Document:

EX-10.1

 

EXHIBIT 10.1

FIRST MODIFICATION TO LOAN DOCUMENTS

     THIS FIRST MODIFICATION TO THE LOAN DOCUMENTS (“First Modification”) is given to be effective
as of June 30, 2006, and is entered into by and among FIRST NATIONAL BANK OF COLORADO, a national
bank association, as lender (“Lender”), METRETEK TECHNOLOGIES, INC., a Delaware corporation, as
guarantor (the “Guarantor”), SOUTHERN FLOW COMPANIES, INC., a Delaware corporation, as borrower and
debtor (“Southern Flow”), POWERSECURE, INC., a Delaware corporation, as borrower and debtor
(“PowerSecure”), METRETEK INCORPORATED, a Florida corporation (“Metretek”). Southern Flow and
PowerSecure are hereinafter sometimes referred to collectively herein as “Borrower” or “Borrowers”.

RECITALS

     This First Modification is entered into upon the basis of the following facts and
circumstances:

     A. Lender, Borrowers, Guarantor and Metretek have entered into that certain Credit Agreement
dated as of September 2, 2005 (the “Agreement”), pursuant to which Lender has agreed to extend a
revolving line of credit to PowerSecure in the maximum aggregate amount of Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00) (the “Credit Facility A”), and a revolving line of
credit to Southern Flow in the maximum aggregate amount of Two Million and 00/100 Dollars
($2,000,000.00) (the “Credit Facility B”).

     B. Credit Facility A and Credit Facility B are further evidenced by PowerSecure’s Facility A
Note and Southern Flow’s Facility B Note dated September 2, 2005 (the “Notes”).

     C. Payment of the Notes is guaranteed by that certain Commercial Guaranty executed by
Guarantor for the benefit of Lender (the “Guaranty”).

     D. The parties have agreed to modify the Loan Documents on the terms and conditions set forth
herein.

AGREEMENT

     NOW, THEREFORE, in consideration of the foregoing Recitals and the promises and agreements
contained herein, the undersigned parties hereby agree to amend and modify the Loan Documents, as
follows:

     1. Modification of Credit Agreement. The Credit Agreement is hereby amended as
follows:

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          (a) Annual Facility Fee Definition. The definition of “Annual Facility Fee” is hereby
deleted.

          (b) Promise to Pay Fees. Section 3.2 is hereby deleted and replaced in its entirety as
follows:

3.2 Promise to Pay Fees. Each Borrower shall pay an Annual Unused
Fee on the average daily unused amount of the Credit Facility A and Credit
Facility B during the preceding quarter and payable, in arrears, on the last
day of each quarter, and continuing on the last day of each quarter until
the Maturity Date. The initial payment of the Annual Unused Fee
will be prorated based on the number of days from the Closing Date through
the date the fee is paid, divided by the number of days in the quarter
ending as of such date payable or the last Business Day of such quarter. If
Borrower fails to make, when due, any payment of fees or expenses specified
or referred to in this Agreement due to Lender, including, without
limitation, Annual Unused Fee referred to in this Section or fees referred
to elsewhere in this Agreement or in any separate agreement between Borrower
and Lender relating to this Agreement or the transactions contemplated
hereby, the amount due shall bear interest until paid at the Default Rate.
Furthermore, such amount shall constitute part of the Facilities, secured by
all of the Collateral.

          (c) Annual Unused Fee Definition. The definition of “Annual Unused Fee” is hereby
deleted and replaced in its entirety as follows:

“Annual Unused Fee” means 0.125% of the average unused amount of the
Facility A Total Draw Commitment or the Facility B Total Draw Commitment, as
applicable.

          (d) Eligible A/R Definition. The definition of “Eligible A/R” is hereby deleted and
replaced in its entirety as follows:

“Eligible A/R” shall mean Accounts of PowerSecure or Southern Flow,
as applicable, arising in the ordinary course of such applicable Borrower’s
business from arms-length transactions, provided, however, that unless
otherwise approved by Lender in writing, a Account shall not constitute an
Eligible A/R if:

(i) any account receivable or part thereof which is disputed or against
which any defense or counter-claim or right of setoff has been asserted;

(ii) accounts where debtor has filed bankruptcy;

(iii) any account of the United States government or any department or
agency thereof arising under a contract with any such account debtor,

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unless
such account is assignable and has been duly assigned to Lender and
acknowledged in accordance with federal law;

(iv) any account of an account debtor whose chief executive officer or
principal place of business is located outside of the United States of
America;

(v) any account which is unpaid more than ninety (90) days past the date
when payment is due on the invoice therefore;

(vi) any account of a person or entity which is controlled by or controls or
is under common control with the account creditor or any account of an
employee of the account creditor;

(vii) all accounts of an account debtor if ten percent (10%) or more of the
total amount owed by the account debtor to the account creditor is ninety
(90) days or more past due;

(viii) any account in which the Lender does not have a perfected, first
priority security interest;

(ix) any account which the Lender reasonably determines to be ineligible
for, among any number of reasons, includes that the account is of doubtful
collection value.

          (e) Eligible Inventory Definition. The definition of “Eligible Inventory” is hereby
deleted and replaced in its entirety as follows:

“Eligible Inventory” means all Inventory of PowerSecure or Southern
Flow, as applicable, provided, however, that unless otherwise approved by
Lender, no Inventory shall constitute Eligible Inventory if:

(i) such Inventory is owned in whole or in part by any Person other
than PowerSecure or Southern Flow, as applicable;

(ii) PowerSecure or Southern Flow, as applicable, does not have a good,
valid and marketable title to such Inventory;

(iii) any Inventory that is obsolete, damaged, defective or otherwise unable
to be sold or used;

(iv) any Inventory not located in the United States of America;

(v) any Inventory in which the Lender does not have a valid, perfected first
priority security interest, including all Inventory in which another
creditor asserts a purchase money security interest, unless the purchase
money security interest has been subordinated to the security interests of
Lender in a form acceptable to Lender;

(vi) such Inventory does not conform in all respects to the warranties
contained in this Agreement and the other Loan Documents; or

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(vii) the Lender, in its reasonable discretion, designates such Inventory to
be ineligible.

          (f) Facility B Borrowing Base Definition. The definition of “Facility B Borrowing
Base” is hereby deleted and replaced in its entirety as follows:

“Facility B Borrowing Base” means (a) 80% of Eligible A/R of
Southern Flow, plus (b) 20% of Eligible Inventory of Southern Flow, all as
calculated on the most recent monthly Borrowing Base Report.

          (g) Interest; Interest Payments. Section 3.1(a) is hereby deleted and replaced in
its entirety as follows:

3.1(a) Interest; Interest Payments. The Borrowers agree to pay
interest on the Facility A Draw Outstandings or the Facility B Draw
Outstandings, as applicable, from time to time as provided herein. Interest
on the Credit Facility A and on the Credit Facility B shall be due and
payable monthly in arrears on the first (1st) of each month,
commencing August 1, 2006. With respect to both Borrowers, the unpaid
principal balance of each Advance will bear interest at an annual rate equal
to the Prime Rate. The applicable rate shall change on each day on which
the Prime Rate changes.

          (h) Closing Deliveries. Section 6.2(c) is hereby deleted.

          (i) Monthly Financial Statements; Accounts Receivable Aging; Borrowing Base Report.
Section 7.1(c) is hereby deleted and replaced in its entirety as follows:

7.1(c) Accounts Receivable Aging; Borrowing Base Report. Along with
Borrower’s next request for an Advance and submission of a Borrowing Notice
and within thirty (30) days after the end of each calendar month during the
Fiscal Year thereafter, (i) Borrowing Base Report of Borrower; and (ii)
accounts receivable aging; each covering the periods from the end of the
immediately preceding Fiscal Year of the Borrower, to the end of such month,
and for such month alone (if applicable), all in such detail as Lender may
request and signed and certified to be correct by the president or chief
financial officer of each Borrower and Guarantor, as applicable or other
financial officer satisfactory to Lender.

          (j) Investments and Advances. Section 8.7 is hereby deleted and replaced in its
entirety as follows:

8.7 Investments and Advances.
Make any investment in, or advances to, any other Person, firm, or
corporation, except (a) advance payments or deposits against purchases made
in the ordinary course of Borrower’s

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regular business; (b) direct
obligations of the United States of America; (c) money market mutual funds
that invest in direct obligations of the United States of America; (d)
advances to other Obligors or their Affiliates (subject to the restrictions
thereon provided in this Agreement and provided no Default or Event of
Default has occurred and is continuing), (e) investments in commercial paper
and variable or fixed rate notes issued or guaranteed by U.S. corporations
rated “A-1” or “A-2” by Standard & Poor’s Corporation or “P-1” or “P-2” by
Moody’s Investors Service or certificates of deposit or bankers’ acceptances
having a maturity of one year or less issued by members of the Federal
Reserve System having deposits in excess of $200,000,000 (which certificates
of deposit or bankers’ acceptances are fully insured by the Federal Deposit
Insurance Corporation); and (f) investments, classified in accordance with
GAAP as current assets, in money market investment programs registered under
the Investment Company Act of 1940, as amended, which are administered by
reputable financial institutions having capital of at least $500,000,000 and
the portfolios of which are limited to investments of the character
described in foregoing clauses (b), (c), (e) and (f). In addition to the
foregoing, an Obligor shall be permitted to make any other investment
permitted under the Company’s Investment Policy as currently in effect, or
as amended from time to time with the consent of the Lender.

          (k) Inter-Company Liability – PowerSecure. Section 8.9 is hereby deleted in its
entirety.

          (l) PowerSecure Financial Covenants. Section 8.11(a)(i) is hereby deleted in its
entirety.

          (m) PowerSecure Financial Covenants. Section 8.11(a)(ii) is hereby deleted in its
entirety.

          (n) PowerSecure Financial Covenants. Section 8.11(a)(iii) is hereby deleted in its
entirety and replaced as follows:

8.11(a)(iii) Current Assets to Current Liabilities Ratio.
PowerSecure shall maintain a ratio of Current Assets of PowerSecure to
Current Liabilities of PowerSecure of no less than 1.10:1, as of the end of
any fiscal quarter. For purposes of this paragraph, (A) neither Facility
shall be considered a Current Liability and (b) the Current Assets and
Current Liabilities calculation shall exclude all receivables, loans or
other advances owed to PowerSecure by any affiliate or made by PowerSecure
to any Affiliate.

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          (o) Southern Flow Financial Covenants. Section 8.11(b)(i) is hereby deleted in its
entirety.

          (p) Southern Flow Financial Covenants. Section 8.11(b)(ii) is hereby deleted in its
entirety and replaced as follows:

8.11(b)(ii) Tangible Net Worth. Southern Flow shall maintain a Tangible
Net Worth of Southern Flow of no less than $1,500,000, as of the end of
any fiscal quarter.

          (q) Guarantor Financial Covenants. Section 8.11(c)(i) is hereby deleted in its
entirety and replaced as follows:

8.11(c)(i) Debt to Tangible Net Worth Ratio. Guarantor, on a
consolidated basis as of the end of any fiscal quarter, shall not permit the
ratio of Debt to Tangible Net Worth to exceed 2.00:1 during the time period
beginning on the date hereof and at all times thereafter.

          (r) Guarantor Financial Covenants. Section 8.11(c)(ii) is hereby deleted in its
entirety.

     2. Modification of Facility A Note. The interest rate on the outstanding principal
balance of Facility A Note is reduced to the Prime Rate. Borrower shall pay interest on the
outstanding principal balance of Facility A Note at the rate per annum equal to the Prime Rate.

     3. Modification of Facility B Note. The interest rate on the outstanding principal
balance of Facility B Note is reduced to the Prime Rate. Borrower shall pay interest on the
outstanding principal balance of Facility B Note at the rate per annum equal to the Prime Rate.

     4. Modification of Loan Documents. Any references in the Loan Documents to the Credit
Agreement, the Notes, or the Commercial Guaranty shall mean the Credit Agreement, the Notes and the
Commercial Guaranty as modified by this First Modification.

     5. Definitions. All capitalized terms used in this First Modification which are not
otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement. The
defined terms set forth in this First Modification are hereby incorporated into the Credit
Agreement.

     6. No Other Modifications. Except as expressly amended and modified by the terms of
this First Modification, the terms and conditions of the Loan Documents shall remain
unchanged and in full force and effect and are hereby ratified and confirmed by Borrowers and
Guarantor.

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     7. Ratification. The parties hereby ratify and confirm the continued force and effect
of the Loan Documents, as modified by this First Modification, without change except as
specifically amended by this First Modification. It is expressly understood and agreed that this
First Modification shall in no manner alter or affect (except as expressly provided therein),
extinguish or impair the Indebtedness evidenced by the Loan Documents, and shall not extinguish or
impair any rights and remedies of the Lender thereunder or the priority of the Loan Documents.

     8. Ratification of Guarantor. Guarantor hereby (a) consents to the amendment of the
Loan Documents as set forth in this First Modification, (b) ratifies and confirms the continued
force and effect of the Loan Documents, as modified by this First Modification, without change
except as specifically amended by this First Modification, (c) ratifies and confirms the continued
force and effect of the Commercial Guaranty to which Guarantor is signatory, and (d) covenants and
agrees with the Lender to perform in a full and timely manner all of its obligations under the Loan
Documents to which she is signatory, in accordance with such Loan Documents.

     9. No Release. Borrowers and Guarantor specifically acknowledge and agree that
nothing contained in this First Modification shall be understood or construed to be a satisfaction
or release in whole or in part of any Indebtedness evidenced by the Loan Documents, or to be an
amendment or waiver of any of the provisions of the Loan Documents, except as specifically set
forth in this First Modification, or as reasonably necessary to effect the amendments contained
herein. Except as otherwise necessary to effect the intent hereof, the terms and conditions of the
Loan Documents shall continue in full force and effect without change. Borrowers and Guarantor
hereby affirm their respective agreements to be bound by all of the obligations, covenants,
liabilities and warranties set forth in the Loan Documents in accordance with their respective
terms, as amended by this First Modification, and acknowledge that no defenses exist to the
enforcement of the Loan Documents in accordance with their respective terms and no basis exists for
asserting any offset or other claim against the Lender.

     10. Representations and Warranties. Borrowers and Guarantor represents and warrants
to the Lender:

          (a) To its knowledge after due inquiry regarding Credit Facility A or Credit Facility B, no
Default or Event of Default under any of the Loan Documents, nor any event, that, with the giving
of notice or the passage of time or both, would be a Default or an Event of Default under the Loan
Documents herein has occurred and is continuing.

          (b) There has been no material adverse occurrence regarding the Obligors.

          (c) Except as disclosed in writing by the Borrowers and Guarantor to Lender as of the date
hereof, each and all representations and warranties of Borrowers and Guarantor in
the Loan Documents are restated and reaffirmed and are accurate on the date hereof to the same

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extent as though made as of the date of this First Modification, except to the extent such
representations and warranties specifically relate to an earlier date.

          (d) The Borrowers and Guarantor have no claims, counterclaims, defenses, or set-offs against
Lender with respect to Credit Facility A or Credit Facility B or the Loan Documents.

          (e) The Loan Documents, as modified herein, to which Borrowers and Guarantor are signatory are
the legal, valid, and binding obligation of Borrowers and Guarantor, enforceable against such
Borrowers and Guarantor in accordance with their terms.

          (f) Each of the Borrowers and Guarantor which is a legal entity is validly existing under the
laws of the state of its formation or organization and has the requisite power and authority to
execute and deliver this First Modification and to perform the Loan Documents to which such
Borrowers and Guarantor is signatory. The execution and delivery of this First Modification and the
performance of the Loan Documents as modified herein have been duly authorized by all requisite
action by or on behalf of each Borrowers and Guarantor. This First Modification has been duly
executed and delivered on behalf of each Borrowers and Guarantor.

     11. Savings Clause. If any provision in this First Modification is invalid, illegal,
or unenforceable, the remaining provisions shall not be affected or impaired thereby, and there
shall be substituted for the invalid, illegal, or unenforceable provision the most similar
provision that is valid, legal and enforceable.

     12. Counterparts. This First Modification may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken together shall
constitute one and the same First Modification.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

	 	 	 	 	 	 	 	 	 	 	 
	BORROWERS:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	POWERSECURE, INC.	 	 	 	SOUTHERN FLOW COMPANIES, INC.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ A. Bradley Gabbard, August 7, 2006
	 	 	 	By:
	 	/s/ A. Bradley Gabbard, August 7, 2006	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	A. Bradley Gabbard,
	 	 	 	 	 	A. Bradley Gabbard,	 	 
	 

	 	Executive Vice President and CFO
	 	 	 	 	 	Executive Vice President and CFO	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Address:

	 	230 Capcom Avenue, Suite 107
	 	 	 	Address:
	 	132 Demanade Blvd.	 	 
	 

	 	Wake Forest, North Carolina 27587
	 	 	 	 	 	Lafayette, LA 70503
	 	 
	Facsimile:

	 	(919) 556-3596
	 	 	 	Facsimile:
	 	337-237-3790	 	 

	 	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	METRETEK:	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	METRETEK TECHNOLOGIES, INC.	 	 	 	METRETEK INCORPORATED	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ A. Bradley Gabbard, August 7, 2006
	 	 	 	By:
	 	/s/ A. Bradley Gabbard, August 7, 2006
	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	A. Bradley Gabbard,
	 	 	 	 	 	A. Bradley Gabbard,	 	 
	 

	 	Executive Vice President and CFO
	 	 	 	 	 	Executive Vice President and CFO	 	 

	 	 	 	 	 	 	 	 	 	 	 
	Address:

	 	303 East 17th Avenue, Suite 660
	 	 	 	Address:
	 	305-A East Drive	 	 
	 

	 	Denver, CO 80203
	 	 	 	 	 	Melbourne, FL 32904
	 	 
	Facsimile:

	 	303-785-8085
	 	 	 	Facsimile:
	 	321-259-2900	 	 

LENDER:

	 	 	 	 	 	 	 
	FIRST NATIONAL BANK OF COLORADO	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Greg H. Atkinson
 

Greg H. Atkinson,
	 	 	 	 
	 

	 	Vice President	 	 	 	 
	Address: 3033 Iris Avenue	 	 	 	 
	Boulder, CO 80301-9032	 	 	 	 
	Facsimile: 303-443-0181EX-10.2

 

EXHIBIT 10.2

METRETEK TECHNOLOGIES, INC.

POWERSECURE KEY EMPLOYEE RETENTION PLAN

Adopted as of June 12, 2006

     SECTION 1. Purpose. The purpose of PowerSecure Key Employee Retention Plan is to provide
incentives and rewards to key employees of PowerSecure, Inc. (“PowerSecure”), a Delaware
corporation and wholly-owned subsidiary of Metretek Technologies, Inc. (“Metretek”), a Delaware
corporation, to enhance the ability of PowerSecure to retain and motive these key employees to make
significant contributions to PowerSecure’s growth, profitability, cash flow and financial success
based on the achievement of financial and other Performance Goal.

     SECTION 2. Definitions. The following terms as used in the Plan shall have the meanings set
forth below:

     (a) “Award” means the grant of any Performance Goal and/or Time Goal by the Committee to any
Participant under the Plan.

     (b) “Bonus” means a cash bonus under the Plan paid to a Participant for the Participant’s
achievement of a Performance Goal or of a Time Goal.

     (c) “Board” means the Board of Directors of the Metretek.

     (d) “Cause” means the termination by PowerSecure of a Participant’s employment with
PowerSecure for any of the following reasons :

          (i) The failure or refusal by the Participant to perform any of his duties as an officer
or employee of PowerSecure, which failure, refusal or breach remains unremedied or uncured for a
period of twenty (20) business days after notice thereof is given to the Participant by
PowerSecure;

          (ii) Any act of dishonesty, disloyalty, insubordination, gross negligence, recklessness,
fraud, breach of fiduciary duty or bad faith by the Participant that is materially detrimental to
PowerSecure or that results in substantial personal enrichment of the Participant; or

          (iii) The conviction of the Participant, or the entering of a guilty plea or a plea of no
contest by the Participant with respect to (A) a felony, or (B) a misdemeanor that involves theft,
fraud or dishonesty, results in the Participant’s imprisonment or impairs the Participant’s ability
to perform his duties hereunder or damages the reputation or business of PowerSecure.

     (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time, together
with the rules, regulations and interpretations promulgated thereunder, and any successor
provisions, rules, regulations and interpretations.

     (f) “Committee” means the Compensation Committee of the Board, or any successor committee
appointed by the Board to administer the Plan.

     (g) “Controller” means the person elected by the board of directors of PowerSecure and serving
as the Controller of PowerSecure, or if no person has been so elected and is not serving, such
other person then serving the controller function of PowerSecure as determined by the Committee.

     (h) “Effective Date” of the Plan means June 12, 2006.

     (i) “Employee” means an officer or other key employee of PowerSecure or any Subsidiary.

     (j) “GAAP” means generally accepted accounting principles as consistently applied in the
United States, as in effect from time to time.

 

 

     (k) “Gross Profit” means, for purposes of computing any Performance Goal, the revenues of
PowerSecure less the direct material costs and labor costs (including sales commissions but not
including the Performance Bonus) of PowerSecure, but without reduction for any other
overhead allocations.

     (l) “Metretek” means Metretek Technologies, Inc., a Delaware corporation, together with any
successor thereto.

     (m) “Participant” means any Employee who has been granted an Award under the Plan by the
Committee.

     (n) “Performance Bonus” means a Bonus paid to a Participant for the achievement of a
Performance Goal.

     (o) “Performance Goal” means the standards of measurement of PowerSecure performance and
individual performance applicable to a Participant as established by the Committee pursuant to
Section 5 below.

     (p) “Person” means any individual, corporation, partnership, limited liability company,
association, joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.

     (q) “Plan” means the PowerSecure Key Employee Retention Plan, as amended from time to time in
accordance with the provisions hereof.

     (r) “PowerSecure” means PowerSecure, Inc., a Delaware corporation, together with any successor
thereto, and its Subsidiaries.

     (s) “Sales” means, for the purposes of computing any Performance Goal, the accrued revenues
applicable by sales of PowerSecure of certain specified products and/or services, which may be in
certain specified states, for the applicable year determined in accordance with GAAP, as used and
applied by PowerSecure in its financial statements.

     (t) “Subsidiary” means any corporation, partnership, limited liability company, trust or other
entity (whether now or hereafter existing) which, on the date of determination, qualifies as a
subsidiary corporation of PowerSecure under Section 425(f) of the Code, and any successor thereto.

     (u) “Time Bonus” means a Bonus paid to a Participant for the achievement of a Time Goal.

     (v) “Time Goal” means the continued employment of a Participant with PowerSecure or a
Subsidiary from the date an Employee becomes a Participant with a Time Goal established by the
Committee until and through a target date specified by the Committee.

     SECTION 3. Administration.

          (a) Authority of the Committee. The Plan shall be administered by the Committee.
Subject to the terms of the Plan and applicable law and subject to such resolutions, not
inconsistent with the Plan, as may be adopted by the Board, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate the Participants; (ii) grant Awards under the Plan to Participants;
(iii) determine the type or types of Performance Goals with respect to each Award; (iv) determine
the size of Awards and establish any other terms and conditions of any Award; (v) construe,
interpret and administer the Plan and any instrument or agreement relating to, or Award made under,
the Plan; (vi) adopt, amend, suspend, waive or rescind such rules and regulations and appoint such
agents as it shall deem necessary or desirable for the administration of the Plan; (vii) correct
any defect or supply any omission or reconcile any inconsistency, and to construe and interpret the
Plan, the rules and regulations, any agreement evidencing an Award or other instrument

2

 

entered into or Award made under the Plan; and (viii) make any other determinations and
decisions and take any other action that the Committee deems necessary or desirable for the
administration of the Plan.

          (b) Exercise of Authority. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with respect to the Plan
or any Award shall be within the sole discretion of the Committee, may be made at any time and
shall be final, conclusive and binding upon all Persons, including PowerSecure, its Subsidiaries,
Employees, Participants and their legal representatives and beneficiaries and stockholders. The
express grant of any specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority of the Committee. The
Committee may delegate to officers or managers of PowerSecure or any Subsidiary, or committees
thereof, the authority, subject to such terms as the Committee shall determine, to perform such
functions, including administrative functions, as the Committee may determine, to the extent that
such delegation will not cause Awards intended to qualify as “performance-based compensation” under
Section 162(m) of the Code of the Code to fail to so qualify. The Committee may appoint agents to
assist it in administering the Plan.

          (c) Committee Proceedings. The Committee shall hold its meetings at such times and
places as it shall deem advisable. A majority of the members of the Committee shall constitute a
quorum and all determinations shall be made by a majority of such quorum. Any determination
reduced to writing and signed by all of the members of the Committee shall be fully as effective as
if it had been made by a majority vote at a meeting of the Committee duly called and held.

          (d) Limitation of Liability. The Committee and each member thereof shall be entitled
to, in good faith, rely or act upon any report or other information furnished to him or her by any
Employee officer, other officer or employee of PowerSecure or a Subsidiary, PowerSecure’s
independent auditors, legal counsel, other consultants or any other agents assisting in the
administration of the Plan. Members of the Committee, and any officer or employee of PowerSecure
or a Subsidiary acting at the direction or on behalf of the Committee, shall not be personally
liable for any action or determination taken or made in good faith with respect to the Plan, and
shall, to the extent permitted by law, be fully indemnified and protected by PowerSecure with
respect to any such action or determination.

     SECTION 4. Eligibility. Employees shall be eligible to be selected by the Committee to be
Participants in the Plan and to be granted Awards under the Plan.

     SECTION 5. Awards.

          (a) General. Subject to the provisions of the Plan, Awards may be granted as set
forth in this Section 5. In addition, the Committee may impose on any Award or the exercise
thereof, at the date of grant or thereafter (subject to the terms of Section 7 hereof), such
additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee
shall determine, including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make elections pertaining to
his Award. Subject to the provisions of the Plan, the Committee shall have the right, in its sole
and absolute discretion, to accelerate the vesting or exercising of any Award granted under the
Plan. Except as required by applicable law, Awards shall be granted for no consideration other
than prior and future services.

          (b) Establishment of Performance Goals. The Committee may establish for each
Participant one or two (but not more than two) Performance Goals. The Performance Goals may vary
by Participant. The Performance Goals utilized by the Committee for each Participant may be based
on individual performance, corporate financial measures (including but not limited to Sales,
operating income, pre-tax income, net income, Gross Profit, costs, cash flow, EBITDA, any of the
preceding measures as a percent of sales, earnings per share, return on equity, return on
investment, total stockholder return and change in PowerSecure stock price), other PowerSecure and
business unit financial objectives, operational efficiency measures, and other measurable
objectives tied to PowerSecure’s success or such other criteria as the Committee shall determine in
its discretion. The Committee also may decide not to establish any Performance Goals for a
Participant. Notwithstanding the foregoing, the measurement of any Performance

3

 

Goals shall exclude any Revenues, Gross Profit or other financial or business metrics
applicable to orders made by or sales made to Publix Super Markets, Inc. on or prior to the
Effective Date (“Per-Existing Publix Orders”).

          (c) Determination and Payment of Performance Bonuses. As soon as practicable after
the end of each calendar year, the Controller will determine, in accordance with GAAP, whether any
Participant has achieved any of the Performance Goals applicable to such Participant, based upon
the financial statements and records of PowerSecure, and, if any Performance Goal of any
Participant has been achieved, will certify the same to the Committee, along with supporting
documentation thereof.

          (d) Establishment of Time Goals. The Committee may establish for each Participant one
or more Time Goals. While the Time Goals may vary by Participant, unless otherwise established by
the Committee, (i) each Participant shall have two Time Goals: December 31, 2010 and December 31,
2015; and (ii) upon achievement of each Time Goal, the Participant shall receive a Time Bonus of
$250,000. No Time Bonus will be paid with respect to a Time Goal for a Participant if the
Participant ‘s employment is terminated prior to the date of such Time Goal, regardless of the
reason for such termination (whether by PowerSecure or the PowerSecure), except as otherwise
provided in Section 6.

          (e) Payment of Bonuses. Bonuses will be paid in cash, subject to applicable withheld
as determined and computed by the Controller, within 90 days of the end of the calendar year in
which they are earned provided that the Committee may, in its discretion, permit Participants to
defer the payment of all or a portion of their Bonuses in accordance with Section 409A of the Code,
or if PowerSecure has adopted a deferred compensation plan and the Participant is also eligible to
participate therein, to defer the payment of all or a portion of their Bonuses in accordance with
the terms of such plan.

          (f) Maximum Amount of Bonuses. The maximum dollar amount that may be paid as a Bonus
under the Plan to any Participant may not exceed the sum of (i) $250,000 per Time Bonus, up to a
maximum of $500,000 for all Time Bonuses payable to any one Participant under the Plan, and (ii)
$750,000 per Performance Bonus, up to a maximum of $1,500,000 for all Performance Bonuses payable
to any one Participant under the Plan.

     SECTION 6. Termination of Employment.

          (a) General Termination of Rights Hereunder. Except as may be otherwise provided in a
binding employment agreement between PowerSecure and a Participant, in the event a Participant’s
employment with PowerSecure terminates for any reason, voluntarily or involuntarily, before a
Performance Goal or a Time Goal has been achieved, then that Participant shall have no further
rights under the Plan and shall not be entitled to payment of any Bonus under the Plan, except as
expressly provided in this Section 6.

          (b) Termination by PowerSecure without Cause or due to a Change in Control. If a
Participant’s employment is terminated by PowerSecure without Cause within 90 days of the end of a
fiscal year of PowerSecure, or at any time upon or following a “change in control” of PowerSecure
(as defined by the Committee), then that Participant shall be entitled to payment of any Bonus
under the Plan to which such Participant would have been entitled if such Participant had remained
employed with PowerSecure through the last day of the fiscal year in which such Participant was
terminated.

     SECTION 7. Non-Competition Covenant. In consideration in part for accepting any Bonus under
the Plan, whether a Time Bonus or a Performance Bonus, a Participant (i) who is a party to a
Non-Competition, Confidentiality and Proprietary Rights Agreement with PowerSecure agrees that the
“Restricted Period” provided therein shall become, from and after the date the Bonus is received,
the greater of (A) two (2) years or (B) one (1) year longer than it was prior thereto; and (ii) who
is not a party to a Non-Competition, Confidentiality and Proprietary Rights Agreement with
PowerSecure agrees to the following covenant not to compete against PowerSecure:

4

 

          (a) Covenant Not to Compete. During the term of the Participant’s employment with
PowerSecure and for a period of one year thereafter (the “Restricted Period”), the Participant
shall not, directly or indirectly, alone or in association with others, whether as owner,
shareholder, employee, officer, director, partner, manager, member, lender, investor, consultant,
principal, agent, independent contractor, co-venturer or in any other capacity, invest in, engage
in, have a financial interest in, be in any other way connected or affiliated with, or render
advice or service to, any Person that is in competition with PowerSecure in the United States or in
any other country in which PowerSecure does a material amount of business or otherwise has material
operations.

          (b) Competition with PowerSecure. For purposes of the Plan, (i) the phrase “in
competition with PowerSecure” shall be deemed to include competition with PowerSecure and its
Subsidiaries and affiliates, or their respective successors or assigns, or the businesses of any of
them, and (ii) a business shall be deemed to be in competition with PowerSecure if it is engaged in
any business activity or has products or services that are the same or similar to the business
activities, products or services of PowerSecure during the term of the Participant’s employment
with PowerSecure. Notwithstanding the foregoing, nothing herein contained shall prevent
Participant from acquiring and holding for investment up to five percent (5%) of any class of
securities of any corporation, if such securities are listed or traded on a national securities
exchange or the Nasdaq Stock Market or in the over-the-counter market.

          (c) Interpretation of Covenant. The Participant acknowledges and agrees that the
duration and area for which the covenant not to compete set forth in this Section 7 is to be
effective are fair and reasonable and are reasonably necessary for the protection of PowerSecure
and its business and good will, and the Participant hereby waives any objections to or defenses in
respect thereof. In the event that any court determines that any portion of the time period or the
area, or both of them, are unreasonable, arbitrary or against public policy, and that such covenant
is to such extent unenforceable, illegal or invalid, the parties hereto agree that this Section 7
shall be deemed amended to delete therefrom such provisions or portions adjudicated to be
unenforceable, illegal or invalid so that the covenant shall remain in full force and effect for
the greatest time period and in the greatest geographical area that would render it enforceable,
legal and valid. The parties intend that the covenant set forth in this Section 7 shall be deemed
to be a series of separate covenants, one for each and every county of each and every state of the
United States of America and one for each and every political subdivision of each and every other
country where the covenant is intended to be effective and is not proscribed by law.

     SECTION 8. Amendments to and Termination of the Plan and Awards. The Committee may, in its
sole discretion, from time to time amend, alter, suspend, discontinue or terminate the Plan or
discontinue granting Bonuses under the Plan without the consent of Participants; provided, however,
that, without the consent of a Participant, no amendment, alteration, suspension, discontinuation
or termination of the Plan may materially and adversely affect the rights of such Participant under
any Award theretofore granted to him. The Committee may waive any conditions or rights under,
amend any terms of, or amend, alter, suspend, discontinue or terminate, any Award theretofore
granted, prospectively or retrospectively; provided, however, that, without the consent of the
Participant, no amendment, alteration, suspension, discontinuation or termination of any Award may
materially and adversely affect the rights of such Participant under any Award theretofore granted
to him.

     SECTION 9. General Provisions.

          (a) Compliance with Legal and Other Requirements. PowerSecure may, to the extent
deemed necessary or advisable by the Committee, postpone the issuance or delivery of any Bonus
until completion of any required action under any applicable federal, state or local law, rule,
regulation, order, decree or other requirement, or compliance with any other obligation of
PowerSecure, as the Committee may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the payment of any Award in compliance
with applicable laws, rules, and regulations, listing requirements, or other obligations.

5

 

          (b) No Transferability. No Award granted under the Plan, nor any other rights
acquired by a Participant under the Plan, shall be assignable or transferable by a Participant,
other than by a will or the laws of descent and distribution, or pursuant to a qualified domestic
relations order as defined under the Code or Title I of the Employee Retirement Income Security Act
of 1974, and no Award under this Plan shall be subject in any manner to anticipation, pledge,
encumbrance, charge, garnishment, execution or levy or lien of any kind, whether voluntary or
involuntary, and any attempt contrary thereto shall be void.. Following any permitted transfer,
any transferee shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer.

          (c) Designation of Beneficiary. Subject to applicable law, each Participant shall
have the right to file with PowerSecure a written designation of one or more persons as
beneficiaries who shall be entitled to receive the amount, if any, payable under the Plan pursuant
to an award upon the Participant’s death. A Participant may from time to time revoke or change the
beneficiary by filing a new designation with PowerSecure. The last such designation received by
PowerSecure shall be controlling,; provided, however, that no designation, change or evocation
thereof shall be effective until received by PowerSecure prior the to the Participant’s death, and
in no event shall it be effective as of a date prior to receipt. If no such beneficiary
designation is in effect at the time of a Participant’s death, or if no designated beneficiary
survives the Participant, or if such designation conflicts with law, the payment of the amount, if
any, payable pursuant to an Award under the Plan upon the Participant’s death shall be made to the
Participant’s estate by the Committee. If the Committee is in doubt as to the right of any person
to receive any amount, then the Committee may retain such amount, without liability for any
interest thereon, until the rights thereto are determined, or the Committee may pay such amount
into any court of appropriate jurisdiction or to the estate of the Participant, in which event
PowerSecure and the Committee shall have no further liability to any Person with respect to such a
amount.

          (d) No Rights to Awards. Nothing in the Plan shall be construed as giving any
Participant, Employee or other Person any right to claim to be granted any Award under the Plan, or
to be treated uniformly with other Participants and Employees.

          (e) Tax Withholding. The PowerSecure or any Subsidiary is authorized to withhold from
any Award granted or any payment due under the Plan amounts of withholding and other taxes due with
respect to an Award and to take such other action as the Committee may deem necessary or advisable
to enable PowerSecure and Participants to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Awards.

          (f) No Right to Employment. Nothing contained in the Plan or any Award Agreement
shall confer, and no grant of an Award shall be construed as, (i) conferring, upon any Participant
or any Employee, any right to continue in the employ or service of PowerSecure or any Subsidiary or
(ii) interfering in any way with the right of PowerSecure or any Subsidiary to (A) terminate any
Participant’s or Employee’s employment or service at any time or (B) increase or decrease the
compensation of any Participant from the rate in existence at the time of granting of an Award,
except as may be expressly provided in any Award Agreement or other compensation arrangement.

          (g) Unfunded Status of Awards. The Plan is intended to constitute an “unfunded” plan
for incentive and deferred compensation, and PowerSecure shall not have any obligation to establish
any trust or other special or separate fund or to make any other segregation of assets to assure
the payment of any Award under the Plan. With respect to any payments not yet made to Participant
pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant
any rights that are greater than those of a general unsecured creditor of PowerSecure; provided,
however, that the Committee, in its sole and absolute discretion, may authorize the creation of
trusts or make other arrangements to meet PowerSecure’s obligations under the Plan to deliver cash
pursuant to any Award, which trusts or other arrangements shall be consistent with the “unfunded”
status of the Plan unless the Committee otherwise determines.

          (h) No Limitation on Other Compensatory Arrangements. Nothing contained in the Plan
shall prevent PowerSecure or any Subsidiary from adopting or continuing in effect other or
additional

6

 

compensation arrangements (which may include, without limitation, employment agreements with
Employees and arrangements which relate to Awards under the Plan), and such arrangements may be
either generally applicable only in specific cases.

          (i) Governing Law. The validity, interpretation, construction and effect of the Plan,
any rules and regulations relating to the Plan and any Award thereunder shall be governed by the
laws of the State of Delaware (without regard to provisions governing conflicts of laws) and
applicable federal law.

          (j) Severability. If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or
would disqualify the Plan or any Award under any law deemed amended to conform to applicable laws
or, if it cannot be construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be deleted and the remainder of the Plan shall
remain in full force and effect; provided, however, that, unless otherwise determined by the
Committee, the provision shall not be construed or deemed amended or deleted with respect to any
Participant whose rights and obligations under the Plan are not subject to the law of such
jurisdiction or the law deemed applicable by the Committee.

          (k) Headings. Headings are given to the sections and subsections of the Plan solely
as a convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction or interpretation of the Plan or any provision thereof.

          (l) Indemnification. Each person who is or shall have been a member of the Committee
shall be indemnified and held harmless by PowerSecure against and from any loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit or proceeding to which he may be made a party or in which he may be
involved by reason of any action taken or failure to act under the Plan and against and from any
and all amounts paid by him in settlement thereof, with PowerSecure’s approval, or paid by him in
satisfaction of any judgment in any such action, suit or proceeding against him, provided he shall
give PowerSecure an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of indemnification shall
not be exclusive and shall be independent of any other rights of indemnification to which such
persons may be entitled under PowerSecure’s Certificate of Incorporation or By-laws, by contract,
as a matter of law, or otherwise.

          (m) Construction. For purposes of the Plan, the following rules of construction
shall apply: (i) the word “or” is disjunctive but not necessarily exclusive; (ii) words in the
singular include the plural; words in the plural include the singular; and words in the neuter
gender include the masculine and feminine genders; and (iii) words in the masculine or feminine
gender include the other and neuter genders.

          (n) Costs and Expenses. The costs and expenses of administering the Plan shall be
borne solely by PowerSecure.

     SECTION 10. Effective Date and Termination.

          (a) The Plan shall become effective as of the Effective Date, provided that Performance Goals
may be achieved based upon the financial statements, books and records of PowerSecure for the
fiscal year commencing January 1, 2006 (excluding Pre-Existing Publix Orders).

          (b) No Awards shall be made under the Plan, and no Bonuses shall be payable for Performance
Goals achieved under this Plan, after December 31, 2015, provided that if any Performance Goal
requires more than one fiscal year of PowerSecure to be achieved, and if the performance metrics of
at least the first year of that Performance Goal was achieved during the last fiscal year of
PowerSecure that ended on or before December 31, 2015, then the applicable Performance Bonus
relating to such Performance Goal shall be paid thereafter, as if the Plan remained in effect, so
long as the performance

7

 

metrics applicable to such Performance Goal continue to be met in consecutive fiscal years,
commencing with the last full fiscal year ending on or before December 31, 2015.

8

 

POWERSECURE, INC.

PowerSecure Key Employee Retention Plan

Notice of Grant

	 	 	 	 	 	 	 
	Name of Participant:
	 	 	 	 	 	 
	 

	 	 

	 	 	 	 
	 
	 	 	 	 	 	 
	Time Goals:

	 	December 31, 2010	 	 	 	 
	 

	 	December 31, 2015	 	 	 	 
	 
	 	 	 	 	 	 
	Time Bonus:

	 	$250,000 per Time Goal	 	 	 	 

Performance Goal(s):

Performance Bonus:

          By their execution of the Notice of Grant, PowerSecure and the Participant agree that this
Award is granted under and governed by the terms and conditions of the PowerSecure Key Employee
Retention Plan (as amended and restated from time to time) and of this Notice.

	 	 	 	 	 	 	 
	POWERSECURE, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 

      Sidney Hinton, President
	 	 	 	 

	 	 	 	 	 
	 

	 	PARTICIPANT:	 	 
	 
	 	 	 	 
	 

	 	 

Signature
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	Street Address	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	City                     State                     Zip Code	 	 

9

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