Exhibit 10.1
CREDIT AGREEMENT
BETWEEN
METRETEK TECHNOLOGIES, INC.,
POWERSECURE, INC.,
SOUTHERN FLOW COMPANIES, INC.,
METRETEK INCORPORATED,
AND
FIRST NATIONAL BANK OF COLORADO
AS OF SEPTEMBER 2, 2005
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.................................................... 1
1.1 Certain Specific Terms........................................ 1
1.2 Singulars and Plurals......................................... 11
1.3 UCC Definitions............................................... 11
ARTICLE II AMOUNTS AND TERMS OF LOANS.................................... 11
2.1 Facilities.................................................... 11
2.2 Payments, Prepayment.......................................... 12
ARTICLE III INTEREST, FEES AND PAYMENT CONVENTIONS....................... 13
3.1 Promise to Pay Interest....................................... 13
3.2 Promise to Pay Fees........................................... 14
3.3 Computation of Interest and Fees.............................. 14
3.4 Funding Losses - Additional Costs............................. 14
3.5 Indemnification for Funding Loss.............................. 15
ARTICLE IV COLLATERAL AND INDEBTEDNESS SECURED........................... 15
4.1 Security Interest............................................. 15
4.2 Indebtedness Secured.......................................... 16
ARTICLE V REPRESENTATIONS AND WARRANTIES................................. 16
5.1 Existence..................................................... 17
5.2 Capacity...................................................... 17
5.3 Inventory..................................................... 17
5.4 Title to Collateral........................................... 18
5.5 Receivables................................................... 18
5.6 Equipment..................................................... 19
5.7 Place of Business............................................. 19
5.8 Financial Condition........................................... 19
5.9 Taxes......................................................... 20
5.10 Litigation.................................................... 20
5.11 ERISA Matters................................................. 20
5.12 Environmental Matters......................................... 21
5.13 Validity of Loan Documents.................................... 22
5.14 No Consent or Filing.......................................... 22
5.15 No Violations................................................. 22
5.16 Trademarks and Patents........................................ 22
5.17 Contingent Liabilities........................................ 23
5.18 Compliance With Laws.......................................... 23
5.19 Subsidiaries.................................................. 23
5.20 Margin Stock.................................................. 23
5.21 Government Regulations........................................ 23
5.22 Accurate Information.......................................... 23
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ARTICLE VI CERTAIN DOCUMENTS TO BE DELIVERED TO LENDER................... 23
6.1 All Advances.................................................. 23
6.2 Closing Deliveries............................................ 24
6.3 Additional Documents.......................................... 25
ARTICLE VII AFFIRMATIVE COVENANTS........................................ 26
7.1 Financial Information......................................... 26
7.2 Activities of Subsidiaries.................................... 27
7.3 Books and Records; Verification of Collateral................. 27
7.4 Taxes......................................................... 27
7.5 Litigation.................................................... 28
7.6 Insurance..................................................... 28
7.7 Good Standing; Business....................................... 29
7.8 Notice of Adverse Event or Non-Compliance..................... 29
7.9 Compliance with Environmental Laws............................ 29
7.10 Maintenance and Defense....................................... 29
7.11 Use of Proceeds............................................... 30
7.12 Compliance with Laws and Contractual Obligations.............. 30
7.13 Maintenance of Property....................................... 30
7.14 Trademarks and Patents........................................ 30
7.15 ERISA......................................................... 31
7.16 Subsidiaries.................................................. 31
ARTICLE VIII NEGATIVE COVENANTS.......................................... 31
8.1 Location of Collateral and Business Records................... 31
8.2 Borrowed Money................................................ 31
8.3 Security Interest and Other Encumbrances...................... 31
8.4 Storing and Use of Collateral................................. 32
8.5 Mergers, Consolidations, Sales or Acquisitions................ 32
8.6 Restricted Payment............................................ 32
8.7 Investments and Advances...................................... 32
8.8 Guaranties.................................................... 33
8.9 Inter-Company Liability - PowerSecure......................... 33
8.10 Change of Name or Domicile.................................... 33
8.11 Financial Covenants........................................... 33
8.12 Agreements with Affiliates.................................... 34
ARTICLE IX EVENTS OF DEFAULT............................................. 35
9.1 Events of Default............................................. 35
9.2 Effects of an Event of Default................................ 37
ARTICLE X LENDER'S RIGHTS AND REMEDIES................................... 37
10.1 Generally..................................................... 37
10.2 Notification of Account Debtors............................... 37
10.3 Possession of Collateral...................................... 38
10.4 Collection of Receivables..................................... 38
ARTICLE XI MISCELLANEOUS................................................. 38
11.1 Expenses...................................................... 38
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11.2 Lender's Consents, Waivers and Amendments..................... 38
11.3 Perfecting the Security Interest; Protecting the Collateral... 38
11.4 Performance of Borrower's Duties.............................. 39
11.5 Notice of Sale................................................ 39
11.6 Waiver by Each Obligor........................................ 40
11.7 Setoff........................................................ 40
11.8 Assignment.................................................... 40
11.9 Successors and Assigns........................................ 40
11.10 Modification; Waiver.......................................... 40
11.11 Counterparts.................................................. 41
11.12 Generally Accepted Accounting Principles...................... 41
11.13 Indemnification............................................... 41
11.14 Termination................................................... 42
11.15 Further Assurances............................................ 42
11.16 Headings...................................................... 42
11.17 Cumulative Security Interest, Etc............................. 42
11.18 Lender's Duties............................................... 43
11.19 Notices Generally............................................. 43
11.20 Severability.................................................. 43
11.21 Inconsistent Provisions....................................... 43
11.22 Entire Agreement.............................................. 43
11.23 Applicable Law................................................ 43
11.24 Consent to Jurisdiction....................................... 43
11.25 Jury Trial Waiver............................................. 44
11.26 No Oral Agreements............................................ 44
LIST OF EXHIBITS
Exhibit A Borrowing Notice
Exhibit B Facility A Note
Exhibit C Facility B Note
Exhibit D Security Agreement - PowerSecure, Inc.
Exhibit E Security Agreement - Southern Flow Companies, Inc.
Exhibit F Security Agreement - Metretek Incorporated
Exhibit G Guaranty
Exhibit H Secretary's Certificate
Exhibit I Borrowing Base Certificate
Exhibit J Compliance Certificate
Exhibit K Financial Statements Certificate
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LIST OF SCHEDULES
Schedule 4.1(d) Trademarks and Patents
Schedule 5.3 Obsolete, Slow-Moving or Otherwise Defective Inventory
Schedule 5.4 Real Property Owned
Schedule 5.6 Locations of Equipment
Schedule 5.10 Litigation
Schedule 5.19 Subsidiaries
Schedule 7.7 Proposed New Business
Schedule 8.2 Currently Outstanding Debt
Schedule 8.3 Current Liens
Schedule 8.8 Current Guaranties
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CREDIT AGREEMENT
This CREDIT AGREEMENT (the "Agreement"), dated as of September 2, 2005, is
by and between METRETEK TECHNOLOGIES, INC., a Delaware corporation, as guarantor
(the "Guarantor"), SOUTHERN FLOW COMPANIES, INC., a Delaware corporation, as
borrower and debtor ("Southern Flow"), POWERSECURE, INC., a Delaware
corporation, as borrower and debtor ("PowerSecure"), METRETEK INCORPORATED, a
Florida corporation ("Metretek") and FIRST NATIONAL BANK OF COLORADO, a national
bank association, as lender (the "Lender"). Southern Flow and PowerSecure are
hereinafter sometimes referred to collectively herein as "Borrower" or
"Borrowers".
RECITALS
A. Borrowers have requested that Lender provide (1) a Credit Facility A (as
defined below) and (2) a Credit Facility B (as defined below) pursuant to which
Lender will provide funding to Borrowers up to the aggregate principal amount
equal to the Total Draw Commitment (as defined below).
B. Lender is willing to make available the credit facilities provided for
herein based on the representations, warranties, covenants, terms and conditions
set forth herein.
AGREEMENT
In consideration of the recitals and the promises and agreements contained
herein, the Lender and the Borrower agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Specific Terms.
For purposes of this Agreement, the following terms shall have the
following meanings:
"Account" means any account receivable, including any rights of
payment for goods sold or leased or for services rendered, which is not
evidenced by an instrument (as defined in the UCC) or chattel paper, whether or
not it has been earned by performance and, in addition, includes all property
included in the definition of "accounts" as used in the UCC together with any
guaranties, letters of credit and other security therefor.
"Account Debtor" means a Person who is obligated under any Account,
general intangible, chattel paper or instrument.
"Adjusted EBITDA" means Net Income after taxes plus (a) non-cash
charges (i.e., depreciation and amortization expense) plus (b) all interest paid
or payable during such
period by a Person on Debt of such Person, plus (c) the maximum amount of all
rents and other payments paid or required to be paid by such Person during such
period under any lease or other contract or arrangement providing for use of
real or personal property in respect of which such Person is obligated as a
lessee, user or obligor, plus (d) losses from discontinued operations, less (e)
all dividends and other distributions paid or payable by such Person or
otherwise accumulating during such period on any capital stock of such Person.
"Advance" means a loan made to Borrower by Lender pursuant to this
Agreement.
"Affiliate" means, when used with respect to any Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), with respect to any Person, means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
by contract or otherwise. For purposes of this Agreement, the term "Affiliate"
shall not include, with respect to any Obligor, the Trust, unless and until such
Obligor owns a majority of the outstanding equity interests in such Trust.
"Annual Facility Fee" means 0.50% of the Facility A Total Draw
Commitment and 0.50% of the Facility B Total Draw Commitment, as applicable.
"Annual Unused Fee" means 0.25% of the average unused amount of the
Facility A Total Draw Commitment or the Facility B Total Draw Commitment, as
applicable.
"Borrower or Borrowers" has the meaning provided in the introductory
paragraph of this Agreement.
"Borrowing Base Report" means the borrowing base compliance
certificate in the form set forth as Exhibit I.
"Borrowing Notice" means a written request for an Advance under the
Draw Facility in the form attached as Exhibit A.
"Business Day" means any day which is not a Saturday, Sunday or a day
on which Lender is authorized or obligated by law, executive order or
governmental decree to be closed.
"Cash Flow Coverage Ratio" means the ratio of Adjusted EBITDA to Debt
Service.
"Closing Date" means the date on which all Loan Documents have been
executed and delivered to and accepted by Lender, all conditions precedent to
funding have been satisfied, including those set forth in Article VI, and the
initial Advances are made by Lender.
"Collateral" means collectively all of the assets of PowerSecure,
Southern Flow and Metretek as described in Section 4.1.
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"Compliance Certificate" means a certification executed by the
Borrower's president or chief executive officer in the form of Exhibit J
attached hereto, as further described in Section 7.1(c).
"Contractual Obligations" means, as applied to any Person, any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject
including, without limitation, the Loan Documents.
"Credit Facility A" means a revolving line of credit provided by
Lender for PowerSecure's working capital purposes as set forth in this
Agreement.
"Credit Facility B" means a revolving line of credit provided by
Lender for Southern Flow's working capital purposes as set forth in this
Agreement.
"Current Assets" means, as of any applicable date of determination,
all cash, non-affiliated customer receivables, United States government
securities, claims against the United States government, inventories and other
current assets in accordance with GAAP.
"Current Liabilities" means, as of any applicable date of
determination, all liabilities of a Person that should be classified as current
in accordance with GAAP.
"Debt" means with respect to any Person, as of any applicable date of
determination, all items of indebtedness, obligation or Liability of a Person,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.
"Debt Service" means for any applicable period of determination, the
sum, without duplication, of (a) all interest paid or payable during such period
by a Person on Debt of such Person, plus (b) all payments of principal or other
sums paid or payable during such period by such Person with respect to Debt of
such person having a final maturity more than one year from the date of creation
of such Debt, plus (c) the maximum amount of all rents and other payments paid
or required to be paid by such Person during such period under any lease or
other contract or arrangement providing for use of real or personal property in
respect of which such Person is obligated as a lessee, user or obligor, plus,
(d) only with regard to the calculation of Debt Service for Section 8.11(c), all
loans or other advances made by such person during such period to any Affiliate
of such Person.
"Default" means any event or condition which, with the giving or
receipt of notice or lapse of time or both, would constitute an Event of Default
hereunder.
"Default Rate" means fees, and other amounts payable in respect to the
Indebtedness a rate of interest per annum that shall be six and one-half percent
(6.5%) above the Prime Rate, as currently applicable to each Advance, and in any
case, the maximum rate permitted by applicable law, if lower.
"Eligible A/R" shall mean Accounts of PowerSecure, Southern Flow, or
Metretek, as applicable, arising in the ordinary course of such applicable
Obligor's business from
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arms-length transactions, provided, however, that unless otherwise approved by
Lender in writing, a Account shall not constitute an Eligible A/R if:
(i) any account receivable or part thereof which is disputed or
against which any defense or counter-claim or right of setoff has been
asserted;
(ii) accounts where debtor has filed bankruptcy;
(iii) any account of the United States government or any department or
agency thereof arising under a contract with any such account debtor,
unless such account is assignable and has been duly assigned to Lender and
acknowledged in accordance with federal law;
(iv) any account of an account debtor whose chief executive officer or
principal place of business is located outside of the United States of
America, except in the case of Metretek, which shall exclude any account of
an account debtor whose chief executive officer or principal place of
business is located outside of the United States of America or Canada;
(v) any account which is unpaid more than ninety (90) days past the
date when payment is due on the invoice therefore;
(vi) any account of a person or entity which is controlled by or
controls or is under common control with the account creditor or any
account of an employee of the account creditor;
(vii) all accounts of an account debtor if ten percent (10%) or more
of the total amount owed by the account debtor to the account creditor is
ninety (90) days or more past due;
(viii) any account in which the Lender does not have a perfected,
first priority security interest;
(ix) any account which the Lender reasonably determines to be
ineligible for, among any number of reasons, includes that the account is
of doubtful collection value.
"Eligible Inventory" means all Inventory of PowerSecure, Southern
Flow, or Metretek, as applicable, provided, however, that unless otherwise
approved by Lender, no Inventory shall constitute Eligible Inventory if:
(i) such Inventory is owned in whole or in part by any Person other
than PowerSecure, Southern Flow, or Metretek, as applicable;
(ii) PowerSecure, Southern Flow, or Metretek, as applicable, does not
have a good, valid and marketable title to such Inventory;
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(iii) any Inventory that is obsolete, damaged, defective or otherwise
unable to be sold or used;
(iv) any Inventory not located in the United States of America;
(v) any Inventory in which the Lender does not have a valid, perfected
first priority security interest, including all Inventory in which another
creditor asserts a purchase money security interest, unless the purchase
money security interest has been subordinated to the security interests of
Lender in a form acceptable to Lender;
(vi) such Inventory does not conform in all respects to the warranties
contained in this Agreement and the other Loan Documents; or
(vii) the Lender, in its reasonable discretion, designates such
Inventory to be ineligible.
"Environment" means any water including, but not limited to, surface
water and ground water or water vapor, any land including land surface or
subsurface, stream sediments, air, fish, wildlife, plants, and all other natural
resources or environmental media.
"Environmental Laws" means all federal, state, and local
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances, regulations, codes, and rules relating to the
protection of the Environment and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production, or disposal of
hazardous substances and the policies, guidelines, procedures, interpretations,
decisions, orders, and directives of federal, state, and local governmental
agencies and authorities with respect thereto.
"Environmental Audit" means a review for the purpose of determining
whether the Borrower complies with Environmental Laws and whether there exists
any condition or circumstance which requires or will require investigation,
characterization, cleanup, removal or other remedial action under Environmental
Laws on the part of the Borrower, including, but not limited to, a Phase 1 site
assessment that complies with the standards set forth in the American Society
for Testing and Materials ("ASTM") E1527-00 Standard Practice for Environmental
Site Assessments: Phase 1 Environmental Site Assessment Process ("PHASE 1
ASSESSMENT"), and, if warranted by the results of the Phase 1 Assessment, a
Phase II assessment that complies with the standards set forth in the ASTM
E1903-07 Standard Guide for Environmental Site Assessments: Phase II
Environmental Site Assessment Process. In addition, if any potentially
asbestos-containing building materials were installed in any structure on any
real property prior to 1990, an asbestos survey that complies with the
requirements set forth in the regulations promulgated pursuant to the Asbestos
Hazard Emergency Response Act, 40 C.F.R., Part 763.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" means an Event of Default or Events of Default as
defined in Article IX.
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"Facility" means the Credit Facility A or the Credit Facility B.
"Facility A Borrowing Base" means (a) 75% of Eligible A/R of
PowerSecure plus (b) 25% of the difference between (i) 100% of unbilled accounts
receivable of PowerSecure minus (ii) 100% of unearned revenues or advanced
xxxxxxxx on contracts, plus (c) 25% of Eligible Inventory of PowerSecure, all as
calculated on the most recent monthly Borrowing Base Report.
"Facility B Borrowing Base" means (a) 80% of Eligible A/R of Southern
Flow, plus (b) 20% of Eligible Inventory of Southern Flow, plus (c) 70% of
Eligible A/R of Metretek (including Canadian receivables which otherwise meet
the criteria of Eligible A/R), all as calculated on the most recent monthly
Borrowing Base Report.
"Facility A Draw Outstandings" means, as of any date of determination,
the aggregate principal amount of all Facility A Loans then outstanding.
"Facility B Draw Outstandings" means, as of any date of determination,
the aggregate principal amount of all Facility B Loans then outstanding.
"Facility A Loans" means any borrowing pursuant to an Advance under
the Credit Facility A.
"Facility B Loans" means any borrowing pursuant to an Advance under
the Credit Facility B.
"Facility A Note" has the meaning as provided in Section 2.1(a) of
this Agreement.
"Facility B Note" has the meaning as provided in Section 2.1(b) of
this Agreement.
"Facility A Total Draw Commitment" means a principal amount equal to a
maximum of Two Million Five Hundred Thousand Dollars ($2,500,000).
"Facility B Total Draw Commitment" means a principal amount equal to a
maximum of Two Million Dollars ($2,000,000).
"Federal Bankruptcy Code" means Title 11 of the United States Code,
entitled "Bankruptcy," as amended, or any successor federal bankruptcy law.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 9:00 a.m. (Denver
time) on such day on such transactions received by the Lender from three Federal
funds brokers of recognized standing selected by the Lender in its sole
discretion.
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"Financial Hedge" means a transaction between Borrower and Lender or
any Affiliate of Lender which is intended to reduce or eliminate the risk of
fluctuations in one or more interest rates, foreign currencies, commodity
prices, equity prices, or other financial measures, whether or not such
transaction is governed by or subject to any master agreement conforming to ISDA
standards and which is legal and enforceable under applicable law.
"Fiscal Year" means the twelve-month fiscal period of the Borrower
commencing on January 1 and ending on the next ensuing December 31.
"Funding Losses" means any actual loss or expense that Lender
reasonably incurs because Borrower fails or refuses (for any reason whatsoever,
other than a default by Lender) to take any Advance or other loan that it has
requested under this Agreement.
"GAAP" means generally accepted accounting principles consistently
applied from period to period, being those principles of accounting set forth in
pronouncements of the Financial Accounting Standards Board, the American
Institute of Certified Public Accountants, or which have other substantial
authoritative support and are applicable in the circumstances as of the date of
a report.
"Guarantor" means Metretek Technologies, Inc., a Delaware corporation.
"Guaranty" means the guaranty agreement executed by Guarantor and
delivered to Lender.
"Indebtedness" means all outstanding amounts evidenced by the Facility
A Note and the Facility B Note, secured by the Security Interest described in
Article IV, together with all other amounts due, or which may become due,
including but not limited to interest, under this Agreement or any of the Loan
Documents, including but not limited to all amounts described in Section 4.2 of
this Agreement.
"Indemnified Liabilities" has the meaning provided in Section 11.13(c)
of this Agreement.
"Instrument" means all "instruments," "chattel paper" and "letters of
credit" (each as defined in the UCC) in which Borrower now has or hereafter
acquires any rights, including, without limitation, all checks, drafts, notes,
bonds, debentures and certificates of deposit.
"Intangible Assets" means patents, patent rights, trademarks, trade
names, franchises, copyrights, licenses, goodwill, and similar intangible
assets, or that portion of the book value of all of such Person's assets that
would be treated as intangibles under GAAP such as service marks, copyrights,
blueprints, drawings, customer lists, monies due or recoverable from pension
funds, route lists, rights to payment and other rights under any royalty or
licensing agreements, infringement claims, computer programs, information
contained on computer disks or tapes, or software.
"Inter-Company Liability or Inter-Company Liabilities" means any
Liability of a Borrower, Guarantor or any Subsidiary of Guarantor to a Borrower,
Guarantor, or any Subsidiary of Guarantor.
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"Inventory" shall have the meaning assigned to such term, as of the
date of this Agreement, in Article 9 the Uniform Commercial Code for the State
of Colorado.
"Lender" means First National Bank of Colorado and any successors or
assigns of Lender.
"Liability" means any direct or indirect indebtedness, liability,
claim, damage, deficiency, obligation or responsibility, fixed or unfixed,
xxxxxx or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise.
"Lien" means any lien, claim, charge, pledge, security interest,
mortgage or other encumbrance.
"Loan or Loans" means any borrowing pursuant to an Advance under the
Credit Facility A or the Credit Facility B.
"Loan Documents" means this Agreement, the Notes, and all other
agreements and documents, including, without limitation, collateral documents,
letter of credit agreements, notes, acceptance credit agreements, security
agreements, pledges, guaranties, mortgages, title insurance, assignments, and
subordination agreements now or hereafter required to be executed by Borrowers
in favor of Lender and related to the Credit Facility A or the Credit Facility
B.
"Material Adverse Effect" means a material adverse effect on (a) the
business, properties, operations, prospects or condition, financial or
otherwise, of the Borrower, taken as a whole, (b) the ability of the Borrower
taken as a whole to pay or perform its respective obligations, liabilities and
indebtedness under the Loan Documents as such payment or performance becomes due
in accordance with the terms thereof, or (c) the rights, powers and remedies of
Lender under any Loan Document or the validity, legality or enforceability
thereof.
"Maturity Date" means September 1, 2007.
"Metretek" means Metretek Incorporated, a Florida corporation.
"Net Income" means the net income (or loss) of a Person for any period
determined in accordance with GAAP but excluding in any event:
(i) any gains or losses on the sale or other disposition, not in
the ordinary course of business, of investments or fixed or capital assets, and
any taxes on the excluded gains and any tax deductions or credits on account on
any excluded losses; and
(ii) net earnings of any other Person (other than the Trust) in
which the Person for which the calculation is being performed has an ownership
interest, unless such net earnings shall have actually been received by such
Person for which the calculation is being performed in the form of cash
distributions.
"Notes" means the Facility A Note and the Facility B Note.
"Obligor" means Guarantor, Borrowers and Metretek.
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"Pension Event" means, with respect to any Pension Plan, the
occurrence of (a) any prohibited transaction described in Section 406 of ERISA
or in Section 4975 of the Internal Revenue Code; (b) any Reportable Event; (c)
any complete or partial withdrawal, or proposed complete or partial withdrawal,
of Borrower or any Subsidiary from such Pension Plan; (d) any complete or
partial termination, or proposed complete or partial termination, of such
Pension Plan; or (e) any accumulated funding deficiency (whether or not waived),
as defined in Section 302 of ERISA or in Section 412 of the Internal Revenue
Code.
"Pension Plan" means any pension plan, as defined in Section 3(2) of
ERISA, which is a multi-employer plan or a single employer plan, as defined in
Section 4001 of ERISA, and subject to Title IV of ERISA and which is (a) a plan
maintained by Borrower for employees or former employees of Borrower; (b) a plan
to which Borrower contributes or is required to contribute; (c) a plan to which
Borrower was required to make contributions at any time during the five (5)
calendar years preceding the date of this Agreement; or (d) any other plan with
respect to which Borrower has incurred or may incur Liability, including,
without limitation, contingent Liability, under Title IV of ERISA either to such
plan or to the Pension Benefit Guaranty Corporation. For purposes of this
definition and the definition of Pension Event, Borrower shall include any trade
or business (whether or not incorporated) which, together with Borrower, is
deemed to be a "single employer" within the meaning of Section 4001(b)(1) of
ERISA.
"Permitted Liens" has the meaning provided in Section 8.3 of this
Agreement.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, limited liability partnerships,
general partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof and their respective permitted successors and
assigns (or in the case of a governmental person, the successor functional
equivalent of such Person).
"PowerSecure" means PowerSecure, Inc., a Delaware corporation.
"Prime Rate" means the Prime Rate per annum published in the Wall
Street Journal Money Rates section as a guide to general levels for the Prime
Rate or, if no longer published as described, such other rate published in the
Wall Street Journal as Lender determines to be an appropriate substitute. The
Wall Street Prime Rate may not be the lowest rate charged by the Lender for
commercial or other extensions of credit. In the event of any change in the
Prime Rate, the rate of interest applicable to Borrower's loans evidenced hereby
shall be adjusted to immediately correspond with each such change, except such
rate shall not exceed the highest rate permitted by law.
"Property" shall have the meaning set forth in Section 5.12.
"Release" means "release," as defined in Section 101(22) of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. Section 9601(22), and the regulations promulgated thereunder.
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"Reportable Event" means any event described in Section 4043(b) of
ERISA or in regulations issued thereunder with regard to a Pension Plan.
"Responsible Officer" of any person shall mean any executive officer
or financial officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person in
respect of this Agreement.
"Restricted Payment" means (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock or securities
of Borrower or any securities of its (other than those payable or distributable
solely to the Borrower) now or hereafter outstanding, except a dividend payable
solely in shares of class of stock or securities to the holders of that class;
or (b) any redemption, conversion, exchange, retirement or similar payment,
purchase or other acquisition for value, direct or indirect, of any shares of
any class of stock or securities of Borrower (other than those payable or
distributable solely to the Borrower) now or hereafter outstanding.
"Schedule" means any schedule executed in connection with, and which
is a part of, this Agreement.
"Security Interest" means the security interest granted to Lender by
Borrower as described in Article IV, or a security interest within the meaning
of the UCC, as appropriate.
"Southern Flow" means Southern Flow Companies, Inc., a Delaware
corporation.
"State" means the state of Colorado.
"Subsidiary" of any Person means any corporation, limited liability
company, partnership or other entity of which at least fifty percent (50%) of
the voting power is controlled by such Person, directly or indirectly, through
one or more Subsidiaries, whether existing on the date hereof or acquired at any
time hereafter.
"Tangible Net Worth" means, for any Person, as of any date of
determination, the result of (a) such Person's total stockholder's equity, minus
(b) the sum of (i) all Intangible Assets of such Person, and (ii) all amounts
due to such Person from any Affiliate.
"Third Party" means any Person or entity who has executed and
delivered, or who in the future may execute and deliver, to Lender any
agreement, instrument, or document, pursuant to which such Person or entity has
guaranteed to Lender the payment of the Indebtedness or has granted Lender a
security interest in or lien on some or all of such Person's or entity's real or
personal property to secure the payment of the Indebtedness, and any such
Person's heirs, administrators, successors and assigns. It is acknowledged that
as of the Closing Date, the Obligors are the only Third Parties.
"Total Draw Commitment" means the sum of the Facility A Total Draw
Commitment and the Facility B Total Draw Commitment.
"Trust" means Xxxxxx Midstream 1995-2 Business Trust, a Delaware
statutory trust.
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"UCC" means the Uniform Commercial Code, as in effect in the State on
the date hereof.
1.2 Singulars and Plurals.
Unless the context otherwise requires, words in the singular include the
plural, and in the plural include the singular.
1.3 UCC Definitions.
All terms used herein without definition which are defined by the UCC shall
have the meanings assigned to them by the UCC unless and to the extent varied by
this Agreement.
ARTICLE II
AMOUNTS AND TERMS OF LOANS
2.1 Facilities.
(a) Credit Facility A. Subject to the terms and conditions of this
Agreement, Lender agrees to make available to PowerSecure the Credit Facility A,
provided that Advances may only be made under the Credit Facility A until the
Maturity Date, and any Advances made thereunder shall not exceed an aggregate
amount outstanding at any time equal to the lesser of (i) the Facility A
Borrowing Base or (ii) the Facility A Total Draw Commitment. The indebtedness
outstanding under the Credit Facility A shall be evidenced by a promissory note
in the form of Exhibit B attached hereto ("Facility A Note"). Notwithstanding
anything to the contrary in this Agreement, Lender shall not be required and
shall have no obligation to make any such Advance (y) so long as any Default or
an Event of Default has occurred and is continuing, or (z) if Lender has
accelerated the maturity of any of the Notes as a result of an Event of Default.
(b) Credit Facility B. Subject to the terms and conditions of this
Agreement, Lender agrees to make available to Southern Flow the Credit Facility
B, provided that Advances may only be made under the Credit Facility B until the
Maturity Date, and any Advances made thereunder shall not exceed an aggregate
amount outstanding at any time equal to the lesser of (i) the Facility B
Borrowing Base or (ii) the Facility B Total Draw Commitment. The indebtedness
outstanding under the Credit Facility B shall be evidenced by a promissory note
in the form of Exhibit C attached hereto ("Facility B Note"). Notwithstanding
anything to the contrary in this Agreement, Lender shall not be required and
shall have no obligation to make any such Advance (y) so long as any Default or
an Event of Default has occurred and is continuing, or (z) if Lender has
accelerated the maturity of any of the Notes as a result of an Event of Default.
(c) Maturity. The Loans shall carry interest at the rate specified in
Section 3.1 of this Agreement. All outstanding, unpaid principal and accrued,
unpaid interest, and any other amounts otherwise due under the Loans shall be
due and payable in full on the Maturity Date.
(d) Advances.
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(i) Requests for Advances. The Borrower shall request each
Advance hereunder no later than 12:00 p.m. Denver, Colorado time on the
same Business Day on which such Advance is to be made. Each such request
shall be effective upon receipt by the Lender of a request by electronic
mail or facsimile, or in writing in the form attached hereto as a Borrowing
Notice, with such documentation attached as required by the Borrowing
Notice, and shall be given by (A) a Responsible Officer, (B) a person
designated as the Borrower's agent by a Responsible Officer in a writing
delivered to the Lender, or (C) a person whom the Lender reasonably
believes to be a Responsible Officer or such designated agent. Each such
notice of borrowing shall be irrevocable and shall be deemed a
representation by the Borrower that all conditions precedent to such
borrowing have been satisfied. Each request for an Advance hereunder shall
specify (1) the requested date of Advance and (2) the aggregate amount of
the Advance to be made on the requested date of Advance.
(ii) Advances under Credit Facility A. On the requested date for
an Advance under Credit Facility A, unless Lender determines that any
applicable condition thereto has not been satisfied, Lender will make
available to PowerSecure at PowerSecure's demand deposit account no.
701006704 maintained with Lender (or such other account agreed upon by
Lender and PowerSecure), immediately available funds not later than 3:00
P.M. (Denver, Colorado time) on the requested date of Advance the amount of
the requested Advance. Lender shall be entitled to honor any request for an
Advance that it reasonably believes to be genuine, whether or not the
Person making the request is named as an authorized Person in any corporate
resolution or instruction furnished to Lender by Borrowers.
(iii) Advances under Credit Facility B. On the requested date for
an Advance under Credit Facility B, unless Lender determines that any
applicable condition thereto has not been satisfied, Lender will make
available to Southern Flow at Southern Flow's demand deposit account no.
701006835 maintained with Lender (or such other account agreed upon by
Lender and Southern Flow), immediately available funds not later than 3:00
P.M. (Denver, Colorado time) on the requested date of Advance the amount of
the requested Advance. Lender shall be entitled to honor any request for an
Advance that it reasonably believes to be genuine, whether or not the
Person making the request is named as an authorized Person in any corporate
resolution or instruction furnished to Lender by Borrowers.
(e) Frequency and Amount of Borrowings. Subject to the provisions of
this Agreement, until the Business Day next preceding the Maturity Date,
Borrowers may request an Advance under the Facility at any time and from time to
time.
2.2 Payments, Prepayment.
(a) Interest Payments; Repayment. The Borrowers shall pay to Lender
interest which has accrued on each of the Notes as set forth in Section 3.1 and
in accordance with the terms of the Notes. Additionally, Borrower shall pay to
Lender the outstanding principal of all Advances under the Credit Facility A and
the Credit Facility B, together with all interest accrued thereon and any amount
due with respect thereto, in full upon the earlier to occur of (i)
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termination of this Agreement, (ii) acceleration of the time for payment of the
Indebtedness pursuant to this Agreement or (iii) the Maturity Date,
respectively. The Borrowers shall make each payment (including principal and
interest and any fees or other amounts) hereunder and under any other Loan
Document not later than 12:00 (noon), Denver, Colorado time, on the date when
due in dollars and in immediately available funds. Whenever any payment
(including principal and interest and any fees or other amounts) hereunder or
under any other Loan Document shall become due, or otherwise would occur, on a
day that is not a Business Day, such payment may be made on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of interest or fees, if applicable. The Borrowers may arrange to
make all payments hereunder by direct debit of the Borrower's operating account
maintained by the Lender. 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 this Agreement would not be satisfied, make an Advance in an amount
equal to the portion of any of the Borrower's obligations hereunder (including
principal and interest and any fees or other amounts) from time to time due and
payable.
(b) Prepayments. Subject to the terms and conditions of this
Agreement, any amounts borrowed under Credit Facility A or Credit Facility B (as
applicable) may be voluntarily prepaid at anytime, provided, however, that
Borrower shall notify Lender by 12:00 P.M. (Denver, Colorado time) on any
Business Day of any prepayment of any amounts under either Facility.
(c) Joint and Several Obligations. Payment of all Indebtedness
hereunder, whether under Credit Facility A or Credit Facility B, shall be joint
and several obligations of the Borrowers.
ARTICLE III
INTEREST, FEES AND PAYMENT CONVENTIONS
3.1 Promise to Pay Interest.
(a) Interest; Interest Payments. The Borrowers agree to pay interest
on the Facility A Draw Outstandings or the Facility B Draw Outstandings, as
applicable, from time to time as provided herein. Interest on the Credit
Facility A and on the Credit Facility B shall be due and payable monthly in
arrears on the first (1st) of each month, commencing October 1, 2005. With
respect to both Borrowers, the unpaid principal balance of each Advance will
bear interest at an annual rate equal to the Prime Rate plus 1.5%. The
applicable rate shall change on each day on which the Prime Rate changes.
(b) Default Interest. Notwithstanding the rates of interest specified
herein and the payment dates specified herein, effective immediately upon the
occurrence and during the continuance of any Event of Default, the principal
balance of all outstanding Facility A Loans (in the event PowerSecure is in
Default) or Facility B Loans (in the event Southern Flow is in Default) and, to
the extent permitted by applicable law, any interest payments on the Facility A
Loans or the Facility B Loans, as applicable, shall bear interest payable upon
demand at the Default Rate. In addition, all other amounts due Lender under this
Agreement or any of the other
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Loan Documents, if not paid when due or, in the event no time period is
expressed, if not paid within five (5) days after written notice from Lender
that the same has become due, shall thereafter bear interest at the Default
Rate. Finally, any amount due under the Credit Facility A or under the Credit
Facility B on the Maturity Date which is not then paid shall also bear interest
thereafter at the Default Rate.
3.2 Promise to Pay Fees.
The Borrowers shall pay an Annual Facility Fee, to be paid on the Closing
Date and on each anniversary thereof. Further, each Borrower shall pay Annual
Unused Fee on the average daily unused amount of the Credit Facility A and
Credit Facility B during the preceding quarter and payable, in arrears, on the
last day of each quarter, and continuing on the last day of each quarter until
the Maturity Date. The initial payment of the Annual Unused Fee will be prorated
based on the number of days from the Closing Date through the date the fee is
paid, divided by the number of days in the quarter ending as of such date
payable or the last Business Day of such quarter. If Borrower fails to make,
when due, any payment of fees or expenses specified or referred to in this
Agreement due to Lender, including, without limitation, Annual Facility Fee or
Annual Unused Fee referred to in this Section or fees referred to elsewhere in
this Agreement or in any separate agreement between Borrower and Lender relating
to this Agreement or the transactions contemplated hereby, the amount due shall
bear interest until paid at the Default Rate. Furthermore, such amount shall
constitute part of the Facilities, secured by all of the Collateral.
3.3 Computation of Interest and Fees.
Interest and fees shall be computed on the basis of the actual number of
days elapsed in the period during which interest or fees accrue and a year of
three hundred sixty (360) days. Notwithstanding any of the terms and conditions
contained in this Section, interest in respect of the Facility A Draw
Outstandings and the Facility B Draw Outstandings shall not exceed the maximum
rate permitted by applicable law.
3.4 Funding Losses - Additional Costs.
If any present or future law regarding capital adequacy or compliance by
Lender with any request, directive or requirement now existing or hereafter
imposed by any court or authority regarding capital adequacy, or any change in
its written policies or in the risk category of this transaction, reduces the
rate of return on its capital as a consequence of its obligations under this
Agreement to a level below that which it otherwise could have achieved (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by it to be material (and it may, in determining the amount, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect is already
reflected in the rate of interest then applicable under this Agreement) Lender
shall notify Borrower and deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to compensate it
(which certificate is conclusive and binding absent manifest error), and
Borrower shall promptly pay that amount to Lender upon demand. This paragraph
shall survive the satisfaction and payment of all Indebtedness and termination
of this Agreement. This paragraph may be invoked by Lender only if Lender is
generally invoking
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similar provisions against other Persons to which Lender lends funds pursuant to
facilities similar to either of the Facilities.
3.5 Indemnification for Funding Loss.
Borrowers agree to indemnify Lender against, and pay to it upon demand, any
Funding Loss of that Lender. When Lender demands that Borrower pay any Funding
Loss, Lender shall deliver to Borrower a certificate setting forth in reasonable
detail the basis for imposing a Funding Loss and the calculation of the amount,
which calculation is conclusive and binding absent manifest error. The
provisions of and undertakings and indemnification set forth in this paragraph
shall survive the satisfaction and payment of the Indebtedness and termination
of this Agreement.
ARTICLE IV
COLLATERAL AND INDEBTEDNESS SECURED
4.1 Security Interest.
Each of the Borrowers and Metretek hereby grant to Lender a security
interest in, and a first priority security interest and lien on, all of their
assets, both now owned and hereafter acquired, including, but not limited to,
the following (collectively, the "Collateral"):
(a) All Accounts, as extracted collateral, goods, general intangibles,
chattel paper, documents, and instruments, whether or not specifically assigned
to Lender, including, without limitation, all Accounts, and all equipment
(whether or not affixed to realty), motor vehicles, furniture and fixtures.
(b) All guaranties, collateral, liens on, or security interests in,
real or personal property, leases, letter of credit rights and other rights,
agreements, and property securing or relating to payment of Accounts.
(c) All trademarks, trademark rights, patents, patent rights,
licenses, permits, trade names, trade name rights, and approvals, including,
without limitation, those listed on Schedule 4.1(c) attached hereto, together
with all goodwill, income, royalties, damages and payments now and hereafter due
and payable thereunder and with respect thereto. Lender does not currently
intend to file financing statements on foreign trademarks or patents but
reserves the right to do so in the future at Lender's discretion.
(d) All contracts and agreements (whether written or oral) between a
Borrower or Metretek, as applicable, and third parties.
(e) The entire goodwill and all product lines of each Borrower's and
Metretek's business and other general intangibles of each Borrower and Metretek,
including, without limitation, know-how, trade secrets, customer lists,
proprietary information, inventions, methods, procedures and formulae in
connection with the use of and symbolized by the trademarks of each Borrower and
Metretek.
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(f) All books, records, ledger cards, data processing records,
computer software, and other property at any time evidencing or relating to the
Collateral.
(g) All monies, securities (including a pledge of all stock owned in
any Affiliate and other property now or hereafter held, or received by, or in
transit to, Lender from or for each Borrower and Metretek, and all of each
Borrower's and Metretek's investment property and financial assets (as each is
defined in the UCC)), deposit accounts, credits, and balances with Lender or any
third party existing at any time.
(h) All parts, accessories, attachments, special tools, additions,
replacements, substitutions, and accessions to or for all of the foregoing.
(i) Any and all other personal property.
(j) All proceeds and products of all of the foregoing in any form,
including, without limitation, amounts payable under any policies of insurance
insuring the foregoing against loss or damage, and all increases and profits
received from all of the foregoing.
Notwithstanding the foregoing, the security interest and lien granted
hereunder by the Borrowers and Metretek to the Lender are subject to any and all
Permitted Liens.
4.2 Indebtedness Secured.
The Security Interest granted in the Collateral secures payment of any and
all Indebtedness, and the performance of all obligations and agreements, of
Borrower to Lender, whether now existing or hereafter incurred or arising, of
every kind and character, primary or secondary, direct or indirect, absolute or
contingent, sole, joint or several, and whether such Indebtedness is from time
to time reduced and thereafter increased, or entirely extinguished and
thereafter reincurred, including, without limitation: (a) all Advances under the
Credit Facility A and the Facility A Note; (b) all Advances under the Credit
Facility B and the Facility B Note; all interest which accrues on any such
indebtedness, until payment of such indebtedness in full, including, without
limitation, all interest provided for under this Agreement or any other Loan
Documents; (c) all other monies payable by Borrowers, and all obligations and
agreements of Borrowers to Lender; (d) all debts owed, or to be owed, by
Borrower to others which Lender has obtained, or may obtain, by assignment or
otherwise, including, without limitation, debts acquired by Lender from its
Affiliates that arise either (i) from negative balances which may exist from
time to time in any operating, deposit or other account maintained with such
Affiliate of Lender, or (ii) under any credit card line of credit established by
such Affiliate of Lender for Borrower; (e) all monies payable by any Third
Party, and all obligations and agreements of any Third Party to Lender, pursuant
to any of the Loan Documents; and (f) all monies due, and to become due, in any
way under the Loan Documents; provided, that all references to "Indebtedness" in
the Loan Documents shall, in addition to the foregoing, also include all present
and future indebtedness, liabilities and obligations (and all renewals and
extensions thereof or any part thereof) now or hereafter owed to Lender or any
Affiliate of Lender arising from, by virtue of, or pursuant to, any Financial
Hedge entered into by Borrowers.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, make available the
Facilities and make Advances to Borrowers from time to time as herein provided,
each of the Obligors represents and warrants and, so long as any Indebtedness
remains unpaid or this Agreement remains in effect, shall be deemed continuously
to represent and warrant as follows:
5.1 Existence.
(a) Guarantor is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and is duly licensed or qualified to do business and
in good standing in Colorado and each other state in which the nature of its
business or ownership of its property requires such licensing or qualification,
except to the extent that a failure to be so licensed or qualified would not
interfere with its ability to conduct its business as presently conducted.
Guarantor's organizational identification number is 2259314.
(b) PowerSecure is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and is duly licensed or qualified to do business and
in good standing in North Carolina and in each other state in which the nature
of its business or ownership of its property requires such licensing or
qualification, except to the extent that a failure to be so licensed or
qualified would not interfere with its ability to conduct its business as
presently conducted. PowerSecure's organizational identification number is
3278285.
(c) Southern Flow is a Delaware corporation, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and is duly licensed or qualified to do business and
in good standing in Colorado and each other state in which the nature of its
business or ownership of its property requires such licensing or qualification,
except to the extent that a failure to be so licensed or qualified would not
interfere with its ability to conduct its business as presently conducted.
Southern Flow's organizational identification number is 2176645.
(d) Metretek is a Florida corporation, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or formation and is duly licensed or qualified to do business and
in good standing in every state in which the nature of its business or ownership
of its property requires such licensing or qualification, except to the extent
that a failure to be so licensed or qualified would not interfere with its
ability to conduct its business as presently conducted. Metretek's
organizational identification number is 525191.
5.2 Capacity.
The execution, delivery, and performance of the Loan Documents to which
each Obligor is a party are within each Obligor's corporate or other
organizational powers, have been duly authorized by all necessary and
appropriate corporate or other organizational action, and are not in
contravention of any law, rule or regulation of any governmental agency or
authority, or the terms of Obligor's certificate of incorporation, bylaws or
other organizational documents or any
17
amendment thereto, or of any indenture, agreement, undertaking, or other
document to which Obligor is a party or by which Obligor or any of Obligor's
property is bound or affected.
5.3 Inventory.
Except as set forth on Schedule 5.3 attached hereto, the inventory of each
Obligor as set forth on the most recent financial statements and which is still
inventory of such Obligor as of the date hereof, is merchantable and fit for the
purpose for which it was procured or manufactured, as the case may be, and none
of which his slow-moving, obsolete, damaged, or defective, or not usable or
salable in the ordinary course of business of such Obligor as presently
conducted, except for inventory of an Obligor for which an appropriate reserve
has been recorded on the financial statements of such Obligor.
5.4 Title to Collateral.
(a) Each Obligor is as of the date hereof, and, as to Collateral
acquired by it from time to time after the date hereof will be, the sole direct
and beneficial owner of the Collateral, except for minor defects in title that
do not interfere with its ability to conduct its business as presently
conducted, free of all security interests, liens, and other encumbrances or
rights of others whatsoever, except, with respect to the Collateral, Lender's
Security Interest therein and other Permitted Liens;
(b) all owned and leased buildings and material equipment of the
Obligor to such Obligor's knowledge are in working order (ordinary wear and tear
excepted) and conform to all applicable laws, ordinances and regulations, except
for such failures as would not interfere with such Obligor's ability to conduct
its business as presently conducted;
(c) Each Borrower and Metretek, as applicable, has the unconditional
authority to grant a Security Interest in the Collateral to Lender;
(d) assuming that all necessary UCC filings have been made and, if
applicable, assuming compliance with the Federal Assignment of Claims Act of
1940, as amended, Lender has an enforceable first lien and deed of trust and
perfected first priority security interest on all Collateral, superior and prior
to the rights of all other Persons or entities therein, except for the Permitted
Liens; and
(e) the legal descriptions of all real property owned by Borrower (or
Metretek, as applicable) are as set forth on the attached Schedule 5.4.
5.5 Receivables.
(a) None of the Accounts is, nor will any hereafter arising Account be
evidenced by an Instrument, document, or chattel paper or by any note, draft,
trade acceptance, or other Instrument for the payment of money, except such
Instrument, as has been endorsed and delivered by Borrower or Metretek, as
applicable, to Lender and has not been presented for payment and returned
uncollected for any reason.
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(b) Each existing account receivable or other Account, including
retentions and holdbacks pursuant to their terms, constitutes, and each
hereafter arising Account will constitute, the legally valid and binding
obligation of the Account Debtor obligated to pay the same. The amount
represented by the applicable Obligor to Lender as owing by each Account Debtor
is, or will be, the correct amount actually and unconditionally owing, except
for normal cash discounts, allowances, credits and adjustments in the ordinary
course of business where applicable, and subject to the reserves therefor set
forth on the financial statements of the Obligor. No Account Debtor has any
defense, setoffs, claims or counterclaims that are, in the aggregate, material
to the value of the Accounts or in excess of such reserves.
5.6 Equipment.
All of Borrower's (or Metretek's, as applicable) equipment is located, and
equipment which is a fixture is affixed to real property, only at (a) the
address of Borrower (or Metretek, as applicable) set forth on the signature
pages to this Agreement; (b) within the State, (c) one of the locations
specified on Schedule 5.6 or (d) such other place or places as approved by
Lender in writing. The real property at which such equipment is located is owned
or leased pursuant to valid leasehold interests by Borrower (or Metretek, as
applicable).
5.7 Place of Business.
Borrower and Metretek, as applicable, are engaged in business operations
which are in whole, or in part, carried on at its chief executive office address
specified on the signature pages to this Agreement and at no other address or
addresses, except for one of the locations specified on Schedule 5.6 or
locations at which such Obligor is performing services for its customers, and
such Obligor's records concerning the Collateral are kept at such chief
executive address.
5.8 Financial Condition.
(a) All financial statements concerning each Obligor which have been
or will hereafter be furnished to Lender have been or will be prepared in
accordance with GAAP consistently applied (except as disclosed therein), are
correct and complete in all material respects, and do or will present fairly in
all material respects the financial condition of the entities covered thereby as
at the dates thereof and the results of their operations for the periods then
ended, it being understood that all interim financial statements are subject to
year-end adjustments and are not required to have footnote disclosures.
(b) All projections delivered on or prior to the Closing Date and any
projections delivered pursuant to Section 7.1 represent and will represent as of
the date thereof the good faith estimate of Borrower and its senior management
concerning the most probable course of its business, it being recognized by
Lender, however, that projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by such
projections may differ form the projected results and that such differences may
be material.
(c) PowerSecure has furnished to the Lender unaudited internally
prepared financial statements of PowerSecure as of June 30, 2005. Since June 30,
2005, there have been no events or changes in facts or circumstances affecting
PowerSecure or its business that have
19
resulted (or reasonably could be expected to result), either individually or in
the aggregate, in a Material Adverse Effect.
(d) Southern Flow has furnished to the Lender unaudited internally
prepared financial statements of Southern Flow as of June 30, 2005. Since June
30, 2005, there have been no events or changes in facts or circumstances
affecting Southern Flow or its business that have resulted (or reasonably could
be expected to result), either individually or in the aggregate, in a Material
Adverse Effect.
(e) Guarantor has furnished to the Lender unaudited internally
prepared consolidated financial statements of Guarantor as of June 30, 2005.
Since June 30, 2005, there have been no events or changes in facts or
circumstances affecting the Guarantor or its business that have resulted (or
reasonably could be expected to result), either individually or in the
aggregate, in a Material Adverse Effect.
5.9 Taxes.
All federal and other tax returns required to be filed by each Obligor have
been filed, are true, complete and correct, and all taxes required by such
returns to be paid have been paid when due, 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; and no Obligor has
received any notice from the Internal Revenue Service or any other taxing
authority proposing additional taxes. No Obligor is the subject of any review or
audit by the Internal Revenue Service or any governmental investigation
concerning the violation or possible violation of any law, except to the extent
that such review or audit could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
5.10 Litigation.
Except as otherwise provided on Schedule 5.10, there are no action or
proceedings which are pending or, to the knowledge of any Obligor, threatened
against such Obligor, and each Obligor shall, promptly upon becoming aware of
any such pending or threatened action or proceeding, give written notice thereof
to Lender.
5.11 ERISA Matters.
(a) No Obligor is a party to a defined benefit pension plan.
(b) There are no investigations by any governmental agency,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Pension Plan), suits or proceedings against or
involving any Pension Plan or asserting any rights to or claims for benefits
under any Pension Plan that could give rise to any material Liability, and there
are not any facts that could give rise to any Material Adverse Effect in the
event of any such investigation, claim, suit or proceeding.
(c) None of the Pension Plans under which any Obligor has or could
have any Liability (i) constitutes a multiemployer plan; (ii) is subject to
Title IV of ERISA, Section 302 of
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ERISA or Section 412 of the Code; or (iii) has given, or could give, rise to a
Liability under Title IV of ERISA.
(d) All contributions to, and payments from, the Pension Plans have
been timely made in accordance with the terms of the Pension Plans. All such
contributions to, and payments from, the Pension Plans, except those payments to
be made from a trust qualified under Section 401(a) of the Code, for any period
ending before the date hereof that are not yet, but will be, required to be
made, will be properly accrued and reflected in the Borrower's financial
statements.
(e) Each benefit plan that is a Pension Plan that is intended to be a
tax-qualified plan has been the subject of a determination letter from the
Internal Revenue Service to the effect that such Obligor Pension Plan is
qualified and exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code; no such determination letter has been revoked, and,
to the knowledge of the Obligor, revocation has not been threatened; no event
has occurred and no circumstances exist that would adversely affect the
tax-qualification of such Pension Plan; and such Pension Plan has not been
amended since the effective date of its most recent determination letter in any
respect that might adversely affect its qualification, materially increase its
cost or require security under Section 307 of ERISA. No event has occurred that
could subject any Pension Plan to tax under Section 511 of the Code.
(f) No "prohibited transaction" (as defined in Section 4975 of the
Code) has occurred that could subject any Obligor or any of its employees, or,
to the knowledge of the Borrower, a trustee, administrator or other fiduciary of
any trust created under any Pension Plan to the tax or sanctions on prohibited
transactions imposed by Section 4975 of the Code or Title I of ERISA; and
neither the Obligor, administrator nor other fiduciary of any Pension Plan nor
any agent of any of the foregoing has engaged in any transaction or acted in a
manner that could, or has failed to act so as to, subject the Obligor or any
trustee, administrator or other fiduciary to any Liability for breach of
fiduciary duty under ERISA or any other applicable law.
(g) No Pension Plan has been terminated, or partially terminated, or
is insolvent, or in reorganization, nor have any proceedings been instituted to
terminate or reorganize any Pension Plan, nor has any event occurred with
respect to a Pension Plan that could reasonably cause a Material Adverse Effect.
5.12 Environmental Matters.
(a) Except as described in writing delivered to the Lender, no Obligor
nor, to any Obligor's knowledge, no other person has ever caused or permitted
any Hazardous Material to be placed, held, located or disposed of on, under or
at any of the real property owned by any Obligor (the "Property") or any part
thereof except in compliance with Environmental Laws. Each Obligor hereby
warrants and represents that: (a) it has complied and, in the future, will
comply in all material respects with all applicable Environmental Laws; (b) to
such Obligor's knowledge, the Property has not previously contained and does not
contain any underground storage tanks (other than in compliance with all
applicable Environmental Laws) and have never been used by the Obligor or to the
Obligor's knowledge, by any other person as a temporary or permanent storage or
disposal site for any Hazardous Material; and (c) except for conditions
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which may arise out of the ordinary course of business conducted by the Obligor
on such properties, there are no conditions existing currently or likely to
exist during the term of this Agreement that would subject the Obligor to
damages, penalties, injunctive relief or cleanup costs under any Environmental
Laws or that require or are likely to require cleanup, removal, remedial action
or other response pursuant to any Environmental Laws by the Obligor and that
arise from operations conducted by the Obligor. The Obligor has delivered to the
Lender all environmental reports, studies, audits and other data and information
in the possession or control of the Obligor relating to the Property. If the
Lender reasonably suspects that any violation of the Environmental Laws is
occurring involving the Property or if an Event of Default shall have occurred
and be continuing which, with the passage of time or the giving of notice, or
both, would constitute an Event of Default, the Lender shall have the right, but
no obligation, in its reasonable discretion to conduct any tests or inspections
of the Property at the Obligor's expense (including, without limitation, soil
and other tests, borings, sampling and monitoring) in order to determine
compliance with Environmental Laws or the presence thereon or therein of
Hazardous Material and to have access to the Property for such purposes.
(b) No Obligor is subject to any existing, pending, or threatened
suit, claim, notice of violation, or request for information under any
Environmental Law nor has any Obligor provided any notice or information under
any Environmental Law.
(c) Each Obligor is in compliance with, and have obtained all
environmental permits required by, all Environmental Laws.
5.13 Validity of Loan Documents.
The Loan Documents constitute the legal, valid, and binding obligations of
each Obligor to which it is a party and any Third Parties thereto, enforceable
in accordance with their respective terms, except as enforceability may be
limited by applicable bankruptcy and insolvency laws, laws affecting creditors
rights generally or general principles of equity.
5.14 No Consent or Filing.
Except for the filings necessary to perfect the Liens in favor of the
Lender in the Collateral and to release Liens in respect of current indebtedness
to Xxxxx Fargo Business Credit, Inc. and other consents, licenses, approvals,
authorizations and other filings that shall have been obtained prior to or as of
the Closing Date, no consent, license, approval, or authorization of, or
registration, declaration, or filing with, any court, governmental body or
authority, or other Person or entity is required in connection with the valid
execution, delivery, or performance of the Loan Documents or for the conduct of
Borrower's business as now conducted, other than filings and recordings to
perfect security interests in or liens on the Collateral in connection with the
Loan Documents.
5.15 No Violations.
No Obligor is in violation of any term of its organizational documents or
of any mortgage, borrowing agreement, or other instrument or agreement
pertaining to indebtedness for borrowed money. No Obligor is in violation of any
term of any other indenture, instrument, or agreement to which it is a party or
by which it or its property may be bound, resulting, or which
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might reasonably be expected have a Material Adverse Effect. To each Obligor's
knowledge, no Obligor is in violation of any order, writ, judgment, injunction,
or decree of any court of competent jurisdiction or of any statute, rule, or
regulation of any governmental authority. The execution and delivery of the Loan
Documents and the performance of all of the same is, and will be, in compliance
with the foregoing and will not result in any violation thereof, or result in
the creation of any mortgage, lien, security interest, charge, or encumbrance
upon, any properties or assets of any Obligor except in favor of Lender. To each
Obligor's knowledge, there exists no other fact or circumstance (whether or not
disclosed in the Loan Documents) related to any Obligor or its business which
would have a Material Adverse Effect, or could reasonably be expected to have a
Material Adverse Effect.
5.16 Trademarks and Patents.
Schedule 4.1(c) lists all trademarks and patents that Obligor has
registered, or filed for registration, with the Secretary of State in any state
or with the U.S. Patent and Trademark Office. Each Obligor, as applicable has
all trademarks, trademark rights, patents, patent rights, trade names, trade
name rights and copyrights that are required for such Obligor, as applicable to
conduct its business as now conducted without conflict with the rights or
claimed rights of others. Borrower (or Metretek, as applicable) has the right to
use all such intellectual property pursuant to valid trademarks, patents,
licenses, sub-licenses or other agreement. Borrower (or Metretek, as applicable)
has not received any written claim, demand or notice alleging any interference,
infringement or misappropriation of its intellectual property with any third
party's intellectual property rights and, to the knowledge of such Obligor, as
applicable, no third party has interfered with, infringed upon or
misappropriated any intellectual property rights of such Obligor. Each Obligor
hereby grants to Lender an absolute power of attorney to sign, upon the
occurrence and during the continuance of an Event of Default, any document which
may be required by any applicable Secretary of State or the United States Patent
and Trademark Office in order to effect an absolute assignment of all right,
title and interest in each trademark, patent and copyright, and to record the
same.
5.17 Contingent Liabilities.
There are no suretyship agreements, guaranties, or other contingent
liabilities of any Obligor which are not disclosed by the financial statements
described in Section 5.8.
5.18 Compliance With Laws.
Each Obligor is in compliance with all applicable laws, rules, regulations,
and other legal requirements with respect to its business and the use,
maintenance, and operation of the real and personal property owned or leased by
it in the conduct of its business, except where the failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect.
5.19 Subsidiaries.
Borrower and Guarantor have no Subsidiaries other than those listed in
Schedule 5.19 attached hereto.
5.20 Margin Stock.
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The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock.
5.21 Government Regulations.
The Borrower is not subject to regulation under the Investment Company Act
of 1940, as amended, the Federal Power Act, the Public Utility Holding Company
Act of 1935 or any federal or state statute or regulation limiting its ability
to incur indebtedness for money borrowed.
5.22 Accurate Information.
All information heretofore, herein or hereafter supplied to Lender by or on
behalf of any Obligor with respect to the Collateral is and will be accurate and
complete in all material respects; provided that (i) to the extent any such
information was based upon or constitutes a forecast or projection, the Obligor
represents only that it acted in good faith and utilized assumptions believed by
it to be reasonable at the time made (it being understood and agreed that
projections as to future events are not to be viewed as facts or guarantees of
future performance, that actual results during the period or periods covered by
such projections may differ materially from the projected results and that the
Obligor makes no representation that such projections will in fact be realized,
and (ii) as to information specified as having been supplied or prepared by a
Person other than an Obligor or a Third Party, the Obligor represents only that
it is not aware of any material misstatement or omission therein.
ARTICLE VI
CERTAIN DOCUMENTS TO BE DELIVERED TO LENDER
6.1 All Advances.
The making of any Advance provided for in this Agreement shall be subject
to the satisfaction of each of the following conditions precedent:
(a) For any advance under the Credit Facility A or Credit Facility B
(as applicable), Lender shall have received a Borrowing Notice, as required by
Section 2.1;
(b) Borrower shall be in compliance with all of the terms and
provisions set forth in this Agreement and the Loan Documents with respect to
their part to be observed or performed, and at the time of and immediately after
such Advance, no Event of Default shall have occurred and be continuing;
(c) All of the representations and warranties contained in this
Agreement and the Loan Documents shall be true and correct as if made on both
the date of the request and the date the Advance is made except to the extent
such representations and warranties expressly relate to an earlier date;
(d) Lender shall have received, in form and substance satisfactory to
Lender, all certificates, orders, authorities, consents, affidavits, schedules,
instruments, security
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agreements, financing statements, reports and other documents which are provided
for hereunder, or which Lender may at any time reasonably request; and
(e) Borrower shall have certified to Lender that there is no material
adverse change in the condition of the Collateral, or operations, financial or
otherwise, of Borrower or any other Obligor.
6.2 Closing Deliveries.
As a condition to entering into this Agreement and the other Loan Documents
and making any Advance, Borrower, Metretek or Guarantor, as applicable, shall
duly authorize, execute and deliver, or cause to be delivered, to Lender on the
Closing Date the following agreements and documents, and otherwise satisfy the
following conditions precedent:
(a) Facility A Note duly executed by each Borrower;
(b) Facility B Note duly executed by each Borrower;
(c) the Annual Facility Fee in the amount of $12,500.00;
(d) Security Agreement, in the form set forth here in as Exhibit D,
duly executed by PowerSecure;
(e) Security Agreement, in the form set forth here in as Exhibit E,
duly executed by Southern Flow;
(f) Security Agreement, in the form set forth here in as Exhibit F,
duly executed by Metretek;
(g) Guaranty, in the form set forth as Exhibit G, duly executed by the
Guarantor;
(h) a certificate from the Secretary of each Obligor in the form of
Exhibit H attached hereto;
(i) a Compliance Certificate executed by Borrower's president or chief
executive officer in the form of Exhibit I attached hereto, certifying, inter
alia, that there has been no default on the part of the Borrower and that all
Representations and Warranties made by Borrower in this Agreement are true,
complete and accurate;
(j) UCC Financing Statements and control agreements for any of the
Collateral which is perfected by "control" under the Uniform Commercial Code, as
necessary, pertaining to the Collateral;
(k) Such Uniform Commercial Code or other searches of security
interests against the Borrower indicating that Lender's security interest in the
Collateral shall be a first priority lien, other than the Permitted Liens, and
Lender shall have received assurances satisfactory to Lender that all liens held
by Xxxxx Fargo Business Credit Inc. in the Collateral
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shall be released in conjunction with the first Advance under the Facilities,
and otherwise as are acceptable to the Lender;
(l) A copy of the Certificate of Incorporation of each Obligor,
certified as of a recent date by the Secretary of State of the state of
incorporation;
(m) Certificate of good standing with respect to each Obligor, issued
as of a recent date by the Secretary of State of the state of incorporation;
(n) A copy, certified by the President of each Obligor to be true and
correct and in full force and effect on the Closing Date, of (i) the By-laws of
such Obligor; (ii) proper authorizations of such Obligor authorizing the
issuance, execution and delivery of the Loan Documents to which such Obligor is
a party; (iii) a statement containing the names of the officer or officers of
the Obligor authorized to sign such Loan Documents, together with the signatures
of such officer or officers, and (iv) a statement that no change has occurred in
the condition or operations (financial or otherwise) of such Obligor since June
30, 2005 that has a Material Adverse Effect;
(o) A proof of insurance coverage and a copy of each existing policy
establishing that the Borrower and its property are insured as provided in
Section 7.6 hereof and that the Lender is named as loss payee thereunder;
(p) If required by the Lender, an opinion from Kegler, Brown, Hill &
Xxxxxx Co., L.P.A., counsel to the PowerSecure and Southern Flow, in form and
substance satisfactory to Lender;
(q) A Borrowing Base Report, dated the Closing Date; and
(r) Completion of all Loan Documents by Borrower and the other
Obligors satisfactory to the Lender, and reviewed and approved by Lender's
counsel.
6.3 Additional Documents.
Each Obligor shall deliver to Lender, at such times as Lender may
reasonably request, any other documents and information reasonably requested by
Lender to effectuate the terms and conditions hereof, all in form, content and
detail reasonably satisfactory to Lender.
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any part of the Indebtedness remains unpaid, or this Agreement
remains in effect, Borrower, Metretek or Guarantor, as applicable, shall comply
with the covenants contained elsewhere in this Agreement, and with the covenants
listed below:
7.1 Financial Information.
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Each Borrower and Guarantor, as applicable, shall furnish, or cause to be
furnished, to Lender:
(a) Annual Financial Statements.
(i) As soon as available and in any event within one hundred
twenty (120) days after the end of each Fiscal Year of Borrower audited
consolidated financial statements of the Guarantor as of the end of such
Fiscal Year, fairly presenting the Guarantor's financial position, which
statements shall consist of a balance sheet and related statements of
income, retained earnings, and cash flow covering the period of the
Guarantor's immediately preceding Fiscal Year, and which shall be audited
by independent certified public accountants satisfactory to Lender (and
Lender hereby acknowledges that Xxxx & Associates LLP, the Guarantor's
current independent certified public accountant, is satisfactory to
Lender), together with copies of any management letters provided by said
accountants to Guarantor in connection with performing such audit, and
which shall be certified to be correct by the president or chief financial
officer of Guarantor in the form of Exhibit K attached hereto.
(ii) As soon as available and in any event within forty-five (45)
days after the end of each Fiscal Year of Borrower, unaudited consolidating
financial statements of each Obligor as of the end of such Fiscal Year,
fairly presenting such Obligor's financial position, subject to minor
year-end adjustments made in connection with an audit by accountants, which
statements shall consist of a balance sheet and related statements of
income, covering the period of such Obligor's immediately preceding Fiscal
Year, and which shall be prepared by such Obligor.
(b) Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter during
the Fiscal Year, (ii) consolidated and consolidating financial statements of
each Obligor as of the end of such fiscal quarter, fairly presenting such
Obligor's financial position and results of operations, subject to minor
year-end adjustments in connection with an audit by accountants, which
statements shall consist of a balance sheet and related statements of income and
(consolidated only) cash flow; and (ii) the Compliance Certificate referenced in
Section 7.1(d), below.
(c) Monthly Financial Statements; Accounts Receivable Aging; Borrowing
Base Report. As soon as available and in any event within thirty (30) days after
the end of each calendar month during the Fiscal Year, (i) Borrowing Base Report
of each Borrower; (ii) consolidated and consolidating financial statements of
the Obligors as of the end of such calendar month, fairly presenting each such
Obligor's, as applicable financial position and results of operations, subject
to minor year-end adjustments made in connection with an audit by accountants,
which statements shall consist of a balance sheet and related statement of
income; and (iii) accounts receivable aging; each covering the periods from the
end of the immediately preceding Fiscal Year of the Borrower, to the end of such
month, and for such month alone (if applicable), all in such detail as Lender
may request and signed and certified to be correct by the president or chief
financial officer of each Borrower and Guarantor, as applicable or other
financial officer satisfactory to Lender in the form of Exhibit E attached
hereto and made a part hereof.
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(d) Compliance Certificates. As soon as available and in any event
within one hundred twenty (120) days after the end of each Fiscal Year and
within forty-five (45) days after the end of each quarter during the Fiscal
Year, a Compliance Certificate executed by the president or chief financial
officer of each Borrower and Guarantor or other financial officer satisfactory
to Lender in the form of Exhibit J attached hereto and made a part hereof.
(e) Other Information. Such additional information as Lender may from
time to time reasonably request regarding the financial and business affairs of
Borrower, any Subsidiary or any other Obligor.
7.2 Activities of Subsidiaries.
In the event that either Borrower acquires or forms any Subsidiary, unless
the provisions of this Section 7.2 are expressly waived by Lender in writing,
Borrower shall cause each Subsidiary to comply with Articles VII and VIII
hereof, as applicable, and to enter into third party security agreements and any
other documentation necessary to evidence its obligations to Lender, including
the obligation to grant a security interest in all of its property to Lender to
secure the Indebtedness.
7.3 Books and Records; Verification of Collateral.
Each Obligor shall keep proper, complete and accurate books of record and
account and permit any representative of Lender to visit and inspect any of the
properties and examine and copy any of the books and records of any Obligor at
any reasonable time and as often as may reasonably be desired. Lender shall have
the right to inspect and verify all or any Collateral in any manner and through
any medium Lender may consider appropriate and each Obligor agrees to furnish
all assistance and information and perform any acts which Lender may require in
connection therewith. Each Obligor shall furnish Lender from time to time upon
request, statements and schedules further identifying and describing the
Collateral and such other information, reports and evidence concerning the
Collateral (and in particular the Accounts) as Lender may reasonably request,
all in reasonable detail, including, but not limited to, at Lender's request,
copies of any bank statements regarding deposit accounts maintained by each
Borrower from time to time.
7.4 Taxes.
Each Obligor shall promptly pay and discharge all of its taxes,
assessments, and other governmental charges prior to the date on which penalties
are attached thereto, establish adequate reserves for the payment of such taxes,
assessments, and other governmental charges, make all required withholding and
other tax deposits, and, upon request, provide Lender with receipts or other
proof that such taxes, assessments, and other governmental charges have been
paid in a timely fashion; provided, however, that nothing contained herein shall
require the payment of any tax, assessment, or other governmental charge so long
as its validity is being contested in good faith, and by appropriate proceedings
diligently conducted, and adequate reserves for the payment thereof have been
established.
7.5 Litigation.
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(a) Each Obligor shall promptly notify Lender in writing (i) of any
litigation or counterclaim which is filed against Borrower, and shall provide
Lender quarterly written updates regarding the status of such litigation or
counterclaim, as applicable, and subsequently, to immediately notify Lender in
writing of any negative outcome, including any judgment, of such litigation, or
(ii) of any other proceeding or of any investigation of, Borrower if: (A) the
outcome of such proceeding or investigation could reasonably be expected to
materially and adversely affect the finances or operations of Borrower or title
to, or the value of, any assets of the Borrower, or (B) such litigation,
proceeding, counterclaim, or investigation questions the validity of any Loan
Document or any action taken, or to be taken, pursuant to any Loan Document.
(b) Each Obligor shall furnish to Lender such information regarding
any such litigation, proceeding, counterclaim, or investigation as Lender shall
request.
7.6 Insurance.
(a) Each Obligor shall maintain insurance coverage as may be required
by but in any event not less than insurance coverage, in the forms, amounts and
with companies, which would be carried by prudent management in connection with
similar properties and businesses. Without limiting the foregoing, each Borrower
will (i) keep all its physical property insured against fire and extended
coverage risks in amounts and with deductibles at least equal to those generally
maintained by businesses engaged in similar activities in similar geographic
areas; (ii) maintain all such worker's compensation or similar insurance as may
be required by law provided that each Borrower may self insure any such worker's
compensation and similar insurance; and (iii) maintain, in amounts and with
deductibles at least equal to those generally maintained by businesses engaged
in similar activities in similar geographic areas, general public liability
insurance against claims for bodily injury, death or property damage occurring
on, in or about the properties of Borrower and business interruption insurance.
(b) Each Obligor shall deliver to Lender certificates of insurance or
the policies of insurance required by Lender, with appropriate endorsements
designating Lender as an additional insured, mortgagee and lender loss payee as
requested by Lender. Each certificate and policy of insurance shall provide that
if such policy is cancelled for any reason whatsoever, if any substantial change
is made in the coverage provided by such policy, or if such policy is allowed to
lapse for nonpayment of premium, such cancellation, change, or lapse shall not
be effective as to Lender until thirty (30) days after receipt by Lender of
written notice thereof from the insurer issuing such policy.
(c) Each Obligor hereby appoints Lender as its attorney-in-fact, with
full authority in the place and stead of Borrower and in the name of Borrower,
to take any actions and to execute any instruments which Lender may deem
necessary or desirable to obtain, adjust, make claims under, or otherwise deal
with insurance required pursuant hereto and to receive, endorse, and collect any
drafts or other instruments delivered in connection therewith; provided,
however, that Lender agrees that it will not take any action pursuant to this
power of attorney unless Borrower fails to take any action requested by Lender
promptly upon receipt by Borrower of such request.
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7.7 Good Standing; Business.
(a) Each Obligor shall take all necessary steps to preserve its
existence and its right to conduct business in all states in which the nature of
its business or ownership of its property requires such qualification except
where such failure would not interfere with its ability to conduct business as
then conducted.
(b) Each Obligor shall preserve and keep in full force and effect its
licenses, rights and franchises necessary to continue its business.
(c) Each Obligor shall engage in business only in the same industry
such business is conducted by it on the date of this Agreement except as
otherwise set forth on Schedule 7.7 or consented in advance by Lender.
7.8 Notice of Adverse Event or Non-Compliance.
Borrower shall notify Lender in writing (a) of any failure by Borrower or
any Third Party to comply with any provision of any Loan Document immediately
upon learning of such non-compliance, (b) if any representation or warranty
contained in any Loan Document is no longer true, (c) a Pension Event and (d) of
any event or occurrence which has or could reasonably be expected to have a
Material Adverse Effect.
7.9 Compliance with Environmental Laws.
(a) Each Obligor shall comply with all applicable Environmental Laws.
(b) At the Lender's request, each Obligor shall promptly have an
Environmental Audit on all or part of the Property prepared, at the Borrower's
expense by a firm acceptable to the Lender.
(c) Each Obligor shall deliver promptly to Lender: (i) copies of any
documents received from the United States Environmental Protection Agency or any
state, county, or municipal environmental or health agency concerning Borrower's
operations; and (ii) copies of any documents submitted by Borrower to the United
States Environmental Protection Agency or any state, county, or municipal
environmental or health agency concerning its operations.
7.10 Maintenance and Defense.
(a) Each Borrower (and Metretek, as applicable) shall continue to
collect, at its own expense, all amounts due or to become due to such Borrower
under the Accounts and apply such amounts as are so collected to the outstanding
balances thereof.
(b) In connection with such collections, each Borrower (and Metretek,
as applicable) may take (and, after the occurrence and during the continuance of
an Event of Default at Lender's direction, shall take) such action as Borrower
or Lender may deem necessary or advisable to enforce collection of the Accounts;
provided, that Lender shall have the right at any time after occurrence and
during the continuance of a Default or an Event of Default to take
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all remedial actions contemplated hereby and under the UCC, including but not
limited to: (i) notify the customers or obligors under any Accounts of the
assignment of such Accounts to Lender and to direct such customers or obligors
to make payment of all amounts due or to become due directly to Lender; (ii)
enforce collection of any such Accounts; and (iii) adjust, settle or compromise
the amount or payment of such Accounts. After the occurrence and during the
continuance of a Default or an Event of Default all amounts and proceeds
received by Borrower with respect to the Accounts shall be received in trust for
the benefit of Lender, shall be segregated from other funds of Borrower and
shall be forthwith paid over to Lender in the same form as so received (with any
necessary endorsement) to be held in a Depository Account established by Lender.
After the occurrence and during the continuance of an Event of Default, Borrower
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any customer or obligor thereof, or allow any credits
adjustments, allowances or discount thereon (other than credits adjustments,
allowances and discounts in the ordinary course of business) without the prior
consent of Lender.
(c) Each Borrower (and Metretek, as applicable) shall defend the
Collateral against the claims and demands of all other parties (other than
Lender), including, without limitation, defenses, setoffs, and counterclaims
asserted by any Account Debtor or any other third party against Borrower or
Lender.
7.11 Use of Proceeds.
Each Borrower shall use the proceeds of Advances under the Facility for its
working capital purposes.
7.12 Compliance with Laws and Contractual Obligations.
Each Obligor shall comply with all applicable laws, rules, regulations, and
other legal requirements with respect to its business and the use, maintenance,
and operation of the real and personal property owned or leased by it in the
conduct of its business. Each Obligor shall comply with the obligations,
covenants and conditions contained in all material Contractual Obligations,
unless and to the extent that any such Contractual Obligation is being contested
in good faith and adequate reserves with respect thereto are maintained in
accordance with GAAP.
7.13 Maintenance of Property.
Each Borrower and Metretek shall maintain its property, including, without
limitation, the Collateral, in good condition, working order and repair
(ordinary wear and tear excepted) and shall prevent the Collateral, or any part
thereof, from being or becoming an accession to other goods not constituting
Collateral; provided, however, that nothing in this Section 7.13 shall prevent
Metretek from selling, abandoning or otherwise discontinuing the operation and
maintenance of any of its properties or business from time to time up to a
maximum amount of $100,000 per year, if, in the judgment of Metretek, any such
sale, abandonment or discontinuance is desirable in the conduct of Metretek's
business and not disadvantageous in any material respect to the Lender.
7.14 Trademarks and Patents.
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Each Obligor shall maintain all of their trademarks, trademark rights,
patents, patent rights, licenses, permits, trade names, trade name rights,
licenses and approvals, including, without limitation, those described in
Schedule 4.1(c), if any, in full force and effect until their respective
expiration dates, except for those the non-maintenance of which would not
interfere with such Obligor's ability to conduct its business as presently
conducted. Within thirty (30) days of the issuance of any new trademarks by any
Obligor or the acquisition or issuance or any patent or copyright or the filing
of any application for a trademark, patent or copyright, such Obligor shall
deliver copies of all documentation relating to such acquisition or issuance.
7.15 ERISA.
Each Obligor shall comply with the provisions of ERISA and the Internal
Revenue Code with respect to each Pension Plan.
7.16 Subsidiaries.
Each Obligor shall notify Lender in writing prior to the incorporation,
formation, acquisition or organization of any new Subsidiary.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any part of the Indebtedness remains unpaid or this Agreement
remains in effect, no Obligor, without the prior written consent of Lender or
unless otherwise permitted under this Article VIII, shall do any of the
following:
8.1 Location of Collateral and Business Records.
Without providing at least five (5) Business days' notice to Lender,
move any of the Collateral or the records concerning the Collateral from the
location where they are kept as specified on the signature pages or the
Schedules hereto, other than to customer sites in the ordinary course of
business, provided that a listing of locations of customer sites on which any
Collateral is located shall be provided to Lender from time to time upon
request.
8.2 Borrowed Money.
(a) Create, incur, assume, or suffer to exist any Liability for
borrowed money (including capital leases), except for (i) customary trade
payables entered into in the ordinary course of Borrower's business, (ii) any
Debt in an aggregate amount less than $100,000 outstanding at any one time,
(iii) liabilities and currently outstanding debt as set forth on Schedule 8.2,
(iv) amounts owed to or owing from Affiliates as Inter-Company Liabilities
(subject to the restrictions thereon provided in this Agreement and provided no
Default or Event of Default has occurred and is continuing), (v) amounts now or
hereafter owed by PowerSecure to Caterpillar Financial Services Corporation
("Caterpillar") under a $5 million line of credit provided by Caterpillar for
equipment purchases by PowerSecure, and (vi) amounts owed to Lender.
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(b) Make any voluntary prepayment on the principal of any Liability
for borrowed money other than the amounts owed to Lender, whether subordinate to
the amounts owed to Lender or not, except prepayments or repayments of
indebtedness occurred under Section 8.2(a)(iv) of this Agreement.
8.3 Security Interest and Other Encumbrances.
Create, incur, assume, or suffer to exist any mortgage, security interest,
lien, or other encumbrance upon any of its properties or assets, whether now
owned or hereafter acquired, whether personal or real property assets of
Borrower, except the following (collectively, "Permitted Liens"): (i) liens in
existence on the date hereof and identified on Schedule 8.3, (ii) security
interests, liens and other encumbrances in specific equipment acquired from
Caterpillar for the benefit of Caterpillar under the line of credit referenced
in Section 8.2(a)(v) of this Agreement, (iii) purchase money liens relating to
the acquisition of machinery and equipment of Borrower not exceeding the lesser
of cost or fair market value thereof not exceeding $100,000 in the aggregate
during any fiscal year, (iv) 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
(v) mortgages, security interests, liens and encumbrances in favor of Lender.
8.4 Storing and Use of Collateral.
Place the Collateral in any warehouse that may issue a negotiable document
with respect thereto or use the Collateral in violation of any provision of the
Loan Documents, of any applicable statute, regulation, or ordinance, or of any
policy insuring the Collateral.
8.5 Mergers, Consolidations, Sales or Acquisitions.
(a) Merge or consolidate with or into any corporation or other entity,
except as set forth in Schedule 7.7;
(b) enter into any joint venture or partnership with any Person, firm,
or corporation;
(c) convey, lease, or sell all or any material portion of its property
or assets or business to any other Person, firm, or corporation except in the
ordinary course of its business and in accordance with the terms of this
Agreement;
(d) convey, lease, or sell any of its assets other than in the
ordinary course of business, but in no event for less than the fair market value
thereof; or
(e) consummate any purchases or other acquisitions of the capital
stock or equity interests in, or all or any portion of the property or assets or
business of any other Person, firm, or corporation;
provided that the Lender's prior written consent to transactions subject to this
Section 8.5 shall not be unreasonably withheld.
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8.6 Restricted Payment.
Make any Restricted Payment, except that such restriction shall not
prohibit the Guarantor from redeeming shares of its Series B Preferred Stock
that by their terms became redeemable in December 2004 but had not been
redeemed.
8.7 Investments and Advances.
Make any investment in, or advances to, any other Person, firm, or
corporation, except (a) advance payments or deposits against purchases made in
the ordinary course of Borrower's regular business; (b) direct obligations of
the United States of America; (c) money market mutual funds that invest in
direct obligations of the United States of America; (d) advances to other
Obligors or their Affiliates (subject to the restrictions thereon provided in
this Agreement and provided no Default or Event of Default has occurred and is
continuing), (e) investments in commercial paper and variable or fixed rate
notes issued or guaranteed by U.S. corporations rated "A-1" or "A-2" by Standard
& Poor's Corporation or "P-1" or "P-2" by Xxxxx'x Investors Service or
certificates of deposit or bankers' acceptances having a maturity of one year or
less issued by members of the Federal Reserve System having deposits in excess
of $200,000,000 (which certificates of deposit or bankers' acceptances are fully
insured by the Federal Deposit Insurance Corporation); and (f) investments,
classified in accordance with GAAP as current assets, in money market investment
programs registered under the Investment Company Act of 1940, as amended, which
are administered by reputable financial institutions having capital of at least
$500,000,000 and the portfolios of which are limited to investments of the
character described in foregoing clauses (b), (c), (e) and (f).
8.8 Guaranties.
Become a guarantor, a surety, or otherwise liable for the debts or other
obligations of any other Person, firm, or corporation, whether by guaranty or
suretyship agreement, agreement to purchase indebtedness, agreement for
furnishing funds through the purchase of goods, supplies, or services (or by way
of stock purchase, capital contribution, advance, or loan) for the purpose of
paying or discharging indebtedness, or otherwise, except (a) as an endorser of
instruments for the payment of money deposited to its bank account for
collection in the ordinary course of business, or (b) guaranties, endorsements
or liabilities in existence on the date hereof and specified on Schedule 8.8.
8.9 Inter-Company Liability - PowerSecure.
PowerSecure shall not make any payments to reduce Inter-Company Liability
to Guarantor if PowerSecure is in violation of any of its covenants under this
Agreement or if such payment to Guarantor would result in a violation of a
covenant hereunder. Provided that no such covenant violation exists or would
result, PowerSecure's payments to reduce Inter-Company Liability to Guarantor
shall under no circumstances exceed $100,000 during the fourth calendar quarter
of 2005, and thereafter, $150,000 per calendar quarter.
8.10 Change of Name or Domicile.
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Change the name or state of incorporation of any Obligor without giving at
least thirty (30) days, prior written notice of the proposed new name or the
proposed state of incorporation to Lender, together with delivery to Lender of
UCC Financing Statements reflecting such Obligor's new name or state of
incorporation, all in form and substance satisfactory to Lender.
8.11 Financial Covenants.
(a) PowerSecure Financial Covenants. PowerSecure shall not fail to
comply with the following financial covenants, which shall be tested on a
quarterly basis:
(i) Cash Flow Coverage Ratio. PowerSecure shall maintain a Cash
Flow Coverage Ratio of no less than 1.65:1, tested at the end of each
fiscal quarter for the preceding 12-month period.
(ii) Debt to Tangible Net Worth Ratio. PowerSecure shall not, as
of the end of any fiscal quarter, permit the ratio of Debt of PowerSecure
to Tangible Net Worth of PowerSecure to exceed (i) 5.25:1 during the time
period beginning on the date hereof and ending on December 30, 2005, (ii)
4.50:1 during the time period beginning on December 31, 2005 and ending on
December 30, 2006, and (iii) 3.75:1 during the time period beginning on
December 31, 2006 and continuing thereafter. For the purposes of this
paragraph, the Debt calculation shall exclude Inter-Company Liabilities.
(iii) Current Assets to Current Liabilities Ratio. PowerSecure
shall maintain a ratio of Current Assets of Power Secure to Current
Liabilities of Power Secure of no less than 1.20:1, as of the end of any
fiscal quarter. For purposes of this paragraph, (A) neither Facility shall
be considered a Current Liability and (b) Current Liabilities calculation
shall exclude all loans or other advances made by PowerSecure to any
Affiliate.
(b) Southern Flow Financial Covenants. Southern Flow shall not fail to
comply with the following financial covenants, which shall be tested on a
quarterly basis:
(i) Current Assets to Current Liabilities Ratio. Southern Flow
shall maintain a ratio of Current Assets of Southern Flow to Current
Liabilities of Southern Flow of no less than 1.35:1, as of the end of any
fiscal quarter. For purposes of this paragraph, (A) the Facility B Draw
Outstandings shall be considered Current Liability, (B) the Current Assets
of Southern Flow shall include the Eligible A/R of Metretek included in the
Facility B Borrowing Base, and (C) the Current Assets calculation shall
exclude all loans or other advances made by Southern Flow to any Affiliate.
(ii) Tangible Net Worth. Southern Flow shall maintain a Tangible
Net Worth of Southern Flow of no less than $1,500,000, as of the end of any
fiscal quarter. For purposes of this paragraph, the Tangible Net Worth of
Southern Flow shall include the Eligible A/R of Metretek included in the
Facility B Borrowing Base.
(c) Guarantor Financial Covenants. Guarantor shall not fail to comply,
on a consolidated basis, with the following financial covenants, which shall be
tested on a quarterly basis:
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(i) Debt to Tangible Net Worth Ratio. Guarantor, on a
consolidated basis as of the end of any fiscal quarter, shall not permit
the ratio of Debt to Tangible Net Worth to exceed (i) 5.25:1 during the
time period beginning on the date hereof and ending on June 29, 2006, and
(ii) 4.00:1 during the time period beginning on June 30, 2006 and
continuing thereafter.
(ii) Cash Flow Coverage Ratio. Guarantor, on a consolidated
basis, shall maintain the Cash Flow Coverage Ratio of no less than 1.15:1,
tested at the end of each fiscal quarter for the preceding 12-month period.
8.12 Agreements with Affiliates.
Except for (a) those agreements identified on Schedule 8.12 hereto, (b)
advances and repayments by and to Obligors (subject to the restrictions set
forth in this Agreement and provided no Event of Default shall have occurred and
be continuing) and (c) normal compensation, indemnities and reimbursement of
reasonable expense of officers and directors, enter into any material agreement
or transaction with any Affiliate; provided, however, Borrower may enter into
additional agreements and transactions with Affiliates that are in the ordinary
course of business which contain terms that are fair and reasonable to both
parties; and of which Lender has received written notification. Borrower shall
not prepay any Debt owing to any Affiliate or former Affiliate or pay any Debt
that has been accelerated and is owing to such Persons.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default.
The occurrence of any one or more of the following events shall constitute
an event of default (individually, an "Event of Default" and, collectively,
"Events of Default"):
(a) Nonpayment. Nonpayment when due of any principal, or nonpayment
within five (5) calendar days after the due date of any interest, premium, fee,
cost, or expense due under this Agreement or the other Loan Documents.
(b) Affirmative Covenants. Default in the observance of any of the
covenants or agreements of any Obligor contained in Article VII that is not
remedied by the earlier of ten (10) calendar days after (i) notice thereof by
Lender to Obligor, or (ii) the date Obligor was required to give notice to
Lender under this Agreement.
(c) Negative Covenants. Default in the observance of any of the
covenants or agreements of any Obligor contained in Article VIII, which, in the
event of a default in Section 8.9 (only), is not cured in five (5) business
days.
(d) Other Covenants. Default in the observance of any of the covenants
or agreements of either any Obligor contained in the Loan Documents, other than
in Article VII, Article VIII or payment obligations, or in any other agreement
with Lender which is not
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remedied within the greater of ten (10) days or the grace period permitted
therein, if any, after (i) notice thereof by Lender to Obligor, or (ii) the date
Obligor was required to give notice to Lender under this Agreement.
(e) Cessation of Business or Voluntary Insolvency Proceedings. The (i)
cessation of operations of any Obligor's business as conducted on the date of
this Agreement; (ii) filing by any Obligor of a petition or request for
liquidation, reorganization, arrangement, adjudication as a bankrupt, relief as
a debtor, or other relief under the bankruptcy, insolvency, or similar laws of
the United States of America or any state or territory thereof or any foreign
jurisdiction now or hereafter in effect; (iii) making by any Obligor of a
general assignment for the benefit of creditors; (iv) consent by any Obligor to
the appointment of a receiver or trustee, including, without limitation, a
"custodian," as defined in the Federal Bankruptcy Code, for Obligor or any of
Obligor's assets; (v) making of any, or sending of any, notice of any intended
bulk sale by any Obligor; or (vi) execution by any Obligor of a consent to any
other type of insolvency proceeding (under the Federal Bankruptcy Code or
otherwise) or any formal or informal proceeding for the dissolution or
liquidation of, or settlement of claims against, or winding up of affairs of,
Obligor.
(f) Involuntary Insolvency Proceedings.
(i) The appointment of a receiver, trustee, custodian, or officer
performing similar functions, including, without limitation, a "custodian,"
as defined in the Federal Bankruptcy Code, for any Obligor or any of such
Obligor's assets; or the filing against any Obligor of a request or
petition for liquidation, reorganization, arrangement, adjudication as a
bankrupt, or other relief under the bankruptcy, insolvency, or similar laws
of the United States of America, any state or territory thereof, or any
foreign jurisdiction now or hereafter in effect; or of any other type of
insolvency proceeding (under the Federal Bankruptcy Code or otherwise) or
any formal or informal proceeding for the dissolution or liquidation of,
settlement of claims against, or winding up of affairs of Obligor shall be
instituted against Obligor; and
(ii) such appointment shall not be vacated, or such petition or
proceeding shall not be dismissed, within sixty (60) days after such
appointment, filing, or institution.
(g) Other Indebtedness and Agreements. Failure by any Obligor to pay,
when due (or, if permitted by the terms of any applicable documentation, within
any applicable grace period) any indebtedness in a principal amount in excess of
$50,000 owing by any Obligor to Lender or any other Person or entity (other than
the Indebtedness incurred pursuant to or expressly permitted by this
Agreement)("Outside Indebtedness") whether such indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand, or
otherwise, or failure by any Obligor to perform any term, covenant, or agreement
on its part to be performed under any agreement or instrument (other than a Loan
Document) evidencing or securing or relating to any Outside Indebtedness owing
by Borrower when required to be performed if the effect of such failure is to
permit the holder to accelerate the maturity of such indebtedness; provided that
it shall not be a default under this Agreement if any Obligor has not
37
paid any amount due to anyone other than Lender which it is currently contesting
in good faith and for which adequate reserves have been set aside in the event
such contest is unsuccessful.
(h) Judgments. Any judgment or judgments against any Obligor (other
than any judgment for which such Obligor is fully insured) in excess of $100,000
shall remain unpaid, unstayed on appeal, undischarged, unbonded, or undismissed
for a period of thirty (30) days after the entry thereof.
(i) Collateral; Impairment. There shall occur with respect to the
Collateral any (A) fraud, (B) misappropriation, conversion or diversion; (C) a
levy, seizure, or attachment which would materially or adversely affect the
financial condition of any Obligor; or (D) material loss, theft, or damage not
covered by insurance.
(j) Third Party Default. There shall occur with respect to any Third
Party, (i) any event described in Section 9.1(e), 9.1(f), 9.1(g), or 9.1(h);
(ii) any failure by a Third Party to perform in accordance with the terms of any
agreement between such Person and Lender; or (iii) any material adverse change
to the financial condition of any Third Party.
(k) Representations. Any certificate, statement, representation,
warranty, or financial statement furnished by, or on behalf of, Obligor or any
Third Party, pursuant to, or in connection with, this Agreement (including,
without limitation, representations and warranties contained herein) or as an
inducement to Lender to enter into this Agreement or any other lending agreement
with Obligor shall prove to have been false in any material respect at the time
as of which the facts therein set forth were certified or shall prove to have
omitted any substantial contingent or unliquidated Liability against Obligor or
any such Third Party, or if on the date of the execution of this Agreement there
shall have been any materially adverse change in any of the facts disclosed by
any such statement or certificate which shall not have been disclosed in writing
to Lender at, or prior to, the time of such execution.
(l) Challenge to Validity. Borrower or any Third Party commences any
action or proceeding to contest the validity or enforceability of any Loan
Document or any lien or security interest granted or obligations evidenced by
any Loan Document.
Notwithstanding anything to the contrary in this Section 9.1 or
elsewhere in this Agreement, an event relating solely to Metretek under this
Section 9.1 that would otherwise constitute a Default or an Event of Default
hereunder (a "Metretek Default") shall not be considered a Default or an Event
of Default hereunder, provided that (X) Obligors agree to remove the Eligible
A/R of Metretek from the Facility B Borrowing Base, and (Y) to the extent the
inclusion of the aggregate Advances outstanding under Credit Facility B exceed
the amount of the Facility B Borrowing Base, computed without the inclusion of
the Eligible A/R of Metretek (such excess being referred to in this paragraph as
the "Metretek Excess"), then within fourteen (14) days of the occurrence of the
Metretek Default Southern Flow pays to the Lender an amount equal to the
Metretek Excess so that its outstanding Advances under Credit Facility B do not
exceed the Facility B Borrowing Base, computed without the inclusion of the
Eligible A/R of Metretek.
9.2 Effects of an Event of Default.
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(a) Upon the happening of one or more Events of Default (except an
Event of Default under either Section 9.1(e) or 9.1(f)), Lender may declare any
obligations it may have hereunder to be cancelled, and the principal of the
Indebtedness then outstanding to be immediately due and payable, together with
all interest thereon and costs and expenses accruing under the Loan Documents.
Upon such declaration, any obligations Lender may have hereunder shall be
immediately cancelled, and the Indebtedness then outstanding shall become
immediately due and payable without presentation, demand, or further notice of
any kind to Borrower.
(b) Upon the happening of one or more Events of Default under Section
9.1(e) or 9.1(f), Lender's obligations hereunder shall be cancelled immediately,
automatically, and without notice, and the Indebtedness then outstanding shall
become immediately due and payable without presentation, demand, or notice of
any kind to the Borrower.
ARTICLE X
LENDER'S RIGHTS AND REMEDIES
10.1 Generally.
Lender's rights and remedies with respect to the Collateral, in addition to
those rights granted in this Agreement and in any other agreement between Lender
and Borrower or any Third Party now or hereafter in effect, shall be those of a
secured party under the UCC and under any other applicable law.
10.2 Notification of Account Debtors.
Upon the occurrence of an Event of Default or an event which with notice or
lapse of time, or both, would constitute an Event of Default, Lender may, at any
time and from time to time, notify any or all of Borrower's Account Debtors of
Lender's Security Interest in the Collateral and may direct such Account Debtors
to make all payments on receivables directly to Lender, and provide Borrower
with notice of such notification.
10.3 Possession of Collateral. Whenever Lender may take possession of the
Collateral pursuant to Section 10.1 or otherwise, Lender may take possession of
the Collateral on Borrower's (or Metretek's, as applicable) premises or may
remove the Collateral, or any part thereof, to such other places as Lender may,
in its sole discretion, determine. If requested by Lender, Borrower and/or
Metretek shall assemble the Collateral and deliver it to Lender at such place as
may be designated by Lender.
10.4 Collection of Receivables.
Upon the occurrence of an Event of Default or an event which with notice or
lapse of time, or both, would constitute an Event of Default, Lender may demand,
collect, and xxx for all monies and proceeds due, or to become due, on the
receivables included within the Collateral (in either Borrower's, Metretek's or
Lender's name at the latter's option) with the right to enforce, compromise,
settle, or discharge any or all such receivables. If Lender takes any action
39
contemplated by this Section with respect to any receivable included within the
Collateral, neither Borrower nor Metretek, as applicable, shall exercise any
right that such party would otherwise have had with respect to such receivable.
ARTICLE XI
MISCELLANEOUS
11.1 Expenses.
Each Borrower agrees to pay on demand all costs and expenses of the Lender
in connection with the preparation, execution, delivery, administration,
modification, and amendment of this Agreement, the other Loan Documents, and the
other documents to be delivered hereunder, as those documents relate to such
Borrower, including, without limitation, the reasonable fees and expenses of
counsel for Lender (including the cost of internal counsel) with respect thereto
and with respect to advising Lender as to its rights and responsibilities under
the Loan Documents. Each Borrower further agrees to pay on demand all costs and
expenses of Lender (including, without limitation, reasonable attorneys' fees
and expenses and the cost of internal counsel), in connection with the
enforcement (whether through negotiations, legal proceedings, or otherwise) of
the Loan Documents and the other documents to be delivered hereunder against
such Borrower.
11.2 Lender's Consents, Waivers and Amendments.
Lender shall have the authority to grant any consents or waivers or approve
any amendments to the Loan Documents, including, but not limited to (a)
increases in the aggregate Total Draw Commitment, (b) reductions of principal,
interest or fees payable by Borrower under the Credit Facility A or the Credit
Facility B, (c) extensions of scheduled maturities or times for payments and (d)
the release of any Collateral.
11.3 Perfecting the Security Interest; Protecting the Collateral.
Borrower and Metretek hereby irrevocably appoints Lender as Borrower's (or
Metretek's, as applicable) attorney-in-fact, with full authority in the place
and stead of Borrower and/or Metretek, as applicable, and in the name of
Borrower, Metretek, Lender or otherwise, from time to time (after the occurrence
and continuation of a Default or Event of Default with respect to clauses (a),
(b), (d), (e) and (g) below, and at any time with respect to clauses (c) and (f)
below) in Lender's discretion to take any action and to execute any instrument
that Lender may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to Lender;
(b) to ask, demand, collect, xxx for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
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(c) to receive, endorse, and collect any drafts or other Instruments,
documents and chattel paper, in connection with clauses (a) and (b) above);
(d) to file any claims or take any action or institute any proceedings
that Lender may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Lender with respect to any of
the Collateral;
(e) to pay or discharge taxes or liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Lender in its sole
discretion, and such payments made by Lender to become obligations of Borrower
to Lender, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, assignments, verifications and notices
in connection with accounts and other documents relating to the Collateral; and
(g) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and completely
as though Lender were the absolute owner thereof for all purposes, and to do, at
Lender's option and Borrower's expense, at any time or from time to time, all
acts and things that Lender deems necessary to protect, preserve or realize upon
the Collateral.
Borrower hereby ratifies and approves all acts of Lender made or taken pursuant
to this Section 11.3. Neither Lender nor any Person designated by Lender shall
be liable for any acts or omissions or for any error of judgment or mistake of
fact or law unless the result of fraud or recklessness. This power, being
coupled with an interest, is irrevocable so long as this Agreement shall remain
in force.
11.4 Performance of Borrower's Duties.
Upon any Obligor's failure to perform any of its duties or obligations
under this Agreement or any of the other Loan Documents, Lender may, but shall
not be obligated to, perform or otherwise satisfy any or all such duties or
obligations.
11.5 Notice of Sale.
Without in any way requiring notice to be given in the following manner,
each Obligor agree that any notice by Lender of sale, disposition, or other
intended action hereunder, or in connection herewith, whether required by the
UCC or otherwise, shall constitute reasonable notice to Borrower (or Metretek,
as applicable) if such notice is mailed by regular or certified mail, postage
prepaid, at least ten (10) days prior to such action, to Borrower's (or
Metretek's, as applicable) address or addresses specified on the signature page
hereto or to any other address which Borrower (or Metretek, as applicable) has
specified in writing to Lender as the address to which notices hereunder shall
be given to Borrower (or Metretek, as applicable).
11.6 Waiver by Each Obligor.
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Lender shall have no obligation to take, and each Borrower (or Metretek, as
applicable) shall have the sole responsibility for taking, any and all steps to
preserve rights against any and all of Borrower's (or Metretek's, as applicable)
Account Debtors and against any and all prior parties to any note, chattel
paper, draft, trade acceptance, or other instrument for the payment of money
covered by Lender's Security Interest in the Collateral whether or not in
Lender's possession. Lender shall not be responsible to Borrower (or Metretek,
as applicable) for loss or damage resulting from Lender's failure to enforce any
receivables or to collect any moneys due, or to become due, thereunder or other
proceeds constituting Collateral hereunder. Borrower (or Metretek, as
applicable) waives protest of any note, check, draft, trade acceptance, or other
instrument for the payment of money constituting Collateral at any time held by
Lender on which Borrower (or Metretek, as applicable) is in any way liable and
waives notice of any other action taken by Lender, including, without
limitation, notice of Lender's intention to accelerate the Indebtedness or any
part thereof.
11.7 Setoff.
Without limiting any other right of Lender, whenever Lender has the right
to declare any Indebtedness to be immediately due and payable (whether or not it
has so declared), Lender, at its sole election, may setoff against the
Indebtedness any and all monies then or thereafter owed to Borrower (or
Metretek, as applicable) by Lender in any capacity, whether or not the
Indebtedness or the obligation to pay such monies owed by Lender is then due,
and Lender shall be deemed to have exercised such right of setoff immediately at
the time of such election even though any charge therefor is made or entered on
Lender's records subsequent thereto.
11.8 Assignment.
The rights and benefits of Lender hereunder shall inure to any party
acquiring any interest in the Indebtedness or any part thereof, provided such
assignee agrees in writing to be bound by the terms hereof.
11.9 Successors and Assigns.
Lender and Obligors, as used herein, shall include the successors or
assigns of those parties, except that no Obligor shall have the right to assign
their rights hereunder or any interest herein.
11.10 Modification; Waiver.
No modification or amendment of any provision of this Agreement shall be
made, except by a written agreement signed by Borrowers, Guarantor and Lender
(and Metretek to the extent Metretek's rights would be adversely affected by
such modification or amendment). Lender shall not be deemed to have waived any
rights under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of any
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's rights otherwise to demand strict compliance with that provision or any
other provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any Third Party,
shall constitute a waiver of any of Lender's
42
rights or of any obligations of Borrower or of any Third Party as to any future
transactions. Whenever the consent of Lender is required under this Agreement,
the granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required, and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.
11.11 Counterparts.
This Agreement may be executed in any number of counterparts, and by
Lender, each Borrower, Guarantor and Metretek on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all of which
shall together constitute one and the same Agreement.
11.12 Generally Accepted Accounting Principles.
Any financial calculation to be made, all financial statements and other
financial information to be provided, and all books and records to be kept in
connection with the provisions of this Agreement, shall be in accordance with
GAAP consistently applied from period to period.
11.13 Indemnification.
(a) If after receipt of any payment of all, or any part of, the
Indebtedness, Lender is, for any reason, compelled to surrender such payment to
any Person or entity because such payment is determined to be void or voidable
as a preference, an impermissible setoff, or a diversion of trust funds, or for
any other reason, the Loan Documents shall continue in full force and Borrowers,
jointly and severally, shall be liable, and shall indemnify and hold Lender
harmless for, the amount of such payment surrendered. The provisions of this
Section shall be and remain effective notwithstanding any contrary action which
may have been taken by Lender in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to Lender's rights under the
Loan Documents and shall be deemed to have been conditioned upon such payment
having become final and irrevocable. The provisions of this Section 11.13(a)
shall survive the termination of this Agreement and the Loan Documents.
(b) Borrowers, jointly and severally, agree to indemnify, defend, and
hold harmless Lender from and against, any and all liabilities, claims, damages,
penalties, expenditures, losses, or charges, including, but not limited to, all
costs of investigation, monitoring, legal representation, remedial response,
removal, restoration, or permit acquisition, which may now, or in the future, be
undertaken, suffered, paid, awarded, assessed, or otherwise incurred by Lender
or any other Person or entity as a result of the presence of, Release of, or
threatened Release of hazardous substances on, in, under, or near the property
owned, leased, or operated by Borrower or any Subsidiary. The Liability of
Borrower under the covenants of this Section 11.13(b) is not limited by any
exculpatory provisions in this Agreement or any other documents securing the
Indebtedness and shall survive repayment of the Indebtedness or any transfer or
termination of this Agreement regardless of the means of such transfer or
termination. Borrower agrees that Lender shall not be liable in any way for the
completeness or accuracy of any environmental report or the information
contained therein. Borrower further agrees that
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Lender has no duty to warn Borrower or any other Person or entity about any
actual or potential environmental contamination or other problem that may have
become a Guarantor, or will become a Guarantor, to Lender. The provisions of
this Section 11.13(b) shall survive repayment of the Indebtedness.
(c) Borrowers, jointly and severally, agree to pay, indemnify, and
hold Lender harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements of any kind or nature whatsoever (including, without limitation,
counsel and special counsel fees and disbursements in connection with any
litigation, investigation, hearing, or other proceeding) with respect, or in any
way related, to the existence, execution, delivery, enforcement, performance,
and administration of this Agreement and any other Loan Document (all of the
foregoing, collectively, the "Indemnified Liabilities"). The provisions of this
Section 11.13(c) shall survive repayment of the Indebtedness.
11.14 Termination.
This Agreement is, and is intended to be, a continuing Agreement and shall
remain in full force and effect until the full and final payment of all of the
Indebtedness; provided, however, that Borrower, subject to the provisions hereof
which expressly survive termination, may terminate this Agreement at any time by
giving Lender at least five (5) Business Days prior notice of termination in
writing whereupon all outstanding Indebtedness shall be due and payable in full
without presentation, demand, or further notice of any kind, whether or not all
or any part of such Indebtedness is otherwise due and payable pursuant to the
agreement or instrument evidencing same. Lender may terminate this Agreement
immediately and without notice upon the occurrence of an Event of Default.
Notwithstanding the foregoing or anything in this Agreement or elsewhere to the
contrary, Lender's Security Interest in the Collateral, Lender's rights and
remedies under the Loan Documents and Borrower's obligations and liabilities
under the Loan Documents, shall survive any termination of this Agreement and
shall remain in full force and effect until all of the Indebtedness outstanding,
or contracted or committed for (whether or not outstanding), before the receipt
of such notice by Lender, and any extensions or renewals thereof (whether made
before or after receipt of such notice), together with interest accruing thereon
after such notice, shall be finally and irrevocably paid in full. No Collateral
shall be released or financing statement terminated until: (a) such final and
irrevocable payment in full of the Indebtedness as described in the preceding
sentence; and (b) Borrower and Lender execute a mutual general release, subject
to any continuing obligations hereunder, in form and substance satisfactory to
the Lender and Borrower and their counsel. Thereafter, Lender shall (at
Borrower's expense) release or terminate all security interests, liens and
encumbrances held by Lender on the Collateral.
11.15 Further Assurances.
From time to time, Borrower shall take such action and execute and deliver
to Lender such additional documents, instruments, certificates, and agreements
as Lender may reasonably request to effectuate the purposes of the Loan
Documents.
11.16 Headings.
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Article and Section headings used in this Agreement are for convenience
only and shall not affect the construction of this Agreement.
11.17 Cumulative Security Interest, Etc.
The execution and delivery of this Agreement shall in no manner impair or
affect any other security (by endorsement or otherwise) for payment or
performance of the Indebtedness, and no security taken hereafter as security for
payment or performance of the Indebtedness shall impair in any manner or affect
this Agreement, or Lender's Security Interest in the Collateral granted hereby,
all such present and future additional security to be considered as cumulative
security.
11.18 Lender's Duties.
Without limiting any other provision of this Agreement: (a) the powers
conferred on Lender hereunder are solely to protect its interests and shall not
impose any duty to exercise any such powers; and (b) except as may be required
by applicable law, Lender shall not have any duty as to any Collateral or as to
the taking of any necessary steps to preserve rights against any parties or any
other rights pertaining to any Collateral.
11.19 Notices Generally.
All notices and other communications hereunder, unless otherwise expressly
provided, shall be in writing and made by telecopy, overnight air courier, or
certified or registered mail, return receipt requested, and shall be deemed to
be received by the party to whom sent one (1) Business Day after sending, if
sent by telecopy or overnight air courier; and three (3) Business Days after
mailing, if sent by certified or registered mail. All such notices and other
communications to a party hereto shall be addressed to such party at the address
set forth on the signature pages hereof or to such other address as such party
may designate for itself in a notice to the other party given in accordance with
this Section 11.19. In addition, in the case of any of the Obligors, copies of
any such notices shall also be sent to Metretek Technologies, Inc., 000 Xxxx
Xxxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, Attention: President,
with a copy to Kegler, Brown, Hill & Xxxxxx Co., L.P.A., 00 Xxxx Xxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxxx, Xxxx 00000, Attn: Xxxx X. Xxxx, Esq.
11.20 Severability.
The provisions of this Agreement are independent of, and separable from,
each other, and no such provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other such provision
may be invalid or unenforceable in whole or in part. If any provision of this
Agreement is prohibited or unenforceable in any jurisdiction, such provision
shall be ineffective in such jurisdiction only to the extent of such prohibition
or unenforceability, and such prohibition or unenforceability shall not
invalidate the balance of such provision to the extent it is not prohibited or
unenforceable nor render prohibited or unenforceable such provision in any other
jurisdiction.
11.21 Inconsistent Provisions.
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The terms of this Agreement and the other Loan Documents shall be
cumulative except to the extent that they are specifically inconsistent with
each other, in which case the terms of this Agreement shall prevail.
11.22 Entire Agreement.
This Agreement, the Exhibits and Schedules attached hereto and incorporated
herein by this reference, and the other Loan Documents constitute the entire
agreement and understanding between the parties hereto with respect to the
transactions contemplated hereby and supersede all prior negotiations,
understandings, and agreements between such parties with respect to such
transactions, including, without limitation, those expressed in any commitment
letter delivered by Lender to Borrower.
11.23 Applicable Law.
This Agreement, and the transactions evidenced hereby, shall be governed
by, and construed under, the internal laws of the State of Colorado, without
regard to principles of conflicts of law, as the same may from time to time be
in effect, including, without limitation, the UCC.
11.24 Consent to Jurisdiction.
Borrowers, Guarantor, Metretek and Lender agree that any action or
proceeding to enforce, or arising out of, the Loan Documents may be commenced in
any state or federal court of competent jurisdiction in the State of Colorado,
and Borrower and Lender waive personal service of process and agree that a
summons and complaint commencing an action or proceeding in any such court shall
be properly served and shall confer personal jurisdiction if served by
registered or certified mail to Borrower or Lender, as appropriate, or as
otherwise provided by the laws of the State or the United States.
11.25 Jury Trial Waiver.
BORROWERS, GUARANTOR, METRETEK AND LENDER HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY BORROWERS, GUARANTOR,
METRETEK OR LENDER MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY, IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO. EACH
BORROWER REPRESENTS AND WARRANTS THAT NO REPRESENTATIVE OR AGENT OF LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WILL NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. EACH BORROWER
ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE PROVISIONS OF THIS SECTION 11.25.
11.26 No Oral Agreements.
Oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt, including promises to extend or renew such
debt, are not
46
enforceable. To protect parties hereto from misunderstanding or disappointment,
any agreements covering such matters are contained in the Loan Documents, which
are the complete and exclusive statement of the agreement between the parties,
except as the parties may later agree in writing.
[Remainder Of This Page Is Left Intentionally Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BORROWERS:
POWERSECURE, INC. SOUTHERN FLOW COMPANIES, INC.
By: /s/ A. Xxxxxxx Xxxxxxx By: /s/ A. Xxxxxxx Xxxxxxx
--------------------------------- ------------------------------------
A. Xxxxxxx Xxxxxxx, A. Xxxxxxx Xxxxxxx,
Executive Vice President and CFO Executive Vice President and CFO
Address: 000 Xxxxxx Xxxxxx, Xxxxx 000 Address: 000 Xxxxxxxx Xxxx.
Xxxx Xxxxxx, Xxxxx Xxxxxxxx Xxxxxxxxx, XX 00000
27587 Facsimile: 000-000-0000
Facsimile: (000) 000-0000
GUARANTOR: METRETEK:
METRETEK TECHNOLOGIES, INC. METRETEK INCORPORATED
By: /s/ A. Xxxxxxx Xxxxxxx By: /s/ A. Xxxxxxx Xxxxxxx
--------------------------------- ------------------------------------
A. Xxxxxxx Xxxxxxx, A. Xxxxxxx Xxxxxxx,
Executive Vice President and CFO Executive Vice President and CFO
Address: 000 Xxxx 00xx Xxxxxx, Xxxxx Xxxxxxx: 000-X Xxxx Xxxxx
000 Xxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Facsimile: 000-000-0000 Facsimile: 000-000-0000
LENDER:
FIRST NATIONAL BANK OF COLORADO
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------
Xxxx X. Xxxxxxxx,
Vice President
Address: 0000 Xxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Facsimile: 000-000-0000
SIGNATURE PAGE TO CREDIT AGREEMENT
