Document:

Unassociated Document

    
      EXHIBIT 10.5

    

     

    
      WARRANT
PURCHASE AGREEMENT

      

       

      April 30, 2010

      

      

      Pioneer
Power Solutions, Inc.

      One
Parker Plaza 

      400 Kelby
Street, 9th Floor 

      Fort Lee,
NJ 07024

      

       

      Gentlemen:

      

      This
Warrant Purchase Agreement (the “Agreement”) is made as of April 30, 2010 (the
“Closing Date”) by and between PIONEER POWER SOLUTIONS, INC.,
a Delaware corporation with offices at One Parker Plaza, 400
Kelby Street, 9th Floor, Fort Lee, NJ 07024 (the “Company”), and THOMAS KLINK, an individual
residing at 2323 Ridgewood Road, Grafton, WI 53024 (“Purchaser”).

       

      1.        Authorization and Purchase
of the Warrant.

      

      (A) Authorization of the
Warrant. The Company’s Board of Directors has authorized the issuance by
the Company, and the sale to Purchaser, of a Warrant to Purchase Common Stock
(the “Warrant”) in respect of One Million (1,000,000) shares of the Company’s
Common Stock, par value $0.001 per share, at an exercise price of $3.25 per
share, all as more fully described and subject to the conditions set forth below
and in the form of Warrant annexed hereto as Schedule A. The
Company’s common stock issuable upon exercise of the Warrant is herein referred
to as the “Warrant Stock,” and the Warrant and the Warrant Stock are hereinafter
sometimes collectively referred to as the “Securities.”

      

      (B) Purchase of Warrant.
Subject to the terms and conditions set forth below and in the Warrant, the
Company shall issue to Purchaser the Warrant in consideration of the payment of
$10,000.00 (the “Warrant Purchase Price”).  The parties hereby
acknowledge and agree that this Warrant Purchase Price constitutes fair and
adequate consideration for the Warrant.

       

      2.        The Closing. The
closing of the purchase and sale of the Warrant to Purchaser (the “Closing”)
shall be held at the offices of the Company, or at such other location as may be
mutually agreed upon by the parties hereto. On the Closing Date, the Company
shall deliver to Purchaser the Warrant registered in the name of Purchaser as
against payment by Purchaser to the Company of the entire Warrant Purchase Price
in immediately available funds.

      

      3.        Representations and
Warranties of the Company. The Company represents and warrants to the
Purchaser that:

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      (A) Corporate Power;
Authorization. The Company has all requisite corporate power and has
taken all requisite corporate action to execute and deliver each of this
Agreement and the Warrant, to sell and issue the Securities and to carry out and
perform all of its obligations hereunder and thereunder.  Each of this
Agreement and the Warrant has been duly authorized, executed and delivered on
behalf of the Company and constitutes the valid and binding agreement of the
Company, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization or similar laws relating to or
affecting the enforcement of creditors’ rights generally and (ii) as
limited by equitable principles generally.

      

      (B) Validity of
Securities. The Warrant, when sold against the consideration therefor as
provided therein, will be validly authorized, issued and fully paid. The
issuance and delivery of the Warrant is not subject to preemptive or any similar
rights of the stockholders of the Company (which have not been duly waived) or
any liens or encumbrances, except for restrictions on transfer provided for
herein or under applicable federal and state securities laws; and when the
Warrant Stock is issued upon exercise and in accordance with the terms of the
Warrant, such Securities will be, at each such issuance, validly issued and
outstanding, fully paid and non-assessable and free of any liens or encumbrances
except for restrictions on transfer provided for herein or therein or otherwise
under applicable Federal and state securities laws.

      

      (C) No Conflict. The
execution and delivery of this Agreement and the Warrant do not, and the
consummation of the transactions contemplated hereby and thereby will not,
materially conflict with, or result in any material violation of, or material
default (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or to a
loss of a material benefit, under, any provision of its current Certificate of
Incorporation or Bylaws, as amended, or any mortgage, indenture, lease or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company, its properties or assets, the effect of which would have a material
adverse effect on the Company or materially impair or restrict its power to
perform its obligations as contemplated hereby or thereby.

       

      (D) Consents. No consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental authority or other
person or entity is required on the part of the Company in connection with the
execution, delivery and performance of this Agreement and the Warrant or the
offer, issuance, sale and delivery of the Warrant and the Warrant Stock, and
except any notices of sale required to be filed with the Securities and Exchange
Commission under Regulation D of the Securities Act or such post-closing filings
as may be required under applicable state securities laws, all of which will be
filed within applicable periods therefor.

      

      4.        Representations and
Warranties of Purchaser. Purchaser hereby represents and warrants to the
Company as follows:

      

      (A) Investment
Experience. Purchaser is an “accredited investor” within the meaning of
Rule 501 under the Securities Act.  Purchaser is aware of the
Company’s business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision to
acquire the Securities. Purchaser has such business and financial experience as
is required to give him the capacity to protect his own interests in connection
with the purchase of the Securities. Purchaser has had the opportunity to ask
questions of the Company concerning the Company’s business prospects and
financial condition.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (B) Investment Intent.
Purchaser is purchasing the Warrant for investment for his own account only and
not with a view to, or for resale in connection with, any “distribution” thereof
within the meaning of the Securities Act. Purchaser understands that the Warrant
has not been registered under the Securities Act or registered or qualified
under any state securities law in reliance on specific exemptions therefrom,
which exemptions may depend upon, among other matters, the bona fide nature of
Purchaser’s investment intent as expressed herein.

      

      (C) Authorization.
Purchaser has all requisite power and has taken all requisite action to execute
and deliver each of this Agreement and to carry out and perform all of his
obligations hereunder. This Agreement has been duly executed and delivered on
behalf of Purchaser and constitutes the valid and binding agreement of
Purchaser, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization or similar laws relating to
or affecting the enforcement of creditors’ rights generally and (ii) as
limited by equitable principles generally.

      

      Restrictions on Transfer of
Securities; Lock-Up Period. The Warrant sets forth certain restrictions
on transfer of the Securities.  The Warrant will also provide for a
“Lock-Up Period” for a period of eighteen (18) months following the date of
issuance thereof in respect of the Securities.

      

      Pursuant
to a certain loan agreement between Johnson Bank, as Lender, and Jefferson
Electric Inc., as Borrower, Purchaser has furnished a personal guaranty to
Lender.  As collateral security for such personal guaranty, Purchaser
shall furnish to the Bank a pledge and security interest in the
Warrant.  The parties hereby acknowledge and agree that the grant of
such pledge and security interest granted by Purchaser to Lender under such loan
agreement and during the Lock-Up Period hereunder shall not in any manner
whatsoever constitute a violation of any of the provisions of this Agreement
and/or the Warrant relating to a pledge of such Securities or
otherwise.

      

      6.        Miscellaneous.

      

      (A) Waivers and
Amendments. This Agreement and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

      

      (B) Governing Law;
Jurisdiction. This agreement shall in all respects be governed by, and
construed in accordance with, the applicable laws of the State of New York,
U.S.A., without giving effect to principles of conflicts of law. Each party
hereto irrevocably and unconditionally consents to submit the exclusive
jurisdiction of the United States District Court for the Southern District of
New York, or if jurisdiction in such court is lacking, any court of the State of
New York of competent jurisdiction sitting in New York City, in connection with
any action, suit or proceeding arising out of or relating to this agreement and
the transactions contemplated hereby, and
agrees that service of process may be made in any manner acceptable for use in
such New York courts. 
Each party hereby irrevocably and unconditionally waives any objection to the
laying of venue of any action, suit or proceeding arising out of this agreement
and/or the transactions contemplated hereby, in the above New York courts, and
hereby further irrevocably and unconditionally waives and agrees not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.  The parties hereby
expressly waive the right to any jury trial in any action or proceeding
involving this Agreement.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      (C) Successors and
Assigns. The provisions hereof shall inure to the benefit of, and be
binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto.

       

      (D) Entire Agreement;
Construction. This Agreement and the Warrant constitute the full and
entire understanding and agreement between the parties with regard to the
subject hereof. In the event of any conflict between the terms of this Agreement
and the terms of the Warrant, the terms of the Warrant shall prevail. Any rule
of construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in the construction or interpretation of
this Agreement or the Warrant.

      

      (E) Notices, etc. Any
notice or other communication given under this Agreement shall be sufficient if
in writing and sent by personal service, facsimile, courier service promising
overnight delivery or registered or certified mail, return receipt requested,
postage prepaid, to a party at its address set forth below (or at such other
address as shall be designated for such purpose by such party in a written
notice to the other party hereto):

       

      if to the
Company, to:

      

      Pioneer
Power Solutions, Inc.

      One
Parker Plaza 

      400 Kelby
Street, 9th Floor 

      Fort Lee,
NJ 07024

      

      with
copies to:

      

      Joshua
Glikman, Esq.

      Shiboleth
LLP

      One Penn
Plaza, Suite 2527

      New York,
NY 10119

      

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      if to
Purchaser, to:

      

      Mr.
Thomas Klink

      2323
Ridgewood Road

      Grafton,
Wisconsin 53024

      Facsimile:
262.377.

      Tklink@Jeffersonelectric.com

      with
copies to:

      

      Dean P.
Delforge, Esq.

      Law
Office of Dean P. Delforge, S.C.

      15850 W.
Bluemound Road, Suite 200

      Brookfield,
Wisconsin 53005

      Facsimile:
262.787.0606

      dpdelforge@tds.net

      

       

      or in any
case at such other address as Purchaser or the Company shall have furnished to
the other in writing.

      

      (F) Severability of this
Agreement. If any provision of this Agreement shall be judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

      

      (G) Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which together shall constitute one
instrument.

       

      

      [Execution
Page to Follow]

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Please
confirm that the foregoing correctly sets forth the agreement between us by
signing in the space provided below for that purpose.

      

      
        
          	
                	/s/ Thomas Klink	 
	 	
                  Thomas
      Klink

                	 
	 	 	 	 

        

      

      

      AGREED
AND ACCEPTED,

      as of the
date first above written:

      

      

      PIONEER
POWER SOLUTIONS, INC.

       

       

      
        
          	By: 	/s/ Nathan J. Mazurek	 	 	 	 
	 	 	 	 	 	 
	Its: 	Chief
      Executive Officer	 	 	 	 

        

      

      
 

      Dated:
April 30, 2010

       

       

      [Signature Page to
Warrant Purchase Agreement]

       

       

      6Unassociated Document

    
      EXHIBIT 10.6

    

     

    
      LOAN AND
SECURITY AGREEMENT

       

      Dated
January 2, 2008

       

       

      Johnson
Bank (the “Bank”), 333 E. Wisconsin Ave., Milwaukee, WI  53202, and
Jefferson Electric, Inc. (the “Borrower”), whose principal place of business is
located at 9650 S. Franklin Dr., Franklin, WI  53132, agree as
follows:

       

       

      1.  DEFINITIONS

       

      All terms
defined in Articles 1 through 9 of the applicable Uniform Commercial Code, as it
may be amended, reenacted or otherwise in effect from time to time, shall have
the meanings specified therein unless otherwise defined herein or unless the
context requires otherwise.  All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, except as otherwise
stated herein.

       

      “Affiliate”
shall mean (a) a person or entity which directly or indirectly owns, controls or
holds with power to vote, 5% or more of the outstanding voting securities of
Borrower; (b) a corporation 5% or more of whose outstanding voting securities
are directly or indirectly owned, controlled or held with power to vote, by
Borrower, or by a person or entity which is an Affiliate within the meaning of
subclause (a) above; (c) a person or entity which manages, operates or leases
all or a material part of Borrower’s business; (d) any director, officer or
controlling person of Borrower; (e) any partnership in which Borrower is a
general or limited partner; or (f) any limited liability company in which
Borrower is a member.

       

      “Affiliated
Company” shall mean any of the following:  (1) any company which is a
member of a controlled group of corporations (determined under Section 1563(a)
of the Internal Revenue Code without regard to Section 1563(a)(4) and (e)(3)(C))
which also includes Borrower as a member, (2) any trade or business under common
control (as defined in Section 414(c) of the Internal Revenue Code) with
Borrower, (3) a member of an affiliated service group (as defined in Section
414(m) of the Internal Revenue Code) which includes Borrower, and (4) any other
entity required to be aggregated with Borrower under Section 414(o) of the
Internal Revenue Code.

       

      “Authorized
Security Interest” shall mean the liens and security interests permitted
pursuant to Section 6.2 hereof.

       

      “Code” or
“Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended
from time to time and any corresponding or succeeding law, together with any
regulations, interpretations, announcements or decisions
thereunder.

       

      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

       

      “Collateral”
shall mean and include all property and assets of the Borrower, including but
not limited to all of the following, whether now owned or existing or hereafter
created or acquired, wheresoever located, together with all additions and
accessions and all proceeds and products of the following, including without
limitation cash, deposit accounts, negotiable instruments and other instruments
for the payment of money, chattel paper, rights to payment of money, security
agreements or other documents, and all proceeds of credit or other forms of
insurance coverage on any of the following, and all books and records pertaining
to any of the following:

       

      (1)           all
of Borrower’s Receivables, and all rights, title or interest in any other real
or personal property represented by or securing the same, and all of Borrower’s
rights as an unpaid vendor or lienor, including stoppage in transit, replevin or
reclamation and any other items of real or personal property in which Borrower
has granted or may in the future grant a lien or security interest to Bank
hereunder or in any supplement hereto or otherwise;

       

      (2)           all
guarantees, mortgages on real or personal property, leases or other agreements
or property securing or relating to any of the items referred to in Section (1)
of this definition of “Collateral” or acquired for the purpose of securing and
enforcing any of such items;

       

      (3)           all
of Borrower’s Inventory;

       

      (4)           all
of Borrower’s General Intangibles;

       

      (5)           all
of Borrower’s instruments, including promissory notes, and all of Borrower’s
documents;

       

      (6)           all
of Borrower’s Investment Property;

       

      (7)           all
of Borrower’s deposit accounts;

       

      (8)           all
of Borrower’s machinery, equipment, motor vehicles of any nature and
description, furniture and fixtures and all assets which are classified by
Borrower as fixed assets for accounting purposes or which should be classified
as fixed assets in accordance with GAAP;

       

      (9)           all
of Borrower’s leases, rents, issues and profits;

       

      (10)         all
of Borrower’s life insurance policies and their cash surrender
values;

       

      (11)         all
supporting obligations, including all guaranties and letter of credit
rights;

       

      (12)         all
of Borrower’s rights in, and all of Borrower’s rights in connection with, post
office boxes;

       

      (13)         all
computer and other data processing hardware, all software programs, whether
owned, licensed or leased, and all documentation for such hardware and software;
and

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (14)           all
of Borrower’s real estate;

       

      (15)           all
of Borrower’s books and records pertaining to any of the foregoing, however
produced, reproduced or recorded, including but not limited to books and records
stored or maintained on any type of computer and/or data processing system or
equipment (including but not limited to all related discs, tapes, printouts and
media).

       

      “Collateral
Shortfall” means the difference between the Loan Amount and the Discounted
Collateral Value, but not less than $0.00.

       

      “Company
Guarantor” means Jefferson Electric Leasing, LLC.

       

      “Discounted
Collateral Amount” means the sum of (i) 80% of Borrower’s Qualified Accounts,
plus (ii) 50% of Borrower’s Qualified Inventory, plus (iii) 80% of the purchase
price of Borrower’s equipment purchased within one year prior to the date of
determination, plus (iv) 80% of the appraised value of Borrower’s other
equipment, which appraised value has been established within one year prior to
the date of determination by appraisals satisfactory to Bank, and for such other
equipment that has not been so appraised, 80% of Borrower’ net book
value.

       

      “EBITDA”
shall mean, for any period, the sum of amounts for such period of (a) Pre-Tax
Net Income, and (b) to the extent deducted in determining net income, interest
expense, depreciation and amortization, all determined in accordance with
GAAP.

       

      “Environmental
Laws” shall mean all federal, state and local laws including statutes,
regulations, ordinances, codes, rules and other governmental restrictions and
requirements relating to the discharge of air pollutants, water pollutants or
process waste water, hazardous waste or otherwise relating to the environment or
hazardous substances including, but not limited to, the Federal Solid Waste
Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Federal Occupational Safety and Health Act, regulations of the Environmental
Protection Agency, regulations of the Nuclear Regulatory Agency, and regulations
of any state department of natural resources or state environmental protection
agency now or at any time hereafter in effect.

       

      “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any corresponding or succeeding law, together with any
regulations, interpretations, announcements or decisions
thereunder.

       

      “Excess
Cash Flow” means, for any fiscal year of Borrower, EBITDA, less the sum of (a)
amounts that have been or will be distributed for income taxes for such year,
(b) interest expense paid in cash, (c) scheduled principal payments on the Term
Note, (d) scheduled principal payments on obligations other than the Term Note,
and (e) capital expenditures paid in cash or paid from the proceeds of the
Revolving Credit Facility.

       

      “GAAP”
means generally accepted accounting principles consistently
applied.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “General
Intangibles” shall mean, without limitation, all general intangibles; all
payment intangibles; all goodwill; patents; know-how; trademarks; trade names;
copyrights; patent, trademark, trade name and copyright registrations and
applications; trade secrets; customer lists; franchises; license agreements
related to any of the foregoing (and income derived therefrom); all of
Borrower’s interests in and rights to domain names and web sites and all rights
and interests related thereto; tax refund claims and all other contract rights
and choses in action.

       

      “Guarantors”
means Thomas Klink and Jefferson Electric Leasing, LLC.

       

      “Included
Location” means a location identified on part I(A) of Schedule 4.3 hereto,
or a location that after the date hereof meets the following
criteria:  (a) Borrower has delivered to Bank a Consent of Lessor or
Warehouseman Letter for such location which Consent of Lessor or Warehouseman
Letter, as applicable, is approved by Bank, and (b) Bank has approved such
location in a writing addressed to Borrower or in an email correspondence to
Borrower.

       

      “Inventory”
shall mean and include all inventory of Borrower, all personal property of
Borrower held for sale, lease or demonstration, or to be furnished under
contracts for service, goods leased to others, trade-ins and repossessions, raw
materials, work in process, materials and supplies used or consumed in
Borrower’s business, and all additions and accessions to any of the foregoing,
including documents evidencing such property, and all such property which may be
returned to Borrower by its customers or repossessed by Borrower.

       

      “Investment
Property” means all of Borrower’s investment property, and all other stock and
other interest of Borrower in any corporation, limited liability company or
other entity;

       

      “Letter
of Credit Liabilities” shall mean the total of (1) the sum of the face amounts
of all outstanding letters of credit issued by Bank for the account of Borrower,
plus (2) the aggregate liability of Borrower for amounts owing as a result of
advances pursuant to letters of credit and all interest, collection costs, fees,
expenses and other amounts owing in connection with letters of
credit.

       

      “Loan
Amount” means the sum of $3,000,000 plus the outstanding balance of the Term
Note.

       

      “Loan
Documents” means all documents evidencing, securing or relating to the
Obligations.

       

      “Net Cash
Flow” for any fiscal period of Borrower, means EBITDA, less  the sum
of (a) distributions for income taxes paid in cash, and (b) capital expenditures
paid in cash or paid from the proceeds of the Revolving Credit
Facility.

       

      “Net
Income” shall mean, for any fiscal period of Borrower, net income determined in
accordance with GAAP, including extraordinary losses but excluding extraordinary
gains.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Notes” shall mean the Revolving Note
and the Term Note.

       

      “Obligations”
shall mean all of Borrower’s debts, notes (specifically including but not
limited to the Notes), obligations and liabilities (specifically including but
not limited to liabilities under leases, Letter of Credit Liabilities, corporate
credit card liabilities and interest rate agreement liabilities) of whatever
nature or amount (and any extensions, renewals, or modifications thereof) to
Bank arising out of this Agreement or other credit or financial accommodations
of whatever nature (contingent or otherwise) previously granted,
contemporaneously granted or granted in the future by Bank to Borrower, to
Borrower and another, or to another guaranteed or endorsed by Borrower, and the
performance of all covenants, conditions and agreements contained in this
Agreement, the Notes, or any other Loan Document, and, to the extent not
prohibited by law, costs and expenses of collection or enforcement of the
Obligations, including but not limited to actual attorneys’ fees.

       

      “Pension
Plan” shall mean an employee pension benefit plan, within the meaning of Section
3(2) of ERISA, which is maintained or sponsored by Borrower or any Affiliated
Company, or to which Borrower or any Affiliated Company is required to
contribute.  The term “Pension Plan” also means any multiemployer plan
within the meaning of Section 3(37) of ERISA, which is contributed to by
Borrower or any Affiliated Company.

       

      “Plan”
shall mean either a Pension Plan or a Welfare Benefit Plan.

       

      “Pre-Tax
Net Income” shall mean, for any fiscal period of Borrower, net income prior to
provision for income taxes, determined in accordance with GAAP, including
extraordinary losses but excluding extraordinary gains.

       

      “Qualified
Account” shall mean an account owing to Borrower, less any amount reserved for
discounts, which meets all of the following specifications:

      

      (1)           Sale of Goods or Services
Rendered.  It arose from the performance of services by
Borrower, or from a bona fide sale or lease of
goods, which have been delivered or shipped to the customer and for which
Borrower has genuine invoices, shipping documents or receipts, which sale is not
a consignment sale, a “sale on approval” or a “sale or return.”

      

      (2)           Age and Due
Date.  It is not more than 90 days past the date of
invoice.  An invoice may not be dated prior to performance of the
service or delivery of the goods represented on that invoice.

      

      (3)           Past Due Accounts of
Customer.  Not more than 25% (in dollar amount) of the amount
owing by the customer to Borrower for accounts is more than 90 days past the
date of invoice.

      

      (4)           Ownership.  It
is owned by Borrower free of all liens and encumbrances and security interests
(except Bank’s security interest and subordinated Authorized Security
Interests).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      (5)           Acceptance by
Customer.  It is enforceable against the customer and for the
amount shown as owing in the statements furnished by Borrower to
Bank.  No return, rejection or repossession has
occurred.  It and the transaction out of which it arose comply with
all applicable laws and regulations.  The merchandise or services have
been fully accepted by the customer without dispute and are not subject to any
setoff, credit allowance or adjustment, nor is it subject to any defenses or
counterclaims.  Any account otherwise includable in Qualified Accounts
shall be reduced by any amount claimed to be owing by Borrower to the customer
and only the reduced amount shall be included in Qualified
Accounts.

      

      (6)           Not a Foreign
Receivable.  The customer has its principal place of business
in the United States, or the account is secured by a Letter of Credit in form
and substance satisfactory to Bank issued by a United States bank approved by
Bank.

      

      (7)           Affiliates.  It
is not due from an Affiliate.

      

      (8)           Government as
Customer.  It is not due from the United States Government or
any of its departments, agencies or instrumentalities.

      

      (9)           Satisfaction of Bank as to
Financial Condition of Customer.  Bank is, and continues to be
satisfied with the creditworthiness of the customer in relation to the amount of
credit extended and has not notified Borrower, orally or in writing, that the
account or customer is unsatisfactory.

      

      (10)         Satisfaction of
Bank.  Bank has not notified Borrower, orally or in writing,
that the account or customer is unsatisfactory in any respect.

      

      “Qualified
Inventory” shall mean Inventory, excluding office supplies, which meets these
specifications:

      

      (1)           Ownership.  It
is owned by Borrower free of all tax liens and other liens, encumbrances and
security interests (except Bank’s security interest and subordinated Authorized
Security Interests) and it is located at one of the locations listed in part
I(A) of Schedule
4.3 hereto or at a location that becomes an Included Location after the
date hereof.

      

      (2)           Other
Financing.  No financing statement (other than Bank’s and those
relating to subordinated Authorized Security Interests) is on file covering it
or its products or proceeds.

      

      (3)           Documents.  If
it is represented or covered by documents of title, Borrower is the owner of the
documents free of all tax liens and other liens, encumbrances and security
interests (other than Bank’s security interest and subordinated Authorized
Security Interests).

      

      (4)           Condition.  It
is in good condition and, in the case of goods held for sale, it is new and
unused (except as Bank may otherwise consent in writing).

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (5)           Contra
Accounts.  Its value is calculated in accordance with GAAP net
of any royalties and commissions (other than sales commissions) owing on the
Inventory or the sale thereof, any balance sheet reserves for obsolete inventory
and any inventory valuation reserves.

      

      (6)           Satisfaction of
Bank.  Bank has not notified Borrower, orally or in writing,
that any of the Inventory is unsatisfactory.

      

      “Receivables”
shall mean and include all of Borrower’s accounts, receivables, including
health-care-insurance receivables, contract rights, instruments, drafts,
documents, notes, acceptances, and chattel paper.

       

      “Release
Date” means the first December 31 on or after December 31, 2010 as of which all
of the following conditions are met (a) as of such date, the ratio of Borrower’s
total liabilities to Tangible Net Worth is less than or equal to 2.0 to 1.0, (b)
for the fiscal year ending on such date, the ratio of (1) Borrower’s Net Cash
Flow, to (2) the sum of Borrower’s required principal payments plus interest
expense is at least 1.25 to 1.0, (c) as of such date, the ratio of the
Discounted Collateral Amount to the Loan Amount equals at least 1.2 to 1.0, and
(d) as of such date, the Collateral Shortfall is $0.00.

       

      “Revolving
Note” shall mean Borrower’s promissory note, substantially in the form attached
hereto as Exhibit
A.

      

      “Tangible
Net Worth” shall mean (1) the total of all of Borrower’s assets, excluding any
noncompetition agreements, capitalized acquisition costs, prepaid expenses,
goodwill and other intangibles, minus (2) the aggregate of all Borrower’s
liabilities and reserves of every kind and character, all determined in
accordance with GAAP.

      

      “Term
Note” shall mean Borrower’s promissory note, substantially in the form attached
hereto as Exhibit
B.

       

      “Welfare
Benefit Plan” shall mean an employee welfare benefit plan, within the meaning of
Section 3(1) of ERISA, which is maintained or sponsored by Borrower or any
Affiliated Company, or to which Borrower or any Affiliated Company is required
to contribute.

       

       

      2.  CREDIT
FACILITIES

       

      
        	
                 
      

              	
                2.1

              	
                Revolving Credit
      Facility.

              

      

       

      2.1.1           Revolving Loans;
Advances.  Subject to the terms, conditions and limitations
hereof, and provided that no Event of Default has occurred hereunder, Bank
agrees to lend (and upon repayment relend) money to Borrower in such amounts as
Borrower from time to time requests, up to the maximum amount of Three Million
Dollars ($3,000,000.00), provided that the amount available to be borrowed under
the Revolving Credit Facility shall be reduced by the amount of any Letter of
Credit Liabilities.  Advances by Bank hereunder shall be made by
deposits or transfers to Borrower’s commercial demand account number 1001368991,
maintained with Bank.  Loans so made shall be evidenced by Borrower’s
Revolving Note, and, in addition, Bank shall maintain a loan account ledger for
Borrower, the debit balance of which shall reflect the amount of Borrower’s
indebtedness to the Bank from time to time by reason of any loans, advances or
financial accommodations made in conformance with this Revolving Credit
Facility.  Each month the Bank shall render to Borrower a statement of
account, which statement shall be considered correct and accepted by Borrower
and conclusively binding upon Borrower unless Borrower notifies the Bank to the
contrary within thirty (30) days from the date of mailing of said
statement.  Borrower promises to pay to Bank the outstanding principal
and accrued and unpaid interest under the Revolving Note as
follows:  (1) monthly payments of accrued interest, commencing on
February 1, 2008 and on the first day of each month thereafter, and (2) a final
payment of all outstanding principal and accrued but unpaid interest on January
1, 2009.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      2.1.2           
Conditions to Each
Extension of Credit.  Bank shall not be obligated to lend money
to Borrower unless all of the following are met:  (a) no Event of
Default has occurred and is continuing or will exist upon the lending of the
amount requested, and (b) the representations and warranties contained in
Section 4 hereof shall be true and correct with the same force and effect as if
made on the date of the request for an advance.

       

      2.2          Term Credit
Facility.  Subject to the terms, conditions and limitations
hereof, and provided that no Event of Default has occurred hereunder, Bank
agrees to lend money to Borrower up to the maximum amount of Four Million Four
Hundred Fifty Two Thousand Eight Hundred Eighty Six Dollars
($4,452,886.00).  The loan so made shall be evidenced by Borrower’s
Term Note.  Borrower promises to pay to Bank the outstanding principal
and accrued and unpaid interest under the Term Note as follows:  (1)
monthly payments of interest commencing on February 1, 2008 and on the first day
of each month thereafter through and including July 1, 2008, (2) monthly
payments of principal and interest in the amount of Seventy Two Thousand Twenty
Three and 90/100 Dollars ($72,023.90) each, commencing on August 1, 2008 and on
the first day of each month thereafter, and (2) a final payment of all
outstanding principal and accrued but unpaid interest on January 1,
2013.

       

      2.3          Interest
Rate.

       

      2.3.1           Interest Rate on the
Revolving Note.  The interest rate hereunder on the Revolving
Note shall be equal to the LIBOR Rate plus three percentage points (3.0%) per
annum.  “LIBOR Rate” means the 30 Day London Interbank Offer Rate as
published in the Wall Street Journal on the first business day of each calendar
month and effective on the same day (the "Index"). The Index is not necessarily
the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request.  Borrower understands that Lender may make loans
based on other rates as well.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      2.3.2           Interest Rate on the Term
Note.  The interest rate hereunder on the Term Note shall be
Seven and 27/100 percentage points (7.27%) per annum.

       

      2.3.3           Calculation of
Interest.  Interest shall be computed daily based upon a
360-day year and the LIBOR Rate and the outstanding loan balances as they exist
at the end of each day.

       

      2.4           
Limitation on
Interest.  In no contingency or event whatsoever shall the
interest rate charged hereunder exceed the highest rate permissible under any
law which a court of competent jurisdiction shall, in a final determination,
deem applicable hereto.  In the event such a court determines that
Bank has received interest hereunder in excess of the highest rate permissible
under law, Bank shall promptly refund such excess to Borrower without penalty or
damages of any kind.

       

      2.5           Default
Interest.  The unpaid balances on the Notes shall bear interest
after default or maturity at five percentage points (5.0%) per annum in excess
of the rate that would apply in the absence of a default.

       

      2.6           Collateral-Obligation
Ratio.  Borrower shall not at any time permit the sum of the
aggregate amount of those Obligations reflected by the loan account ledger for
the Revolving Credit Facility plus all Letter of Credit Liabilities to exceed
the lesser of (a)  $3,000,000, or (b)  the total sum
of:

       

      2.6.1           Eighty
percent (80%) of the amount owing on Qualified Accounts (after deducting
payments on Qualified Accounts which are in the process of collection by the
Bank); plus

       

      2.6.2           Fifty
percent (50%) of Qualified Inventory at cost (determined in accordance with
GAAP) or wholesale market value, whichever is lower; less

       

      2.6.3           such
reserves as Bank, in its sole discretion, deems necessary or appropriate, taking
into account the Borrowers’ and Borrowers’ customers’ financial condition and
prospects, the nature and condition of the Collateral, applicable contingencies
and any other factor deemed material by Bank.

       

      In
addition to other required payments, Borrower shall pay Bank, in reduction of
the Obligations owing to Bank at any time, such sums as may be necessary from
time to time to maintain the foregoing ratios and to comply with the foregoing
advance limits.  Such ratio is stated only for the purpose of advances
under this Agreement and not for valuation of the Collateral.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      2.7           Application of
Payments.   Unless otherwise agreed to, in writing, or
otherwise required by applicable law, payments will be applied first to any
unpaid collection costs, late charges and other charges, then to accrued, unpaid
interest, and then to principal, provided, however, after an Event of Default
which is continuing Bank may apply payments among principal, interest, late
charges, collection costs and other charges at its discretion.  All
prepayments of principal on the Term Note shall be applied to the principal
amounts owing under the Term Note in the inverse order of their
maturity.

       

      2.8           Excess Cash Flow
Payments.  On or before April 30, 2009, and on before March 31
of each year thereafter, Borrower shall prepay the Obligations in an amount
equal to seventy-five percent (75%) of the Excess Cash Flow of Borrower for the
prior fiscal year of Borrower.  Such payment shall be applied to
principal outstanding under the Term Note in the inverse order in which such
principal becomes due, provided that no such payment shall be required at any
time that the Collateral Shortfall equals $0.00.

       

      2.9           Prepayment
Premium.  In the event Borrower desires to prepay any principal
owing under the Term Note, in whole or in part, including prepayment following
an Event of Default but excluding payments required under Section 2.8 hereof,
with proceeds of financing from a party other than Bank, Borrower shall pay to
Lender a prepayment fee of one percentage point (1.0%) of the amount
prepaid.

       

      2.10         Facility
Fee.  In addition to all other amount payable hereunder,
Borrower shall pay a facility fee on the date hereof equal to $1,000, which fee
shall be deemed fully earned and non-refundable upon execution of this Agreement
by Bank.

       

       

      3.  SECURITY
INTEREST AND PLEDGE

       

      To secure
the payment and performance of all of the Obligations, howsoever arising, of
whatever nature, contingent or otherwise, and whether arising out of existing or
future credit granted by Bank to Borrower, to Borrower and another or to another
guaranteed or endorsed by Borrower, and as a contemporaneous exchange for value,
Borrower grants and assigns to Bank a security interest in and lien on the
Collateral.  Borrower also grants Bank a security interest in and lien
on any credit balance or other money now or hereafter owed Borrower by Bank and,
in addition, Borrower agrees that Bank may at any time after the occurrence of
an Event of Default, and without notice or demand, setoff against any such
credit balance or other money any amount unpaid on the Obligations.

       

       

      4.  BORROWER’S
WARRANTIES

       

      Borrower
warrants that while any of the Obligations are unpaid or
unsatisfied:

       

      4.1           Accuracy of
Information.  All information, certificates or statements given
to Bank pursuant to this Agreement shall be true and complete when
given.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      4.2           Accuracy of Financial
Statements.  As of the date hereof, no material or adverse
change has occurred or is about to occur which would affect Borrower’s December
31, 2006 year-end financial statements, or the Borrower’s October 31, 2007
interim financial statements.  Borrower agrees to immediately advise
Bank of any adverse changes to said financial statements.

       

      4.3           Names;
Addresses.  The address appearing on page 1 hereof is
Borrower’s principal place of business and the address of the office where
Borrower keeps its records concerning accounts and contract
rights.  Such location shall not be changed without the prior written
consent of Bank.  Schedule 4.3 hereto
lists all of the locations at which Borrower keeps any Collateral or
records.  Borrower’s corporate name is Jefferson Electric,
Inc.  Schedule 4.3
hereto lists all prior corporate names and all trade names by which Borrower is
now known or was previously known within the past seven years.

       

      4.4           Organization.  Borrower
is a duly organized, validly existing corporation and in good standing under the
laws of the State of Wisconsin and is duly qualified to do business and is in
good standing in every jurisdiction in which Borrower is required under the laws
of such jurisdiction to qualify to do business or otherwise
register.  Borrower has filed all reports required to be filed by
Borrower with the Secretary of State of the State of Wisconsin in order to
maintain its charter and no proceeding is pending to revoke Borrower’s charter
or dissolve Borrower.

       

      4.5           Other
Agreements.  Borrower is not in default under any agreement for
the payment of money.

       

      4.6           Unfunded Liabilities -
ERISA.  Except as set forth on Schedule 4.6,
Borrower has no Plan.  None of the Pension Plans has an accumulated
funding deficiency, as defined under Section 302 of ERISA and Section 412 of the
Internal Revenue Code whether or not waived.  All of the Pension Plans
are qualified under Section 401(a) of the Internal Revenue Code and the related
trusts are exempt from tax under Section 501(a) of the Internal Revenue
Code.  Borrower has not incurred and does not expect to incur any
liability to the Pension Benefit Guaranty Corporation (“PBGC”), or to any
trustee appointed pursuant to ERISA Section 4042, with respect to any Pension
Plan, and the PBGC has not instituted proceedings to terminate any Pension Plan
or to have a trustee appointed under ERISA Section 4042 to administer or
terminate any Pension Plan.  There are no pending investigations by
any government agency involving the Plans.  Except as set forth on
Schedule 4.6
hereto, no event has occurred, and there exists no condition or set of
circumstances which presents a risk of termination of any Pension Plan or which
could result in any liability on the part of Borrower to the PBGC and there has
been no reportable event (as defined in Section 4043(b) of
ERISA.  Borrower has not engaged in any “prohibited transaction” (as
defined in ERISA Section 406 and Section 4975 of the Internal Revenue Code),
with respect to a Plan or any of the related trusts, which may result in any
civil penalty assessed pursuant to ERISA Section 502(i) or a tax imposed by the
Internal Revenue Code.  Borrower has no withdrawal liability assessed
or contingently assessable under ERISA as to any Pension Plan which is a
multiemployer Plan.  Except as set forth on Schedule 4.6,
Borrower does not maintain unfunded Welfare Benefit Plans (within the meaning of
ERISA Section 3(1)) for employees of Borrower which cannot be terminated without
further financial obligation on the part of Borrower upon notice of not more
than thirty (30) days.  Each of the Plans has been administered at all
times, and in all material respects, in accordance with its
terms.  Borrower has fully complied with the notice and continuation
of coverage requirements of Sections 601 through 608 of ERISA and Section 4980B
of the Internal Revenue Code.  All reports, statements, returns, and
other information required to be furnished or filed with respect to the Plans
have been furnished or filed, or both, in accordance with Sections 101 through
105 of ERISA and Section 6057 through 6059 of the Internal Revenue Code, and
they are true and correct.  Records of the Plans have been maintained
in accordance with Section 107 of ERISA.  The Borrower and all other
fiduciaries (as defined in Section 3(21) of ERISA) with respect to any of the
Plans do not have any material liability for any breach of any fiduciary duties
under Sections 404, 405 or 409 of ERISA.  No action, proceeding or
claim has been asserted, or is pending or threatened, against Borrower or any
Plan fiduciary with respect to any Plan and no basis exists
therefor.  For purposes of this Section 4.6, “Borrower” shall include
Borrower and any Affiliated Company.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      4.7           Ownership.  Borrower
is the exclusive owner of the Collateral free of all encumbrances, security
interests, liens and interests of third parties whatsoever (except Bank’s
security interest and Authorized Security Interests), and chattel paper
constituting Collateral evidences a perfected security interest in the goods
covered by it, free from all other encumbrances and security interests, and no
financing statement or assignment (absolute or conditional), or notice thereof
(other than Bank’s or one giving rise to an Authorized Security Interest) is on
file covering the Collateral or any of it.  If Inventory is
represented or covered by documents of title, Borrower is the owner of the
documents, free of all encumbrances and security interests other than Bank’s
security interest and Authorized Security Interests.  Borrower is duly
authorized to sell, transfer, pledge and grant a security interest in each and
every item of the Collateral.

       

      4.8           Litigation.  There
is no litigation or proceeding pending or, to the knowledge of any of Borrower’s
officers, threatened against Borrower which might materially adversely affect
the condition of the Borrower or the ability of the Borrower to perform the
Obligations.

       

      4.9           Fiscal
Year.  Borrower’s fiscal year ends December 31.

       

      4.10         Validity of
Agreement.  The execution and delivery of this Agreement to
Bank will not violate or constitute a breach of Borrower’s Articles of
Incorporation, By-Laws or other incorporation papers or any indenture, agreement
or undertaking to which Borrower is a party or is subject.

       

      4.11         Dump
Sites.  With respect to the period during which Borrower owned
or occupied its real estate, and to the Borrower’s knowledge, with respect to
the time before Borrower owned or occupied its real estate, no person or entity
has caused or permitted materials to be stored, deposited, treated, recycled or
disposed of on, under or at any real estate owned or occupied by the Borrower,
which materials, if known to be present, would require investigation, cleanup,
removal or some other remedial action under Environmental Laws.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      4.12           Tanks.  There
are not now, nor to the Borrower’s knowledge, have there ever been, tanks or
other facilities on, under, or at any real estate owned or occupied by the
Borrower which contained materials which, if known to be present in soils,
surface water or ground water, would require investigation, cleanup, removal or
some other remedial action under Environmental Laws.

       

      4.13           Other Environmental
Conditions.  To the Borrower’s knowledge, there are no
conditions existing currently or likely to exist during the term of this loan
which would subject Borrower to damages, penalties, injunctive relief or
investigation or cleanup costs under any Environmental Laws or which require or
are likely to require investigation cleanup, removal, remedial action or other
response pursuant to Environmental Laws by the Borrower.

       

      4.14           Changes in
Laws.  To the Borrower’s knowledge after reasonable
investigation, there are no proposed or pending changes in Environmental Laws
that would adversely affect the Borrower.

       

      4.15           Environmental Judgments,
Decrees and Order.  Borrower is not subject to any judgment,
decree, notice of violation, order or citation related to or arising out of
Environmental Laws and has not been named or listed as a potentially responsible
party by any governmental body or agency in a matter arising under any
Environmental Laws.

       

      4.16           Environmental Permits and
Licenses.  Borrower has all permits, licenses and approvals
required under Environmental Laws, including all permits, licenses and approvals
relating to air or water discharges or emissions or disposal of hazardous waste,
hazardous substances or wastewater.

       

      4.17           Employee
Controversies.  There are no controversies pending or, to the
best of the Borrower’s knowledge after diligent inquiry, threatened or
anticipated between the Borrower and any of its employees, other than as
described on Schedule
4.17 hereto and other than employee grievances arising in the ordinary
course of business which are not, in the aggregate, material to the continued
financial success and well-being of the Borrower.

       

      4.18           Labor
Matters.  There are no strikes or other labor disputes against
the Borrower pending or, to Borrower’s knowledge, threatened.  The
hours worked and payment made to employees of the Borrower have not been in
material violation of the Fair Labor Standards Act or any other applicable law
dealing with such matters.  All payments due from Borrower, or for
which any claim may be made against the Borrower, on account of wages and
employee health and welfare insurance and other benefits have been paid or
accrued as a liability on the books of the Borrower.  The consummation
of the transactions contemplated by this Agreement will not give rise to a right
of termination or right of renegotiation on the part of any union under any
collective bargaining agreement to which the Borrower is a party or by which the
Borrower is bound.

       

      4.19           Patents,
Licenses.  The Borrower possesses adequate assets, licenses,
patents, patent applications, copyrights, service marks, trademarks and trade
names to continue to conduct its business as heretofore
conducted.  All of the following that are federally registered or for
which Borrower has made application for federal registration, whether owned by
or licensed to Borrower, are listed on Schedule 4.19
hereto:  patents, patent applications, copyrights, service marks,
trademarks and trade names.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      4.20           Investment
Company.  Borrower is not an “investment company” or a company
controlled by an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

       

      4.21           Consignments.  None
of the inventory in Borrower’s possession was obtained by Borrower on
consignment or approval.

       

       

      5.  BORROWER’S
AFFIRMATIVE COVENANTS

       

      During
the term of this Agreement, and until the Obligations are paid or satisfied in
full, Borrower covenants and agrees as follows:

       

      5.1           Business Records;
Reports.  Borrower shall maintain a reasonable system of
business records prepared in accordance with GAAP and shall furnish Bank such
reports respecting the business, assets and financial condition of Borrower as
Bank may reasonably request, all of which reports shall be certified, in form
reasonably satisfactory to Bank, by a principal officer of Borrower or, when
requested by Bank, audited by an independent certified public accountant who is
reasonably satisfactory to Bank.  Bank shall have the right at any
time during normal business hours to verify, check, inspect and make abstracts
and copies of all of Borrower’s books, accounts, records, audits, orders,
correspondence, corporate minute books and other legal records and such other
papers, computer files, discs, tapes, printouts and other media as Bank may
desire.  In addition to the foregoing, Borrower agrees to deliver to
Bank:

       

      5.1.1           On
or before April 30, 2008 for Borrower’s fiscal year ending December 31, 2007,
and within ninety (90) days after the end of each fiscal year of Borrower
thereafter, a balance sheet of Borrower as of the close of such fiscal year and
related statements of earnings, retained earnings and statements of cash flows
for such year, each with comparative figures for the preceding fiscal year, all
in reasonable detail satisfactory to the Bank, prepared in accordance with GAAP,
audited by Borrower’s current accountants or by independent certified public
accountants reasonably satisfactory to Bank.

       

      5.1.2           Within
thirty (30) days after the end of each fiscal month, a balance sheet and related
statements of earnings, retained earnings and statements of cash flows for such
month, in each case with comparative figures for the same month in the preceding
fiscal year, prepared on the same basis as the most recent annual statement
provided pursuant to Section 5.1.1 above, certified by an officer of
Borrower.

       

      5.1.3           Within
thirty (30) days after the end of each month, based on Qualified Accounts and
Qualified Inventory figures as of the end of such month, and at such other times
as requested by Bank, a report in the form required by the Bank reflecting the
Collateral-Obligation Ratio, together with such information relating to the
Collateral as Bank may request, certified by an authorized signatory of
Borrower.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      5.1.4           On
or before thirty (30) days prior to the beginning of each fiscal year of
Borrower commencing with the fiscal year of Borrower ending December 31, 2009,
Borrower shall furnish to Bank a Business Plan (as defined hereinafter) for
Borrower for such fiscal year of Borrower.  For purposes of this
Section 5.1.4, “Business Plan” shall mean a statement prepared by Borrower’s
management of management’s intentions and projections with regard to anticipated
business developments or objectives relating to Borrower’s business, including
(a) a statement of Borrower’s projected Inventory and sales, (b) an operating
and capital budget, and (c) projections of (i) monthly balance sheets of
Borrower, for such fiscal year of Borrower, (ii) monthly statements of income
and expense and of shareholders’ equity of Borrower, for such fiscal year of
Borrower, and (iii) monthly budgets of capital expenditures to be incurred by
the Borrower during such fiscal year of Borrower.  The Business Plan
shall be in reasonable detail and certified by the President of Borrower as
having been prepared in good faith and to the best knowledge and ability of
Borrower.  Borrower shall, promptly upon any material revision of any
of the foregoing, provide a copy of such revision to Bank.

       

      5.1.5           
Upon receipt by Borrower, copies of all management letters and detailed reports
submitted to Borrower by independent accountants.

       

      5.1.6           
On or before April 1 of each year, an updated personal financial statement for
each Guarantor.

       

      5.1.7           
Within 30 days after the end of each fiscal month, a statement on the form of
Exhibit C
hereto certified by an officer of Borrower, in form and content satisfactory to
Bank, representing the warranting that (a) the representations and warranties
contained in this Agreement are true and correct as of the date of such
statement, except for changes permitted or contemplated by this Agreement which
have been disclosed in writing to Bank; (b) no condition, event, act or omission
has occurred or exists which constitutes an Event of Default under this
Agreement; (c) no condition, event, act or omission has occurred which, with the
giving of notice or the passage of time, will constitute an Event of Default
under this Agreement; and (d) Borrower is in compliance with the following
Sections of this Agreement:  5.21 (for certifications given as of the
end of a fiscal year of Borrower commencing December 31, 2008), 5.22 (for each
certification commencing with the certification given as of December 31, 2008)
and 6.3 (in each case, on a fiscal year to date basis).

       

      5.2           Conduct of Business; State
of Incorporation.  Borrower shall maintain current filings of
its Articles of Incorporation in all states in which Borrower is qualified to do
business, and do all things necessary for the Borrower to remain duly organized
and validly existing as a Wisconsin corporation and maintain all requisite
authority to conduct its business in Wisconsin and in all other states as may be
required.  Borrower shall not change its state of
incorporation.

       

      5.3           Chattel Paper, Instruments,
etc.  Chattel Paper, instruments, drafts, notes, acceptances,
and other documents which constitute Collateral shall be on forms satisfactory
to the Bank.  Borrower shall promptly mark all such forms of
Collateral to indicate conspicuously the Bank’s interest and immediately deliver
them to the Bank.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      5.4           Collateral Records and
Statements.  Borrower shall keep accurate and complete books
and records pertaining to the Collateral in such detail and form as Bank
requires and in accordance with GAAP, including but not limited to, schedules of
inventory, original orders, invoices, and shipping documents.  At the
request of Bank, Borrower shall furnish to Bank a statement, certified by
Borrower and in such form and containing such information as may be prescribed
by Bank, showing the current status and value of the Collateral.

       

      5.5           Taxes and
Expenses.  Any taxes (excluding income taxes of the Bank and
taxes imposed on Bank in lieu of income taxes) payable or ruled payable by
Federal or State authority in respect of this Agreement, the Notes or the Loan
Documents shall be paid by the Borrower, together with interest and penalties,
if any, provided that Borrower shall be allowed to contest the same in good
faith so long as (1) Borrower maintains adequate reserves therefor, (2) Borrower
gives Bank notice thereof, and (3) the Bank will not be adversely affected
thereby.  Borrower shall also reimburse the Bank for all reasonable
fees and out-of-pocket expenses and disbursements incurred by Bank in connection
with this Agreement, including the actual legal fees and expenses of the Bank’s
legal counsel.  Borrower also agrees to pay the fees and expenses
incurred by the Bank in connection with any subsequent amendment or modification
of this Agreement, the Notes or any of the Loan Documents, or their collection
and/or enforcement (including, but not limited to, reasonable attorney fees and
reasonable time charges of attorneys who may be employees of the
Bank).  In the event that Bank ever agrees to limit the amount of
attorneys fees to be paid by Borrower, the amount charged to Borrower shall
comply with such limit.

       

      5.6           Inspection of
Collateral.  At reasonable times on reasonable notice Bank may
examine the Collateral and have full access to, and right to audit, check,
inspect and make abstracts and copies from Borrower’s books and records
pertaining to it, wherever located; and Borrower shall assist Bank in so
doing.

       

      5.7           Insurance.  Borrower
shall procure forthwith and maintain insurance against loss, theft, destruction
and damage to the Collateral for the full insurable value thereof, with such
companies as are acceptable to the Bank for the life of this Agreement, plus
other insurance thereon in the amounts and against such risks as the Bank may
reasonably specify, and promptly deliver an original copy of each policy to the
Bank, with a standard Lender’s Loss Payable Clause in favor of
Bank.  Loss or damage to the Collateral shall not release Borrower
from any of its Obligations to Bank.  Bank is authorized, but not
obligated, in the name of Borrower or otherwise, to make, adjust, settle claims
under or cancel any insurance on the Collateral and apply all insurance proceeds
against the Obligations.  All policies of insurance shall provide for
at least ten (10) days prior written notice of cancellation to
Bank.  In addition, Borrower agrees to maintain business interruption
and workman’s compensation insurance in reasonable amounts designated at any
time or from time to time by Bank.

       

      
        
          
          

        

        
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      5.8             Maintenance of
Collateral.  Borrower shall maintain the Collateral and every
part thereof in good condition and repair and not permit its value to be
impaired (excepting only reasonable wear and tear); keep it free from all tax
liens and other liens, encumbrances and security interests (other than Bank’s
security interest and Authorized Security Interests); defend it at its own
expense against all claims and legal proceedings by persons other than Bank; pay
and discharge when due all taxes, levies and other charges or fees levied or
assessed upon it, provided, however, that Borrower shall be allowed to contest
the same in good faith so long as (1) Borrower maintains adequate reserves
therefor, (2) Borrower gives Bank notice thereof, and (3) the Bank will not be
adversely affected thereby; not lease, sell, transfer it from the premises where
now located, or otherwise dispose of it or permit it to become a fixture or
accession to other goods, without the prior written approval of Bank, except for
sales or leases of Inventory in the ordinary course of business; not permit it
to be used in violation of any applicable law, regulations, or policy of
insurance; and, as to Collateral consisting of instruments, chattel paper and
General Intangibles, preserve rights in it against prior
parties.  Preservation of rights against prior parties includes,
without limitation, defense of lawsuits, arbitrations, oppositions,
reexaminations, interferences, public use proceedings and the like in any court
of law, administrative agency or other tribunal and the like.  In the
event Bank is named or impleaded in any of the aforementioned proceedings,
Borrower shall hold Bank harmless and indemnify Bank for all losses, expenses
and attorneys’ fees the Bank incurs in participating in same or otherwise
preserving its legal rights and complying with any legal or procedural
requirements associated with same.  Borrower will mark all of its
chattel paper with a legend acceptable to Bank indicating that Bank has a
security interest in the chattel paper.

       

      5.9             Maintenance of Security
Interest.  Borrower shall pay all expenses and, upon request,
take any action reasonably deemed advisable by Bank to preserve the Collateral
or to establish priority of, perfect, continue perfected, terminate or enforce
Bank’s interest in it or rights under this Agreement.  Borrower shall
execute and deliver to Bank any and all documents Bank reasonably requests to
perfect its security interest in any or all Collateral.

       

      5.10           Notice of
Changes.  Borrower shall promptly notify Bank in writing of any
change of its officers, directors or key employees; change of location of its
principal offices; change of location of any of its assets (except the shipment,
temporary storage or temporary use in its manufacturing processes of Inventory
in the ordinary and normal course of Borrower’s business); change of Borrower’s
name or use of any trade name not listed on Schedule 4.3 hereto,
acquisition of any federally registered patents, patent applications,
copyrights, service marks, trademarks or trade names;  application for
registration of any patents, patent applications, copyrights, service marks,
trademarks or trade names; death of any guarantors; any sale or purchase not in
the regular course of Borrower’s business; or any other material change in the
business or financial affairs of Borrower.

       

      5.11           Use of
Proceeds.  Advances by Bank to Borrower under this or other
agreements shall be used exclusively by Borrower in connection with the
acquisition of stock of Borrower from Mike Buckna and for operating capital and
other valid corporate purposes.

       

      5.12           Compliance with
Laws.  Borrower shall comply in all material respects with all
laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it may be subject.

       

      5.13           Notice of
Default.  Borrower shall give prompt notice in writing to Bank
of the occurrence of any default or of any other development, financial or
otherwise, which might materially adversely affect its business, properties or
affairs or the ability of Borrower to perform the Obligations.

       

      
        
          
          

        

        
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      5.14           Further
Assurances.  Borrower authorizes Bank to file financing
statements describing the Collateral.  Borrower shall cooperate in
Bank’s efforts to comply with or address any amendments to the Article 9 of the
Uniform Commercial Code that may be in effect from time to time.  Upon
the reasonable request of the Bank from time to time, Borrower shall execute and
deliver to Bank in form reasonably acceptable to Bank’s counsel (i) all such
further documents and assurances in order to perfect and/or maintain any
assignment, security interest or mortgage granted to the Bank, (ii) collateral
assignments of all leases of real or personal property, and all patents and
patent applications, acquired by Borrower after the date of this Agreement,
(iii) mortgage and security agreements covering all General Intangibles acquired
by the Borrower, (iv) mortgages covering all real estate acquired by the
Borrower after the date hereof, (v) motor vehicle lien applications and other
documentation reasonably requested by Bank to cause Bank to be named as a
secured party on the titles to Borrower’s vehicles, (vi) assignments of life
insurance, (vii) agreements from third parties who may be holding Collateral
that they are holding the Collateral for the benefit of Bank, and (viii) control
agreements in form and substance satisfactory to Bank with respect to Collateral
consisting of deposit accounts, investment property, letter of credit rights and
electronic chattel paper.

       

      5.15           Maintain
Deposits.  Borrower shall maintain all its commercial demand
deposit and other accounts with the Bank.  Such accounts shall at all
times have deposits in sufficient amounts to pay all bank charges and fees
charged by Bank, including but not limited to all deposit account charges, all
lockbox charges and all fees for cash management services.

       

      5.16           Margin
Security.  As of the execution hereof, the Borrower does not
own any margin security and none of the loans advanced hereunder will be used
for the purpose of purchasing or carrying any margin securities or for the
purpose of reducing or retiring any indebtedness which was originally incurred
to purchase any margin securities or for any other purpose not permitted by
Regulation U of the Board of Governors of the Federal Reserve
System.

       

      5.17           Compliance with
Environmental Laws.  Borrower shall timely comply with all
applicable Environmental Laws.

       

      5.18           Orders, Decrees and Other
Documents.  Borrower shall provide to the Bank immediately upon
receipt copies of any correspondence, notice relating to a violation or alleged
violation, pleading, citation, indictment, complaint, order, decree, or other
document from any source asserting or alleging a circumstance or condition which
requires or may require a financial contribution by Borrower or an
investigation, cleanup, removal, remedial action, or other response by or on the
part of the Borrower under Environmental Laws which seeks injunctive relief,
damages or civil, criminal or punitive penalties from Borrower for an alleged
violation of Environmental Laws.

       

      
        
          
          

        

        
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      5.19           Agreement to
Update.  Borrower shall advise the Bank in writing as soon as
Borrower becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or
inaccurate.

       

      5.20           Sales on
Consignment.  Borrower shall promptly notify Bank of all sales
of Inventory on consignment, on “sale or return” or on “sale on approval,” and
Borrower shall take all steps requested by Bank to protect Borrower’s interest
in such Inventory and to perfect Bank’s security interest in such
Inventory.

       

      5.21           Net
Income.  Borrower shall achieve, as of the last day of each
fiscal year of Borrower, commencing with Borrower’s fiscal year ending on
December 31, 2008, for the twelve month period ending on such day, Net Income of
at least $1,000,000.00.

       

      5.22           Debt
Service.  Borrower shall maintain as of the last day of each
fiscal month of Borrower, commencing December 31, 2008, in each case for the
period of twelve months ending on such date, a ratio of (1) Borrower’s Net Cash
Flow, to (2) the sum of Borrower’s required principal payments, plus interest
expense, of at least 1.25 to 1.0.

       

      5.23           Non-Guarantor
Subsidiaries.  On or before January 31, 2008, each of Jefferson
Electric Equipment, Inc. and Jefferson Electric Staffing, Inc. shall either (a)
dissolve or merge into Borrower, or (b) provide to Bank a guaranty of the
Obligations in form and substance satisfactory to Bank, together with such
evidence of authority and other due diligence documentation as Bank may
request.

       

      5.24           Life Insurance
Assignment.  On or before February 29, 2008, Borrower shall
increase the amount of life insurance on the life of Thomas Klink that is
assigned to Bank to $4,000,000, with the form and substance of such Assignment
to be satisfactory to Bank and with satisfactory evidence regarding such
insurance, including but not limited to ownership, lack of other liens, cash
value, issuer and policy number.

       

       

      6.  BORROWER’S
NEGATIVE COVENANTS

       

      During
the term of this Agreement, and until the Obligations are paid or satisfied in
full, Borrower covenants and agrees that it will not, except with the prior
written approval of Bank:

       

      6.1           Indebtedness.  Become
or remain liable in any manner in respect of any indebtedness or contractual
liability (including, without limitation, notes, bonds, debentures, loans,
guaranties, endorsements, obligations of partnerships, and pension liabilities,
in each case whether or not contingent and whether or not subordinated),
except:

       

      6.1.1           Indebtedness
arising under this Agreement;

       

      
        
          
          

        

        
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      6.1.2           Secured
indebtedness corresponding to Authorized Security Interests;

       

      6.1.3           Unsecured
indebtedness, other than for money borrowed for the purchase of a capital asset,
incurred in the ordinary course of its business, which becomes due and must be
fully satisfied within twelve (12) months after the date on which it is
incurred;

       

      6.1.4           Indebtedness
arising out of the lease or purchase of goods constituting equipment and either
unsecured or secured only by a purchase money security interest securing
purchase money indebtedness, but in any event only if such equipment is acquired
in compliance with Section 6.3 hereof.

       

      6.2           Liens.  Create,
incur or cause to exist any mortgage, security interest, encumbrance, lien or
other charge of any kind upon any of its property or assets, whether now owned
or hereafter acquired, except:

       

      6.2.1           The
interests created by this Agreement and other documents between the Borrower and
the Bank in favor of the Bank;

       

      6.2.2           Liens
for taxes or assessments not yet due or contested in good faith by appropriate
proceedings;

       

      6.2.3           A
purchase money security interest or lessor’s interest securing indebtedness
permitted to be outstanding or incurred under Section 6.1.4 hereof;

       

      6.2.4           Construction
lien claims arising from work done pursuant to construction contracts, provided
that Borrower is not in default under such construction contracts;

       

      6.2.5           Liens
in connection with workers compensation or other insurance or to secure
performance of bids, trade contracts, leases, public or statutory obligations,
surety or appeal bonds or other obligations of like nature incurred in the
ordinary course of business, provided that Borrower is not in default under or
delinquent in any of the foregoing agreements or obligations;

       

      6.2.5           Liens
described on Schedule 6.2 relating to amounts outstanding on the date hereof;
and

       

      6.2.7           Other
liens, charges and encumbrances incidental to the conduct of its business or the
ownership of its property which were not incurred in connection with the
borrowing of money or the purchase of property on credit and which do not in the
aggregate materially detract from the value of its property or materially impair
the use thereof in its business.

       

      6.3           Expenditures.  Expend
or contract to expend in any fiscal year of Borrower more than $800,000.00 in
the aggregate for the lease (other than operating lease), purchase or other
acquisition of any capital asset, or for the lease (other than operating lease)
of any other asset, whether payable currently or in the future.

       

      
        
          
          

        

        
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      6.4           Sale of
Assets.  Sell, lease, or otherwise dispose of all or any
substantial part of its property, except as permitted hereunder.

       

      6.5           Recapitalization and
Merger.  Recapitalize its corporate structure, consolidate or
merge with any other corporation, acquire any business, acquire stock of any
corporation, or enter into any partnership or joint venture.

       

      6.6           Conduct of
Business.  Substantially alter the nature of the business in
which it has advised Bank it plans to engage.

       

      6.7           Distributions.  Except
with the Bank’s prior written approval, (a) directly or indirectly declare or
pay any dividends or make any distributions or payments on account of stock,
including preferred stock, to shareholders, relatives of shareholders or
Affiliates of shareholders (except dividends payable solely in its capital
stock); (b) purchase or redeem any of its capital stock or purchase or redeem
any interest or property of any of its shareholders, relatives of shareholders
or Affiliates of shareholders; or (c) enter into any agreement for any of the
foregoing. The
foregoing notwithstanding, so long as Borrower is an “S Corporation” as defined
in Section 1361(a)(1) of the Internal Revenue Code of 1986, Borrower may make
dividend distributions to its shareholders in an equal amount per share and in
amounts sufficient, when added to all prior distributions made hereunder, to
allow each shareholder of Borrower to have paid all federal, state and local
income taxes on the cumulative income of Borrower which is includable in the
taxable income of such shareholder from the date hereof through the date of the
proposed distribution, provided, however, that (i) such distributions shall not
exceed 45% of Pre-Tax Net Income for any fiscal year of Borrower; (ii) at the
time of such distribution no Event of Default exists; (iii) such distribution
will not create an Event of Default; and (iv) the assumed tax rate will equal
the maximum federal and state rates for individuals living in Wisconsin adjusted
for the deductibility of state taxes.

       

      6.8           Investments.  Purchase
stock or securities of, extend credit to (other than that expressly permitted in
Section 6.11 hereof) or make investments in, become liable as surety for, or
guarantee or endorse any obligation of, any person, firm or corporation, except
investments in direct obligations of the United States and commercial bank
deposits with Bank and extensions of credit reflected by trade accounts
receivables arising for goods sold by Borrower in the ordinary course of its
business.

       

      6.9           Discounts and
Allowances.  After notice of default from Bank which default is
continuing, grant any discount, credit or allowance to any customer of Borrower
or accept any return of goods sold.

       

      6.10         Restricted
Transfers.  In any manner transfer any property without prior
or present receipt of full and adequate consideration.

       

      6.11         Restricted
Payments.  Permit any amount to be owing to Borrower by the
officers, directors or shareholders of Borrower or any Affiliate of Borrower, or
members of their families, excepting any reasonable loans and advances to
employees and agents in the ordinary course of business.

       

      
        
          
          

        

        
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      6.12           Salaries; Compensation;
Management Fees.  Pay any excessive or unreasonable salaries,
bonuses, commissions, consultant fees, or other compensation; or pay any
management fees.

       

      6.13           Guarantees.  Make
or suffer to exist any guarantees, except by endorsement of instruments for
deposit or collection in the ordinary course of business.

       

      6.14           ERISA.  Except
as set forth on Schedule 4.6, become
a party to, or directly or contingently liable under, any Plan.

       

      6.15           Obligations to Third
Parties.  Permit any breach, default or event of default to
occur under any note, loan agreement, indenture, lease, mortgage, contract for
deed, security agreement or other contractual obligation binding upon Borrower
which would materially adversely affect Borrower’s business, properties or
affairs or the ability of Borrower to perform the Obligations.

       

      6.16           Subsidiaries.  Create
or permit to exist any subsidiaries of Borrower.

       

      6.17           Fiscal
Year.  Change its fiscal year.

       

      6.18           Change of Name or
Location.  Without at least 30 days’ prior written notice to
Bank, change its name, its principal office, its office where its records
concerning Receivables are kept or the location of any of its assets (except the
shipment or temporary storage of Inventory in the ordinary and usual course of
Borrower’s business).

       

      6.19           Government
Regulation.  (1) Be or become subject at any time to any law,
regulation, or list of any government agency (including, without limitation, the
U.S. Office of Foreign Asset Control list) that prohibits or limits Bank from
making any advance or extension of credit to Borrower or any Subsidiary or from
otherwise conducting business with Borrower or any Subsidiary, or (2) fail to
provide documentary and other evidence of Borrower’s and each Subsidiary’s
identity as may be requested by Bank at any time to enable Bank to verify
Borrower’s and each Subsidiary’s identity or to comply with any applicable law
or regulation, including, without limitation, Section 326 of the USA Patriot Act
of 2001, 31 U.S.C. Section 5318.

       

       

      7.
DEFAULT

       

      7.1           Upon
the occurrence of one or more of the following events of default (each an “Event
of Default”):

       

      
        
          
          

        

        
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      7.1.1           Insolvency, Bankruptcy, et.
al.  The commencement by the Borrower or any Guarantor of a
voluntary case under the federal bankruptcy laws, or any other applicable
federal or state bankruptcy, insolvency or other similar law, or the consent by
any of them to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of the Borrower or any Guarantor or of any substantial part of any of
their property, or the making by any of them of any assignment for the benefit
of creditors or the failure of the Borrower or any Guarantor generally to pay
such party’s debts as such debts become due or the taking of action by the
Borrower or any Guarantor in furtherance of any of the foregoing; in addition,
the entry of a decree or order for relief by a court having jurisdiction in the
premises in respect of the Borrower or any Guarantor in an involuntary case
under the federal bankruptcy laws or any other applicable federal or state
bankruptcy, insolvency or other similar law, or the appointment by a court of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Borrower or any Guarantor or of any substantial part of the
property of any of them, or the ordering by a court of the winding-up of
Borrower’s or any Guarantor’s affairs or liquidation of Borrower’s or any
Guarantor’s affairs or assets and the continuance of any such decree or order
unstayed, uncontested by such party in good faith and in effect for a period of
thirty (30) consecutive days;

       

      7.1.2           Nonperformance.  Borrower
fails to pay when due any of the Obligations or breaches or fails to perform any
warranty, covenant or undertaking by Borrower in this Agreement or the
Obligations; or fails to perform pursuant to or breaches any provisions of any
other agreement with Bank;

       

      7.1.3           Continuation of
Guarantors.  Any Guarantor terminates, revokes or repudiates
his, her or its suretyship or guaranty obligations or defaults under any
agreement securing such obligations;

       

      7.1.4           Continuation of
Subordination Agreements.  Any creditor of Borrower which is a
party to a subordination agreement or intercreditor agreement with Bank
terminates, revokes or defaults under such subordination agreement or
intercreditor agreement, or a standstill period or payment blockage period is in
effect or has expired under any such agreement;

       

      7.1.5           Inability to
Perform.  Borrower or any guarantor of any of the Obligations
dies, ceases to exist, or becomes insolvent;

       

      7.1.6           Misrepresentation.  Any
representation, whether oral or written, made to induce Bank to extend credit to
Borrower, under this Agreement or otherwise, is false in any material respect
when made;

       

      

       

      7.1.7           Injunction or
Attachment.  There is an injunction or attachment issued
against any of Borrower’s property or materially restricting the operation of
Borrower’s business;

       

      7.1.8           Acceleration of
Indebtedness.  Any event shall arise which results in the
acceleration of the maturity of the indebtedness of Borrower to others under any
indenture, note, agreement or other form of undertaking; or

       

      7.1.9           Ownership of
Borrower.  Except with Bank’s written consent, any transfer or
issuance of stock of Borrower shall occur if after giving effect to such
transfer or issuance Thomas Klink owns less than 85% of any class of Borrower’s
stock;

       

      
        
          
          

        

        
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      7.2           then
all of the Obligations shall, at the option of Bank and without any notice or
demand, become immediately due and payable; and Bank shall have (i) the rights
and remedies provided for in the Loan Documents, (ii) all rights and remedies
for default provided by the applicable Uniform Commercial Code, as well as any
other applicable law, INCLUDING WITHOUT LIMITATION THE RIGHT TO REPOSSESS,
RENDER UNUSABLE OR DISPOSE OF THE COLLATERAL WITHOUT JUDICIAL PROCESS, WHICH IS
HEREBY EXPRESSLY WAIVED BY BORROWER and the right to foreclose the security
interest granted herein by any available judicial procedure to the fullest
extent permitted by law.  With respect to such rights and
remedies:

       

      7.2.1           Assembling
Collateral.  Bank may require Borrower to assemble the
Collateral and to make it available to Bank at any convenient place designated
by Bank, and Borrower hereby consents to the entry of any injunctive order, or
other appropriate equitable relief, compelling Borrower to assemble the
Collateral and to make it available to Bank at any convenient place designated
by Bank.  Borrower waives any bond or undertaking which might
otherwise be required in connection with such relief.  Bank may enter
any premises of the Borrower, or wherever the Collateral may be located, and
keep and store the same on said premises without charge, until
sold.

       

      7.2.2           Collection and Handling of
Receivables.  Bank may receive, open and process all mail
addressed to Borrower and notify the Post Office authorities to change the
address for delivery of mail addressed to Borrower to such address as Bank may
designate and may, pursuant to the power of attorney granted herein, endorse the
name of Borrower on any notes, acceptances, checks, drafts, money orders or
other instruments for the payment of money or any document relating to any
security interest that may come into Bank’s possession and sign Borrower’s name
on any invoice or bill of lading relating to any of the Receivables, on drafts
against customers and notices to customers.  The Bank may without
notice to Borrower, collect, by legal proceedings or otherwise, extend the time
of payment of, or compromise or settle for cash, credit or otherwise upon any
terms, any of the Receivables or any security interest, instrument or insurance
applicable thereto or release the obligor thereon and release and/or impair
Collateral.  Nothing in this Agreement shall be construed to
constitute the Bank as Borrower’s agent for any purpose.  The Bank
shall not be liable for any error or omission or delay of any kind occurring in
the settlement, collection or payment of any of the Receivables or any
instrument received in payment thereof or for any damages resulting therefrom,
except for Bank’s gross negligence or willful misconduct.

       

      7.2.3           Expenses and Application of
Proceeds.  Borrower shall reimburse the Bank for any expense
incurred by Bank in protecting or enforcing its rights under this Agreement,
including without limitation, reasonable attorneys’ fees incurred in the efforts
made to enforce payment or otherwise effect collection of any Receivables, as
well as reasonable attorneys’ fees and legal expenses incurred in instituting,
maintaining, preserving, enforcing and foreclosing the security interest in any
of the Collateral, whether through judicial proceedings or otherwise or in
defending or prosecuting any actions or proceedings arising out of or relating
to Borrower’s transactions with Bank, including reasonable attorneys’ fees on
appeal, all expenses of taking possession, holding, preparing for disposition
and disposing of the Collateral, and all other collection expenses, whether or
not in a legal proceeding.  After deduction of such expenses, Bank may
apply the proceeds of disposition to the Obligations in such order and amounts
as it elects.

       

      
        
          
          

        

        
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      7.2.4           Jurisdiction and
Venue.  Borrower consents to the venue and jurisdiction of any
Circuit Court of Milwaukee County Civil Division in the State of Wisconsin and
agrees that all actions, proceedings or other matters arising directly or
indirectly hereunder may be initiated in such courts and expressly consents that
any service of process may be made by personal service upon Borrower wherever
Borrower can be located or by certified or registered mail directed to Borrower
at Borrower’s address set forth herein to the full extent permitted by
law.

       

      7.2.5           Notice of Disposition of
Collateral.  Written notice, when required by law, sent to any
address of Borrower in this Agreement, at least ten (10) calendar days (counting
the day of mailing) before the date of a proposed disposition of the Collateral
is reasonable notice.

       

      7.2.6           Protection or Preservation
of Collateral.  The Bank has no duty to protect, insure,
collect or realize upon the Collateral or preserve rights in it against prior
parties.  The Bank shall not be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
regardless of the cause thereof.  Bank has no obligation to clean the
Collateral or otherwise prepare the Collateral for sale.

       

      7.2.7           Waiver.  Bank
may, at its option, take such action, in Borrower’s name or otherwise, as may be
necessary or desirable to fully or partially remedy such default, including
without limitation signing Borrower’s name or paying any amount so required, and
the cost shall be debited to Borrower’s loan account ledger for the Revolving
Credit Facility and treated for all purposes as an advance made by Bank
hereunder, or the Bank may permit Borrower to remedy any default, each without
waiving any other subsequent or prior default by Borrower.  Bank may
permit Borrower to remedy any default without waiving any other subsequent or
prior default by Borrower.  Borrower waives any right it may have to
require Bank to pursue any third person for any of the Obligations.

       

      7.2.8           Compliance with Other
Laws.  Bank may comply with any applicable state or federal law
requirements in connection with a disposition of the Collateral and compliance
will not be considered adversely to affect the commercial reasonableness of any
sale of the Collateral.

       

      7.2.9           Warranties.  Bank
may sell the Collateral without giving any warranties as to the
Collateral.  Bank may specifically disclaim any warranties of title or
the like.  This procedure will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      8.  INDEMNIFICATION

       

      In
consideration of the execution and delivery of this Agreement by Bank and the
agreement to extend the credit provided hereunder, Borrower and any Guarantor of
the Obligations hereby agree to indemnify, exonerate and hold free and harmless
Bank and each of the officers, directors, employees and agents of Bank
(collectively, herein called the “Bank Parties”) free and harmless from and
against any and all actions, causes of action, suits, losses, liabilities,
damages and expenses, including, without limitation, reasonable attorneys’ fees
and disbursements (collectively, and including all of the
foregoing  based upon contract, tort or otherwise, herein called the
“Indemnified Liabilities”), incurred by the Bank Parties or any of them as a
result of, or arising out of, or relating to (a) the execution, delivery,
performance, enforcement or administration of this Agreement, the Notes, the
Documents, any Guaranty of the Obligations, or any other document or instrument
executed or delivered in connection with this Agreement, (b) the relationship of
the parties as borrower, guarantor and lender, or (c) the noncompliance by
Borrower or by any property of Borrower with Environmental
Laws.  Notwithstanding the foregoing, Borrower and Guarantor shall not
be required to indemnify Bank for any such Indemnified Liabilities arising on
account of the willful misconduct of Bank, and if and to the extent that the
foregoing undertaking may be unenforceable for any reason, Borrower and all
Guarantors of the Obligations hereby agree to make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.

       

       

      9.  INCREASED
COSTS; CAPITAL ADEQUACY

       

      9.1           Increased
Costs.  If (i) the amendment of Regulation D of the Board of
Governors of the Federal Reserve System, or (ii) after the date hereof, the
adoption of any applicable law, rule or regulation, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by Bank with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency issued after the date hereof,

       

      9.1.1           shall
subject Bank to any tax, duty or other charge with respect to the Credit
Facilities, the Notes or Bank’s obligation to make or maintain any extension of
credit hereunder, or shall change the basis of taxation of payments to Bank of
the principal of or interest on the Credit Facilities or any other amounts due
under this Agreement in respect of any extension of credit hereunder or Bank’s
obligation to make or maintain any extension of credit hereunder (except for
changes in the rate of tax on the overall net income of Bank imposed by the
jurisdiction in which the Bank’s principal executive office is located);
or

       

      9.1.2           shall
impose, modify or deem applicable any reserve (including, without limitation,
any reserve imposed by the Board of Governors of the Federal Reserve System),
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended hereunder by, Bank; or

       

      9.1.3           shall
impose on Bank any other condition affecting any extension of credit hereunder,
the Notes or Bank’s obligation to make or maintain any extension of credit
hereunder;

       

      and the
result of any of the foregoing is to increase the cost to (or to impose a cost
on) Bank of making or maintaining any extension of credit hereunder or to reduce
the amount of any sum received or receivable by Bank under this Agreement or
under the Notes with respect thereto, then upon demand by Bank (which demand
shall be accompanied by a statement reasonably setting forth the basis of such
demand), Borrower shall pay directly to Bank such additional amount or amounts
as will compensate Bank for such increased cost or such reduction.

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      9.2           Capital
Adequacy.  If either (i) the introduction of or any change in
or in the interpretation of any law or regulation, or (ii) compliance by Bank
with any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by Bank or any
corporation controlling Bank and Bank determines that the amount of such capital
is increased by or based upon the existence of Bank’s commitment to make or
maintain extensions of credit hereunder and other commitments of this type,
then, upon demand by Bank, Borrower shall immediately pay to Bank, from time to
time as specified by Bank, additional amounts sufficient to compensate for
Bank’s losses or costs in light of such circumstances in connection with Bank’s
compliance with such requirement or expectation, to the extent that Bank
reasonably determines such increase in capital to be allocable to the existence
of Bank’s commitment to make or maintain extensions of credit
hereunder.  If Bank’s exercise of its rights under this Section 9.2
results in higher costs to Borrower, and if Borrower is able to refinance the
Obligations within 90 days thereafter at a cost to Borrower that is less than
the cost of continuing under this Agreement, then Borrower may proceed with such
refinancing without paying the prepayment premium that would otherwise be
required under Section 2.9 hereof.

       

       

      10.  PERSONS
BOUND

       

      This
Agreement benefits the Bank, its successors and assigns, and binds Borrower and
Borrower’s successors and assigns.

       

       

      11.  INTERPRETATION

       

      All of
the terms and conditions hereof and the rights, duties and remedies of the
parties hereto are governed by the laws of Wisconsin.  The provisions
of this Agreement are severable, and invalidity of any provision of this
Agreement shall not affect the validity of any other provisions.  The
decision by Bank at any time or times hereafter to not enforce strict
performance by Borrower relative to any of the provisions, warranties, terms and
conditions contained in this Agreement or any other agreement between Borrower
and Bank shall not waive, affect, or diminish the right of Bank thereafter to
demand strict compliance and performance therewith.  None of the
provisions, warranties, terms and conditions contained in this Agreement or any
other agreement now or hereafter executed between Borrower and Bank shall be
deemed to have been waived by any act or knowledge of Bank unless in writing and
signed by an officer of Bank and directed to Borrower specifying such
waiver.  The titles of sections in this Agreement are for convenience
only and do not limit or construe the meaning of any section.

       

      
        
          
          

        

        
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      12.  NOTICES

       

      Any
notice required to be given to either party hereunder shall be deemed given when
placed in the U.S. mail, certified or registered, and properly addressed with
postage prepaid, or when delivered by hand delivery or overnight courier to the
following address or upon transmission by facsimile to the relevant party at the
facsimile number set forth and a confirmation is received, or at any other
address or facsimile number as may be designated by the party in a notice to the
other party:

       

      If to
Bank:

       

      Johnson
Bank

      333 E.
Wisconsin Ave.

      Milwaukee,
WI 53202

      Attn:  Roberta
Cummings

      Facsimile: (414) 287-6455

       

      If to Borrower:

       

      Jefferson
Electric, Inc.

      9650 S.
Franklin Dr.

      Franklin,
WI 53132

      Attn:  Thomas
Klink

      Facsimile:
(414) 209-1621

       

      with a
copy to:

       

      Dean
Delforge

      15850 W.
Bluemound Road

      #200

      Brookfield,
WI  53005-6007

      Facsimile:  (262)
787-0606

      

       

      13.  RETURN
OF DOCUMENTS, SCHEDULES AND INVOICES

       

      Any
documents, schedules, invoices or other papers delivered to the Bank by Borrower
may be destroyed or otherwise disposed of by the Bank three months after they
are delivered to or received by the Bank unless Borrower requests, in writing,
the return of said documents, schedules, invoices or other papers and makes
arrangements for such return, at Borrower’s expense.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      14.  PARTICIPATING
LENDERS

       

      Borrower
agrees that Bank may, at its option, grant to one or more other financial
institutions the right to participate in the loan advances described in this
Agreement, provided however that Bank shall alone retain the right to amend,
modify, waive, or enforce the provisions of this Agreement.  If any
Participating Lender shall at any time participate with Bank in making any loan
advances hereunder, Borrower hereby grants to such Participating Lender (in
addition to any other rights which such Participating Lender may have) both a
continuing lien and security interest in any money, security and other personal
property of Borrower which is in the possession of such Participating Lender,
and an express, contractual right of setoff therein, for the benefit of all
Participating Lender(s) and the Bank (such interests, rights and the proceeds
thereof to be shared on a pro-rata basis by the Participating Lenders and Bank
according to their respective outstanding balances).  Bank may
disclose to any Participating Lender, or any potential or prospective
Participating Lender, any financial, credit or confidential information or
documents of or concerning Borrower.

       

       

      15.  CONDITIONS
PRECEDENT

       

      Bank will not lend any money to
Borrower hereunder until this Agreement has been executed by Borrower, and Bank
shall have received the following documents fully executed, where applicable,
and in form satisfactory to Bank and its counsel:

       

      15.1           Certificates
of Status for the Borrower and the Company Guarantor certified by the Wisconsin
Department of Financial Institutions;

       

      
        15.2           The
Notes;

      

       

      15.3           UCC
Financing Statements;

       

      15.4           Consent
of Lessor;

       

      15.5           Warehouseman
Letters;

       

      15.6           A
Designation of Authority;

       

      15.7           Completed
requests for information establishing to the satisfaction of the Bank that the
financing statements have been effectively filed and/or recorded in all
appropriate offices providing the Bank with a perfected first priority security
interest in the personal property and fixtures Collateral described
herein;

       

      15.8           Copies
of evidence satisfactory to the Bank to the effect that the Bank is the Lender’s
Loss Payee, Mortgagee and Additional Insured under the policies of insurance
required by this Agreement;

       

      15.9           A
copy of the resolutions of the Board of Directors of the Borrower and of the
Members of the Company Guarantor authorizing the execution, delivery and
performance of this Agreement, the Notes, the Guaranty of the Company Guarantor
and all other matters contemplated hereby, certified for accuracy and due
adoption by an Officer of the Borrower and of the Company Guarantor as of the
date hereof, together with such other necessary corporate action as the Bank
shall reasonably request;

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      15.10           A
certificate, dated of even date herewith, signed by an officer of the Borrower
and of the Company Guarantor as to the incumbency and signature of the person or
persons authorized to execute and deliver this Agreement, the Notes, the
Guaranty of the Company Guarantor and any other instrument or agreement
contemplated hereby;

       

      15.11           Copies
of (a) the Articles of Incorporation of Borrower certified by the Wisconsin
Department of Financial Institutions and (b) the By-Laws of
the Borrower and the Operating Agreement of the Company Guarantor, each as
existing on the date hereof, and copies of any documents creating, evidencing or
relating to preferred shareholders’ rights, certified for accuracy and due
adoption by an officer of the Borrower;

       

      15.12           The
Bank’s satisfaction with terms and conditions of the documentation for the
contemplated transfer of stock of Borrower;

       

      15.13           A
favorable written opinion, dated of even date herewith, of counsel for the
Borrower, in form and substance satisfactory to Bank;

       

      15.14           Assignment
of Life Insurance Policy for a policy on the life of Thomas Klink, in the face
amount of at least $1,500,000.00, along with such documentation regarding such
policy as Bank may request;

       

      15.15           The
continuing unlimited guaranties of Thomas Klink and the Company Guarantor,
provided that the guaranty of Thomas Klink shall provide that it will be
released as of the Release Date;

       

      15.16           A
Borrowing Base Certificate; and

       

      15.17           A
payoff letter and appropriate releases relating to Borrower’s existing
indebtedness.

       

       

      16.  LIMITATION
ON DAMAGES

       

      The
Borrower, any Guarantor of the Obligations and Bank hereby voluntarily,
knowingly, irrevocably and unconditionally (a) agree that they shall be limited
to actual, compensatory damages other than those waived pursuant to the
following clause (b), and (b) waive any right to claim or recover from the other
party any special, exemplary, punitive, indirect or consequential damages, in
the case of the foregoing (a) and (b) for any claim (including contract, tort
and all other claims) between or among the Borrower, any Guarantor and Bank
arising out of or in any way related to this Agreement, the Notes, the Loan
Documents, or any other related document, or arising out of or in any way
related to the relationship among the parties as borrower, guarantor and lender
or otherwise.  This provision is a material inducement for Bank to
provide the financing described herein.

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      17.           U.S.A.
PATRIOT ACT NOTIFICATION

       

      The following notification is provided
to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318:

       

      IMPORTANT INFORMATION ABOUT PROCEDURES
FOR OPENING A NEW ACCOUNT.  To help the government fight the funding
of terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify, and record information that identifies each
person or entity that opens an account, including any deposit account, treasury
management account, loan, other extension of credit, or other financial services
product. What this means for Borrower: When a Borrower opens an account, if such
Borrower is an individual Bank will ask for such Borrower’s name, taxpayer
identification number, residential address, date of birth, and other information
that will allow Bank to identify such Borrower, and if such Borrower is not an
individual Bank will ask for such Borrower’s name, taxpayer identification
number, business address, and other information that will allow Bank to identify
such Borrower. Bank may also ask, if such Borrower is an individual, to see such
Borrower’s driver’s license or other identifying documents, and if such Borrower
is not an individual to see such Borrower’s legal organizational documents or
other identifying documents.

       

       

      18.  WAIVER
OF JURY

       

       THE
BORROWER, ANY GUARANTOR OF THE OBLIGATIONS AND BANK  HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT
OR OTHERWISE) BETWEEN OR AMONG THE BORROWER, ANY GUARANTOR AND BANK ARISING OUT
OF OR IN ANY WAY RELATED TO THIS AGREEMENT, THE NOTES, THE LOAN DOCUMENTS, ANY
GUARANTY OR ANY OTHER RELATED DOCUMENT, OR ARISING OUT OF OR IN ANY WAY RELATED
TO THE RELATIONSHIP AMONG THE PARTIES AS BORROWER, GUARANTOR AND LENDER OR
OTHERWISE.  THIS PROVISION IS A MATERIAL INDUCEMENT TO BANK TO PROVIDE
THE FINANCING DESCRIBED HEREIN.

       

      

       

      [SIGNATURE
PAGE TO FOLLOW]

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

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

       

      
        
          	 	
                  BORROWER:

                   

                  Jefferson
      Electric, Inc.

                	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/
      Thomas Klink	 
	 	 	
                  Thomas
      Klink, President

                	 

        

        
           

           

          
            	 	
                    
                      BANK:

                       

                      Johnson
      Bank

                    

                  	 
	 	 	 	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/
      Roberta S. Cummings	 
	 	 	
                    
                      Roberta
      S. Cummings, Vice President

                    

                  	 

          

           

           

          
            32

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