EXHIBIT 10.1
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CREDIT AND SECURITY AGREEMENT
BY AND BETWEEN
POWERSECURE, INC.
AND
▇▇▇▇▇ FARGO BUSINESS CREDIT, INC.
SEPTEMBER 24, 2003
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................................................................... 1
Section 1.1 Definitions.................................................................................. 1
Section 1.2 Other Definitional Terms; Rules of Interpretation............................................ 11
ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY...................................................................... 12
Section 2.1 Revolving Advances........................................................................... 12
Section 2.2 Procedures for Requesting Advances........................................................... 12
Section 2.3 Increased Costs; Capital Adequacy; Funding Exceptions........................................ 12
Section 2.4 Letters of Credit............................................................................ 13
Section 2.5 Special Account.............................................................................. 14
Section 2.6 Payment of Amounts Drawn Under Letters of Credit; Obligation of Reimbursement................ 14
Section 2.7 Obligations Absolute......................................................................... 15
Section 2.8 Interest; Minimum Interest Charge; Default Interest; Clearance Days; Participations; Usury .. 15
Section 2.9 Fees......................................................................................... 17
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days; Computation of Interest and Fees.... 18
Section 2.11 Lockbox and Collateral Account; Application of Payments...................................... 18
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the Credit Facility by
the Borrower................................................................................. 19
Section 2.13 Mandatory Prepayment......................................................................... 19
Section 2.14 Revolving Advances to Pay Obligations........................................................ 20
Section 2.15 Use of Proceeds.............................................................................. 20
Section 2.16 Liability Records............................................................................ 20
ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF........................................................................ 20
Section 3.1 Grant of Security Interest................................................................... 20
Section 3.2 Notification of Account Debtors and Other Obligors........................................... 20
Section 3.3 Assignment of Insurance...................................................................... 21
Section 3.4 Occupancy.................................................................................... 21
Section 3.5 License...................................................................................... 21
Section 3.6 Financing Statement.......................................................................... 21
Section 3.7 Setoff....................................................................................... 22
Section 3.8 Collateral................................................................................... 22
ARTICLE IV CONDITIONS OF LENDING........................................................................................ 23
Section 4.1 Conditions Precedent to the Initial Advance and Letter of Credit............................. 23
Section 4.2 Conditions Precedent to All Advances and Letters of Credit................................... 25
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ARTICLE V REPRESENTATIONS AND WARRANTIES................................................................................ 25
Section 5.1 Existence and Power; Name; Chief Executive Office; Inventory and Equipment Locations;
Federal Employer Identification Number and Organizational Identification Number.............. 25
Section 5.2 Capitalization............................................................................... 26
Section 5.3 Authorization of Borrowing; No Conflict as to Law or Agreements.............................. 26
Section 5.4 Legal Agreements............................................................................. 26
Section 5.5 Subsidiaries................................................................................. 26
Section 5.6 Financial Condition; No Adverse Change....................................................... 26
Section 5.7 Litigation................................................................................... 27
Section 5.8 Regulation U................................................................................. 27
Section 5.9 Taxes........................................................................................ 27
Section 5.10 Titles and Liens............................................................................. 27
Section 5.11 Intellectual Property Rights................................................................. 27
Section 5.12 Plans........................................................................................ 28
Section 5.13 Default...................................................................................... 29
Section 5.14 Environmental Matters........................................................................ 29
Section 5.15 Submissions to Lender........................................................................ 29
Section 5.16 Financing Statements......................................................................... 30
Section 5.17 Rights to Payment............................................................................ 30
Section 5.18 Financial Solvency........................................................................... 30
ARTICLE VI COVENANTS.................................................................................................... 30
Section 6.1 Reporting Requirements....................................................................... 31
Section 6.2 Financial Covenants.......................................................................... 34
Section 6.3 Permitted Liens; Financing Statements........................................................ 35
Section 6.4 Indebtedness................................................................................. 35
Section 6.5 Guaranties................................................................................... 36
Section 6.6 Investments and Subsidiaries................................................................. 36
Section 6.7 Dividends and Distributions.................................................................. 36
Section 6.8 Salaries..................................................................................... 36
Section 6.9 Books and Records; Inspection and Examination................................................ 37
Section 6.10 Account Verification......................................................................... 37
Section 6.11 Compliance with Laws......................................................................... 37
Section 6.12 Payment of Taxes and Other Claims............................................................ 37
Section 6.13 Maintenance of Properties.................................................................... 38
Section 6.14 Insurance.................................................................................... 38
Section 6.15 Preservation of Existence.................................................................... 38
Section 6.16 Delivery of Instruments, etc................................................................. 38
Section 6.17 Sale or Transfer of Assets; Suspension of Business Operations................................ 38
Section 6.18 Consolidation and Merger; Asset Acquisitions................................................. 39
Section 6.19 Sale and Leaseback........................................................................... 39
Section 6.20 Restrictions on Nature of Business........................................................... 39
Section 6.21 Accounting................................................................................... 39
Section 6.22 Discounts, etc............................................................................... 39
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Section 6.23 Plans........................................................................................ 39
Section 6.24 Place of Business; Name...................................................................... 39
Section 6.25 Constituent Documents; S Corporation Status.................................................. 40
Section 6.26 Performance by the Lender.................................................................... 40
Section 6.27 Advances to Corporate Guarantors............................................................. 40
ARTICLE VII EVENTS OF DEFAULT, RIGHTS AND REMEDIES...................................................................... 40
Section 7.1 Events of Default............................................................................ 40
Section 7.2 Rights and Remedies.......................................................................... 43
Section 7.3 Certain Notices.............................................................................. 44
ARTICLE VIII MISCELLANEOUS.............................................................................................. 44
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws......................................... 44
Section 8.2 Amendments, Etc.............................................................................. 45
Section 8.3 Addresses for Notices; Requests for Accounting............................................... 45
Section 8.4 Further Documents............................................................................ 45
Section 8.5 Costs and Expenses........................................................................... 45
Section 8.6 Indemnity.................................................................................... 46
Section 8.7 Participants................................................................................. 46
Section 8.8 Execution in Counterparts; Telefacsimile Execution........................................... 46
Section 8.9 Retention of Borrower's Records.............................................................. 47
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging Information....................... 47
Section 8.11 Severability of Provisions................................................................... 47
Section 8.12 Headings..................................................................................... 47
Section 8.13 Governing Law; Jurisdiction, Venue; Waiver of Jury Trial..................................... 47
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CREDIT AND SECURITY AGREEMENT
Dated as of September 24, 2003
POWERSECURE, INC., a Delaware corporation (the "Borrower"), and ▇▇▇▇▇
FARGO BUSINESS CREDIT, INC., a Minnesota corporation (the "Lender"), hereby
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly provided, the following terms shall have the meanings
assigned to them in this Section or in the Section referenced after such term:
"Accounts" means all of the Borrower's accounts, as such term is
defined in the UCC, including each and every right of the Borrower to the
payment of money, whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale, lease or other disposition
of goods or other property, out of a rendering of services, out of a loan, out
of the overpayment of taxes or other liabilities, or otherwise arises under any
contract or agreement, whether such right to payment is created, generated or
earned by the Borrower or by some other person who subsequently transfers such
person's interest to the Borrower, whether such right to payment is or is not
already earned by performance, and howsoever such right to payment may be
evidenced, together with all other rights and interests (including all Liens)
which the Borrower may at any time have by law or agreement against any account
debtor or other obligor obligated to make any such payment or against any
property of such account debtor or other obligor; all including but not limited
to all present and future accounts, contract rights, loans and obligations
receivable, chattel papers, bonds, notes and other debt instruments, tax refunds
and rights to payment in the nature of general intangibles.
"Advance" means a Revolving Advance.
"Affiliate" or "Affiliates" means each Corporate Guarantor and any
other Person controlled by, controlling or under common control with the
Borrower or Parent, including any Subsidiary of the Borrower or Parent. For
purposes of this definition, "control," when used with respect to any specified
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.
"Aggregate Face Amount" has the meaning specified in Section 2.9(e).
"Agreement" means this Credit and Security Agreement.
"Availability" means the lessor of (I) the difference of (i) the
Borrowing Base and (ii) the sum of (A) the outstanding principal balance of the
Revolving Note and (B) the L/C Amount and (II) the Maximum Line less the sum of
(A) the outstanding principal balance of the Revolving Note, (B) the L/C Amount,
(C) the outstanding principal balance of the Metretek Revolving Note, (D) the
Metretek L/C Amount, and (E) the outstanding principal balance of the Southern
Flow Revolving Note.
"Banking Day" means a day on which the Federal Reserve Bank of New York
is open for business.
"Base Rate" means the rate of interest publicly announced from time to
time by ▇▇▇▇▇ Fargo Bank National Association at its principal office in San
Francisco as its "prime rate", with the understanding that the "prime rate" is
one of ▇▇▇▇▇ Fargo's base rates (not necessarily the lowest of such rates) and
serves as the basis upon which effective rates of interest are calculated for
loans making reference thereto.
"Book Net Worth" means the aggregate of the common and preferred
shareholders' equity in the Borrower, determined in accordance with GAAP.
"Borrowing Base" means at any time the lesser of:
(a) the Maximum Line; or
(b) subject to change from time to time in the Lender's sole
discretion, 80% of Eligible Accounts.
"Capital Adequacy Rule" has the meaning specified in Section 2.3(a).
"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.
"Change of Control" means the occurrence of any of the following
events:
(a) Any Person or "group" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934) is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, except that a Person will be deemed to have "beneficial ownership" of all
securities that such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50 percent of the voting power of all classes of voting
stock of the Borrower.
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the board of Directors of the Borrower
(together with any new Directors whose election to such board of Directors, or
whose nomination for election by the owners of the Borrower, was approved by a
vote of 66-2/3% of the Directors then still in office who were either Directors
at the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of Directors of the Borrower then in office.
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"Collateral" means all of the Borrower's and Corporate Guarantors'
Accounts, 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 the Borrower that now or hereafter come into the possession,
custody, or control of the Lender; (vii) all sums on deposit in the Special
Account; and (viii) proceeds of, and supporting obligations with respect to, any
and all of the foregoing.
"Collateral Account" means the "Lender Account" as defined in the
Lockbox and Collection Account Agreement.
"Commitment" means the Lender's commitment to make Advances to, and to
cause the Issuer to issue Letters of Credit for the account of, the Borrower
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.
"Corporate Guarantor Security Agreement" means each Security Agreement
between Lender and each Corporate Guarantor, each dated as of the date hereof,
and any other security agreement entered into after the date hereof between
Lender and any Corporate Guarantor.
"Corporate Guarantors" means each of Parent; Metretek Contract
Manufacturing Company, Inc., a Florida corporation; Southern Flow Companies,
Inc., a Delaware corporation; and Metretek, Incorporated, a Florida corporation;
together with any other entity that becomes a beneficiary of any advance from
the Borrower pursuant to Section 6.27 and enters into a Corporate Guaranty and a
Corporate Guarantor Security Agreement in form and substance satisfactory to
Lender; provided, however, that as used herein, the term Corporate Guarantor
shall not include any Person, including any of the foregoing Persons, after such
time as such Person's Corporate Guaranty and Corporate Guarantor Security
Agreement shall have been terminated in accordance with the terms hereof and
thereof.
"Corporate Guaranty" means each Corporate Guaranty in favor of Lender
from each Corporate Guarantor, each dated as of the date hereof, and any other
guaranty entered into after the date hereof by any Corporate Guarantor in favor
of Lender.
"Credit Facility" means the credit facility being made available to the
Borrower by the Lender under Article II.
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"Debt" means of a Person as of a given date, all items of indebtedness
or liability which in accordance with GAAP would be included in determining
total liabilities as shown on the liabilities side of a balance sheet for such
Person and shall also include the aggregate payments required to be made by such
Person at any time under any lease that is considered a capitalized lease under
GAAP.
"Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default.
"Default Period" means any period of time beginning on the first day of
any month during which a Default or Event of Default has occurred and ending on
the date the Lender notifies the Borrower in writing that such Default or Event
of Default has been cured or waived.
"Default Rate" means an annual interest rate equal to three percent
(3%) over the Floating Rate, which interest rate shall change when and as the
Floating Rate changes.
"Director" means a director, if the Borrower is a corporation, a
governor, if the Borrower is a limited liability company, or a general partner,
if the Borrower is a partnership.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group which includes the Borrower and which
is treated as a single employer under Section 414 of the IRC.
"Eligible Accounts" means all unpaid Accounts arising from the sale or
lease of goods or the performance of services, net of any credits, but excluding
any such Accounts having any of the following characteristics:
(i) That portion of Accounts unpaid 90 days or more after
the invoice date;
(ii) That portion of Accounts that is disputed or subject
to a claim of offset or a contra account;
(iii) That portion of Accounts not yet earned by the final
delivery of goods or rendition of services, as applicable, by the
Borrower to the customer, including progress ▇▇▇▇▇▇▇▇, and that portion
of Accounts for which an invoice has not been sent to the applicable
account debtor (provided, however, unless otherwise ineligible, (A)
when equipment or generator is delivered to the project site there
shall be included in Eligible Accounts that portion of Accounts (i)
invoiced when the equipment or generator is delivered to the project
site and (ii) previously invoiced amounts related to the design of the
project (excluding ▇▇▇▇▇▇▇▇ for down payments/deposits) and (B) when
the final invoice for the project is sent there shall be included in
Eligible Accounts that portion of Accounts previously invoiced for all
portions of the project);
(iv) Accounts constituting (i) proceeds of copyrightable
material unless such copyrightable material shall have been registered
with the United States Copyright
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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 the United States of America, or any
department, agency, subdivision, or instrumentality thereof, or any
unit of foreign government (provided, however, that there shall be
included in Eligible Accounts that portion of Accounts owed by such
units of government for which the Borrower has provided evidence
satisfactory to the Lender that (A) the Lender has a first priority
perfected security interest and (B) such Accounts may be enforced by
the Lender directly against such unit of government under all
applicable laws);
(vi) Accounts owed by an account debtor located outside
the United States or Canada which are not (A) backed by a bank letter
of credit naming the Lender as beneficiary or assigned to the Lender,
in the Lender's possession or control, and with respect to which a
control agreement concerning the letter-of-credit rights is in effect,
and acceptable to the Lender in all respects, in its sole discretion,
or (B) covered by a 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 the Borrower;
(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;
(xii) That portion of Accounts owed by an account debtor
regardless of whether otherwise eligible, to the extent that the
aggregate balance of such Accounts exceeds 25% of the aggregate amount
of all Accounts;
(xiii) Accounts owed by an account debtor, regardless of
whether otherwise eligible, if 10% or more of the total amount due
under Accounts from such debtor is ineligible under clauses (i), (ii)
or (x) above; and
(xiv) Accounts, or portions thereof, otherwise deemed
ineligible by the Lender in its sole discretion.
"Environmental Law" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the protection
of human health and the environment.
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"Equipment" means all of the Borrower's equipment, as such term is
defined in the UCC, whether now owned or hereafter acquired, including but not
limited to all present and future machinery, vehicles, furniture, fixtures,
manufacturing equipment, shop equipment, office and recordkeeping equipment,
parts, tools, supplies, and including specifically the goods described in any
equipment schedule or list herewith or hereafter furnished to the Lender by the
Borrower.
"Event of Default" has the meaning specified in Section 7.1.
"Financial Covenants" means the covenants set forth in Section 6.2.
"Floating Rate" means with respect to the Revolving Advances, an annual
interest rate equal to the sum of the Base Rate plus two percent (2.0%), which
interest rate shall, in each case, change when and as the Base Rate changes.
"Floating Rate Advance" means an Advance bearing interest at the
Floating Rate.
"Funding Date" has the meaning specified in Section 2.1.
"GAAP" means generally accepted accounting principles, applied on a
basis consistent with the accounting practices applied in the financial
statements described in Section 5.6.
"General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including all present and future Intellectual Property Rights, customer or
supplier lists and contracts, manuals, operating instructions, permits,
franchises, the right to use the Borrower's name, and the goodwill of the
Borrower's business.
"Guarantor(s)" means the Corporate Guarantors and any other Person now
or hereafter guarantying the Obligations.
"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.
"Infringement" when used with respect to Intellectual Property Rights
means any infringement or other violation of Intellectual Property Rights.
"Intangible Assets" means all intangible assets as determined in
accordance with GAAP and including Intellectual Property Rights, goodwill,
accounts due from Affiliates, Directors, Officers or employees, deferred charges
or treasury stock or any securities or Debt of the Borrower or any other
securities unless the same are readily marketable in the US or entitled to be
used as a credit against federal income tax liabilities, non-compete agreements
and any other assets designated from time to time by the Lender, in its sole
discretion.
"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
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connection with copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.
"Inventory" means all of the Borrower's inventory, as such term is
defined in the UCC, whether now owned or hereafter acquired, whether consisting
of whole goods, spare parts or components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.
"Investment Property" means all of the Borrower's investment property,
as such term is defined in the UCC, whether now owned or hereafter acquired,
including but not limited to all securities, security entitlements, securities
accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and U.S. Government securities.
"Issuer" means the issuer of any Letter of Credit.
"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 and agreement for letters of
credit in a form acceptable to the Issuer and the Lender.
"L/C Rule" has the meaning specified in Section 2.3(b).
"Letter of Credit" has the meaning specified in Section 2.4.
"Licensed Intellectual Property" has the meaning specified 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 Note, the Security Documents
and any L/C Application.
"Lockbox" means "Lockbox" as defined in the Lockbox and Collection
Account Agreement.
"Lockbox and Collection Account Agreement" means the Lockbox and
Collection Account Agreement by and among the Borrower, ▇▇▇▇▇ Fargo Bank and the
Lender, of even date herewith.
"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 Borrower;
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(ii) a material adverse effect on the ability of the
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 Permitted Liens) or enforceability of any Lien
securing payment or performance of the Obligations; or
(iv) any claim against the Borrower or threat of
litigation which if determined adversely to the Borrower would cause
the Borrower to be liable to pay an amount exceeding $250,000 or would
be an event described in clauses (i), (ii) and (iii) above.
"Maturity Date" means September 30, 2006.
"Maximum Line" means $3,000,000 unless said amount is reduced pursuant
to Section 2.12, in which event it means such lower amount.
"Metretek Credit and Security Agreement" means the Credit and Security
Agreement dated as of September 6, 2002, by and between Metretek, Incorporated,
a Florida corporation and the Lender, as amended by a First Amendment to Credit
and Security Agreement and Waiver of Defaults dated as of March 26, 2003 and by
a Second Amendment to Credit and Security Agreement dated as of September 24,
2003, and as may be further amended from time to time.
"Metretek L/C Amount" means the L/C Amount as defined in the Metretek
Credit and Security Agreement.
"Metretek Revolving Advances" means Revolving Advances as defined in
the Metretek Credit and Security Agreement.
"Metretek Revolving Note" means the Revolving Note as defined in the
Metretek Credit and Security Agreement.
"Minimum Interest Charge" has the meaning given in Section 2.8(b).
"Multiemployer Plan" means a multiemployer plan (as defined in Section
4001(a)(3) of ERISA) to which the Borrower or any ERISA Affiliate contributes or
is obligated to contribute.
"Net Income" means fiscal year-to-date after-tax net income from
continuing operations, excluding extraordinary gains but including extraordinary
losses, as determined in accordance with GAAP.
"Note" means the Revolving Note.
"Obligation of Reimbursement" has the meaning specified in Section
2.6(a).
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"Obligations" means the Note, the Obligation of Reimbursement and each
and every other debt, liability and obligation of every type and description
which the Borrower may now or at any time hereafter owe to the Lender, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, whether it arises in a transaction involving the Lender alone or in a
transaction involving other creditors of the Borrower, and whether it is direct
or indirect, due or to become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or sole, joint, several or joint and several, and
including all indebtedness of the Borrower arising under any Loan Document or
guaranty between the Borrower and the Lender, whether now in effect or hereafter
entered into.
"Officer" means with respect to the Borrower, an officer, if the
Borrower is a corporation, a manager of the Borrower, if the Borrower is a
limited liability company, or a partner, if the Borrower is a partnership.
"Owned Intellectual Property" has the meaning specified in Section
5.11(a).
"Owner" means with respect to the Borrower, each Person having legal or
beneficial title to an ownership interest in the Borrower or a right to acquire
such an interest.
"Parent" means Metretek Technologies, Inc., a Delaware corporation.
"Patent and Trademark Security Agreement" means the Patent and
Trademark Security Agreement by the Borrower in favor of the Lender of even date
herewith.
"Pension Plan" means a pension plan (as defined in Section 3(2) of
ERISA) maintained for employees of the Borrower or any ERISA Affiliate and
covered by Title IV of ERISA.
"Permitted Lien" has the meaning specified in Section 6.3(a).
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Plan" means an employee benefit plan (as defined in Section 3(3) of
ERISA) maintained for employees of the Borrower or any ERISA Affiliate.
"PowerSecure Guaranty" means the guaranty by the Borrower in favor of
the Lender in connection with the Metretek Credit and Security Agreement.
"PowerSecure Security Agreement" means the security agreement by and
between the Borrower and the Lender in connection with the Metretek Credit and
Security Agreement.
"Premises" means all premises where the Borrower conducts its business
and has any rights of possession, including the premises legally described in
Exhibit C attached hereto.
"Related Documents" has the meaning specified in Section 2.7.
"Related Lender" has the meaning specified in Section 2.3(c).
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"Reportable Event" means a reportable event (as defined in Section 4043
of ERISA), other than an event for which the 30-day notice requirement under
ERISA has been waived in regulations issued by the Pension Benefit Guaranty
Corporation.
"Return" has the meaning specified in Section 2.3(d).
"Revolving Advance" has the meaning specified in Section 2.1.
"Revolving Note" means the Borrower's revolving promissory note,
payable to the order of the Lender in substantially the form of Exhibit A
hereto.
"Rule Change" has the meaning specified in Section 2.3(e).
"Security Documents" means this Agreement, the Lockbox and Collection
Account Agreement, the Corporate Guaranties, the Corporate Guarantor Security
Agreements, 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 specified in Section 3.1.
"Southern Flow Credit and Security Agreement" means the Credit and
Security Agreement dated as of September 24, 2001, by and between Southern Flow
Companies, Inc., a Delaware corporation and the Lender, as amended by a First
Amendment to Credit and Security Agreement dated as of November 19, 2002, by a
Second Amendment to Credit and Security Agreement and Waiver of Defaults dated
as of March 26, 2003, by a Third Amendment to Credit and Security Agreement
dated as of April 4, 2003, and by a Fourth Amendment to Credit and Security
Agreement dated as of September 24, 2003, and as may be further amended from
time to time.
"Southern Flow Revolving Advances" means Revolving Advances as defined
in the Southern Flow Credit and Security Agreement.
"Southern Flow Revolving Note" means the Revolving Note as defined in
the Southern Flow Credit and Security Agreement.
"Southern Flow Term Note" means the Term Note as defined in the
Southern Flow Credit and Security Agreement.
"Special Account" means a specified cash collateral account maintained
by a financial institution acceptable to the Lender in connection with Letters
of Credit, as contemplated by Section 2.5.
"Subordination Agreement" means the Metretek Technologies, Inc.
Subordination Agreement of even date herewith, executed by the Parent in the
Lender's favor and acknowledged by the Borrower, and any other subordination
agreement accepted by the Lender from time to time.
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"Subordinated Indebtedness" means the Subordinated Indebtedness as
defined in the Subordination Agreement.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of Directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.
"Tangible Net Worth" means the difference between (i) Book Net Worth
and (ii) Intangible Assets.
"Termination Date" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the date the
Lender demands payment of the Obligations after an Event of Default pursuant to
Section 7.2.
"UCC" means the Uniform Commercial Code as in effect 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" has the meaning specified in Section 2.9(b).
"▇▇▇▇▇ Fargo Bank" means ▇▇▇▇▇ Fargo Bank, National Association.
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.
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ARTICLE II
AMOUNT AND TERMS OF THE CREDIT FACILITY
Section 2.1 Revolving Advances. The Lender agrees, on the terms and
subject to the conditions herein set forth, to make advances to the Borrower
from time to time from the date all of the conditions set forth in Section 4.1
are satisfied (the "Funding Date") to the Termination Date (the "Revolving
Advances"). The Lender shall have no obligation to make a Revolving Advance to
the extent the amount of the requested Revolving Advance exceeds Availability.
The Borrower's 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 Borrower may borrow, prepay pursuant to Section
2.12 and reborrow.
Section 2.2 Procedures for Requesting Advances. The Borrower shall
comply with the following procedures in requesting Revolving Advances:
(a) TIME FOR REQUESTS. The Borrower shall request each Advance not
later than 11:00 a.m., Denver, Colorado time, on the Banking Day which is the
date the Advance is to be made. Each such request shall be effective upon
receipt by the Lender, shall be in writing or by telephone or telecopy
transmission, to be confirmed in writing by the Borrower if so requested by the
Lender shall be by (i) an Officer of the Borrower; or (ii) a person designated
as the Borrower's agent by an Officer of the Borrower in a writing delivered to
the Lender; or (iii) a person whom the Lender reasonably believes to be an
Officer of the Borrower or such a designated agent. The Borrower shall repay all
Advances even if the Lender does not receive such confirmation and even if the
person requesting an Advance was not in fact authorized to do so. Any request
for an Advance, whether written or telephonic, shall be deemed to be a
representation by the Borrower that the conditions set forth in Section 4.2 have
been satisfied as of the time of the request.
(b) DISBURSEMENT. Upon fulfillment of the applicable conditions set
forth in Article IV, the Lender shall disburse the proceeds of the requested
Advance by crediting the same to the Borrower's demand deposit account
maintained with ▇▇▇▇▇ Fargo Bank unless the Lender and the Borrower shall agree
in writing to another manner of disbursement.
Section 2.3 Increased Costs; Capital Adequacy; Funding Exceptions. If
the Lender determines at any time that its Return has been reduced as a result
of any Rule Change, the Lender may so notify the Borrower and require the
Borrower, beginning fifteen (15) days after such notice, to pay it the amount
necessary to restore its Return to what it would have been had there been no
Rule Change. For purposes of this Section 2.3:
(a) "Capital Adequacy Rule" means any law, rule, regulation, guideline,
directive, requirement or request regarding capital adequacy, or the
interpretation or administration thereof by any governmental or regulatory
authority, central bank or comparable agency, whether or not having the force of
law, that applies to any Related Lender, including rules requiring financial
institutions to maintain total capital in amounts based upon percentages of
outstanding loans, binding loan commitments and letters of credit.
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(b) "L/C Rule" means any law, rule, regulation, guideline, directive,
requirement or request regarding letters of credit, or the interpretation or
administration thereof by any governmental or regulatory authority, central bank
or comparable agency, whether or not having the force of law, that applies to
any Related Lender, including those that impose taxes, duties or other similar
charges, or mandate reserves, special deposits or similar requirements against
assets of, deposits with or for the account of, or credit extended by any
Related Lender, on letters of credit.
(c) "Related Lender" includes (but is not limited to) the Lender, any
parent of the Lender, any assignee of any interest of the Lender hereunder and
any participant in the Credit Facility.
(d) "Return", for any period, means the percentage determined by
dividing (i) the sum of interest and ongoing fees earned by the Lender under
this Agreement during such period, by (ii) the average capital the Lender is
required to maintain during such period as a result of its being a party to this
Agreement, as determined by the Lender based upon its total capital requirements
and a reasonable attribution formula that takes account of the Capital Adequacy
Rules and L/C Rules then in effect, costs of issuing or maintaining any Advance
or Letter of Credit and amounts received or receivable under this Agreement or
the Note with respect to any Advance or Letter of Credit. Return may be
calculated for each calendar quarter and for the shorter period between the end
of a calendar quarter and the date of termination in whole of this Agreement.
(e) "Rule Change" means any change in any Capital Adequacy Rule or L/C
Rule occurring after the date of this Agreement, or any change in the
interpretation or administration thereof by any governmental or regulatory
authority, but the term does not include any changes that at the Funding Date
are scheduled to take place under the existing Capital Adequacy Rules or L/C
Rules or any increases in the capital that the Lender is required to maintain to
the extent that the increases are required due to a regulatory authority's
assessment of that Lender's financial condition.
The initial notice sent by the Lender shall be sent as
promptly as practicable after the Lender learns that its Return has been
reduced, shall include a demand for payment of the amount necessary to restore
the Lender's Return for the quarter in which the notice is sent, and shall state
in reasonable detail the cause for the reduction in its Return and its
calculation of the amount of such reduction. Thereafter, the Lender may send a
new notice during each calendar quarter setting forth the calculation of the
reduced Return for that quarter and including a demand for payment of the amount
necessary to restore its Return for that quarter. The Lender's calculation in
any such notice shall be conclusive and binding absent demonstrable error.
Section 2.4 Letters of Credit.
(a) The Lender agrees, on the terms and subject to the conditions
herein set forth, to cause an Issuer to issue, from the Funding Date to the
Termination Date, one or more irrevocable standby or documentary letters of
credit (each, a "Letter of Credit") for the Borrower's account by guaranteeing
payment of the Borrower's obligations or being a co-applicant. The Lender shall
have no obligation to cause an Issuer to issue any Letter of Credit if the face
amount of the Letter of Credit to be issued would exceed the lesser of:
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(i) $100,000 less the L/C Amount, or
(ii) Availability.
Each Letter of Credit, if any, shall be issued pursuant to a separate
L/C Application entered into between the Borrower and the Lender for
the benefit of the Issuer, completed in a manner satisfactory to the
Lender and the Issuer. The terms and conditions set forth in each such
L/C Application shall supplement the terms and conditions hereof, but
if the terms of any such L/C Application and the terms of this
Agreement are inconsistent, the terms hereof shall control.
(b) 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) Any request to cause an Issuer to issue a Letter of Credit shall be
deemed to be a representation by the Borrower that the conditions set forth in
Section 4.2 have been satisfied as of the date of the request.
Section 2.5 Special Account. If the Credit Facility is terminated for
any reason while any Letter of Credit is outstanding, the Borrower shall
thereupon pay the Lender in immediately available funds for deposit in the
Special Account an amount equal to the L/C Amount. The Special Account shall be
an interest bearing account maintained for the Lender by any 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 Borrower 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 Borrower when the Lender is required to release
its security interest in the Special Account under applicable law.
Section 2.6 Payment of Amounts Drawn Under Letters of Credit;
Obligation of Reimbursement. The Borrower acknowledges that the Lender, as
co-applicant, will be liable to the Issuer for reimbursement of any and all
draws under Letters of Credit and for all other amounts required to be paid
under the applicable L/C Application. Accordingly, the Borrower shall pay to the
Lender any and all amounts required to be paid under the applicable L/C
Application, when and as required to be paid thereby, and the amounts designated
below, when and as designated:
(a) The Borrower shall pay to the Lender on the day a draft is honored
under any Letter of Credit a sum equal to all amounts drawn under such Letter of
Credit plus any and all reasonable charges and expenses that the Issuer or the
Lender may pay or incur relative to such draw and the applicable L/C
Application, plus interest on all such amounts, charges and expenses as set
forth below (the Borrower's obligation to pay all such amounts is herein
referred to as the "Obligation of Reimbursement").
(b) Whenever a draft is submitted under a Letter of Credit, the
Borrower authorizes the Lender to make a Revolving Advance in the amount of the
Obligation of Reimbursement and to apply the proceeds of such Revolving Advance
thereto. Such Revolving Advance shall be
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repayable in accordance with and be treated in all other respects as a Revolving
Advance hereunder.
(c) If a draft is submitted under a Letter of Credit when the Borrower
is unable, because a Default Period exists or for any other reason, to obtain a
Revolving Advance to pay the Obligation of Reimbursement, the Borrower 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 Borrower's
inability to obtain a Revolving Advance for 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.
(d) The Borrower's obligation to pay any Revolving Advance made under
this Section 2.6, shall be evidenced by the Revolving Note and shall bear
interest as provided in Section 2.8.
Section 2.7 Obligations Absolute. The Borrower's obligations arising
under Section 2.6 shall be absolute, unconditional and irrevocable, and shall be
paid strictly in accordance with the terms of Section 2.6, under all
circumstances whatsoever, including (without limitation) the following
circumstances:
(a) any lack of validity or enforceability of any Letter of Credit or
any other agreement or instrument relating to any Letter of Credit (collectively
the "Related Documents");
(b) any amendment or waiver of or any consent to departure from all or
any of the Related Documents;
(c) the existence of any claim, setoff, defense or other right which
the Borrower may have at any time, against any beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom any such beneficiary
or any such transferee may be acting), or other person or entity, whether in
connection with this Agreement, the transactions contemplated herein or in the
Related Documents or any unrelated transactions;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment by or on behalf of the Issuer under any Letter of Credit
against presentation of a draft or certificate which does not strictly comply
with the terms of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
Section 2.8 Interest; Minimum Interest Charge; Default Interest;
Clearance Days; Participations; Usury.
(a) INTEREST. Except as set forth in Section 2.8(c) and Section 2.8(f),
the outstanding principal balance of the Note shall bear interest at the
Floating Rate.
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(b) MINIMUM INTEREST CHARGE. Notwithstanding the interest payable
pursuant to Subsection (a), the Borrower shall pay to the Lender interest of not
less than $37,500 per quarter (the "Minimum Interest Charge") during the term of
this Agreement, and the Borrower shall pay any deficiency between (i) the
Minimum Interest Charge and (ii) the sum of the amount of interest otherwise
calculated under Section 2.8(a) of this Agreement, Section 2.8(a) of the
Metretek Credit and Security Agreement and Section 2.5(a) of the Southern Flow
Credit and Security Agreement; on the first day of each quarter and on the
Termination Date. The Borrower will be given full credit on a dollar for dollar
basis against the Minimum Interest Charge payable hereunder to the extent such
amount is paid to the Lender pursuant to the Metretek Credit and Security
Agreement or the Southern Flow Credit and Security Agreement.
(c) DEFAULT INTEREST RATE. Upon notice to the Borrower from the Lender
from time to time, the principal of the Advances outstanding from time to time
shall bear interest at the Default Rate, effective as of the first day of the
month during which any Default Period begins through the last day of such
Default Period. The Lender's election to charge the Default Rate shall be in its
sole discretion and shall not be a waiver of any of its rights and remedies. The
Lender's election to charge interest at the Default Rate for less than the
entire period during which the Default Rate may be charged shall not be a waiver
of its right to later charge the Default Rate for the entire such period.
(d) CLEARANCE DAYS. Notwithstanding Section 2.11(b)(ii), interest at
the interest rate applicable under this Section 2.8 shall accrue on the amount
of all payments (even if in the form of immediately available federal funds) for
one (1) day(s) for clearance.
(e) PARTICIPATIONS. If any Person shall acquire a participation in the
Advances or the Obligation of Reimbursement, the Borrower shall be obligated to
the Lender to pay the full amount of all interest calculated under this Section
2.8, 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 2.8,
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
Borrower and the Lender are hereby limited so that in no contingency or event
whatsoever shall the total liability for payments in the nature of interest,
additional interest and other charges exceed the applicable limits imposed by
any applicable usury laws. If any payments in the nature of interest, additional
interest and other charges made under any Loan Document are held to be in excess
of the limits imposed by any applicable usury laws, it is agreed that any such
amount held to be in excess shall be considered payment of principal hereunder,
and the indebtedness evidenced hereby shall be reduced by such amount so that
the total liability for payments in the nature of interest, additional interest
and other charges shall not exceed the applicable limits imposed by any
applicable usury laws, in compliance with the desires of the Borrower and the
Lender. This provision shall never be superseded or waived and shall control
every other provision of the Loan Documents and all agreements between the
Borrower and the Lender, or their successors and assigns.
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Section 2.9 Fees.
(a) RESTRUCTURE FEE. The Borrower shall pay the Lender a fully earned
and non-refundable restructure fee of $7,500, due and payable upon the execution
of this Agreement. The Borrower will be given full credit on a dollar for dollar
basis against the restructure fee payable hereunder to the extent such amount is
paid to the Lender pursuant to the Metretek Credit and Security Agreement or the
Southern Flow Credit and Security Agreement.
(b) UNUSED LINE FEE. For the purposes of this Section 2.9, "Unused
Amount" means the Maximum Line reduced by (A) outstanding Revolving Advances,
(B) the L/C Amount, (C) outstanding Metretek Revolving Advances, (D) the
Metretek L/C Amount, and (E) outstanding Southern Flow Revolving Advances. The
Borrower agrees to pay to the Lender an unused line fee at the rate of one
quarter of one percent (.25%) per annum on the average daily Unused Amount from
the date of this Agreement to and including the Termination Date, due and
payable monthly in arrears on the first day of the month and on the Termination
Date. The Borrower will be given full credit on a dollar for dollar basis
against the unused line fee payable hereunder to the extent such amount is paid
to the Lender pursuant to the Metretek Credit and Security Agreement or the
Southern Flow Credit and Security Agreement.
(c) FACILITY FEE. The Borrower agrees to pay to the Lender an annual
facility fee at the rate of one half of one percent (.50%) of the Maximum Line,
which facility fee shall be due and payable annually on September 1st. The
Borrower will be given full credit on a dollar for dollar basis against the
facility fee payable hereunder to the extent such amount is paid to the Lender
pursuant to the Metretek Credit and Security Agreement or the Southern Flow
Credit and Security Agreement.
(d) AUDIT FEES. The Borrower shall pay the Lender, on demand, audit
fees in connection with any audits or inspections conducted by the Lender of any
Collateral or the Borrower's operations or business at the rates established
from time to time by the Lender as its audit fees (which fees are currently $90
per hour per auditor), together with all actual out-of-pocket costs and expenses
incurred in conducting any such audit or inspection.
(e) LETTER OF CREDIT FEES. The Borrower shall pay to the Lender a fee
with respect to each Letter of Credit, if any, accruing on a daily basis and
computed at the annual rate of two percent (2.0%) of the aggregate amount that
may then be drawn on under it 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 Issuer with respect
to or in connection with such Letter of Credit.
(f) LETTER OF CREDIT ADMINISTRATIVE FEES. The Borrower shall pay to the
Lender, on written demand, the administrative fees charged by the Issuer in
connection with the honoring of drafts under any Letter of Credit, amendments
thereto, transfers thereof and all other activity
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with respect to the Letters of Credit at the then-current rates published by the
Issuer for such services rendered on behalf of customers of the Issuer
generally.
(g) TERMINATION AND LINE REDUCTION FEES. If the Credit Facility is
terminated (i) by the Lender during a Default Period that begins before a
Maturity Date, (ii) by the Borrower (A) as of a date other than a Maturity Date
or (B) as of a Maturity Date but without the Lender having received written
notice of such termination at least 90 days before such Maturity Date, or if the
Borrower reduces the Maximum Line, the Borrower shall pay to the Lender a fee in
an amount equal to a percentage of the Maximum Line (or the reduction of the
Maximum Line, as the case may be) as follows: (A) two percent (2.0%) if the
termination or reduction occurs on or before September 30, 2004; and (B) one
percent (1.0%) if the termination or reduction occurs after September 30, 2004.
The Borrower will be given full credit on a dollar for dollar basis against the
fee payable hereunder to the extent such amount is paid to the Lender pursuant
to the Metretek Credit and Security Agreement or the Southern Flow Credit and
Security Agreement.
(h) WAIVER OF TERMINATION FEE. The Borrower will not be required to pay
the termination fee otherwise due under Section 2.9(g) if (i) such termination
or prepayment is made because of refinancing by an affiliate of the Lender or
(ii) the Credit Facility is refinanced within 90 days after a request by the
Lender for compensation under Section 2.3.
(i) OTHER FEES. The Lender may from time to time charge additional fees
for Advances made in excess of the Borrowing Base, for late delivery of reports,
in lieu of imposing interest at the Default Rate, and (during a Default Period)
for other reasons.
Section 2.10 Time for Interest Payments; Payment on Non-Banking Days;
Computation of Interest and Fees.
(a) TIME FOR INTEREST PAYMENTS. Interest shall be due and payable in
arrears on the first day of each month and on the Termination Date.
(b) PAYMENT ON NON-BANKING DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day which is not a Banking Day, such
payment may be made on the next succeeding Banking Day, and such extension of
time shall in such case be included in the computation of interest on the
Advances or the fees hereunder, as the case may be.
(c) COMPUTATION OF INTEREST AND FEES. Interest accruing on the
outstanding principal balance of the Advances and fees hereunder outstanding
from time to time shall be computed on the basis of actual number of days
elapsed in a year of 360 days.
Section 2.11 Lockbox and Collateral Account; Application of Payments.
(a) LOCKBOX AND COLLATERAL ACCOUNT.
(i) The Borrower shall instruct all account debtors to
pay all Accounts directly to the Lockbox. If, notwithstanding such
instructions, the Borrower receives any payments on Accounts, the
Borrower shall deposit such payments into the Collateral Account. The
Borrower shall also deposit all other cash proceeds of Collateral
directly into the Collateral Account. Until so deposited, the Borrower
shall hold all such
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payments and cash proceeds in trust for and as the property of the
Lender and shall not commingle such property with any of its other
funds or property. Amounts deposited in the Collateral Account shall
not bear interest. All deposits in the Collateral Account shall
constitute proceeds of Collateral and shall not constitute payment of
the Obligations.
(ii) All items deposited in the Collateral Account shall
be subject to final payment. If any such item is returned uncollected,
the Borrower will immediately pay the Lender, or, for items deposited
in the Collateral Account, the bank maintaining such account, the
amount of that item, or such bank at its discretion may charge any
uncollected item to the Borrower's commercial account or other account.
The Borrower shall be liable as an endorser on all items deposited in
the Collateral Account, whether or not in fact endorsed by the
Borrower.
(b) APPLICATION OF PAYMENTS.
(i) The Borrower may, from time to time, in accordance
with the 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. Except as provided in the preceding
sentence, amounts deposited in the Collateral Account shall not be
subject to withdrawal by the Borrower, except after full payment and
discharge of all Obligations.
(ii) All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations
upon receipt by the Lender. Funds received from the Collateral Account
shall be deemed to be immediately available. The Lender may hold all
payments not constituting immediately available funds for three (3)
additional days before applying them to the Obligations.
Section 2.12 Voluntary Prepayment; Reduction of the Maximum Line;
Termination of the Credit Facility by the Borrower. Except as otherwise provided
herein, the Borrower may prepay the Advances in whole at any time or from time
to time in part. The Borrower may terminate the Credit Facility or reduce the
Maximum Line at any time if it (i) gives the Lender at least 30 days' prior
written notice and (ii) pays the Lender termination or Maximum Line reduction
fees in accordance with Section 2.9(g). Any reduction in the Maximum Line must
be in an amount of not less than $100,000 or an integral multiple thereof. If
the Borrower reduces the Maximum Line to zero, all Obligations shall be
immediately due and payable. Subject to termination of the Credit Facility and
payment and performance of all Obligations, the Lender shall, at the Borrower's
expense, release or terminate the Security Interest and the Security Documents
to which the Borrower is entitled by law.
Section 2.13 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 Borrower 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 under this Section 2.13 or
under Section 2.12 may be applied to
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the Obligations, in such order and in such amounts as the Lender, in its
discretion, may from time to time determine.
Section 2.14 Revolving Advances to Pay Obligations. Notwithstanding
anything in Section 2.1, the Lender may, in its discretion at any time or from
time to time, without the Borrower's request and even if the conditions set
forth in Section 4.2 would not be satisfied, make a Revolving Advance in an
amount equal to the portion of the Obligations from time to time due and
payable.
Section 2.15 Use of Proceeds. The Borrower shall use the proceeds of
Advances and each Letter of Credit for ordinary working capital purposes and to
provide advances to Corporate Guarantors in accordance with Section 6.27.
Section 2.16 Liability Records. The Lender may maintain from time to
time, at its discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes the
contrary. Upon the Lender's demand, the Borrower will admit and certify in
writing the exact principal balance of the Obligations that the Borrower then
asserts to be outstanding. Any billing statement or accounting rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the Lender specific written notice of exception within 30 days after
receipt.
ARTICLE III
SECURITY INTEREST; OCCUPANCY; SETOFF
Section 3.1 Grant of Security Interest. The Borrower hereby pledges,
assigns and grants to the Lender a lien and security interest (collectively
referred to as the "Security Interest") in the Collateral, as security for the
payment and performance of the Obligations. Upon request by the Lender, the
Borrower will grant the Lender a security interest in all commercial tort claims
it may have against any Person.
Section 3.2 Notification of Account Debtors and Other Obligors. The
Lender may at any time (whether or not a Default Period then exists) notify any
account debtor or other person obligated to pay the amount due that such right
to payment has been assigned or transferred to the Lender for security and shall
be paid directly to the Lender. The Borrower will join in giving such notice if
the Lender so requests. At any time after the Borrower or the Lender gives such
notice to an account debtor or other obligor, the Lender may, but need not, in
the Lender's name or in the Borrower's name, (a) demand, ▇▇▇ for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any such right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any such account
debtor or other obligor; and (b) as the Borrower's agent and attorney-in-fact,
notify the United States Postal Service to change the address for delivery of
the Borrower's mail to any address designated by the Lender, otherwise intercept
the Borrower's mail, and receive, open and dispose of the Borrower's mail,
applying all Collateral as permitted under this Agreement and holding all other
mail for the Borrower's account or forwarding such mail to the Borrower's last
known address.
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Section 3.3 Assignment of Insurance. As additional security for the
payment and performance of the Obligations, the Borrower hereby assigns to the
Lender any and all monies (including proceeds of insurance and refunds of
unearned premiums) due or to become due under, and all other rights of the
Borrower with respect to, any and all policies of insurance now or at any time
hereafter covering the Collateral or any evidence thereof or any business
records or valuable papers pertaining thereto, and the Borrower hereby directs
the issuer of any such policy to pay all such monies directly to the Lender. At
any time, whether or not a Default Period then exists, the Lender may (but need
not), in the Lender's name or in the Borrower's name, execute and deliver proof
of claim, receive all such monies, endorse checks and other instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.
Section 3.4 Occupancy.
(a) The Borrower hereby irrevocably grants to the Lender the right to
take exclusive possession of the Premises at any time during a Default Period.
(b) The Lender may use the Premises only to hold, process, manufacture,
sell, use, store, liquidate, realize upon or otherwise dispose of goods that are
Collateral and for other purposes that the Lender may in good ▇▇▇▇▇ ▇▇▇▇ to be
related or incidental purposes.
(c) The Lender's right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and discharge of all Obligations and
termination of the Credit Facility, and (ii) final sale or disposition of all
goods constituting Collateral and delivery of all such goods to purchasers.
(d) The Lender shall not be obligated to pay or account for any rent or
other compensation for the possession, occupancy or use of any of the Premises;
provided, however, that if the Lender does pay or account for any rent or other
compensation for the possession, occupancy or use of any of the Premises, the
Borrower shall reimburse the Lender promptly for the full amount thereof. In
addition, the Borrower will pay, or reimburse the Lender for, all taxes, fees,
duties, imposts, charges and expenses at any time incurred by or imposed upon
the Lender by reason of the execution, delivery, existence, recordation,
performance or enforcement of this Agreement or the provisions of this Section
3.4.
Section 3.5 License. Without limiting the generality of any other
Security Document, the Borrower hereby grants to the Lender a non-exclusive,
worldwide and royalty-free license to use or otherwise exploit all Intellectual
Property Rights of the Borrower for the purpose of: (a) completing the
manufacture of any in-process materials during any Default Period so that such
materials become saleable Inventory, all in accordance with the same quality
standards previously adopted by the Borrower for its own manufacturing and
subject to the Borrower's reasonable exercise of quality control; and (b)
selling, leasing or otherwise disposing of any or all Collateral during any
Default Period.
Section 3.6 Financing Statement. The Borrower authorizes the Lender to
file from time to time where permitted by law, such financing statements against
collateral described as "all personal property" or describing specific items of
collateral including commercial tort claims
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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 Borrower and are hereby re-authorized. A carbon,
photographic or other reproduction of this Agreement or of any financing
statements signed by the Borrower is sufficient as a financing statement and may
be filed as a financing statement in any state to perfect the security interests
granted hereby. For this purpose, the following information is set forth:
Name and address of Debtor:
PowerSecure, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Federal Employer Identification No. ▇▇-▇▇▇▇▇▇▇
Organizational Identification No. DE3278285
Name and address of Secured Party:
▇▇▇▇▇ Fargo Business Credit, Inc.
MAC C7300-210
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Section 3.7 Setoff. The Lender may at any time or from time to time
after a Default or an Event of Default has occurred and is continuing, at its
sole discretion and without demand and without notice to anyone, setoff any
liability owed to the Borrower by the Lender, whether or not due, against any
Obligation, whether or not due. In addition, each other Person holding a
participating interest in any Obligations shall have the right to appropriate or
setoff any deposit or other liability then owed by such Person to the Borrower,
whether or not due, and apply the same to the payment of said participating
interest, as fully as if such Person had lent directly to the Borrower the
amount of such participating interest.
Section 3.8 Collateral. This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any deficiency.
The Lender's duty of care with respect to Collateral in its possession (as
imposed by law) shall be deemed fulfilled if it exercises reasonable care in
physically keeping such Collateral, or in the case of Collateral in the custody
or possession of a bailee or other third person, exercises reasonable care in
the selection of the bailee or other third person, and the Lender need not
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior
parties, to realize on the Collateral at all or in any particular manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application. The Lender has no obligation to clean-up or otherwise prepare the
Collateral for sale. The Borrower waives any right it may have to require the
Lender to pursue any third person for any of the Obligations.
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ARTICLE IV
CONDITIONS OF LENDING
Section 4.1 Conditions Precedent to the Initial Advance and Letter of
Credit. The Lender's obligation to make the initial Advance 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 in form and substance
satisfactory to the Lender:
(a) This Agreement, properly executed by the Borrower.
(b) The Note, properly executed by the Borrower.
(c) A true and correct copy of any and all leases pursuant to which the
Borrower is leasing the Premises, together with a landlord's disclaimer and
consent with respect to each such lease.
(d) A true and correct copy of any and all mortgages pursuant to which
the Borrower has mortgaged the Premises, together with a mortgagee's disclaimer
and consent with respect to each such mortgage.
(e) A true and correct copy of any and all agreements pursuant to which
the Borrower's property is in the possession of any Person other than the
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 the 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 the
Borrower's other than the Borrower, or if there exists any such secured party,
evidence that each such secured party has received notice from the Borrower and
the Lender sufficient to protect the Borrower's and the Lender's interests in
the Borrower's goods from any claim by such secured party.
(f) An acknowledgment and waiver of Liens from each warehouse in which
the Borrower is storing Inventory.
(g) A true and correct copy of any and all agreements pursuant to which
the Borrower's property is in the possession of any Person other than the
Borrower, together with, (i) an acknowledgment and waiver of Liens from each
subcontractor who has possession of the Borrower's goods from time to time, (ii)
UCC financing statements sufficient to protect the 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
the Borrower, or if there exists any such secured party, evidence that each such
secured party has received notice from the Borrower and the Lender sufficient to
protect the Borrower's and the Lender's interests in the Borrower's goods from
any claim by such secured party.
(h) An acknowledgment and agreement from each licensor in favor of the
Lender, together with a true, correct and complete copy of all license
agreements.
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(i) The Lockbox and Collection Account Agreement, properly executed by
the Borrower and ▇▇▇▇▇ Fargo Bank.
(j) Control agreements, properly executed by the Borrower and each bank
at which the Borrower maintains deposit accounts.
(k) The Patent and Trademark Security Agreement, properly executed by
the Borrower.
(l) The Subordination Agreement, properly executed by the Parent and
acknowledged by the Borrower.
(m) Current searches of appropriate filing offices showing that (i) no
Liens have been filed and remain in effect against the Borrower or any Corporate
Guarantor except Permitted Liens or Liens held by Persons who have agreed in
writing that upon receipt of proceeds of the initial Advance, 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.
(n) A certificate of the Borrower's (and each Corporate Guarantor's)
Secretary or Assistant Secretary certifying that attached to such certificate
are (i) the resolutions of the Borrower's (and each Corporate Guarantor's)
Directors and, if required, Owners, authorizing the execution, delivery and
performance of the Loan Documents, (ii) true, correct and complete copies of the
Borrower's (and each Corporate Guarantor's) Constituent Documents, and (iii)
examples of the signatures of the Borrower's (and each Corporate Guarantor's)
Officers or agents authorized to execute and deliver the Loan Documents and
other instruments, agreements and certificates, including Advance requests, on
the Borrower's (and each Corporate Guarantor's) behalf.
(o) A current certificate issued by the Secretary of State of the
jurisdiction of incorporation of the Borrower, certifying that the Borrower is
in compliance with all applicable organizational requirements of such State,
together with a current certificate issued by the Secretary of State of the
jurisdiction of incorporation of each Corporate Guarantor, certifying that such
Corporate Guarantor is in compliance with all applicable organizational
requirements of such State.
(p) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by it makes such licensing or
qualification necessary.
(q) A certificate of an Officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in Article V.
(r) Support agreements in favor of the Lender, properly executed by the
Borrower's Chairman of the Board and Chief Financial Officer, in their personal
capacity.
(s) An opinion of counsel to the Borrower and each Corporate Guarantor,
addressed to the Lender.
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(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) A separate guaranty, properly executed by each Guarantor, pursuant
to which each Guarantor unconditionally guarantees the full and prompt payment
of all Obligations.
(v) A separate security agreement from each Corporate Guarantor,
pursuant to which each Corporate Guarantor grants a security interest on all of
its assets to Lender as security for the Obligations.
(w) Payment of the fees and commissions due under Section 2.9 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.
(x) 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 and to cause each Letter of Credit
to be issued shall be subject to the further conditions precedent that:
(a) the representations and warranties of the Borrower and each
Guarantor contained in Article V and in each Loan Document 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 a Material Adverse
Effect or which constitutes a Default or an Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender as follows:
Section 5.1 Existence and Power; Name; Chief Executive Office;
Inventory and Equipment Locations; Federal Employer Identification Number and
Organizational Identification Number. The Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
the jurisdiction of its incorporation 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
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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 all ownership interests of the Borrower 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 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 Borrower is a party
or by which it or its properties may be bound or affected; or (v) result in, or
require, the creation or imposition of any Lien (other than the Security
Interest) upon or with respect to any of the properties now owned or hereafter
acquired by the Borrower.
Section 5.4 Legal Agreements. This Agreement constitutes and, upon due
execution by the Borrower, the other Loan Documents will constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with their respective terms.
Section 5.5 Subsidiaries. Except as set forth in Schedule 5.5 hereto,
the Borrower has no Subsidiaries.
Section 5.6 Financial Condition; No Adverse Change. The Borrower has
furnished to the Lender its audited financial statements for its fiscal year
ended December 31, 2002 and unaudited financial statements for the
fiscal-year-to-date period ended July 31, 2003, 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 GAAP. For purposes of this Agreement, the Lender agrees that the
audited consolidated financial statements of Parent and its Subsidiaries,
including Borrower, and the consolidating financial statements of Borrower
included therein, shall constitute the "audited" financial statements of
Borrower hereunder. Since the date of the most recent financial statements,
there has been no change in the Borrower's business, properties or condition
(financial or otherwise) which has had a Material Adverse Effect.
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Section 5.7 Litigation. There are no actions, suits or proceedings
pending or, to the Borrower's knowledge, threatened against or affecting the
Borrower or any of its Affiliates or the properties of the Borrower or any of
its Affiliates before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if determined
adversely to the Borrower or any of its Affiliates, would have a Material
Adverse Effect, except as set forth on Schedule 5.7.
Section 5.8 Regulation U. The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying any margin stock.
Section 5.9 Taxes. The Borrower and its Affiliates have paid or caused
to be paid to the proper authorities when due all federal, state and local taxes
required to be withheld by each of them, except to the extent of any taxes that
are being contested in good faith by appropriate proceedings and for which
proper reserves have been made in accordance with GAAP. Except as set forth in
the foregoing proviso, the Borrower and its Affiliates have filed all federal,
state and local tax returns which to the knowledge of the Officers of the
Borrower or any Affiliate, as the case may be, are required to be filed, and the
Borrower and its Affiliates have paid or caused to be paid to the respective
taxing authorities all taxes as shown on said returns or on any assessment
received by any of them to the extent such taxes have become due.
Section 5.10 Titles and Liens. The Borrower has good and absolute title
to all Collateral free and clear of all Liens other than Permitted Liens. No
financing statement naming the Borrower as debtor is on file in any office
except to perfect only Permitted Liens.
Section 5.11 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 ▇▇▇ 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. The Borrower has entered
into a legally enforceable agreement with each of its 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
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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 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
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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 in compliance with all provisions
of all agreements, instruments, decrees and orders to which it is a party or by
which it or its property is bound or affected, the breach or default of which
could have a Material Adverse Effect.
Section 5.14 Environmental Matters.
(a) To the Borrower's best knowledge, there are not present in, on or
under the Premises any Hazardous Substances in such form or quantity as to
create any material liability or obligation for either the Borrower or the
Lender under 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) To the Borrower's best knowledge, the Borrower has not disposed of
Hazardous Substances in such a manner as to create any material liability under
any Environmental Law.
(c) There are not and there never have been any requests, claims,
notices, investigations, demands, administrative proceedings, hearings or
litigation, relating in any way to the Premises or the Borrower, alleging
material liability under, violation of, or noncompliance with any Environmental
Law or any license, permit or other authorization issued pursuant thereto. To
the Borrower's best knowledge, no such matter is threatened or impending.
(d) To the Borrower's best knowledge, the Borrower's businesses are and
have in the past always been conducted in accordance with all Environmental Laws
and all licenses, permits and other authorizations required pursuant to any
Environmental Law and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force and effect. No
permit required under any Environmental Law is scheduled to expire within 12
months and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(e) To the Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
similar federal, state or local list, schedule, log, inventory or database.
(f) The Borrower has delivered to Lender all environmental assessments,
audits, reports, permits, licenses and other documents describing or relating in
any way to the Premises or Borrower's businesses.
Section 5.15 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.
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Section 5.16 Financing Statements. The Borrower and each Corporate
Guarantor has authorized the filing of financing statements sufficient when
filed to perfect the Security Interest and the other security interests created
by the Security Documents. When such financing statements are filed in the
offices noted therein, the Lender will have a valid and perfected security
interest in all Collateral which is capable of being perfected by filing
financing statements. None of the Collateral is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.
Section 5.17 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.
Section 5.18 Financial Solvency. Both before and after giving effect to
the transactions contemplated in the Loan Documents, none of the Borrower or its
Affiliates:
(a) was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2 of the
Uniform Fraudulent Transfer Act;
(b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction for which any remaining assets of the Borrower or
such Affiliate are unreasonably small;
(c) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;
(d) by executing, delivering or performing its obligations under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto, intends to hinder, delay or defraud either its present or
future creditors; and
(e) at this time contemplates filing a petition in bankruptcy or for an
arrangement or reorganization or similar proceeding under any law of any
jurisdiction, nor, to the best knowledge of the Borrower, is the subject of any
actual, pending or threatened bankruptcy, insolvency or similar proceedings
under any law of any jurisdiction.
ARTICLE VI
COVENANTS
So long as the Obligations shall remain unpaid, or the Credit Facility
shall remain outstanding, the Borrower will comply with the following
requirements, unless the Lender shall otherwise consent in writing:
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Section 6.1 Reporting Requirements. The Borrower will deliver, or cause
to be delivered, to the Lender each of the following, which shall be in form and
detail acceptable to the Lender:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in any event
within 90 days after the end of each fiscal year of the Borrower, the Borrower
will deliver, or cause to be delivered, to the Lender, audited consolidated and
consolidating financial statements of the Parent and its Subsidiaries with the
unqualified opinion of independent certified public accountants selected by the
Borrower and acceptable to the Lender, which annual financial statements shall
include the Parent's (on a consolidated basis) and the Borrower's balance sheet
as at the end of such fiscal year and the related statements of the Parent's (on
a consolidated basis) and Borrower's operations, stockholders' equity and cash
flows for the fiscal year then ended, all in reasonable detail and prepared in
accordance with GAAP, together with (i) copies of all management letters
prepared by such accountants; and (ii) a certificate of the Borrower's chief
financial officer stating that such financial statements have been prepared in
accordance with GAAP, fairly represent the Parent's and the Borrower's financial
position and the results of its operations, and whether or not such Officer has
knowledge of the occurrence of any Default or Event of Default and, if so,
stating in reasonable detail the facts with respect thereto.
(b) MONTHLY FINANCIAL STATEMENTS.
(i) As soon as available and in any event within 30 days
after the end of each month, the Borrower will deliver to the Lender an
unaudited/internal balance sheet and statements of income and retained
earnings of the Borrower as at the end of and for such month and for
the year to date period then ended, prepared, if the Lender so
requests, on a consolidating and consolidated basis to include any
Affiliates, in reasonable detail and stating in comparative form the
figures for the corresponding date and periods in the previous year,
all prepared in accordance with GAAP, subject to year-end audit
adjustments and fairly represent the Borrower's financial position and
the results of its operations; and accompanied by a certificate of the
Borrower's chief financial officer, substantially in the form of
Exhibit B hereto stating (i) that such financial statements have been
prepared in accordance with GAAP, subject to year-end audit
adjustments, (ii) whether or not such officer has knowledge of the
occurrence of any Default or Event of Default not theretofore reported
and remedied and, if so, stating in reasonable detail the facts with
respect thereto, and (iii) all relevant facts in reasonable detail to
evidence, and the computations as to, whether or not the Borrower is in
compliance with the Financial Covenants.
(ii) As soon as available and in any event within 30 days
after the end of each month, the Borrower will cause to be delivered to
the Lender unaudited consolidated internal statements of income of the
Parent as at the end of and for such month and for the year-to-date
period then ended, to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments.
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(iii) As soon as available and in any event within 30 days
after the end of each quarter, the Borrower will deliver to the Lender
unaudited consolidated and consolidating statements of operation of the
Parent as at the end of and for such month and for the year-to-date
period then ended, to include any Affiliates, in reasonable detail and
stating in comparative form the figures for the corresponding date and
periods in the previous year, all prepared in accordance with GAAP,
subject to year-end audit adjustments.
(c) COLLATERAL REPORTS. Within 15 days after the end of each month or
more frequently if the Lender so requires, the Borrower will deliver to the
Lender agings of the Borrower's accounts receivable and its accounts payable, an
inventory certification report, and a calculation of the Borrower's Accounts,
Eligible Accounts and Inventory as at the end of such month or shorter time
period.
(d) PROJECTIONS. At least 30 days before the beginning of each fiscal
year of the Borrower (and each Corporate Guarantor), the Borrower (and each
Corporate Guarantor) will deliver to the Lender the projected balance sheets and
income statements for each month of such year, each in reasonable detail,
representing the Borrower's (and each Corporate Guarantor's) good faith
projections and certified by the Borrower's (and each Corporate Guarantor's)
chief financial officer as being the most accurate projections available and
identical to the projections used by the Borrower (and each Corporate Guarantor)
for internal planning purposes, together with a statement of underlying
assumptions and such supporting schedules and information as the Lender may in
its discretion require.
(e) SUPPLEMENTAL REPORTS. Borrower shall provide daily reporting of
collections (supported by Borrower's cash receipts journal), deposit information
and at least weekly reporting of sales (supported by Borrower's sales journal),
credit memos, copies of invoices and shipping information to account debtors in
excess of $30,000 and an accounts receivable aging (summary page only), together
with a Borrowing Base reconciliation report.
(f) LITIGATION. Immediately after the commencement thereof, the
Borrower will deliver to the Lender notice in writing of all litigation and of
all proceedings before any governmental or regulatory agency affecting the
Borrower (i) of the type described in Section 5.14(c) or (ii) which seek a
monetary recovery against the Borrower or any Corporate Guarantor in excess of
$50,000;
(g) DEFAULTS. As promptly as practicable (but in any event not later
than five business days) after an Officer of the Borrower obtains knowledge of
the occurrence of any Default or Event of Default, the Borrower will deliver to
the Lender notice of such occurrence, together with a detailed statement by a
responsible Officer of the Borrower of the steps being taken by the Borrower to
cure the effect thereof.
(h) PLANS. As soon as possible, and in any event within 30 days after
the Borrower knows or has reason to know that any Reportable Event with respect
to any Pension Plan has occurred, the Borrower will deliver to the Lender a
statement of the Borrower's chief financial officer setting forth details as to
such Reportable Event and the action which the Borrower proposes to take with
respect thereto, together with a copy of the notice of such Reportable Event to
the Pension Benefit Guaranty Corporation. As soon as possible, and in any event
within 10 days after the Borrower fails to make any quarterly contribution
required with respect to any
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Pension Plan under Section 412(m) of the IRC, the Borrower will deliver to the
Lender a statement of the Borrower's chief financial officer setting forth
details as to such failure and the action which the Borrower proposes to take
with respect thereto, together with a copy of any notice of such failure
required to be provided to the Pension Benefit Guaranty Corporation. As soon as
possible, and in any event within 10 days after the Borrower knows or has reason
to know that it has or is reasonably expected to have any liability under
Section 4201 or 4243 of ERISA for any withdrawal, partial withdrawal,
reorganization or other event under any Multiemployer Plan, the Borrower will
deliver to the Lender a statement of the Borrower's chief financial officer
setting forth details as to such liability and the action which the Borrower
proposes to take with respect thereto.
(i) DISPUTES. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of (i) any disputes or claims by the Borrower's
customers exceeding $25,000 individually or $75,000 in the aggregate during any
fiscal year; and (ii) credit memos (not disclosed pursuant to Section 6.1(e)
hereof).
(j) OFFICERS AND DIRECTORS. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice any change in the persons
constituting the Borrower's Officers and Directors.
(k) COLLATERAL. Promptly upon knowledge thereof, the Borrower will
deliver to the Lender notice of any loss of or material damage to any Collateral
or of any substantial adverse change in any Collateral or the prospect of
payment thereof.
(l) COMMERCIAL TORT CLAIMS. Promptly upon knowledge thereof, the
Borrower will deliver to the Lender notice of any commercial tort claims it may
bring against any Person, including the name and address of each defendant, a
summary of the facts, an estimate of the Borrower's damages, copies of any
complaint or demand letter submitted by the Borrower, and such other information
as the Lender may request.
(m) INTELLECTUAL PROPERTY.
(i) The Borrower will give the Lender 30 days prior
written notice of its intent to acquire material Intellectual Property
Rights; except for transfers permitted under Section 6.17, the Borrower
will give the Lender 30 days prior written notice of its 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 Borrower will
deliver to the Lender notice of (A) any Infringement of its
Intellectual Property Rights by others, (B) claims that the Borrower is
Infringing another Person's Intellectual Property Rights and (C) any
threatened cancellation, termination or material limitation of its
Intellectual Property Rights.
(iii) Promptly upon receipt, the Borrower will give the
Lender copies of all registrations and filings with respect to its
Intellectual Property Rights.
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(n) REPORTS TO OWNERS. Promptly upon their distribution, the Borrower
will deliver to the Lender copies of all financial statements, reports and proxy
statements which the Borrower shall have sent to its Owners.
(o) SEC FILINGS. Promptly after the sending or filing thereof, the
Borrower will deliver to the Lender copies of all regular and periodic reports
which the Borrower or any Corporate Guarantor shall file with the Securities and
Exchange Commission or any national securities exchange.
(p) VIOLATIONS OF LAW. Promptly upon knowledge thereof, the Borrower
will deliver to the Lender notice of the Borrower's violation of any law, rule
or regulation, the non-compliance with which could have a Material Adverse
Effect.
(q) OTHER REPORTS. From time to time, with reasonable promptness, the
Borrower will deliver to the Lender any and all receivables schedules,
collection reports, deposit records, equipment schedules, copies of invoices to
account debtors, shipment documents and delivery receipts for goods sold, and
such other material, reports, records or information as the Lender may request.
Section 6.2 Financial Covenants.
(a) MINIMUM TANGIBLE NET WORTH. The Borrower will maintain, during each
period described below, its Tangible Net Worth, (i) less software development,
(ii) less intercompany indebtedness owing from all Corporate Guarantors to
Borrower, (iii) plus Subordinated Indebtedness, determined as at the end of each
month, at an amount not less than the amount set forth opposite such period:
Period Minimum Tangible Net Worth
------ --------------------------
September 30, 2003 $609,000
October 31, 2003 $800,000
November 30, 2003 $800,000
December 31, 2003 and
thereafter $800,000
(b) MINIMUM NET INCOME. The Borrower will achieve during each period
described below, its Net Income, of not less than the amount set forth opposite
such period:
Period Minimum Net Income
------ ------------------
Nine months ending September 30, 2003 $400,000
Twelve months ending December 31, 2003 $600,000
(c) CAPITAL EXPENDITURES. The Borrower will not incur or contract to
incur unfinanced Capital Expenditures of more than $400,000 in the aggregate
during the fiscal year ending December 31, 2003.
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Section 6.3 Permitted Liens; Financing Statements.
(a) The Borrower will not create, incur or suffer to exist any Lien
upon or of any of its assets, now owned or hereafter acquired, to secure any
indebtedness; excluding, however, from the operation of the foregoing, the
following (collectively, "Permitted Liens"):
(i) in the case of any of the Borrower's property which is not
Collateral, covenants, restrictions, rights, easements and minor irregularities
in title which do not materially interfere with the Borrower's business or
operations as presently conducted;
(ii) Liens in existence on the date hereof and listed in
Schedule 6.3 hereto, securing indebtedness for borrowed money permitted
under Section 6.4;
(iii) the Security Interest and Liens created by the
Security Documents;
(iv) purchase money Liens relating to the acquisition of
machinery and equipment of the Borrower not exceeding the lesser of
cost or fair market value thereof not exceeding $1,000,000 in the
aggregate during any fiscal year, and so long as no Default Period is
then in existence and none would exist immediately after such
acquisition;
(v) liens for taxes, assessments, or other governmental
charges which are not delinquent or which are being contested in good
faith and for which adequate reserves have been established in
accordance with GAAP; and
(vi) liens of mechanics, materialmen, warehousemen,
carriers or other similar statutory liens securing obligations that are
not yet due and are incurred in the ordinary course of business.
(b) The Borrower 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;
(d) indebtedness arising from the lease of vehicles and equipment, all
in the ordinary course of business, the obligations under which are not required
to be classified as "liabilities" on Borrower's Balance sheet in accordance with
GAAP; and
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(e) indebtedness arising out of capital leases, the obligations under
which are required to be classified as "liabilities" on Borrower's balance sheet
in accordance with GAAP, to the extent permitted pursuant to Section 6.2(c).
Section 6.5 Guaranties. The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except:
(a) the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar transactions in the ordinary course of
business; and
(b) guaranties, endorsements and other direct or contingent liabilities
in connection with the obligations of other Persons, in existence on the date
hereof and listed in Schedule 6.4 hereto.
Section 6.6 Investments and Subsidiaries. The Borrower will not
purchase or hold beneficially any stock or other securities or evidences of
indebtedness of, make or permit to exist any loans or advances to, or make any
investment or acquire any interest whatsoever in, any other Person, including
any partnership or joint venture, except:
(a) investments in direct obligations of the United States of America
or any agency or instrumentality thereof whose obligations constitute full faith
and credit obligations of the United States of America having a maturity of one
year or less, commercial paper issued by U.S. corporations rated "A-1" or "A-2"
by Standard & Poor's Corporation or "P-1" or "P-2" by ▇▇▇▇▇'▇ Investors Service
or certificates of deposit or bankers' acceptances having a maturity of one year
or less issued by members of the Federal Reserve System having deposits in
excess of $100,000,000 (which certificates of deposit or bankers' acceptances
are fully insured by the Federal Deposit Insurance Corporation);
(b) travel advances or loans to the Borrower's Officers and employees
not exceeding at any one time an aggregate of $20,000;
(c) loans from Borrower to Corporate Guarantors permitted by Section
6.27; and
(d) current investments in the Subsidiaries in existence on the date
hereof and listed in Schedule 5.5 hereto.
Section 6.7 Dividends and Distributions. The Borrower will not declare
or pay any dividends (other than dividends payable solely in stock of the
Borrower) on any class of its stock or make any payment on account of the
purchase, redemption or other retirement of any shares of such stock or make any
distribution in respect thereof, either directly or indirectly.
Section 6.8 Salaries. The Borrower 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, Officer or consultant, or any member of
their families, by more than 15% 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; provided, however, that the
foregoing limitations shall not apply to sales commissions paid by Borrower in
the ordinary course of business or to bonuses to employees in
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an aggregate amount on an annual basis of up to 20% of the Borrower's annual
cash flow from operations.
Section 6.9 Books and Records; Inspection and Examination. The Borrower
will keep accurate books of record and account for itself pertaining to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete entries will be made in accordance with GAAP and, upon the Lender's
request, will permit any officer, employee, attorney or accountant for the
Lender to audit, review, make extracts from or copy any and all company and
financial books and records of the Borrower at all times during ordinary
business hours, to send and discuss with account debtors and other obligors
requests for verification of amounts owed to the Borrower, and to discuss the
Borrower's affairs with any of its Directors, Officers, employees or agents. The
Borrower hereby irrevocably authorizes all accountants and third parties to
disclose and deliver to Lender, at the Borrower's expense, all financial
information, books and records, work papers, management reports and other
information in their possession regarding the Borrower. The Borrower will permit
the Lender, or its employees, accountants, attorneys or agents, to examine and
inspect any Collateral or any other property of the Borrower at any time during
ordinary business hours.
Section 6.10 Account Verification. The Lender may at any time and from
time to time send or require the Borrower to send requests for verification of
accounts or notices of assignment to account debtors and other obligors. The
Lender may also at any time and from time to time telephone account debtors and
other obligors to verify accounts.
Section 6.11 Compliance with Laws.
(a) The Borrower will (i) comply with the requirements of applicable
laws and regulations, the non-compliance with which would materially and
adversely affect its business or its financial condition and (ii) use and keep
the Collateral, and require that others use and keep the Collateral, only for
lawful purposes, without violation of any federal, state or local law, statute
or ordinance.
(b) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply with all applicable Environmental Laws
and obtain and comply with all permits, licenses and similar approvals required
by any Environmental Laws, and will not generate, use, transport, treat, store
or dispose of any Hazardous Substances in such a manner as to create any
material liability or obligation under the common law of any jurisdiction or any
Environmental Law.
Section 6.12 Payment of Taxes and Other Claims. The Borrower will pay
or discharge, when due, (a) all taxes, assessments and governmental charges
levied or imposed upon it or upon its income or profits, upon any properties
belonging to it (including the Collateral) or upon or against the creation,
perfection or continuance of the Security Interest, prior to the date on which
penalties attach thereto, (b) all federal, state and local taxes required to be
withheld by it, and (c) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon any properties of the
Borrower; provided, that the Borrower shall not be required to pay any such tax,
assessment, charge or claim whose amount, applicability or validity is being
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contested in good faith by appropriate proceedings and for which proper reserves
have been made.
Section 6.13 Maintenance of Properties.
(a) The Borrower will keep and maintain the Collateral and all of its
other properties necessary or useful in its business in good condition, repair
and working order (normal wear and tear excepted) and will from time to time
replace or repair any worn, defective or broken parts; provided, however, that
nothing in this Section 6.13 shall prevent the Borrower from discontinuing the
operation and maintenance of any of its properties if such discontinuance is, in
the Borrower's judgment, desirable in the conduct of the Borrower's business and
not disadvantageous in any material respect to the Lender. The Borrower will
take all commercially reasonable steps necessary to protect and maintain its
Intellectual Property Rights.
(b) The Borrower will defend the Collateral against all Liens, claims
or demands of all Persons (other than the Lender) claiming the Collateral or any
interest therein. The Borrower will keep all Collateral free and clear of all
Liens except Permitted Liens. The Borrower will take all commercially reasonable
steps necessary to prosecute any Person Infringing its Intellectual Property
Rights and to defend itself against any Person accusing it of Infringing any
Person's Intellectual Property Rights.
Section 6.14 Insurance. The Borrower will obtain and at all times
maintain insurance with insurers believed by the Borrower to be responsible and
reputable, in such amounts and against such risks as may from time to time be
required by the Lender, but in all events in such amounts and against such risks
as is usually carried by companies engaged in similar business and owning
similar properties in the same general areas in which the Borrower operates.
Without limiting the generality of the foregoing, the Borrower will at all times
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. The Borrower will preserve and
maintain its existence and all of its rights, privileges and franchises
necessary or desirable in the normal conduct of its business and shall conduct
its business in an orderly, efficient and regular manner.
Section 6.16 Delivery of Instruments, etc. Upon request by the Lender,
the Borrower will promptly deliver to the Lender in pledge all instruments,
documents and chattel paper constituting Collateral, duly endorsed or assigned
by the Borrower.
Section 6.17 Sale or Transfer of Assets; Suspension of Business
Operations. The Borrower will not sell, lease, assign, transfer or otherwise
dispose of (i) the stock of any Subsidiary, (ii) all or a substantial part of
its assets, or (iii) any Collateral or any interest therein (whether in one
transaction or in a series of transactions) to any other Person other than the
sale
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of Inventory in the ordinary course of business and will not liquidate, dissolve
or suspend business operations. The Borrower will not transfer any part of its
ownership interest in any Intellectual Property Rights and will not permit any
agreement under which it has licensed Licensed Intellectual Property to lapse,
except that the Borrower may transfer such rights or permit such agreements to
lapse if it shall have reasonably determined that the applicable Intellectual
Property Rights are no longer useful in its business. If the Borrower transfers
any Intellectual Property Rights for value, the Borrower will pay over the
proceeds to the Lender for application to the Obligations. The Borrower will not
license any other Person to use any of the Borrower's Intellectual Property
Rights, except that the Borrower may grant licenses in the ordinary course of
its business in connection with sales of Inventory or provision of services to
its customers.
Section 6.18 Consolidation and Merger; Asset Acquisitions. The Borrower
will not consolidate with or merge into any Person, or permit any other Person
to merge into it, or acquire (in a transaction analogous in purpose or effect to
a consolidation or merger) all or substantially all the assets of any other
Person.
Section 6.19 Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
Section 6.20 Restrictions on Nature of Business. The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.
Section 6.21 Accounting. The Borrower will not adopt any material
change in accounting principles other than as required by GAAP. The Borrower
will not adopt, permit or consent to any change in its fiscal year.
Section 6.22 Discounts, etc. After notice from the Lender, the Borrower
will not grant any discount, credit or allowance to any customer of the Borrower
or accept any return of goods sold. The Borrower will not at any time modify,
amend, subordinate, cancel or terminate the obligation of any account debtor or
other obligor of the Borrower.
Section 6.23 Plans. Unless disclosed to the Lender pursuant to Section
5.12, neither the Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Pension Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan in
a manner that would materially increase its funding obligations.
Section 6.24 Place of Business; Name. The Borrower will not transfer
its chief executive office or principal place of business, or move, relocate,
close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the
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Collateral to be located in any state or area in which, in the event of such
location, a financing statement covering such Collateral would be required to
be, but has not in fact been, filed in order to perfect the Security Interest.
The Borrower will not change its name or jurisdiction of organization.
Section 6.25 Constituent Documents; S Corporation Status. The Borrower
will not amend its Constituent Documents. The Borrower will not become an S
Corporation.
Section 6.26 Performance by the Lender. If the Borrower at any time
fails to perform or observe any of the foregoing covenants contained in this
Article VI or elsewhere herein, and if such failure shall continue for a period
of ten calendar days after the Lender gives the Borrower written notice thereof
(or in the case of the agreements contained in 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 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 Borrower
shall thereupon pay to the Lender on demand the amount of all monies expended
and all costs and expenses (including reasonable attorneys' fees and legal
expenses) incurred by the Lender in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Lender, together with interest thereon from the date expended or incurred at the
Default Rate. To facilitate the Lender's performance or observance of such
covenants of the Borrower, the Borrower hereby irrevocably appoints the Lender,
or the Lender's delegate, acting alone, as the Borrower's attorney in fact
(which appointment is coupled with an interest) with the right (but not the
duty) from time to time to create, prepare, complete, execute, deliver, endorse
or file in the name and on behalf of the Borrower any and all instruments,
documents, assignments, security agreements, financing statements, applications
for insurance and other agreements and writings required to be obtained,
executed, delivered or endorsed by the Borrower under this Section 6.26.
Section 6.27 Advances to Corporate Guarantors. Before making an advance
to any Corporate Guarantor, and after making such advance to any Corporate
Guarantor, Availability shall not be less than $100,000. Advances to Corporate
Guarantors shall not exceed $800,000 in the aggregate during the fiscal year
ending December 31, 2003. Any payment made to Parent will be considered an
advance and not a payment on the Subordinated Indebtedness; provided, however,
that payments made to Parent to reimburse Parent for current expenses of
Borrower paid by Parent (such as payroll, rent, utilities, etc.) will not be
considered an advance.
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:
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(a) Default in the payment of any Obligations when they become due and
payable;
(b) Default in the performance, or breach, of any covenant or agreement
of the Borrower contained in this Agreement;
(c) A Change of Control shall occur;
(d) Any Financial Covenant shall become inapplicable due to the lapse
of time and the failure to amend any such covenant to cover future periods;
(e) The Borrower or any Guarantor shall be or become insolvent, or
admit in writing its or his inability to pay its or his debts as they mature, or
make an assignment for the benefit of creditors; or the 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 the Borrower or such Guarantor,
as the case may be; or the Borrower or any Guarantor shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it or him under the laws of any jurisdiction; or
any such proceeding shall be instituted (by petition, application or otherwise)
against the 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 the Borrower or any Guarantor;
(f) A petition shall be filed by or against the Borrower or any
Guarantor under the United States Bankruptcy Code naming the Borrower or such
Guarantor as debtor;
(g) Any representation or warranty made by the Borrower in this
Agreement, by any Guarantor in any guaranty delivered to the Lender, or by the
Borrower (or any of its Officers) or any Guarantor in any agreement,
certificate, instrument or financial statement or other statement contemplated
by or made or delivered pursuant to or in connection with this Agreement or any
such guaranty shall prove to have been incorrect in any material respect when
deemed to be effective;
(h) The rendering against the Borrower or a Corporate Guarantor of an
arbitration award, final judgment, decree or order for the payment of money in
excess of $50,000 and the continuance of such arbitration award, judgment,
decree or order unsatisfied and in effect for any period of 30 consecutive days
without a stay of execution;
(i) A default under any bond, debenture, note or other evidence of
material indebtedness of the Borrower or a Corporate Guarantor owed to any
Person other than the Lender, or under any indenture or other instrument under
which any such evidence of indebtedness has been issued or by which it is
governed, or under any material lease or other contract, and the expiration of
the applicable period of grace, if any, specified in, or otherwise agreed by all
parties to, 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 appropriate United States District Court of a trustee to
administer any Pension Plan, shall have occurred and be
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continuing 30 days after written notice to such effect shall have been given to
the Borrower by the Lender; or a trustee shall have been appointed by an
appropriate United States District Court to administer any Pension Plan; or the
Pension Benefit Guaranty Corporation shall have instituted proceedings to
terminate any Pension Plan or to appoint a trustee to administer any Pension
Plan; or the Borrower or any ERISA Affiliate shall have filed for a distress
termination of any Pension Plan under Title IV of ERISA; or the Borrower or any
ERISA Affiliate shall have failed to make any quarterly contribution required
with respect to any Pension Plan under Section 412(m) of the IRC, which the
Lender determines in good faith may by itself, or in combination with any such
failures that the Lender may determine are likely to occur in the future, result
in the imposition of a Lien on the Borrower's assets in favor of the Pension
Plan; or any withdrawal, partial withdrawal, reorganization or other event
occurs with respect to a Multiemployer Plan which results or could reasonably be
expected to result in a material liability of the Borrower to the Multiemployer
Plan under Title IV of ERISA;
(k) An event of default shall occur under any Security Document;
(l) The Borrower or a Corporate Guarantor shall liquidate, dissolve,
terminate or suspend its business operations or otherwise fail to operate its
business in the ordinary course, or sell or attempt to sell all or substantially
all of its assets, without the Lender's prior written consent;
(m) Default in the payment of any amount owed by the Borrower or a
Corporate Guarantor to the Lender other than any indebtedness arising hereunder;
(n) Any Guarantor or person signing a support agreement in favor of the
Lender shall repudiate, purport to revoke or fail to perform its obligations
under such guaranty or support agreement in favor of the Lender, any individual
Guarantor shall die or any other Guarantor shall cease to exist;
(o) The Borrower shall take or participate in any action which would be
prohibited under the provisions of any Subordination Agreement or make any
payment on the Subordinated Indebtedness that any Person was not entitled to
receive under the provisions of the Subordination Agreement;
(p) W. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ shall cease to be the Chairman of the Board of
the Borrower, and the Borrower shall fail to employ a replacement acceptable to
the Lender in its sole discretion;
(q) A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall cease to be the Chief Financial Officer of
the Borrower, and the Borrower shall fail to employ a replacement acceptable to
the Lender in its sole discretion;
(r) Any person who has executed a support agreement in connection with
the Credit Facility shall die, become mentally or physically incapacitated, or
cease to be employed by the Borrower; provided, however, that such occurrence
shall not constitute an Event of Default if within 60 days of such occurrence
(i) the Borrower employs a replacement acceptable to the Lender in its sole
discretion and (ii) such replacement executes a support agreement substantially
in the form of the agreement executed by the person so replaced;
(s) Any event or circumstance with respect to the Borrower shall occur
such that the Lender shall believe in good faith that the prospect of payment of
all or any part of the
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Obligations or the performance by the Borrower under the Loan Documents is
impaired or any material adverse change in the business or financial condition
of the Borrower shall occur; or
(t) Any breach, default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender shall occur.
Provided, however, notwithstanding anything to the contrary herein or in the
PowerSecure Guaranty or the PowerSecure Security Agreement, a default under
Section 6.2(a) or Section 6.2(b) of the Metretek Credit and Security Agreement (
a "Metretek Default") shall not constitute an Event of Default under this
Agreement, the PowerSecure Guaranty or the PowerSecure Security Agreement if
within 20 days of the occurrence of the Metretek Default:
(1) the Metretek Default is waived by the Lender in writing, or
(2) each of the following conditions precedent have been
satisfied, each in form and substance satisfactory to the Lender:
A. The Metretek Revolving Note and the Metretek L/C Amount are
paid in full, and all fees and expenses of the Lender payable under the Metretek
Credit and Security Agreement are paid in full.
B. The Metretek Credit and Security Agreement is terminated by
Metretek, Incorporated.
C. The Southern Flow Term Note is paid in full.
D. Neither the Borrower nor Southern Flow Companies, Inc. are in
default under this Agreement or the Southern Flow Credit and Security Agreement,
or any guarantees by the Borrower or Southern Flow Companies, Inc. in favor of
the Lender or any security agreements by and between the Lender and the Borrower
or Southern Flow Companies, Inc.
provided, further, however, that Metretek, Incorporated will remain as a
Guarantor under this Agreement and under the Southern Flow Credit and Security
Agreement.
Section 7.2 Rights and Remedies. During any Default Period, the Lender
may exercise any or all of the following rights and remedies:
(a) the Lender may, by notice to the Borrower, declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;
(b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable, whereupon all Obligations shall become and be
forthwith due and payable, without presentment, notice of dishonor, protest or
further notice of any kind, all of which the Borrower hereby expressly waives;
(c) the Lender may, without notice to the Borrower and without further
action, apply any and all money owing by the Lender to the Borrower to the
payment of the Obligations;
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(d) the Lender may exercise and enforce any and all rights and remedies
available upon default to a secured party under the UCC, including the right to
take possession of Collateral, or any evidence thereof, proceeding without
judicial process or by judicial process (without a prior hearing or notice
thereof, which the Borrower hereby expressly waives) and the right to sell,
lease or otherwise dispose of any or all of the Collateral (with or without
giving any warranties as to the Collateral, title to the Collateral or similar
warranties), and, in connection therewith, the Borrower will on demand assemble
the Collateral and make it available to the Lender at a place to be designated
by the Lender which is reasonably convenient to both parties;
(e) the Lender may make demand upon the Borrower and, forthwith upon
such demand, the Borrower will pay to the Lender in immediately available funds
for deposit in the Special Account pursuant to Section 2.13 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; and
(g) 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 Section 7.1(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 the Borrower of any intended
disposition of Collateral or any other intended action is required by law in a
particular instance, such notice shall be deemed commercially reasonable if
given (in the manner specified in Section 8.3) at least ten calendar days before
the date of intended disposition or other action.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 No Waiver; Cumulative Remedies; Compliance with Laws. No
failure or delay by the Lender in exercising any right, power or remedy under
the Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
under the Loan Documents. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law. The Lender may
comply with any applicable state or federal law requirements in connection with
a disposition of the Collateral and such compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the Collateral.
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Section 8.2 Amendments, Etc. No amendment, modification, termination or
waiver of any provision of any Loan Document or consent to any departure by the
Borrower therefrom or any release of a Security Interest shall be effective
unless the same shall be in writing and signed by the Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on the Borrower in any
case shall entitle the Borrower to any other or further notice or demand in
similar or other circumstances.
Section 8.3 Addresses for Notices; Requests for Accounting. Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the Loan Documents shall be in writing and
shall be (a) personally delivered, (b) sent by first class United States mail,
(c) sent by overnight courier of national reputation, or (d) transmitted by
telecopy, in each case addressed or telecopied to the party to whom notice is
being given at its address or telecopier number as set forth below next to its
signature or, as to each party, at such other address or telecopier number as
may hereafter be designated by such party in a written notice to the other party
complying as to delivery with the terms of this Section. All such notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail, (c) the date sent if delivered by overnight courier, or (d)
the date of transmission if delivered by telecopy, except that notices or
requests delivered to the Lender pursuant to any of the provisions of Article II
shall not be effective until received by the Lender. All requests under Section
9-210 of the UCC (i) shall be made in a writing signed by a Person authorized
under Section 2.2(a), (ii) shall be personally delivered, sent by registered or
certified mail, return receipt requested, or by overnight courier of national
reputation, (iii) shall be deemed to be sent when received by the Lender and
(iv) shall otherwise comply with the requirements of Section 9-210. The Borrower
requests that the Lender respond to all such requests which on their face appear
to come from an authorized individual and releases the Lender from any liability
for so responding. The Borrower shall pay the Lender the maximum amount allowed
by law for responding to such requests.
Section 8.4 Further Documents. The Borrower will from time to time
execute, 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 the 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 Borrower shall pay on demand all
costs and expenses, including reasonable attorneys' fees, incurred by the Lender
in connection with the Obligations, this Agreement, the Loan Documents, any
Letter of Credit 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
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such documents and agreements and the creation, perfection, protection,
satisfaction, foreclosure or enforcement of the Security Interest.
Section 8.6 Indemnity. In addition to the payment of expenses pursuant
to Section 8.5, the Borrower shall indemnify, defend and hold harmless the
Lender, and any of its participants, parent corporations, subsidiary
corporations, affiliated corporations, successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the "Indemnitees") from and against any of the following (collectively,
"Indemnified Liabilities"):
(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 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
shall be designated a party thereto, which may be imposed on, incurred
by or asserted against any such Indemnitee, in any manner related to or
arising out of or in connection with the making of the Advances and the
Loan Documents or the use or intended use of the proceeds of the
Advances.
If any investigative, judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the Borrower, or counsel designated by the Borrower and satisfactory to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the Indemnitee, at the Borrower's sole costs and
expense. Each Indemnitee will use its best efforts to cooperate in the defense
of any such action, suit or proceeding. If the foregoing undertaking to
indemnify, defend and hold harmless may be held to be unenforceable because it
violates any law or public policy, the Borrower shall nevertheless make the
maximum contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 8.6 shall survive the termination of this Agreement and the
discharge of the Borrower's other obligations hereunder.
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
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together, shall constitute but one and the same instrument. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement.
Section 8.9 Retention of Borrower's Records. The Lender shall have no
obligation to maintain any electronic records or any documents, schedules,
invoices, agings, or other papers delivered to the Lender by the Borrower or in
connection with the Loan Documents for more than four months after receipt by
the Lender.
Section 8.10 Binding Effect; Assignment; Complete Agreement; Exchanging
Information. The Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the Lender's prior written consent.
To the extent permitted by law, the Borrower waives and will not assert against
any assignee any claims, defenses or set-offs which the Borrower could assert
against the Lender. This Agreement shall also bind all Persons who become a
party to this Agreement as a borrower. This Agreement, together with the Loan
Documents, comprises the complete and integrated agreement of the parties on the
subject matter hereof and supersedes all prior agreements, written or oral, on
the subject matter hereof. Without limiting the Lender's right to share
information regarding the Borrower and its Affiliates with the Lender's
participants, accountants, lawyers and other advisors, the Lender, ▇▇▇▇▇ Fargo &
Company, and all direct and indirect subsidiaries of ▇▇▇▇▇ Fargo & Company, may
exchange any and all information they may have in their possession regarding the
Borrower and its Affiliates, and the Borrower waives any right of
confidentiality it may have with respect to such exchange of such 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 Colorado. The
parties hereto hereby (i) consent to the personal jurisdiction of the state and
federal courts located in the State of Colorado in connection with any
controversy related to this Agreement; (ii) waive any argument that venue in any
such forum is not convenient; (iii) agree that any litigation initiated by the
Lender or the Borrower in connection with this Agreement or the other Loan
Documents may be venued in either the state or federal courts located in the
City and County of Denver, Colorado; and (iv) agree that a final judgment in any
such suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
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BASED ON OR PERTAINING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
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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.
PowerSecure, Inc. POWERSECURE, INC.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ By: /s/ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ --------------------------------
Attention: A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
e-mail: ▇▇▇▇▇▇@▇▇▇.▇▇▇ Chief Financial Officer
▇▇▇▇▇ Fargo Business Credit, Inc. ▇▇▇▇▇ FARGO BUSINESS CREDIT, INC.
MAC-C7300-210
▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ --------------------------------
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Commercial Banking Officer
e-mail: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
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TABLE OF EXHIBITS AND SCHEDULES
Exhibit A Form of Revolving Note
Exhibit B Compliance Certificate
Exhibit C Premises
Schedule 5.1 Trade Names, Chief Executive Office, Principal Place of
Business, and Locations of Collateral
Schedule 5.2 Capitalization and Organizational Chart
Schedule 5.5 Subsidiaries
Schedule 5.7 Litigation
Schedule 5.11 Intellectual Property Disclosures
Schedule 6.3 Permitted Liens
Schedule 6.4 Permitted Indebtedness and Guaranties
Exhibit A to Credit and Security Agreement
REVOLVING NOTE
$3,000,000 Denver, Colorado
September 24, 2003
For value received, the undersigned, POWERSECURE, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay on the Termination Date
under the Credit Agreement (defined below), to the order of ▇▇▇▇▇ FARGO BUSINESS
CREDIT, INC., a Minnesota corporation (the "Lender"), at its main office in
Denver, Colorado, or at any other place designated at any time by the holder
hereof, in lawful money of the United States of America and in immediately
available funds, the principal sum of Three Million Dollars ($3,000,000) or, if
less, the aggregate unpaid principal amount of all Revolving Advances made by
the Lender to the Borrower under the Credit Agreement (defined below) together
with interest on the principal amount hereunder remaining unpaid from time to
time, computed on the basis of the actual number of days elapsed and a 360-day
year, from the date hereof until this Note is fully paid at the rate from time
to time in effect under the Credit and Security Agreement of even date herewith
(the "Credit Agreement") by and between the Lender and the Borrower. The
principal hereof and interest accruing thereon shall be due and payable as
provided in the Credit Agreement. This Note may be prepaid only in accordance
with the Credit Agreement.
This Note is issued pursuant, and is subject, to the Credit Agreement,
which provides, among other things, for acceleration hereof. This Note is the
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 Borrower shall pay all costs of collection, including reasonable
attorneys' fees and legal expenses if this Note is not paid when due, whether or
not legal proceedings are commenced.
Presentment or other demand for payment, notice of dishonor and protest
are expressly waived.
POWERSECURE, INC.
By:________________________________
A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
A-1