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Loan Agreement

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Title:

Loan Agreement

Entities:

Electric City Corp.; Morgan Stanley Dean Witter; International Brotherhood of Electrical Workers

Date:

2002

Size:

67KB total

Price:

$38

ID:

#425571

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LOAN AGREEMENT

THIS LOAN AGREEMENT (Agreement), is made and entered into this 29th day of May, 2002, by and among American Chartered Bank, an Illinois banking association (Bank), Electric City Corp., a Delaware corporation (Electric), Switchboard Apparatus, Inc., a Delaware corporation (Switchboard), and Great Lakes Controlled Energy Corporation, a Delaware corporation (Great Lakes, collectively with Electric and Switchboard, Borrowers and each individually a Borrower).

R E C I T A L S

A. Borrowers, now and from time to time hereafter, may request loans, advances, extensions of credit and/or other financial accommodations from Bank; and

B. Bank has agreed to lend monies and/or make advances, extensions of credit or other financial accommodations to, on behalf of or for the benefit of Borrowers pursuant to the terms and conditions set forth herein. Capitalized terms in this Agreement which are not otherwise defined shall have the meanings set forth in Section 2.

NOW THEREFORE, in consideration of any loan, advance, extension of credit and/or other financial accommodation at any time made by Bank to or for the benefit of Borrowers, and of the promises set forth herein, the parties hereby agree as follows:

1. CREDIT FACILITIES. Subject to and upon the terms and conditions herein set forth, Bank agrees to make available to Borrowers the following credit facilities:

1.1 Revolving Credit.

(a) Borrowing Capacity. Bank shall make available to Borrowers, a secured revolving credit facility (the Revolving Credit) with a maximum principal amount at any one time outstanding equal to the lesser of (i) $2,000,000.00 or (ii) the Borrowing Base. The Revolving Credit shall be subject to all of the terms hereof, may be availed of by Borrowers from time to time, may be repaid by Borrowers and may be availed of by Borrowers again.

(b) Revolving Note. The Revolving Credit shall be evidenced by a Revolving Note of Borrowers (as amended from time to time, the Revolving Note).

(c) Interest Rate. All advances under the Revolving Credit shall bear interest (computed for the actual number of days elapsed on the basis of a 360-day year) until maturity (whether by lapse of time, acceleration or otherwise) at the Revolving Credit Interest Rate.

(d) Interest and Principal Payments. Borrowers shall jointly and severally make monthly payments of all accrued and unpaid interest under the Revolving Credit. The monthly interest payments shall be due on the first day of each month (commencing June 1, 2002) until April 1, 2003. All outstanding principal and all accrued and unpaid interest under the Revolving Credit shall be due and payable on April 30, 2003.

(e) Advances. Borrowers shall give Bank notice prior to 2:00 p.m. (Chicago time) on the date it requests that any advance be made to it under the Revolving Credit. The proceeds of each advance under the Revolving Credit shall be made available to Borrowers at the office of Bank. As a condition of any advance under the Revolving Credit, Borrowers shall deliver to Bank such certifications and other materials as may be required by Bank including, without limitation, a current Borrowing Base certificate in a form satisfactory to Bank.

(f) Unused Line Fee. Borrowers shall pay to Bank an unused commitment fee on the average unused balance of the Revolving Credit at the per annum rate of 0.50% on the amount by which $2,000,000 exceeds the average principal amount of the Revolving Credit outstanding from time to time (computed on a daily basis. This fee shall be payable on a quarterly basis and shall be due within 30 days following the end of each calendar quarter commencing June 30, 2002; provided, however, upon the maturity date of the Revolving Credit any fees due hereunder shall become immediately due and payable at maturity.

1.2 Term Loan.

(a) Principal Amount; Term Note. Bank shall provide to Borrowers a secured term loan in the amount of $400,000.00 (the Term Loan). The Term Loan shall be evidenced by a term note of Borrowers (as amended from time to time, the Term Note).

(b) Interest Rate. The Term Loan shall bear interest (computed for the actual number of days elapsed on the basis of a 360-day year) at the Term Interest Rate.

(c) Interest and Principal Payments. Borrowers shall jointly and severally make equal consecutive monthly principal installments of $8,500.00, plus monthly payments of all accrued and unpaid interest. The monthly principal and

2 interest payments shall be due on the first day of each month (commencing June 1, 2002) until April 1, 2004. A final payment of all outstanding principal and all accrued and unpaid interest shall be due and payable on April 30, 2004.

(d) Prepayment. Borrowers may prepay amounts outstanding under the Term Loan, in whole or in part, from time to time as Borrowers may desire in the minimum amount of $10,000 or an integral multiple thereof, without penalty. Borrowers shall give Bank one business days notice prior to such repayment.

1.3 Mortgage Loan.

(a) Principal Amount; Mortgage Note. Bank shall provide to Borrowers a mortgage loan (the Mortgage Loan) in the amount of $735,000.00. The Mortgage Loan shall be evidenced by a Mortgage Note of Borrowers (as amended from time to time, the Mortgage Note).

(b) Interest Rate. The Mortgage Loan shall bear interest (computed for the actual number of days elapsed on the basis of a 360-day year) at the Mortgage Loan Interest Rate.

(c) Interest and Principal Payments. Borrowers shall jointly and severally make equal consecutive monthly principal installments of $3,000.00, plus monthly payments of all accrued and unpaid interest. The monthly principal and interest payments shall be due on the first day of each month (commencing June 1, 2002) until April 1, 2004. A final payment of all outstanding principal and all accrued and unpaid interest shall be due and payable on April 30, 2004.

(d) Prepayment. Borrowers may prepay amounts outstanding under the Term Loan, in whole or in part, from time to time as Borrowers may desire in the minimum amount of $10,000 or an integral multiple thereof, without penalty. Borrowers shall give Bank one business days notice prior to such prepayment.

1.4 Late Charge. Bank may, at its sole option, assess a late charge equal to 5.0% of the amount of any delinquent payment which is not received within 5 days after such payment is due to cover the additional expense involved in handling such payment, which charge shall constitute additional indebtedness, payable in immediately available funds on demand.

1.5 Security. As security for the payment of the Revolving Credit, the Term Loan and the Mortgage Loan, Borrowers have concurrently herewith granted to Bank a first security interest in all assets of Borrowers including, but not limited to, all of Borrowers accounts receivable, inventory, equipment, trademarks, general intangibles, insurance and the proceeds therefrom and any and all other assets and property (real and personal) of Borrowers, wherever located, and all the products and proceeds therefrom,

3 whether now existing or hereafter acquired, including a first priority mortgage and assignment of rents on the land and building located at the Property.

1.6 Lockbox. All checks, monies, drafts and proceeds of Collateral shall, at Banks option, be collected through a lock box or be immediately deposited in kind by Borrowers in a depository account in Banks name. Upon request of Bank, all proceeds deposited in such lock box or depository account shall be applied to the outstanding principal balance of the credit facilities hereunder one business day after receipt of such payment. Each Borrower shall execute any agreements or instruments necessary, in Banks discretion, to effect the foregoing.

2. DEFINED TERMS.

2.1 Affiliate. The term Affiliate shall mean any person, firm, corporation or entity (herein collectively called a Person) directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for the purposes of this definition if such first Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise. Notwithstanding anything to the contrary, the term Affiliate shall not include EP Power Finance, L.L.C., Newcourt Capital USA, Inc., Morgan Stanley Dean Witter Equity Funding, Inc., Originators Investment Plan, L.P., Duke Capital Partners, LLC, and Joe Marino.

2.2 Borrowing Base. The term Borrowing Base shall mean (i) 70% of the face amount of Eligible Receivables of Electric, and (ii) 80% of the face amount of Eligible Receivables of Switchboard and Great Lakes. The Borrowing Base shall be computed only as against and on so much of the Eligible Receivables as are included in the certifications or other appropriate evidence, in the Banks sole discretion, from time to time furnished by Electric and Switchboard to Bank pursuant hereto. Notwithstanding anything to the contrary, the Eligible Receivables of Great Lakes shall not be included in the Borrowing Base until Bank receives the field exam results for Great Lakes and Bank is satisfied with such results, in its sole discretion.

2.3 Collateral. The term Collateral shall mean all property (personal and real) from time to time subject to the security interest granted to Bank pursuant to the Loan Documents.

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