Document:

exv4w4

 

Exhibit 4.4

WARRANT

To Purchase Common Stock

of

Orion Energy Systems, Ltd.

     THIS CERTIFIES THAT, upon surrender of this Warrant at the office of the Warrant Agent
hereinafter named, in the City of Plymouth, County of Sheboygan, State of Wisconsin, accompanied by
payment as hereinafter provided,                                                             
                
     or assigns (“Holder”) is entitled to purchase at any time prior to the expiration of the Warrant Exercise Period (as
hereinafter defined), but not thereafter,                                                                         shares of common
stock (“Common Stock”), of Orion Energy Systems, Ltd., a Wisconsin corporation (“Company”), as such Common Stock
shall be constituted at the time of purchase, which shares have been duly authorized and set aside
for issuance and will, upon such issuance, be fully paid and nonassessable, at the price of Four
Dollars and 60/100 Cents ($4.60) per share, subject to the terms and provisions set forth herein
and in an agreement by and between the Company and Community Bank & Trust Co., Plymouth, Wisconsin
(“Warrant Agent”), and not otherwise.

     This Warrant shall be exercisable in whole at any time or in part from time to time (provided
that not less than One Hundred (100) shares of Common Stock, or any integral multiple of such
amount, shall be purchased upon any such partial exercise hereof), prior to

                                                                 
 (“Warrant Exercise Period”). Upon the expiration of the Warrant Exercise
Period, this Warrant will expire and become void and of no value. No fractional shares will be
issued upon the exercise hereof.

     This Warrant shall be registered at the office of the Warrant Agent and is transferable only
at said office by the registered Holder hereof or his duly authorized attorney upon surrender of
this certificate, properly endorsed.

     Upon any adjustment of the number of shares of Common Stock which may be purchased upon the
exercise of this Warrant and/or the purchase price per share, then in each such case the Company
shall give written notice thereof, as hereinbelow provided, which notice shall state the purchase
price per share resulting from such adjustment and the increase or decrease, if any, in the number
of shares of Common Stock purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which such calculation is
based.

THIS WARRANT MAY NOT BE TRANSFERRED OR EXERCISED UNLESS SAID WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON THE EXERCISE THEREOF ARE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS, OR ARE EXEMPT FROM SUCH REGISTRATION, OR SUCH TRANSFER OR
EXERCISE (AND THE ISSUANCE OF COMMON STOCK PURSUANT TO SUCH EXERCISE) IS EXEMPT
FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS. THE COMPANY WILL USE ITS BEST EFFORTS TO SO
REGISTER OR QUALIFY THIS WARRANT, AND THE COMMON STOCK ISSUABLE UPON THE EXERCISE HEREOF, AND/OR

 

 

TO SO REGISTER OR QUALIFY THE TRANSACTIONS PURSUANT TO WHICH SUCH SECURITIES ARE ISSUED OR
TRANSFERRED, UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES LAWS OF THE
JURISDICTIONS IN WHICH WARRANTS ARE SOLD; THE COMPANY MAY, IN ITS SOLE DISCRETION, ATTEMPT TO SO
REGISTER OR QUALIFY SUCH SECURITIES IN JURISDICTIONS OTHER THAN THOSE IN WHICH WARRANTS ARE SOLD.

     The Holder of this Warrant shall not by virtue thereof have any rights of a shareholder of the
Company or to notice of meetings of shareholders or of any other proceedings of the Company.

     This Warrant is divisible on surrender, in which case a new Warrant or Warrants will be
issued.

     The Company shall not have the right to require the redemption of this Warrant. The stock
underlying this Warrant is subject to certain piggyback registration rights.

     If prior to the expiration of this Warrant, by exercise hereof or by its terms:

     (a) Stock Splits. The Company shall be recapitalized through the subdivision of its
outstanding shares of Common Stock into a greater number of shares, or shall by exchange or
substitution of or for its outstanding Common Stock or otherwise, reduce the number of such shares,
then in each such case the number of shares deliverable upon the exercise of this Warrant shall be
changed in proportion to such increase or decrease of the outstanding shares of such Common Stock
of the Company, without any change in the aggregate payment by the Warrant Holder from the
aggregate payment specified on the face of this Warrant.

     (b) Stock Dividends. A dividend shall be declared or paid at any time on the Common Stock of
the Company in its Common Stock or in securities convertible into Common Stock of the Company, then
in each such case the number of shares deliverable upon the exercise thereafter of this Warrant
shall, without requiring any payment by the Warrant Holder in addition to the payment
specified on the face hereof, be increased in proportion to the increase, through such
dividend, in the number of outstanding shares of Common Stock of the Company. In the computation
of the increased number of shares deliverable upon the exercise of this Warrant, any dividend paid
or distributed upon the Common Stock in securities convertible into Common Stock shall be treated
as a dividend paid in Common Stock to the extent that shares of Common Stock are issuable upon the
conversion thereof. The obligations of the Company and the rights of the Holder hereof shall not
be affected by the exercise of any conversion privileges heretofore granted to the holders of any
of the stock or securities of the Company or of any other corporation.

     (c) Notice of Cash Dividends. The Company shall, at any time while any of the Warrants are
outstanding, declare a dividend on its Common Stock, other than as provided in the preceding
paragraph (b), then in each such case the Company shall give notice in writing to the registered
Holder of this Warrant, and such dividends so declared shall be made payable only to

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the
shareholders of record on a date at least ten (10) days subsequent to the date of such notice,
including stock issued pursuant to the exercise of such Warrants prior to such record date.

     (d) Recapitalizations, Mergers and Share Exchanges. The Company shall be recapitalized by
reclassifying its outstanding Common Stock into stock without par value, or the Company or a
successor corporation shall consolidate or merge with, or convey all, or substantially all, of its
or any successor corporation’s property or assets to, any other corporation or corporations (any
such corporation being included within the meaning of “successor corporation” as hereinbefore used
in the event of any consolidation or merger of such corporation with, or the sale of all, or
substantially all, of the property or assets of such corporation to another corporation or
corporations) then in each such case, as a condition of such recapitalization, consolidation,
merger or conveyance, lawful and adequate provision shall be made whereby the Holder of each
Warrant shall thereafter have the right to purchase, upon the basis and upon the terms and
conditions specified in this Warrant, in lieu of the shares of Common Stock of the Company
theretofore purchasable upon the exercise of this Warrant, such shares of stock, securities or
other assets as may be issued or payable with respect to, or in exchange for, the number of shares
of Common Stock of the Company theretofore purchasable upon the exercise of this Warrant had such
recapitalization, consolidation, merger or conveyance not taken place; and in any such event the
rights of the Warrant Holder to an adjustment of the number of shares of Common Stock purchasable
upon the exercise of this Warrant as hereinbefore provided shall continue and be preserved in
respect of any stock which the Warrant Holder becomes entitled to purchase. It shall be a
condition of such consolidation, merger or conveyance that each successor corporation shall assume,
in manner and form satisfactory to the Warrant Agent, the obligation to deliver to the Warrant
Holder, upon the exercise of this Warrant, such shares of stock, securities or assets as, in
accordance with the provisions of this Warrant, shall have been provided for such purpose. The
Warrant Agent shall assume no liability for its exercise of discretion hereunder, other than for
willful wrongdoing.

     This Warrant shall be deemed to have been exercised, and the Holder exercising the same to
have become a shareholder of record of the Company, for the purpose of receiving dividends and for
all other purposes whatsoever as of the date the Holder surrendered this Warrant accompanied by
payment in cash, as herein provided. The Company agrees that, while this Warrant shall remain
valid and outstanding, its stock transfer books shall not be closed for any
purpose whatsoever, except under arrangements which shall insure to Holders exercising
Warrants or applying for transfer of stock within five (5) days after the books shall have been
reopened all rights and privileges which they might have had or received if the transfer books had
not been closed and they had exercised their Warrants at any time during which such transfer books
shall have been closed.

     Upon each increase or decrease in the number of shares of Common Stock of the Company
deliverable upon the exercise of this Warrant, or in the event of changes in the rights of the
Warrant Holders by reason of other events hereinbefore set forth, then in each such case the
Company shall forthwith file with the Warrant Agent a certificate executed by its President or one
of its Vice Presidents, and attested by its Secretary or one of its Assistant Secretaries, stating
the increased or decreased number of shares so deliverable and setting forth in reasonable detail
the method of calculation and the facts upon which such calculation is based.

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     The Company covenants, at all times when Warrants are outstanding and in effect, to reserve,
unissued, such number of shares of Common Stock as it may be required to deliver pursuant to the
exercise of this Warrant, subject to consolidation, merger or sale, as hereinabove set forth.

     As used herein, the terms “Holder” “Warrant Holder” and “Holder of this Warrant” shall be
construed to mean the registered holder hereof, and, in the case of any notice required by this
Warrant to be given to the Warrant Holder, it shall be sufficient if mailed to the last known
address of such Holder as the same appears on the books of the Company.

     IN WITNESS WHEREOF, Orion Energy Systems, Ltd. has caused this Warrant to be signed in its
corporate name by its President or a Vice President, manually or in facsimile, and its corporate
seal or a facsimile to be imprinted hereon and attested by the manual or facsimile signature of its
Secretary or an Assistant Secretary, as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Orion Energy Systems, Ltd.
	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	[CORPORATE SEAL]
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Secretary	 	 

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SUBSCRIPTION FORM

(To be Executed Upon Exercise of Warrant)

     The undersigned, the Holder(s) or assignee(s) of such Holder(s) of the within Warrant, hereby
(i) subscribes for shares of Common Stock which the undersigned is entitled to purchase under terms
of the within Warrant and (ii) tenders herewith the full exercise price of all shares subscribed
for.

Dated:                                         

Number of Shares Subscribed for:

                                                            

	 	 	 	 	 	 	 
	 

	 	By:
	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	(Signature)	 	 

ASSIGNMENT

(To Be Executed By the Registered Holder to Effect

a Transfer of the Within Warrant)

     FOR VALUE RECEIVED, the undersigned Warrant Holder(s) do(es) hereby sell, assign and transfer
unto                                                                    
             the right to purchase common
stock evidenced by this Warrant, and does hereby irrevocably constitute and appoint
                                                                                 to
transfer the said right on the books of
the Company, with full power of substitution.

Dated:                                         

	 	 	 	 	 
	 

	 	 

(Signature)
	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 

	 	(Signature)	 	 

5exv4w5

 

Exhibit 4.5

 

CREDIT AND SECURITY AGREEMENT

BY AND AMONG

ORION ENERGY SYSTEMS, LTD.

AND

GREAT LAKES ENERGY TECHNOLOGIES, LLC,

AND

WELLS FARGO BANK, NATIONAL ASSOCIATION

Acting through its WELLS FARGO BUSINESS CREDIT

operating division

December 22, 2005

 

 

 

CREDIT AND SECURITY AGREEMENT

Dated as of December 22, 2005

     ORION ENERGY SYSTEMS, LTD., a Wisconsin corporation (“Orion”) and GREAT LAKES ENERGY
TECHNOLOGIES, LLC, a Wisconsin limited liability company (“Great Lakes” and together with Orion,
the “Borrowers” and each a “Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national
banking association acting through its WELLS FARGO BUSINESS CREDIT operating division (the
“Lender”), hereby agree as follows:

ARTICLE I

DEFINITIONS

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

     “Accounts” shall have the meaning given it under the UCC.

     “Accounts Advance Rate” means up to eighty five percent (85%), or such lesser rate as the
Lender in its sole discretion may deem appropriate from time to time.

     “Advance” means a Revolving Advance.

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

     “Agreement” means this Credit and Security Agreement.

     “Availability” means the amount, if any, by which the Borrowing Base exceeds the sum of (i)
the outstanding principal balance of the Revolving Note and (ii) the L/C Amount.

     “Book Net Worth” means the aggregate of the Owners’ equity in the Borrowers, determined on a
consolidated basis in accordance with GAAP; provided, however, that any increase in
the Owners’ equity on account of the forgiveness of debt due to Osram, which is to occur late in
fiscal year 2006 or early in fiscal year 2007 shall be excluded in determining the Borrowers’
compliance with the provisions of Section 6.2(a) for the period in which such event occurs.

     “Borrowing Base” means at any time the lesser of:

     (a) The Maximum Line Amount; or

 

 

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

     (i) The lesser of (A) the product of the Accounts Advance Rate times Eligible
Accounts or (B) $25,000,000, plus

     (ii) The lesser of (A) the product of the Inventory Advance Rate times Eligible
Inventory or (B) $5,500,000, less

     (iii) The Borrowing Base Reserve, less

     (iv) Obligations that the Borrowers owe to the Lender that have not yet been advanced
on the Revolving Note, and the dollar amount that the Lender in its reasonable discretion
then determines to be a reasonable determination of the Borrowers’ credit exposure with
respect to Wells Fargo Bank Affiliate Obligations.

     “Borrowing Base Reserve” means, as of any date of determination, such amounts (expressed as
either a specified amount or as a percentage of a specified category or item) as the Lender may
from time to time establish and adjust in reducing Availability (a) to reflect events, conditions,
contingencies or risks which, as determined by the Lender, do or may affect (i) the Collateral or
its value, (ii) the assets, business or prospects of any Borrower, or (iii) the security interests
and other rights of the Lender in the Collateral (including the enforceability, perfection and
priority thereof), including, without limitation, such reserve as the Lender may from time to time
establish in its discretion, for potential wage liens, as determined under Wis.
Stat. Section 109.09, or (b) to reflect the Lender’s judgment that any collateral report or
financial information furnished by or on behalf of the Borrowers to the Lender is or may have been
incomplete, inaccurate or misleading in any material respect, or (c) in respect of any state of
facts that the Lender determines constitutes an Event of Default.

     “Business Day” means day on which the Federal Reserve Bank of New York is open for business.

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

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

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each Borrower, including all mail or electronic mail addressed to a Borrower; and (x) all of
the foregoing, whether now owned or existing or hereafter acquired or arising or in which the
Borrower now has or hereafter acquires any rights.

     “Collateral Account” means the “Lender Account” as defined in the Wholesale Lockbox and
Collection Account Agreement.

     “Commercial Letter of Credit Agreement” means an agreement governing the issuance of
documentary letters of credit by the Lender, entered into between a Borrower as applicant and the
Lender as issuer.

     “Commitment” means the Lender’s commitment to make Advances to, and to issue Letters of Credit
for the account of, the Borrowers pursuant to Article II.

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

     “Credit Facility” means the credit facility under which Revolving Advances may be made
available to the Borrowers by the Lender under Article II.

     “Cut-off Time” means 11:00 a.m. Milwaukee, Wisconsin time.

     “Default Period” means any period of time beginning on the day an Event of Default occurs and
ending on the date identified by the Lender in writing as the date that such Event of Default has
been cured or waived.

     “Default Rate” means an annual interest rate in effect during a Default Period or following
the Termination Date, which interest rate shall be equal to three percent (3%) over the Floating
Rate, as such rate may change from time to time.

     “Director” means, as to each Borrower, a director of such Borrower.

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

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

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

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     (i) That portion of Accounts unpaid ninety (90) days or more after the invoice date,
or, if the Lender in its discretion has determined that a particular dated Account may be
eligible, that portion of such Account which is unpaid more than sixty (60) days past the
stated due date or more than one hundred twenty (120) days past the invoice date;

     (ii) That portion of Accounts related to goods or services with respect to which the
applicable Borrower has received notice of a claim or dispute, which are subject to a claim
of offset or a contra account, or which reflect a reasonable reserve for warranty claims or
returns;

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

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

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

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

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

     (viii) Accounts owed by an Owner, Subsidiary, Affiliate, Officer or employee of any
Borrower or by Northland Capital;

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

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

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

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     (xii) Accounts owed by an account debtor, regardless of whether otherwise eligible, to
the extent that the aggregate balance of such Accounts exceeds fifteen percent (15%) of the
aggregate amount of all Eligible Accounts;

     (xiii) Accounts owed by an account debtor, regardless of whether otherwise eligible, if
twenty five percent (25%) or more of the total amount of Accounts due from such account
debtor is ineligible under clauses (i), (ii), or (x) above; and

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

     “Eligible Inventory” means, as to each Borrower, all Inventory of such Borrower, valued at the
lower of cost or market in accordance with GAAP; but excluding any Inventory having any of the
following characteristics:

     (i) Inventory that is: in-transit; located at any warehouse, job site or other premises
other than the Premises or other premises approved by the Lender in writing; not subject to
a duly perfected first priority security interest in the Lender’s favor; subject to any lien
or encumbrance that is subordinate to Lender’s first priority security interest; covered by
any negotiable or non-negotiable warehouse receipt, bill of lading or other document of
title; on consignment from any Person; on consignment to any Person or subject to any
bailment unless such consignee or bailee has executed an agreement with the Lender;

     (ii) Supplies, packaging, fabricated parts, sample Inventory, or customer supplied
parts or Inventory;

     (iii) Work-in-process Inventory;

     (iv) Inventory that is damaged, defective, obsolete, slow moving or not currently
saleable in the normal course of a Borrower’s operations, or the amount of such Inventory
that has been reduced by shrinkage;

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

     (vi) Inventory that is perishable or live;

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

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

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

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

     “Equipment” shall have the meaning given it under the UCC.

     “Event of Default” has the meaning set forth in Section 7.1.

     “Executive Officers” means those Officers of the Borrowers identified on Schedule 1.1 hereto.

     “Financial Covenants” means the covenants set forth in Section 6.2.

     “Floating Rate” means an annual interest rate equal to the sum of the Prime Rate plus
one percent (1.0%), which interest rate shall change when and as the Prime Rate changes.

     “Funding Date” has the meaning set forth in Section 2.1.

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

     “General Intangibles” shall have the meaning given it under the UCC.

     “Guarantor Security Documents” means the Security Agreement between Orion Aviation, Inc. and
the Lender, to secure such Guarantor’s obligations to the Lender pursuant to its guaranty and to
secure the Obligations, and any other document delivered by a Guarantor to the Lender from time to
time to secure the Obligations.

     “Guarantors” means Orion Aviation, Inc. or any other Person now or hereafter guarantying the
Obligations, each a “Guarantor.”

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

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

     “Infringement” or “Infringing” when used with respect to Intellectual Property Rights means
any infringement or other violation of Intellectual Property Rights.

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

     “Intercreditor Agreements” means the Security Interest Subordination Agreement executed by the
City of Manitowoc, in the Lender’s favor, and the Intercreditor Agreement between Hometown Bank and
the Lender, each dated on or about the same date as this

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Agreement and acknowledged by the Borrowers, and any other subordination or intercreditor
agreement accepted by the Lender from a creditor of any Borrower from time to time.

     “Interest Payment Date” has the meaning set forth in Section 2.5(a).

     “Inventory” shall have the meaning given it under the UCC.

     “Inventory Advance Rate” means up to sixty percent (60%), or such lesser rate as the Lender in
its sole discretion may deem appropriate from time to time.

     “Investment Property” shall have the meaning given it under the UCC.

     “L/C Amount” means the sum of (i) the aggregate face amount of any issued and outstanding
Letters of Credit and (ii) the unpaid amount of the Obligation of Reimbursement.

     “L/C Application” means an application for the issuance of standby letters of credit pursuant
to the terms of a Standby Letter of Credit Agreement or a Commercial Letter of Credit Agreement in
form acceptable to the Lender.

     “Letter of Credit” has the meaning set forth in Section 2.3(a).

     “Licensed Intellectual Property” has the meaning set forth in Section 5.11(c).

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

     “Loan Documents” means this Agreement, the Notes, the Security Documents and any L/C
Application.

     “Lockbox” means the “Lockbox” as defined in the Wholesale Lockbox and Collection Account
Agreement.

     “Material Adverse Effect” means any of the following:

     (i) A material adverse effect on the business, operations, results of operations,
prospects, assets, liabilities or financial condition of the Borrowers , taken as a whole;

     (ii) A material adverse effect on the ability of any Borrower to perform its
obligations under the Loan Documents;

     (iii) A material adverse effect on the ability of the Lender to enforce the Obligations
or to realize the intended benefits of the Security Documents, including a material adverse
effect on the validity or enforceability of any Loan Document or of any rights against any
Guarantor, or on the status, existence, perfection, priority (subject to

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Permitted Liens) or enforceability of any Lien securing payment or performance of the
Obligations; or

     (iv) Any claim against any Borrower or threat of litigation which if determined
adversely to such Borrower would cause such Borrower to be liable to pay an amount exceeding
Fifty Thousand Dollars ($50,000) or would be an event described in clauses (i), (ii) and
(iii) above.

     “Maturity Date” means December 31, 2008.

     “Maximum Line Amount” means Twenty Five Million Dollars ($25,000,000).

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

     “Mortgaged Real Estate” means the real estate of the Borrowers, which is encumbered by the
Mortgages.

     “Mortgages” means the Real Estate Mortgages by each of the Borrowers in favor of the Lender
with respect top their respective Premises.

     “Multiemployer Plan” means a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to
which any Borrower or any ERISA Affiliate contributes or is obligated to contribute.

     “Net Income” means fiscal year-to-date after-tax net income of the Borrowers from continuing
operations, including extraordinary losses but excluding extraordinary gains, all as determined on
a consolidated basis in accordance with GAAP; provided, however, that any income
earned by the Borrowers on account of the forgiveness of debt due to Osram, which is to occur late
in fiscal year 2006 or early in fiscal year 2007 shall be excluded in determining the Borrowers’
compliance with the provisions of Section 6.2(b) for the periods in which such event occurs.

     “Note” means the Revolving Note or any other promissory note hereafter issued by a Borrower
hereunder; collectively, the “Notes.”

     “Obligation of Reimbursement” means the obligation of Borrowers to reimburse the Lender
pursuant to the terms of the Standby Letter of Credit Agreement or Commercial Letter of Credit
Agreement and any applicable L/C Application.

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

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     “Officer” means, as to each Borrower, an officer of such Borrower.

     “Overadvance” means the amount, if any, by which (i) the outstanding principal balance of the
Revolving Note, plus (ii) the L/C Amount, is in excess of the then-existing Borrowing Base.

     “Owned Intellectual Property” has the meaning set forth in Section 5.11(a).

     “Owner” means, as to each Borrower, each Person having legal or beneficial title to an
ownership interest in such Borrower or a right to acquire such an interest.

     “Pass-Through Tax Liabilities” means, as to Great Lakes, the amount of state and federal
income tax paid or to be paid by such Borrower’s Owners on taxable income earned by such Borrower
and attributable to the Owners as a result of such Borrower’s “pass-through” tax status, assuming
the highest marginal income tax rate for federal and state (for the state or states in which any
Owner is liable for income taxes with respect to such income) income tax purposes, after taking
into account any deduction for state income taxes in calculating the federal income tax liability
and all other deductions, credits, deferrals and other reductions available to the Owners from or
through such Borrower.

     “Patent and Trademark Security Agreement” means the Patent and Trademark Security Agreement by
the Borrowers in favor of the Lender dated the same date as this Agreement.

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

     “Permitted Lien” and “Permitted Liens” have the meanings set forth in Section 6.3(a).

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

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

     “Premises” means, as to each Borrower, all locations where such Borrower conducts its business
or has any rights of possession, including but not limited to the locations legally described in
Exhibit C attached hereto.

     “Prime Rate” means at any time the rate of interest most recently announced by the Lender at
its principal office as its Prime Rate, with the understanding that the Prime Rate is one of the
Lender’s base rates, and serves as the basis upon which effective rates of interest are calculated
for those loans making reference thereto, and is evidenced by the recording thereof in such
internal publication or publications as the Lender may designate. Each change in the rate of
interest shall become effective on the date each Prime Rate change is announced by the Lender.

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

     “Revolving Advance” has the meaning set forth in Section 2.1.

     “Revolving Note” means the Borrowers’ revolving promissory note, payable to the order of the
Lender in substantially the form of Exhibit A hereto, as same may be renewed and amended from time
to time, and all replacements thereto.

     “Security Documents” means this Agreement, the Wholesale Lockbox and Collection Account
Agreement, the Mortgages, the Patent and Trademark Security Agreement and any other document
delivered to the Lender from time to time to secure the Obligations.

     “Security Interest” has the meaning set forth in Section 3.1.

     “Special Account” means a specified cash collateral account maintained by the Lender or
another financial institution acceptable to the Lender in connection with Letters of Credit, as
contemplated by Section 2.4.

     “Standby Letter of Credit Agreement” means an agreement governing the issuance of standby
letters of credit by the Lender entered into between the applicable Borrower as applicant and the
Lender as issuer.

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

     “Tax Distributions” means, as to each of Great Lakes, distributions declared and paid by such
Borrower to its Owners, or which could have been declared and paid by such Borrower, in an amount
not to exceed the Pass-Through Tax Liabilities of such Borrower.

     “Termination Date” means the earliest of (i) the Maturity Date, (ii) the date the Borrowers
terminate the Credit Facility, or (iii) the date the Lender demands payment of the Obligations,
following an Event of Default, pursuant to Section 7.2.

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

     “Unused Amount” is defined in Section 2.6(c).

     “Wells Fargo Bank Affiliate Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by a Borrower or its Subsidiaries to any

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person that is owned in material part by the Lender and that relates to any service or
facility extended to such Borrower or its Subsidiaries including but not limited to: (a) credit
cards, (b) credit card processing services, (c) debit cards, and (d) purchase cards, as well as any
other services or facilities from time to time specified by the Lender, whether direct or indirect,
absolute or contingent, due or to become due, and whether existing now or in the future;
provided, however, that the Borrower’s obligations to Wells Fargo Equipment Finance
are specifically excluded from the Wells Fargo Bank Affiliate Obligations.

     “Wholesale Lockbox and Collection Account Agreement” means the Wholesale Lockbox and
Collection Account Agreement by and among the Borrowers and the Lender, dated the same date as this
Agreement.

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

ARTICLE II

AMOUNT AND TERMS OF THE CREDIT FACILITY

     Section 2.1 Revolving Advances. The Lender agrees, subject to the terms and
conditions of this Agreement, to make advances (“Revolving Advances”) to the Borrowers from time to
time from the date that all of the conditions set forth in 4.1 are satisfied (the “Funding Date”)
to and until the Termination Date in an amount not in excess of the Maximum Line Amount. The
Lender shall have no obligation to make a Revolving Advance to the extent that the amount of the
requested Revolving Advance exceeds Availability. Each Borrower’s joint and several obligation to
pay the Revolving Advances shall be evidenced by the Revolving Note and shall be secured by the
Collateral. Within the limits set forth in this Section 2.1, the Borrowers may borrow, prepay
pursuant to Section 2.9, and reborrow.

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     Section 2.2 Procedures for Requesting Advances. The Borrowers shall comply with the
following procedures in requesting Revolving Advances:

     (a) Time for Requests. The Borrowers shall request each Advance not later than the Cut-off
Time on the Business Day on which the Advance is to be made. Each request that conforms to the
terms of this Agreement shall be effective upon receipt by the Lender, shall be in writing or by
telephone or telecopy transmission, and shall be confirmed in writing by the Borrowers if so
requested by the Lender, by (i) an Officer of any Borrower; or (ii) a person designated as any
Borrower’s agent by an Officer of such Borrower in a writing delivered to the Lender; or (iii) a
person whom the Lender reasonably believes to be an Officer of the Borrower or such a designated
agent. The Borrowers shall repay all Advances even if the Lender does not receive such
confirmation and even if the person requesting an Advance was not in fact authorized to do so. Any
request for an Advance, whether written or telephonic, shall be deemed to be a representation by
the Borrowers that the conditions set forth in Section 4.2 have been satisfied as of the time of
the request.

     (b) Disbursement. Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall disburse the proceeds of the requested Advance by crediting the same to Orion’s demand
deposit account maintained with Lender unless the Lender and the Borrowers shall agree in writing
to another manner of disbursement.

     Section 2.3 Letters of Credit.

     (a) Issuance of Letters of Credit. The Lender agrees, subject to the terms and conditions of
this Agreement, to issue, at any time after the Funding Date and prior to the Termination Date, one
or more irrevocable standby or documentary letters of credit (each, a “Letter of Credit”) for the
requested Borrower’s account. The Lender shall have no obligation to issue any Letter of Credit if
the face amount of the Letter of Credit to be issued would exceed the Availability. Each Letter of
Credit, if any, shall be issued pursuant to a separate L/C Application made by the Borrower to the
Lender, which must be completed in a manner satisfactory to the Lender. The terms and conditions
set forth in each such L/C Application shall supplement the terms and conditions of the Commercial
Letter of Credit Agreement or Standby Letter of Credit Agreement applicable thereto.

     (b) Expiry Date. No Letter of Credit shall be issued with an expiry date later than the
Termination Date in effect as of the date of issuance.

     (c) Conditions Precedent. Any request for issuance of a Letter of Credit shall be deemed to
be a representation by the Borrowers that the conditions set forth in Section 4.2 have been
satisfied as of the date of the request.

     (d) Obligation of Reimbursement. If a draft is submitted under a Letter of Credit when the
Borrowers are unable, because a Default Period exists or for any other reason, to obtain a
Revolving Advance to pay the Obligation of Reimbursement, the Borrowers shall pay to the Lender on
demand and in immediately available funds, the amount of the Obligation of Reimbursement together
with interest, accrued from the date of the draft until payment in full at the Default Rate.
Notwithstanding the Borrowers’ inability to obtain a Revolving Advance for

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any reason, the Lender is irrevocably authorized, in its sole discretion, to make a Revolving
Advance in an amount sufficient to discharge the Obligation of Reimbursement and all accrued but
unpaid interest thereon.

     Section 2.4 Special Account. If the Credit Facility is terminated for any reason
while any Letter of Credit is outstanding, the Borrowers shall thereupon pay the Lender in
immediately available funds for deposit in the Special Account an amount equal to the L/C Amount
plus any anticipated fees and costs. If Borrowers fail to promptly make any such payment in the
amount required hereunder, then Lender may make a Revolving Advance against the Credit Facility in
an amount sufficient to fulfill this obligation and deposit the proceeds to the Special Account.
The Special Account shall be an interest bearing account maintained by the Lender or by any other
financial institution acceptable to the Lender. Any interest earned on amounts deposited in the
Special Account shall be credited to the Special Account. The Lender may apply amounts on deposit
in the Special Account at any time or from time to time to the Obligations in the Lender’s sole
discretion. The Borrowers may not withdraw any amounts on deposit in the Special Account as long
as the Lender maintains a security interest therein. The Lender agrees to transfer any balance in
the Special Account to the Borrowers when the Lender is required to release its security interest
in the Special Account under applicable law.

     Section 2.5 Interest; Minimum Interest Charge; Default Interest Rate; Application of
Payments; Participations; Usury.

     (a) Interest. Except as provided in Section 2.5(c) and Section 2.5(f), the principal amount
of each Advance shall bear interest at the Floating Rate.

     (b) Minimum Interest Charge. Notwithstanding any other terms of this Agreement to the
contrary, the Borrowers shall pay to the Lender interest of not less than Twenty Thousand Dollars
($20,000) per calendar month (the “Minimum Interest Charge”) during the term of this Agreement, and
the Borrowers shall pay any deficiency between the Minimum Interest Charge and the amount of
interest otherwise calculated under Section 2.5(a) on the first day of each month and on the
Termination Date. When calculating the deficiency due hereunder, if any, between the Minimum
Interest Charge and the amount of interest otherwise payable under Section 2.5(a), the Default
Rate, if applicable, shall be disregarded.

     (c) Default Interest Rate. At any time during any Default Period or following the Termination
Date, in the Lender’s sole discretion and without waiving any of its other rights or remedies, the
principal of the Notes shall bear interest at the Default Rate or such lesser rate as the Lender
may determine, effective as of the first day of the month in which any Default Period begins
through the last day of such Default Period, or any shorter time period that the Lender may
determine. The decision of the Lender to impose a rate that is less than the Default Rate or to
not impose the Default Rate for the entire duration of the Default Period shall be made by Lender
in its sole discretion and shall not be a waiver of any of its other rights and remedies, including
its right to retroactively impose the full Default Rate for the entirety of any such Default Period
or following the Termination Date.

     (d) Application of Payments. Payments shall be applied to the Obligations on the Business Day
of receipt by the Lender in the Lender’s general account, but the amount of

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principal paid shall continue to accrue interest at the interest rate applicable under the
terms of this Agreement from the calendar day the Lender receives the payment, and continuing
through the end of the second Business Day following receipt of the payment.

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

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

     Section 2.6 Fees.

     (a) Origination Fee. The Borrowers shall pay the Lender a fully earned and non-refundable
origination fee of Fifty Thousand Dollars ($50,000), due and payable upon the execution of this
Agreement.

     (b) Facility Fee. The Borrowers agree to pay to the Lender a fully earned and non-refundable
annual facility fee of Fifteen Thousand Dollars ($15,000), which facility fee shall be due and
payable annually in advance on the Funding Date, and thereafter on January 1, 2007, and each
January 1 thereafter.

     (c) Unused Fee. For the purpose of this Section 2.6(c) “Unused Amount” means the Maximum Line
Amount reduced by outstanding Revolving Advances and the L/C Amount. The Borrower agrees to pay to
the Lender an unused line fee at the rate of one quarter percent (.25%) per annum on the average
daily Unused Amount from the date of this Agreement to and including the Termination Date, due and
payable monthly in arrears on the first day of the month and on the Termination Date.

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     (d) Collateral Exam Fees. The Borrowers shall pay the Lender fees in connection with any
collateral exams, audits or inspections conducted by or on behalf of the Lender of any Collateral
or the Borrowers’ respective operations or business at the rates established from time to time by
the Lender as its collateral exam fees (which fees are currently $850 per day per collateral
examiner), together with all actual out-of-pocket costs and expenses incurred in conducting any
such collateral examination or inspection; provided, however, that except during
Default Periods, the Borrowers shall not have to reimburse the Lender for more than four (4) such
collateral exams per calendar year.

     (e) Letter of Credit Fees. The Borrowers shall pay to the Lender a fee with respect to each
Letter of Credit, if any, accruing on a daily basis and computed at an annual rate of two percent
(2.0%) of the aggregate amount that may then be drawn, assuming compliance with all conditions for
drawing (the “Aggregate Face Amount”), from and including the date of issuance of such Letter of
Credit until such date as such Letter of Credit shall terminate by its terms or be returned to the
Lender, due and payable monthly in arrears on the first day of each month and on the Termination
Date; provided, however, that during Default Periods, in the Lender’s sole
discretion and without waiving any of its other rights and remedies, such fee shall increase to
five percent (5.0%) of the Aggregate Face Amount. The foregoing fee shall be in addition to any
and all fees, commissions and charges of the lender with respect to or in connection with such
Letter of Credit.

     (f) Letter of Credit Administrative Fees. The Borrowers shall pay to the Lender all
administrative fees charged by the Lender in connection with the honoring of drafts under any
Letter of Credit, amendments thereto, transfers thereof and all other activity with respect to the
Letters of Credit at the then – current rates published by the Lender for such services rendered on
behalf of its customers generally.

     (g) Termination Fees. If the Credit Facility is terminated by the Borrowers as of a date
other than the Maturity Date then in effect (as determined in accordance with Section 2.9), the
Borrowers shall pay to the Lender as liquidated damages a termination fee in an amount equal to the
following percentages of the Maximum Line Amount: (i) three percent (3.0%) if such termination
occurs on or prior to the first anniversary of the Funding Date; (ii) two percent (2.0%) if such
termination occurs after the first anniversary of the Funding Date but on or prior to the second
anniversary of the Funding Date, or (iii) one percent (1.0%) if such termination occurs after the
second anniversary of the Funding Date.

     Borrowers acknowledge that termination may result in Lender incurring additional costs,
expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs,
expenses and/or liabilities. Borrowers therefore agree to pay the above-described termination fees
and agree that said termination fees represent a reasonable estimate of the termination costs,
expenses and/or liabilities of the Lender.

     (h) Waiver of Termination Fees. The Borrowers, at the Lender’s discretion, will be excused
from the payment of termination fees otherwise due under Section 2.6(g) if such termination is made
because of refinancing through Wells Fargo Bank.

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     (i) Overadvance Fees. The Borrowers shall pay a fee for each Overadvance in the minimum
amount of One Thousand Dollars ($1,000) for each day that an Overadvance exists, regardless of how
the Overadvance arises or whether or not the Overadvance has been agreed to in advance by Lender;
provided, however, that during a Default Period, the Overadvance fee shall be Two
Thousand Dollars ($2,000) per day. The acceptance of payment of any such Overadvance fee shall not
be deemed to constitute either consent to the Overadvance or the waiver of any Event of Default
arising as the result of an Overadvance not otherwise consented to in advance by Lender.

     (j) Other Fees and Charges; Payment of Fees. The Lender may from time to time impose
additional fees and charges as consideration for Advances made in excess of Availability or for
other events that constitute an Event of Default hereunder, including fees and charges for the
administration of Collateral by the Lender, and fees and charges for the late delivery of reports,
which may be assessed in the Lender’s sole discretion on either an hourly, periodic, or flat fee
basis, and in lieu of or in addition to imposing interest at the Default Rate.

     Section 2.7 Time for Interest Payments; Payment on Non-Business Days; Computation of
Interest and Fees.

     (a) Time For Interest Payments. Accrued and unpaid interest shall be due and payable on the
first day of each month and on the Termination Date (each an “Interest Payment Date”), or if any
such day is not a Business Day, on the next succeeding Business Day. Interest will accrue from the
most recent date to which interest has been paid or, if no interest has been paid, from the date of
advance to the Interest Payment Date. If an Interest Payment Date is not a Business Day, payment
shall be made on the next succeeding Business Day.

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

     (c) Computation of Interest and Fees. Interest accruing on the outstanding principal balance
of the Advances and fees hereunder outstanding from time to time shall be computed on the basis of
actual number of days elapsed in a year of three hundred sixty (360) days.

     Section 2.8 Lockbox and Collateral Account; Sweep of Funds. 

     (a) Lockbox and Collateral Account.

     (i) Each Borrower shall instruct all account debtors to pay all Accounts directly to
the Lockbox. If, notwithstanding such instructions, any Borrower receives any payments on
Accounts, such Borrower shall deposit such payments into the Collateral Account. Each
Borrower shall also deposit all other cash proceeds of Collateral regardless of source or
nature directly into the Collateral Account. Until so deposited, the Borrowers shall hold
all such payments and cash proceeds in trust for and as the property of the Lender and shall
not commingle such property with any of their other funds or property. All deposits in the
Collateral Account shall constitute proceeds of Collateral and shall not constitute payment
of the Obligations.

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

     (b) Sweep of Funds. The Lender shall from time to time, in accordance with the Wholesale
Lockbox and Collection Account Agreement, cause funds in the Collateral Account to be transferred
to the Lender’s general account for payment of the Obligations. Amounts deposited in the
Collateral Account shall not be subject to withdrawal by any Borrower, except after payment in full
and discharge of all Obligations.

     Section 2.9 Voluntary Prepayment; Termination of the Credit Facility by the Borrowers.
Except as otherwise provided herein, the Borrowers may prepay the Advances in whole at any time or
from time to time in part. The Borrowers may terminate the Credit Facility at any time if they (i)
give the Lender at least sixty (60) days advance written notice prior to the proposed Termination
Date, and (ii) pay the Lender applicable termination fees in accordance with Section 2.6(g). If
the Borrowers terminate the Credit Facility, all Obligations shall be immediately due and payable,
and if the Borrowers give the Lender less than the required sixty (60) days advance written notice,
then the interest rate applicable to borrowings evidenced by Revolving Note shall be the Default
Rate for the period of time commencing sixty (60) days prior to the proposed Termination Date
through the date that the Lender actually receives such written notice. If the Borrowers do not
wish the Lender to consider renewal of the Credit Facility on the next Maturity Date, then the
Borrowers shall give the Lender at least sixty (60) days written notice prior to the Maturity Date
that they will not be requesting renewal. If the Borrowers fail to give the Lender such timely
notice, then the interest rate applicable to borrowings evidenced by the Revolving Note shall be
the Default Rate for the period of time commencing sixty (60) days prior to the Maturity Date
through the date that the Lender actually receives such written notice.

     Section 2.10 Mandatory Prepayment. Without notice or demand, if the sum of the
outstanding principal balance of the Revolving Advances plus the L/C Amount shall at any time
exceed the Borrowing Base, the Borrowers shall (i) first, immediately prepay the Revolving Advances
to the extent necessary to eliminate such excess; and (ii) if prepayment in full of the Revolving
Advances is insufficient to eliminate such excess, pay to the Lender in immediately available funds
for deposit in the Special Account an amount equal to the remaining excess. Any payment received
by the Lender hereunder or under Section 2.9 may be applied to the Obligations, in such order and
in such amounts as the Lender in its sole discretion may determine from time to time.

     Section 2.11 Revolving Advances to Pay Obligations. Notwithstanding the terms of
Section 2.1, the Lender may, in its discretion at any time or from time to time, without the
Borrowers’ request and even if the conditions set forth in Section 4.2 would not be satisfied, make
a Revolving Advance in an amount equal to the portion of the Obligations from time to

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time due and payable, and may deliver the proceeds of any such Revolving Advance to any
affiliate of the Lender in satisfaction of any Wells Fargo Bank Affiliate Obligations.

     Section 2.12 Use of Proceeds. The Borrowers shall use the proceeds of Advances and
each Letter of Credit to refinance outstanding indebtedness and for ordinary working capital
purposes.

     Section 2.13 Liability Records. The Lender may maintain from time to time, at its
discretion, records as to the Obligations. All entries made on any such record shall be presumed
correct until the Borrowers establish the contrary. Upon the Lender’s demand, the Borrowers will
admit and certify in writing the exact principal balance of the Obligations that the Borrowers then
assert to be outstanding. Any billing statement or accounting rendered by the Lender shall be
conclusive and fully binding on the Borrowers unless the Borrowers gives the Lender specific
written notice of exception within thirty (30) days after receipt.

ARTICLE III

SECURITY INTEREST; OCCUPANCY; SETOFF

     Section 3.1 Grant of Security Interest. Each Borrower hereby pledges, assigns and
grants to the Lender, for the benefit of itself and as agent for any affiliate of the Lender that
may provide credit or services to the Borrowers that constitute Wells Fargo Bank Affiliate
Obligations, a lien and security interest (collectively referred to as the “Security Interest”) in
the Collateral, as security for the payment and performance of the Obligations. Upon request by the
Lender, each Borrower will grant the Lender, for the benefit of itself and as agent for any
affiliate of the Lender that may provide credit or services to the Borrowers that constitute Wells
Fargo Bank Affiliate Obligations, a security interest in all commercial tort claims it may have
against any Person.

     Section 3.2 Notification of Account Debtors and Other Obligors. The Lender may at any
time a Default Period then exists notify any account debtor or other person obligated to pay the
amount due that such right to payment has been assigned or transferred to the Lender for security
and shall be paid directly to the Lender. The applicable Borrower will join in giving such notice
if the Lender so requests. At any time after a Borrower or the Lender gives such notice to an
account debtor or other obligor, the Lender may, but need not, in the Lender’s name or in such
Borrower’s name, (a) demand, sue for, collect or receive any money or property at any time payable
or receivable on account of, or securing, any such right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify, amend or change the
obligations (including collateral obligations) of any such account debtor or other obligor. The
Lender may, in the Lender’s name or in a Borrower’s name, as such Borrower’s agent and
attorney-in-fact, notify the United States Postal Service to change the address for delivery of
such Borrower’s mail to any address designated by the Lender, otherwise intercept such Borrower’s
mail, and receive, open and dispose of such Borrower’s mail, applying all Collateral as permitted
under this Agreement and holding all other mail for such Borrower’s account or forwarding such mail
to such Borrower’s last known address.

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

     Section 3.4 Occupancy.

     (a) Right to Possession Upon Default. Each Borrower hereby irrevocably grants to the Lender
the right to take exclusive possession of its Premises at any time during a Default Period without
notice or consent.

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

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

     (d) No Obligation. The Lender shall not be obligated to pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises; provided,
however, that if the Lender does pay or account for any rent or other compensation for the
possession, occupancy or use of any of the Premises, the Borrowers shall reimburse the Lender
promptly for the full amount thereof. In addition, the Borrowers will pay, or reimburse the Lender
for, all taxes, fees, duties, imposts, charges and expenses at any time incurred by or imposed upon
the Lender by reason of the execution, delivery, existence, recordation, performance or enforcement
of this Agreement or the provisions of this Section 3.4.

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

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     Section 3.6 Financing Statement. Each Borrower authorizes the Lender to file from
time to time, such financing statements against collateral described as “all personal property” or
“all assets” or describing specific items of collateral including commercial tort claims as the
Lender deems necessary or useful to perfect the Security Interest. All financing statements filed
before the date hereof to perfect the Security Interest were authorized by the Borrowers and are
hereby re-authorized. A carbon, photographic or other reproduction of this Agreement or of any
financing statements signed by the applicable Borrower is sufficient as a financing statement and
may be filed as a financing statement in any state to perfect the security interests granted
hereby. For this purpose, the Borrowers represent and warrant that the following information is
true and correct:

Names and addresses of Debtor:

Orion Energy Systems, Ltd.

1204 Pilgrim Road

Plymouth, Wisconsin 53073

Federal Employer Identification No. 39-1847269

Organizational Identification No. O017617

Great Lakes Energy Technologies, LLC

2001 Mirro Drive

Manitowoc, Wisconsin 54220

Federal Employer Identification No. 72-1582713

Organizational Identification No. G034942

Name and address of Secured Party:

Wells Fargo Bank, National Association,

acting through its Wells Fargo Business Credit operating division

100 East Wisconsin Avenue, Suite 1400

MAC N9811–143

Milwaukee, Wisconsin 53202

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

     Section 3.8 Collateral. This Agreement does not contemplate a sale of accounts,
contract rights or chattel paper, and, as provided by law, the Borrowers are entitled to any
surplus and shall remain liable for any deficiency. The Lender’s duty of care with respect to
Collateral in its possession (as imposed by law) shall be deemed fulfilled if it exercises
reasonable care in physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in the selection of the

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

ARTICLE IV

CONDITIONS OF LENDING

     Section 4.1 Conditions Precedent to the Initial Advances and Letter of Credit. The
Lender’s obligation to make the initial Advances or to cause any Letters of Credit to be issued
shall be subject to the condition precedent that the Lender shall have received all of the
following, each properly executed by the appropriate party and in form and substance satisfactory
to the Lender:

     (a) This Agreement.

     (b) The Revolving Note.

     (c) A Standby Letter of Credit Agreement or Commercial Letter of Credit Agreement, and L/C
Application for each Letter of Credit, if any, that Borrowers wish to have issued thereunder on the
Funding Date.

     (d) A true and correct copy of any and all leases pursuant to which any Borrower is leasing
the Premises, together with a landlord’s disclaimer and consent with respect to each such lease.

     (e) A true and correct copy of any and all mortgages pursuant to which any Borrower has
mortgaged the Premises, together with, when required by the Lender, a mortgagee’s disclaimer and
consent with respect to each such mortgage.

     (f) A true and correct copy of any and all agreements pursuant to which any Borrower’s
property is in the possession of any Person other than such Borrower, together with, in the case of
any goods held by such Person for resale, (i) a consignee’s acknowledgment and waiver of Liens,
(ii) UCC financing statements sufficient to protect such Borrower’s and the Lender’s interests in
such goods, and (iii) UCC searches showing that no other secured party has filed a financing
statement against such Person and covering property similar to such Borrower’s other than such
Borrower, or if there exists any such secured party, evidence that each such secured party has
received notice from such Borrower and the Lender sufficient to protect such Borrower’s and the
Lender’s interests in such Borrower’s goods from any claim by such secured party.

     (g) An acknowledgment and waiver of Liens from each warehouse in which any Borrower is storing
Inventory.

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     (h) A true and correct copy of any and all agreements pursuant to which any Borrower’s
property is in the possession of any Person other than such Borrower, together with, (i) an
acknowledgment and waiver of Liens from each subcontractor who has possession of such Borrower’s
goods from time to time, (ii) UCC financing statements sufficient to protect such Borrower’s and
the Lender’s interests in such goods, and (iii) UCC searches showing that no other secured party
has filed a financing statement covering such Person’s property other than such Borrower, or if
there exists any such secured party, evidence that each such secured party has received notice from
such Borrower and the Lender sufficient to protect such Borrower’s and the Lender’s interests in
such Borrower’s goods from any claim by such secured party.

     (i) The Wholesale Lockbox and Collection Account Agreement.

     (j) Control agreements with each bank other than the Lender, if any, at which any Borrower
maintains deposit accounts.

     (k) The Patent and Trademark Security Agreement.

     (l) The Mortgages.

     (m) Each Intercreditor Agreement duly executed by the creditor of Borrowers party thereto, and
each acknowledged by the Borrowers.

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

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

     (p) Current certificates issued by the Wisconsin Department of Financial Institutions,
certifying that each of the Borrowers is in compliance with all applicable organizational
requirements of the State of Wisconsin and is in active status.

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

     (r) Certificate of an Officer of each Borrower confirming the representations and warranties
set forth in Article V.

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     (s) An authorized individuals letter regarding those Persons authorized to request Advances,
confirm such request, and sign collateral reports.

     (t) Certificates of the insurance required hereunder, with all hazard insurance containing a
lender’s loss payable endorsement in the Lender’s favor and with all liability insurance naming the
Lender as an additional insured.

     (u) The guaranty of Orion Aviation, Inc., pursuant to which such Guarantor unconditionally
guarantees the full and prompt payment of all Obligations to the extent provided in such guaranty.

     (v) A Security Agreement, duly executed by Orion Aviation, Inc.

     (w) A certificate of Orion Aviation, Inc.’s Secretary or Assistant Secretary certifying that
attached to such certificate are (i) the resolutions of such Guarantor’s Directors and, if
required, Owners, authorizing the execution, delivery and performance of such Guarantor’s guaranty
and Guarantor Security Documents, (ii) true, correct and complete copies of such Guarantor’s
Constituent Documents, and (iii) examples of the signatures of such Guarantor’s Officers or agents
authorized to execute and deliver the guaranty and Guarantor Security Documents and other
instruments, agreements and certificates on such Guarantor’s behalf.

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

     (y) Evidence that after making the initial Revolving Advance, satisfying the working capital
obligations of the Borrowers owed to Hometown Bank, satisfying all trade payables older than thirty
(30) days from due date, book overdrafts and closing costs, Availability shall be not less than
Seven Hundred Fifty Thousand Dollars ($750,000).

     (z) A Customer Identification Information form and such other forms and verification as Lender
may need to comply with the U.S.A. Patriot Act.

     (aa) With respect to the Mortgaged Real Estate (i) a flood hazard determination form,
confirming whether or not the parcel is in a flood hazard area and whether or not flood insurance
must be obtained, and, if the real estate is located in a flood hazard area, a policy of flood
insurance, and (ii) a title report showing the applicable Borrower’s fee interest in its Mortgaged
Real Estate, subject only to such prior liens as are acceptable to the Lender in its discretion.

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

     Section 4.2 Conditions Precedent to All Advances and Letters of Credit. The Lender’s
obligation to make each Advance or to cause the issuance of a Letter of Credit shall be subject to
the further conditions precedent that:

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     (a) the representations and warranties contained in Article V are correct on and as of the
date of such Advance or issuance of a Letter of Credit as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier date; and

     (b) no event has occurred and is continuing, or would result from such Advance or issuance of
a Letter of Credit which constitutes an Event of Default.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

     Each Borrower (as to such Borrower) represents and warrants to the Lender as follows:

     Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory and Equipment
Locations; Federal Employer Identification Number and Organizational Identification Number.
The Borrower is a corporation, duly organized, validly existing and in good standing under the laws
of the state of Wisconsin and is duly licensed or qualified to transact business in all
jurisdictions where the character of the property owned or leased or the nature of the business
transacted by it makes such licensing or qualification necessary. The Borrower has all requisite
power and authority to conduct its business, to own its properties and to execute and deliver, and
to perform all of its obligations under, the Loan Documents. During its existence, the Borrower
has done business solely under the names set forth in Schedule 5.1. The Borrower’s chief executive
office and principal place of business is located at the address set forth in Schedule 5.1, and all
of the Borrower’s records relating to its business or the Collateral are kept at that location.
All Inventory and Equipment is located at that location or at one of the other locations listed in
Schedule 5.1. The Borrower’s federal employer identification number and organization
identification number are correctly set forth in Section 3.6.

     Section 5.2 Capitalization. Schedule 5.2 constitutes a correct and complete list of
the principal shareholders of Orion and rights to acquire ownership interests including the record
holder, number of interests and percentage interests on a fully diluted basis, and an
organizational chart showing the ownership structure of the Borrower and all Subsidiaries of the
Borrower.

     Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements. The
execution, delivery and performance by the Borrower of the Loan Documents and the borrowings from
time to time hereunder have been duly authorized by all necessary corporate action and do not and
will not (i) require any consent or approval of the Borrower’s Owners; (ii) require any
authorization, consent or approval by, or registration, declaration or filing with, or notice to,
any governmental department, commission, board, bureau, agency or instrumentality, domestic or
foreign, or any third party, except such authorization, consent, approval, registration,
declaration, filing or notice as has been obtained, accomplished or given prior to the date hereof;
(iii) violate any provision of any law, rule or regulation (including Regulation X of the Board of
Governors of the Federal Reserve System) or of any order, writ, injunction or decree presently in
effect having applicability to the Borrower or of the Borrower’s Constituent Documents; (iv) result
in a breach of or constitute a default under any indenture or loan or credit agreement or any other
material agreement, lease or instrument to which the

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Borrower is a party or by which it or its properties may be bound or affected; or (v) result
in, or require, the creation or imposition of any Lien (other than the Security Interest) upon or
with respect to any of the properties now owned or hereafter acquired by the Borrower.

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

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

     Section 5.6 Financial Condition; No Adverse Change. The Borrower has furnished to the
Lender its financial statements for the fiscal-year-to-date period ended November 30, 2005, and
those statements fairly present the Borrower’s financial condition on the dates thereof and the
results of its operations and cash flows for the periods then ended and were prepared in accordance
with generally accepted accounting principals. Since the date of the most recent financial
statements, there has been no change in the Borrower’s business, properties or condition (financial
or otherwise) which has had a Material Adverse Effect.

     Section 5.7 Litigation. There are no actions, suits or proceedings pending or, to the
Borrower’s knowledge, threatened against or affecting the Borrower or any of its Affiliates or the
properties of the Borrower or any of its Affiliates before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would result in a final judgment or judgments
against the Borrower or any of its Affiliates in an amount in excess of Fifty Thousand Dollars
($50,000), apart from those matters specifically listed in Schedule 5.7; or result in a Material
Adverse Effect.

     Section 5.8 Regulation U. The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any
Advance will be used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.

     Section 5.9 Taxes. The Borrower and its Affiliates have paid or caused to be paid to
the proper authorities when due all federal, state and local taxes required to be withheld by each
of them. The Borrower and its Affiliates have filed all federal, state and local tax returns which
to the knowledge of the Officers of the Borrower or any Affiliate, as the case may be, are required
to be filed, and the Borrower and its Affiliates have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment received by any of them
to the extent such taxes have become due.

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

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     Section 5.11 Intellectual Property Rights.

     (a) Owned Intellectual Property. Schedule 5.11 is a complete list of all patents,
applications for patents, trademarks, applications to register trademarks, service marks,
applications to register service marks, mask works, trade dress and copyrights for which the
Borrower is the owner of record (the “Owned Intellectual Property”). Except as disclosed on
Schedule 5.11, (i) the Borrower owns the Owned Intellectual Property free and clear of all
restrictions (including covenants not to sue a third party), court orders, injunctions, decrees,
writs or Liens, whether by written agreement or otherwise, (ii) no Person other than the Borrower
owns or has been granted any right in the Owned Intellectual Property, (iii) all Owned Intellectual
Property is valid, subsisting and enforceable and (iv) the Borrower has taken all commercially
reasonable action necessary to maintain and protect the Owned Intellectual Property.

     (b) Agreements with Employees and Contractors. As reasonably determined by the Borrower to be
necessary in its business, the Borrower has entered into a legally enforceable agreements with such
employees and subcontractors obligating each such Person to assign to the Borrower, without any
additional compensation, any Intellectual Property Rights created, discovered or invented by such
Person in the course of such Person’s employment or engagement with the Borrower (except to the
extent prohibited by law), and further requiring such Person to cooperate with the Borrower,
without any additional compensation, in connection with securing and enforcing any Intellectual
Property Rights therein; provided, however, that the foregoing shall not apply with
respect to employees and subcontractors whose job descriptions are of the type such that no such
assignments are reasonably foreseeable.

     (c) Intellectual Property Rights Licensed from Others. Schedule 5.11 is a complete list of
all agreements under which the Borrower has licensed Intellectual Property Rights from another
Person (“Licensed Intellectual Property”) other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for performing accounting, word
processing and similar administrative tasks (“Off-the-shelf Software”) and a summary of any ongoing
payments the Borrower is obligated to make with respect thereto. Except as disclosed on Schedule
5.11 and in written agreements copies of which have been given to the Lender, the Borrower’s
licenses to use the Licensed Intellectual Property are free and clear of all restrictions, Liens,
court orders, injunctions, decrees, or writs, whether by written agreement or otherwise. Except as
disclosed on Schedule 5.11, the Borrower is not obligated or under any liability whatsoever to make
any payments of a material nature by way of royalties, fees or otherwise to any owner of, licensor
of, or other claimant to, any Intellectual Property Rights.

     (d) Other Intellectual Property Needed for Business. Except for Off-the-shelf Software and as
disclosed on Schedule 5.11, the Owned Intellectual Property and the Licensed Intellectual Property
constitute all Intellectual Property Rights used or necessary to conduct the Borrower’s business as
it is presently conducted or as the Borrower reasonably foresees conducting it.

     (e) Infringement. Except as disclosed on Schedule 5.11, the Borrower has no knowledge of, and
has not received any written claim or notice alleging, any Infringement of

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another Person’s Intellectual Property Rights (including any written claim that the Borrower
must license or refrain from using the Intellectual Property Rights of any third party) nor, to the
Borrower’s knowledge, is there any threatened claim or any reasonable basis for any such claim.

     Section 5.12 Plans. Except as disclosed to the Lender in writing prior to the date
hereof, neither the Borrower nor any ERISA Affiliate (i) maintains or has maintained any Pension
Plan, (ii) contributes or has contributed to any Multiemployer Plan or (iii) provides or has
provided post-retirement medical or insurance benefits with respect to employees or former
employees (other than benefits required under Section 601 of ERISA, Section 4980B of the IRC or
applicable state law). Neither the Borrower nor any ERISA Affiliate has received any notice or has
any knowledge to the effect that it is not in full compliance with any of the requirements of
ERISA, the IRC or applicable state law with respect to any Plan. No Reportable Event exists in
connection with any Pension Plan. Each Plan which is intended to qualify under the IRC is so
qualified, and no fact or circumstance exists which may have an adverse effect on the Plan’s
tax-qualified status. Neither the Borrower nor any ERISA Affiliate has (i) any accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the IRC) under any Plan, whether
or not waived, (ii) any liability under Section 4201 or 4243 of ERISA for any withdrawal, partial
withdrawal, reorganization or other event under any Multiemployer Plan or (iii) any liability or
knowledge of any facts or circumstances which could result in any liability to the Pension Benefit
Guaranty Corporation, the Internal Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than routine claims for benefits under the Plan).

     Section 5.13 Default. The Borrower is not in breach or default of any provisions of
any agreements, instruments, decrees and orders to which it is a party or by which it or its
property is bound or affected, which breach or default could have a Material Adverse Effect.

     Section 5.14 Environmental Matters.

     (a) Presence of Hazardous Substances. Except as disclosed on Schedule 5.14, there are not
present in, on or under the Premises any Hazardous Substances in such form or quantity as to create
any material liability or obligation for either the Borrower or the Lender under the common law of
any jurisdiction or under any Environmental Law, and no Hazardous Substances have ever been stored,
buried, spilled, leaked, discharged, emitted or released in, on or under the Premises in such a way
as to create any such material liability.

     (b) Disposal of Hazardous Substances. Except as disclosed on Schedule 5.14, the Borrower has
not disposed of Hazardous Substances in such a manner as to create any material liability under any
Environmental Law.

     (c) Claims. Except as disclosed on Schedule 5.14, there have not existed in the past, nor are
there any threatened or impending requests, claims, notices, investigations, demands,
administrative proceedings, hearings or litigation relating in any way to the Premises or the
Borrower, alleging material liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant thereto.

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     (d) Compliance with Environmental Law. Except as disclosed on Schedule 5.14, the Borrower’s
businesses are and have in the past always been conducted in accordance with all Environmental Laws
and all licenses, permits and other authorizations required pursuant to any Environmental Law and
necessary for the lawful and efficient operation of such businesses are in the Borrower’s
possession and are in full force and effect, nor has Borrower been denied insurance on grounds
related to potential environmental liability. No permit required under any Environmental Law is
scheduled to expire within 12 months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.

     (e) Lists. Except as disclosed on Schedule 5.14, the Premises are not and never have been
listed on the National Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or local list, schedule, log, inventory
or database.

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

     Section 5.15 Submissions to Lender. All financial and other information provided to
the Lender by or on behalf of the Borrower in connection with the Borrower’s request for the credit
facilities contemplated hereby is (i) true and correct in all material respects, (ii) does not omit
any material fact necessary to make such information not misleading and, (iii) as to projections,
valuations or proforma financial statements, present a good faith opinion as to such projections,
valuations and proforma condition and results.

     Section 5.16 Financing Statements. The Borrower has authorized the filing of
financing statements sufficient when filed to perfect the Security Interest and the other security
interests created by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security interest in all
Collateral which is capable of being perfected by filing financing statements. None of the
Collateral is or will become a fixture on real estate, unless a sufficient fixture filing is in
effect with respect thereto.

     Section 5.17 Rights to Payment. Each right to payment and each instrument, document,
chattel paper and other agreement constituting or evidencing Collateral is (or, in the case of all
future Collateral, will be when arising or issued) the valid, genuine and legally enforceable
obligation, subject to no defense, setoff or counterclaim, of the account debtor or other obligor
named therein or in the Borrower’s records pertaining thereto as being obligated to pay such
obligation.

ARTICLE VI

COVENANTS

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

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

     (a) Annual Financial Statements. As soon as available, and in any event within one hundred
five (105) days after the end of each fiscal year of the Borrowers, the Borrowers’ audited
financial statements with the unqualified opinion of independent certified public accountants
selected by the Borrowers and acceptable to the Lender, which annual financial statements shall
include the Borrowers’ balance sheet as at the end of such fiscal year and the related statements
of the Borrowers’ income, retained earnings and cash flows for the fiscal year then ended, prepared
on a consolidated basis to include any Affiliates, all in reasonable detail and prepared on a
consolidated basis in accordance with GAAP, together with (i) copies of all management letters
prepared by such accountants; and (ii) a certificate of the Borrowers’ chief financial officer
substantially in the form of Exhibit B hereto stating that such financial statements have been
prepared in accordance with GAAP, fairly represent the Borrowers’ financial position and the
results of their operations, and whether or not such Officer has knowledge of the occurrence of any
Event of Default and, if so, stating in reasonable detail the facts with respect thereto.

     (b) Monthly Financial Statements. As soon as available and in any event within twenty (20)
days after the end of each month, the unaudited/internal balance sheet and statements of income and
retained earnings of the Borrowers as at the end of and for such month and for the year-to-date
period then ended, prepared on a consolidated basis to include any Affiliates, in reasonable detail
and stating in comparative form the figures for the corresponding date and periods in the previous
year, all prepared on a consolidated basis in accordance with GAAP, subject to year-end audit
adjustments and the absence of footnotes, and which fairly represent the Borrowers’ financial
position and the results of their operations; and accompanied by a certificate of the Borrowers’
chief financial officer, substantially in the form of Exhibit B hereto stating (i) that such
financial statements have been prepared in accordance with GAAP, subject to year-end audit
adjustments, and fairly represent the Borrowers’ financial position and the results of their
operations, (ii) whether or not such Officer has knowledge of the occurrence of any Event of
Default not theretofore reported and remedied and, if so, stating in reasonable detail the facts
with respect thereto, and (iii) all relevant facts in reasonable detail to evidence, and the
computations as to, whether or not the Borrowers are in compliance with the Financial Covenants.

     (c) Collateral Reports. Within twenty (20) days after the end of each month or more
frequently if the Lender so requires, the Borrowers will deliver to the Lender, or its designated
agent, agings of each Borrower’s accounts receivable and accounts payable, an inventory
certification report, and a calculation of each Borrower’s Accounts, Eligible Accounts, Inventory
and Eligible Inventory as at the end of such month or shorter time period.

     (d) Projections. No later than thirty (30) days prior to the last day of each fiscal year,
the Borrowers will deliver to the Lender their projected balance sheets, income statements,
statements of cash flow and projected Availability for each month of the succeeding fiscal year,
each in reasonable detail. Such items will be certified by the Borrowers’ chief financial officer
as being the most accurate projections available and identical to the projections used by the

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Borrowers for internal planning purposes and be delivered with a statement of underlying
assumptions and such supporting schedules and information as the Lender may in its discretion
require.

     (e) Supplemental Reports. Weekly, or more frequently if the Lender so requires, the Borrowers
will deliver to the Lender the “daily collateral reports”, receivables schedules, collection
reports, copies of invoices to account debtors in excess of Twenty Thousand Dollars ($20,000),
signed and dated shipment documents and delivery receipts for goods sold to said account debtors in
excess of Twenty Thousand Dollars ($20,000).

     (f) Litigation. Immediately after the commencement thereof, the Borrowers will deliver to the
Lender notice in writing of all litigation and of all proceedings before any governmental or
regulatory agency affecting any Borrower (i) of the type described in Section 5.14(c) or (ii) which
seek a monetary recovery against any Borrower in excess of Fifty Thousand Dollars ($50,000).

     (g) Defaults. When any Officer of any Borrower becomes aware of the probable occurrence of
any Event of Default, the Borrowers will deliver to the Lender, no later than three (3) days after
such Officer becomes aware of such Event of Default, notice of such occurrence, together with a
detailed statement by a responsible Officer of such Borrower of the steps being taken by such
Borrower to cure the effect thereof.

     (h) Plans. As soon as possible, and in any event within thirty (30) days after any Borrower
knows or has reason to know that any Reportable Event with respect to any Pension Plan has
occurred, the Borrowers will deliver to the Lender a statement of the Borrowers’ chief financial
officer setting forth details as to such Reportable Event and the action which the Borrowers
propose to take with respect thereto, together with a copy of the notice of such Reportable Event
to the Pension Benefit Guaranty Corporation. As soon as possible, and in any event within ten (10)
days after any Borrower fails to make any quarterly contribution required with respect to any
Pension Plan under Section 412(m) of the IRC, the Borrowers will deliver to the Lender a statement
of the Borrowers’ chief financial officer setting forth details as to such failure and the action
which the Borrowers propose to take with respect thereto, together with a copy of any notice of
such failure required to be provided to the Pension Benefit Guaranty Corporation. As soon as
possible, and in any event within ten (10) days after any Borrower knows or has reason to know that
it has or is reasonably expected to have any liability under Sections 4201 or 4243 of ERISA for any
withdrawal, partial withdrawal, reorganization or other event under any Multiemployer Plan, the
Borrowers will deliver to the Lender a statement of the Borrowers’ chief financial officer setting
forth details as to such liability and the action which the Borrowers propose to take with respect
thereto.

     (i) Disputes. Promptly upon knowledge thereof, the Borrowers will deliver to the Lender
notice of (i) any disputes or claims by any Borrower’s customers; (ii) credit memos; and (iii) any
goods returned to or recovered by any Borrower; in each of the foregoing instances, exceeding
$15,000 individually or $25,000 in the aggregate during any fiscal year.

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     (j) Officers and Directors. Promptly upon knowledge thereof, the Borrowers will deliver to
the Lender notice any change in the persons constituting any Borrower’s Executive Officers or
Directors.

     (k) Collateral. Promptly upon knowledge thereof, the Borrowers will deliver to the Lender
notice of any loss of or damage to any Collateral in excess of $50,000 or of any substantial
adverse change in any Collateral or the prospect of payment thereof.

     (l) Commercial Tort Claims. Promptly upon knowledge thereof, the Borrowers will deliver to
the Lender notice of any commercial tort claims either may bring against any Person, including the
name and address of each defendant, a summary of the facts, an estimate of such Borrower’s damages,
copies of any complaint or demand letter submitted by such Borrower, and such other information as
the Lender may request.

     (m) Intellectual Property.

     (i) The Borrowers will give the Lender thirty (30) days prior written notice of their
intent to acquire material Intellectual Property Rights; except for transfers permitted
under Section 6.18, the Borrowers will give the Lender thirty (30) days prior written notice
of their intent to dispose of material Intellectual Property Rights and upon request shall
provide the Lender with copies of all proposed documents and agreements concerning such
rights.

     (ii) Promptly upon knowledge thereof, the Borrowers will deliver to the Lender notice
of (A) any Infringement of its Intellectual Property Rights by others, (B) claims that any
Borrower is Infringing another Person’s Intellectual Property Rights and (C) any threatened
cancellation, termination or material limitation of any Borrower’s Intellectual Property
Rights.

     (iii) Promptly upon receipt, the Borrowers will give the Lender copies of all
registrations and filings with respect to their Intellectual Property Rights.

     (n) Reports to Owners. Promptly upon their distribution, the Borrowers will deliver to the
Lender copies of all financial statements, reports and proxy statements which any Borrower shall
have sent to its Owners.

     (o) Tax Returns of Each Borrower and Guarantor. As soon as possible, and in any event no
later than twenty (20) days after they are due to be filed (or any proper extension of such date),
copies of the state and federal income tax returns and all schedules thereto of each Borrower and
of Guarantor.

     (p) Violations of Law. Promptly upon knowledge thereof, the Borrowers will deliver to the
Lender notice of any Borrower’s violation of any law, rule or regulation, the non-compliance with
which could have a Material Adverse Effect.

     (q) Other Reports. From time to time, with reasonable promptness, the Borrowers will deliver
to the Lender any and all receivables schedules, collection reports, deposit records, equipment
schedules, copies of invoices to account debtors, shipment documents and delivery

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receipts for goods sold, and such other material, reports, records or information as the
Lender may request.

     Section 6.2 Financial Covenants.

     (a) Minimum Book Net Worth. The Borrowers will maintain, as of each date described below
during the term hereof, a Book Net Worth of an amount not less than the amount set forth below
opposite such period:

	 	 	 
	Date	 	Minimum Book Net Worth
	Funding Date
	 	$5,490,000

	 	 	 
	December 31, 2005
	 	Book Net Worth as of September 30, 2005, plus
$60,000

	 	 	 
	March 31, 2006
	 	Book Net Worth as of December 31, 2005, plus
$300,000 and Book Net Worth as of March 31, 2005, minus
$942,000

	 	 	 
	June 30, 2006
	 	Book Net Worth as of March 31, 2006, plus
$150,000

	 	 	 
	September 30, 2006
	 	Book Net Worth as of March 31, 2006, plus
$425,000

	 	 	 
	December 31, 2006
	 	Book Net Worth as of March 31, 2006, plus
$725,000

	 	 	 
	March 31, 2007
	 	Book Net Worth as of March 31, 2006, plus
$1,250,000

	 	 	 
	June 30, 2007, and each June 30 thereafter
	 	Book Net Worth as of prior March 31, plus
$200,000

	 	 	 
	September 30, 2007, and each September 30
thereafter
	 	Book Net Worth as of prior March 31, plus
$600,000

	 	 	 
	December 31, 2007, and each December 31
thereafter
	 	Book Net Worth as of prior March 31, plus
$1,100,000

	 	 	 
	March 31, 2008, and each march 31 thereafter
	 	Book Net Worth as of prior March 31, plus
$1,750,000

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     (b) Minimum Net Income. The Borrowers will achieve during each fiscal year period described
below ending during the term hereof, a Net Income of not less than the amount set forth opposite
such period:

	 	 	 	 	 
	Period	 	Minimum Net Income
	Three (3) months ended December 31, 2005
	 	$	60,000	 
	Six (6) months ended March 31, 2006
	 	$	300,000	 
	Three (3) months ended June 30, 2006
	 	$	150,000	 
	Six (6) months ended September 30, 2006
	 	$	425,000	 
	Nine (9) months ended December 31, 2006, and each
December 31 thereafter
	 	$	725,000	 
	Twelve (12) months ended March 31, 2007, and each
March 31 thereafter
	 	$	1,250,000	 
	Three (3) months ended June 30, 2007, and each
June 30 thereafter
	 	$	200,000	 
	Six (6) months ended September 30, 2007, and each
September 30 thereafter
	 	$	600,000	 
	Nine (9) months ended December 31, 2007, and each
December 31 thereafter
	 	$	1,100,000	 
	Twelve (12) months ended March 31, 2008, and each March
31 thereafter
	 	$	1,750,000	 

     (c) Capital Expenditures. The Borrowers will not incur or contract to incur Capital
Expenditures of more than One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate
during any fiscal year ending during the term hereof, with no more than Five Hundred Thousand
Dollars ($500,000) in the aggregate to be paid from the Borrowers’ working capital in any such
fiscal year.

     Section 6.3 Permitted Liens; Financing Statements.

     (a) The Borrowers will not create, incur or suffer to exist any Lien upon or of any of their
respective assets, now owned or hereafter acquired, to secure any indebtedness; excluding,
however, from the operation of the foregoing, the following (each a “Permitted Lien”;
collectively, “Permitted Liens”):

     (i) In the case of any Borrower’s property which is not Collateral, covenants,
restrictions, rights, easements and minor irregularities in title which do not materially
interfere with such Borrower’s business or operations as presently conducted;

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

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

     (iv) Purchase money Liens relating to the acquisition of machinery and equipment of the
Borrowers not exceeding the lesser of cost or fair market value thereof and so long as no
Default Period is then in existence and none would exist immediately after such acquisition.

     (b) The Borrowers will not amend any financing statements in favor of the Lender except as
permitted by law. Any authorization by the Lender to any Person to amend financing statements in
favor of the Lender shall be in writing.

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

     (a) Indebtedness arising hereunder;

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

     (c) Indebtedness relating to Permitted Liens; and

     (d) Indebtedness subject to a debt subordination agreement in favor of the Lender and
acceptable to the Lender in its sole discretion.

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

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

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

     Section 6.6 Investments and Subsidiaries. No Borrower will make or permit to exist
any loans or advances to, or make any investment or acquire any interest whatsoever in, any other
Person or Affiliate, including any partnership or joint venture, nor purchase or hold beneficially
any stock or other securities or evidence of indebtedness of any other person or Affiliate, except:

     (a) Investments in direct obligations of the United States of America or any agency or
instrumentality thereof whose obligations constitute full faith and credit obligations of the
United States of America having a maturity of one year or less, commercial paper issued by U.S.
corporations rated “A-1” or “A-2” by Standard & Poor’s Ratings Services or “P-1” or “P-2” by
Moody’s Investors Service or certificates of deposit or bankers’ acceptances having a maturity of

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one year or less issued by members of the Federal Reserve System having deposits in excess of
One Hundred Million Dollars ($100,000,000) (which certificates of deposit or bankers’ acceptances
are fully insured by the Federal Deposit Insurance Corporation);

     (b) Travel advances or loans to such Borrower’s Officers and employees not exceeding at any
one time an aggregate of Ten Thousand Dollars ($10,000); provided, however, that
the Lender agrees that advances to Neal Verfuerth in an amount not to exceed $230,000 at any time
outstanding may remain outstanding.

     (c) Prepaid rent not exceeding one (1) month and security deposits; and

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

     Section 6.7 Dividends and Distributions. Except as set forth in this Section 6.7, no
Borrower will declare or pay any dividends (other than dividends payable solely in stock of the
Borrower) on any class of its stock or make any payment on account of the purchase, redemption or
other retirement of any shares of such stock or make any distribution in respect thereof, either
directly or indirectly. With respect to Great Lakes so long as such Borrower is a “pass-through”
tax entity for United States federal income tax purposes, and after first providing such supporting
documentation as the Lender may request such Borrower may pay Tax Distributions, net of any prior
year loss carry-forward.

     Section 6.8 Salaries. The Borrowers will not pay excessive or unreasonable salaries,
bonuses, commissions, consultant fees or other compensation; or increase the salary, bonus,
commissions, consultant fees or other compensation of any Director, Executive Officer or
consultant, or any member of their families, by more than ten percent (10%) in any one year, either
individually or for all such persons in the aggregate, or pay any such increase from any source
other than profits earned in the year of payment.

     Section 6.9 Books and Records; Collateral Examination, Inspection and Appraisals.

     (a) Each Borrower will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to such Borrower’s business and financial condition and such other
matters as the Lender may from time to time request in which true and complete entries will be made
in accordance with GAAP and, upon the Lender’s request, will permit any officer, employee,
attorney, accountant or other agent of Lender to audit, review, make extracts from or copy any and
all company and financial books and records of such Borrower at all times during ordinary business
hours, to send and discuss with account debtors and other obligors requests for verification of
amounts owed to such Borrower, and to discuss such Borrower’s affairs with any of its Directors,
Officers, employees or agents.

     (b) Each Borrower hereby irrevocably authorizes all accountants and third parties to disclose
and deliver to Lender or its designated agent, at such Borrower’s expense, all financial
information, books and records, work papers, management reports and other information in their
possession regarding such Borrower.

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     (c) Each Borrower will permit the Lender or its employees, accountants, attorneys or agents,
to examine and inspect any Collateral or any other property of such Borrower at any time during
ordinary business hours.

     (d) The Lender may also, from time to time, no more than one (1) time each calendar year,
obtain at the Borrowers’ expense an appraisal of Inventory by appraisers acceptable to the Lender
in its sole discretion; provided, however, that nothing contained herein shall
limit the Lender’s right to obtain, at the Borrowers’ expense, such appraisals as it deems
necessary during any Default Period.

     Section 6.10 Account Verification.

     (a) The Lender or its agent may at any time and from time to time send or require any Borrower
to send requests for verification of accounts or notices of assignment to account debtors and other
obligors. The Lender or its agent may also at any time and from time to time telephone account
debtors and other obligors to verify accounts.

     (b) Each Borrower shall pay when due each account payable due to a Person holding a Permitted
Lien (as a result of such payable) on any Collateral.

     Section 6.11 Compliance with Laws.

     (a) Each Borrower shall (i) comply with the requirements of applicable laws and regulations,
the non-compliance with which could have a Material Adverse Effect and (ii) use and keep the
Collateral, and require that others use and keep the Collateral, only for lawful purposes, without
violation of any federal, state or local law, statute or ordinance.

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

     (c) The Borrowers shall (a) ensure that no Owner shall be listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained by the Office of Foreign Assets
Control (“OFAC”), the Department of the Treasury or included in any Executive Orders, (b) not use
or permit the use of the proceeds of the Credit Facility or any other financial accommodation from
Lender to violate any of the foreign asset control regulations of OFAC or other applicable law, (c)
comply with all applicable Bank Secrecy Act laws and regulations, as amended from time to time, and
(d) otherwise comply with the USA Patriot Act as required by federal law and Lender’s policies and
practices.

     Section 6.12 Payment of Taxes and Other Claims. Each Borrower will pay or discharge,
when due, (a) all taxes, assessments and governmental charges levied or imposed upon it or upon its
income or profits, upon any properties belonging to it (including the Collateral) or upon or
against the creation, perfection or continuance of the Security Interest, prior to the date on
which penalties attach thereto, (b) all federal, state and local taxes required to

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be withheld by it, and (c) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon any properties of such Borrower; provided, that such
Borrower shall not be required to pay any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate proceedings and for which
proper reserves have been made.

     Section 6.13 Maintenance of Properties.

     (a) Each Borrower will keep and maintain the Collateral and all of its other properties
necessary or useful in its business in good condition, repair and working order (normal wear and
tear excepted) and will from time to time replace or repair any worn, defective or broken parts;
provided, however, that nothing in this Section 6.13 shall prevent such Borrower
from discontinuing the operation and maintenance of any of its properties if such discontinuance
is, in such Borrower’s judgment, desirable in the conduct of such Borrower’s business and not
disadvantageous in any material respect to the Lender. Each Borrower will take all commercially
reasonable steps necessary to protect and maintain its Intellectual Property Rights.

     (b) Each Borrower will defend the Collateral against all Liens, claims or demands of all
Persons (other than the Lender) claiming the Collateral or any interest therein. Each Borrower
will keep all Collateral free and clear of all Liens except Permitted Liens. Each Borrower will
take all commercially reasonable steps necessary to prosecute any Person Infringing its
Intellectual Property Rights and to defend itself against any Person accusing it of Infringing any
Person’s Intellectual Property Rights.

     Section 6.14 Insurance. Each Borrower will obtain and at all times maintain insurance
with insurers acceptable to Lender, in such amounts, on such terms (including any deductibles) and
against such risks as may from time to time be required by the Lender, but in all events in such
amounts and against such risks as is usually carried by companies engaged in similar business and
owning similar properties in the same general areas in which the Borrower operates. Without
limiting the generality of the foregoing, each Borrower will at all times maintain business
interruption insurance including coverage for force majeure and keep all tangible Collateral
insured against risks of fire (including so-called extended coverage), theft, collision (for
Collateral consisting of motor vehicles) and such other risks and in such amounts as the Lender may
reasonably request, with any loss payable to the Lender to the extent of its interest, and all
policies of such insurance shall contain a lender’s loss payable endorsement for the Lender’s
benefit. All policies of liability insurance required hereunder shall name the Lender as an
additional insured.

     Section 6.15 Preservation of Existence. Each Borrower will preserve and maintain its
existence and all of its rights, privileges and franchises necessary or desirable in the normal
conduct of its business and shall conduct its business in an orderly, efficient and regular manner.

     Section 6.16 Delivery of Instruments, etc. Upon request by the Lender, each Borrower
will promptly deliver to the Lender in pledge all instruments, documents and chattel paper
constituting Collateral, duly endorsed or assigned by such Borrower.

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     Section 6.17 Sale or Transfer of Assets; Suspension of Business Operations. No
Borrower will sell, lease, assign, transfer or otherwise dispose of (i) the stock of any
Subsidiary, (ii) all or a substantial part of its assets, or (iii) any Collateral or any interest
therein (whether in one transaction or in a series of transactions) to any other Person other than
the sale of Inventory in the ordinary course of business and will not liquidate, dissolve or
suspend business operations. No Borrower will transfer any part of its ownership interest in any
Intellectual Property Rights and will not permit any agreement under which it has licensed Licensed
Intellectual Property to lapse, except that a Borrower may transfer such rights or permit such
agreements to lapse if it shall have reasonably determined that the applicable Intellectual
Property Rights are no longer useful in its business. If a Borrower transfers any Intellectual
Property Rights for value, the Borrower will pay over the proceeds to the Lender for application to
the Obligations. No Borrower will license any other Person to use any of such Borrower’s
Intellectual Property Rights, except that each Borrower may grant licenses in the ordinary course
of its business in connection with sales of Inventory or provision of services to its customers.

     Section 6.18 Consolidation and Merger; Asset Acquisitions. No Borrower will
consolidate with or merge into any Person (other than another of the Borrowers), or permit any
other Person (other than another of the Borrowers) to merge into it, or acquire (in a transaction
analogous in purpose or effect to a consolidation or merger) all or substantially all the assets of
any other Person.

     Section 6.19 Sale and Leaseback. No Borrower will enter into any arrangement,
directly or indirectly, with any other Person whereby such Borrower shall sell or transfer any real
or personal property, whether now owned or hereafter acquired, and then or thereafter rent or lease
as lessee such property or any part thereof or any other property which such Borrower intends to
use for substantially the same purpose or purposes as the property being sold or transferred.

     Section 6.20 Restrictions on Nature of Business. No Borrower will engage in any line
of business materially different from that presently engaged in by such Borrower and will not
purchase, lease or otherwise acquire assets not related to its business.

     Section 6.21 Accounting. The Borrowers will not adopt any material change in
accounting principles other than as required by GAAP. The Borrowers will not adopt, permit or
consent to any change in their fiscal year.

     Section 6.22 Discounts, etc. After notice from the Lender, no Borrower will grant any
discount, credit or allowance to any customer of such Borrower or accept any return of goods sold.
No Borrower will at any time modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor of such Borrower.

     Section 6.23 Plans. Unless disclosed to the Lender pursuant to Section 5.12, no
Borrower nor any ERISA Affiliate will (i) adopt, create, assume or become a party to any Pension
Plan, (ii) incur any obligation to contribute to any Multiemployer Plan, (iii) incur any obligation
to provide post-retirement medical or insurance benefits with respect to employees or former
employees (other than benefits required by law) or (iv) amend any Plan in a manner that would
materially increase its funding obligations.

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     Section 6.24 Place of Business; Name. No Borrower will transfer its chief executive
office or principal place of business, or move, relocate, close or sell any business location. No
Borrower will permit any tangible Collateral or any records pertaining to the Collateral to be
located in any state or area in which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in fact been, filed in order to
perfect the Security Interest. No Borrower will change its name or jurisdiction of organization.

     Section 6.25 Constituent Documents. The Borrowers will not amend their Constituent
Documents in any manner which would (i) affect either Borrower’s ability to perform under the terms
of this Agreement as previously authorized, (ii) affect the Liens granted to the Lender pursuant to
the Security Documents, or (iii) change either Borrower’s name or jurisdiction of incorporation or
organization.

     Section 6.26 Performance by the Lender. If a Borrower at any time fails to perform or
observe any of the foregoing covenants contained in this Article VI or elsewhere herein, and if
such failure shall continue for a period of ten (10) calendar days after the Lender gives the
Borrowers written notice thereof (or in the case of the agreements contained in Section 6.12 and
Section 6.14, immediately upon the occurrence of such failure, without notice or lapse of time),
the Lender may, but need not, perform or observe such covenant on behalf and in the name, place and
stead of the applicable Borrower (or, at the Lender’s option, in the Lender’s name) and may, but
need not, take any and all other actions which the Lender may reasonably deem necessary to cure or
correct such failure (including the payment of taxes, the satisfaction of Liens, the performance of
obligations owed to account debtors or other obligors, the procurement and maintenance of
insurance, the execution of assignments, security agreements and financing statements, and the
endorsement of instruments); and the Borrowers shall thereupon pay to the Lender on demand the
amount of all monies expended and all costs and expenses (including reasonable attorneys’ fees and
legal expenses) incurred by the Lender in connection with or as a result of the performance or
observance of such agreements or the taking of such action by the Lender, together with interest
thereon from the date expended or incurred at the Default Rate. To facilitate the Lender’s
performance or observance of such covenants of the Borrowers, the Borrowers hereby irrevocably
appoint the Lender, or the Lender’s delegate, acting alone, as each Borrower’s attorney in fact
(which appointment is coupled with an interest) with the right (but not the duty) from time to time
to create, prepare, complete, execute, deliver, endorse or file in the name and on behalf of the
Borrowers any and all instruments, documents, assignments, security agreements, financing
statements, applications for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by any Borrower under this Section 6.26.

ARTICLE VII

EVENTS OF DEFAULT, RIGHTS AND REMEDIES

     Section 7.1 Events of Default. “Event of Default”, wherever used herein, means any
one of the following events:

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

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

     (c) The existence of any Overadvance arising as the result of any reduction in the Borrowing
Base, or that arises in any manner and on terms not otherwise approved in advance by the Lender;

     (d) Any majority ownership interest in any Borrower shall be sold, transferred, or become
subject to a Lien or Neal Verfuerth shall cease to actively manage the Borrowers’ day to day
business activities;

     (e) Any Borrower or any Guarantor shall be or become insolvent, or admit in writing its or his
inability to pay its or his debts as they mature, or make an assignment for the benefit of
creditors; or any Borrower or any Guarantor shall apply for or consent to the appointment of any
receiver, trustee, or similar officer for it or him or for all or any substantial part of its or
his property; or such receiver, trustee or similar officer shall be appointed without the
application or consent of such Borrower or such Guarantor, as the case may be; or any Borrower or
any Guarantor shall institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, liquidation
or similar proceeding relating to it or him under the laws of any jurisdiction; or any such
proceeding shall be instituted (by petition, application or otherwise) against any Borrower or any
such Guarantor; or any judgment, writ, warrant of attachment or execution or similar process shall
be issued or levied against a substantial part of the property of any Borrower or any Guarantor;

     (f) A petition shall be filed by or against any Borrower or any Guarantor under the United
States Bankruptcy Code naming such Borrower or such Guarantor as debtor;

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

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

     (i) A default under any bond, debenture, note or other evidence of material indebtedness of
any Borrower owed to any Person other than the Lender, or under any indenture or other instrument
under which any such evidence of indebtedness has been issued or by which it is governed, or under
any material lease or other contract, and the expiration of the applicable period of grace, if any,
specified in such evidence of indebtedness, indenture, other instrument, lease or contract;

     (j) Any Reportable Event, which the Lender determines in good faith might constitute grounds
for the termination of any Pension Plan or for the appointment by the

-40-

 

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

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

     (l) Any Borrower shall liquidate, dissolve, terminate or suspend its business operations or
otherwise fail to operate its business in the ordinary course, merge with another organization
(other than another of the Borrowers) unless such Borrower is the surviving entity; or sell or
attempt to sell all or substantially all of its assets, without the Lender’s prior written consent;

     (m) Default in the payment of any amount owed by the Borrowers to the Lender other than any
indebtedness arising hereunder;

     (n) Any Guarantor shall repudiate, purport to revoke or fail to perform its obligations under
its Guaranty in favor of the Lender, or any Guarantor shall cease to exist;

     (o) Any Borrower shall take or participate in any action which would be prohibited under the
provisions of any debt subordination agreement or any Intercreditor Agreement;

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

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

     (r) The indictment of any Director or Executive Officer of any Borrower, or Guarantor, for a
felony offence under state or federal law.

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

-41-

 

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

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

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

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

     (e) The Lender may make demand upon the Borrowers and, forthwith upon such demand, the
Borrowers will pay to the Lender in immediately available funds for deposit in the Special Account
pursuant to Section 2.5 an amount equal to the aggregate maximum amount available to be drawn under
all Letters of Credit then outstanding, assuming compliance with all conditions for drawing
thereunder;

     (f) The Lender may exercise and enforce its rights and remedies under the Loan Documents, the
Guaranties and the Guarantor Security Documents;

     (g) The Lender may without regard to any waste, adequacy of the security or solvency of any
Borrower, apply for the appointment of a receiver of the Collateral, to which appointment the
Borrowers hereby consent, whether or not foreclosure proceedings have been commenced under the
Security Documents and whether or not a foreclosure sale has occurred; and

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

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

     Section 7.3 Certain Notices. If notice to a Borrower of any intended disposition of
Collateral or any other intended action is required by law in a particular instance, such notice

-42-

 

shall be deemed commercially reasonable if given (in the manner specified in Section 8.3) at
least ten (10) calendar days before the date of intended disposition or other action.

ARTICLE VIII

MISCELLANEOUS

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

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

     Section 8.3 Notices; Communication of Confidential Information; Requests for
Accounting. Except as otherwise expressly provided herein, all notices, requests, demands and
other communications provided for under the Loan Documents shall be in writing and shall be (a)
personally delivered, (b) sent by first class United States mail, (c) sent by overnight courier of
national reputation, (d) transmitted by telecopy, or (e) sent as electronic mail, in each case
delivered or sent to the party to whom notice is being given to the business address, telecopier
number, or e-mail address set forth below next to its signature or, as to each party, at such other
business address, telecopier number, or e-mail address as it may hereafter designate in writing to
the other party pursuant to the terms of this Section. All such notices, requests, demands and
other communications shall be deemed to be an authenticated record communicated or given on (a) the
date received if personally delivered, (b) when deposited in the mail if delivered by mail, (c) the
date delivered to the courier if delivered by overnight courier, or (d) the date of transmission if
sent by telecopy or by e-mail, except that notices or requests delivered to the Lender pursuant to
any of the provisions of Article II of this Agreement shall not be effective until received by the
Lender. All notices, financial information, or other business records sent by either party to this
Agreement may be transmitted, sent, or otherwise communicated via such medium as the sending party
may deem appropriate and commercially reasonable; provided, however, that the risk
that the confidentiality or privacy of such notices, financial information, or other business
records sent by either party may be compromised shall be borne exclusively by the Borrowers. All
requests for an accounting under Section 9-210 of the UCC (i) shall be made in a writing signed by
a Person authorized under Section 2.2(b), (ii) shall be personally delivered,

-43-

 

sent by registered or certified mail, return receipt requested, or by overnight courier of
national reputation, (iii) shall be deemed to be sent when received by the Lender and (iv) shall
otherwise comply with the requirements of Section 9-210 of the UCC. The Borrowers request that the
Lender respond to all such requests which on their face appear to come from an authorized
individual and release the Lender from any liability for so responding. The Borrowers shall pay
the Lender the maximum amount allowed by law for responding to such requests.

     Section 8.4 Further Documents. Each Borrower will from time to time execute, deliver,
endorse and authorize the filing of any and all instruments, documents, conveyances, assignments,
security agreements, financing statements, control agreements and other agreements and writings
that the Lender may reasonably request in order to secure, protect, perfect or enforce the Security
Interest or the Lender’s rights under the Loan Documents (but any failure to request or assure that
such Borrower executes, delivers, endorses or authorizes the filing of any such item shall not
affect or impair the validity, sufficiency or enforceability of the Loan Documents and the Security
Interest, regardless of whether any such item was or was not executed, delivered or endorsed in a
similar context or on a prior occasion).

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

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

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

     (ii) Any claims, loss or damage to which any Indemnitee may be subjected if any
representation or warranty contained in Section 5.14 proves to be incorrect in any respect
or as a result of any violation of the covenant contained in Section 6.11(b); and

     (iii) Any and all other liabilities, losses, damages, penalties, judgments, suits,
claims, costs and expenses of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel) in connection with the foregoing and any other investigative,
administrative or judicial proceedings, whether or not such Indemnitee

-44-

 

shall be designated a party thereto, which may be imposed on, incurred by or asserted
against any such Indemnitee, in any manner related to or arising out of or in connection
with the making of the Advances and the Loan Documents, the Guaranties and the Guarantor
Security Documents or the use or intended use of the proceeds of the Advances.

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

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

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

     Section 8.9 Retention of Borrowers’ Records. The Lender shall have no obligation to
maintain any electronic records or any documents, schedules, invoices, agings, or other papers
delivered to the Lender by the Borrowers or in connection with the Loan Documents for more than
thirty (30) days after receipt by the Lender. If there is a special need to retain specific
records, the Borrowers must inform Lender of its need to retain those records with particularity,
which must be delivered in accordance with the notice provisions of Section 8.3 of this Agreement
within thirty (30) days of Lender taking control of same.

     Section 8.10 Binding Effect; Assignment; Complete Agreement; Sharing Information. The
Loan Documents shall be binding upon and inure to the benefit of each Borrower and the Lender and
their respective successors and assigns, except that no Borrower shall have the right to assign its
rights thereunder or any interest therein without the Lender’s prior written consent. To the
extent permitted by law, each Borrower waives and will not assert against any assignee any claims,
defenses or set-offs which such Borrower could assert against the Lender. This

-45-

 

Agreement shall also bind all Persons who become a party to this Agreement as a borrower.
This Agreement, together with the Loan Documents, comprises the complete and integrated agreement
of the parties on the subject matter hereof and supersedes all prior agreements, written or oral,
on the subject matter hereof. To the extent that any provision of this Agreement contradicts other
provisions of the Loan Documents, this Agreement shall control. Without limiting the Lender’s right
to share information regarding the Borrowers and their Affiliates with the Lender’s participants,
accountants, lawyers and other advisors, the Lender may share any and all information it may have
in its possession regarding the Borrowers and their Affiliates, and the Borrowers waive any right
of confidentiality they may have with respect to such sharing of information.

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

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

     Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial. The Loan
Documents shall be governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Wisconsin. The parties hereto hereby (i) consent to the personal
jurisdiction of the state and federal courts located in the State of Wisconsin in connection with
any controversy related to this Agreement; (ii) waive any argument that venue in any such forum is
not convenient; (iii) agree that any litigation initiated by the Lender or any Borrower in
connection with this Agreement or the other Loan Documents may be venued in either the state or
federal courts located in the City of Milwaukee, Wisconsin, County of Milwaukee; and (iv) agree
that a final judgment in any such suit, action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

     EACH BORROWER AND LENDER WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION AT LAW OR IN EQUITY OR
IN ANY OTHER PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Borrowers’ Initials                      ; Lender’s Initials
                     .

-46-

 

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

	 	 	 	 	 	 	 	 	 
	Orion Energy Systems, Ltd.	 	 	 	ORION ENERGY SYSTEMS, LTD.
	1204 Pilgrim Road	 	 	 	 	 	 
	Plymouth, Wisconsin 53073	 	 	 	 	 	 
	Facsimile: ____/____-_______	 	 	 	By:	 	/s/ Neal R. Verfuerth
	Attention:
	 	 	 	 	 	 	 	Neal R. Verfuerth, President
	 

	 	 
	 	 	 	 	 	 
	e-mail:

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Eric von Estorff
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Eric von Estorff, Secretary
	 
	 	 	 	 	 	 	 	 
	Great Lakes Energy Technologies, LLC	 	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	2001 Mirro Drive	 	 	 	 	 	 
	Manitowoc, Wisconsin 54220	 	 	 	 	 	 
	Facsimile: ____/____-________	 	 	 	 	 	 
	Attention:

	 	 	 	 	 	By:
	 	/s/ Neal Verfuerth
	 

	 	 	 	 	 	 	 	 
	e-mail:
	 	 	 	 	 	 	 	Neal R. Verfuerth, Manager
	 

	 	 
	 	 	 	 	 	
	 
	 	 	 	 	 	 	 	 
	Wells Fargo Bank, National Association	 	 	 	WELLS FARGO BANK,
	acting through its	 	 	 	NATIONAL ASSOCIATION, acting through its
	Wells Fargo Business Credit operating division	 	 	 	Wells Fargo Business Credit operating division
	100 East Wisconsin Avenue, Suite 1400	 	 	 	 	 	 
	MAC N9811–143	 	 	 	 	 	 
	Milwaukee, Wisconsin 53202	 	 	 	 	 	 
	Telecopier: 414/224-7439	 	 	 	 	 	 
	Attention: Melissa L. Dreifuerst	 	 	 	By:	 	/s/ Melissa L. Dreifuerst
	 

	 	 	 	 	 	 	 	 
	e-mail: melissa.l.dreifuerst@wellsfargo.com	 	 	 	 	 	Melissa L. Dreifuerst, Vice President

-47-

 

Table of Exhibits and Schedules

	 	 	 
	Exhibit A

	 	Form of Revolving Note
	 
	 	 
	Exhibit B

	 	Compliance Certificate
	 
	 	 
	Exhibit C

	 	Premises
	 
	 	 
	Schedule 1.1

	 	Executive Officers
	 
	 	 
	Schedule 5.1

	 	Trade Names, Chief Executive Office, Principal Place of Business, and Locations of Collateral
	 
	 	 
	Schedule 5.2

	 	Capitalization and Organizational Chart
	 
	 	 
	Schedule 5.5

	 	Subsidiaries
	 
	 	 
	Schedule 5.7

	 	Litigation Matters in Excess of $50,000.00
	 
	 	 
	Schedule 5.11

	 	Intellectual Property Disclosures
	 
	 	 
	Schedule 5.14

	 	Environmental Matters
	 
	 	 
	Schedule 6.3

	 	Permitted Liens
	 
	 	 
	Schedule 6.4

	 	Permitted Indebtedness and Guaranties

 

 

Exhibit A to Credit and Security Agreement

REVOLVING NOTE

	 	 	 	 	 
	$25,000,000.00

	 	 	 	December 22, 2005

     For value received, the undersigned, ORION ENERGY SYSTEMS, LTD., a Wisconsin corporation
(“Orion”) and GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited liability company (“Great
Lakes” and together with Orion, the “Borrowers” and each a “Borrower”), hereby jointly and
severally promise to pay on the Termination Date under the Credit Agreement (defined below), to the
order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, acting through its
WELLS FARGO BUSINESS CREDIT operating division (the “Lender”), at its office in Milwaukee,
Wisconsin, or at any other place designated at any time by the holder hereof, in lawful money of
the United States of America and in immediately available funds, the lesser of the principal sum of
Twenty Five Million Dollars ($25,000,000) or the aggregate unpaid principal amount of all Revolving
Advances made by the Lender to the Borrowers under the Credit Agreement (defined below) together
with interest on the principal amount hereunder remaining unpaid from time to time, computed on the
basis of the actual number of days elapsed and a three hundred sixty (360) day year, from the date
hereof until this Note is fully paid at the rate from time to time in effect under the Credit and
Security Agreement dated the same date as this Note (the “Credit Agreement”) by and among the
Lender and the Borrowers. The principal hereof and interest accruing thereon shall be due and
payable as provided in the Credit Agreement. This Note may be prepaid only in accordance with the
Credit Agreement.

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

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

A-1-

 

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

	 	 	 	 	 
	 	 	ORION ENERGY SYSTEMS, LTD.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Neal R. Verfuerth, President
	 
	 	 	 	 
	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Neal R. Verfuerth, President

A-2-

 

Exhibit B to Credit and Security Agreement

COMPLIANCE CERTIFICATE

	 	 	 
	To:

	 	Wells Fargo Business Credit
	Date:

	 	                    , 200___
	Subject:

	 	Financial Statements

     In accordance with our Credit and Security Agreement dated as of December 22, 2005 (the
“Credit Agreement”), attached are the financial statements of each of Orion Energy Systems, Ltd.,
a Wisconsin corporation (“Orion”) and Great Lakes Energy Technologies, LLC, a Wisconsin limited
liability company (“Great Lakes” and together with Orion, the “Borrowers” and each a “Borrower”) as
of and for                     , 200___ (the “Reporting Date”) and the year-to-date period then
ended (the “Current Financials”). All terms used in this certificate have the meanings given in
the Credit Agreement.

     I certify that the Current Financials have been prepared in accordance with GAAP, subject to
year-end adjustments, and fairly present each Borrower’s financial condition as of the date
thereof.

     I further hereby certify as follows: Events of Default. (Check one):

	 	o	 	The undersigned does not have knowledge of the occurrence of an Event of Default
under the Credit Agreement except as previously reported in writing to the Lender.
	 
	 	o	 	The undersigned has knowledge of the occurrence of an Event of Default under the
Credit Agreement not previously reported in writing to the Lender and attached
hereto is a statement of the facts with respect to thereto. The Borrower
acknowledges that pursuant to 2.5(c) of the Credit Agreement, the Lender may impose
the Default Rate at any time during the resulting Default Period.

	 	 	Material Adverse Change in Litigation Matters of Borrowers. I further hereby
certify as follows (check one):

	 	o	 	The undersigned has no knowledge of any material adverse change to the litigation
exposure of the Borrowers or any of the Guarantors or Affiliates.
	 
	 	o	 	The undersigned has knowledge of material adverse changes to the litigation exposure
of the Borrowers or any of the Guarantors or Affiliates not previously disclosed in
Schedule 5.7. Attached to this Certificate is a statement of the facts with respect
thereto.

B-1

 

     Financial Covenants. I further hereby certify as follows (check and complete each of
the following):

     1. Minimum Book Net Worth. Pursuant to Section 6.2(a) of the Credit Agreement, as of the
Reporting Date, the combined Book Net Worth of the Borrowers was $                     which  ̈
satisfies  ̈ does not satisfy the requirement that such amount be not less than
$                    
on the Reporting Date as set forth in the table below:

	 	 	 
	Date	 	Minimum Book Net Worth
	Funding Date
	 	$60,000

	 	 	 
	December 31, 2005
	 	Book Net Worth as of September 30, 2005, plus
$150,000

	 
	March 31, 2006
	 	Book Net Worth as of December 31, 2005, plus
$300,000 and Book Net Worth as of March 31,
2005, minus $942,000

	 	 	 
	June 30, 2006
	 	Book Net Worth as of March 31, 2006, plus
$150,000

	 	 	 
	September 30, 2006
	 	Book Net Worth as of March 31, 2006, plus
$425,000

	 	 	 
	December 31, 2006
	 	Book Net Worth as of March 31, 2006, plus
$725,000

	 	 	 
	March 31, 2007
	 	Book Net Worth as of March 31, 2006, plus
$1,250,000

	 	 	 
	June 30, 2007, and each June 30 thereafter
	 	Book Net Worth as of prior March 31, plus
$200,000

	 	 	 
	September 30, 2007, and each September 30
thereafter
	 	Book Net Worth as of prior March 31, plus
$600,000

	 	 	 
	December 31, 2007, and each December 31
thereafter
	 	Book Net Worth as of prior March 31, plus
$1,100,000

	 	 	 
	March 31, 2008, and each march 31 thereafter
	 	Book Net Worth as of prior March 31, plus
$1,750,000

     2. Minimum Net Income. Pursuant to Section 6.2(b) of the Credit Agreement, the combined Net
Income of the Borrowers for the fiscal year-to-date period ending on the Reporting Date, was
$                    , which  ̈ satisfies  ̈
does not satisfy the requirement that such amount be
not less than $                     during the relevant period as set forth in the table below:

B-2

 

	 	 	 	 	 
	Period	 	Minimum Net Income
	Three (3) months ended December 31, 2005
	 	$	60,000	 
	Six (6) months ended March 31, 2006
	 	$	300,000	 
	Three (3) months ended June 30, 2006
	 	$	150,000	 
	Six (6) months ended September 30, 2006
	 	$	425,000	 
	Nine (9) months ended December 31, 2006, and each
December 31 thereafter
	 	$	725,000	 
	Twelve (12) months ended March 31, 2007, and each
March 31 thereafter
	 	$	1,250,000	 
	Three (3) months ended June 30, 2007, and each
June 30 thereafter
	 	$	200,000	 
	Six (6) months ended September 30, 2007, and each
September 30 thereafter
	 	$	600,000	 
	Nine (9) months ended December 31, 2007, and each
December 31 thereafter
	 	$	1,100,000	 
	Twelve (12) months ended March 31, 2008, and each March
31 thereafter
	 	$	1,750,000	 

     3. Capital Expenditures. Pursuant to Section 6.2(c) of the Credit Agreement, for the
year-to-date period ending on the Reporting Date, the Borrowers have expended or contracted to
expend during the fiscal year ended                     , 200___, for Capital Expenditures,
$                     in the aggregate of which
$                     was from the Borrowers’ working capital,
which  ̈ satisfies  ̈ does not satisfy the requirement that (a) such expenditures not
exceed One Million Five Hundred Thousand Dollars ($1,500,000) in the aggregate during any fiscal
year thereafter, and (b) not more than Five Hundred Thousand Dollars ($500,000) in the aggregate of
such expenditures may be made from the Borrowers’ working capital during in any fiscal year.

     4. Salaries. As of the Reporting Date, the Borrowers have not paid excessive or unreasonable
salaries, bonuses, commissions, consultant fees or other compensation, or increased the salary,
bonus, commissions, consultant fees or other compensation of any Director, Officer or consultant,
or any member of their families, by more than ten percent (10%) over the amount paid in the
Borrowers’ previous fiscal year, either individually or for all such persons in the aggregate, and
has not paid any increase from any source other than profits earned in the year of payment, and as
a consequence o is o is not in compliance with Section 6.8 of the Credit Agreement.

B-3

 

     Attached hereto are all relevant facts in reasonable detail to evidence, and the computations
of the financial covenants referred to above. These computations were made in accordance with
GAAP.

	 	 	 	 	 
	 	 	ORION ENERGY SYSTEMS, LTD.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Its Chief Financial Officer
	 
	 	 	 	 
	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Its Chief Financial Officer

B-4

 

Exhibit C to Credit and Security Agreement

PREMISES

     The Premises referred to in the Credit and Security Agreement are legally described as
follows:

Orion Energy Systems, Ltd.

     Lots 8 and 9, Plymouth Industrial Park – South, in the County of Sheboygan and State of
Wisconsin.

Great Lakes Energy Technologies, LLC

     PARCEL A:

     Tract Numbered One (1) of a Certified Survey in the Southeast Quarter of Section Numbered Nine
(9), Township Numbered Nineteen (19) North, Range Numbered Twenty-four (24) East, in the City of
Manitowoc, as recorded in the Office of the Register of Deeds for Manitowoc County, Wisconsin, in
Volume 24 of Certified Survey Maps on page 63 as Document No. 967193.

     EXCEPTING the East 40 feet for Woodland Drive.

     PARCEL B:

     Non-exclusive easement for the benefit of Parcel A created by an instrument dated May 27, 2004
and recorded as Document No. 969543 for ingress and egress as provided for therein.

C-1

 

FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT

     THIS AMENDMENT, dated as of January 26, 2006, is made by and among ORION ENERGY SYSTEMS,
LTD., a Wisconsin corporation (“Orion”) and GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin
limited liability company (“Great Lakes” and together with Orion, the “Borrowers” and each a
“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), acting through its WELLS FARGO
BUSINESS CREDIT operating division.

RECITALS

     The Borrower and the Lender are parties to a Credit and Security Agreement dated as of
December 22, 2005 (the “Credit Agreement”). Capitalized terms used in these recitals have the
meanings given to them in the Credit Agreement unless otherwise specified.

     The Borrower has requested that certain amendments be made to the Credit Agreement, which the
Lender is willing to make pursuant to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:

     1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.

     2. Amendment of Section 6.2(c). Section 6.2(c) of the Credit Agreement is amended to
read as follows:

     (c) Capital Expenditures. The Borrowers will not incur or contract to incur Capital
Expenditures of more than One Million Five Hundred Thousand Dollars ($1,500,000) in the
aggregate during any fiscal year ending during the term hereof, with no more than Eight
Hundred Fifty Thousand Dollars ($850,000) in the aggregate to be paid from the Borrowers’
working capital in the fiscal year ending March 31, 2006, and no more than Five Hundred
Thousand Dollars ($500,000) in the aggregate to be paid from the Borrowers’ working capital
in any fiscal year thereafter.

     3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

     4. Conditions Precedent. This Amendment shall be effective when the Lender shall have
received an executed original hereof, together with the Acknowledgment and Agreement of Guarantor
set forth at the end of this Amendment, duly executed by the Guarantor.

 

 

     5. Representations and Warranties. The Borrower hereby represents and warrants to the
Lender as follows:

     (a) The Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Amendment has been duly executed and
delivered by the Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.

     (b) The execution, delivery and performance by the Borrower of this Amendment have been
duly authorized by all necessary corporate action and do not (i) require any authorization,
consent or approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the articles of incorporation or by-laws of the Borrower,
or (iii) result in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected.

     (c) All of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date.

     6. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.

     7. No Waiver. The execution of this Amendment and acceptance of any documents related
hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on the date of this
Amendment.

     8. Release. The Borrower, and the Guarantor by signing the Acknowledgment and
Agreement of Guarantor set forth below, each hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and employees of any of the
foregoing, from any and all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether such claims,
demands and causes of action are matured or unmatured or known or unknown.

-2-

 

     9. Costs and Expenses. The Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the
Lender in connection with the Loan Documents, including without limitation all reasonable fees and
disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. The Borrower hereby agrees that the Lender may, at any time or
from time to time in its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any loan, for the purpose
of paying any such fees, disbursements, costs and expenses.

     10. Miscellaneous. This Amendment and the Acknowledgment and Agreement of Guarantor
may be executed in any number of counterparts, each of which when so executed and delivered shall
be deemed an original and all of which counterparts, taken together, shall constitute one and the
same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first written above.

	 	 	 	 	 	 	 	 	 
	WELLS FARGO BANK,	 	 	 	ORION ENERGY SYSTEMS, LTD.
	NATIONAL ASSOCIATION, acting through its	 	 	 	 	 	 
	Wells Fargo Business Credit operating division	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, President
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Melissa L. Dreifuerst	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Melissa L. Dreifuerst, Vice President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Eric von Estorff
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Eric von Estorff, Secretary
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, Manager

-3-

 

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS

          The undersigned, a guarantor of the indebtedness of Orion Energy Systems, Ltd., a Wisconsin
corporation (“Orion”) and Great Lakes Energy Technologies, LLC, a Wisconsin limited liability
company (“Great Lakes” and together with Orion, the “Borrowers” and each a “Borrower”) to Wells
Fargo Bank, National Association (the “Lender”), through its Wells Fargo Business Credit operating
division, pursuant to a Guaranty by Corporation dated as of December 22, 2005, (the “Guaranty”),
hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including
without limitation the release set forth in paragraph 8 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of its Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Credit
Agreement and any indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the Guaranty for all of
the Borrower’s present and future indebtedness to the Lender.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	ORION AVIATION, INC.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, President

-4-

 

SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT

     THIS SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT (the “Amendment”), dated as of
June 30, 2006, is made by and among ORION ENERGY SYSTEMS, LTD., a Wisconsin corporation (“Orion”)
and GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited liability company (“Great Lakes” and
together with Orion, the “Borrowers” and each a “Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Lender”), acting through its WELLS FARGO BUSINESS CREDIT operating division.

RECITALS

     The Borrowers and the Lender are parties to a Credit and Security Agreement dated as of
December 22, 2005, as amended (the “Credit Agreement”). Capitalized terms used in these recitals
have the meanings given to them in the Credit Agreement unless otherwise specified.

     Orion and Clean Technology Fund II, LP have entered in to a letter of intent summarizing the
terms upon which Orion may sell up to 1,636,364 shares of its Series C Preferred Stock
(representing 7.05% of the fully diluted equity of Orion) (the “Series C Stock”) for up to
$4,500,000. In connection with the sale of the Series C Stock the Borrowers have requested that
certain amendments be made to the Credit Agreement, which the Lender is willing to make pursuant to
the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:

     1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
In addition, the following defined terms shall be added or amended, as the case may be:

     “Book Net Worth” means, as of the date of determination, the sum of (i) the aggregate of the
Owners’ equity in the Borrowers plus (ii) the Series C Stock, all as determined on a
consolidated basis in accordance with GAAP; provided, however, that any increase in
the Owners’ equity on account of the forgiveness of debt due to Osram, which is to occur late in
fiscal year 2006 or early in fiscal year 2007 shall be excluded in determining the Borrowers’
compliance with the provisions of Section 6.2(a) for the period in which such event occurs.

     “Net Income” means the sum of (i) fiscal year-to-date after-tax net income of the Borrowers
from continuing operations, including extraordinary losses but excluding extraordinary gains,
plus unpaid dividends accrued during such fiscal year-to-date period on the Series C Stock
(to the extent the same have reduced net income), all as determined on a consolidated basis in
accordance with GAAP (ii); provided, however, that any income earned by the
Borrowers on account of the forgiveness of debt due to Osram, which is to occur late in fiscal

 

 

year 2006 or early in fiscal year 2007 shall be excluded in determining the Borrowers’
compliance with the provisions of Section 6.2(b) for the periods in which such event occurs.

     “Series C Stock” shall mean at any time the issued and outstanding shares of Orion’s Series C
Preferred Stock.

     2. Amendment of Section 7.1(p). Section 7.1(p) of the Credit Agreement shall be
amended to read as follows:

     (p) Intentionally Left Blank;

     3. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

     4. Conditions Precedent. This Amendment shall be effective when the Lender shall have
received an executed original hereof, together with the Acknowledgment and Agreement of Guarantor
set forth at the end of this Amendment, duly executed by the Guarantor.

     5. Representations and Warranties. The Borrower hereby represents and warrants to the
Lender as follows:

     (a) The Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Amendment has been duly executed and
delivered by the Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.

     (b) The execution, delivery and performance by the Borrower of this Amendment have been
duly authorized by all necessary corporate action and do not (i) require any authorization,
consent or approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree presently in effect, having
applicability to the Borrower, or the articles of incorporation or by-laws of the Borrower,
or (iii) result in a breach of or constitute a default under any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected.

     (c) All of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date.

-2-

 

     6. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.

     7. No Waiver. The execution of this Amendment and acceptance of any documents related
hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on the date of this
Amendment.

     8. Release. The Borrower, and the Guarantor by signing the Acknowledgment and
Agreement of Guarantor set forth below, each hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and employees of any of the
foregoing, from any and all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether such claims,
demands and causes of action are matured or unmatured or known or unknown.

     9. Costs and Expenses. The Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the
Lender in connection with the Loan Documents, including without limitation all reasonable fees and
disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. The Borrower hereby agrees that the Lender may, at any time or
from time to time in its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any loan, for the purpose
of paying any such fees, disbursements, costs and expenses.

     10. Miscellaneous. This Amendment and the Acknowledgment and Agreement of Guarantor
may be executed in any number of counterparts, each of which when so executed and delivered shall
be deemed an original and all of which counterparts, taken together, shall constitute one and the
same instrument.

-3-

 

     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Credit and
Security Agreement to be duly executed as of the date first written above.

	 	 	 	 	 	 	 	 	 
	WELLS FARGO BANK,	 	 	 	ORION ENERGY SYSTEMS, LTD.
	NATIONAL ASSOCIATION, acting through its	 	 	 	 	 	 
	Wells Fargo Business Credit operating division	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, President
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Melissa L. Dreifuerst	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Melissa L. Dreifuerst, Vice President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Eric von Estorff
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Eric von Estorff, Secretary
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, Manager

-4-

 

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS

          The undersigned, a guarantor of the indebtedness of Orion Energy Systems, Ltd., a Wisconsin
corporation (“Orion”) and Great Lakes Energy Technologies, LLC, a Wisconsin limited liability
company (“Great Lakes” and together with Orion, the “Borrowers” and each a “Borrower”) to Wells
Fargo Bank, National Association (the “Lender”), through its Wells Fargo Business Credit operating
division, pursuant to a Guaranty by Corporation dated as of December 22, 2005, (the “Guaranty”),
hereby (i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including
without limitation the release set forth in paragraph 7 of the Amendment) and execution thereof;
(iii) reaffirms its obligations to the Lender pursuant to the terms of its Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Credit
Agreement and any indebtedness or agreement of the Borrower, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the Guaranty for all of
the Borrower’s present and future indebtedness to the Lender.

	 	 	 	 	 
	 	ORION AVIATION, INC.

 	 
	 	By:  	/s/ Neal R. Verfuerth
 	 
	 	 	Neal R. Verfuerth, President 	 
	 	 	 	 
	 

 

 

THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT,

WAIVER OF DEFAULTS AND CONSENTS

     This Third Amendment to Credit and Security Agreement, Waiver of Defaults and Consents
(the “Amendment”), dated as of March 29, 2007, is made by and among ORION ENERGY SYSTEMS, LTD., a
Wisconsin corporation (“Orion”) and GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin limited
liability company (“Great Lakes” and together with Orion, the “Borrowers” and each a “Borrower”),
and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), acting through its Wells Fargo Business
Credit operating division.

RECITALS

     The Borrowers and the Lender are parties to a Credit and Security Agreement dated as of
December 22, 2005, as amended (the “Credit Agreement”). Capitalized terms used in these recitals
have the meanings given to them in the Credit Agreement unless otherwise specified.

     The Borrowers have requested that the Lender waive certain defaults, consent to various
matters and make certain amendments to the Credit Agreement, all of which the Lender is willing to
do pursuant to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:

     1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.
In addition, the following defined terms shall be added or amended, as the case may be:

     “Borrowing Base” means at any time the lesser of:

     (a) The Maximum Line Amount; or

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

     (i) The lesser of (A) the product of the Accounts Advance Rate
times Eligible Accounts or (B) $25,000,000, plus

     (ii) The lesser of (A) the product of the Inventory Advance Rate
times Eligible Inventory or (B) $5,500,000, less

     (iii) The Borrowing Base Reserve, less

     (iv) Indebtedness that the Borrowers owe to the Lender that has not yet
been advanced on the Revolving Note, and the dollar amount that

 

 

the Lender in its reasonable discretion then determines to be a
reasonable determination of the Borrowers’ credit exposure with respect to
any swap, derivative, foreign exchange, hedge, deposit, treasury management
or other similar transaction or arrangement offered to Borrowers by Lender
that is not described in Article II of this Agreement.

     “Guarantor Security Documents” means each Security Agreement between a Guarantor and
the Lender, to secure such Guarantor’s obligations to the Lender pursuant to its guaranty
and to secure the Indebtedness, and any other document delivered by a Guarantor to the
Lender from time to time to secure the Indebtedness.

     “Guarantors” means Clean Energy Solutions, LLC, Energy Capital Partners, LLC or any
other Person now or hereafter guarantying the Indebtedness, each a “Guarantor.”

     “Lender” means Wells Fargo Bank, National Association in its broadest and most
comprehensive sense as a legal entity, and is not limited in its meaning to Lender’s Wells
Fargo Business Credit operating division, or to any other operating division of Lender.

     2. Definition of Indebtedness. The definition of “Wells Fargo Bank Affiliate
Obligations” shall be deleted in its entirety from the Credit Agreement and shall not be replaced,
and each reference in the Credit Agreement to “Obligations” shall be deleted and replaced with the
term “Indebtedness”, and Section 1.1 of the Credit Agreement shall further be amended to include
the following definition:

     “Indebtedness” is used herein in its most comprehensive sense and means any and all
advances, debts, obligations and liabilities of each Borrower to the Lender, heretofore, now
or hereafter made, incurred or created, whether voluntary or involuntary and however
arising, whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, including under any swap, derivative, foreign exchange, hedge,
deposit, treasury management or other similar transaction or arrangement at any time entered
into by any Borrower with the Lender, and whether any Borrower may be liable individually or
jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.

     3. Amendment of Section 2.11. Section 2.11 of the Credit Agreement shall be amended
to read as follows:

     Section 2.11 Revolving Advances to Pay Indebtedness. Notwithstanding the terms
of Section 2.1, the Lender may, in its discretion at any time or from time to time, without
the Borrowers’ request and even if the conditions set forth in Section 4.2 would not be
satisfied, make a Revolving Advance in an amount equal to the portion of the Indebtedness
from time to time due and payable.

     4. Amendment of Section 3.1. Section 3.1 of the Credit Agreement shall be amended in
its entirety to read as follows:

 

 

     Section 3.1 Grant of Security Interest. Each Borrower hereby pledges, assigns
and grants to the Lender, a lien and security interest (collectively referred to as the
“Security Interest”) in the Collateral, as security for the payment and performance of: (a)
all present and future Indebtedness of the Borrowers to the Lender; (b) all obligations of
the Borrowers and rights of the Lender under this Agreement; and (c) all present and future
obligations of the Borrowers to the Lender of other kinds. Upon request by the Lender, each
Borrower will grant the Lender a security interest in all commercial tort claims that such
Borrower may have against any Person.

     5. Amendment of Section 6.2. Section 6.2 of the Credit Agreement shall be amended to
read as follows:

     Section 6.2 Financial Covenants.

     (a) Minimum Book Net Worth. The Borrowers will maintain, as of each date described
below during the term hereof, a Book Net Worth of an amount not less than the amount set
forth below opposite such period:

	 	 	 
	Date	 	Minimum Book Net Worth
	June 30, 2006
	 	Book Net Worth as of March 31, 2006,
plus $172,000

	September 30, 2006
	 	Book Net Worth as of March 31, 2006,
plus $219,000

	December 31, 2006
	 	Book Net Worth as of March 31, 2006,
plus $558,000

	March 31, 2007
	 	Book Net Worth as of March 31, 2006,
plus $608,000

	June 30, 2007, and each June 30
thereafter
	 	Book Net Worth as of prior March 31,
plus $25,000  

	September 30, 2007, and each
September 30 thereafter
	 	Book Net Worth as of prior March 31,
plus $125,000

	December 31, 2007, and each
December 31 thereafter
	 	Book Net Worth as of prior March 31,
plus $500,000

	March 31, 2008, and each March 31
thereafter
	 	Book Net Worth as of prior March 31,
plus $800,000

     (b) Minimum Net Income. The Borrowers will achieve during each fiscal year period
described below ending during the term hereof, a Net Income of not less than the amount set
forth opposite such period:

 

 

	 	 	 	 	 
	Period	 	Minimum Net Income
	Three (3) months ended June 30, 2006
	 	$	172,000	 
	Six (6) months ended September 30, 2006
	 	$	219,000	 
	Nine (9) months ended December 31, 2006
	 	$	558,000	 
	Twelve (12) months ended March 31, 2007
	 	$	608,000	 
	Three (3) months ended June 30, 2007, and
each June 30 thereafter
	 	$	25,000	 
	Six (6) months ended September 30, 2007,
and each September 30 thereafter
	 	$	125,000	 
	Nine (9) months ended December 31, 2007,
and each December 31 thereafter
	 	$	500,000	 
	Twelve (12) months ended March 31, 2008,
and each March 31 thereafter
	 	$	800,000	 

     (c) Capital Expenditures. The Borrowers will not incur or contract to incur Capital
Expenditures of more than One Million Five Hundred Thousand Dollars ($1,500,000) in the
aggregate during any fiscal year ending during the term hereof, with no more than One
Million Dollars ($1,000,000) in the aggregate to be paid from the Borrowers’ working capital
in the fiscal year ending March 31, 2007, and no more than One Million One Hundred Thousand
Dollars ($1,100,000) in the aggregate to be paid from the Borrowers’ working capital in any
fiscal year thereafter.

     6. Amendment of Section 6.4. Section 6.4 of the Credit Agreement shall be amended in
its entirety to read as follows:

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

     (a) The Indebtedness arising hereunder;

     (b) Any indebtedness of any Borrower in existence on the date of this Agreement and
listed in Schedule 6.4 hereto;

     (c) Any indebtedness relating to Permitted Liens; and

     (d) Any indebtedness subject to a debt subordination agreement in favor of the Lender
and acceptable to the Lender in its sole discretion.

     7. Amendment of Schedules. Schedules 1.1, 5.1, 5.2, 5.5 and 5.11 to the Credit
Agreement shall be amended in their entirety to read as set forth in Exhibit A attached hereto.

 

 

     8. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

     9. Waiver of Defaults. Prior to giving effect to the amendments set forth herein, the
Borrowers were in default of both the provisions of Section 6.2(b) of the Credit Agreement (Minimum
Net Income) for the fiscal year-to-date period ended December 31,2006, and the provision of Section
6.6(b) of the Credit Agreement (Investments and Subsidiaries) on account of advances to Neal
Verfuerth exceeding the stated limitation therein prior to the date hereof (the “Defaults”). Upon
the terms and subject to the conditions set forth in this Amendment and provided the outstanding
amount of advances to Mr. Verfuerth have not exceeded Two Hundred Fifty Thousand Dollars
($250,000), the Lender hereby waives the Defaults. This waiver shall be effective only in this
specific instance and for the specific purpose for which it is given, and this waiver shall not
entitle the Borrowers to any other or further waiver in any similar or other circumstances.

     10. Consents. The Borrowers have advised the Lender that Orion has or expects to take
the following steps to restructure or reorganize its business and that Orion has or expects to make
the following described loans:

     (a) Orion has created a wholly owned subsidiary known as Clean Energy Solutions, LLC, a
Wisconsin limited liability company (“CES”) which entity will operate under the trade name
Orion Energy Services and conduct national retail sales;

     (b) Orion has created a wholly owned subsidiary known as Energy Capital Partners, LLC,
a Wisconsin limited liability company (“ECP”) which entity will provide project financing
and other related business services;

     (c) Orion Aviation, Inc. is to be merged into Orion as there are no longer assets or
indebtedness at Orion Aviation, Inc.;

     (d) Orion has made a loan of Four Hundred Fifty Thousand Dollars ($450,000) (the “CPLN
Loan”) to WebEnergy.net, Inc., doing business as ConsumerPowerline (“CPLN”), which loan is
evidenced by a Note in such amount payable to Orion and secured by a first priority security
interest in the assets of CPLN and a personal guaranty of CPLN’s President; and

     (e) Orion intends to make a loan of Eight Hundred Twelve Thousand Five Hundred Dollars
($812,500) (the “Verfuerth Loan”) to Neal R. Verfuerth, which loan is to be used for the
purchase of stock of Orion under certain stock option agreements in favor of Mr. Verfuerth,
which loan will be evidenced by a Note in such amount payable to Orion and secured by a
pledge of all stock purchased with the proceeds of such loan.

Upon the terms and subject to the conditions set forth in this Amendment, the Lender hereby
provides its consent to the foregoing matters notwithstanding anything in the Credit Agreement to
the contrary. These consents shall be effective only in this specific instance and for this

 

 

specific purpose for which they are given and these consents shall not entitle the Borrowers to any
other or further waiver or consent in any similar or other circumstances.

     11. Conditions Precedent. This Amendment, and the waiver and consents set forth in
Paragraphs 9 and 10, shall be effective when the Lender shall have received an executed original
hereof, together with each of the following:

     (a) A Certificate of Authority of the Secretary of Orion certifying as to (i) the
resolutions of the Board of Directors of Orion approving the execution and delivery of this
Amendment, (ii) the fact that the Articles or Incorporation and By-Laws of Orion, which
documents were certified and delivered to the Lender pursuant to this Certificate of
Authority of the Secretary of Orion dated as of December 22, 2005, in connection with the
execution and delivery of the Credit Agreement, continue in full force and effect and have
not been amended or otherwise modified, except as set forth in the Certificate to be
delivered, and (iii) the officers and agents of Orion who have been certified to the Lender,
pursuant to its Certificate of Authority dated as of December 22, 2005, as being authorized
as to sign and to act on behalf of the Borrower continue to be so authorized or setting
forth the name, title and signature of those officers and agents of Orion who have been
subsequently authorized to sign and to act on behalf of Orion.

     (b) With respect to CES, a Guaranty, Security Agreement and Certificate of Authority of
the Secretary of CES including resolutions of CES approving the execution and delivery of
said Guaranty and Security Agreement.

     (c) With respect to ECP, a Guaranty, Security Agreement and Certificate of Authority of
the Secretary of ECP including resolutions of ECP approving the execution and delivery of
said Guaranty and Security Agreement.

     (d) Copies of all of the executed and recorded documents provided to Orion in
connection with the CPLN Loan and the Verfuerth Loan.

     (e) Such other matters as the Lender may require.

     12. Representations and Warranties. Each Borrower (as to such Borrower) hereby
represents and warrants to the Lender as follows:

     (a) The Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Amendment has been duly executed and
delivered by the Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.

     (b) The execution, delivery and performance by the Borrower of this Amendment have been
duly authorized by all necessary corporate action and do not (i) require any authorization,
consent or approval by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or
regulation or of any order, writ, injunction or decree

 

 

presently in effect, having applicability to the Borrower, or the articles of
incorporation or by-laws of the Borrower, or (iii) result in a breach of or constitute a
default under any indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its properties may be bound or
affected.

     (c) All of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date.

     13. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.

     14. No Other Waiver or Consent. Except as provided in Paragraphs 9 and 10, the
execution of this Amendment and acceptance of any documents related hereto shall not be deemed to
be a waiver of or consent to any Default or Event of Default under the Credit Agreement or breach,
default or event of default under any Security Document or other document held by the Lender,
whether or not known to the Lender and whether or not existing on the date of this Amendment.

     15. Release. The Borrowers, each hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and employees of any of the
foregoing, from any and all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or federal law or
otherwise, which the Borrowers have had, now have or have made claim to have against any such
person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the
beginning of time to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.

     16. Costs and Expenses. The Borrowers hereby reaffirm their agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the
Lender in connection with the Loan Documents, including without limitation all reasonable fees and
disbursements of legal counsel. Without limiting the generality of the foregoing, the Borrowers
specifically agree to pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. The Borrowers hereby agree that the Lender may, at any time or
from time to time in its sole discretion and without further authorization by the Borrowers, make a
loan to the Borrowers under the Credit Agreement, or apply the proceeds of any loan, for the
purpose of paying any such fees, disbursements, costs and expenses.

 

 

     17. Miscellaneous. This Amendment may be executed in any number of counterparts, each
of which when so executed and delivered shall be deemed an original and all of which counterparts,
taken together, shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Credit and Security
Agreement, Waiver of Defaults and Consents to be duly executed as of the date first written above.

	 	 	 	 	 	 	 	 	 
	WELLS FARGO BANK,	 	 	 	ORION ENERGY SYSTEMS, LTD.
	NATIONAL ASSOCIATION, acting through its	 	 	 	 	 	 
	Wells Fargo Business Credit operating division	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, President
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Melissa L. Dreifuerst	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Melissa L. Dreifuerst, Vice President	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Eric von Estorff
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Eric von Estorff, Secretary
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, Manager

 

 

FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT

     THIS AMENDMENT, dated as of July 27, 2007, is made by and among ORION ENERGY SYSTEMS,
LTD., a Wisconsin corporation (“Orion”) and GREAT LAKES ENERGY TECHNOLOGIES, LLC, a Wisconsin
limited liability company (“Great Lakes” and together with Orion, the “Borrowers” and each a
“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), acting through its WELLS FARGO
BUSINESS CREDIT operating division.

RECITALS

     The Borrowers and the Lender are parties to a Credit and Security Agreement dated as of
December 22, 2005, as amended, (the “Credit Agreement”). Capitalized terms used in these recitals
have the meanings given to them in the Credit Agreement unless otherwise specified.

     The Borrowers have requested that certain amendments be made to the Credit Agreement, which
the Lender is willing to make pursuant to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:

     1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined herein.

     2. Amendment of Section 6.2(c). Section 6.2(c) of the Credit Agreement is amended to
read as follows:

     (c) Capital Expenditures. The Borrowers will not incur or contract to incur Capital
Expenditures of more than Four Million Dollars ($4,000,000) in the aggregate during any
fiscal year ending on or after March 31, 2008 during the term hereof, with no more than One
Million One Hundred Thousand Dollars ($1,100,000) in the aggregate to be paid from the
Borrowers’ working capital in any such fiscal year.

     3. Amendment of Section 6.4. Section 6.4 of the Credit Agreement is amended to read
as follows:

 

 

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

     (a) The Indebtedness arising hereunder;

     (b) Any indebtedness of any Borrower in existence on the date of this Agreement and
listed in Schedule 6.4 hereto;

     (c) Any indebtedness relating to Permitted Liens;

     (d) Any indebtedness subject to a debt subordination agreement in favor of the Lender
and acceptable to the Lender in its sole discretion; and

     (e) The indebtedness of any Borrower to General Electric Energy Financial Services,
Inc. or an affiliate and Expansion Capital Partners or an affiliate under the Borrowers’ Ten
Million Five Hundred Thousand Dollars ($10,500,000.00) Subordinated Convertible Promissory
Notes, provided such notes remain fully subordinated to the Indebtedness on terms acceptable
to the Lender in its sole discretion.

     4. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.

     5. Conditions Precedent. This Amendment shall be effective when the Lender shall have
received an executed original hereof, together with the Acknowledgment and Agreement of Guarantor
set forth at the end of this Amendment, duly executed by the Guarantor.

     6. Representations and Warranties. Each Borrower (as to such Borrower) hereby
represents and warrants to the Lender as follows:

     (a) The Borrower has all requisite power and authority to execute this Amendment and to
perform all of its obligations hereunder, and this Amendment has been duly executed and
delivered by the Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.

     (b) The execution, delivery and performance by the Borrower of this Amendment have been
duly authorized by all necessary corporate or limited liability company action, as the case
may be, and do not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
violate any provision of any law, rule or regulation or of any order, writ, injunction or
decree presently in effect, having applicability to the Borrower, or the Constituent
Documents of the Borrower, or (iii) result in a breach of or constitute a default under any
indenture or loan or credit

-2-

 

agreement or any other agreement, lease or instrument to which the Borrower is a party
or by which it or its properties may be bound or affected.

     (c) All of the representations and warranties contained in Article V of the Credit
Agreement are correct on and as of the date hereof as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date.

     7. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.

     8. No Waiver. The execution of this Amendment and acceptance of any documents related
hereto shall not be deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or other document held
by the Lender, whether or not known to the Lender and whether or not existing on the date of this
Amendment.

     9. Release. Each Borrower, and each Guarantor by signing the Acknowledgment and
Agreement of Guarantors set forth below, each hereby absolutely and unconditionally releases and
forever discharges the Lender, and any and all participants, parent corporations, subsidiary
corporations, affiliated corporations, insurers, indemnitors, successors and assigns thereof,
together with all of the present and former directors, officers, agents and employees of any of the
foregoing, from any and all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or federal law or
otherwise, which such Borrower or such Guarantor has had, now has or has made claim to have against
any such person for or by reason of any act, omission, matter, cause or thing whatsoever arising
from the beginning of time to and including the date of this Amendment, whether such claims,
demands and causes of action are matured or unmatured or known or unknown.

     10. Costs and Expenses. The Borrowers hereby reaffirm their agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by
the Lender in connection with the Loan Documents, including without limitation all reasonable fees
and disbursements of legal counsel. Without limiting the generality of the foregoing, the
Borrowers specifically agree to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this Amendment and the
documents and instruments incidental hereto. The Borrowers hereby agree that the Lender may, at
any time or from time to time in its sole discretion and without further authorization by the
Borrowers, make a loan to the Borrowers under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and expenses.

     11. Miscellaneous. This Amendment and the Acknowledgment and Agreement of Guarantors
may be executed in any number of counterparts, each of which when so executed

-3-

 

and delivered shall be deemed an original and all of which counterparts, taken together,
shall constitute one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first written above.

	 	 	 	 	 	 	 	 	 
	WELLS FARGO BANK,	 	 	 	ORION ENERGY SYSTEMS, LTD.
	NATIONAL ASSOCIATION, acting through its	 	 	 	 	 	 
	Wells Fargo Business Credit operating division	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, President
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Brian P. Bur	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Brian P. Bur, Relationship Manager	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Eric von Estorff
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Eric von Estorff, Secretary
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GREAT LAKES ENERGY TECHNOLOGIES, LLC
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Neal R. Verfuerth
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Neal R. Verfuerth, Manager

-4-

 

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS

     Each of the undersigned, a guarantor of the indebtedness of Orion Energy Systems, Ltd., a
Wisconsin corporation (“Orion”) and Great Lakes Energy Technologies, LLC, a Wisconsin limited
liability company (“Great Lakes” and together with Orion, the “Borrowers” and each a “Borrower”) to
Wells Fargo Bank, National Association (the “Lender”), through its Wells Fargo Business Credit
operating division, pursuant to a Guaranty dated as of March 29, 2007, (the “Guaranty”), hereby (i)
acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including without
limitation the release set forth in paragraph 8 of the Amendment) and execution thereof; (iii)
reaffirms its obligations to the Lender pursuant to the terms of its Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Credit
Agreement and any indebtedness or agreement of the Borrowers, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the Guaranty for all of
the Borrowers’ present and future indebtedness to the Lender.

	 	 	 	 	 
	 	CLEAN ENERGY SOLUTIONS, LLC

 	 
	 	By:  	/s/ Neal R. Verfuerth
 	 
	 	 	Neal R. Verfuerth, Manager 	 
	 	 	 	 
	 
	 	ENERGY CAPITAL PARTNERS, LLC

 	 
	 	By:  	/s/ Neal R. Verfuerth
 	 
	 	 	Neal R. Verfuerth, Manager 	 
	 	 	 	 
	 

5

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