Document:

Skechers U.S.A., Inc. Exhibit 4.4

Exhibit 4.4

SKECHERS U.S.A., INC.

AMENDMENT NO. 1

TO

AMENDED AND RESTATED

1998 STOCK OPTION, DEFERRED STOCK

AND

RESTRICTED STOCK PLAN

Approved on June 1, 2001

The following constitutes the amended provision of the Amended and Restated
1998 Stock Option, Deferred Stock and Restricted Stock Plan (the “Plan”) of
Skechers U.S.A., Inc. (the “Company”). Pursuant to a unanimous written consent
of the Board of Directors dated April 20, 2001, and the approval of the
Stockholders obtained at the annual meeting of the Company’s Stockholders held
on June 1, 2001, the following amendment to the Plan was approved:

1.  Section 3(a) of the Plan shall be deleted in its entirety and replaced with
the following:

"(a)  The total number of shares of Stock reserved and available for issuance
under the Plan shall be Eight Million Two Hundred Fifteen Thousand One Hundred
Fifty Four (8,215,154) shares. Such shares shall consist of authorized but
unissued shares. Except in the event that the Stock is a Covered Security, at
no time shall the total number of shares issuable upon exercise of all
outstanding options and the total number of shares provided for under any stock
bonus plan of the issuer exceed the applicable percentage as calculated in
accordance with the conditions and exclusions of Section 260.140.45 of the
California Corporate Securities Rules, or any successor thereto, based on the
shares of the issuer which are outstanding at the time the calculation is made.

     IN WITNESS WHEREOF, pursuant to the due authorization and adoption of this
amendment to the Plan by the Board of Directors and Stockholders on the day and
year first above written, the Company has caused this amendment to the Plan to
be duly executed by its duly authorized officer.

	 	 	 	 
	 	SKECHERS U.S.A., INC.,

a Delaware corporation
	 
	 	By:  	/s/  DAVID WEINBERG
        

	 	 	Name:  	David Weinberg
	 	 	Title:	Executive Vice President and

Chief Financial Officer<PAGE>   1

                                                                    EXHIBIT 10.1

===============================================================================

                          CREDIT AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                          SOUTHERN FLOW COMPANIES, INC.

                                       AND

                        WELLS FARGO BUSINESS CREDIT, INC.

------------------------------------------------------------------------------
                               SEPTEMBER 24, 2001

===============================================================================

<PAGE>   2

<TABLE>
<CAPTION>
                                                        TABLE OF CONTENTS

                                                                                                                Page

<S>                <C>                                                                                         <C>
ARTICLE I DEFINITIONS.............................................................................................1
    Section 1.1    Definitions....................................................................................1
    Section 1.2    Other Definitional Terms; Rules of Interpretation..............................................9

ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY................................................................9
    Section 2.1    Advances.......................................................................................9
    Section 2.2    Procedures for Requesting Advances............................................................10
    Section 2.3    Increased Costs; Capital Adequacy.............................................................10
    Section 2.4    Inventory Appraisals..........................................................................11
    Section 2.5    Interest; Minimum Interest Charge; Default Interest; Participations;
                   Clearance Days; Usury.... ....................................................................11
    Section 2.6    Fees..........................................................................................13
    Section 2.7    Time for Interest Payments; Payment on Non-Banking Days; Computation of Interest and Fees.....14
    Section 2.8    Collateral Account; Application of Payments; Lockbox..........................................14
    Section 2.9    Voluntary Prepayment; Reduction of the Maximum Line; Termination
                   of the Credit Facility by the Borrower .......................................................15
    Section 2.10   Mandatory Prepayment..........................................................................15
    Section 2.11   Advances to Pay Obligations...................................................................15
    Section 2.12   Use of Proceeds...............................................................................15
    Section 2.13   Liability Records.............................................................................15
    Section 2.13   Liability Records.............................................................................16

ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF.................................................................16
    Section 3.1    Grant of Security Interest....................................................................16
    Section 3.2    Notification of Account Debtors and Other Obligors............................................16
    Section 3.3    Assignment of Insurance.......................................................................17
    Section 3.4    Occupancy.....................................................................................17
    Section 3.5    License.......................................................................................18
    Section 3.6    Financing Statement...........................................................................18
    Section 3.7    Setoff........................................................................................18
    Section 3.8    Collateral....................................................................................18

ARTICLE IV CONDITIONS OF LENDING.................................................................................20
    Section 4.1    Conditions Precedent to the Initial Advance...................................................20
    Section 4.2    Conditions Precedent to All Advances..........................................................22
</TABLE>

                                       i
<PAGE>   3
<TABLE>
<S>                <C>                                                                                         <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES.........................................................................22
    Section 5.1    Existence and Power; Name; Chief Executive Office; Inventory and
                   Equipment Locations; Federal Employer Identification Number...................................22
    Section 5.2    Capitalization................................................................................22
    Section 5.3    Authorization of Borrowing; No Conflict as to Law or Agreements...............................23
    Section 5.4    Legal Agreements..............................................................................23
    Section 5.5    Subsidiaries..................................................................................23
    Section 5.6    Financial Condition; No Adverse Change........................................................23
    Section 5.7    Litigation....................................................................................23
    Section 5.8    Regulation U..................................................................................23
    Section 5.9    Taxes.........................................................................................24
    Section 5.10   Titles and Liens..............................................................................24
    Section 5.11   Plans.........................................................................................24
    Section 5.12   Default.......................................................................................24
    Section 5.13   Environmental Matters.........................................................................24
    Section 5.14   Submissions to Lender.........................................................................25
    Section 5.15   Financing Statements..........................................................................25
    Section 5.17   Rights to Payment.............................................................................25
    Section 5.18   Financial Solvency............................................................................26

ARTICLE VI COVENANTS.............................................................................................26
    Section 6.1    Reporting Requirements........................................................................26
    Section 6.2    Financial Covenants...........................................................................30
    Section 6.3    Permitted Liens; Financing Statements.........................................................30
    Section 6.4    Indebtedness..................................................................................31
    Section 6.5    Guaranties....................................................................................31
    Section 6.6    Investments and Subsidiaries..................................................................32
    Section 6.7    Dividends and Distributions...................................................................32
    Section 6.8    Books and Records; Inspection and Examination.................................................32
    Section 6.9    Account Verification..........................................................................33
    Section 6.10   Compliance with Laws..........................................................................33
    Section 6.11   Payment of Taxes and Other Claims.............................................................33
    Section 6.12   Maintenance of Properties.....................................................................33
    Section 6.13   Insurance.....................................................................................34
    Section 6.14   Preservation of Existence.....................................................................34
    Section 6.15   Delivery of Instruments, etc..................................................................34
    Section 6.16   Sale or Transfer of Assets; Suspension of Business Operations.................................34
    Section 6.17   Consolidation and Merger; Asset Acquisitions..................................................34
    Section 6.18   Sale and Leaseback............................................................................35
    Section 6.19   Restrictions on Nature of Business............................................................35
    Section 6.20   Accounting....................................................................................35
    Section 6.21   Discounts, etc................................................................................35
    Section 6.22   Plans.........................................................................................35
</TABLE>

                                       ii
<PAGE>   4
<TABLE>
<S>                <C>                                                                                         <C>
    Section 6.23   Place of Business; Name.......................................................................35
    Section 6.24   Constituent Documents; S Corporation Status...................................................35
    Section 6.25   Performance by the Lender.....................................................................35
    Section 6.26   Advances to Corporate Guarantors..............................................................36

ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES...............................................................36
    Section 7.1    Events of Default.............................................................................36
    Section 7.2    Rights and Remedies...........................................................................39
    Section 7.3    Certain Notices...............................................................................39

ARTICLE VIII MISCELLANEOUS.......................................................................................40
    Section 8.1    No Waiver; Cumulative Remedies; Compliance with Laws..........................................40
    Section 8.2    Amendments, Etc...............................................................................40
    Section 8.3    Addresses for Notices; Requests for Accounting................................................40
    Section 8.4    Further Documents.............................................................................40
    Section 8.5    Costs and Expenses............................................................................41
    Section 8.6    Indemnity.....................................................................................41
    Section 8.7    Participants..................................................................................42
    Section 8.8    Execution in Counterparts; Telefacsimile Execution............................................42
    Section 8.9    Retention of Borrower's Records...............................................................42
    Section 8.10   Binding Effect; Assignment; Complete Agreement; Exchanging  Information.......................42
    Section 8.11   Severability of Provisions....................................................................42
    Section 8.12   Headings......................................................................................42
    Section 8.13   Governing Law; Jurisdiction, Venue; Waiver of Jury Trial......................................42
</TABLE>

                                      iii
<PAGE>   5

                          CREDIT AND SECURITY AGREEMENT
                         Dated as of September 24, 2001

SOUTHERN FLOW COMPANIES, INC., a Delaware corporation (the "Borrower"), and
WELLS FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"),
hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS
                                   -----------

         Section 1.1 DEFINITIONS. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:

                  "Accounts" means all of the Borrower's accounts, as such term
         is defined in the UCC, including each and every right of the Borrower
         to the payment of money, whether such right to payment now exists or
         hereafter arises, whether such right to payment arises out of a sale,
         lease or other disposition of goods or other property, out of a
         rendering of services, out of a loan, out of the overpayment of taxes
         or other liabilities, or otherwise arises under any contract or
         agreement, whether such right to payment is created, generated or
         earned by the Borrower or by some other Person who subsequently
         transfers such Person's interest to the Borrower, whether such right to
         payment is or is not already earned by performance, and howsoever such
         right to payment may be evidenced, together with all other rights and
         interests (including all Liens) which the Borrower may at any time have
         by law or agreement against any account debtor or other obligor
         obligated to make any such payment or against any property of such
         account debtor or other obligor; all including but not limited to all
         present and future accounts, contract rights, loans and obligations
         receivable, chattel papers, bonds, notes and other debt instruments,
         tax refunds and rights to payment in the nature of general intangibles.

                  "Advance" has the meaning given in Section 2.1.

                  "Affiliate" or "Affiliates" means each Corporate Guarantor and
         any other Person controlled by, controlling or under common control
         with the Borrower or Parent, including any Subsidiary of the Borrower
         or Parent. For purposes of this definition, "control," when used with
         respect to any specified Person, means the power to direct the
         management and policies of such Person, directly or indirectly, whether
         through the ownership of voting securities, by contract or otherwise.

                  "Agreement" means this Credit and Security Agreement.

                  "Availability" means the difference between (i) the Borrowing
         Base and (ii) the outstanding principal balance of the Note.

<PAGE>   6

                  "Banking Day" means a day on which the Federal Reserve Bank of
         New York is open for business.

                  "Base Rate" means the rate of interest per annum publicly
         announced from time to time by Wells Fargo Bank National Association at
         its principal office in San Francisco as its "prime rate", with the
         understanding that the "prime rate" is one of Wells Fargo's base rates
         (not necessarily the lowest of such rates) and serves as the basis upon
         which effective rates of interest are calculated for loans making
         reference thereto.

                  "Borrowing Base" means at any time the lesser of:

         (a)      the Maximum Line; or

         (b)      subject to change from time to time in the Lender's sole
                  discretion, the sum of:

                  (i)      85% of Eligible Accounts, plus

                  (ii)     the lesser of (A) 20% of Eligible Inventory or (B)
                           $200,000.

                  "Capital Expenditures" means for a period, any expenditure of
         money during such period for the lease, purchase or other acquisition
         of any capital asset, or for the lease of any other asset whether
         payable currently or in the future.

                  "Collateral" means all of the Borrower's and Corporate
         Guarantor's Accounts, chattel paper, deposit accounts, documents,
         Equipment, General Intangibles, goods, instruments, Inventory,
         Investment Property, letter-of-credit rights, letters of credit, and
         all sums on deposit in any Collateral Account; together with (i) all
         substitutions and replacements for and products of any of the
         foregoing; (ii) in the case of all goods, all accessions; (iii) all
         accessories, attachments, parts, equipment and repairs now or hereafter
         attached or affixed to or used in connection with any goods; (iv) all
         warehouse receipts, bills of lading and other documents of title now or
         hereafter covering such goods; (v) all collateral subject to the Lien
         of any Security Document; (vi) any money, or other assets of the
         Borrower that now or hereafter come into the possession, custody, or
         control of the Lender; and (vii) proceeds of, and supporting
         obligations with respect to, any and all of the foregoing.

                  "Collateral Account" has the meaning set forth in the
         Collateral Account Agreement.

                  "Collateral Account Agreement" means the Collateral Account
         and Control Agreement by and among Borrower and Lender.

                  "Commitment" means the Lender's commitment to make Advances to
         the Borrower pursuant to Article II.

                                       2
<PAGE>   7

                  "Constituent Documents" means with respect to any Person, as
         applicable, such Person's certificate of incorporation, articles of
         incorporation, by-laws, certificate of formation, articles of
         organization, limited liability company agreement, management
         agreement, operating agreement, shareholder agreement, partnership
         agreement or similar document or agreement governing such Person's
         existence, organization or management or concerning disposition of
         ownership interests of such Person or voting rights among such Person's
         owners.

                  "Corporate Guarantor Security Agreement" means each Security
         Agreement between Lender and each Corporate Guarantor, each dated as of
         the date hereof, and any other security agreement entered into after
         the date hereof between Lender and any Corporate Guarantor.

                  "Corporate Guarantors" means each of Parent; Metretek,
         Incorporated, a Florida corporation; and PowerSecure, Inc., a Delaware
         corporation; together with any other entity that becomes a beneficiary
         of any advance from the Borrower pursuant to Section 6.26 and enters
         into a Corporate Guaranty and a Corporate Guarantor Security Agreement
         in form and substance satisfactory to Lender; provided, however, that
         as used herein, the term Corporate Guarantor shall not include any
         Person, including any of the foregoing Persons, after such time as such
         Person's Corporate Guaranty and Corporate Guarantor Security Agreement
         shall have been terminated in accordance with the terms hereof and
         thereof.

                  "Corporate Guaranty" means each Corporate Guaranty in favor of
         Lender from each Corporate Guarantor, each dated as of the date hereof,
         and any other guaranty entered into after the date hereof by any
         Corporate Guarantor in favor of Lender.

                  "Credit Facility" means the credit facility being made
         available to the Borrower by the Lender under Article II.

                  "Dallas Premises" means the real estate owned by Borrower
         located at 4011 Schillingway, Dallas, Texas and the attendant buildings
         and fixtures located thereon.

                  "Default" means an event that, with giving of notice or
         passage of time or both, would constitute an Event of Default.

                  "Default Period" means any period of time beginning on the
         first day of any month during which a Default or Event of Default has
         occurred and ending on the date the Lender notifies the Borrower in
         writing that such Default or Event of Default has been cured or waived.

                  "Default Rate" means an annual interest rate equal to three
         percent (3%) over the Floating Rate, which interest rate shall change
         when and as the Floating Rate changes.

                  "Director" means a director if the Borrower is a corporation,
         a governor if the Borrower is a limited liability company, or a partner
         if the Borrower is a partnership.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974.

                                       3
<PAGE>   8

                  "ERISA Affiliate" means any trade or business (whether or not
         incorporated) that is a member of a group which includes the Borrower
         and which is treated as a single employer under Section 414 of the IRC.

                  "Eligible Accounts" means all unpaid Accounts of the Borrower
         arising from the sale or lease of goods or the performance of services,
         net of any credits, but excluding any such Accounts having any of the
         following characteristics:

                  (i)      That portion of Accounts unpaid 90 days or more after
                           the invoice date;

                  (ii)     That portion of Accounts that is (a) disputed or (b)
                           subject to a claim of offset or a contra account;

                  (iii)    That portion of Accounts not yet earned by the final
                           delivery of goods or rendition of services, as
                           applicable, by the Borrower to the customer,
                           including progress billings, and that portion of
                           Accounts for which an invoice has not been sent to
                           the applicable account debtor;

                  (iv)     That portion of Accounts owed by account debtors
                           located in the states of New Jersey, Minnesota,
                           Indiana, or West Virginia (or any other state that
                           requires a creditor to file a business activity
                           report or similar document in order to bring suit or
                           otherwise enforce its remedies against such account
                           debtor in the courts or through any judicial process
                           of such state), unless the Borrower has qualified to
                           do business in such state, or has filed a notice of
                           business activities report with the applicable
                           division of taxation, the department of revenue, or
                           with such other state offices, as appropriate, for
                           the then-current year, or is exempt from such filing
                           requirement;

                  (v)      Accounts constituting (i) proceeds of copyrightable
                           material unless such copyrightable material shall
                           have been registered with the United States Copyright
                           Office, or (ii) proceeds of patentable inventions
                           unless such patentable inventions have been
                           registered with the United States Patent and
                           Trademark Office;

                  (vi)     Accounts owed by any unit of government, whether
                           foreign or domestic (provided, however, that there
                           shall be included in Eligible Accounts that portion
                           of Accounts owed by such units of government for
                           which the Borrower has provided evidence satisfactory
                           to the Lender that (A) the Lender has a first
                           priority perfected security interest and (B) such
                           Accounts may be enforced by the Lender directly
                           against such unit of government under all applicable
                           laws);

                  (vii)    Accounts owed by an account debtor located outside
                           the United States (excluding Canada) which are not
                           (A) backed by a bank letter of credit naming the
                           Lender as beneficiary or assigned to the Lender, in
                           the Lender's possession or control, and with respect
                           to which a control agreement concerning the
                           letter-of-credit rights is in effect, and acceptable
                           to the Lender in all respects, in its sole
                           discretion, or (B) covered by a

                                       4
<PAGE>   9

                           foreign receivables insurance policy acceptable to
                           the Lender in its sole discretion;

                  (viii)   Accounts owed by an account debtor that is insolvent,
                           is the subject of bankruptcy proceedings or has gone
                           out of business;

                  (ix)     Accounts owed by an Owner, Subsidiary, Affiliate,
                           Officer or employee of the Borrower;

                  (x)      Accounts not subject to a duly perfected security
                           interest in the Lender's favor or which are subject
                           to any Lien in favor of any Person other than the
                           Lender;

                  (xi)     That portion of Accounts that has been restructured,
                           extended, amended or modified;

                  (xii)    That portion of Accounts that constitutes
                           advertising, finance charges, service charges or
                           sales or excise taxes;

                  (xiii)   Accounts owed by an account debtor, regardless of
                           whether otherwise eligible, if 10% or more of the
                           total amount due under Accounts from such debtor is
                           ineligible under clauses (i), (ii)(a) or (xi) above;

                  (xiv)    That portion of Accounts owing from a single account
                           debtor that exceeds 15% of total Eligible Accounts at
                           any time; and

                  (xv)     Accounts, or portions thereof, otherwise deemed
                           ineligible by the Lender in its sole discretion.

                  "Eligible Inventory" means all Inventory of the Borrower
         constituting parts and finished goods and located at Borrower's
         headquarters in Lafayette, Louisiana used in the installation, testing,
         calibration and maintenance of flow measurement equipment, at the lower
         of cost or market value as determined in accordance with GAAP; but
         excluding any Inventory having any of the following characteristics:

                  (i)      Inventory that is: in-transit; located at any
                           warehouse, job site or other premises not approved by
                           the Lender in writing; located outside of the states,
                           or localities, as applicable, in which the Lender has
                           filed financing statements to perfect a first
                           priority security interest in such Inventory; covered
                           by any negotiable or non-negotiable warehouse
                           receipt, bill of lading or other document of title;
                           on consignment from any Person; on consignment to any
                           Person or subject to any bailment unless such
                           consignee or bailee has executed an agreement with
                           the Lender;

                  (ii)     Supplies, packaging or sample Inventory;

                  (iii)    Work-in-process Inventory;

                                       5
<PAGE>   10

                  (iv)     Inventory that is damaged, obsolete, slow moving or
                           not currently saleable in the normal course of the
                           Borrower's operations;

                  (v)      Inventory that the Borrower has returned, has
                           attempted to return, is in the process of returning
                           or intends to return to the vendor thereof;

                  (vi)     Inventory that is perishable or live;

                  (vii)    Inventory manufactured by the Borrower pursuant to a
                           license unless the applicable licensor has agreed in
                           writing to permit the Lender to exercise its rights
                           and remedies against such Inventory;

                  (viii)   Inventory that is subject to a Lien in favor of any
                           Person other than the Lender; and

                  (ix)     Inventory otherwise deemed ineligible by the Lender
                           in its sole discretion.

                  "Environmental Law" means any federal, state, local or other
         governmental statute, regulation, law or ordinance dealing with the
         protection of human health and the environment.

                  "Equipment" means all of the Borrower's equipment, as such
         term is defined in the UCC, whether now owned or hereafter acquired,
         including but not limited to all present and future machinery,
         vehicles, furniture, fixtures, manufacturing equipment, shop equipment,
         office and record keeping equipment, parts, tools, supplies, and
         including specifically the goods described in any equipment schedule or
         list herewith or hereafter furnished to the Lender by the Borrower.

                  "Event of Default" has the meaning specified in Section 7.1.

                  "Financial Covenants" means the covenants set forth in Section
         6.2.

                  "Floating Rate" means an annual interest rate equal to the sum
         of the Base Rate plus one percent (1%), which interest rate shall
         change when and as the Base Rate changes.

                  "Funding Date" has the meaning given in Section 2.1.

                  "GAAP" means generally accepted accounting principles, applied
         on a basis consistent with the accounting practices applied in the
         financial statements described in Section 5.6.

                  "General Intangibles" means all of the Borrower's general
         intangibles, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including all present and future Intellectual
         Property Rights, customer or supplier lists and contracts, manuals,
         operating instructions, permits, franchises, the right to use the
         Borrower's name, and the goodwill of the Borrower's business.

                                       6
<PAGE>   11

                  "Guarantor(s)" means all Corporate Guarantors and any other
         Person now or hereafter guaranteeing the Obligations, but only so long
         as any applicable guaranteeing document by such Guarantor is in effect.

                  "Hazardous Substances" means pollutants, contaminants,
         hazardous substances, hazardous wastes, petroleum and fractions
         thereof, and all other chemicals, wastes, substances and materials
         listed in, regulated by or identified in any Environmental Law.

                  "IRC" means the Internal Revenue Code of 1986.

                  "Intellectual Property Rights" means all actual or prospective
         rights of the Borrower arising in connection with any intellectual
         property or other proprietary rights, including all rights arising in
         connection with copyrights, patents, service marks, trade dress, trade
         secrets, trademarks, trade names or mask works.

                  "Inventory" means all of the Borrower's inventory, as such
         term is defined in the UCC, whether now owned or hereafter acquired,
         whether consisting of whole goods, spare parts or components, supplies
         or materials, whether acquired, held or furnished for sale, for lease
         or under service contracts or for manufacture or processing, and
         wherever located.
                  "Investment Property" means all of the Borrower's investment
         property, as such term is defined in the UCC, whether now owned or
         hereafter acquired, including but not limited to all securities,
         security entitlements, securities accounts, commodity contracts,
         commodity accounts, stocks, bonds, mutual fund shares, money market
         shares and U.S. Government securities.

                  "Lien" means any security interest, mortgage, deed of trust,
         pledge, lien, charge, encumbrance, title retention agreement or
         analogous instrument or device, including the interest of each lessor
         under any capitalized lease and the interest of any bondsman under any
         payment or performance bond, in, of or on any assets or properties of a
         Person, whether now owned or hereafter acquired and whether arising by
         agreement or operation of law.

                  "Loan Documents" means this Agreement, the Note and the
         Security Documents.

                  "Maturity Date" means September 30, 2004.

                  "Maximum Line" means $2,000,000.00 unless said amount is
         reduced pursuant to Section 2.9, in which event it means such lower
         amount.

                  "Minimum Interest Charge" has the meaning given in Section
         2.5(b).

                  "Net Income" means fiscal year-to-date net income from
         continuing operations excluding extraordinary gains, as determined in
         accordance with GAAP.

                  "Note" means the Borrower's promissory note, payable to the
         order of the Lender in substantially the form of Exhibit A hereto.

                                       7
<PAGE>   12

                  "Obligations" means the Note and each and every other debt,
         liability and obligation of every type and description which the
         Borrower may now or at any time hereafter owe to the Lender, whether
         such debt, liability or obligation now exists or is hereafter created
         or incurred, whether it arises in a transaction involving the Lender
         alone or in a transaction involving other creditors of the Borrower,
         and whether it is direct or indirect, due or to become due, absolute or
         contingent, primary or secondary, liquidated or unliquidated, or sole,
         joint, several or joint and several, and including all indebtedness of
         the Borrower arising under any Credit Document or guaranty between the
         Borrower and the Lender, whether now in effect or hereafter entered
         into.

                  "Officer" means with respect to the Borrower, an officer if
         the Borrower is a corporation, a manager if the Borrower is a limited
         liability company, or a partner if the Borrower is a partnership.

                  "Owner" means with respect to the Borrower, each Person having
         legal or beneficial title to an ownership interest in the Borrower or a
         right to acquire such an interest.

                  "Parent" means Metretek Technologies, Inc., a Delaware
         corporation.

                  "Pension Plan" means a pension plan (as defined in Section
         3(2) of ERISA) maintained for employees of the Borrower or any ERISA
         Affiliate and covered by Title IV of ERISA.

                  "Permitted Lien" has the meaning given in Section 6.3(a).

                  "Person" means any individual, corporation, partnership, joint
         venture, limited liability company, association, joint-stock company,
         trust, unincorporated organization or government or any agency or
         political subdivision thereof.

                  "Plan" means an employee benefit plan (as defined in Section
         3(3) of ERISA) maintained for employees of the Borrower or any ERISA
         Affiliate.

                  "Premises" means all premises where the Borrower or Parent
         conducts its business and has any rights of possession, including the
         premises legally described in Exhibit C attached hereto.

                  "Reportable Event" means a reportable event (as defined in
         Section 4043 of ERISA), other than an event for which the 30-day notice
         requirement under ERISA has been waived in regulations issued by the
         Pension Benefit Guaranty Corporation.

                  "Security Documents" means this Agreement, the Collateral
         Account Agreement, the Corporate Guaranties, the Corporate Guarantor
         Security Agreements, and any other document delivered to the Lender
         from time to time to secure the Obligations.

                  "Security Interest" has the meaning given in Section 3.1.

                                       8
<PAGE>   13

                  "Subsidiary" means any corporation of which more than 50% of
         the outstanding shares of capital stock having general voting power
         under ordinary circumstances to elect a majority of the board of
         Directors of such corporation, irrespective of whether or not at the
         time stock of any other class or classes shall have or might have
         voting power by reason of the happening of any contingency, is at the
         time directly or indirectly owned by the Borrower, by the Borrower and
         one or more other Subsidiaries, or by one or more other Subsidiaries.

                  "Tangible Book Net Worth" has the meaning set forth in Section
6.2(a).
                  "Termination Date" means the earliest of (i) the Maturity
         Date, (ii) the date the Borrower terminates the Credit Facility, or
         (iii) the date the Lender demands payment of the Obligations after an
         Event of Default pursuant to Section 7.2.

                  "UCC" means the Uniform Commercial Code as in effect from time
         to time in the state designated in Section 8.13 as the state whose laws
         shall govern this Agreement, or in any other state whose laws are held
         to govern this Agreement or any portion hereof.

         Section 1.2 OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All accounting terms not otherwise
defined herein have the meanings assigned to them in accordance with GAAP. All
terms defined in the UCC and not otherwise defined herein have the meanings
assigned to them in the UCC. References to Articles, Sections, subsections,
Exhibits, Schedules and the like, are to Articles, Sections and subsections of,
or Exhibits or Schedules attached to, this Agreement unless otherwise expressly
provided. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". Unless the context in which it is
used herein otherwise clearly requires, the word "or" has the inclusive meaning
represented by the phrase "and/or". Defined terms include in the singular number
the plural and in the plural number the singular. Reference to any agreement
(including the Loan Documents), document or instrument means such agreement,
document or instrument as amended or modified and in effect from time to time in
accordance with the terms thereof (and, if applicable, in accordance with the
terms hereof and the other Loan Documents), except where otherwise explicitly
provided, and reference to any promissory note includes any promissory note
which is an extension or renewal thereof or a substitute or replacement
therefore. Reference to any law, rule, regulation, order, decree, requirement,
policy, guideline, directive or interpretation means as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect on the
determination date, including rules and regulations promulgated thereunder.

                                   ARTICLE II

                     AMOUNT AND TERMS OF THE CREDIT FACILITY
                     ---------------------------------------

         Section 2.1 ADVANCES. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make advances to the Borrower from time to
time from the date all of the conditions set forth in Section 4.1 are satisfied
(the "Funding Date") to the Termination Date (the "Advances"). The Lender shall
have no obligation to make an Advance to the extent the amount of the requested
Advance exceeds Availability. The Borrower's obligation to pay the Advances

                                       9
<PAGE>   14

shall be evidenced by the Note and shall be secured by the Collateral. Within
the limits set forth in this Section 2.1, the Borrower may borrow, prepay
pursuant to Section 2.9 and reborrow.

         Section 2.2 PROCEDURES FOR REQUESTING ADVANCES. The Borrower shall
comply with the following procedures in requesting Advances:

         (a)      TIME FOR REQUESTS. The Borrower shall request each Advance not
                  later than 11:00 a.m., (Denver time) on the Banking Day which
                  is the date the Advance is to be made. Each such request shall
                  be effective upon receipt by the Lender, shall be in writing
                  or by telephone or telecopy transmission, to be confirmed in
                  writing by the Borrower if so requested by the Lender, shall
                  be by (i) an Officer of the Borrower; or (ii) a person
                  designated as the Borrower's agent by an Officer of the
                  Borrower in a writing delivered to the Lender; or (iii) a
                  person whom the Lender reasonably believes to be an Officer of
                  the Borrower or such a designated agent. The Borrower shall
                  repay all Advances even if the Lender does not receive such
                  confirmation and even if the person requesting an Advance was
                  not in fact authorized to do so. Any request for an Advance,
                  whether written or telephonic, shall be deemed to be a
                  representation by the Borrower that the conditions set forth
                  in Section 4.2 have been satisfied as of the time of the
                  request.

         (b)      DISBURSEMENT. Upon fulfillment of the applicable conditions
                  set forth in Article IV, the Lender shall disburse the
                  proceeds of the requested Advance by crediting the same to the
                  Borrower's demand deposit account maintained with Bank One,
                  ABA#065400137, Acct. #710-1152-470, unless the Lender and the
                  Borrower shall agree in writing to another manner of
                  disbursement.

         Section 2.3 INCREASED COSTS; CAPITAL ADEQUACY.

         If the Lender determines at any time that its Return has been reduced
as a result of any Rule Change, such Lender may so notify the Borrower and
require the Borrower, beginning fifteen (15) days after such notice, to pay it
the amount necessary to restore its Return to what it would have been had there
been no Rule Change. For purposes of this Section 2.3:

                  (i)      "Capital Adequacy Rule" means any law, rule,
                           regulation, guideline, directive, requirement or
                           request regarding capital adequacy, or the
                           interpretation or administration thereof by any
                           governmental or regulatory authority, central bank or
                           comparable agency, whether or not having the force of
                           law, that applies to any Related Lender, including
                           rules requiring financial institutions to maintain
                           total capital in amounts based upon percentages of
                           outstanding loans, binding loan commitments and
                           letters of credit.

                                       10
<PAGE>   15

                  (ii)     "Related Lender" includes (but is not limited to) the
                           Lender, any parent of the Lender, any assignee of any
                           interest of the Lender hereunder and any participant
                           in the Credit Facility.

                  (iii)    "Return", for any period, means the percentage
                           determined by dividing (i) the sum of interest and
                           ongoing fees earned by the Lender under this
                           Agreement during such period, by (ii) the average
                           capital such Lender is required to maintain during
                           such period as a result of its being a party to this
                           Agreement, as determined by such Lender based upon
                           its total capital requirements and a reasonable
                           attribution formula that takes account of the Capital
                           Adequacy Rules, then in effect, costs of issuing or
                           maintaining any Advance and amounts received or
                           receivable under this Agreement or the Notes with
                           respect to any Advance. Return may be calculated for
                           each calendar quarter and for the shorter period
                           between the end of a calendar quarter and the date of
                           termination in whole of this Agreement.

                  (iv)     "Rule Change" means any change in any Capital
                           Adequacy Rule occurring after the date of this
                           Agreement, or any change in the interpretation or
                           administration thereof by any governmental or
                           regulatory authority, but the term does not include
                           any changes that at the Funding Date are scheduled to
                           take place under the existing Capital Adequacy Rules,
                           or any increases in the capital that the Lender is
                           required to maintain to the extent that the increases
                           are required due to a regulatory authority's
                           assessment of that Lender's financial condition.

                                    The initial notice sent by the Lender shall
                           be sent as promptly as practicable after such Lender
                           learns that its Return has been reduced, shall
                           include a demand for payment of the amount necessary
                           to restore such Lender's Return for the quarter in
                           which the notice is sent, and shall state in
                           reasonable detail the cause for the reduction in its
                           Return and its calculation of the amount of such
                           reduction. Thereafter, such Lender may send a new
                           notice during each calendar quarter setting forth the
                           calculation of the reduced Return for that quarter
                           and including a demand for payment of the amount
                           necessary to return its Return for that quarter. The
                           Lender's calculation in any such notice shall be
                           conclusive and binding absent demonstrable error.

         Section 2.4 INVENTORY APPRAISALS. The Lender may from time to time, but
not more frequently than once per calendar year unless a Default has occurred
and is continuing, obtain at the Borrower's expense an appraisal of Inventory by
an appraiser acceptable to the Lender in its sole discretion.

         Section 2.5 INTEREST; MINIMUM INTEREST CHARGE; DEFAULT INTEREST;
PARTICIPATIONS; CLEARANCE DAYS; USURY.

                                       11
<PAGE>   16

         (a)      INTEREST. Except as set forth in Subsections (c) and (f), the
                  outstanding principal balance of the Note shall bear interest
                  at the Floating Rate.

         (b)      MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
                  pursuant to Subsection (a), the Borrower shall pay to the
                  Lender interest of not less than $22,500 per calendar quarter
                  (the "Minimum Interest Charge") during the term of this
                  Agreement, and the Borrower shall pay any deficiency between
                  the Minimum Interest Charge and the amount of interest
                  otherwise calculated under Subsection (a) on the first day of
                  the following calendar quarter and on the Termination Date.
                  The Minimum Interest Charge for each period of less than a
                  full calendar quarter shall be prorated for the number of days
                  during such quarter that this Agreement is in effect.

         (c)      DEFAULT INTEREST RATE. At any time during any Default Period,
                  in the Lender's sole discretion and without waiving any of its
                  other rights and remedies, the principal of the Advances
                  outstanding from time to time shall bear interest at the
                  Default Rate, effective for any periods designated by the
                  Lender from time to time during that Default Period.

         (d)      CLEARANCE DAYS. Notwithstanding Section 2.8(b)(ii), interest
                  at the interest rate applicable under this Section 2.5 shall
                  accrue on the amount of all payments (even if in the form of
                  immediately available federal funds) for one (1) day for
                  clearance.

         (e)      PARTICIPATIONS. If any Person shall acquire a participation in
                  the Advances under this Agreement, the Borrower shall be
                  obligated to the Lender to pay the full amount of all interest
                  calculated under Section 2.5(a), along with all other fees,
                  charges and other amounts due under this Agreement, regardless
                  if such Person elects to accept interest with respect to its
                  participation at a lower rate than the Floating Rate, or
                  otherwise elects to accept less than its pro rata share of
                  such fees, charges and other amounts due under this Agreement.

         (f)      USURY. In any event no rate change shall be put into effect
                  which would result in a rate greater than the highest rate
                  permitted by law. Notwithstanding anything to the contrary
                  contained in any Loan Document, all agreements which either
                  now are or which shall become agreements between the Borrower
                  and the Lender are hereby limited so that in no contingency or
                  event whatsoever shall the total liability for payments in the
                  nature of interest, additional interest and other charges
                  exceed the applicable limits imposed by any applicable usury
                  laws. If any payments in the nature of interest, additional
                  interest and other charges made under any Loan Document are
                  held to be in excess of the limits imposed by any applicable
                  usury laws, it is agreed that any such amount held to be in
                  excess shall be considered payment of principal hereunder, and
                  the indebtedness evidenced hereby shall be reduced by such
                  amount so that the total liability for payments in the nature
                  of interest, additional interest and other charges shall not
                  exceed the applicable limits imposed by any applicable usury
                  laws, in compliance with the desires of the Borrower and the
                  Lender. This provision shall never be superseded or waived and
                  shall control every other provision of the Loan Documents and
                  all agreements between the Borrower and the Lender, or their
                  successors and assigns.

                                       12
<PAGE>   17

         Section 2.6 FEES.

         (a)      ORIGINATION FEE. The Borrower shall pay the Lender a fully
                  earned and non-refundable origination fee of one percent
                  (1.0%) of the Maximum Line ($20,000), due and payable upon the
                  execution of this Agreement. The Lender has received $15,000
                  toward payment of this fee and the fees, costs and expenses
                  described in Sections 2.6(b) and 8.5.

         (b)      AUDIT FEES. The Borrower shall pay the Lender, on demand,
                  audit fees in connection with any audits or inspections
                  conducted by the Lender of any Collateral or the Borrower's
                  operations or business at the rates established from time to
                  time by the Lender as its audit fees (which fees are currently
                  $87.50 per hour per auditor), together with all actual
                  out-of-pocket costs and expenses incurred in conducting any
                  such audit or inspection.

         (c)      TERMINATION AND LINE REDUCTION FEES. If the Credit Facility is
                  terminated (i) by the Lender during a Default Period that
                  begins before the Maturity Date, or (ii) by the Borrower as of
                  a date other than the Maturity Date, or if the Borrower
                  reduces the Maximum Line, then in each case the Borrower shall
                  pay to the Lender a fee in an amount equal to a percentage of
                  the Maximum Line (or the reduction of the Maximum Line, as the
                  case may be) as follows: (A) two percent (2%) if the
                  termination or reduction occurs on or before the first
                  anniversary of the Funding Date; and (B) one percent (1%) if
                  the termination or reduction occurs after the first
                  anniversary of the Funding Date.

         (d)      WAIVER OF TERMINATION FEES. The Borrower will not be required
                  to pay the termination fees otherwise due under subsection (c)
                  if (i) such termination is made because of refinancing of the
                  Credit Facility with Lender or an Affiliate of the Lender, or
                  (ii) the Credit Facility is refinanced within 90 days after a
                  request by the Lender for compensation under Section 2.3.

         (e)      UNUSED LINE FEE. For the purposes of this Section 2.6(e),
                  "Unused Amount" means the Maximum Line reduced by outstanding
                  Advances. The Borrower agrees to pay to the Lender an unused
                  line fee at the rate of one-quarter of one percent (.25%) per
                  annum on the average daily Unused Amount from the date of this
                  Agreement to and including the Termination Date, due and
                  payable monthly in arrears on the first day of the month and
                  on the Termination Date.

         (f)      ANNUAL FACILITY FEE. Borrower hereby agrees to pay to the
                  Lender an annual facility fee of one-quarter of one percent
                  (.25%) of the Maximum Line, due and payable on an annual basis
                  on each anniversary of the date hereof.

                                       13

<PAGE>   18

         (g)      OTHER FEES. The Lender may from time to time charge additional
                  fees for Advances made in excess of the Borrowing Base, for
                  late delivery of reports, in lieu of imposing interest at the
                  Default Rate, and (during a Default Period) for other reasons.

         Section 2.7 TIME FOR INTEREST PAYMENTS; PAYMENT ON NON-BANKING DAYS;
COMPUTATION OF INTEREST AND FEES.

         (a)      TIME FOR INTEREST PAYMENTS. Interest shall be due and payable
                  in arrears on the last day of each month and on the
                  Termination Date.

         (b)      PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
                  hereunder shall be stated to be due on a day which is not a
                  Banking Day, such payment may be made on the next succeeding
                  Banking Day, and such extension of time shall in such case be
                  included in the computation of interest on the Advances or the
                  fees hereunder, as the case may be.

         (c)      COMPUTATION OF INTEREST AND FEES. Interest accruing on the
                  outstanding principal balance of the Advances and fees
                  hereunder outstanding from time to time shall be computed on
                  the basis of actual number of days elapsed in a year of 360
                  days.

         Section 2.8 COLLATERAL ACCOUNT; APPLICATION OF PAYMENTS; LOCKBOX.

         (a)      COLLATERAL ACCOUNT.

                  (i)      When the Borrower receives any payments on Accounts
                           or other cash proceeds, the Borrower shall deposit
                           such payments into the Collateral Account. Until so
                           deposited, the Borrower shall hold all such payments
                           in trust for and as the property of the Lender and
                           shall not commingle such payments with any of its
                           other funds or property. Amounts deposited in the
                           Collateral Account shall not bear interest. All
                           deposits in the Collateral Account shall constitute
                           proceeds of Borrower's Collateral and shall not
                           constitute payment of the Obligations.

                  (ii)     All items deposited in the Collateral Account shall
                           be subject to final payment. If any such item is
                           returned uncollected, the Borrower will immediately
                           pay the Lender, or, for items deposited in the
                           Collateral Account, the bank maintaining such
                           account, the amount of that item, or such bank at its
                           discretion may charge any uncollected item to the
                           Borrower's commercial account or other account. The
                           Borrower shall be liable as an endorser on all items
                           deposited in the Collateral Account, whether or not
                           in fact endorsed by the Borrower.

         (b)      APPLICATION OF PAYMENTS.

                  (i)      The Lender or Borrower may, from time to time after
                           allowing two Banking Days for the collection of
                           uncollected funds, apply deposited funds in the
                           Collateral Account to the payment of the Obligations,
                           in any order or manner of application satisfactory to
                           Lender, by transferring such

                                       14
<PAGE>   19

                           funds to Lender's general account maintained with
                           Wells Fargo Bank, N.A., ABA No. 091000019, Account
                           No. 635-5010053. Except as provided in the preceding
                           sentence, amounts deposited in the Collateral Account
                           shall not be subject to withdrawal by the Borrower,
                           except after full payment and discharge of all
                           Obligations.

                  (ii)     All payments to the Lender shall be made in
                           immediately available funds and shall be applied to
                           the Obligations upon receipt by the Lender. Funds
                           received from the Collateral Account shall be deemed
                           to be immediately available.

         (c) LOCKBOX. After the occurrence of any Default, upon request of the
         Lender, Borrower shall enter into a lockbox arrangement with Lender in
         accordance with Lender's customary procedures and documentation, in a
         manner acceptable to the Lender.

         Section 2.9 VOLUNTARY PREPAYMENT; REDUCTION OF THE MAXIMUM LINE;
TERMINATION OF THE CREDIT FACILITY BY THE BORROWER. Except as otherwise provided
herein, the Borrower may prepay the Advances in whole at any time or from time
to time in part. The Borrower may terminate the Credit Facility or reduce the
Maximum Line at any time if it (i) gives the Lender at least 30 days' prior
written notice and (ii) pays the Lender termination or Maximum Line reduction
fees in accordance with Section 2.6(c). Any reduction in the Maximum Line must
be in an amount of not less than $100,000 or an integral multiple thereof. If
the Borrower reduces the Maximum Line to zero, all Obligations shall be
immediately due and payable. Subject to termination of the Credit Facility and
payment and performance of all Obligations, the Lender shall, at the Borrower's
expense, release or terminate the Security Interest and the Security Documents
to which the Borrower is entitled by law.

         Section 2.10 MANDATORY PREPAYMENT. Without notice or demand, if the sum
of the outstanding principal balance of the Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Advances to the
extent necessary to eliminate such excess. Any payment received by the Lender
under this Section 2.10 or under Section 2.9 may be applied to the Obligations,
in such order and in such amounts as the Lender, in its discretion, may from
time to time determine.

         Section 2.11 ADVANCES TO PAY OBLIGATIONS. Notwithstanding anything in
Section 2.1, the Lender may, in its discretion at any time or from time to time,
without the Borrower's request and even if the conditions set forth in Section
4.2 would not be satisfied, make a Advance in an amount equal to the portion of
the Obligations from time to time due and payable.

         Section 2.12 USE OF PROCEEDS. The Borrower shall use the proceeds of
Advances for ordinary working capital purposes, to refinance existing loans from
National Bank of Canada and to provide advances to Corporate Guarantors in
accordance with Section 6.26.

         Section 2.13 LIABILITY RECORDS. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall

                                       15
<PAGE>   20

be conclusive and fully binding on the Borrower unless the Borrower gives the
Lender specific written notice of exception within 30 days after receipt.

         Section 2.14 TERMINATION OF CORPORATE GUARANTOR DOCUMENTS. In the event
that any Corporate Guarantor (the "Withdrawing Corporate Guarantor") proposes to
enter into a transaction providing for either (i) debt or equity financing that
would permit such Withdrawing Corporate Guarantor to operate without utilizing
any proceeds from intercompany transfers of advances or any portion thereof
under the Credit Facility, or (ii) the sale of all or substantially all of its
assets or voting stock, then the Lender agrees, subject to the conditions set
forth below, that it shall, not later than 30 calendar days after receipt of
written notice from such Withdrawing Corporate Guarantor of such proposed
transaction, (a) release such Withdrawing Corporate Guarantor from all
obligations relating to such Withdrawing Corporate Guarantor under all Corporate
Guaranties and the Corporate Guarantor Security Agreements pertaining to such
Withdrawing Corporate Guarantor (including but not limited to the termination of
such Withdrawing Corporate Guarantor's guaranty and security interest granted to
Lender thereunder), and (b) terminate all other covenants and agreements of, on
or relating to Withdrawing Corporate Guarantor under this Agreement, the
Corporate Guaranty, the Corporate Guarantor Security Agreement or any other
agreement or instrument entered into in connection with the Credit Facility by
such Withdrawing Corporate Guarantor, other than any provision thereof that
expressly survives termination thereof (collectively, the "Withdrawing Corporate
Guarantor Documents"); provided, however, that the foregoing obligations of
Lender shall only become effective if the following two conditions are fully
satisfied and the Chief Financial Officer of the Borrower and of such
Withdrawing Corporate Guarantor shall have provided a certification to Lender to
such effect: (1) such Withdrawing Corporate Guarantor has repaid all advances
which have been made by the Borrower to such Withdrawing Corporate Guarantor,
and (2) no Default or Event of Default has occurred and is continuing under this
Agreement or any Withdrawing Corporate Guarantor Document or would occur as a
result of such transaction or transactions. In fulfilling its obligations under
this Section 2.14, the Lender agrees to promptly (and in no event more than 30
calendar days after all above conditions are satisfied) furnish to such
Withdrawing Corporate Guarantor duly executed and properly completed termination
statements in proper form for filing as reasonably requested by such Withdrawing
Corporate Guarantor to terminate the applicable security interests under such
Withdrawing Corporate Guarantor Documents, and to take all other actions as
reasonably requested by the Borrower or such Withdrawing Corporate Guarantor to
effectuate the release and termination contemplated by this Section 2.14.

                                   ARTICLE III

                      SECURITY INTEREST; OCCUPANCY; SETOFF
                      ------------------------------------

         Section 3.1 GRANT OF SECURITY INTEREST. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.

         Section 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS. The
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other Person obligated to pay the amount due that such right
to payment has been assigned or transferred to the

                                       16
<PAGE>   21

Lender for security and shall be paid directly to the Lender. The Borrower will
join in giving such notice if the Lender so requests. At any time after the
Borrower or the Lender gives such notice to an account debtor or other obligor,
the Lender may, but need not, in the Lender's name or in the Borrower's name,
(a) demand, sue for, collect or receive any money or property at any time
payable or receivable on account of, or securing, any such right to payment, or
grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral
obligations) of any such account debtor or other obligor; and (b) as the
Borrower's agent and attorney-in-fact, notify the United States Postal Service
to change the address for delivery of the Borrower's mail to any address
designated by the Lender, otherwise intercept the Borrower's mail, and receive,
open and dispose of the Borrower's mail, applying all Collateral as permitted
under this Agreement and holding all other mail for the Borrower's account or
forwarding such mail to the Borrower's last known address.

         Section 3.3 ASSIGNMENT OF INSURANCE. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.

         Section 3.4 OCCUPANCY.

         (a)      The Borrower hereby irrevocably grants to the Lender the right
                  to take exclusive possession of the Premises at any time
                  during a Default Period.

         (b)      The Lender may use the Premises only to hold, process,
                  manufacture, sell, use, store, liquidate, realize upon or
                  otherwise dispose of goods that are Collateral and for other
                  purposes that the Lender may in good faith deem to be related
                  or incidental purposes.

         (c)      The Lender's right to hold the Premises shall cease and
                  terminate upon the earlier of (i) payment in full and
                  discharge of all Obligations and termination of the Credit
                  Facility, and (ii) final sale or disposition of all goods
                  constituting Collateral and delivery of all such goods to
                  purchasers.

         (d)      The Lender shall not be obligated to pay or account for any
                  rent or other compensation for the possession, occupancy or
                  use of any of the Premises; provided, however, that if the
                  Lender does pay or account for any rent or other compensation
                  for the possession, occupancy or use of any of the Premises,
                  the Borrower shall reimburse the Lender promptly for the full
                  amount thereof. In addition, the Borrower will pay, or
                  reimburse the Lender for, all taxes, fees, duties, imposts,
                  charges and expenses at any time incurred by or imposed upon
                  the

                                       17
<PAGE>   22

                  Lender by reason of the execution, delivery, existence,
                  recordation, performance or enforcement of this Agreement or
                  the provisions of this Section 3.4.

         Section 3.5 LICENSE. Without limiting the generality of any other
Security Document, the Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of the Borrower for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by the Borrower for its own manufacturing and
subject to the Borrower's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.

         Section 3.6 FINANCING STATEMENT. The Borrower authorizes the Lender to
file from time to time where permitted by law, such financing statements against
collateral described as "all personal property" as the Lender deems necessary or
useful to perfect the Security Interest. A carbon, photographic or other
reproduction of this Agreement or of any financing statements (whether or not
signed by the Borrower) is sufficient as a financing statement and may be filed
as a financing statement in any state to perfect the security interests granted
hereby. For this purpose (until changed by notice as provided in Section 8.3),
the following information is set forth:

                  Name and address of Debtor:

                  Southern Flow Companies, Inc.
                  132 Demanade Boulevard
                  Lafayette, Louisiana  70503
                  Federal Employer Identification No. 84-1106948
                  Name and address of Secured Party:

                  Wells Fargo Business Credit, Inc.
                  MAC C7300-300
                  1740 Broadway
                  Denver, Colorado 80274
                  Federal Employer Identification No. 41-1237652

         Section 3.7 SETOFF. The Lender may at any time or from time to time
after a Default or an Event of Default has occurred and is continuing, at its
sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.

         Section 3.8 COLLATERAL. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in

                                       18
<PAGE>   23

physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.

                                       19
<PAGE>   24

                                   ARTICLE IV

                              CONDITIONS OF LENDING
                              ---------------------

         Section 4.1 CONDITIONS PRECEDENT TO THE INITIAL ADVANCE. The Lender's
obligation to make the initial Advance hereunder shall be subject to the
condition precedent that the Lender shall have received all of the following,
each in form and substance satisfactory to the Lender:

         (a)      This Agreement, properly executed by the Borrower.

         (b)      The Note, properly executed by the Borrower.

         (c)      A true and correct copy of any and all leases pursuant to
                  which the Borrower leases any Premises in Lafayette,
                  Louisiana, plus a true and correct copy of all the leases
                  pursuant to which Parent will replace its Premises located at
                  600 17th Street, Denver, Colorado, together with a landlord's
                  disclaimer and consent with respect to each such lease.

         (d)      The Collateral Account Agreement, properly executed by the
                  Borrower and Bank One.

         (e)      Control agreements, properly executed by the Borrower and each
                  bank at which the Borrower maintains deposit accounts
                  including the Collateral Account.

         (f)      Current searches of appropriate filing offices showing that
                  (i) no Liens have been filed and remain in effect against the
                  Borrower or any Corporate Guarantor except Permitted Liens or
                  Liens held by Persons who have agreed in writing that upon
                  receipt of proceeds of the initial Advances, they will
                  satisfy, release or terminate such Liens in a manner
                  satisfactory to the Lender, and (ii) the Lender has duly filed
                  all financing statements necessary to perfect the Security
                  Interest, to the extent the Security Interest is capable of
                  being perfected by filing.

         (g)      A certificate of the Borrower's (and each Corporate
                  Guarantor's) Secretary or Assistant Secretary certifying that
                  attached to such certificate are (i) the resolutions of the
                  Borrower's (and each Corporate Guarantor's) Directors and, if
                  required, Owners, authorizing the execution, delivery and
                  performance of the Loan Documents, (ii) true, correct and
                  complete copies of the Borrower's (and each Corporate
                  Guarantor's) Constituent Documents, and (iii) examples of the
                  signatures of the Borrower's (and each Corporate Guarantor's)
                  Officers or agents authorized to execute and deliver the Loan
                  Documents and other instruments, agreements and certificates,
                  including Advance requests, on the Borrower's (and each
                  Corporate Guarantor's) behalf.

         (h)      A current certificate issued by the Secretary of State of
                  Delaware, certifying that the Borrower is in compliance with
                  all applicable organizational requirements of the State of
                  Delaware, together with a current certificate issued by the
                  Secretary of State of the jurisdiction of incorporation of
                  each Corporate Guarantor, certifying that such Corporate
                  Guarantor is in compliance with all applicable organizational
                  requirements of such State.

                                       20

<PAGE>   25

         (i)      Evidence that the Borrower is duly licensed or qualified to
                  transact business in all jurisdictions where the character of
                  the property owned or leased or the nature of the business
                  transacted by it makes such licensing or qualification
                  necessary.

         (j)      A support agreement in favor of the Lender, properly executed
                  by each of W. Phillip Marcum and A. Bradley Gabbard.

         (k)      An opinion of counsel to the Borrower and each Corporate
                  Guarantor, addressed to the Lender.

         (l)      Certificates of the insurance required hereunder, with all
                  hazard insurance containing a lender's loss payable
                  endorsement in the Lender's favor and with all liability
                  insurance naming the Lender as an additional insured.

         (m)      A separate guaranty, properly executed by each Corporate
                  Guarantor, pursuant to which each Corporate Guarantor
                  unconditionally guarantees the full and prompt payment of all
                  Obligations.

         (n)      A separate security agreement from each Corporate Guarantor,
                  pursuant to which each Corporate Guarantor grants a security
                  interest in all of its assets to Lender as security for the
                  Obligations.

                                       21
<PAGE>   26

         (o)      Payment of the fees and commissions due under Section 2.6
                  through the date of the initial Advance and expenses incurred
                  by the Lender through such date and required to be paid by the
                  Borrower under Section 8.5, including all legal expenses
                  incurred through the date of this Agreement.

         (p)      Evidence that after making the initial Advance, satisfying all
                  obligations owed to National Bank of Canada, satisfying all
                  trade payables older than 30 days from due date, book
                  overdrafts and closing costs, Availability shall be not less
                  than $300,000.00.

         (q)      Such other documents as the Lender in its sole discretion may
                  require.

         Section 4.2 CONDITIONS PRECEDENT TO ALL ADVANCES . The Lender's
obligation to make each Advance shall be subject to the further conditions
precedent that:

         (a)      the representations and warranties or Borrower and each
                  Guarantor contained in Article V and in each Loan Document are
                  correct in all material respects on and as of the date of such
                  Advance as though made on and as of such date, except to the
                  extent that such representations and warranties relate solely
                  to an earlier date; and

         (b)      no event has occurred and is continuing, or would result from
                  such Advance, which constitutes a material adverse change in
                  the financial condition of Borrower or Parent since the most
                  recent financial statements delivered to Lender or which
                  constitutes a Default or an Event of Default.

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

                  The Borrower represents and warrants to the Lender as follows:

         Section 5.1 EXISTENCE AND POWER; NAME; CHIEF EXECUTIVE OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS; FEDERAL EMPLOYER IDENTIFICATION NUMBER. The
Borrower is, and for the past five years was, a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly licensed or qualified to transact business in all jurisdictions
where the character of the property owned or leased or the nature of the
business transacted by it makes such licensing or qualification necessary. The
Borrower has all requisite power and authority to conduct its business, to own
its properties and to execute and deliver, and to perform all of its obligations
under, the Loan Documents. During its existence, the Borrower has done business
solely under the names set forth in Schedule 5.1 and all of the Borrower's
records relating to its business or the Collateral are kept at that location.
The Borrower's chief executive office and principal place of business is, and
for the past five years was, located at the address set forth in Schedule 5.1.
All Inventory and Equipment is, and for the past five years was, located at that
location or at one of the other locations listed in Schedule 5.1. The Borrower's
federal employer identification number is correctly set forth in Section 3.6.

         Section 5.2       CAPITALIZATION. Schedule 5.2 constitutes a correct
and complete list of all ownership interests in the Borrower and rights to
acquire ownership interests in the Borrower including the record holder, number
of interests and percentage interests on a fully diluted basis.

                                       22

<PAGE>   27

         Section 5.3 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR
AGREEMENTS. The execution, delivery and performance by the Borrower of the Loan
Documents and the borrowings from time to time hereunder have been duly
authorized by all necessary corporate action and do not and will not (i) require
any consent or approval of the Borrower's Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing
with, or notice to, any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any provision of any law, rule or regulation (including Regulation T, U or X of
the Board of Governors of the Federal Reserve System) or of any order, writ,
injunction or decree presently in effect having applicability to the Borrower or
of the Borrower's Constituent Documents; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.

         Section 5.4 LEGAL AGREEMENTS. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.

         Section 5.5 SUBSIDIARIES. Except as set forth in Schedule 5.5 hereto,
the Borrower has no Subsidiaries.

         Section 5.6 FINANCIAL CONDITION; NO ADVERSE CHANGE. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2000 and unaudited financial statements for the
fiscal-year-to-date period ended August 30, 2001, and, subject to year end
adjustments in the unaudited financial statements, those statements fairly
present the Borrower's financial condition on the dates thereof and the results
of its operations and cash flows for the periods then ended and were prepared in
accordance with generally accepted accounting principles. For purposes of this
Agreement, the Lender agrees that the audited consolidated financial statements
of Parent and its Subsidiaries, including Borrower, and the consolidating
financial statements of Borrower included therein, shall constitute the
"audited" financial statements of Borrower hereunder. Since the date of the most
recent financial statements, there has been no material adverse change in the
Borrower's business, properties or condition (financial or otherwise).

         Section 5.7 LITIGATION. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a material
adverse effect on the financial condition, properties or operations of the
Borrower or any of its Affiliates, except as set forth in Schedule 5.7.

         Section 5.8 REGULATION U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any

                                       23
<PAGE>   28

Advance will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying any margin stock.

         Section 5.9 TAXES. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them, except to the extent of any taxes that
are being contested in good faith by appropriate proceedings and for which
proper reserves have been made in accordance with GAAP. Except as set forth in
the foregoing proviso, the Borrower and its Affiliates have filed all federal,
state and local tax returns which to the knowledge of the Officers of the
Borrower or any Affiliate, as the case may be, are required to be filed, and the
Borrower and its Affiliates have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.

         Section 5.10 TITLES AND LIENS. The Borrower has good and absolute title
to all Collateral free and clear of all Liens other than Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.

         Section 5.11 PLANS. Except as disclosed to the Lender in writing prior
to the date hereof, neither the Borrower nor any ERISA Affiliate (i) maintains
or has maintained any Pension Plan, (ii) contributes or has contributed to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither the Borrower nor any ERISA Affiliate has received
any notice or has any knowledge to the effect that it is not in full compliance
with any of the requirements of ERISA, the IRC or applicable state law with
respect to any Plan. No Reportable Event exists in connection with any Pension
Plan. Each Plan which is intended to qualify under the IRC is so qualified, and
no fact or circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any
accumulated funding deficiency (as defined in Section 302 of ERISA and Section
412 of the IRC) under any Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan or (iii) any
liability or knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal Revenue
Service, the Department of Labor or any participant in connection with any Plan
(other than routine claims for benefits under the Plan).

         Section 5.12 DEFAULT. The Borrower is in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a material adverse effect on the Borrower's financial condition,
properties or operations.

         Section 5.13 ENVIRONMENTAL MATTERS.

         (a)      To the Borrower's best knowledge, there are not present in, on
                  or under the Premises any Hazardous Substances in such form or
                  quantity as to create any material liability or obligation for
                  either the Borrower or the Lender under common law of any
                  jurisdiction or under any Environmental Law, and no Hazardous
                  Substances have ever been stored, buried, spilled, leaked,
                  discharged,

                                       24
<PAGE>   29

                  emitted or released in, on or under the Premises in such a way
                  as to create any such material liability.

         (b)      To the Borrower's best knowledge, the Borrower has not
                  disposed of Hazardous Substances in such a manner as to create
                  any material liability under any Environmental Law.

         (c)      There are not and there never have been any requests, claims,
                  notices, investigations, demands, administrative proceedings,
                  hearings or litigation, relating in any way to the Premises or
                  the Borrower, alleging material liability under, violation of,
                  or noncompliance with any Environmental Law or any license,
                  permit or other authorization issued pursuant thereto. To the
                  Borrower's best knowledge, no such matter is threatened or
                  impending.

         (d)      To the Borrower's best knowledge, the Borrower's businesses
                  are and have in the past always been conducted in accordance
                  with all Environmental Laws and all licenses, permits and
                  other authorizations required pursuant to any Environmental
                  Law and necessary for the lawful and efficient operation of
                  such businesses are in the Borrower's possession and are in
                  full force and effect. No permit required under any
                  Environmental Law is scheduled to expire within 12 months and
                  there is no threat that any such permit will be withdrawn,
                  terminated, limited or materially changed.

         (e)      To the Borrower's best knowledge, the Premises are not and
                  never have been listed on the National Priorities List, the
                  Comprehensive Environmental Response, Compensation and
                  Liability Information System or any similar federal, state or
                  local list, schedule, log, inventory or database.

         (f)      The Borrower has delivered to Lender all environmental
                  assessments, audits, reports, permits, licenses and other
                  documents describing or relating in any way to the Premises or
                  Borrower's businesses.

         Section 5.14 SUBMISSIONS TO LENDER. All financial and other information
provided to the Lender by or on behalf of the Borrower in connection with the
Borrower's request for the credit facilities contemplated hereby is (i) true and
correct in all material respects, (ii) does not omit any material fact necessary
to make such information not misleading and, (iii) as to projections, valuations
or proforma financial statements, present a good faith opinion as to such
projections, valuations and proforma condition and results.

         Section 5.15 FINANCING STATEMENTS. The Borrower and each Corporate
Guarantor has authorized the filing of financing statements sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.

         Section 5.16 RIGHTS TO PAYMENT. Each right to payment and each
instrument, document, chattel paper and other agreement constituting or
evidencing Collateral is (or, in the case of all

                                       25
<PAGE>   30

future Collateral, will be when arising or issued) the valid, genuine and
legally enforceable obligation, subject to no defense, setoff or counterclaim,
of the account debtor or other obligor named therein or in the Borrower's
records pertaining thereto as being obligated to pay such obligation.

         Section 5.17 FINANCIAL SOLVENCY. Both before and after giving effect to
the transactions contemplated in the Loan Documents, none of the Borrower or its
Affiliates:

         (a)      was or will be insolvent, as that term is used and defined in
                  Section 101(32) of the United States Bankruptcy Code and
                  Section 2 of the Uniform Fraudulent Transfer Act;

         (b)      has unreasonably small capital or is engaged or about to
                  engage in a business or a transaction for which any remaining
                  assets of the Borrower or such Affiliate are unreasonably
                  small;

         (c)      by executing, delivering or performing its obligations under
                  the Loan Documents or other documents to which it is a party
                  or by taking any action with respect thereto, intends to, nor
                  believes that it will, incur debts beyond its ability to pay
                  them as they mature;

         (d)      by executing, delivering or performing its obligations under
                  the Loan Documents or other documents to which it is a party
                  or by taking any action with respect thereto, intends to
                  hinder, delay or defraud either its present or future
                  creditors; and

         (e)      at this time contemplates filing a petition in bankruptcy or
                  for an arrangement or reorganization or similar proceeding
                  under any law any jurisdiction, nor, to the best knowledge of
                  the Borrower, is the subject of any actual, pending or
                  threatened bankruptcy, insolvency or similar proceedings under
                  any law of any jurisdiction.

                                   ARTICLE VI

                                    COVENANTS
                                    ---------

         So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:

         Section 6.1 REPORTING REQUIREMENTS. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:

         (a)      ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any
                  event within 90 days after the end of each fiscal year of the
                  Borrower, audited consolidated and consolidating financial
                  statements of Metretek Technologies, Inc. and its Subsidiaries
                  with the unqualified opinion of independent certified public
                  accountants selected by the Borrower and acceptable to the
                  Lender, which annual

                                       26
<PAGE>   31

                  financial statements shall include the Parent's (on a
                  consolidated basis) and Borrower's balance sheet as at the end
                  of such fiscal year and the related statements of the Parent's
                  (on a consolidated basis) and Borrower's operations,
                  stockholders' equity and cash flows for the fiscal year then
                  ended, all in reasonable detail and prepared in accordance
                  with GAAP, together with (i) copies of all management letters
                  prepared by such accountants; and (ii) a certificate of the
                  Borrower's chief financial officer stating that such financial
                  statements have been prepared in accordance with GAAP and
                  whether or not such officer has knowledge of the occurrence of
                  any Default or Event of Default and, if so, stating in
                  reasonable detail the facts with respect thereto.

         (b)      MONTHLY FINANCIAL STATEMENTS. (A) As soon as available and in
                  any event within 20 days after the end of each month, the
                  Borrower will deliver to the Lender an unaudited/internal
                  balance sheet and statements of operations of the Borrower as
                  at the end of and for such month and for the year to date
                  period then ended, prepared, if the Lender so requests, on a
                  consolidating and consolidated basis to include any
                  Subsidiaries of Borrower, in reasonable detail and stating in
                  comparative form the figures for the corresponding date and
                  periods in the previous year, all prepared in accordance with
                  GAAP, subject to year-end audit adjustments; and accompanied
                  by a certificate of the Borrower's chief financial Officer,
                  substantially in the form of Exhibit B hereto stating (i) that
                  such financial statements have been prepared in accordance
                  with GAAP, subject to year-end audit adjustments, (ii) whether
                  or not such officer has knowledge of the occurrence of any
                  Default or Event of Default not theretofore reported and
                  remedied and, if so, stating in reasonable detail the facts
                  with respect thereto, and (iii) all relevant facts in
                  reasonable detail to evidence, and the computations as to,
                  whether or not the Borrower is in compliance with the
                  Financial Covenants.

                  (B) As soon as available and in any event within 30 days after
         the end of each month, the Borrower will cause to be delivered to the
         Lender unaudited consolidated internal statements of income of the
         Parent as at the end of and for such month and for the year to date
         period then ended, to include any Affiliates, in reasonable detail and
         stating in comparative form the figures for the corresponding date and
         periods in the previous year, all prepared in accordance with GAAP,
         subject to year-end audit adjustments.

                  (C) As soon as available and in any event within 30 days after
         the end of each quarter, the Borrower will deliver to the Lender
         unaudited consolidated and consolidating statements of operation of the
         Parent as at the end of and for such month and for the year-to-date
         period then ended, to include any Affiliates, in reasonable detail and
         stating in comparative form the figures for the corresponding date and
         periods in the previous year, all prepared in accordance with GAAP,
         subject to year-end audit adjustments.

                                       27
<PAGE>   32

         (c)      COLLATERAL REPORTS. Within 15 days after the end of each month
                  or more frequently if the Lender so requires, the Borrower
                  will deliver to the Lender agings of the Borrower's accounts
                  receivable and its accounts payable, an inventory
                  certification report, and a calculation of the Borrower's
                  Eligible Accounts and Eligible Inventory as at the end of such
                  month or shorter time period.

         (d)      PROJECTIONS. At least 30 days before the beginning of each
                  fiscal year of the Borrower, the Borrower will deliver to the
                  Lender the projected balance sheets and income statements for
                  each quarter of such year, each in reasonable detail,
                  representing (i) the Borrower's good faith projections and
                  certified by the Borrower's chief financial Officer as being
                  the most accurate projections available and identical to the
                  projections used by the Borrower for internal planning
                  purposes, and (ii) the Parent's good faith projections
                  (consolidated and consolidating) and certified by the Parent's
                  chief financial Officer as being the most accurate projections
                  available and identical to the projections used by the Parent
                  for internal planning purposes, in each case (x) together with
                  a statement of underlying assumptions and such supporting
                  schedules and information as the Lender may in its discretion
                  require, and (y) based upon plans, intentions, goals,
                  strategies, beliefs and expectations of management as of that
                  time and the best information then available to management.

         (e)      LITIGATION. Immediately after the commencement thereof, the
                  Borrower will deliver to the Lender notice in writing of all
                  litigation and of all proceedings before any governmental or
                  regulatory agency affecting the Borrower or any Corporate
                  Guarantor (i) of the type described in Section 5.13(c) or (ii)
                  which seek a monetary recovery against the Borrower or any
                  Corporate Guarantor in excess of $50,000.

         (f)      DEFAULTS. As promptly as practicable (but in any event not
                  later than five business days) after an Officer of the
                  Borrower obtains knowledge of the occurrence of any Default or
                  Event of Default, the Borrower will deliver to the Lender
                  notice of such occurrence, together with a detailed statement
                  by a responsible Officer of the Borrower of the steps being
                  taken by the Borrower to cure the effect thereof.

         (g)      PLANS. As soon as possible, and in any event within 30 days
                  after the Borrower knows or has reason to know that any
                  Reportable Event with respect to any Pension Plan has
                  occurred, the Borrower will deliver to the Lender a statement
                  of the Borrower's chief financial Officer setting forth
                  details as to such Reportable Event and the action which the
                  Borrower proposes to take with respect thereto, together with
                  a copy of the notice of such Reportable Event to the Pension
                  Benefit Guaranty Corporation. As soon as possible, and in any
                  event within 10 days after the Borrower fails to make any
                  quarterly contribution required with respect to any Pension
                  Plan under Section 412(m) of the IRC, the Borrower will
                  deliver to the Lender a statement of the Borrower's chief
                  financial Officer setting forth details as to such failure and
                  the action which the Borrower proposes to take with respect
                  thereto, together with a copy of any notice of such failure
                  required to be provided to the Pension Benefit Guaranty
                  Corporation. As soon as possible, and in any event with 10
                  days after the Borrower knows or has reason to know that it
                  has or

                                       28
<PAGE>   33

                  is reasonably expected to have any liability under Section
                  4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
                  reorganization or other event under any Multiemployer Plan,
                  the Borrower will deliver to the Lender a statement of the
                  Borrower's chief financial Officer setting forth details as to
                  such liability and the action which Borrower proposes to take
                  with respect thereto.

         (h)      DISPUTES. Promptly upon knowledge thereof, the Borrower will
                  deliver to the Lender notice of (i) any disputes or claims by
                  the Borrower's customers exceeding $25,000 individually or
                  $125,000 in the aggregate during any fiscal year; and (ii)
                  credit memos (not disclosed pursuant to Section 6.1(o)
                  hereof).

         (i)      OFFICERS AND DIRECTORS. Promptly upon knowledge thereof, the
                  Borrower will deliver to the Lender notice any change in the
                  persons constituting the Borrower's Officers and Directors.

         (j)      COLLATERAL. Promptly upon knowledge thereof, the Borrower will
                  deliver to the Lender notice of any loss of or material damage
                  to any Collateral or of any substantial adverse change in any
                  Collateral or the prospect of payment thereof.

         (k)      COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof, the
                  Borrower will deliver to the Lender notice of any commercial
                  tort claims it intends to or does bring against any Person,
                  including the name and address of each defendant, a summary of
                  the facts, an estimate of the Borrower's damages, copies of
                  any complaint or demand letter submitted by the Borrower, and
                  such other information as the Lender may request.

         (l)      REPORTS TO OWNERS. Promptly upon their distribution, the
                  Borrower will cause the Parent to deliver to the Lender copies
                  of all financial statements, reports and proxy statements
                  which the Parent shall have sent to its Owners.

         (m)      SEC FILINGS. Promptly after the sending or filing thereof, the
                  Borrower will deliver to the Lender copies of all regular and
                  periodic reports which the Parent shall file with the
                  Securities and Exchange Commission or any national securities
                  exchange.

         (n)      VIOLATIONS OF LAW. Promptly upon knowledge thereof, the
                  Borrower will deliver to the Lender notice of the Borrower's
                  violation of any law, rule or regulation, the non-compliance
                  with which could materially and adversely affect the
                  Borrower's business or its financial condition.

         (o)      COLLECTIONS, SALES, CREDIT MEMOS, ETC. Borrower shall provide
                  daily reporting of collections (supported by Borrower's cash
                  receipts journal) and at least weekly reporting of sales
                  (supported by Borrower's sales journal), credit memos, and an
                  accounts receivable aging (summary page only), together with a
                  Borrowing Base reconciliation report.

         (p)      OTHER REPORTS. From time to time, with reasonable promptness,
                  the Borrower will deliver to the Lender any and all
                  receivables schedules, collection reports, deposit records,
                  equipment schedules, copies of invoices to account debtors,

                                       29

<PAGE>   34

                  shipment documents and delivery RECEIPTS for goods sold, and
                  such other material, reports, records or information as the
                  Lender may request.

         Section 6.2 FINANCIAL COVENANTS.

         (a)      MINIMUM TANGIBLE BOOK NET WORTH. The Borrower will maintain,
                  during each period described below, its Tangible Book Net
                  Worth, determined as at the end of each month, at an amount
                  greater than $650,000. "Tangible Book Net Worth" means the
                  aggregate of the common and preferred stockholders' equity in
                  the Borrower LESS intangibles and LESS total intercompany
                  indebtedness owing from Corporate Guarantors to Borrower, all
                  determined in accordance with GAAP.

         (b)      MINIMUM PROFITABILITY. The Borrower will achieve, during each
                  period described below, Net Income, determined at the end of
                  each quarter, greater than the amount set forth opposite such
                  period:

                  Period                              Minimum Net Income

                  9 mos. ending 9/30/01                         $750,000

                  12 mos. ending 12/31/01                     $1,000,000

                  3 mos. ending 3/31/02                         $200,000

                  6 mos. ending 6/30/02                         $400,000

                  9 mos. ending 9/30/02                         $600,000

                  12 mos. ending 12/31/02                       $800,000

         (c)      CAPITAL EXPENDITURES. The Borrower will not incur or contract
                  to incur Capital Expenditures of more than (i) $200,000 in the
                  aggregate during the fiscal year ending December 31, 2001 or
                  (ii) $200,000 in the aggregate during the fiscal year ending
                  December 31, 2002.

         Section 6.3 PERMITTED LIENS; FINANCING STATEMENTS.

         (a)      The Borrower will not create, incur or suffer to exist any
                  Lien upon or of any of its assets, now owned or hereafter
                  acquired, to secure any indebtedness; EXCLUDING, HOWEVER, from
                  the operation of the foregoing, the following (collectively,
                  "Permitted Liens"):

                  (i)      covenants, restrictions, rights, easements and minor
                           irregularities in title which do not materially
                           interfere with the Borrower's business or operations
                           as presently conducted;

                  (ii)     Liens in existence on the date hereof and listed in
                           Schedule 6.3 hereto, securing indebtedness for
                           borrowed money permitted under Section 6.4;

                  (iii)    the Security Interest and Liens created by the
                           Security Documents;

                                       30

<PAGE>   35

                  (iv)     purchase money Liens relating to the acquisition or
                           lease of vehicles, machinery and equipment of the
                           Borrower not exceeding the lesser of cost or fair
                           market value thereof, in the ordinary course of
                           business, and so long as no Default Period is then in
                           existence and none would exist immediately after such
                           acquisition;

                  (v)      liens for taxes, assessments, or other governmental
                           charges which are not delinquent or which are being
                           contested in good faith and for which adequate
                           reserves have been established in accordance with
                           GAAP;

                  (vi)     liens of mechanics, materialmen, warehousemen,
                           carriers or other similar statutory liens securing
                           obligations that are not yet due and are incurred in
                           the ordinary course of business; and

                  (vii)    the Dallas Premises.

         (b)      Borrower will not amend any financing statements in favor of
                  the Lender except as permitted by law.

         Section 6.4 INDEBTEDNESS. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or
advances or any indebtedness for borrowed money or letters of credit issued on
the Borrower's behalf, or any other indebtedness or liability evidenced by
notes, bonds, debentures or similar obligations, except:

         (a)      indebtedness arising hereunder;

         (b)      indebtedness of the Borrower in existence on the date hereof
                  and listed in Schedule 6.4 hereto;

         (c)      indebtedness relating to Permitted Liens;

         (d)      indebtedness arising from the lease of vehicles and equipment,
                  all in the ordinary course of business, the obligations under
                  which ARE NOT required to be classified as "liabilities" on
                  Borrower's balance sheet in accordance with GAAP; and

         (e)      indebtedness arising out of capital leases, the obligations
                  under which ARE required to be classified as "liabilities" on
                  Borrower's balance sheet in accordance with GAAP, to the
                  extent permitted pursuant to Section 6.2(c).

         Section 6.5 GUARANTIES. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:

                                       31
<PAGE>   36

         (a)      the endorsement of negotiable instruments by the Borrower for
                  deposit or collection or similar transactions in the ordinary
                  course of business; and

         (b)      guaranties, endorsements and other direct or contingent
                  liabilities in connection with the obligations of other
                  Persons, in existence on the date hereof and listed in
                  Schedule 6.4 hereto.

         Section 6.6 INVESTMENTS AND SUBSIDIARIES. The Borrower will not
purchase or hold beneficially any stock or other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any other Person, including
any partnership or joint venture, except:

         (a)      investments in direct obligations of the United States of
                  America or any agency or instrumentality thereof whose
                  obligations constitute full faith and credit obligations of
                  the United States of America having a maturity of one year or
                  less, commercial paper issued by U.S. corporations rated "A-1"
                  or "A-2" by Standard & Poors 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 $100,000,000 (which certificates of
                  deposit or bankers' acceptances are fully insured by the
                  Federal Deposit Insurance Corporation);

         (b)      travel advances or loans to the Borrower's Officers and
                  employees not exceeding at any one time an aggregate of
                  $20,000;

         (c)      loans from Borrower to Corporate Guarantors permitted by
                  Section 6.26; and

         (d)      current investments in the Subsidiaries in existence on the
                  date hereof and listed in Schedule 5.5 hereto.

         Section 6.7 DIVIDENDS AND DISTRIBUTIONS. The Borrower will not declare
or pay any dividends (other than dividends payable solely in stock of the
Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.

         Section 6.8 BOOKS AND RECORDS; INSPECTION AND EXAMINATION. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all company and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its Directors, Officers, employees or agents. The
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender, at the Borrower's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding the Borrower. The Borrower will permit
the Lender, or its employees, accountants, attorneys or agents, to

                                       32
<PAGE>   37

examine and inspect any Collateral or any other property of the Borrower at any
time upon reasonable notice during ordinary business hours.

         Section 6.9 ACCOUNT VERIFICATION. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.

         Section 6.10 COMPLIANCE WITH LAWS.

         (a)      The Borrower will (i) comply with the requirements of
                  applicable laws and regulations, the non-compliance with which
                  would materially and adversely affect its business or its
                  financial condition and (ii) use and keep the Collateral, and
                  require that others use and keep the Collateral, only for
                  lawful purposes, without violation of any federal, state or
                  local law, statute or ordinance.

         (b)      Without limiting the foregoing undertakings, the Borrower
                  specifically agrees that it will comply with all applicable
                  Environmental Laws and obtain and comply with all permits,
                  licenses and similar approvals required by any Environmental
                  Laws, and will not generate, use, transport, treat, store or
                  dispose of any Hazardous Substances in such a manner as to
                  create any material liability or obligation under the common
                  law of any jurisdiction or any Environmental Law.

         Section 6.11 PAYMENT OF TAXES AND OTHER CLAIMS. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of the
Borrower; provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which proper reserves
have been made.

         Section 6.12 MAINTENANCE OF PROPERTIES.

         (a)      The Borrower will keep and maintain the Collateral and all of
                  its other properties necessary or useful in its business in
                  good condition, repair and working order (normal wear and tear
                  excepted) and will from time to time replace or repair any
                  worn, defective or broken parts; provided, however, that
                  nothing in this Section 6.12 shall prevent the Borrower from
                  discontinuing the operation and maintenance of any of its
                  properties if such discontinuance is, in the Borrower's
                  judgment, desirable in the conduct of the Borrower's business
                  and not disadvantageous in any material respect to the Lender.
                  The Borrower will take all commercially reasonable steps
                  necessary to protect and maintain its Intellectual Property
                  Rights.

         (b)      The Borrower will defend the Collateral against all Liens,
                  claims or demands of all Persons (other than the Lender)
                  claiming the Collateral or any interest therein.

                                       33
<PAGE>   38

                  The Borrower will keep all Collateral free and clear of all
                  Liens except Permitted Liens. The Borrower will take all
                  commercially reasonable steps necessary to prosecute any
                  Person Infringing its Intellectual Property Rights and to
                  defend itself against any Person accusing it of Infringing any
                  Person's Intellectual Property Rights.

         Section 6.13 INSURANCE. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
keep all tangible Collateral insured against risks of fire (including so-called
extended coverage), theft, and such other risks and in such amounts as the
Lender may reasonably request, with any loss payable to the Lender to the extent
of its interest, and all policies of such insurance shall contain a lender's
loss payable endorsement for the Lender's benefit. All policies of liability
insurance required hereunder shall name the Lender as an additional insured.

         Section 6.14 PRESERVATION OF EXISTENCE. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.

         Section 6.15 DELIVERY OF INSTRUMENTS, ETC. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.

         Section 6.16 SALE OR TRANSFER OF ASSETS; SUSPENSION OF BUSINESS
OPERATIONS. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale of Inventory in the ordinary course of business and the sale of the Dallas
Premises and will not liquidate, dissolve or suspend business operations. The
Borrower will not transfer any part of its ownership interest in any
Intellectual Property Rights and will not permit any agreement under which it
has licensed Intellectual Property Rights to lapse, except that the Borrower may
transfer such rights or permit such agreements to lapse if it shall have
reasonably determined that the applicable Intellectual Property Rights are no
longer useful in its business. If the Borrower transfers any Intellectual
Property Rights for value, the Borrower will pay over the proceeds to the Lender
for application to the Obligations. The Borrower will not license any other
Person to use any of the Borrower's Intellectual Property Rights, except that
the Borrower may grant licenses in the ordinary course of its business in
connection with sales of Inventory or provision of services to its customers.
The Borrower will not in any manner transfer any property without prior or
present receipt of full and adequate consideration.

         Section 6.17 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.

                                       34

<PAGE>   39

         Section 6.18 SALE AND LEASEBACK. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred; provided, however, that the foregoing restriction shall not apply
with respect to the Dallas Premises.

         Section 6.19 RESTRICTIONS ON NATURE OF BUSINESS. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.

         Section 6.20 ACCOUNTING. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.

         Section 6.21 DISCOUNTS, ETC. Borrower will not grant any discount,
credit or allowance to any customer of the Borrower greater than 2% 10 net 30 or
accept any return of goods sold. The Borrower will not at any time modify,
amend, subordinate, cancel or terminate the obligation of any account debtor or
other obligor of the Borrower.

         Section 6.22 PLANS. Unless disclosed to the Lender pursuant to
Section 5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt,
create, assume or become a party to any Pension Plan, (ii) incur any obligation
to contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.

         Section 6.23 PLACE OF BUSINESS; NAME. The Borrower will not
transfer its chief executive office or principal place of business, or move,
relocate, close or sell any business location (except that Borrower may close or
sell its Dallas Premises). The Borrower will not permit any tangible Collateral
or any records pertaining to the Collateral to be located in any state or area
in which, in the event of such location, a financing statement covering such
Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. The Borrower will not change its name or
jurisdiction of organization.

         Section 6.24 CONSTITUENT DOCUMENTS; S CORPORATION STATUS. The Borrower
will not amend its Constituent Documents. The Borrower will not become an S
Corporation.

         Section 6.25 PERFORMANCE BY THE LENDER. If the Borrower at any
time fails to perform or observe any of the foregoing covenants contained in
this Article VI or elsewhere herein, and if such failure shall continue for a
period of ten calendar days after the Lender gives the Borrower written notice
thereof (or in the case of the agreements contained in Sections 6.11 and 6.13,
immediately upon the occurrence of such failure, without notice or lapse of
time), the Lender may, but need not, perform or observe such covenant on behalf
and in the name, place and stead of the Borrower (or, at the Lender's option, in
the Lender's name) and may, but need not, take any and all other actions which
the Lender may reasonably deem necessary to cure or correct such failure
(including the payment of taxes, the satisfaction of Liens, the performance of
obligations owed to account debtors or other obligors, the procurement and
maintenance of

                                       35
<PAGE>   40

insurance, the execution of assignments, security agreements and financing
statements, and the endorsement of instruments); and the Borrower shall
thereupon pay to the Lender on demand the amount of all monies expended and all
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender,
together with interest thereon from the date expended or incurred at the Default
Rate. To facilitate the Lender's performance or observance of such covenants of
the Borrower, the Borrower hereby irrevocably appoints the Lender, or the
Lender's delegate, acting alone, as the Borrower's attorney in fact (which
appointment is coupled with an interest) with the right (but not the duty) from
time to time to create, prepare, complete, execute, deliver, endorse or file in
the name and on behalf of the Borrower any and all instruments, documents,
assignments, security agreements, financing statements, applications for
insurance and other agreements and writings required to be obtained, executed,
delivered or endorsed by the Borrower under this Section 6.25.

         Section 6.26 ADVANCES TO CORPORATE GUARANTORS. Total intercompany
indebtedness owing from all Corporate Guarantors to Borrower determined at the
end of each month may not exceed the greater of: (a) the Borrowing Base on such
date less $150,000, or (b) cumulative Net Income from January 1, 2001 until such
date.

         Section 6.27 COLORADO LEASE. Borrower agrees that if it or any of
its Affiliates is party to a lease agreement relating to the Premises located at
600 17th Street, Denver, Colorado after December 31, 2001, it will enter into a
Landlord's Disclaimer and Consent with respect thereto in form and substance
satisfactory to Lender in its sole discretion. If at any time after the date
hereof Borrower or any of its Affiliates is party to a lease agreement relating
to any other real property located in the State of Colorado, and such real
property constitutes Premises, it will enter into a Landlord's Disclaimer and
Consent with respect thereto in form and substance satisfactory to Lender in its
sole discretion.

                                   ARTICLE VII

                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES
                     --------------------------------------

         Section 7.1 .EVENTS OF DEFAULT. "Event of Default", wherever used
herein, means any one of the following events:

         (a)      Default in the payment of any Obligations when they become due
                  and payable;

         (b)      Default in the performance, or breach, of any covenant or
                  agreement of the Borrower contained in this Agreement;

         (c)      Any ownership interest in the Borrower shall be sold,
                  transferred, or become subject to a Lien (other than a Lien in
                  favor of Lender or a Permitted Lien);

         (d)      Any Financial Covenant shall become inapplicable due to the
                  lapse of time and the failure to amend any such covenant to
                  cover future periods;

         (e)      Either (i) the Borrower or any Guarantor shall be or become
                  insolvent, or admit in writing its or his inability to pay its
                  or his debts as they mature, or make an assignment for the
                  benefit of creditors; (ii) or the Borrower or any Guarantor
                  shall

                                       36
<PAGE>   41

                  apply for or consent to the appointment of any receiver,
                  trustee, or similar officer for it or him or for all or any
                  substantial part of its or his property; or (iii) such
                  receiver, trustee or similar officer shall be appointed
                  without the application or consent of the Borrower or such
                  Guarantor, which appointment is not revoked within 30 days
                  after such appointment; or (iv) the Borrower or any Guarantor
                  shall institute (by petition, application, answer, consent or
                  otherwise) any bankruptcy, insolvency, reorganization,
                  arrangement, readjustment of debt, dissolution, liquidation or
                  similar proceeding relating to it or him under the laws of any
                  jurisdiction; or (v) any such proceeding shall be instituted
                  (by petition, application or otherwise) against the Borrower
                  or any such Guarantor, and any such proceeding remains
                  undismissed and unstayed for a period of 30 days after the
                  commencement thereof; or (vi) any judgment, writ, warrant of
                  attachment or execution or similar process shall be issued or
                  levied against a substantial part of the property of the
                  Borrower or any Guarantor which remains unsatisfied or
                  undischarged and in effect for a period of 30 days after such
                  issuance of levy without a stay of enforcement or execution;

         (f)      Either (i) a petition shall be filed against the Borrower or
                  any Guarantor under the United States Bankruptcy Code naming
                  the Borrower or such Guarantor as debtor if such petition has
                  not been dismissed within 30 days of the filing of such
                  petition against such Person, or (ii) a petition shall be
                  filed by the Borrower or any Guarantor under the United States
                  Bankruptcy Code naming the Borrower or such Guarantor as
                  debtor;

         (g)      Any representation or warranty made by the Borrower in this
                  Agreement, by any Guarantor in any guaranty delivered to the
                  Lender, or by the Borrower (or any of its Officers) or any
                  Guarantor in any agreement, certificate, instrument or
                  financial statement or other statement contemplated by or made
                  or delivered pursuant to or in connection with this Agreement
                  or any such guaranty shall prove to have been incorrect in any
                  material respect when deemed to be effective;

         (h)      The rendering against the Borrower or a Corporate Guarantor of
                  an arbitration award, final judgment, decree or order for the
                  payment of money in excess of $50,000 and the continuance of
                  such arbitration award, judgment, decree or order unsatisfied
                  and in effect for a period of 30 days without a stay of
                  execution;

         (i)      A default under any bond, debenture, note or other evidence of
                  material indebtedness of the Borrower or a Corporate Guarantor
                  owed to any Person other than the Lender, or under any
                  indenture or other instrument under which any such evidence of
                  indebtedness has been issued or by which it is governed, or
                  under any material lease or other contract, and the expiration
                  of the applicable period of grace or cure period, if any,
                  specified in, or otherwise agreed by all parties to, such
                  evidence of indebtedness, indenture, other instrument, lease
                  or contract; provided that to the extent Borrower or any
                  Corporate Guarantor is contesting any amount owed to Scient
                  Corporation in respect of any note payable to Scient
                  Corporation, non-payment of such contested amount shall not be
                  an Event of Default hereunder

                                       37
<PAGE>   42

                  so long as such contest continues in good faith or to the
                  extent that such contest is adjudicated in favor of Borrower
                  or such Corporate Guarantor;

         (j)      Any Reportable Event, which the Lender determines in good
                  faith might constitute grounds for the termination of any
                  Pension Plan or for the appointment by the appropriate United
                  States District Court of a trustee to administer any Pension
                  Plan, shall have occurred and be continuing 30 days after
                  written notice to such effect shall have been given to the
                  Borrower by the Lender; or a trustee shall have been appointed
                  by an appropriate United States District Court to administer
                  any Pension Plan; or the Pension Benefit Guaranty Corporation
                  shall have instituted proceedings to terminate any Pension
                  Plan or to appoint a trustee to administer any Pension Plan;
                  or the Borrower or any ERISA Affiliate shall have filed for a
                  distress termination of any Pension Plan under Title IV of
                  ERISA; or the Borrower or any ERISA Affiliate shall have
                  failed to make any quarterly contribution required with
                  respect to any Pension Plan under Section 412(m) of the IRC,
                  which the Lender determines in good faith may by itself, or in
                  combination with any such failures that the Lender may
                  determine are likely to occur in the future, result in the
                  imposition of a Lien on the Borrower's assets in favor of the
                  Pension Plan; or any withdrawal, partial withdrawal,
                  reorganization or other event occurs with respect to a
                  Multiemployer Plan which results or could reasonably be
                  expected to result in a material liability of the Borrower to
                  the Multiemployer Plan under Title IV of ERISA.

         (k)      An event of default shall occur under any Security Document;

         (l)      The Borrower or a Corporate Guarantor shall liquidate,
                  dissolve, terminate or suspend its business operations or
                  otherwise fail to operate its business in the ordinary course,
                  or sell or attempt to sell all or substantially all of its
                  assets, without the Lender's prior written consent;

         (m)      Default in the payment of any amount owed by the Borrower or a
                  Corporate Guarantor to the Lender other than any indebtedness
                  arising hereunder;

         (n)      Any Guarantor or Person signing a support agreement in favor
                  of the Lender shall repudiate, purport to revoke or fail to
                  perform any of its or his material obligations under its or
                  his guaranty or support agreement in favor of the Lender, any
                  individual Guarantor shall die or any other Guarantor shall
                  cease to exist;

         (o)      Any event or circumstance with respect to the Borrower shall
                  occur such that the Lender shall believe in good faith that
                  the prospect of payment of all or any part of the Obligations
                  or the performance by the Borrower under the Loan Documents is
                  materially impaired or any material adverse change in the
                  business or financial condition of the Borrower shall occur;
                  or

         (p)      Any breach, default or event of default by or attributable to
                  any Affiliate under any agreement between such Affiliate and
                  the Lender shall occur.

                                       38

<PAGE>   43

         Section 7.2 .RIGHTS AND REMEDIES. During any Default Period, the
Lender may exercise any or all of the following rights and remedies:

         (a)      the Lender may, by notice to the Borrower, declare the
                  Commitment to be terminated, whereupon the same shall
                  forthwith terminate;

         (b)      the Lender may, by notice to the Borrower, declare the
                  Obligations to be forthwith due and payable, whereupon all
                  Obligations shall become and be forthwith due and payable,
                  without presentment, notice of dishonor, protest or further
                  notice of any kind, all of which the Borrower hereby expressly
                  waives;

         (c)      the Lender may, without notice to the Borrower and without
                  further action, apply any and all money owing by the Lender to
                  the Borrower to the payment of the Obligations;

         (d)      the Lender may exercise and enforce any and all rights and
                  remedies available upon default to a secured party under the
                  UCC, including the right to take possession of Collateral, or
                  any evidence thereof, proceeding without judicial process or
                  by judicial process (without a prior hearing or notice
                  thereof, which the Borrower hereby expressly waives) and the
                  right to sell, lease or otherwise dispose of any or all of the
                  Collateral (with or without giving any warranties as to the
                  Collateral, title to the Collateral or similar warranties),
                  and, in connection therewith, the Borrower will on demand
                  assemble the Collateral and make it available to the Lender at
                  a place to be designated by the Lender which is reasonably
                  convenient to both parties;

         (e)      the Lender may exercise and enforce its rights and remedies
                  under the Loan Documents; and

         (f)      the Lender may exercise any other rights and remedies
                  available to it by law or agreement.

Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in subsections (e) or (f) of Section 7.1, the Obligations shall be
immediately due and payable automatically without presentment, demand, protest
or notice of any kind. If the Lender sells any of the Collateral on credit, the
Obligations will be reduced only to the extent of payments actually received. If
the purchaser fails to pay for the Collateral, the Lender may resell the
Collateral and shall apply any proceeds actually received to the Obligations.

         Section 7.3 .CERTAIN NOTICES. If notice to the Borrower of any
intended disposition of Collateral or any other intended action is required by
law in a particular instance, such notice shall be deemed commercially
reasonable if given (in the manner specified in Section 8.3) at least ten
calendar days before the date of intended disposition or other action.

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<PAGE>   44

                                  ARTICLE VIII

                                  MISCELLANEOUS
                                  -------------

         Section 8.1  NO WAIVER; CUMULATIVE REMEDIES; COMPLIANCE WITH LAWS.
No failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.

         Section 8.2  AMENDMENTS, ETC. No amendment, modification,
termination or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom or any release of a Security Interest shall
be effective unless the same shall be in writing and signed by the Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No notice to or demand on the Borrower
in any case shall entitle the Borrower to any other or further notice or demand
in similar or other circumstances.

         Section 8.3  ADDRESSES FOR NOTICES; REQUESTS FOR ACCOUNTING.
Except as otherwise expressly provided herein, all notices, requests, demands
and other communications provided for under the Loan Documents shall be in
writing and shall be (a) personally delivered, (b) sent by first class United
States mail, (c) sent by overnight courier of national reputation, or (d)
transmitted by telecopy, in each case addressed or telecopied to the party to
whom notice is being given at its address or telecopier number as set forth
below next to its signature or, as to each party, at such other address or
telecopier number as may hereafter be designated by such party in a written
notice to the other party complying as to delivery with the terms of this
Section. All such notices, requests, demands and other communications shall be
deemed to have been given on (a) the date received if personally delivered, (b)
when deposited in the mail if delivered by mail, (c) the date sent if sent by
overnight courier, or (d) the date of transmission if delivered by telecopy,
except that notices or requests to the Lender pursuant to any of the provisions
of Article II shall not be effective until received by the Lender. All requests
under Section 9-210 of the UCC (i) shall be made in a writing signed by a person
authorized under Section 2.2(b), (ii) shall be personally delivered, sent by
registered or certified mail, return receipt requested, or by overnight courier
of national reputation (iii) shall be deemed to be sent when received by the
Lender and (iv) shall otherwise comply with the requirements of Section 9-210.
The Borrower requests that the Lender respond to all such requests which on
their face appear to come from an authorized individual and releases the Lender
from any liability for so responding. The Borrower shall pay Lender the maximum
amount allowed by law for responding to such requests.

         Section 8.4  FURTHER DOCUMENTS. The Borrower will from time to
time execute and deliver or endorse any and all instruments, documents,
conveyances, assignments, security agreements, financing statements, control
agreements and other agreements and writings that the Lender may reasonably
request in order to secure, protect, perfect or enforce the Security Interest or
the Lender's rights under the Loan Documents (but any failure to request or
assure that the

                                       40
<PAGE>   45

Borrower executes, delivers or endorses any such item shall not affect or impair
the validity, sufficiency or enforceability of the Loan Documents and the
Security Interest, regardless of whether any such item was or was not executed,
delivered or endorsed in a similar context or on a prior occasion).

         Section 8.5 COSTS AND EXPENSES. The Borrower shall pay on demand
all costs and expenses, including reasonable attorneys' fees, incurred by the
Lender in connection with the Obligations, this Agreement, the Loan Documents
and any other document or agreement related hereto or thereto, and the
transactions contemplated hereby, including all such costs, expenses and fees
incurred in connection with the negotiation, preparation, execution, amendment,
administration, performance, collection and enforcement of the Obligations and
all such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.

         Section 8.6 INDEMNITY. In addition to the payment of expenses
pursuant to Section 8.5, the Borrower shall indemnify, defend and hold harmless
the Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):

         (a)      any and all transfer taxes, documentary taxes, assessments or
                  charges made by any governmental authority by reason of the
                  execution and delivery of the Loan Documents or the making of
                  the Advances;

         (b)      any claims, loss or damage to which any Indemnitee may be
                  subjected if any representation or warranty contained in
                  Section 5.13 proves to be incorrect in any respect or as a
                  result of any violation of the covenant contained in Section
                  6.10(b); and

         (c)      any and all other liabilities, losses, damages, penalties,
                  judgments, suits, claims, costs and expenses of any kind or
                  nature whatsoever (including the reasonable fees and
                  disbursements of counsel) in connection with the foregoing and
                  any other investigative, administrative or judicial
                  proceedings, whether or not such Indemnitee shall be
                  designated a party thereto, which may be imposed on, incurred
                  by or asserted against any such Indemnitee, in any manner
                  related to or arising out of or in connection with the making
                  of the Advances and the Loan Documents or the use or intended
                  use of the proceeds of the Advances.

If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.

                                       41

<PAGE>   46

         Section 8.7  PARTICIPANTS. The Lender and its participants, if
any, are not partners or joint venturers, and the Lender shall not have any
liability or responsibility for any obligation, act or omission of any of its
participants. All rights and powers specifically conferred upon the Lender may
be transferred or delegated to any of the Lender's participants, successors or
assigns.

         Section 8.8  EXECUTION IN COUNTERPARTS; TELEFACSIMILE EXECUTION.
This Agreement and other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as delivery of an
original executed counterpart of this Agreement. Any party delivering an
executed counterpart of this Agreement by telefacsimile also shall deliver an
original executed counterpart of this Agreement but the failure to deliver an
original executed counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.

         Section 8.9  RETENTION OF BORROWER'S RECORDS. The Lender shall
have no obligation to maintain any electronic records or any documents,
schedules, invoices, agings, or other papers delivered to the Lender by the
Borrower or in connection with the Loan Documents for more than four months
after receipt by the Lender.

         Section 8.10 BINDING EFFECT; ASSIGNMENT; COMPLETE AGREEMENT;
EXCHANGING INFORMATION. The Loan Documents shall be binding upon and inure to
the benefit of the Borrower and the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
This Agreement shall also bind all Persons who become a party to this Agreement
as a borrower. This Agreement, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof. The Lender shall have the right to share information regarding the
Borrower and its Affiliates with the Lender's participants, accountants, lawyers
and other advisors, Wells Fargo & Company, and all direct and indirect
subsidiaries and Affiliates of Wells Fargo & Company for the purpose of
administering this Agreement and the Loan Documents or enforcing its rights
hereunder and thereunder.

         Section 8.11 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.

         Section 8.12 HEADINGS. Article, Section and subsection headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.

         Section 8.13 GOVERNING LAW; JURISDICTION, VENUE; WAIVER OF JURY
TRIAL. The Loan Documents shall be governed by and construed in accordance with
the substantive laws (other than conflict laws) of the State of Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient, (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the State or Federal courts located in the
City and County of Denver, Colorado; and (iv) agree that a final

                                       42
<PAGE>   47

judgment in any such suit, 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.

THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.

                                       43
<PAGE>   48

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

Southern Flow Companies, Inc               SOUTHERN FLOW COMPANIES, INC. a
132 Demanade Boulevard                     Delaware Corporation
Lafayette, Louisiana  70503
Telecopier: 337-237-3790
Attention: Brad Gabbard, Chief Financial   By:  /s/ A. Bradley Gabbard
Officer                                        ------------------------------
e-mail: abgden@aol.com                           A. Bradley Gabbard
                                                 Chief Financial Officer

Wells Fargo Business Credit , Inc.         WELLS FARGO BUSINESS CREDIT, INC.
MAC C7300-300
1740 Broadway
Denver, Colorado  80274                    By:  /s/ Gregory L. Glissmann
Telecopier: 303-863-4904                       ------------------------------
Attention: Tony Lee, Vice President               Gregory L. Glissmann
e-mail: tony.s.lee@wellsfargo.com                 Vice President

                                       44
<PAGE>   49

                         TABLE OF EXHIBITS AND SCHEDULES

      Exhibit A                 Form of Note

      Exhibit B                 Compliance Certificate

      Exhibit C                 Premises

      Schedule 5.1              Trade Names, Chief Executive Office,
                                Principal Place of Business, and Locations
                                of Collateral

      Schedule 5.2              Capitalization and Organizational Chart

      Schedule 5.5              Subsidiaries

      Schedule 5.7              Litigation

      Schedule 6.3              Permitted Liens

      Schedule 6.4              Permitted Indebtedness and Guaranties

<PAGE>   50

                                      Exhibit A to Credit and Security Agreement

                                      NOTE
$2,000,000.00                                                  Denver, Colorado
                                                            _____________, 2001

For value received, the undersigned, SOUTHERN FLOW COMPANIES, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of WELLS FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Minneapolis, Minnesota, or at any other place designated at any time by the
holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of Two Million Dollars
($2,000,000.00) or, if less, the aggregate unpaid principal amount of all
Advances made by the Lender to the Borrower under the Credit Agreement (defined
below) together with interest on the principal amount hereunder remaining unpaid
from time to time, computed on the basis of the actual number of days elapsed
and a 360-day year, from the date hereof until this Note is fully paid at the
rate from time to time in effect under the Credit and Security Agreement of even
date herewith (the "Credit Agreement") by and between the Lender and the
Borrower. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in
accordance with the Credit Agreement.

This Note is issued pursuant, and is subject, to the Credit Agreement, which
provides, among other things, for acceleration hereof. This Note is the Note
referred to in the Credit Agreement. This Note is secured, among other things,
pursuant to the Credit Agreement and the Security Documents as therein defined,
and may now or hereafter be secured by one or more other security agreements,
mortgages, deeds of trust, assignments or other instruments or agreements.

The Borrower shall pay all costs of collection, including reasonable attorneys'
fees and legal expenses if this Note is not paid when due, whether or not legal
proceedings are commenced.

Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.

                                          SOUTHERN FLOW COMPANIES, INC., a
                                          Delaware corporation

                                          By _________________________________
                                             A. Bradley Gabbard
                                             Its Chief Financial Officer

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