have the following meanings:

“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.

“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 Bank’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.

“Collateral” shall mean any and all assets and rights and
interests in or to property of Borrower and each of the other Loan Parties,
whether real or personal, tangible or intangible, in which a Lien is granted or
purported to be granted pursuant to the Collateral Documents.

“Collateral Documents” means the Security Agreement of even date
herewith from Borrower to Bank, and all other agreements, instruments and
documents  hereafter executed and
delivered in connection with this Agreement pursuant to which Liens are granted
or purported to be granted to Bank in Collateral securing all or part of the
Obligations, and including also any negative pledge agreements from any Loan
Party in favor of Bank.

“Compliance Certificate” means a certificate substantially in
the form of Exhibit A.

“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.

 22
 

 

“Default” or “default” means any event or condition that
constitutes an Event of Default or that upon notice, lapse of time or both
would, unless cured or waived, become an Event of Default.

“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.

“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 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 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 Borrower or any 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 Borrower or
any ERISA Affiliate.

“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).

“Guarantor”  means each of
Maricor Technologies, Inc.,a Maine corporation, The Maricor Group, a Maine
corporation, and Mecel Properties Limited,a Nova Scotia corporation, and their
respective successors.

“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 

 23
 

 

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 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.

“Guaranty”  means each
guaranty given by a Guarantor to Bank in connection with the Obligations.

“Indebtedness” means, as to any Person at a particular time,
without duplication (for example, Borrower’s letters of credit securing other
Indebtedness shall not count as Indebtedness independent of the Indebtedness
being secured), 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 and, in each
case, not past due for more than 60 days after the date on which such trade
account payable was created);

(e)           indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under
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)            capital leases and
Synthetic Lease Obligations;

(g)           all obligations of
such Person to purchase, redeem, retire, defease or otherwise make any payment
in respect of any Equity Interest in such Person or any other Person, provided
that the term “Indebtedness” shall not include preferred stock ; and

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

“Internal Control Event” means a material weakness in, or fraud
that involves management or other employees who have a significant role in,
Borrower’s internal controls over financial reporting, in each case as
described in the Securities Laws, in each case as described in the Securities
Laws and when relevant requirements become effective as to Borrower under
regulations promulgated under the Securities Laws.

“Laws” means, collectively, all international, foreign, Federal,
state and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or 

 24
 

 

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
duties, requests, licenses, authorizations and permits of, and agreements with,
any Governmental Authority, in each case whether or not having the force of
law.

“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 in
the nature of a security interest of any kind or nature whatsoever (including
any conditional sale or other title retention agreement, any easement, right of
way or other encumbrance on title to real property, and any financing lease
having substantially the same economic effect as any of the foregoing).

“Loan Documents” means this Agreement, any promissory notes
executed pursuant to Section 4.1(b), each Guaranty and each Collateral
Document.

“Loan Parties” means, collectively, Borrower and each Person
executing a Loan Document.

“Material Adverse Effect” means (a) a material adverse change
in, or a material adverse effect upon, the operations, business, properties,
liabilities (actual or contingent), condition (financial or otherwise) or
prospects of Borrower or Borrower and its Subsidiaries taken as a whole; (b) a
material impairment of the ability of any Loan Party to perform its obligations
under any Loan Document to which it is a party; or (c) 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.

“Obligations” means all advances to, and debts, liabilities,
obligations, covenants and duties of, any Loan Party arising under any Loan
Document, Swap Contract or otherwise with respect to any Loan, 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.

“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
Borrower or any ERISA Affiliate or to which 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.

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

“Registered Public Accounting Firm” has the meaning specified in
the Securities Laws and shall be independent of Borrower as prescribed by the
Securities Laws.

“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.

“Responsible Officer” means the chief executive officer,
president, chief financial officer, chief accounting officer, treasurer or
assistant treasurer of a Loan Party.  Any
document delivered hereunder that is signed by a Responsible Officer of a Loan
Party shall be conclusively presumed to have been authorized by all necessary
corporate, partnership and/or other action on the part of 

 25
 

 

such Loan Party and such Responsible Officer shall be conclusively
presumed to have acted on behalf of such Loan Party.

“Sarbanes-Oxley” means the Sarbanes-Oxley Act of 2002.

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

“Securities Laws” means the Securities Act of 1933, the
Securities Exchange Act of 1934, Sarbanes-Oxley and the applicable accounting
and auditing principles, rules, standards and practices promulgated, approved
or incorporated by the SEC or the Public Company Accounting Oversight Board, as
each of the foregoing may be amended and in effect on any applicable date
hereunder.

“Subsidiary” of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity of which a majority
of the shares of securities or other interests having ordinary voting power for
the election of directors or other governing body (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 Borrower.

“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 (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.

“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).

“Threshold Amount”
means Five Hundred Thousand Dollars ($500,000) for Borrower, One Million
Dollars ($1,000,000) for Maine Public Service Company and Two Hundred Fifty
Thousand Dollars ($250,000) for any of the Subsidiary.

10.16       Maine Notice.       By signing below, the Borrower agrees and
acknowledges that, under Maine law, no promise, contract, or agreement to lend
money, extend credit, forbear from collection of debt or make any other
accommodation for the repayment of a debt for more than Two Hundred Fifty
Thousand Dollars ($250,000) may be enforced against the Bank unless the
promise, contract, or agreement (or some memorandum or note thereof) is in
writing and signed by the Bank.  The
Borrower executed this Agreement as of the date stated at the top of the first
page, intending to create an instrument executed under seal.

 26
 

 

 

	
  Attested To:

  	
   

  	
   

  	
  Maine & Maritimes Corporation

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  	
   (Seal)

  
	
  Typed Name

  	
   

  	
   

  	
  Typed Name: J. Nicholas Bayne

  
	
   

  	
   

  	
   

  	
  Title: President and CEO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address where notices to

  
	
   

  	
   

  	
   

  	
  the Borrower are to be sent:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  209 State Street

  
	
   

  	
   

  	
   

  	
  Presque Isle, ME 04769

  
	
   

  	
   

  	
   

  	
  Attention: Patrick Cannon, General Counsel and
  Secretary

  
	
   

  	
   

  	
   

  	
  Telephone: 207-760-2422

  
	
   

  	
   

  	
   

  	
  Telecopier: 207-760-2423

  
	
   

  	
   

  	
   

  	
  Electronic Mail: pcannon@maineandmaritimes.com

  
	
   

  	
   

  	
   

  	
  Website Address: www.maineandmaritimes.com

  
	
  Bank of America, N.A.

  	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Typed Name

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address where notices to

  	
   

  	
   

  
	
  the Bank are to be sent:

  	
   

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
   

  
	
  One Hundred Middle Street, Suite 329

  	
   

  	
   

  
	
  Portland, Maine 04101-4673

  	
   

  	
   

  
	
  Attention: Ms. Jane Parker

  	
   

  	
   

  
	
  Facsimile: 207-874-5167

  	
   

  	
   

  
											

 

 27
 

 

Exhibit A

FORM OF
COMPLIANCE CERTIFICATE

Financial Statement Date:              ,

To:                              Bank of America, N.A.

Ladies
and Gentlemen:

Reference is made to that certain
Loan Agreement, dated as of           ,
2006 (as amended, restated, extended, supplemented or otherwise modified in
writing from time to time, the “Agreement;” the terms defined therein
being used herein as therein defined), among Maine & Maritimes Corporation
(“Borrower”), the Lenders from time to time party thereto, and Bank of
America, N.A., as Bank.

The undersigned Responsible Officer
hereby certifies as of the date hereof that he/she is the                                      
                              
of Borrower, and that, as such, he/she is authorized to execute and deliver
this Certificate to Agent on the behalf of Borrower, and that:

(use the following paragraph for fiscal year-end
financial statements)

1.              Attached hereto as Schedule 1 are the year-end
audited financial statements and other reporting and certifications as required
by Section 7.2(a) of the Agreement for the fiscal year ended as of the above
date.

(use the following paragraph for quarter year-end
financial statements)

1.              Attached hereto as Schedule 1 are the unaudited
financial statements and other reporting and certifications as required by
Section 7.2(b) of the Agreement for the fiscal quarter ended as of the above
date.

2.              The undersigned has reviewed and is familiar with
the terms of the Agreement and has made, or has caused to be made under his/her
supervision, a detailed review of the transactions and condition (financial or
otherwise) of Borrower during the accounting period covered by the attached
financial statements.

3.              A review of the activities of Borrower during such
fiscal period has been made under the supervision of the undersigned with a
view to determining whether during such fiscal period Borrower performed and
observed all its Obligations under the Loan Documents and

 28
 

 

(select one)

(to the best knowledge of the undersigned during such fiscal period,
Borrower performed and observed each covenant and condition of the Loan
Documents applicable to it, and no Default has occurred and it continuing.)

-or-

(the following covenants or conditions have not
been performed or observed and the following is a list of each such Default and
its nature and status:)

4.             The
representations and warranties of Borrower contained in Article VI of
the Agreement, and/or any representations and warranties of Borrower or any
other Loan Party that are contained in any document furnished at any time under
or in connection with the Loan Documents, are true and correct on and as of the
date hereof, except to the extent that such representations and warranties
specifically refer to an earlier date, in which case they are true and correct
as of such earlier date.

5.             The
financial covenant analyses and information set forth on Schedule 2
attached hereto are true and accurate on and as of the date of this
Certificate.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                                 ,
                 .

	
   

  	
  MAINE & MARITIMES
  CORPORATION

  
	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

 29
 

 

 

	
  

  	
  For the Quarter/Year ended

  	
  (“Statement Date”)

  

 

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

	
  I.

  	
  Section 7.3 Debt to Capital Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Consolidated Total Indebtedness for Borrowed Money:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  Common Shareholder’s Equity

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  Consolidated Total Capital (Line IA + IB)

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  Percentage (Line I A  ̧
  Line I C)

  	
     %

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  Maximum Allowed

  	
  57%
  [55%]

  
	
   

  	
   

  	
   

  
	
  II.

  	
  Section 7.4 Interest Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  A.

  	
  Consolidated EBIT:

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  B.

  	
  Consolidated Interest Expense

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  C.

  	
  Preferred Dividend Paid

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  D.

  	
  Ratio (Line II A)  ̧
  (Line II B + II C)

  	
           
  to 1.0

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  E.

  	
  Minimum Required

  	
  1.0 : 1.0

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Use
  applicable Ratio]

  

 30
 

 

Schedule 6.8

Liens.

1. 
Liens in favor of Bank of America, N.A., as Administrative Agent, under
or relating to the Credit Agreement dated as of October  21, 2005, among the Borrower, each lender from
time to time party thereto (initially Bank of America, N.A. and Katahdin Trust
Company), and Bank of America, N.A., as Administrative Agent and L/C Issuer, as
amended from time to time.

 31Exhibit
10(b)

FIRST AMENDMENT

THIS FIRST
AMENDMENT, dated as of June 13, 2006, by and among MAINE & MARITIMES
CORPORATION, a Maine corporation (“Borrower”), BANK OF AMERICA, N.A., as
Administrative Agent (“Agent”), BANK OF AMERICA, N.A. as Lender and L/C
Issuer, and KATAHDIN TRUST COMPANY, as Lender (Bank of America, N.A. and
Katahdin Trust Company are sometimes collectively referred to as the “Lenders”);

WITNESSETH:

WHEREAS, Borrower,
the Agent and the Lenders are parties to a Credit Agreement dated as of October  21, 2005 (the “Credit Agreement”); and

WHEREAS, Borrower
has requested that the Credit Agreement be amended and the Lenders have agreed
to do so;

NOW, THEREFORE,
for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Lenders hereby agree as follows:

1.             Section
6.12 of the Credit Agreement is hereby deleted and replaced with the following:

6.12  Financial Covenants.

(a)  Debt to Capital Ratio.

Not allow
Consolidated Total Indebtedness for Borrowed Money to exceed the percentage of
Consolidated Total Capital indicated for each period specified below:

	
  Period

  	
   

  	
  Maximum Percentage

  
	
  Quarter ending
  03/31/06 through quarter ending 3/31/07

  	
   

  	
  57%

  
	
  Thereafter

  	
   

  	
  55%

  

 

This ratio will be
calculated at the end of each quarter, commencing with the quarter ending March
31, 2006, using the results of the twelve-month period ending with that
reporting period.

(b)  Interest Coverage Ratio.

Maintain on a
consolidated basis an Interest Coverage Ratio of at least the ratio indicated
for each period specified below:

 

 

	
  Period

  	
   

  	
  Ratio

  
	
  Three months ending 3/31/06

  	
   

  	
  2.00:1.0

  
	
  Six months ending 6/30/06

  	
   

  	
  1.00:1.0

  
	
  Nine months ending 9/30/06

  	
   

  	
  1.00:1.0

  
	
  Twelve months ending 12/31/06

  	
   

  	
  2.00:1.0

  
	
  Twelve months ending 3/31/07

  	
   

  	
  1.75:1.0

  
	
  Twelve months ending 6/30/07 and

  	
   

  	
   

  
	
  Each trailing twelve month period thereafter,

  	
   

  	
   

  
	
  On a quarterly basis

  	
   

  	
  2.50:1.0

  

 

This ratio will be
calculated at the end of each quarter, commencing with the quarter ending March
31, 2006.

2.                                       In
all other respects, the Credit Agreement remains unmodified and in full force
and effect and is hereby ratified and affirmed. 
The Borrower represents and warrants to the Lenders that no default now
exists under the Credit Agreement as amended hereby.  From and after the date of this Amendment, any
reference in the Credit Agreement to “this Agreement,” and any reference in any
of the related documents (including promissory notes) to the Credit Agreement,
shall mean such Agreement as amended hereby.

[The next page is the
signature page.]

 2
 

 

IN WITNESS WHEREOF, the
Borrower and the Lenders have caused this Amendment to be duly executed and
delivered as of the date first above written, regardless of the actual date of
execution and delivery.

	
  WITNESS:

  	
   

  	
  MAINE & MARITIMES CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WITNESS:

  	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
   

  	
  as a Lender and L/C Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Stephen P. deCastro

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KATAHDIN TRUST COMPANY,

  
	
   

  	
   

  	
  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

ACKNOWLEDGEMENT OF AGENT

The undersigned,
as Agent under the Credit Agreement, pursuant to Section 10.01 of the Credit
Agreement, hereby acknowledges the foregoing First Amendment.

	
  

  	
   

  	
  BANK OF AMERICA, N.A., as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:  Stephen
  P. deCastro

  
	
   

  	
   

  	
  Title:  Vice
  President

  
						

 

 3

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