Exhibit 10.1
 
 
$60,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
among
PARKER DRILLING COMPANY,
as Borrower
The Several Lenders
from Time to Time Parties Hereto
LEHMAN BROTHERS INC.,
as Sole Advisor, Sole Lead Arranger and Sole Bookrunner
BANK OF AMERICA, N.A.,
as Syndication Agent
and
LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
Dated as of September 20, 2007
 
 

 

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TABLE OF CONTENTS

                                Page  
 
                SECTION 1. DEFINITIONS     1  
 
  1.1   Defined Terms     1  
 
  1.2   Other Definitional Provisions     19  
 
                SECTION 2. AMOUNT AND TERMS OF COMMITMENTS     20  
 
  2.1   Commitments     20  
 
  2.2   Procedure for Borrowing     20  
 
  2.3   Borrowing Base Calculations; Inclusion of Assets in Borrowing Base    
20  
 
  2.4   Repayment of Loans; Evidence of Debt     21  
 
  2.5   Commitment Fees, etc.     22  
 
  2.6   Termination or Reduction of Credit Commitments     22  
 
  2.7   Optional Prepayments     22  
 
  2.8   Mandatory Prepayments     22  
 
  2.9   Conversion and Continuation Options     23  
 
  2.10   Minimum Amounts and Maximum Number of Eurodollar Tranches     23  
 
  2.11   Interest Rates and Payment Dates     23  
 
  2.12   Computation of Interest and Fees     24  
 
  2.13   Inability to Determine Interest Rate     24  
 
  2.14   Pro Rata Treatment and Payments     25  
 
  2.15   Requirements of Law     26  
 
  2.16   Taxes     27  
 
  2.17   Indemnity     29  
 
  2.18   Illegality     29  
 
  2.19   Change of Lending Office     29  
 
  2.21   Bank Products     30  
 
                SECTION 3. LETTERS OF CREDIT     30  
 
  3.1   L/C Commitment     30  
 
  3.2   Procedure for Issuance of Letter of Credit     31  
 
  3.3   Fees and Other Charges     31  
 
  3.4   L/C Participations     32  
 
  3.5   Reimbursement Obligation of the Borrower     33  
 
  3.6   Obligations Absolute     33  
 
  3.7   Letter of Credit Payments     34  
 
  3.8   Applications     34  
 
  3.9   Indemnification; Exoneration; Power of Attorney     34  
 
  3.10   Supporting Letter of Credit; Cash Collateral     36  
 
  3.11   Letters of Credit Issued for Subsidiaries     37  
 
  3.12   Determination of Amount     37  
 
                SECTION 4. REPRESENTATIONS AND WARRANTIES     37  
 
  4.1   Financial Condition     37  

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                                Page  
 
               
 
  4.2   No Change     38  
 
  4.3   Corporate Existence; Compliance with Law     38  
 
  4.4   Corporate Power; Authorization; Enforceable Obligations     38  
 
  4.5   No Legal Bar     38  
 
  4.6   No Material Litigation     38  
 
  4.7   No Default     39  
 
  4.8   Ownership of Property; Liens     39  
 
  4.9   Intellectual Property     39  
 
  4.10   Taxes     39  
 
  4.11   Federal Regulations     39  
 
  4.12   Labor Matters     39  
 
  4.13   ERISA     40  
 
  4.14   Investment Company Act; Other Regulations     40  
 
  4.15   Subsidiaries     40  
 
  4.16   Use of Proceeds     40  
 
  4.17   Environmental Matters     40  
 
  4.18   Accuracy of Information, etc.     41  
 
  4.19   Security Documents     42  
 
  4.20   Solvency     42  
 
                SECTION 5. CONDITIONS PRECEDENT     42  
 
  5.1   Conditions to Initial Extension of Credit     42  
 
  5.2   Conditions to Each Extension of Credit     44  
 
                SECTION 6. AFFIRMATIVE COVENANTS     44  
 
  6.1   Financial Statements     44  
 
  6.2   Certificates; Other Information     45  
 
  6.3   Conduct of Business and Maintenance of Existence, etc.     46  
 
  6.4   Maintenance of Property; Insurance     46  
 
  6.5   Inspection of Property; Books and Records; Discussions     47  
 
  6.6   Notices     47  
 
  6.7   Environmental Laws     47  
 
  6.8   Additional Collateral, etc.     48  
 
  6.9   Borrowing Base Certificate     48  
 
  6.10   Cash Management Systems     49  
 
  6.11   Inspection of Collateral     50  
 
  6.12   Further Assurances     50  
 
                SECTION 7. NEGATIVE COVENANTS     50  
 
  7.1   Financial Condition Covenants     50  
 
  7.2   Limitation on Indebtedness     51  
 
  7.3   Limitation on Liens     52  
 
  7.4   Limitation on Fundamental Changes     53  
 
  7.5   Limitation on Disposition of Property     53  
 
  7.6   Limitation on Restricted Payments     54  
 
  7.7   Limitation on Modifications of Debt Instruments, etc.     55  
 
  7.8   Limitation on Transactions with Affiliates     55  

ii

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                                Page  
 
               
 
  7.9   Limitation on Changes in Fiscal Periods     56  
 
  7.10   Limitation on Negative Pledge Clauses     56  
 
  7.11   Limitation on Restrictions on Subsidiary Distributions     56  
 
  7.12   Limitation on Lines of Business     56  
 
  7.13   Limitation on Hedge Agreements     57  
 
                SECTION 8. EVENTS OF DEFAULT     57  
 
                SECTION 9. THE ADMINISTRATIVE AGENT     60  
 
  9.1   Appointment     60  
 
  9.2   Delegation of Duties     60  
 
  9.3   Exculpatory Provisions     60  
 
  9.4   Reliance by Administrative Agent     61  
 
  9.5   Notice of Default     61  
 
  9.6   Non-Reliance on Administrative Agent and Other Lenders     61  
 
  9.7   Indemnification     62  
 
  9.8   Agent in Its Individual Capacity     62  
 
  9.9   Successor Administrative Agent     62  
 
  9.10   Authorization to Release Liens and Guarantees     63  
 
  9.11   The Arrangers; the Syndication Agent     63  
 
                SECTION 10. MISCELLANEOUS     63  
 
  10.1   Amendments and Waivers     63  
 
  10.2   Notices     65  
 
  10.3   No Waiver; Cumulative Remedies     66  
 
  10.4   Survival of Representations and Warranties     66  
 
  10.5   Payment of Expenses     66  
 
  10.6   Successors and Assigns; Participations and Assignments     67  
 
  10.7   Adjustments; Set-off     69  
 
  10.8   Counterparts     70  
 
  10.9   Severability     70  
 
  10.10   Integration     70  
 
  10.11   GOVERNING LAW     70  
 
  10.12   Submission To Jurisdiction; Waivers     71  
 
  10.13   Acknowledgments     71  
 
  10.14   Confidentiality     71  
 
  10.15   Release of Guarantees and Liens     72  
 
  10.16   Accounting Changes     73  
 
  10.17   Delivery of Lender Addenda     73  
 
  10.18   Usury Not Intended     73  
 
  10.19   WAIVERS OF JURY TRIAL     74  
 
  10.20   USA PATRIOT Act Notice     74  

iii

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ANNEXES:

     
A
  Pricing Grid
B
  Existing Letters of Credit
C
  Existing Control Agreements

SCHEDULES:

     
1.1
  Borrowing Base Provisions
4.4
  Consents, Authorizations, Filings and Notices
4.15
  Subsidiaries; Capital Stock
4.17
  Environmental Matters
4.19
  UCC Filing Jurisdictions
7.2(d)
  Existing Indebtedness
7.3(f)
  Existing Liens
7.5(j)
  Dispositions

EXHIBITS:

     
A
  Form of Acknowledgment and Confirmation of Security Documents
B
  Form of Compliance Certificate
C
  Form of Closing Certificate
D
  Form of Assignment and Acceptance
E-1
  Form of Legal Opinion of Bracewell & Giuliani LLP
E-2
  Form of Legal Opinion of General Counsel of the Borrower
F
  Form of Note
G
  Form of Borrowing Base Certificate
H
  Form of Exemption Certificate
I
  Form of Lender Addendum
J
  Form of Borrowing Notice

iv

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          CREDIT AGREEMENT, dated as of September 20, 2007, among PARKER
DRILLING COMPANY, a Delaware corporation (the “Borrower”), the several banks and
other financial institutions or entities from time to time parties to this
Agreement (the “Lenders”), LEHMAN BROTHERS INC., as sole advisor, sole lead
arranger and sole bookrunner (in such capacity, the “Arranger”), BANK OF
AMERICA, N.A., as syndication agent (in such capacity, the “Syndication Agent”),
and LEHMAN COMMERCIAL PAPER INC., as administrative agent (in such capacity, the
“Administrative Agent”).
WITNESSETH:
          WHEREAS, the Borrower entered into a Credit Agreement, dated as of
December 20, 2004 (as previously amended, the “Existing Credit Agreement”), with
Lehman Commercial Paper Inc., as administrative agent, the financial
institutions parties thereto as lenders and certain other parties;
          WHEREAS, the parties hereto have agreed to amend and restate the
Existing Credit Agreement as provided in this Agreement, which Agreement shall
become effective upon the satisfaction of the conditions precedent set forth in
Section 5.1 hereof; and
          WHEREAS, it is the intent of the parties hereto that this Agreement
not constitute a novation of the obligations and liabilities existing under the
Existing Credit Agreement or evidence repayment of any of such obligations and
liabilities and that this Agreement amend and restate in its entirety the
Existing Credit Agreement and re-evidence the obligations of the Borrower
outstanding thereunder;
          NOW, THEREFORE, in consideration of the above premises, the parties
hereto hereby agree that on the Restatement Effective Date (as defined below)
the Existing Credit Agreement shall be amended and restated in its entirety as
follows:
SECTION 1. DEFINITIONS
          1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.
          “Accounts”: as defined in Schedule 1.1.
          “ACH Transactions”: any cash management or related services including
controlled disbursement accounts and the automated clearinghouse transfer of
funds by any Lender for the account of the Borrower or any of its Subsidiaries
pursuant to agreement or overdrafts.
          “Acknowledgment and Confirmation”: the Acknowledgment and Confirmation
of Security Documents to be executed and delivered by the Borrower and each
Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.

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2

          “Adjustment Date”: as defined in the Pricing Grid.
          “Administrative Agent”: as defined in the preamble hereto.
          “Advance Rate”: as defined in Schedule 1.1.
          “Affiliate”: as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
          “Agents”: the collective reference to the Syndication Agent and the
Administrative Agent.
          “Agreement”: this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
          “Applicable Margin”: (a) in the case of Base Rate Loans, 1.50%, and
(b) in the case of Eurodollar Loans, 2.50%; provided, that on and after the
first Adjustment Date occurring after the completion of one full fiscal quarter
of the Borrower after the Closing Date, the Applicable Margin for each Type of
Loan will be determined pursuant to the Pricing Grid.
          “Application”: an application, in such form as the relevant Issuing
Lender may specify from time to time, requesting such Issuing Lender to issue a
Letter of Credit.
          “Arranger”: as defined in the preamble hereto.
          “Assignee”: as defined in Section 10.6(c).
          “Assignor”: as defined in Section 10.6(c).
          “Available Commitment”: with respect to any Lender at any time, an
amount equal to the excess, if any, of (a) such Lender’s Commitment then in
effect over (b) such Lender’s Extensions of Credit then outstanding.
          “Bank Products”: all (a) ACH Transactions and credit card facilities
extended to the Borrower or any of its Subsidiaries by any Lender (or any
Affiliate of any Lender in reliance on such Lender’s agreement to indemnify such
Affiliate), and any instruments governing any of the foregoing and (b) Specified
Hedge Agreements.
          “Base Rate”: for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in
effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof: “Prime Rate” shall mean the prime
lending rate as set forth on the British Banking Association Telerate Page 5 (or
such other comparable publicly available page as may, in the reasonable opinion
of the Administrative Agent after notice to the Borrower, replace such page for
the purpose of

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3

displaying such rate if such rate no longer appears on the British Bankers
Association Telerate Page 5), as in effect from time to time. The Prime Rate is
a reference rate and does not necessarily represent the lowest or best rate
actually available. Any change in the Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
          “Base Rate Loans”: Loans for which the applicable rate of interest is
based upon the Base Rate.
          “Benefitted Lender”: as defined in Section 10.7.
          “Board”: the Board of Governors of the Federal Reserve System of the
United States (or any successor).
          “Borrower”: as defined in the preamble hereto.
          “Borrowing Base”: as defined in Schedule 1.1.
          “Borrowing Base Certificate”: a borrowing base certificate
substantially in the form of Exhibit G, as the same may be modified from time to
time as agreed by the Borrower and the Administrative Agent.
          “Borrowing Date”: any Business Day specified by the Borrower as a date
on which the Borrower requests the relevant Lenders to make Loans hereunder.
          “Borrowing Notice”: with respect to any request for borrowing of Loans
hereunder, a notice from the Borrower, substantially in the form of, and
containing the information prescribed by, Exhibit J, delivered to the
Administrative Agent.
          “Business Day”: (a) for all purposes other than as covered by clause
(b) below, a day other than a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to close and (b) with
respect to all notices and determinations in connection with, and payments of
principal and interest on, Eurodollar Loans, any day which is a Business Day
described in clause (a) and which is also a day for trading by and between banks
in Dollar deposits in the interbank eurodollar market.
          “Capital Lease Obligations”: with respect to any Person, the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP;
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
          “Capital Stock”: any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

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4

          “Cash Equivalents”: (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition;
(b) certificates of deposit, time deposits, eurodollar time deposits or
overnight bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States of America or any state thereof having combined
capital and surplus of not less than $500,000,000; (c) commercial paper of an
issuer rated at least A-2 by Standard & Poor’s Ratings Services (“S&P”) or P-2
by Moody’s Investors Service, Inc. (“Moody’s”), or carrying an equivalent rating
by a nationally recognized rating agency if both of the two named rating
agencies cease publishing ratings of commercial paper issuers generally, and
maturing within six months from the date of acquisition; (d) repurchase
obligations of any Lender or of any commercial bank satisfying the requirements
of clause (b) of this definition, having a term of not more than 30 days with
respect to securities issued or fully guaranteed or insured by the United States
government; (e) securities with maturities of one year or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States, by any political subdivision or taxing authority of any
such state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody’s; (f) securities with maturities of six months or less
from the date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b) of this
definition; (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition; and (h) shares of the Nations Cash Reserves fund for which an
affiliate of Bank of America, N.A. provides investment advisory services.
          “Change of Control”: the occurrence of any of the following events:
(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) shall
become, or obtain rights (whether by means or warrants, options or otherwise) to
become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under
the Exchange Act), directly or indirectly, of more than 35% of the outstanding
common stock of the Borrower; (b) the board of directors of the Borrower shall
cease to consist of a majority of Continuing Directors; or (c) a Specified
Change of Control.
          “Closing Date”: the date on which the conditions precedent set forth
in Section 5.1 shall have been satisfied, which date shall be not later than
September 20, 2007.
          “Code”: the Internal Revenue Code of 1986, as amended from time to
time.
          “Collateral”: all Property of the Loan Parties, now owned or hereafter
acquired, upon which a Lien is purported to be created by any Security Document.
          “Commitment”: as to any Lender, the obligation of such Lender to make
Loans and participate in Letters of Credit in an aggregate principal and/or face
amount not to exceed the amount set forth on Schedule 1 to the Lender Addendum
delivered by such Lender, or, as the case may be, in the Assignment and
Acceptance pursuant to which such Lender became a party

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5

hereto, as the same may be changed from time to time pursuant to the terms
hereof. The aggregate amount of the Total Commitments is $60,000,000.
          “Commitment Fee Rate”: 1/2 of 1% per annum.
          “Commitment Period”: the period from and including the Closing Date to
the Termination Date.
          “Commonly Controlled Entity”: an entity, whether or not incorporated,
that is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group that includes the Borrower and that
is treated as a single employer under Section 414 of the Code.
          “Compliance Certificate”: a certificate duly executed by a Responsible
Officer, substantially in the form of Exhibit B.
          “Concentration Account”: one or more bank accounts maintained by the
Administrative Agent, over which the Administrative Agent shall have sole
dominion and control, into which proceeds of Collateral shall be transferred
from other accounts maintained by the Borrower and the Subsidiary Guarantors, in
the event that the Administrative Agent requires such transfer during the
existence of an Event of Default.
          “Consolidated Current Assets”: of any Person at any date, all amounts
(other than cash and Cash Equivalents) that would, in conformity with GAAP, be
set forth opposite the caption “total current assets” (or any like caption) on a
consolidated balance sheet of such Person and its Subsidiaries at such date.
          “Consolidated Current Liabilities”: of any Person at any date, all
amounts that would, in conformity with GAAP, be set forth opposite the caption
“total current liabilities” (or any like caption) on a consolidated balance
sheet of such Person and its Subsidiaries at such date, but excluding, with
respect to the Borrower, (a) the current portion of any Funded Debt of the
Borrower and its Subsidiaries and (b), without duplication, all Indebtedness
consisting of Loans, to the extent otherwise included therein.
          “Consolidated EBITDA”: of any Person for any period, Consolidated Net
Income of such Person and its Subsidiaries for such period plus, without
duplication and to the extent reflected as a charge in the statement of such
Consolidated Net Income for such period, the sum of (a) income tax expense,
(b) Consolidated Interest Expense of such Person and its Subsidiaries,
amortization or writeoff of debt discount and debt issuance costs and
commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles
(including, but not limited to, goodwill) and organization costs, (e) any
extraordinary, unusual or non-recurring expenses or losses (including, whether
or not otherwise includable as a separate item in the statement of such
Consolidated Net Income for such period, losses on sales of assets outside of
the ordinary course of business), to the extent such additions are found to be
acceptable by the Administrative Agent, acting reasonably, and (f) any other
non-cash charges, and minus, to the extent included in the statement of such
Consolidated Net Income for such period, the sum of (a) interest income (except
to the extent deducted in determining Consolidated Interest Expense), (b) any
extraordinary, unusual or non-

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6

recurring income or gains (including, whether or not otherwise includable as a
separate item in the statement of such Consolidated Net Income for such period,
gains on the sales of assets outside of the ordinary course of business), to the
extent such deductions are found to be acceptable by the Administrative Agent,
acting reasonably, (c) any other non-cash income, all as determined on a
consolidated basis and (d) the amount of any cash expenditures during such
period in respect of items that were added as non-cash charges in determining
Consolidated EBITDA for a prior period.
          “Consolidated Interest Coverage Ratio”: for any period, the ratio of
(a) Consolidated EBITDA of the Borrower and its Subsidiaries for such period to
(b) Consolidated Interest Expense of the Borrower and its Subsidiaries for such
period.
          “Consolidated Interest Expense”: of any Person for any period, total
interest expense (including that attributable to Capital Lease Obligations) of
such Person and its Subsidiaries for such period with respect to all outstanding
Indebtedness of such Person and its Subsidiaries (including, without limitation,
all commissions, discounts and other fees and charges owed by such Person with
respect to letters of credit and bankers’ acceptance financing and net costs of
such Person under Hedge Agreements in respect of interest rates to the extent
such net costs are allocable to such period in accordance with GAAP).
          “Consolidated Leverage Ratio”: as at the last day of any period of
four consecutive fiscal quarters of the Borrower, the ratio of (a) Consolidated
Total Debt on such day to (b) Consolidated EBITDA of the Borrower and its
Subsidiaries for such period; provided that for purposes of calculating
Consolidated EBITDA of the Borrower and its Subsidiaries for any period, (i) the
Consolidated EBITDA of any Person acquired by the Borrower or its Subsidiaries
during such period shall be included on a pro forma basis for such period
(assuming the consummation of such acquisition and the incurrence or assumption
of any Indebtedness in connection therewith occurred on the first day of such
period) if the consolidated balance sheet of such acquired Person and its
consolidated Subsidiaries as at the end of the period preceding the acquisition
of such Person and the related consolidated statements of income and
stockholders’ equity and of cash flows for the period in respect of which
Consolidated EBITDA is to be calculated (x) have been previously provided to the
Administrative Agent and the Lenders and (y) either (1) have been reported on
without a qualification arising out of the scope of the audit by independent
certified public accountants of nationally recognized standing or (2) have been
found acceptable by the Administrative Agent and (ii) the Consolidated EBITDA of
any Person Disposed of by the Borrower or its Subsidiaries during such period
shall be excluded for such period (assuming the consummation of such Disposition
and the repayment of any Indebtedness in connection therewith occurred on the
first day of such period).
          “Consolidated Net Income”: of any Person for any period, the
consolidated net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; provided,
that in calculating Consolidated Net Income of the Borrower and its consolidated
Subsidiaries for any period, there shall be excluded (a) the income (or deficit)
of any Person accrued prior to the date it becomes a Subsidiary of the Borrower
or is merged into or consolidated with the Borrower or any of its Subsidiaries,
(b) the income (or deficit) of any Person (other than a Subsidiary of the
Borrower) in which the Borrower or any of its Subsidiaries has an ownership
interest, except to the extent that any such

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7

income is actually received by the Borrower or such Subsidiary in the form of
cash dividends or similar cash distributions and (c) the undistributed earnings
of any Subsidiary of the Borrower to the extent that the declaration or payment
of dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
          “Consolidated Senior Secured Debt”: all Consolidated Total Debt that
is secured by a Lien on any Property.
          “Consolidated Senior Secured Leverage Ratio”: as of the last day of
any period of four consecutive fiscal quarters, the ratio of (a) Consolidated
Senior Secured Debt on such day to (b) Consolidated EBITDA of the Borrower and
its Subsidiaries for such period.
          “Consolidated Total Debt”: at any date, the aggregate principal amount
of all Indebtedness of the Borrower and its Subsidiaries at such date (other
than Indebtedness of the type described in clause (f) of the definition of
“Indebtedness”), determined on a consolidated basis in accordance with GAAP.
          “Consolidated Working Capital”: at any date, the difference of
(a) Consolidated Current Assets of the Borrower on such date less
(b) Consolidated Current Liabilities of the Borrower on such date.
          “Continuing Directors”: the directors of the Borrower on the Closing
Date and each other director of the Borrower, if, in each case, such other
director’s nomination for election to the board of directors of the Borrower is
recommended by at least a majority of the then Continuing Directors.
          “Contractual Obligation”: as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
Property is bound.
          “Control Agreement”: (i) the Existing Control Agreements listed on
Annex C hereto and (ii) in respect of each account identified as provided in
Section 6.10(a), a Control Agreement, in form and substance reasonably
satisfactory to the Administrative Agent and the Borrower, pursuant to which
(a) the Borrower or the Subsidiary Guarantor, as the case may be, that is the
owner of such account irrevocably instructs the bank or securities intermediary
that maintains such account that such bank or securities intermediary shall
follow the instructions or entitlement orders, as the case may be, of the
Administrative Agent without further consent of the Borrower or such Subsidiary
Guarantor and (b) the Administrative Agent agrees that it will not give any
instructions or entitlement orders, as the case may be, in respect of such
account unless an Event of Default has occurred and is continuing. Each Control
Agreement shall contain such other terms as shall be customary for agreements of
such type.
          “Control Investment Affiliate”: as to any Person, any other Person
that (a) directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person and (b) is organized by such Person primarily
for the purpose of making equity or debt investments in one or more companies.
For purposes of this definition, “control” of a Person

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8

means the power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
          “Convertible Notes”: the $125,000,000 aggregate principal amount of
convertible notes of the Borrower issued pursuant to the Convertible Notes
Indenture.
          “Convertible Notes Indenture”: the Indenture, dated as of July 5,
2007, in respect of the Convertible Notes, together with all instruments and
other agreements entered into by the Borrower or its Subsidiaries in connection
therewith, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with Section 7.7.
          “Default”: any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
          “Derivatives Counterparty”: as defined in Section 7.6.
          “Disposition”: with respect to any Property, any sale, sale and
leaseback, assignment, conveyance, transfer or other disposition thereof; and
the terms “Dispose” and “Disposed of” shall have correlative meanings.
          “Dollars” and “$”: lawful currency of the United States of America.
          “Domestic Subsidiary”: any Subsidiary of the Borrower organized under
the laws of any jurisdiction within the United States of America.
          “Eligible Accounts Receivable”: as defined in Schedule 1.1.
          “Eligible Rental Equipment”: as defined in Schedule 1.1.
          “Environmental Laws”: any and all laws, rules, orders, regulations,
statutes, ordinances, guidelines, codes, decrees, or other legally enforceable
requirements (including, without limitation, common law) of any international
authority, foreign government, the United States, or any state, local, municipal
or other governmental authority, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment or of human
health, or employee health and safety, as has been, is now, or may at any time
hereafter be, in effect.
          “Environmental Permits”: any and all permits, licenses, approvals,
registrations, notifications, exemptions and other authorizations required under
any Environmental Law.
          “ERISA”: the Employee Retirement Income Security Act of 1974, as
amended from time to time.
          “Eurocurrency Reserve Requirements”: for any day, the aggregate
(without duplication) of the maximum rates (expressed as a decimal fraction) of
reserve requirements in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves) under any regulations of
the Board or other Governmental Authority having jurisdiction with respect
thereto dealing with reserve requirements prescribed for eurocurrency

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9

funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
          “Eurodollar Base Rate”: with respect to each day during each Interest
Period, the rate per annum determined on the basis of the rate for deposits in
Dollars for a period equal to such Interest Period commencing on the first day
of such Interest Period appearing on Reuters Screen LIBOR01 Page as of
11:00 A.M., London time, two Business Days prior to the beginning of such
Interest Period. In the event that such rate does not appear on Reuters Screen
LIBOR01 Page (or otherwise on such screen), the “Eurodollar Base Rate” for
purposes of this definition shall be determined by reference to such other
comparable publicly available service for displaying eurodollar rates as may be
selected by the Administrative Agent.
          “Eurodollar Loans”: Loans for which the applicable rate of interest is
based upon the Eurodollar Rate.
          “Eurodollar Rate”: with respect to each day during each Interest
Period, a rate per annum determined for such day in accordance with the
following formula (rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
 
1.00 - Eurocurrency Reserve Requirements
          “Eurodollar Tranche”: the collective reference to Eurodollar Loans the
then current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall originally
have been made on the same day).
          “Event of Default”: any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
          “Excess Credit Availability”: at any time, the amount, determined by
the Administrative Agent at such time, equal to the lesser of (a) the Borrowing
Base minus the Total Extensions of Credit and (b) the Total Commitments minus
the Total Extensions of Credit.
          “Excluded Subsidiaries”: (a) Parker Drilling Investment Company, an
Oklahoma corporation, (b) PKD Sales Corporation, an Oklahoma corporation,
(b) any Foreign Subsidiary and (c) any Domestic Subsidiary owned by any Foreign
Subsidiary; provided, that a Subsidiary shall cease to be an Excluded Subsidiary
if either (y) it provides a guaranty of the obligations under any Indenture or
(z) in the case of each of Parker Drilling Investment Company and PKD Sales
Corporation, it ceases to be an “Unrestricted Subsidiary” under the Indentures.
          “Existing Credit Agreement”: as defined in the recitals hereto.
          “Existing Issuing Lender”: Bank of America, N.A.
          “Existing Letters of Credit”: the letters of credit described in Annex
B.

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10

          “Extensions of Credit”: as to any Lender at any time, an amount equal
to the sum of (a) the aggregate principal amount of all Loans made by such
Lender then outstanding and (b) such Lender’s Percentage of the L/C Obligations
then outstanding.
          “Facility”: the Commitments and the Loans made thereunder.
          “Federal Funds Effective Rate”: for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding 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 for the day of such transactions received by the Administrative Agent
from three federal funds brokers of recognized standing selected by it.
          “Foreign Subsidiary”: any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
          “FQ1”, “FQ2”, “FQ3”, and “FQ4”: when used with a numerical year
designation, means the first, second, third or fourth fiscal quarters,
respectively, of such fiscal year of the Borrower. (e.g., FQ4 2007 means the
fourth fiscal quarter of the Borrower’s 2007 fiscal year, which ends
December 31, 2007).
          “Funded Debt”: with respect to any Person, all Indebtedness of such
Person of the types described in clauses (a) through (e) of the definition of
“Indebtedness” in this Section.
          “Funding Office”: the office specified from time to time by the
Administrative Agent as its funding office by notice to the Borrower and the
Lenders.
          “GAAP”: generally accepted accounting principles in the United States
of America as in effect from time to time.
          “Governmental Authority”: any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
          “Guarantee and Collateral Agreement”: the Guarantee and Collateral
Agreement, dated as of December 20, 2004, entered into by the Borrower and each
Subsidiary Guarantor in favor of the Administrative Agent for the benefit of the
Secured Parties, as the same may be amended, supplemented or otherwise modified
from time to time.
          “Guarantee Obligation”: as to any Person (the “guaranteeing person”),
any obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit), if to induce the
creation of such obligation of such other Person the guaranteeing person has
issued a reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness (the “primary
obligations”) of any other third Person (the “primary obligor”) in any manner,
whether directly or indirectly, including, without limitation, any obligation of
the guaranteeing person, whether or not contingent, (i) to purchase any such
primary obligation or any Property constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or payment of any

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11

such primary obligation or (2) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase Property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person’s maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
          “Hedge Agreements”: all interest rate or currency swaps, caps or
collar agreements, foreign exchange agreements, commodity contracts or similar
arrangements entered into by the Borrower or its Subsidiaries providing for
protection against fluctuations in interest rates, currency exchange rates,
commodity prices or the exchange of nominal interest obligations, either
generally or under specific contingencies. For avoidance of doubt, Hedge
Agreements shall include any interest rate swap or similar agreement that
provides for the payment by the Borrower or any of its Subsidiaries of
(i) amounts based upon a floating rate in exchange for receipt by the Borrower
or such Subsidiary of amounts based upon a fixed rate or (ii) amounts based upon
a fixed rate in exchange for receipt the Borrower or such Subsidiary of amounts
based upon a floating rate.
          “High Strikes Agreements”: as defined on Schedule 4.15.
          “Immaterial Account”: any account in which the aggregate amount on
deposit (or, in the case of any securities account, the total fair market value
of all securities held in such account) does not at any time exceed $25,000.
          “Immaterial Subsidiary”: any Subsidiary designated by the Borrower, by
written notice to the Administrative Agent, as an “Immaterial Subsidiary”;
provided, that (a) no Subsidiary may be so designated unless such Subsidiary
(i) had assets having an aggregate book value, as of the end of the fiscal year
most recently ended, not exceeding $1,000,000 and (ii) had Consolidated Net
Income not exceeding $1,000,000 for such fiscal year and (b) any Subsidiary
shall automatically cease to be an Immaterial Subsidiary if at the end of any
subsequent fiscal year such Subsidiary would not meet the requirements set forth
in the foregoing clause (a).
          “Indebtedness”: of any Person at any date, without duplication,
(a) all indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of Property or services (other than
trade payables incurred in the ordinary course of such Person’s business),
(c) all obligations of such Person evidenced by notes, bonds, debentures or
other similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such

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12

Person (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
Property), (e) all Capital Lease Obligations of such Person, (f) all obligations
of such Person, contingent or otherwise, as an account party or applicant under
acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value (other than through the issuance of common stock of such
Person) any Capital Stock of such Person, other than any such obligations the
payment of which would be permitted by Section 7.6(c) or (d), (h) all Guarantee
Obligations of such Person in respect of obligations of the kind referred to in
clauses (a) through (g) above; (i) all obligations of the kind referred to in
clauses (a) through (h) above secured by (or for which the holder of such
obligation has an existing right, contingent or otherwise, to be secured by) any
Lien on Property (including, without limitation, accounts and contract rights)
owned by such Person, whether or not such Person has assumed or become liable
for the payment of such obligation and (j) for the purposes of Section 8(e)
only, all obligations of such Person in respect of Hedge Agreements.
          “Indemnified Liabilities”: as defined in Section 10.5.
          “Indemnitee”: as defined in Section 10.5.
          “Indentures”: the collective reference to the Convertible Notes
Indenture, the Senior Notes Indenture and the Senior Floating Rate Notes
Indenture.
          “Insolvency”: with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
          “Insolvent”: pertaining to a condition of Insolvency.
          “Intellectual Property”: the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, copyrights, copyright licenses, patents, patent licenses,
trademarks, trademark licenses, technology, know-how and processes, and all
rights to sue at law or in equity for any infringement or other impairment
thereof, including the right to receive all proceeds and damages therefrom.
          “Interest Payment Date”: (a) as to any Base Rate Loan, the last day of
each March, June, September and December to occur while such Loan is outstanding
and the final maturity date of such Loan, (b) as to any Eurodollar Loan having
an Interest Period of three months or shorter, the last day of such Interest
Period, (c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day that is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such Interest Period
and (d) as to any Eurodollar Loan, the date of any repayment or prepayment made
in respect thereof.
          “Interest Period”: as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and (b) thereafter,
each period commencing on the last day of the next preceding Interest Period
applicable to such Eurodollar Loan and ending one, two, three or six months
thereafter, as

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13

selected by the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then current Interest
Period with respect thereto; provided that, all of the foregoing provisions
relating to Interest Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day that is not a Business
Day, such Interest Period shall be extended to the next succeeding Business Day
unless the result of such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall end on the
immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the Termination Date
shall end on the Termination Date; and
(3) any Interest Period that begins on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last Business Day of
the calendar month at the end of such Interest Period.
          “Investment”: with respect to any Person, any advance, loan, extension
of credit (by way of guaranty or otherwise) or capital contribution to, or
purchase of any Capital Stock, bonds, notes, debentures or other debt securities
of, or any assets constituting an ongoing business from, or any other investment
in, any other Person.
          “ISP”: with respect to any Letter of Credit, the “International
Standby Practices 1998” published by the Institute of International Banking Law
& Practice (or such later version thereof as may be in effect at the time of
issuance of such Letter of Credit).
          “Issuing Lender”: (a) in respect of the Existing Letters of Credit
only, the Existing Issuing Lender and (b) in respect of each Letter of Credit
issued hereunder on or after the Closing Date, Bank of America, N.A. and any
Lender from time to time designated by the Borrower as an Issuing Lender with
the consent of such Lender and the Administrative Agent.
          “L/C Commitment”: $60,000,000.
          “L/C Fee Payment Date”: the last day of each March, June, September
and December and the last day of the Commitment Period.
          “L/C Obligations”: at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not then been reimbursed pursuant to Section 3.5. For purposes of computing
the undrawn amount of any Letter of Credit, such amount shall be determined in
accordance with Section 3.12. For all purposes of this Agreement, if on any date
of determination a Letter of Credit has expired by its terms but any amount may
still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP,
such Letter of Credit shall be deemed to be undrawn, unexpired and outstanding
in the amount so remaining available to be drawn.

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14

          “L/C Participants”: with respect to any Letter of Credit, the
collective reference to all Lenders other than the Issuing Lender that issued
such letter of Credit.
          “Lehman Entity”: any of Lehman Commercial Paper Inc. or any of its
affiliates (including Syndicated Loan Funding Trust).
          “Lender Addendum”: with respect to any initial Lender, a Lender
Addendum, substantially in the form of Exhibit I, to be executed and delivered
by such Lender on the Closing Date as provided in Section 10.17.
          “Lenders”: as defined in the preamble hereto.
          “Letters of Credit”: as defined in Section 3.1(a).
          “Lien”: any mortgage, pledge, hypothecation, collateral assignment,
encumbrance, lien (statutory or other), charge or other security interest of any
kind or nature whatsoever (including, without limitation, any conditional sale
or other title retention agreement and any capital lease having substantially
the same economic effect as any of the foregoing).
          “Loan Documents”: this Agreement, the Security Documents, the
Applications and the Notes.
          “Loan”: as defined in Section 2.1.
          “Loan Parties”: the Borrower and each Subsidiary Guarantor.
          “Lockbox Agreement”: in respect of each lockbox account, and related
lockbox and collection account, an agreement, in form and substance reasonably
satisfactory to the Administrative Agent and the Borrower, pursuant to which the
bank that maintains such account and the Borrower or the Subsidiary Guarantor,
as the case may be, that is the named owner of such account shall agree with the
Administrative Agent (a) that such lockbox and accounts shall be used solely for
the collection and deposit of proceeds of Collateral, (b) that, upon notice from
the Administrative Agent, such bank shall transfer at the end of each business
day all collected funds in any such account to a Concentration Account and
(c) the Administrative Agent agrees that it will not give the notice described
in the foregoing clause (b) unless an Event of Default has occurred and is
continuing. Each Lockbox Agreement shall contain such other terms as shall be
customary for agreements of such type.
          “Material Adverse Effect”: a material adverse effect on (a) the
business, assets, property or financial condition of the Borrower and its
Subsidiaries taken as a whole or (b) the validity or enforceability of any
material provision of this Agreement or any of the other Loan Documents or the
material rights or remedies of the Agents or the Lenders hereunder or
thereunder.
          “Material Subsidiary”: each Domestic Subsidiary that is not an
Immaterial Subsidiary.

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15

          “Materials of Environmental Concern”: any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other substances or forces of any kind,
whether or not any such substance or force is defined as hazardous or toxic
under any Environmental Law, that is regulated pursuant to or could give rise to
liability under any Environmental Law.
          “Maximum Rate”: as defined in Section 10.18.
          “Multiemployer Plan”: a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
          “Net Cash Proceeds”: in connection with any issuance or sale of debt
securities or instruments or the incurrence of loans, the cash proceeds received
from such issuance or incurrence, net of attorneys’ fees, investment banking
fees, accountants’ fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection therewith.
          “Non-Excluded Taxes”: as defined in Section 2.16(a).
          “Non-U.S. Lender”: as defined in Section 2.16(d).
          “Note”: any promissory note evidencing any Loan.
          “Obligations”: the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity of the Loans and
Reimbursement Obligations and interest accruing after the filing of any petition
in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding) the Loans, the
Reimbursement Obligations and all other obligations and liabilities of the
Borrower to the Administrative Agent or to any Lender or any Qualified
Counterparty, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document, the Letters
of Credit, any Bank Products or any other document made, delivered or given in
connection herewith or therewith, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all fees, charges and disbursements of counsel to the
Administrative Agent or to any Lender that are required to be paid by the
Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the
Borrower or any Subsidiary under any Bank Products shall be secured and
guaranteed pursuant to the Security Documents only to the extent that, and for
so long as, the other Obligations are so secured and guaranteed and (ii) any
release of Collateral or Subsidiary Guarantors effected in the manner permitted
by this Agreement shall not require the consent of holders of obligations under
Bank Products.
          “Other Taxes”: any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

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16

          “Participant”: as defined in Section 10.6(b).
          “Participation Amount”: as defined in Section 3.4(b).
          “Paying Subsidiary”: as defined in Section 7.6(a).
          “Payment Office”: the office specified from time to time by the
Administrative Agent as its payment office by notice to the Borrower and the
Lenders.
          “PBGC”: the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA (or any successor).
          “Percentage”: as to any Lender at any time, the percentage which such
Lender’s Commitment then constitutes of the Total Commitments (or, at any time
after the Commitments shall have expired or terminated, the percentage which the
aggregate amount of such Lender’s Extensions of Credit then outstanding
constitutes of the amount of the Total Extensions of Credit then outstanding).
          “Permitted Liens”: any Liens permitted by paragraphs (a), (b), (c),
(d) and (e) of Section 7.3.
          “Person”: an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
          “Plan”: at a particular time, any employee benefit plan that is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5)
of ERISA.
          “Pricing Grid”: the pricing grid attached hereto as Annex A.
          “Projections”: as defined in Section 6.2(c).
          “Property”: any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible,
including, without limitation, Capital Stock.
          “Quail Tools”: Quail Tools, L.P. an Oklahoma limited partnership.
          “Qualified Counterparty”: with respect to any Specified Hedge
Agreement, any counterparty thereto that, at the time such Specified Hedge
Agreement was entered into, was a Lender or an affiliate of a Lender.
          “Refinancing Debt”: any Indebtedness permitted by clause (II) of
Section 7.2(d).
          “Register”: as defined in Section 10.6(d).
          “Regulation U”: Regulation U of the Board as in effect from time to
time.

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17

          “Reimbursement Obligation”: the obligation of the Borrower to
reimburse each Issuing Lender pursuant to Section 3.5 for amounts drawn under
Letters of Credit issued by such Issuing Lender.
          “Related Fund”: with respect to any Lender, any fund that (x) invests
in commercial loans and (y) is managed or advised by the same investment advisor
or an affiliate thereof as such Lender, by such Lender or an Affiliate of such
Lender.
          “Rental Equipment”: as defined in Schedule 1.1.
          “Reorganization”: with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
          “Reportable Event”: any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. §
4043.
          “Required Lenders”: at any time, the holders of more than 50% of the
Total Commitments then in effect or, if the Commitments have been terminated,
the Total Extensions of Credit then outstanding.
          “Requirement of Law”: as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its Property or to which such Person or
any of its Property is subject.
          “Responsible Officer”: the chief executive officer, president, chief
financial officer, controller or treasurer of the Borrower, but in any event,
with respect to financial matters, the chief financial officer of the Borrower.
          “Restricted Payments”: as defined in Section 7.6.
          “SEC”: the Securities and Exchange Commission (or successors thereto
or an analogous Governmental Authority).
          “Secured Parties”: as defined in the Guarantee and Collateral
Agreement.
          “Security Documents”: the collective reference to the Guarantee and
Collateral Agreement, the Lockbox Agreements, the Control Agreements, the
Acknowledgment and Confirmation and all other security documents hereafter
delivered to the Administrative Agent granting a Lien on any Property of any
Person to secure the obligations and liabilities of any Loan Party under any
Loan Document.
          “Senior Floating Rate Notes”: the $100,000,000 aggregate principal
amount of senior floating rate notes of the Borrower issued pursuant to the
Senior Floating Rate Notes Indenture.

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          “Senior Floating Rate Notes Indenture”: the Indenture, dated as of
September 2, 2004, in respect of the Senior Floating Rate Notes, together with
all instruments and other agreements entered into by the Borrower or its
Subsidiaries in connection therewith, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with Section 7.7.
          “Senior Notes”: the $225,000,000 aggregate principal amount of senior
unsecured notes of the Borrower issued pursuant to the Senior Notes Indenture.
          “Senior Notes Indenture”: the Indenture, dated as of October 10, 2003,
in respect of the Senior Notes, together with all instruments and other
agreements entered into by the Borrower or such Subsidiaries in connection
therewith, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with Section 7.7.
          “Single Employer Plan”: any Plan that is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
          “Solvent”: with respect to any Person, as of any date of
determination, (a) the amount of the “present fair saleable value” of the assets
of such Person will, as of such date, exceed the amount of all “liabilities of
such Person, contingent or otherwise”, as of such date, as such quoted terms are
determined in accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the probable liability of such Person on its debts
as such debts become absolute and matured, (c) such Person will not have, as of
such date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) “debt” means liability on a “claim”, and (ii)
“claim” means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.
          “Specified Change of Control”: a “Change of Control”, or like event,
as defined in any of the Indentures.
          “Specified Hedge Agreement”: any Hedge Agreement entered into by the
Borrower or any Subsidiary Guarantor and any Qualified Counterparty which has
been designated as a Specified Hedge Agreement pursuant to a notice given by the
Borrower and such Qualified Counterparty to the Administrative Agent within
60 days after such Hedge Agreement is entered into.
          “Specified Personal Property”: any Property of a type in which a
security interest is purported to be granted pursuant to the Guarantee and
Collateral Agreement.
          “Subsidiary”: as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by

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reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned or otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a “Subsidiary” or to “Subsidiaries” in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.
          “Subsidiary Guarantor”: (i) each Material Subsidiary of the Borrower
other than any Excluded Subsidiary and (ii) Quail USA, LLC.
          “Supporting Letter of Credit”: as defined in Section 3.10.
          “Termination Date”: September 20, 2012.
          “Total Commitments”: at any time, the aggregate amount of the
Commitments then in effect.
          “Total Extensions of Credit”: at any time, the aggregate amount of the
Extensions of Credit of the Lenders outstanding at such time.
          “Transferee”: as defined in Section 10.15.
          “Type”: as to any Loan, its nature as a Base Rate Loan or a Eurodollar
Loan.
          “Wholly Owned Subsidiary”: as to any Person, any other Person all of
the Capital Stock of which (other than directors’ qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
          “Wholly Owned Subsidiary Guarantor”: any Subsidiary Guarantor that is
a Wholly Owned Subsidiary of the Borrower.
          1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
          (b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.
          (c) The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
          (d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

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          (e) All calculations of financial ratios set forth in Section 7.1 and
the calculation of the Consolidated Leverage Ratio for purposes of determining
the Applicable Margin shall be calculated to the same number of decimal places
as the relevant ratios are expressed in and shall be rounded upward if the
number in the decimal place immediately following the last calculated decimal
place is five or greater. For example, if the relevant ratio is to be calculated
to the hundredth decimal place and the calculation of the ratio is 5.126, the
ratio will be rounded up to 5.13.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
          2.1 Commitments. (a) Subject to the terms and conditions hereof, the
Lenders severally agree to make revolving credit loans (“Loans”) to the Borrower
from time to time during the Commitment Period in an aggregate principal amount
at any one time outstanding for each Lender which, when added to such Lender’s
Percentage of the L/C Obligations then outstanding, does not exceed the amount
of such Lender’s Commitment; provided that after giving effect to the making of
each Loan and the immediate application of the proceeds thereof, the Total
Extensions of Credit shall not exceed the Borrowing Base at such time. During
the Commitment Period the Borrower may use the Commitments by borrowing,
prepaying the Loans in whole or in part, and reborrowing, all in accordance with
the terms and conditions hereof. The Loans may from time to time be Eurodollar
Loans or Base Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with Sections 2.2 and 2.9, provided that no
Loan shall be made as a Eurodollar Loan after the day that is one month prior to
the Termination Date.
          (b) The Borrower shall repay all outstanding Loans on the Termination
Date.
          2.2 Procedure for Borrowing. The Borrower may borrow under the
Commitments on any Business Day during the Commitment Period, provided that the
Borrower shall deliver to the Administrative Agent a Borrowing Notice (which
Borrowing Notice must be received by the Administrative Agent prior to 12:00
Noon, New York City time, (a) three Business Days prior to the requested
Borrowing Date in the case of Eurodollar Loans, or (b) one Business Day prior to
the requested Borrowing Date in the case of Base Rate Loans. Each borrowing of
Loans that are Eurodollar Loans shall be in an amount equal to $500,000 or a
whole multiple of $100,000 in excess thereof. Upon receipt of any such Borrowing
Notice from the Borrower, the Administrative Agent shall promptly notify each
Lender thereof. Each Lender will make its Percentage of the amount of each
borrowing of Loans available to the Administrative Agent for the account of the
Borrower at the Funding Office prior to 3:00 P.M., New York City time, on the
Borrowing Date requested by the Borrower in funds immediately available to the
Administrative Agent. Such borrowing will then be made available to the Borrower
by the Administrative Agent in like funds as received by the Administrative
Agent.
          2.3 Borrowing Base Calculations; Inclusion of Assets in Borrowing
Base. (a) At any time when the Total Extensions of Credit equal or exceed
$40,000,000, based on the most recent Borrowing Base Certificate delivered by
the Borrower to the Administrative Agent, the Administrative Agent shall in its
good faith credit judgment determine which Accounts and Rental Equipment shall
be “Eligible Accounts” and “Eligible Rental Equipment,” respectively, for
purposes of this Agreement, utilizing the criteria set forth on Schedule 1.1.

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          (b)Concurrently with delivery by the Borrower to the Administrative
Agent of (i) any notice pursuant to the definition of “Specified Hedge
Agreement” in Section 1.1 designating any Hedge Agreement as a “Specified Hedge
Agreement” and (ii) any Borrowing Base Certificate, the Borrower will deliver to
the Administrative Agent a report from the relevant counterparty setting forth
the “mark-to-market” value of such Hedge Agreement, determined in accordance
with procedures customary in the relevant market. The Administrative Agent will
calculate from time to time the net amount of the “mark-to-market” values of all
Specified Hedge Agreements on the basis of such counterparty report, and if such
net amount is unfavorable to the Borrower (i.e., the Borrower would owe a net
amount under all Specified Hedge Agreements if all Specified Hedge Agreements
were terminated on such date), the Administrative Agent will establish a reserve
for purposes of calculating the Borrowing Base pursuant to Schedule 1.1 in an
amount equal to such net unfavorable amount, and will maintain such reserve
until the next determination by the Administrative Agent pursuant to this
paragraph.
          2.4 Repayment of Loans; Evidence of Debt. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
the appropriate Lender (i) the then unpaid principal amount of each Loan of such
Lender on the Termination Date (or on such earlier date on which the Loans
become due and payable pursuant to Section 8). The Borrower hereby further
agrees to pay interest on the unpaid principal amount of the Loans from time to
time outstanding from the date hereof until payment in full thereof at the rates
per annum, and on the dates, set forth in Section 2.11. The Borrower agrees
that, if an Event of Default shall have occurred and is continuing, the
Administrative Agent may (and the Administrative Agent hereby agrees that it
shall) (i) cause each bank that maintains any account subject to a Control
Agreement or a Lockbox Agreement to transfer, on a daily basis, all collected
funds in any such account to a Concentration Account and (ii) apply any amounts
on deposit in a Concentration Account to repay Loans whenever any Loans are
outstanding.
          (b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
          (c) The Administrative Agent, on behalf of the Borrower, shall
maintain the Register pursuant to Section 10.6(d), and a subaccount therein for
each Lender, in which shall be recorded (i) the amount of each Loan made
hereunder and any Note evidencing such Loan, the Type of such Loan and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) both the amount of any sum received by the Administrative
Agent hereunder from the Borrower and each Lender’s share thereof.
          (d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.4(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower therein recorded; provided, however, that the
failure of any Lender or the Administrative Agent to maintain the Register or
any such account, or any error therein, shall not in any manner affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
the Borrower by such Lender in accordance with the terms of this Agreement.

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          (e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will promptly execute and deliver to such
Lender a promissory note of the Borrower evidencing any Loans of such Lender,
substantially in the form of Exhibit F (a “Note”), with appropriate insertions
as to date and principal amount; provided, that delivery of Notes shall not be a
condition precedent to the occurrence of the Closing Date or the making of the
extensions of credit on the Closing Date.
          2.5 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Administrative Agent for the account of each Lender, a commitment fee for the
period from and including the Closing Date to the last day of the Commitment
Period, computed at the Commitment Fee Rate on the average daily amount of the
Available Commitment of such Lender during the period for which payment is made.
          (b) The Borrower agrees to pay to the Administrative Agent the fees in
the amounts and on the dates from time to time agreed to in writing by the
Borrower and the Administrative Agent.
          2.6 Termination or Reduction of Credit Commitments. The Borrower shall
have the right, upon not less than three Business Days’ notice to the
Administrative Agent, to terminate the Commitments or, from time to time, to
reduce the aggregate amount of the Commitments; provided that no such
termination or reduction of Commitments shall be permitted if, after giving
effect thereto and to any prepayments of the Loans made on the effective date
thereof, the Total Extensions of Credit would exceed the Total Commitments. Any
such reduction shall be in an amount equal to $1,000,000, or a whole multiple
thereof, and shall reduce permanently the Commitments then in effect.
          2.7 Optional Prepayments. The Borrower may at any time and from time
to time prepay the Loans, in whole or in part, without premium or penalty
(except as otherwise provided herein), upon irrevocable notice delivered to the
Administrative Agent at least three Business Days prior thereto in the case of
Eurodollar Loans and at least one Business Day prior thereto in the case of Base
Rate Loans, which notice shall specify the date and amount of such prepayment
and whether such prepayment is of Eurodollar Loans or Base Rate Loans; provided,
that if a Eurodollar Loan is prepaid on any day other than the last day of the
Interest Period applicable thereto, the Borrower shall also pay any amounts
owing pursuant to Section 2.17. Upon receipt of any such notice the
Administrative Agent shall promptly notify each relevant Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable on the date specified therein, together with (except in the case of Base
Rate Loans) accrued interest to such date on the amount prepaid. Partial
prepayments of Loans shall be in an aggregate principal amount of $1,000,000 or
a whole multiple thereof.
          2.8 Mandatory Prepayments. If, at any time during the Commitment
Period, the amount of the Total Extensions of Credit exceeds the lesser of
(i) the Borrowing Base and (ii) the Total Commitments then in effect (whether as
a result of the sale of, or any casualty or condemnation with respect to, assets
included in the Borrowing Base or otherwise), the Borrower shall, without notice
or demand, prepay, in accordance with this Section, the Loans in an aggregate
principal amount equal to such excess, together (except in the case of Base Rate
Loans) with interest accrued to the date of such payment or prepayment; provided
that if the

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aggregate principal amount of Loans then outstanding is less than the amount of
such excess (because L/C Obligations constitute a portion thereof), the Borrower
shall, to the extent of the balance of such excess, cash collateralize
outstanding Letters of Credit in the manner described in Section 3.10(ii).
          2.9 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to Base Rate Loans by giving the
Administrative Agent at least two Business Days’ prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Loans may be made
only on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Base Rate Loans to Eurodollar Loans by
giving the Administrative Agent at least three Business Days’ prior irrevocable
notice of such election (which notice shall specify the length of the initial
Interest Period therefor), provided that no Base Rate Loan may be converted into
a Eurodollar Loan (i) when any Event of Default has occurred and is continuing
and the Administrative Agent has, or the Required Lenders have, determined in
its or their sole discretion not to permit such conversions or (ii) after the
date that is one month prior to the Termination Date. Upon receipt of any such
notice the Administrative Agent shall promptly notify each relevant Lender
thereof.
          (b) The Borrower may elect to continue any Eurodollar Loan as such
upon the expiration of the then current Interest Period with respect thereto by
giving irrevocable notice to the Administrative Agent, in accordance with the
applicable provisions of the term “Interest Period” set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans, provided
that no Eurodollar Loan may be continued as such (i) when any Event of Default
has occurred and is continuing and the Administrative Agent has, or the Required
Lenders have, determined in its or their sole discretion not to permit such
continuations or (ii) after the date that is one month prior to the Termination
Date, and provided, further, that if the Borrower shall fail to give any
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso, such Loans shall be converted
automatically to Base Rate Loans on the last day of such then expiring Interest
Period. Upon receipt of any such notice the Administrative Agent shall promptly
notify each relevant Lender thereof.
          2.10 Minimum Amounts and Maximum Number of Eurodollar Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans and all
selections of Interest Periods shall be in such amounts and be made pursuant to
such elections so that, (a) after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans comprising each Eurodollar Tranche shall be equal
to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no
more than five Eurodollar Tranches shall be outstanding at any one time.
          2.11 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin in effect for such day.
          (b) Each Base Rate Loan shall bear interest for each day on which it
is outstanding at a rate per annum equal to the Base Rate in effect for such day
plus the Applicable Margin in effect for such day.

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          (c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) (to the extent legally permitted) shall
bear interest at a rate per annum that is equal to (x) in the case of the Loans,
the rate that would otherwise be applicable thereto pursuant to the foregoing
provisions of this Section plus 2% or (y) in the case of Reimbursement
Obligations, the rate applicable to Base Rate Loans plus 2%, and (ii) if all or
a portion of any interest payable on any Loan or Reimbursement Obligation or any
commitment fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest at a rate per annum equal to the rate then applicable
to Base Rate Loans plus 2%, in each case, with respect to clauses (i) and
(ii) above, from the date of such non-payment until such amount is paid in full
(after as well as before judgment).
          (d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
          2.12 Computation of Interest and Fees. (a) Interest, fees, commissions
payable pursuant hereto shall be calculated on the basis of a 360-day year for
the actual days elapsed, except that, with respect to Base Rate Loans on which
interest is calculated on the basis of the Prime Rate, the interest thereon
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Borrower and the relevant Lenders of each determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the Base Rate or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Administrative Agent shall as soon as practicable notify the
Borrower and the relevant Lenders of the effective date and the amount of each
such change in interest rate.
          (b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to Section 2.12(a).
          2.13 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
          (a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the Eurodollar Rate for such Interest Period, or
          (b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period,

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the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as Base Rate Loans, (y) any Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be continued as Base Rate Loans and (z) any outstanding
Eurodollar Loans shall be converted, on the last day of the then current
Interest Period with respect thereto, to Base Rate Loans. Until such notice has
been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be
made or continued as such, nor shall the Borrower have the right to convert
Loans to Eurodollar Loans.
          2.14 Pro Rata Treatment and Payments. (a) Each borrowing by the
Borrower from the Lenders hereunder, each payment by the Borrower on account of
any commitment fee or Letter of Credit fee, and any reduction of the Commitments
of the Lenders, shall be made pro rata according to the respective Percentages
of the Lenders.
          (b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Loans shall be made pro rata
according to the respective outstanding principal amounts of the Loans then held
by the Lenders. Each payment in respect of Reimbursement Obligations in respect
of any Letter of Credit shall be made to the Issuing Lender that issued such
Letters of Credit.
          (c) The application of any payment of Loans (including optional and
mandatory prepayments) shall be made, first, to Base Rate Loans and, second, to
Eurodollar Loans. Each payment of the Loans (except in the case of Base Rate
Loans) shall be accompanied by accrued interest to the date of such payment on
the amount paid.
          (d) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the relevant Lenders, at the Payment Office, in Dollars and in
immediately available funds. Any payment made by the Borrower after 12:00 Noon,
New York City time, on any Business Day shall be deemed to have been on the next
following Business Day. The Administrative Agent shall distribute such payments
to the Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day. In the case of
any extension of any payment of principal pursuant to the preceding two
sentences, interest thereon shall be payable at the then applicable rate during
such extension.
          (e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its share of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the

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Administrative Agent may, in reliance upon such assumption, make available to
the Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted to
any Lender with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error. If such Lender’s share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days after such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to Base Rate Loans, on demand, from the Borrower.
          (f) Unless the Administrative Agent shall have been notified in
writing by the Borrower prior to the date of any payment due to be made by the
Borrower hereunder that the Borrower will not make such payment to the
Administrative Agent, the Administrative Agent may assume that the Borrower is
making such payment, and the Administrative Agent may, but shall not be required
to, in reliance upon such assumption, make available to the Lenders their
respective pro rata shares of a corresponding amount. If such payment is not
made to the Administrative Agent by the Borrower within three Business Days
after such due date, the Administrative Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum equal to the daily average Federal Funds Effective Rate. Nothing herein
shall be deemed to limit the rights of the Administrative Agent or any Lender
against the Borrower.
          (g) Notwithstanding any other provision of this Agreement or any other
Loan Document, any proceeds of any foreclosure or other realization by the
Administrative Agent in respect of any Collateral shall be applied as provided
in the Guarantee and Collateral Agreement.
          2.15 Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:

  (i)   shall subject any Lender to any tax of any kind whatsoever with respect
to this Agreement, any Letter of Credit, any Application or any Eurodollar Loan
made by it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by Section 2.16 and
changes in the rate of tax on the overall net income of such Lender);     (ii)  
shall impose, modify or hold applicable any reserve, special deposit, compulsory
loan or similar requirement against assets held by, deposits or other
liabilities in or for the account of, advances, loans or other extensions of
credit by, or any other acquisition of funds by, any office of such Lender that
is not otherwise included in the determination of the Eurodollar Rate hereunder;
or

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  (iii)   shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional amounts pursuant to this Section, it shall promptly
notify the Borrower (with a copy to the Administrative Agent) of the event by
reason of which it has become so entitled.
          (b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender’s or such corporation’s capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender’s or such corporation’s policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender or such corporation
for such reduction.
          (c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrower (with a copy to the
Administrative Agent) shall be conclusive in the absence of manifest error. The
obligations of the Borrower pursuant to this Section shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
          2.16 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income taxes and franchise taxes imposed on any Agent or any Lender as a
result of a present or former connection between such Agent or such Lender and
the jurisdiction of the Governmental Authority imposing such tax or any
political subdivision or taxing authority thereof or therein (other than any
such connection arising solely from such Agent’s or such Lender’s having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
(“Non-Excluded Taxes”) or any Other Taxes are required to be withheld from any
amounts payable to any Agent or any Lender hereunder, the amounts so payable to
such Agent or such Lender shall be increased to the extent necessary to yield to
such Agent or such Lender (after payment of all Non-Excluded Taxes and Other
Taxes) interest or any such other amounts payable hereunder at the rates or in
the amounts specified in this Agreement; provided, however,

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that the Borrower shall not be required to increase any such amounts payable to
any Lender with respect to any Non-Excluded Taxes (i) that are attributable to
such Lender’s failure to comply with the requirements of paragraph (d) or (e) of
this Section or (ii) that are United States withholding taxes imposed on amounts
payable to such Lender at the time such Lender becomes a party to this
Agreement, except to the extent that such Lender’s assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph (a).
          (b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
          (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Administrative Agent for the account of the relevant Agent or Lender, as the
case may be, a certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Administrative Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Administrative Agent and
the Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this Section shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.
          (d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a “Non-U.S. Lender”) shall
deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant, to the Lender from which the related participation shall have been
purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or
Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S.
federal withholding tax under Section 871(h) or 881(c) of the Code with respect
to payments of “portfolio interest” a statement substantially in the form of
Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors
thereto properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.

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          (e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation and in such
Lender’s reasonable judgment such completion, execution or submission would not
materially prejudice the legal position of such Lender.
          2.17 Indemnity. The Borrower agrees to indemnify each Lender for, and
to hold each Lender harmless from, any loss (other than loss of anticipated
profits) or expense that such Lender may sustain or incur as a consequence of
(a) default by the Borrower in making a borrowing of, conversion into or
continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement,
(b) default by the Borrower in making any prepayment of Eurodollar Loans after
the Borrower has given a notice thereof in accordance with the provisions of
this Agreement or (c) the making of a prepayment or conversion of Eurodollar
Loans on a day that is not the last day of an Interest Period with respect
thereto. A certificate as to any amounts payable pursuant to this Section
submitted to the Borrower by any Lender shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
          2.18 Illegality. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be suspended for the
duration of such illegality and (b) such Lender’s Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to Base Rate Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of the
then current Interest Period with respect thereto, the Borrower shall pay to
such Lender such amounts, if any, as may be required pursuant to Section 2.17.
          2.19 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.15, 2.16(a) or
2.18 with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.15, 2.16(a) or 2.18.

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          2.20 Replacement of Lenders under Certain Circumstances. The Borrower
shall be permitted to replace any Lender that (a) requests reimbursement for
amounts owing pursuant to Section 2.15 or 2.16 or gives a notice of illegality
pursuant to Section 2.18 or (b) defaults in its obligation to make Loans
hereunder, with a replacement financial institution; provided that (i) such
replacement does not conflict with any Requirement of Law, (ii) no Event of
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to any such replacement, such Lender shall have taken no action
under Section 2.19 so as to eliminate the continued need for payment of amounts
owing pursuant to Section 2.15 or 2.16 or to eliminate the illegality referred
to in such notice of illegality given pursuant to Section 2.18, (iv) the
replacement financial institution shall purchase, at par, all Loans and other
amounts owing to such replaced Lender on or prior to the date of replacement,
(v) the Borrower shall be liable to such replaced Lender under Section 2.17 (as
though Section 2.17 were applicable) if any Eurodollar Loan owing to such
replaced Lender shall be purchased other than on the last day of the Interest
Period relating thereto, (vi) the replacement financial institution, if not
already a Lender, shall be reasonably satisfactory to the Administrative Agent,
(vii) the replaced Lender shall be obligated to make such replacement in
accordance with the provisions of Section 10.6 (provided that the replacement
financial institution shall be obligated to pay the registration and processing
fee referred to therein), (viii) the Borrower shall pay all additional amounts
(if any) required pursuant to Section 2.15 or 2.16, as the case may be, in
respect of any period prior to the date on which such replacement shall be
consummated, (ix) in the event the replaced Lender is an Issuing Lender, the
outstanding Letters of Credit issued by such replaced Lender shall be replaced
and/or cash-collateralized in an amount and manner satisfactory to such replaced
Lender and (x) any such replacement shall not be deemed to be a waiver of any
rights that the Borrower, the Administrative Agent or any other Lender shall
have against the replaced Lender.
          2.21 Bank Products. The Borrower may request and any Lender or
Affiliate of any Lender may, in its sole and absolute discretion, arrange for
the Borrower to obtain from such Lender or such Affiliate Bank Products (which
shall be subject to all rules and regulations of such Lender or such Affiliate)
although the Borrower is not required to do so.
SECTION 3. LETTERS OF CREDIT
          3.1 L/C Commitment. (a) Prior to the date hereof, the Existing Issuing
Lender has issued the Existing Letters of Credit which, from and after the
Closing Date, shall constitute Letters of Credit hereunder. Subject to the terms
and conditions hereof, each Issuing Lender, in reliance on the agreements of the
other Lenders set forth in Section 3.4(a), agrees to issue letters of credit
(the letters of credit issued on and after the Closing Date pursuant to this
Section 3, together with the Existing Letters of Credit collectively, “Letters
of Credit”) for the account of the Borrower or any Subsidiary on any Business
Day during the Commitment Period in such form as may be approved from time to
time by such Issuing Lender; provided that no Issuing Lender shall have any
obligation to issue any Letter of Credit if, after giving effect to such
issuance, (i) the L/C Obligations would exceed the L/C Commitment (provided
further that Bank of America, N.A., in its capacity as Issuing Lender, shall
have no obligation to issue any Letter of Credit, if after giving effect to such
issuance, the L/C obligations in respect of Letters of Credit issued by it would
exceed $40,000,000) or (ii) the aggregate amount of the Available Commitments
would be less than zero. Each Letter of Credit shall (i) be denominated in
Dollars, or any other currency deemed acceptable by the Administrative Agent and
the Issuing Lender,

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each in its sole discretion and (ii) expire no later than the earlier of (x) the
first anniversary of its date of issuance and (y) the date which is five
Business Days prior to the Termination Date; provided that any Letter of Credit
with a one-year term may provide for the renewal thereof for additional one-year
periods (which shall in no event extend beyond the date referred to in clause
(y) above). In the case of any Letter of Credit denominated in any currency
other than Dollars, it is understood and agreed that, for all purposes of this
Agreement, the face amount and drawable amount thereof at the time of issuance,
and the amount of any unreimbursed drawing in respect thereof at the end of each
subsequent L/C Fee Payment Date or on any applicable date of measurement
hereunder, shall be deemed to be the equivalent in Dollars of such amount at
such time, in each case as reasonably determined by the Administrative Agent in
a manner acceptable to the Administrative Agent, the Borrower and the Issuing
Lender in respect of such Letter of Credit.
          (b) No Issuing Lender shall at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause such
Issuing Lender or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
          3.2 Procedure for Issuance of Letter of Credit. The Borrower may from
time to time request that an Issuing Lender issue a Letter of Credit by
delivering to such Issuing Lender at its address for notices specified herein an
Application therefor, completed to the satisfaction of such Issuing Lender, and
such other certificates, documents and other papers and information as such
Issuing Lender may request. Concurrently with the delivery of an Application to
an Issuing Lender, the Borrower shall deliver a copy thereof to the
Administrative Agent. Upon receipt of any Application, an Issuing Lender will
process such Application and the certificates, documents and other papers and
information delivered to it in connection therewith in accordance with its
customary procedures and shall promptly issue the Letter of Credit requested
thereby by issuing the original of such Letter of Credit to the beneficiary
thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower
(but in no event shall any Issuing Lender be required to issue any Letter of
Credit earlier than two Business Days after its receipt of the Application
therefor and all such other certificates, documents and other papers and
information relating thereto). Promptly after issuance by an Issuing Lender of a
Letter of Credit, such Issuing Lender shall furnish a copy of such Letter of
Credit to the Borrower. Each Issuing Lender shall promptly give notice to the
Administrative Agent of the issuance of each Letter of Credit issued by such
Issuing Lender (including the amount thereof), and shall provide a copy of such
Letter of Credit to the Administrative Agent as soon as possible after the date
of issuance.
          3.3 Fees and Other Charges. (a) The Borrower will pay to the
Administrative Agent for distribution to the Lenders a fee on the aggregate
drawable amount of all outstanding Letters of Credit at a per annum rate equal
to the Applicable Margin then in effect with respect to Eurodollar Loans, to be
shared ratably among the Lenders in accordance with their respective Percentages
and payable quarterly in arrears on each L/C Fee Payment Date after the issuance
date. In addition, the Borrower shall pay to the relevant Issuing Lender for its
own account a fronting fee on the aggregate drawable amount of all outstanding
Letters of Credit issued by it at the rate per annum agreed upon from time to
time by the Borrower and such Issuing Lender, payable quarterly in arrears on
each L/C Fee Payment Date after the issuance date.

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          (b) In addition to the foregoing fees, the Borrower shall pay or
reimburse each Issuing Lender for such normal and customary costs and expenses
as are incurred or charged by such Issuing Lender in issuing, negotiating,
effecting payment under, amending or otherwise administering any Letter of
Credit.
          3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce each Issuing
Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases, without recourse
or warranty, from each Issuing Lender, on the terms and conditions hereinafter
stated, for such L/C Participant’s own account and risk, an undivided interest
equal to such L/C Participant’s Percentage in each Issuing Lender’s obligations
and rights under each Letter of Credit issued by such Issuing Lender hereunder
and the amount of each draft paid by such Issuing Lender thereunder. Each L/C
Participant unconditionally and irrevocably agrees with each Issuing Lender
that, if a draft is paid under any Letter of Credit issued by such Issuing
Lender for which such Issuing Lender is not reimbursed in full by the Borrower
in accordance with the terms of this Agreement, such L/C Participant shall pay
to the Administrative Agent for the account of such Issuing Lender upon demand
at such Issuing Lender’s address for notices specified herein (and thereafter
the Administrative Agent shall promptly pay to such Issuing Lender) an amount
equal to such L/C Participant’s Percentage of the amount of such draft, or any
part thereof, that is not so reimbursed.
          (b) If any amount (a “Participation Amount”) required to be paid by
any L/C Participant to an Issuing Lender pursuant to Section 3.4(a) in respect
of any unreimbursed portion of any payment made by such Issuing Lender under any
Letter of Credit is paid to such Issuing Lender within three Business Days after
the date such payment is due, such Issuing Lender shall so notify the
Administrative Agent (which shall notify the L/C Participants), and each L/C
Participant shall pay to Administrative Agent, for the account of such Issuing
Lender, on demand (and thereafter the Administrative Agent shall promptly pay to
such Issuing Lender) an amount equal to the product of (i) such Participation
Amount, times (ii) the daily average Federal Funds Effective Rate during the
period from and including the date such payment is required to the date on which
such payment is immediately available to such Issuing Lender, times (iii) a
fraction the numerator of which is the number of days that elapse during such
period and the denominator of which is 360. If any Participation Amount required
to be paid by any L/C Participant pursuant to Section 3.4(a) is not made
available to the Administrative Agent for the account of the relevant Issuing
Lender by such L/C Participant within three Business Days after the date such
payment is due, the Administrative Agent on behalf of such Issuing Lender shall
be entitled to recover from such L/C Participant, on demand, such Participation
Amount with interest thereon calculated from such due date at the rate per annum
applicable to Base Rate Loans. A certificate of the Administrative Agent on
behalf of an Issuing Lender submitted to any L/C Participant with respect to any
amounts owing under this Section shall be conclusive in the absence of manifest
error.
          (c) Whenever, at any time after an Issuing Lender has made payment
under any Letter of Credit and has received from the Administrative Agent any
L/C Participant’s its pro rata share of such payment in accordance with
Section 3.4(a), such Issuing Lender receives any payment related to such Letter
of Credit (whether directly from the Borrower or otherwise, including proceeds
of collateral applied thereto by such Issuing Lender), or any payment of

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interest on account thereof, such Issuing Lender will distribute to the
Administrative Agent for the account of such L/C Participant (and thereafter the
Administrative Agent will promptly distribute to such L/C Participant) its pro
rata share thereof; provided, however, that in the event that any such payment
received by such Issuing Lender shall be required to be returned by such Issuing
Lender, such L/C Participant shall return to the Administrative Agent for the
account of such Issuing Lender (and thereafter the Administrative Agent shall
promptly return to such Issuing Lender) the portion thereof previously
distributed by such Issuing Lender.
          3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse each Issuing Lender, on each date on which such Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit (including any Letter of Credit issued for the account of any
Subsidiary) and paid by such Issuing Lender, for the amount of (a) such draft so
paid and (b) any taxes, fees, charges or other costs or expenses incurred by
such Issuing Lender in connection with such payment (the amounts described in
the foregoing clauses (a) and (b) in respect of any drawing, collectively, the
“Payment Amount”). Each such payment shall be made to such Issuing Lender at its
address for notices specified herein in lawful money of the United States of
America and in immediately available funds. Interest shall be payable on each
Payment Amount from the date of the applicable drawing until payment in full at
the rate set forth in (i) until the second Business Day following the date of
the applicable drawing, Section 2.11(b) and (ii) thereafter, Section 2.11(c).
Each drawing under any Letter of Credit shall (unless an event of the type
described in clause (i) or (ii) of Section 8(f) shall have occurred and be
continuing with respect to the Borrower, in which case the procedures specified
in Section 3.4 for funding by L/C Participants shall apply) constitute a request
by the Borrower to the Administrative Agent for a borrowing pursuant to
Section 2.2 of Base Rate Loans in the amount of such drawing. The Borrowing Date
with respect to such borrowing shall be the first date on which a borrowing of
Loans could be made, pursuant to Section 2.2, if the Administrative Agent had
received a notice of such borrowing at the time the Administrative Agent
receives notice from the relevant Issuing Lender of such drawing under such
Letter of Credit.
          3.6 Obligations Absolute. The Borrower’s obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against any Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with each Issuing
Lender that such Issuing Lender shall not be responsible for, and the Borrower’s
Reimbursement Obligations under Section 3.5 shall not be affected by, among
other things, the validity or genuineness of documents or of any endorsements
thereon, even though such documents shall in fact prove to be invalid,
fraudulent or forged, or any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or any claims whatsoever of the Borrower against any
beneficiary of such Letter of Credit or any such transferee. No Issuing Lender
shall be liable for any error, omission, interruption or delay in transmission,
dispatch or delivery of any message or advice, however transmitted, in
connection with any Letter of Credit, except for errors or omissions found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Issuing Lender.
The Borrower agrees that any action taken or omitted by an Issuing Lender under
or in connection with any Letter of Credit issued by it or the related drafts or
documents, if done in the absence of

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gross negligence or willful misconduct and in accordance with the standards or
care specified in the Uniform Commercial Code of the State of New York, shall
not excuse the Reimbursement Obligations of the Borrower hereunder and shall not
result in any liability of such Issuing Lender to the Borrower.
          3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the relevant Issuing Lender shall promptly
notify the Borrower and the Administrative Agent of the date and amount thereof.
The responsibility of the relevant Issuing Lender to the Borrower in connection
with any draft presented for payment under any Letter of Credit, in addition to
any payment obligation expressly provided for in such Letter of Credit issued by
such Issuing Lender, shall be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment appear on their face to be in conformity with such Letter of
Credit.
          3.8 Applications. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
          3.9 Indemnification; Exoneration; Power of Attorney.
     (a) Indemnification. IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED
IN THIS SECTION, THE BORROWER HEREBY AGREES TO PROTECT, INDEMNIFY, PAY AND SAVE
THE LENDERS AND THE AGENTS HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS’ FEES) WHICH ANY LENDER OR ANY AGENT (OTHER THAN ANY LENDER
IN ITS CAPACITY AS AN ISSUING LENDER) MAY INCUR OR BE SUBJECT TO AS A
CONSEQUENCE, DIRECT OR INDIRECT, OF THE ISSUANCE OF ANY LETTER OF CREDIT OTHER
THAN ANY CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES, COSTS, CHARGES, AND
EXPENSES RESULTING SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
SUCH INDEMNIFIED PERSON. THE AGREEMENT IN THIS SECTION SHALL SURVIVE PAYMENT OF
ALL OBLIGATIONS. NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED TO LIMIT THE
BORROWER’S RIGHTS, IF ANY, WITH RESPECT TO ANY ISSUING LENDER WHICH ARISE BY
OPERATION OF LAW OR AS A RESULT OF THE APPLICATION AND RELATED DOCUMENTS
EXECUTED BY AND BETWEEN THE BORROWER AND ANY ISSUING LENDER.
     (b) Assumption of Risk by the Borrower. As among the Loan Parties, the
Lenders, the Issuing Lenders and the Agents, the Borrower or the relevant Loan
Party assumes all risks of the acts and omissions of, or misuse of any of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, the Lenders, the Issuing
Lenders and the Agents shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any Person in connection with the application for and issuance of and
presentation of drafts with respect to any of the Letters of Credit, even if

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it should prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (iii) the
failure of the beneficiary of any Letter of Credit to comply duly with
conditions required in order to draw upon such Letter of Credit; (iv) errors,
omissions, interruptions, or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order make a drawing under
any Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (viii) any consequences arising from causes beyond the
control of the Lenders, the Issuing Lenders or the Agents, including any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto Governmental Authority. None of the foregoing shall affect, impair or
prevent the vesting of any rights or powers of any Agent, any Issuing Lender or
any Lender under this Section.
     (c) Exoneration. In furtherance and extension, and not in limitation, of
the specific provisions set forth above, any action taken or omitted by any
Agent, any Issuing Lender or any Lender under or in connection with any of the
Letters of Credit or any related certificates, if taken or omitted in good
faith, shall not put any Agent, any Issuing Lender or any Lender under any
resulting liability to any Loan Party or relieve the relevant Loan Party of any
of its obligations hereunder to any such Person.
     (d) Indemnification by Lenders. The Lenders agree to indemnify each Issuing
Lender (to the extent not reimbursed by the Borrower and without limiting the
obligations of the Borrower hereunder) ratably in accordance with their
respective Percentages in effect on the date on which indemnification is sought
under this Section (or, if indemnification is sought after the date upon which
the Commitments shall be terminated and the Loans shall have been paid in full,
ratably in accordance with such Percentages immediately prior to such date), for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys’ fees) or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against such Issuing Lender in any way relating to or arising out of
any Letter of Credit or the transactions contemplated thereby or any action
taken or omitted by such Issuing Lender under any Letter of Credit or any Loan
Document in connection therewith; provided that no Lender shall be liable for
any of the foregoing to the extent it arises from the gross negligence or
willful misconduct of the Person to be indemnified. Without limitation of the
foregoing, each Lender agrees to reimburse each Issuing Lender promptly upon
demand for its Percentage of any costs or expenses payable by the Borrower to
such Issuing Lender, to the extent that such Issuing Lender is not promptly
reimbursed for such costs and expenses by the Borrower. The agreement contained
in this Section shall survive payment in full of all Obligations.
     (e) Power of Attorney. In connection with all inventory financed by Letters
of Credit, the Borrower hereby appoints each Issuing Lender, or such Issuing
Lender’s

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designee, as its attorney, with full power and authority: (i) to sign and/or
endorse the Borrower’s name upon any warehouse or other receipts; (ii) to sign
the Borrower’s name on bills of lading and other negotiable and non-negotiable
documents; (iii) to clear inventory through customs in such Issuing Lender’s or
the Borrower’s name, and to sign and deliver to customs officials powers of
attorney in the Borrower’s name for such purpose; (iv) to complete in the
Borrower’s or such Issuing Lender’s name, any order, sale, or transaction,
obtain the necessary documents in connection therewith, and collect the proceeds
thereof; and (v) to do such other acts and things as are necessary in order to
enable such Issuing Lender to obtain possession or control of the inventory and
to obtain payment of the Obligations. None of the Issuing Lenders or any of
their respective designees, as the Borrower’s attorney, will be liable for any
acts or omissions, nor for any error of judgment or mistakes of fact or law.
This power, being coupled with an interest, is irrevocable until all Obligations
have been paid and satisfied.
     (f) Account Party. The Borrower hereby authorizes and directs any Issuing
Lender to name the Borrower as the “Account Party” therein and to deliver to the
Administrative Agent all instruments, documents and other writings and property
received by such Issuing Lender pursuant to the Letter of Credit, and to accept
and rely upon the Administrative Agent’s instructions and agreements with
respect to all matters arising in connection with the Letter of Credit or the
Application therefor.
          3.10 Supporting Letter of Credit; Cash Collateral. If, notwithstanding
the provisions of this Section and Section 8, any Letter of Credit is
outstanding upon the termination of this Agreement, then upon such termination
the Borrower shall deposit with the Administrative Agent, for the ratable
benefit of the Issuing Lenders and the Lenders, with respect to each Letter of
Credit then outstanding, as the Required Lenders in their discretion shall
specify, either (i) a standby letter of credit (a “Supporting Letter of Credit”)
in form and substance satisfactory to the Administrative Agent, issued by an
issuer satisfactory to the Administrative Agent in an amount equal to the
greatest amount for which such Letter of Credit may be drawn plus any fees and
expenses associated with such Letter of Credit, under which Supporting Letter of
Credit the Administrative Agent is entitled to draw amounts necessary to
reimburse the Administrative Agent, the Issuing Lenders and the Lenders for
payments to be made under or in connection with such Letter of Credit and any
fees and expenses associated with such Letter of Credit, or (ii) cash in amounts
necessary to reimburse the Administrative Agent, the Issuing Lenders and the
Lenders for payments made under or in connection with such Letter of Credit and
any fees and expenses associated with such Letter of Credit. Such Supporting
Letter of Credit or deposit of cash shall be held by the Administrative Agent,
for the ratable benefit of the Administrative Agent, the Issuing Lenders and the
Lenders, as security for, and to provide for the payment of, the aggregate
undrawn amount of such Letters of Credit remaining outstanding; provided that in
the case of any Letter of Credit denominated in a currency other than Dollars,
upon the request of the Administrative Agent or the relevant Issuing Lender, the
Borrower shall deposit additional amounts in the cash collateral account in such
amounts as reasonably determined by the Administrative Agent to achieve the
deposit of cash in the amount required above, taking into account the effects of
currency exchange fluctuations with respect to the applicable currency.
Reasonable interest shall accrue on any such cash deposit, which accrued
interest shall be for the account of the Borrower, subject to this Agreement.

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          3.11 Letters of Credit Issued for Subsidiaries. Notwithstanding that a
Letter of Credit issued or outstanding hereunder is in support of any
obligations of, or is for the account of, a Subsidiary, the Borrower shall be
obligated to reimburse the Issuing Lender that issued such Letter of Credit for
any and all drawings thereunder. The Borrower hereby acknowledges that the
issuance of Letters of Credit for the account of Subsidiaries inures to the
benefit of the Borrower, and that the Borrower’s business derives substantial
benefits from the businesses of such Subsidiaries.
          3.12 Determination of Amount. Unless otherwise specified herein, the
amount of a Letter of Credit at any time shall be deemed to be the stated amount
of such Letter of Credit in effect at such time; provided, however, that with
respect to any Letter of Credit that, by its terms or the terms of any agreement
related thereto, provides for one or more automatic increases in the stated
amount thereof, the amount of such Letter of Credit shall be deemed to be the
maximum stated amount of such Letter of Credit after giving effect to all such
increases, whether or not such maximum stated amount is in effect at such time.
SECTION 4. REPRESENTATIONS AND WARRANTIES
          To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to each Agent and each
Lender that:
          4.1 Financial Condition. The audited consolidated balance sheets of
the Borrower as at December 31, 2005 and December 31, 2006, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly in all material respects the
consolidated financial condition of the Borrower as at such date, and the
consolidated results of its operations and its consolidated cash flows for the
respective fiscal years then ended. The unaudited consolidated balance sheets of
the Borrower as at March 31, 2007 and June 30, 2007, and the related unaudited
consolidated statements of income and cash flows for the periods ended on such
date, present fairly in all material respects the consolidated financial
condition of the Borrower as at such dates, and the consolidated results of its
operations and its consolidated cash flows for the quarterly periods then ended
(subject to normal year-end audit adjustments). All such financial statements,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP applied consistently throughout the periods involved
(except as approved by the aforementioned firm of accountants and disclosed
therein). The Borrower and its Subsidiaries do not have any material Guarantee
Obligations, contingent liabilities and liabilities for taxes (except for any
such tax liabilities to taxing authorities outside of the United States which
are not, in the aggregate, material to the Borrower and its Subsidiaries taken
as a whole) or any long-term leases or unusual forward or long-term commitments,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, that are not
reflected in the most recent financial statements referred to in this paragraph.
During the period from December 31, 2006 to and including the date hereof there
has been no Disposition by the Borrower of any material part of its business or
Property, except as reflected in the foregoing financial statements.

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          4.2 No Change. Since December 31, 2006 there has been no development
or event that has had or could reasonably be expected to have a Material Adverse
Effect.
          4.3 Corporate Existence; Compliance with Law. Each of the Borrower and
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the corporate
power and authority, and the legal right, to own and operate its Property, to
lease the Property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of Property or the conduct of its business requires such qualification
except to the extent that the failure to be so qualified could not reasonably be
expected to have a Material Adverse Effect and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.
          4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to borrow hereunder. Each Loan Party has taken all necessary
corporate or other action to authorize the execution, delivery and performance
of the Loan Documents to which it is a party and, in the case of the Borrower,
to authorize the borrowings on the terms and conditions of this Agreement. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or the execution, delivery,
performance, validity or enforceability of this Agreement or any of the other
Loan Documents, except (i) consents, authorizations, filings and notices
described in Schedule 4.4, which consents, authorizations, filings and notices
have been obtained or made and are in full force and effect (except as noted on
Schedule 4.19) and (ii) the filings referred to in Section 4.4. Each Loan
Document has been duly executed and delivered on behalf of each Loan Party that
is a party thereto. This Agreement constitutes, and each other Loan Document
upon execution will constitute, a legal, valid and binding obligation of each
Loan Party that is a party thereto, enforceable against each such Loan Party in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors’ rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).
          4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any material Contractual Obligation of the Borrower or any
of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
          4.6 No Material Litigation. No litigation, investigation or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective

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properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
          4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in
default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
          4.8 Ownership of Property; Liens. Each of the Borrower and its
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its material real property, and good title to, or a valid leasehold interest in,
all its other material Property, and none of such Property is subject to any
Lien except as permitted by Section 7.3.
          4.9 Intellectual Property. The Borrower and each of its Subsidiaries
owns, or is licensed to use, all material Intellectual Property necessary for
the conduct of its business as currently conducted; no material claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any valid basis for any
such claim; and the use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe on the rights of any Person in any material
respect.
          4.10 Taxes. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all Federal, state and other material tax returns
that are required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its Property and
all other taxes, fees or other charges imposed on it or any of its Property by
any Governmental Authority (other than (a) any the amount or validity of which
are currently being contested in good faith by appropriate proceedings and
(b) assessments by the Republic of Kazakhstan, disputed as of the date of this
Agreement, in each case, with respect to which reserves in conformity with GAAP
have been provided on the books of the Borrower or its Subsidiaries, as the case
may be); and no tax Lien has been filed, and, to the knowledge of the Borrower,
no claim is being asserted, with respect to any such tax, fee or other charge
(other than any such Liens and claims in favor of taxing authorities outside of
the United States which are not, in the aggregate, material to the Borrower and
its Subsidiaries taken as a whole).
          4.11 Federal Regulations. No part of the proceeds of any Loans will be
used in violation of Regulation U as now and from time to time hereafter in
effect or for any purpose that violates the provisions of the Regulations of the
Board.
          4.12 Labor Matters. There are no strikes or other labor disputes
against the Borrower or any of its Subsidiaries pending or, to the knowledge of
the Borrower, threatened that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect. Hours worked by and
payment made to employees of the Borrower and its Subsidiaries have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such matters that (individually or in the

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40

aggregate) could reasonably be expected to have a Material Adverse Effect. All
payments due from the Borrower or any of its Subsidiaries on account of employee
health and welfare insurance that (individually or in the aggregate) could
reasonably be expected to have a Material Adverse Effect if not paid have been
paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
          4.13 ERISA. Neither a Reportable Event nor an “accumulated funding
deficiency” (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code, except where, individually or in the aggregate, such occurrence or
noncompliance has not had and could not reasonably be expected to have a
Material Adverse Effect. No termination of a Single Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has arisen, during such five-year
period. The present value of all accrued benefits under each Single Employer
Plan (based on those assumptions used to fund such Plans) did not, as of the
last annual valuation date prior to the date on which this representation is
made or deemed made, exceed the value of the assets of such Plan allocable to
such accrued benefits by a material amount. Neither the Borrower nor any
Commonly Controlled Entity has had a complete or partial withdrawal from any
Multiemployer Plan that has resulted or could reasonably be expected to result
in a material liability under ERISA, and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material liability under ERISA if
the Borrower or any such Commonly Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on which this representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.
          4.14 Investment Company Act; Other Regulations. No Loan Party is an
“investment company”, or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) which limits its ability to incur Indebtedness.
          4.15 Subsidiaries. (a) The Subsidiaries listed on Schedule 4.15
constitute all of the Subsidiaries of the Borrower at the date hereof.
Schedule 4.15 sets forth as of the Closing Date the name and jurisdiction of
incorporation of each such Subsidiary and, as to each, the percentage of each
class of Capital Stock owned by each Loan Party.
          (b) As of the date hereof, there are no outstanding subscriptions,
options, warrants, calls, rights or other agreements or commitments (other than
stock options granted to employees or directors and directors’ qualifying
shares) of any nature relating to any Capital Stock of the Borrower or any
Subsidiary, except as disclosed on Schedule 4.15.
          4.16 Use of Proceeds. The proceeds of the Loans, and the Letters of
Credit, shall be used for the general corporate purposes of the Borrower and its
Subsidiaries, including to satisfy tax obligations owed by any Loan Party to the
Republic of Kazakhstan.
          4.17 Environmental Matters.
          Other than as set forth on Schedule 4.17 and exceptions to any of the
following that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect:

 

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41
          (a) The Borrower and its Subsidiaries: (i) are, and within the period
of all applicable statutes of limitation have been, in compliance with all
applicable Environmental Laws; (ii) hold all Environmental Permits (each of
which is in full force and effect) required for any of their current or intended
operations or for any property owned, leased, or otherwise operated by any of
them; (iii) are, and within the period of all applicable statutes of limitation
have been, in compliance with all of their Environmental Permits; and
(iv) reasonably believe that: each of their Environmental Permits will be timely
renewed and complied with, without material expense; any additional
Environmental Permits that may be required of any of them will be timely
obtained and complied with, without material expense; and compliance with any
Environmental Law that is or is expected to become applicable to any of them
will be timely attained and maintained, without material expense.
          (b) Materials of Environmental Concern are not present at, on, under,
in, or about any real property now or formerly owned, leased or operated by the
Borrower or any of its Subsidiaries, or at any other location (including,
without limitation, any location to which Materials of Environmental Concern
have been sent for re-use or recycling or for treatment, storage, or disposal)
which could reasonably be expected to (i) give rise to liability of the Borrower
or any of its Subsidiaries under any applicable Environmental Law or otherwise
result in costs to the Borrower or any of its Subsidiaries, or (ii) interfere
with the Borrower’s or any of its Subsidiaries’ continued operations, or
(iii) impair the fair saleable value of any real property owned or leased by the
Borrower or any of its Subsidiaries.
          (c) There is no judicial, administrative, or arbitral proceeding
(including any notice of violation or alleged violation) under or relating to
any Environmental Law to which the Borrower or any of its Subsidiaries is, or to
the knowledge of the Borrower or any of its Subsidiaries will be, named as a
party that is pending or, to the knowledge of the Borrower or any of its
Subsidiaries, threatened.
          (d) Neither the Borrower nor any of its Subsidiaries has received any
written request for information, or been notified that it is a potentially
responsible party under or relating to the federal Comprehensive Environmental
Response, Compensation, and Liability Act or any similar Environmental Law, or
with respect to any Materials of Environmental Concern.
          (e) Neither the Borrower nor any of its Subsidiaries has entered into
or agreed to any consent decree, order, or settlement or other agreement, or is
subject to any judgment, decree, or order or other agreement, in any judicial,
administrative, arbitral, or other forum for dispute resolution, relating to
compliance with or liability under any Environmental Law.
          (f) Neither the Borrower nor any of its Subsidiaries has assumed or
retained, by contract or operation of law, any liabilities of any kind, fixed or
contingent, known or unknown, under any Environmental Law or with respect to any
Material of Environmental Concern other than indemnity obligations in the
ordinary course of business.
          4.18 Accuracy of Information, etc. No written statement or information
contained in this Agreement, any other Loan Document or any other document,
certificate or written statement furnished to the Administrative Agent or the
Lenders or any of them, by or on behalf of any Loan Party for use in connection
with the transactions contemplated by this

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42

Agreement or the other Loan Documents, contained as of the date such statement,
information, document or certificate was so furnished, any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements contained herein or therein, taken as a whole, not materially
misleading in light of the circumstances under which made. The projections and
pro forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. As of the Closing Date, there is no fact known to
any Loan Party that could reasonably be expected to have a Material Adverse
Effect that has not been expressly disclosed herein, in the other Loan Documents
or in any other documents, certificates and statements furnished to the
Administrative Agent and the Lenders for use in connection with the transactions
contemplated hereby and by the other Loan Documents.
          4.19 Security Documents. The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral described therein and proceeds thereof. When financing statements in
appropriate form are filed in the offices specified on Schedule 4.19, the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Obligations (as
defined in the Guarantee and Collateral Agreement), in each case prior and
superior in right to any other Person (except Liens permitted by Section 7.3).
          4.20 Solvency. As of the Closing Date, each of the Borrower and each
Loan Party that is a Material Subsidiary is, and after giving effect to the
incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, Solvent.
SECTION 5. CONDITIONS PRECEDENT
          5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it
hereunder is subject to the satisfaction, prior to or concurrently with the
making of such extension of credit on the Closing Date, of the following
conditions precedent:
          (a) Loan Documents. The Administrative Agent shall have received
(i) this Agreement, executed and delivered by a duly authorized officer of the
Borrower, (ii) the Acknowledgment and Confirmation, executed and delivered by a
duly authorized officer of the Borrower and each Subsidiary Guarantor and
(iii) a Lender Addendum executed and delivered by each Lender and accepted by
the Borrower.
          (b) Financial Statements. The Lenders shall have received (i) audited
consolidated financial statements of the Borrower for the 2005 and 2006 fiscal
years and (ii) unaudited interim consolidated financial statements of the
Borrower for each fiscal quarterly period ended subsequent to the date of the
latest applicable financial statements delivered

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pursuant to clause (i) of this paragraph as to which such financial statements
are available, and such financial statements shall not, in the reasonable
judgment of the Lenders, reflect any material adverse change in the consolidated
financial condition of the Borrower, as reflected in the financial statements or
projections previously delivered to them.
          (c) Fees. The Lenders, the Arrangers and the Administrative Agent
shall have received all fees required to be paid, and all expenses for which
invoices have been presented (including reasonable fees, disbursements and other
charges of counsel to the Administrative Agent), on or before the Closing Date.
          (d) Business Plan. The Lenders shall have received a satisfactory
business plan for fiscal years 2007-2009.
          (e) Liquidity. The Borrowing Base shall be no less than $60,000,000 on
the Closing Date. After giving effect to any extensions of credit made hereunder
on the Closing Date and the use of the proceeds thereof, the sum of (A) total
unrestricted cash and cash equivalents of the Borrower and its Subsidiaries and
(B) the Excess Credit Availability, in each case as of the Closing Date, shall
be no less than $150,000,000.
          (f) Lien Searches. The Administrative Agent shall have received the
results of a recent lien search in each of the jurisdictions in which Uniform
Commercial Code financing statement or other domestic filings or recordations
should be made to evidence or perfect security interests in all personal
property assets of the Loan Parties, and such search shall reveal no liens on
any of the assets of the Loan Party, except for Liens permitted by Section 7.3
or Liens to be released in connection with this Agreement.
          (g) Collateral Appraisal. The Lenders shall have received copies of a
satisfactory independent collateral appraisal of the assets of Quail Tools
prepared by Superior Asset Appraisals.
          (h) Closing Certificate. The Administrative Agent shall have received
a certificate of each Loan Party, dated the Closing Date, substantially in the
form of Exhibit C, with appropriate insertions and attachments.
          (i) Legal Opinions. The Administrative Agent shall have received the
following executed legal opinions:

  (i)   the legal opinion of Bracewell & Giuliani LLP, substantially in the form
of Exhibit E-1; and     (ii)   the legal opinion of Ronald Potter, Esq., general
counsel of the Borrower and its Subsidiaries, substantially in the form of
Exhibit E-2.

Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.

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44

          (j) Filings, Registrations and Recordings. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
the Security Documents or under law or reasonably requested by the
Administrative Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for the benefit of the Secured Parties, a
perfected Lien on the Collateral described therein, prior and superior in right
to any other Person (other than with respect to Liens expressly permitted by
Section 7.3), shall have been delivered to the Administrative Agent in proper
form for filing, registration or recordation.
          (k) Insurance. The Administrative Agent shall have received insurance
certificates satisfying the requirements of Section 5.3 of the Guarantee and
Collateral Agreement.
          5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it hereunder on
any date is subject to the satisfaction of the following conditions precedent:
          (a) Representations and Warranties. (i) Each of the representations
and warranties made by any Loan Party in or pursuant to the Loan Documents which
is qualified by materiality shall be true and correct and (ii) each of the other
representations and warranties made by any Loan Party in or pursuant to the Loan
Documents shall be true and correct in all material respects, in each case on
and as of such date as if made on and as of such date.
          (b) No Default. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the extensions of credit
requested to be made on such date.
          (c) Borrowing Base. At any time when the Total Extensions of Credit
equal or exceed $40,000,000, the Administrative Agent shall be satisfied that,
after giving effect to such extension of credit and the use of proceeds thereof,
the Borrowing Base shall not be less than the Total Extensions of Credit.
          Each borrowing by and issuance of a Letter of Credit on behalf of the
Borrower hereunder shall constitute a representation and warranty by the
Borrower as of the date of such extension of credit that the conditions
contained in this Section 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
          The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall and shall cause
each of its Subsidiaries (other than any Immaterial Subsidiary) to:
          6.1 Financial Statements. Furnish to the Administrative Agent (which
shall promptly furnish to each Lender):
          (a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and

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45

its consolidated Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting forth
in each case in comparative form the figures as of the end of and for the
previous year, reported on without a “going concern” or like qualification or
exception, or qualification arising out of the scope of the audit, by KPMG LLP
or other independent certified public accountants of nationally recognized
standing;
          (b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal year
of the Borrower, the unaudited consolidated balance sheet of the Borrower and
its consolidated Subsidiaries as at the end of such quarter and the related
unaudited consolidated statements of income and of cash flows for such quarter
and the portion of the fiscal year through the end of such quarter, setting
forth in each case in comparative form the figures as of the end of and for the
corresponding period in the previous year, certified by a Responsible Officer as
being fairly stated in all material respects (subject to normal year-end audit
adjustments); and
          (c) as soon as available, but in any event not later than 30 days
after the end of each month occurring during each fiscal year of the Borrower
(other than the third, sixth, ninth and twelfth such month), the unaudited
consolidated balance sheets of the Borrower and its Subsidiaries as at the end
of such month and the related unaudited consolidated statements of income and of
cash flows for such month and the portion of the fiscal year through the end of
such month, setting forth in each case in comparative form the figures as of the
end of and for the corresponding period in the previous year, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments);
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
          6.2 Certificates; Other Information. Furnish to the Administrative
Agent (which shall promptly furnish to each Lender), or, in the case of clause
(f), to the relevant Lender:
          (a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that in making the
examination necessary therefor no knowledge was obtained of any Default or Event
of Default, except as specified in such certificate (it being understood that
such certificate shall be limited to the items that independent certified public
accountants are permitted to cover in such certificates pursuant to their
professional standards and customs of the profession);
          (b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
that, to the best of such Responsible Officer’s knowledge, each Loan Party
during such period has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement and the
other Loan Documents to which it is a party to be observed, performed or
satisfied by it, in each case to the extent any failure to do so would
constitute a Default or Event of Default

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hereunder, and that such Responsible Officer has obtained no knowledge of any
Default or Event of Default except as specified in such certificate and (ii) in
the case of quarterly or annual financial statements, (x) a Compliance
Certificate containing all information and calculations necessary for
determining compliance by the Borrower and its Subsidiaries with the provisions
of this Agreement referred to therein as of the last day of the fiscal quarter
or fiscal year of the Borrower, as the case may be, and (y) any UCC financing
statements or other filings specified in such Compliance Certificate as being
required to be delivered therewith;
          (c) as soon as available, and in any event no later than 45 days after
the end of each fiscal year of the Borrower, a detailed consolidated budget for
the following fiscal year (including a projected consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of the following fiscal year,
and the related consolidated statements of projected cash flow, projected
changes in financial position and projected income), and, as soon as available,
significant revisions, if any, of such budget and projections with respect to
such fiscal year (collectively, the “Projections”), which Projections shall in
each case be accompanied by a certificate of a Responsible Officer stating that
such Projections are based on reasonable estimates, information and assumptions
and that such Responsible Officer has no reason to believe that such Projections
are incorrect or misleading in any material respect;
          (d) no later than 10 Business Days prior to the effectiveness thereof,
copies of substantially final drafts of any proposed amendment, supplement,
waiver or other modification with respect to the Indentures;
          (e) within five days after the same are sent, copies of all financial
statements and reports that the Borrower sends to the holders of any class of
its debt securities or public equity securities and, within five days after the
same are filed, copies of all financial statements and reports that the Borrower
may make to, or file with, the SEC; and
          (f) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
          6.3 Conduct of Business and Maintenance of Existence, etc. (a)
(i) Preserve, renew and keep in full force and effect its corporate or other
existence and (ii) take all reasonable action to maintain all rights, privileges
and franchises useful and necessary in the normal conduct of its business,
except, in each case, as otherwise permitted by Section 7.4 and except, in the
case of clause (ii) above, to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect; and (b) comply with
all Contractual Obligations and Requirements of Law, except to the extent that
failure to comply therewith could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect.
          6.4 Maintenance of Property; Insurance. (a) Keep all material Property
and systems useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance on all its Property in at
least such amounts and against at least such risks (but including in any event
public liability, product liability and business interruption) as are usually
insured against in the same general area by companies engaged in the same or a
similar business.

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          6.5 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit any
Lender (accompanied by any other Lender that so elects) to visit and inspect any
of its properties and examine and make abstracts from any of its books and
records at any reasonable time, upon reasonable prior notice, and to discuss the
business, operations, properties and financial and other condition of the
Borrower and its Subsidiaries with officers and employees of the Borrower and
its Subsidiaries and with its independent certified public accountants (it being
understood that all such notices shall be given through the Administrative Agent
and shall be coordinated with any other such notices to the extent reasonably
possible), in each case no more often than twice in any calendar year in the
aggregate for all Lenders unless an Event of Default shall have occurred and be
continuing.
          6.6 Notices. Promptly give notice to the Administrative Agent (which
shall promptly furnish such notice to the Lenders) of:
          (a) the occurrence of any Default or Event of Default;
          (b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect or (ii) litigation, investigation or
proceeding which may exist at any time between the Borrower or any of its
Subsidiaries and any Governmental Authority that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect;
          (c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries (i) in which the amount involved is $5,000,000 or more and not
covered by insurance or (ii) in which injunctive or similar relief is sought
which, if granted, could reasonably be expected to have a Material Adverse
Effect;
          (d) the following events, as soon as possible and in any event within
10 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in favor of the
PBGC or a Plan or any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or
the taking of any other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of, any Plan; and
          (e) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or the relevant Subsidiary proposes to take
with respect thereto.
          6.7 Environmental Laws. Comply in all respects with, and take all
reasonable action to ensure compliance in all respects by all tenants and
subtenants, if any, with, all applicable Environmental Laws, and obtain and
comply in all respects with and maintain, and

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take all reasonable action to ensure that all tenants and subtenants obtain and
comply in all respects with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by applicable Environmental
Laws, except to the extent that any failures to so comply or maintain could not,
in the aggregate, reasonably be expected to result in a Material Adverse Effect.
          6.8 Additional Collateral, etc. (a) With respect to any Specified
Personal Property acquired after the Closing Date by the Borrower or any
Subsidiary Guarantor (other than any Property subject to a Lien expressly
permitted by Section 7.3(g) or 7.3(j)) as to which the Administrative Agent, for
the benefit of the Secured Parties, does not have a perfected Lien, promptly
(i) execute and deliver to the Administrative Agent such amendments to the
Guarantee and Collateral Agreement or such other documents as the Administrative
Agent reasonably deems necessary to grant to the Administrative Agent, for the
benefit of the Secured Parties, a security interest in such Property and
(ii) take all actions necessary or advisable to grant to the Administrative
Agent, for the benefit of the Secured Parties, a perfected first priority
security interest in such Property, subject to Permitted Liens, including
without limitation, the filing of Uniform Commercial Code financing statements
in such jurisdictions as may be required by the Guarantee and Collateral
Agreement or by law or as may be requested by the Administrative Agent.
          (b) With respect to any new Material Subsidiary (other than an
Excluded Subsidiary) created or acquired after the Closing Date (which, for the
purposes of this paragraph, shall include any existing Material Subsidiary that
ceases to be an Excluded Subsidiary and any existing Domestic Subsidiary that
ceases to be an Immaterial Subsidiary), by the Borrower or any of the Subsidiary
Guarantors, promptly (i) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement and (B) in the case of any Domestic
Subsidiary, to take such actions necessary or advisable to grant to the
Administrative Agent for the benefit of the Secured Parties a perfected first
priority security interest in the Collateral described in the Guarantee and
Collateral Agreement with respect to such new Subsidiary (subject to Permitted
Liens), including, without limitation, the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be reasonably requested by the
Administrative Agent, and (ii) if reasonably requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.
          6.9 Borrowing Base Certificate. In the case of the Borrower, at any
time when the Total Extensions of Credit equal or exceed $40,000,000, deliver or
cause to be delivered, at the Borrower’s expense, the following:
          (a) to the Administrative Agent, the following documents in a form
satisfactory to it:

  (i)   on a monthly basis and in no event later than 25 days after the end of
each such month or, if an Event of Default shall exist, more frequently as the
Administrative Agent may reasonably request (but in no event more often than
weekly) or as the Borrower shall

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      elect, a Borrowing Base Certificate, accompanied by such supporting detail
and documentation as is contemplated by the Borrowing Base Certificate and/or as
shall be requested by the Administrative Agent in its reasonable discretion (in
a form and detail satisfactory to the Administrative Agent);     (ii)   on a
monthly basis and in no event later than 25 days after the end of each such
month or, if an Event of Default shall exist, more frequently as the
Administrative Agent may in good faith request (but in no event more often than
weekly), detailed agings of Accounts and a detailed listing of the inventory of
Quail Tools (together with a reconciliation to its general ledger);     (iii)  
upon the Administrative Agent’s request in good faith (but in no event more
often than (x) monthly so long as no Event of Default shall exist or (y) weekly
if an Event of Default shall exist), (A) copies of customer statements and
credit memos, remittance advices and reports, and copies of deposit slips and
bank statements, and (B) a statement of the outstanding loans and payments made,
and Accounts owing to, Affiliates as of the last day of the immediately
preceding month.

          (b) To the Administrative Agent such other reports, statements and
reconciliations with respect to the Borrowing Base or the Collateral as it shall
from time to time request in its reasonable discretion.
          6.10 Cash Management Systems. (a) Within 30 days after the opening of
any deposit account, securities account, lockbox account, concentration account,
collection account or disbursement account, in each case other than any
Immaterial Account, in the United States, deliver to the Administrative Agent a
schedule (a “Supplemental Account Identification Schedule”) which provides, in
respect of each such account opened since the Closing Date (i) the name and
location of each bank and securities intermediary at which the Borrower or such
Subsidiary Guarantor maintains a deposit account, securities account, lockbox
account, concentration account, collection account or disbursement account in
the United States and (ii) the account number and account name or other relevant
descriptive data with respect to each such account and such other information
with respect to each such account as the Administrative Agent shall reasonably
request.
          (b) On or before the date which is 30 days after the delivery of any
Supplemental Account Identification Schedule, cause to be delivered to the
Administrative Agent a Control Agreement and/or a Lockbox Agreement with respect
to each account described in such Supplemental Account Identification Schedule
which the Administrative Agent reasonably requires to be subject to such an
agreement, in each case duly executed and delivered by the Borrower or the
relevant Subsidiary Guarantor and by the bank or securities intermediary that
maintains such account.

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          (c) Cause all proceeds of any Collateral in every form, including,
without limitation, cash, checks, wire transfers and other forms of receipts, to
be deposited promptly in a collection account or lockbox account (i) in respect
of which a Control Agreement and/or Lockbox Agreement, as appropriate, is in
effect and (ii) which, at any time after an Event of Default has occurred and is
continuing, is used solely for the purpose of receiving proceeds of Collateral.
          6.11 Inspection of Collateral. The Borrower agrees that the
Administrative Agent or its agents may, as the Administrative Agent shall deem
necessary or appropriate in the exercise of its sole discretion, enter upon the
premises of the Borrower or any Subsidiary Guarantor at any time and from time
to time, during normal business hours and upon reasonable notice under the
circumstances, and at any time whatsoever on and after the occurrence of a
Default or Event of Default, for the purposes of conducting field examinations
and appraisals and inspecting, evaluating and verifying the Collateral, all of
the above to be at the Borrower’s expense during the existence of an Event of
Default and at the Administrative Agent’s expense if no Event of Default exists.
Notwithstanding the foregoing, at any time, but not more than on one occasion in
any fiscal year of the Borrower, the Administrative Agent may require an
appraisal of the Collateral at the Borrower’s expense.
          6.12 Further Assurances. From time to time execute and deliver, or
cause to be executed and delivered, such additional instruments, certificates or
documents, and take such actions, as the Administrative Agent may reasonably
request for the purposes of implementing or effectuating the provisions of this
Agreement and the other Loan Documents, or of more fully perfecting or renewing
the rights of the Administrative Agent and the Lenders with respect to the
Collateral (or with respect to any additions thereto or replacements or proceeds
thereof or with respect to any other property or assets hereafter acquired by
the Borrower or any Subsidiary which may be deemed to be part of the Collateral)
pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any
Lender of any power, right, privilege or remedy pursuant to this Agreement or
the other Loan Documents which requires any consent, approval, recording,
qualification or authorization of any Governmental Authority, the Borrower will
execute and deliver, or will cause the execution and delivery of, all
applications, certifications, instruments and other documents and papers that
the Administrative Agent or such Lender may be required to obtain from the
Borrower or any of its Subsidiaries for such governmental consent, approval,
recording, qualification or authorization.
SECTION 7. NEGATIVE COVENANTS
          The Borrower hereby agrees that, so long as the Commitments remain in
effect, any Letter of Credit remains outstanding or any Loan or other amount is
owing to any Lender or any Agent hereunder, the Borrower shall not, and shall
not permit any of its Subsidiaries (other than any Immaterial Subsidiary) to,
directly or indirectly:
          7.1 Financial Condition Covenants.

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          (a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio as at the last day of any period of four consecutive fiscal quarters of
the Borrower to exceed 4.50:1.00.
          (b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio for any period of four consecutive fiscal quarters of
the Borrower to be less than 2.00:1.00.
          (c) Consolidated Senior Secured Leverage Ratio. Permit the
Consolidated Senior Secured Leverage Ratio as at the last day of any period of
four consecutive fiscal quarters of the Borrower to exceed 1.25:1.00.
          7.2 Limitation on Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness, except:
          (a) (I) Indebtedness of any Loan Party pursuant to any Loan Document
and (II) any unsecured Indebtedness of any Loan Party the Net Cash Proceeds of
which are used (i) to repay any Indebtedness referred to in the preceding clause
(I), provided that such repayment is accompanied by an equal permanent reduction
of the Commitments, or (ii) to pay premiums, fees or expenses payable in
connection with any such repayment;
          (b) Indebtedness (i) of the Borrower to any Subsidiary and of any
Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary and
(ii) of any Subsidiary to any Loan Party or other Subsidiary;
          (c) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $10,000,000 at any one time outstanding;
          (d) (I) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(d) and (II) any Indebtedness the Net Cash Proceeds of which are
used (i) to refinance, refund, renew or extend any Indebtedness referred to in
the preceding clause (I) (without any shortening of the maturity of any
principal amount thereof) or (ii) to pay premiums, fees or expenses payable in
connection with any such refinancing, refunding, renewal or extension;
          (e) (i) Guarantee Obligations of the Borrower or any Subsidiary in
respect of Indebtedness permitted under this Section 7.2 and (ii) Guarantee
Obligations made in the ordinary course of business by the Borrower or any of
its Subsidiaries of obligations of the Borrower or any Subsidiary Guarantor;
          (f) Indebtedness represented by agreements of the Borrower or any
Subsidiary providing for indemnification, adjustment of purchase price, or
similar obligations, in each case, incurred or assumed in connection with the
Disposition of any business, assets, or Capital Stock of the Borrower or any
Subsidiary; provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received by the
Borrower and its Subsidiaries in connection with such Disposition; and

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          (g) additional Indebtedness of the Borrower or any of its Subsidiaries
in an aggregate principal amount (for the Borrower and all Subsidiaries) not to
exceed $20,000,000 at any one time outstanding.
          7.3 Limitation on Liens. Create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except
for:
          (a) Liens for taxes, assessments or governmental charges or claims not
yet due or which are being contested in good faith by appropriate proceedings,
provided that adequate reserves with respect thereto are maintained on the books
of the Borrower or its Subsidiaries, as the case may be, in conformity with
GAAP;
          (b) Landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s,
repairmen’s or other like Liens arising in the ordinary course of business which
are not overdue for a period of more than 30 days or that are being contested in
good faith by appropriate proceedings;
          (c) pledges or deposits in connection with workers’ compensation,
unemployment insurance and other social security legislation;
          (d) deposits to secure the payment or performance of bids, tenders,
government contracts, trade contracts (other than for borrowed money), leases,
statutory or regulatory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of
business;
          (e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the aggregate,
are not substantial in amount and which do not in any case materially detract
from the value of the Property subject thereto or materially interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries;
          (f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(d), provided that no such Lien is
spread to cover any additional Property after the Closing Date;
          (g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(c) to finance the acquisition of
fixed or capital assets, provided that (i) such Liens shall be created within
90 days after the acquisition of such fixed or capital assets, (ii) such Liens
do not at any time encumber any Property other than the Property financed by
such Indebtedness and (iii) the amount of Indebtedness secured thereby is not
increased;
          (h) Liens created pursuant to the Security Documents;
          (i) any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business and
covering only the assets so leased;
          (j) Liens not otherwise permitted by this Section 7.3 so long as
neither (i) the aggregate outstanding principal amount of the obligations
secured thereby nor (ii) the aggregate

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fair market value (determined, in the case of each such Lien, as of the date
such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower
and all Subsidiaries) $20,000,000 at any one time;
          (k) judgment Liens not giving rise to an Event of Default so long as
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired;
          (l) Liens upon specific items of inventory or other goods of the
Borrower or any Subsidiary securing such Person’s obligations in respect of
bankers acceptances issued or created for the account of such Person to
facilitate the purchase, shipment, or storage of such inventory or other goods;
and
          (m) Liens securing reimbursement obligations with respect to
commercial letters of credit that encumber documents and other property or
assets relating to such letters of credit and products and proceeds thereof.
          7.4 Limitation on Fundamental Changes. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or Dispose of all or substantially all
of its Property or business, except that:
          (a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
surviving corporation) or with or into any Subsidiary Guarantor (provided that
(i) the Subsidiary Guarantor shall be the continuing or surviving corporation or
(ii) simultaneously with such transaction, the continuing or surviving
corporation shall become a Subsidiary Guarantor and the Borrower shall comply
with Section 6.9 in connection therewith);
          (b) any Subsidiary may merge with any other Subsidiary (or any Person
that becomes a Subsidiary contemporaneously with such merger) so long as, in the
case of any merger involving a Subsidiary Guarantor, the surviving Person shall
be (or shall contemporaneously become) a Subsidiary Guarantor and such merger
could not reasonably be expected to have a material adverse effect on the
business, assets, property or financial condition of the surviving Subsidiary;
and
          (c) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Subsidiary (so long as, in the case of any such Disposition by a Subsidiary
Guarantor, the Subsidiary to whom such assets are disposed of is a Subsidiary
Guarantor) and may be dissolved following such Disposition.
          7.5 Limitation on Disposition of Property. Dispose of (i) any barge
rig located in the Gulf of Mexico, (ii) any Eligible Accounts Receivable or
(iii) any Eligible Rental Equipment, in each case whether now owned or hereafter
acquired, or issue or Dispose of any Capital Stock of any Person that directly
or indirectly owns any of the foregoing, except:
          (a) Dispositions permitted by Section 7.4(c);

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          (b) the Disposition of obsolete or worn out property, or property that
is no longer used or useful in such Person’s business, in the ordinary course of
business;
          (c) the Disposition of inventory or other assets in the ordinary
course of business or consistent with past practice;
          (d) Dispositions of cash or Cash Equivalents;
          (e) the sale or issuance of any Subsidiary’s Capital Stock to the
Borrower or any Subsidiary Guarantor;
          (f) transfers of assets between or among the Borrower and the
Subsidiary Guarantors;
          (g) any Dispositions constituted by the granting of Liens permitted by
Section 7.3;
          (h) any lease of drill pipe by Quail Tools to a customer located
outside of the United States and any subsequent sale to such customer of any
such drill pipe;
          (i) any sale by the Borrower or any Subsidiary to its customers of
drill pipe, tools, and associated drilling equipment utilized in connection with
a drilling contract for the employment of a drilling rig in the ordinary course
of business and consistent with past practice; and
          (j) Dispositions of Property described on Schedule 7.5(j).
          7.6 Limitation on Restricted Payments. Declare or pay any dividend on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary, whether now
or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
the Borrower or any Subsidiary, or enter into any derivatives or other
transaction with any financial institution, commodities or stock exchange or
clearinghouse (a “Derivatives Counterparty”) obligating the Borrower or any
Subsidiary to make payments to such Derivatives Counterparty as a result of any
change in market value of any such Capital Stock (collectively, “Restricted
Payments”), except that:
          (a) any Subsidiary (a “Paying Subsidiary”) may make Restricted
Payments (i) to the Borrower or any Subsidiary Guarantor, (ii) in the case of
any Paying Subsidiary that is a partnership or a limited liability company,
ratably to the partners or members thereof, as the case may be, so long as at
least one such partner or member, as the case may be, is a Subsidiary Guarantor
and (iii) if such Paying Subsidiary is not a Subsidiary Guarantor, to any other
Subsidiary which is the parent of such Paying Subsidiary;
          (b) the Borrower may make Restricted Payments in the form of common
stock of the Borrower;

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          (c) the Borrower may make Restricted Payments in connection with
(i) the conversion, redemption, or repurchase of the Convertible Notes and
(ii) the High Strikes Agreements.
          (d) so long as no Event of Default has occurred and is continuing or
would be caused thereby, the Borrower or any Subsidiary may repurchase, redeem,
or otherwise acquire or retire any Capital Stock of the Borrower or any
Subsidiary held by any existing or former officer or employee of the Borrower or
any Subsidiary pursuant to any equity subscription agreement, stock option
agreement, or similar agreement, provided, that the aggregate amount of payments
under this paragraph subsequent to the date hereof (net of any proceeds received
by the Borrower subsequent to the date hereof in connection with resales of any
common stock or common stock options so purchased) shall not exceed $2,000,000
in any 12 month period; and
          (e) the Borrower may acquire Capital Stock in connection with the
exercise of stock options or stock appreciation rights by way of cashless
exercise or in connection with the satisfaction of withholding tax obligations.
          7.7 Limitation on Modifications of Debt Instruments, etc. (a) amend,
modify or otherwise change, or consent or agree to any amendment, modification,
waiver or other change to, any of the terms of the Convertible Notes, the Senior
Notes, the Senior Floating Rate Notes or any Refinancing Debt to the extent that
any such amendment, modification, waiver or other change would shorten the
maturity or increase the amount of any payment of principal thereof, increase
the rate or shorten the date for payment of interest thereon or make any
covenant or other restriction applicable to the Borrower or any of its
Subsidiaries materially more restrictive) or (b) amend its certificate of
incorporation in any manner adverse to the Administrative Agent or the Lenders.
          7.8 Limitation on Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of Property, the rendering of any service or the payment of any
management, advisory or similar fees, with any Affiliate (other than the
Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise
permitted under this Agreement, (b) in the ordinary course of business of the
Borrower or such Subsidiary, as the case may be, and (c) upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary, as the
case may be, than it would obtain in a comparable arm’s length transaction with
a Person that is not an Affiliate, except for transactions permitted by the
following sentence. This Section 7.8 shall not apply to the following
transactions: (i) any employment agreement entered into by the Borrower or any
of its Subsidiaries in the ordinary course of business and consistent with past
practices, (ii) payment of reasonable directors’ fees to Persons who are not
otherwise Affiliates of the Borrower, (iii) sales of Capital Stock of the
Borrower to Affiliates of the Borrower, (iv) any Restricted Payment otherwise
permitted under Section 7.6 or any Investment, (v) indemnification agreements
with, and payments made, to officers, directors, and employees of the Borrower
or any Subsidiary pursuant to charter, bylaw, statutory, or contractual
provisions, and (vi) the performance of obligations of the Borrower or any
Subsidiary under the terms of any agreement to which the Borrower or any
Subsidiary is a party as of the date of this Agreement, and any amendments,
modifications, supplements, extensions, or renewals of such agreements; provided
that any such amendments, modifications, supplements, extensions, or renewals of
such agreements are not materially more

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disadvantageous, taken as a whole, to the Administrative Agent and the Lenders
than the terms of such agreements as in effect on the date of this Agreement.
          7.9 Limitation on Changes in Fiscal Periods. Permit the fiscal year of
the Borrower to end on a day other than December 31 or change the Borrower’s
method of determining fiscal quarters.
          7.10 Limitation on Negative Pledge Clauses. Enter into or suffer to
exist or become effective any agreement that prohibits or limits the ability of
the Borrower or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its Property or revenues, whether now owned or
hereafter acquired, to secure the Obligations or, in the case of any guarantor,
its obligations under the Guarantee and Collateral Agreement, other than
(a) this Agreement and the other Loan Documents, (b) the Indentures or any
indenture or similar instrument governing any Refinancing Debt, (c) any
agreements governing any purchase money Liens or Capital Lease Obligations or
other secured Indebtedness otherwise permitted hereby (in which case, any
prohibition or limitation shall only be effective against the assets financed
thereby or securing such Indebtedness), (d) customary non assignment provisions
in any contract or lease entered into in the ordinary course of business and
consistent with past practices, (e) applicable law or any applicable rule,
regulation, or order of any Governmental Authority, (f) provisions with respect
to the disposition or distribution of assets or property in joint venture
agreements, asset sale agreements, stock sale agreements, and other similar
agreements entered into in the ordinary course of business, and (g) restrictions
on cash or other deposits or net worth imposed by customers under contracts
entered into in the ordinary course of business.
          7.11 Limitation on Restrictions on Subsidiary Distributions. Enter
into or suffer to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (a) make Restricted Payments in
respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness
owed to, the Borrower or any other Subsidiary, (b) make Investments in the
Borrower or any other Subsidiary or (c) transfer any of its assets to the
Borrower or any other Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) any restrictions existing under the Loan
Documents, (ii) any restrictions with respect to a Subsidiary imposed pursuant
to an agreement that has been entered into in connection with the Disposition of
all or substantially all of the Capital Stock or assets of such Subsidiary,
(iii) any restrictions imposed pursuant to agreements governing any purchase
money Liens or Capital Lease Obligations or other secured Indebtedness otherwise
permitted hereby (in which case, any prohibition or limitation shall only be
effective as to transfers of the assets financed thereby or securing such
Indebtedness), (iv) customary non assignment provisions in any contract or lease
entered into in the ordinary course of business and consistent with past
practices, (v) applicable law or any applicable rule, regulation, or order of
any Governmental Authority, (vi) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements, asset sale
agreements, stock sale agreements, and other similar agreements entered into in
the ordinary course of business, provided that such provisions apply only to the
assets subject to such agreements, and (vii) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business.
          7.12 Limitation on Lines of Business. Enter into any material business
except for those businesses in which the Borrower and its Subsidiaries are
engaged on the date of this

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Agreement or that are incidental or reasonably related thereto or that are a
reasonable extension thereof, as determined in good faith by the Borrower or
applicable Subsidiary.
          7.13 Limitation on Hedge Agreements. Enter into any Hedge Agreement
other than Hedge Agreements entered into in the ordinary course of business, and
not for speculative purposes, to protect against changes in interest rates or
foreign exchange rates.
SECTION 8. EVENTS OF DEFAULT
          If any of the following events shall occur and be continuing:
          (a) The Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or the
Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation,
or any other amount payable hereunder or under any other Loan Document, within
three Business Days after any such interest or other amount becomes due in
accordance with the terms hereof or thereof; or
          (b) Any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or in any certificate, document or
financial or other statement furnished by it at any time under or in connection
with this Agreement or any such other Loan Document shall prove to have been
inaccurate in any material respect on or as of the date made or deemed made or
furnished; or
          (c) (i) Any Loan Party shall default in the observance or performance
of any agreement contained in clause (i) or (ii) of Section 6.3(a) (with respect
to the Borrower only), Section 6.6(a) or Section 7, or in Section 5 of the
Guarantee and Collateral Agreement or (ii) any Loan Party shall default in the
observance or performance of any agreement contained in Section 6.1 or in clause
(i) of Section 6.9(a) and such default shall continue unremedied for a period of
10 days; or
          (d) Any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and such
default shall continue unremedied for a period of 30 days; or
          (e) The Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness (including, without
limitation, but without duplication of the Indebtedness guaranteed thereby, any
Guarantee Obligation, but excluding the Loans and Reimbursement Obligations) on
the scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest on any such Indebtedness beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness was created; or (iii) default in the observance or performance of
any other agreement or condition relating to any such Indebtedness or contained
in any instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or other
event or condition is to cause, or to permit the holder or beneficiary of such
Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to
cause, with the giving of notice if required, such Indebtedness to become due
prior to its stated maturity or to become subject to or mandatory offer to
purchase by the obligor thereunder or (in

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the case of any such Indebtedness constituting a Guarantee Obligation) to become
payable; provided, that a default, event or condition described in clause (i),
(ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of
Default unless, at such time, one or more defaults, events or conditions of the
type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have
occurred and be continuing with respect to Indebtedness the outstanding
principal amount of which exceeds in the aggregate $10,000,000; or
          (f) (i) The Borrower or any of its Subsidiaries (other than any
Immaterial Subsidiary) shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or seeking to adjudicate
it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any of its Subsidiaries
(other than any Immaterial Subsidiary) shall make a general assignment for the
benefit of its creditors; or (ii) there shall be commenced against the Borrower
or any of its Subsidiaries (other than any Immaterial Subsidiary) any case,
proceeding or other action of a nature referred to in clause (i) above that
(A) results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against the Borrower or any of its
Subsidiaries (other than any Immaterial Subsidiary) any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets that
results in the entry of an order for any such relief that shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any of its Subsidiaries (other than any Immaterial
Subsidiary) shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
          (g) Any Person shall engage in any “prohibited transaction” (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, or any Lien in
favor of the PBGC or a Plan shall arise on the assets of the Borrower or any
Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan or (vi) any other event or condition shall occur or exist
with respect to a Plan; and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or

 

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          (h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving for the Borrower and its
Subsidiaries taken as a whole a liability (not paid or fully covered by
insurance as to which the relevant insurance company has acknowledged coverage)
of $10,000,000 or more, and all such judgments or decrees shall not have been
vacated, discharged, stayed or bonded pending appeal by the earlier of (i) the
date which 30 days from the entry thereof and (ii) the date on which the
relevant judgment creditor(s) has begun to enforce such judgment(s) or
decree(s); or
          (i) Any of the Security Documents shall cease, for any reason (other
than by reason of the express release thereof pursuant to Section 10.15), to be
in full force and effect, or any Loan Party or any Affiliate of any Loan Party
shall so assert, or any Lien on a material portion of the Collateral created by
any of the Security Documents shall cease (other than by reason of the express
release thereof pursuant to Section 10.15) to be enforceable and of the same
effect and priority purported to be created thereby; or
          (j) The guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason (other than by reason of the
express release thereof pursuant to Section 10.15), to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or
          (k) Any Change of Control shall occur;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including, without limitation, all
amounts of L/C Obligations, whether or not the beneficiaries of the then
outstanding Letters of Credit shall have presented the documents required
thereunder) shall immediately become due and payable, and (B) if such event is
any other Event of Default, either or both of the following actions may be
taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate; and (ii) with
the consent of the Required Lenders, the Administrative Agent may, or upon the
request of the Required Lenders, the Administrative Agent shall, by notice to
the Borrower, declare the Loans hereunder (with accrued interest thereon) and
all other amounts owing under this Agreement and the other Loan Documents
(including, without limitation, all amounts of L/C Obligations, whether or not
the beneficiaries of the then outstanding Letters of Credit shall have presented
the documents required thereunder) to be due and payable forthwith, whereupon
the same shall immediately become due and payable. In the case of all Letters of
Credit with respect to which presentment for honor shall not have occurred at
the time of an acceleration pursuant to this paragraph, the Borrower shall at
such time deposit in a cash collateral account opened by the Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit; provided that in the case of any Letter of Credit denominated
in a currency other than Dollars, upon the request of the Administrative Agent
or the relevant Issuing Lender, the Borrower shall deposit additional amounts in
the cash collateral account in such amounts as reasonably determined by the
Administrative Agent to achieve the deposit of cash in the amount

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required above, taking into account the effects of currency exchange
fluctuations with respect to the applicable currency. Amounts held in such cash
collateral account shall be applied by the Administrative Agent to the payment
of drafts drawn under such Letters of Credit, and the unused portion thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay other obligations of the Borrower hereunder and
under the other Loan Documents. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Borrower hereunder and under the
other Loan Documents shall have been paid in full, the balance, if any, in such
cash collateral account shall be returned to the Borrower (or such other Person
as may be lawfully entitled thereto).
SECTION 9. THE ADMINISTRATIVE AGENT
          9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each Lender irrevocably authorizes
the Administrative Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
          9.2 Delegation of Duties. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
          9.3 Exculpatory Provisions. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except to the extent that any of the foregoing are found by a final
and nonappealable decision of a court of competent jurisdiction to have resulted
from its or such Person’s own gross negligence or willful misconduct) or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of any Loan Party to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of

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any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of any Loan
Party.
          9.4 Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any
instrument, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other document
or conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the Loan
Parties), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless such Note shall have been
transferred in accordance with Section 10.6 and all actions required by such
Section in connection with such transfer shall have been taken. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders (or, if so specified
by this Agreement, all Lenders or any other instructing group of Lenders
specified by this Agreement) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Required Lenders (or, if so
specified by this Agreement, all Lenders or any other instructing group of
Lenders specified by this Agreement), and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
          9.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent shall have received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a “notice of default”. In the
event that the Administrative Agent shall receive such a notice, the
Administrative Agent shall give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders (or, if
so specified by this Agreement, all Lenders or any other instructing group of
Lenders specified by this Agreement); provided that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
          9.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates have
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of a
Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Lender. Each
Lender represents to the Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property,

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financial and other condition and creditworthiness of the Loan Parties and their
affiliates. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
any Loan Party or any affiliate of a Loan Party that may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
          9.7 Indemnification. The Lenders agree to indemnify each Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective Percentages in effect on the date on which indemnification is sought
under this Section (or, if indemnification is sought after the date upon which
the Commitments shall have terminated and the Loans shall have been paid in
full, ratably in accordance with such Percentages immediately prior to such
date), for, and to save each Agent harmless from and against, any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever that may at any time
(including, without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating to
or arising out of, the Commitments, this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by such Agent under or in connection with any of the foregoing; provided that no
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements that are found by a final and nonappealable decision
of a court of competent jurisdiction to have resulted from such Agent’s gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Loans and all other amounts payable hereunder.
          9.8 Agent in Its Individual Capacity. Each Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent were not an Agent. With
respect to its Loans made or renewed by it and with respect to any Letter of
Credit issued or participated in by it, each Agent shall have the same rights
and powers under this Agreement and the other Loan Documents as any Lender and
may exercise the same as though it were not an Agent, and the terms “Lender” and
“Lenders” shall include each Agent in its individual capacity.
          9.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 10 days’ notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other

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Loan Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall (unless an Event of
Default under Section 8(a) or Section 8(f) with respect to the Borrower shall
have occurred and be continuing) be subject to approval by the Borrower (which
approval shall not be unreasonably withheld or delayed), whereupon such
successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term “Administrative Agent” shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent’s rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. If no successor agent has accepted appointment as
Administrative Agent by the date that is 10 days following a retiring
Administrative Agent’s notice of resignation, the retiring Administrative
Agent’s resignation shall nevertheless thereupon become effective, and the
Lenders shall assume and perform all of the duties of the Administrative Agent
hereunder until such time, if any, as the Required Lenders appoint a successor
agent as provided for above. After any retiring Administrative Agent’s
resignation as Administrative Agent, the provisions of this Section 9 shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under this Agreement and the other Loan Documents.
          9.10 Authorization to Release Liens and Guarantees. The Administrative
Agent is hereby irrevocably authorized by each of the Lenders to effect any
release of Liens or guarantee obligations contemplated by Section 10.15.
          9.11 The Arrangers; the Syndication Agent. Neither the Arrangers nor
the Syndication Agent, in their respective capacities as such, shall have no
duties or responsibilities, and shall incur no liability, under this Agreement
and the other Loan Documents.
SECTION 10. MISCELLANEOUS
          10.1 Amendments and Waivers. Neither this Agreement or any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders, the Administrative Agent and each Loan Party party to the
relevant Loan Document may, or (with the written consent of the Required
Lenders) the Administrative Agent and each Loan Party party to the relevant Loan
Document may, from time to time, (a) enter into written amendments, supplements
or modifications hereto and to the other Loan Documents (including amendments
and restatements hereof or thereof) for the purpose of adding any provisions to
this Agreement or the other Loan Documents or changing in any manner the rights
of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on
such terms and conditions as may be specified in the instrument of waiver, any
of the requirements of this Agreement or the other Loan Documents or any Default
or Event of Default and its consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall:

  (i)   forgive the principal amount or extend the final scheduled date of
maturity of any Loan or Reimbursement Obligation, reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof, or increase the amount or extend the expiration date of any Commitment
of any Lender, in

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      each case without the consent of each Lender directly affected thereby;  
  (ii)   amend, modify or waive any provision of this Section or reduce the
percentage specified in the definition of Required Lenders, consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents, release all or substantially
all of the Collateral or release all or substantially all of the Subsidiary
Guarantors from their respective guarantee obligations under the Guarantee and
Collateral Agreement, in each case without the consent of all Lenders;     (iii)
  amend, modify or waive any provision of Section 9, or any other provision
affecting the rights, duties or obligations of any Agent, without the consent of
any Agent directly affected thereby;     (iv)   amend, modify or waive any
provision of Section 2.14 without the consent of each Lender directly affected
thereby;     (v)   amend, modify or waive any provision of Section 3 without the
consent of each Issuing Lender affected thereby;     (vi)   impose restrictions
on assignments and participations that are more restrictive than, or additional
to, those set forth in Section 10.6 without the consent of all Lenders;    
(vii)   increase the Advance Rates under the Borrowing Base or increase the L/C
Commitment without the consent of all Lenders; or     (viii)   amend, modify or
waive any provision of (A) the definition of “Borrowing Base” or (B) any of the
capitalized terms used in such definition, in each case without the consent of
Lenders whose Percentages are no less than 75% in the aggregate.

Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Loan Parties, the
Lenders, the Administrative Agent and all future holders of the Loans. In the
case of any waiver, the Loan Parties, the Lenders and the Administrative Agent
shall be restored to their former position and rights hereunder and under the
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon. Any such waiver, amendment, supplement or modification shall be
effected by a written instrument signed by the parties required to sign pursuant
to the foregoing provisions of this Section; provided, that delivery of an
executed signature page of any such instrument by facsimile transmission shall
be effective as delivery of a manually executed counterpart thereof.

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          10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed (a) in the case of the Borrower and the Administrative
Agent, as follows and (b) in the case of the Lenders, as set forth in an
administrative questionnaire delivered to the Administrative Agent or on
Schedule I to the Lender Addendum to which such Lender is a party or, in the
case of a Lender which becomes a party to this Agreement pursuant to an
Assignment and Acceptance, in such Assignment and Acceptance or (c) in the case
of any party, to such other address as such party may hereafter notify to the
other parties hereto:

         
 
  The Borrower:   Parker Drilling Company
1401 Enclave Parkway
Suite 600
Houston, Texas 77077
Attention: Kirk Brassfield
Telecopy: 281-406-2331
Telephone: 281-406-2330
 
       
 
  The Administrative Agent:   In the case of any borrowing request or any notice
relating to any prepayment or the conversion or continuation of any Loan,
 
       
 
      Lehman Commercial Paper Inc.
Bank Loan Operations
745 Seventh Avenue
16th Floor
New York, New York 10019
Attention: Michelle Rosolinksy
Telecopy: 646-758- 5015
Telephone: 212-526-6590
 
       
 
      In the case of any other notice or communication,
 
       
 
      Lehman Commercial Paper Inc.
Loan Portfolio Group
745 Seventh Avenue
7th Floor
New York, New York 10019
Attention: Parker Drilling Portfolio Manager
Telecopy: 646-758-2774
Telephone: 212-526-1819
 
       
 
  Issuing Lender:   As notified by such Issuing Lender to the Administrative
Agent and the Borrower

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provided that any notice, request or demand to or upon the Administrative Agent,
any Issuing Lender or any Lender shall not be effective until received.
          10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
          10.4 Survival of Representations and Warranties. All representations
and warranties made herein, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
          10.5 Payment of Expenses. The Borrower agrees (a) to pay or reimburse
the Administrative Agent for all its reasonable out-of-pocket costs and expenses
incurred in connection with the syndication of the Facility (other than fees
payable to syndicate members) and the development, preparation and execution of,
and any amendment, supplement or modification to, this Agreement and the other
Loan Documents and any other documents prepared in connection herewith or
therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements and other charges of counsel to the Administrative Agent
and the charges of Intralinks, (b) to pay or reimburse each Lender and the
Administrative Agent for all their costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement, the
other Loan Documents and any other documents prepared in connection herewith or
therewith, including, without limitation, the fees and disbursements of counsel
(including the allocated fees and disbursements and other charges of in-house
counsel) to each Lender and of counsel to the Administrative Agent, (c) to pay,
indemnify, or reimburse each Lender and the Administrative Agent for, and hold
each Lender and the Administrative Agent harmless from, any and all recording
and filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other taxes, if any, which may be payable
or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify or reimburse each Lender, the
Administrative Agent, their respective affiliates, and their respective
officers, directors, trustees, employees, advisors, agents and controlling
persons (each, an “Indemnitee”) for, and hold each Indemnitee harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including, without limitation, any of the foregoing
relating to the use of proceeds of the Loans or the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations of
the Borrower any of its Subsidiaries or any of the Properties and the fees and
disbursements and other charges of legal counsel in connection with the
foregoing (all the

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foregoing in this clause (d), collectively, the “Indemnified Liabilities”),
provided, that the Borrower shall have no obligation hereunder to any Indemnitee
with respect to Indemnified Liabilities to the extent such Indemnified
Liabilities have resulted from the gross negligence or willful misconduct of
such Indemnitee, and provided further that the Borrower shall have no obligation
hereunder to any Indemnitee which is such an advisor with respect to losses,
damages, liabilities or related expenses of such advisor in respect of any
claims brought by any other Indemnitee against such advisor arising from the
negligence of such advisor in the provision of services to such other
Indemnitee. No Indemnitee shall be liable for any damages arising from the use
by unauthorized persons of Information or other materials sent through
electronic, telecommunications or other information transmission systems that
are intercepted by such persons or for any special, indirect, consequential or
punitive damages in connection with the Facility. Without limiting the
foregoing, and to the extent permitted by applicable law, the Borrower agrees
not to assert and to cause its Subsidiaries not to assert, and hereby waives and
agrees to cause its Subsidiaries so to waive, all rights for contribution or any
other rights of recovery with respect to all claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, under or related to Environmental Laws, that any of them might have by
statute or otherwise against any Indemnitee. All amounts due under this Section
shall be payable not later than 30 days after written demand therefor.
Statements payable by the Borrower pursuant to this Section shall be submitted
to the Borrower at the address of the Borrower set forth in Section 10.2, or to
such other Person or address as may be hereafter designated by the Borrower in a
notice to the Administrative Agent. The agreements in this Section shall survive
repayment of the Loans and all other amounts payable hereunder.
          10.6 Successors and Assigns; Participations and Assignments. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of the Administrative Agent and each Lender.
          (b) Any Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a “Participant”) participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents. In the
event of any such sale by a Lender of a participating interest to a Participant,
such Lender’s obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender’s rights and obligations under
this Agreement and the other Loan Documents. In no event shall any Participant
under any such participation have any right to approve any amendment or waiver
of any provision of any Loan Document, or any consent to any departure by any
Loan Party therefrom, except to the extent that such amendment, waiver or
consent would require the consent of the Lender from whom such Participant
purchased such participation pursuant to Section 10.1. The Borrower agrees that
if amounts outstanding under this Agreement and the Loans are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be

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deemed to have the right of setoff in respect of its participating interest in
amounts owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement, provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders the
proceeds thereof as provided in Section 10.7(a) as fully as if such Participant
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.15, 2.16 and 2.17 with respect to its
participation in the Commitments and the Loans outstanding from time to time as
if such Participant were a Lender; provided that, in the case of Section 2.16,
such Participant shall have complied with the requirements of said Section, and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
          (c) Any Lender (an “Assignor”) may, in accordance with applicable law
and upon written notice to the Administrative Agent, at any time and from time
to time assign to any Lender or any affiliate, Related Fund or Control
Investment Affiliate thereof or, with the consent of the Borrower and the
Administrative Agent and the written consent of the Issuing Lender (which, in
each case, shall not be unreasonably withheld or delayed) (provided (x) that no
such consent need be obtained by the Administrative Agent or any of its
Affiliates and (y) the consent of the Borrower need not be obtained with respect
to any assignment if an Event of Default shall have occurred and be continuing),
to an additional bank, financial institution or other entity that is not a
competitor of the Borrower or its Subsidiaries (an “Assignee”) all or any part
of its rights and obligations under this Agreement pursuant to an Assignment and
Acceptance, substantially in the form of Exhibit D, executed by such Assignee
and such Assignor (and, where the consent of the Borrower, the Administrative
Agent or the Issuing Lender is required pursuant to the foregoing provisions, by
the Borrower and such other Persons) and delivered to the Administrative Agent
for its acceptance and recording in the Register; provided that ((i) no such
assignment to an Assignee (other than any Lender or any affiliate thereof) shall
be in an aggregate principal amount of less than $2,500,000 and (ii) after
giving effect thereto, the assigning Lender shall have Commitments and Loans
aggregating at least $2,500,000, unless otherwise agreed by the Borrower and the
Administrative Agent (in each case other than in the case of an assignment of
all of a Lender’s interests under the Facility), unless otherwise agreed by the
Borrower and the Administrative Agent. Upon such execution, delivery, acceptance
and recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with Commitments and/or Loans as set forth
therein, and (y) the Assignor thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all of an Assignor’s
rights and obligations under this Agreement, such Assignor shall cease to be a
party hereto, except as to Section 2.15, 2.16 and 10.5 in respect of the period
prior to such effective date). Notwithstanding any provision of this Section,
the consent of the Borrower shall not be required for any assignment that occurs
at any time when any Event of Default shall have occurred and be continuing. For
purposes of the minimum assignment amounts set forth in this paragraph, multiple
assignments by or to two or more Related Funds, or to two or more funds that
will be Related Funds after giving effect to such assignments, shall be
aggregated.

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          (d) The Administrative Agent shall, on behalf of the Borrower,
maintain at its address referred to in Section 10.2 a copy of each Assignment
and Acceptance delivered to it and a register (the “Register”) for the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time. The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Administrative Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of the Loans and any
Notes evidencing such Loans recorded therein for all purposes of this Agreement.
Any assignment of any Loan, whether or not evidenced by a Note, shall be
effective only upon appropriate entries with respect thereto being made in the
Register (and each Note shall expressly so provide). Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register
only upon surrender for registration of assignment or transfer of the Note
evidencing such Loan, accompanied by a duly executed Assignment and Acceptance;
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the designated Assignee, and the old Notes shall be returned by the
Administrative Agent to the Borrower marked “canceled”. The Register shall be
available for inspection by the Borrower or any Lender (with respect to any
entry relating to such Lender’s Loans) at any reasonable time and from time to
time upon reasonable prior notice.
          (e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 10.6(c), by each such other Person) together with payment
to the Administrative Agent of a registration and processing fee of $3,500
(treating multiple, simultaneous assignments by or to two or more Related Funds,
or to two or more funds that will be Related Funds after giving effect to such
assignments, as a single assignment) (except that no such registration and
processing fee shall be payable in the case of an Assignee which is already a
Lender or is an affiliate or Related Fund of a Lender or a Person under common
management with a Lender), the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Borrower. On or prior to
such effective date, the Borrower, at its own expense, upon request, shall
execute and deliver to the Administrative Agent (in exchange for the Note of the
assigning Lender) a new Note to the order of such Assignee in an amount equal to
the Commitment assumed by it pursuant to such Assignment and Acceptance and, if
the Assignor has retained a Commitment, upon request, a new Note to the order of
the Assignor in an amount equal to the Commitment retained by it hereunder. Such
new Note shall be dated the Closing Date and shall otherwise be in the form of
the Note replaced thereby.
          (f) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this Section concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests in Loans and Notes, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
          10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement provides for payments to be allocated to a particular Lender, if any
Lender (a “Benefitted Lender”) shall at any time receive any payment of all or
part of the Obligations owing to it, or

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receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off, pursuant to events or proceedings of the nature referred to in
Section 8(f), or otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other
Lender’s Obligations, such Benefitted Lender shall purchase for cash from the
other Lenders a participating interest in such portion of each such other
Lender’s Obligations, or shall provide such other Lenders with the benefits of
any such collateral, as shall be necessary to cause such Benefitted Lender to
share the excess payment or benefits of such collateral ratably with each of the
other Lenders; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Lender, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest.
          (b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such setoff and application made
by such Lender, provided that the failure to give such notice shall not affect
the validity of such setoff and application.
          10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement or of a
Lender Addendum by facsimile transmission shall be effective as delivery of a
manually executed counterpart hereof. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
          10.9 Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
          10.10 Integration. This Agreement and the other Loan Documents
represent the entire agreement of the Borrower, the Agents, the Arranger and the
Lenders with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Arranger, any Agent
or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Loan Documents.
          10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED

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BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
          10.12 Submission To Jurisdiction; Waivers. The Borrower hereby
irrevocably and unconditionally:
          (a) submits for itself and its Property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
          (b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
          (c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to the Borrower at its
address set forth in Section 10.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto;
          (d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
          (e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to in
this Section any special, exemplary, punitive or consequential damages.
          10.13 Acknowledgments. The Borrower hereby acknowledges that:
          (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
          (b) neither the Arranger, any Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Arranger, the Agents and the Lenders, on one hand, and the Borrower, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and
          (c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among the
Arranger, the Agents and the Lenders or among the Borrower and the Lenders.
          10.14 Confidentiality. Each of the Agents and the Lenders agrees to
keep confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to the Arranger,

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any Agent, any other Lender or any affiliate of any thereof, (b) to any
Participant or Assignee (each, a “Transferee”) or prospective Transferee that
agrees to comply with the provisions of this Section or substantially equivalent
provisions, (c) to any of its employees, directors, agents, attorneys,
accountants and other professional advisors, (d) to any financial institution
that is a direct or indirect contractual counterparty in swap agreements or such
contractual counterparty’s professional advisor (so long as such contractual
counterparty or professional advisor to such contractual counterparty agrees to
be bound by the provisions of this Section), (e) upon the request or demand of
any Governmental Authority having jurisdiction over it, (f) in response to any
order of any court or other Governmental Authority or as may otherwise be
required pursuant to any Requirement of Law, (g) in connection with any
litigation or similar proceeding, (h) that has been publicly disclosed other
than in breach of this Section, (i) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender’s investment portfolio
in connection with ratings issued with respect to such Lender or (j) in
connection with the exercise of any remedy hereunder or under any other Loan
Document. Notwithstanding anything to the contrary in the foregoing sentence or
any other express or implied agreement, arrangement or understanding, the
parties hereto hereby agree that, from the commencement of discussions with
respect to the financing provided hereunder, any party hereto (and each of its
employees, representatives, or agents) is permitted to disclose to any and all
persons, without limitation of any kind, the tax structure and tax aspects of
the transactions contemplated hereby, and all materials of any kind (including
opinions or other tax analyses) related to such tax structure and tax aspects.
          10.15 Release of Guarantees and Liens. (a) Notwithstanding anything to
the contrary contained herein or in any other Loan Document, promptly upon
request of the Borrower (i) in connection with any Disposition of Property
permitted by the Loan Documents, the Administrative Agent shall (without notice
to, or vote or consent of, any Lender, or any party to any Bank Product) take
such actions as shall be required to release its security interest in any
Collateral being Disposed of in such Disposition and (ii) upon any Disposition
of a Person permitted by the Loan Documents, the Administrative Agent shall
(without notice to, or vote or consent of, any Lender, or any party to any Bank
Product) take such actions as shall be required to release any guaranty and
other obligations of such Person under any Loan Document.
          (b) Notwithstanding anything to the contrary contained herein or any
other Loan Document, when all Obligations (other than obligations in respect of
any Bank Product) have been paid in full, all Commitments have terminated or
expired and no Letter of Credit shall be outstanding, upon request of the
Borrower, the Administrative Agent shall (without notice to, or vote or consent
of, any Lender, or any party to any Bank Product) take such actions as shall be
required to release its security interest in all Collateral, and the
Administrative Agent shall (without notice to, or vote or consent of, any
Lender, or any party to any Bank Product) take such actions as shall be required
to release all guarantee obligations under any Loan Document, whether or not on
the date of such release there may be outstanding Obligations in respect of Bank
Products. Any such release of guarantee obligations shall be deemed subject to
the provision that such guarantee obligations shall be reinstated if after such
release any portion of any payment in respect of the Obligations guaranteed
thereby shall be rescinded or must otherwise be restored or returned upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Borrower or any Guarantor, or upon or as a result of the appointment of a

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receiver, intervenor or conservator of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payment had not been made.
          10.16 Accounting Changes. In the event that any “Accounting Change”
(as defined below) shall occur and such change results in a change in the method
of calculation of financial covenants, standards or terms in this Agreement,
then the Borrower and the Administrative Agent agree to enter into negotiations
in order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Change with the desired result that the criteria for evaluating
the Borrower’s financial condition shall be the same after such Accounting
Change as if such Accounting Change had not been made. Until such time as such
an amendment shall have been executed and delivered by the Borrower, the
Administrative Agent and the Required Lenders, all financial covenants,
standards and terms in this Agreement shall continue to be calculated or
construed as if such Accounting Change had not occurred. “Accounting Change”
refers to any change in accounting principles required by the promulgation of
any rule, regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.
          10.17 Delivery of Lender Addenda. Each initial Lender shall become a
party to this Agreement by delivering to the Administrative Agent a Lender
Addendum duly executed by such Lender, the Borrower and the Administrative
Agent.
          10.18 Usury Not Intended. It is the intent of the Borrower and each
Lender in the execution and performance of this Agreement and the other Loan
Documents to contract in strict compliance with applicable usury laws, including
conflicts of law concepts, from time to time in effect governing the Loans of
each Lender. In furtherance thereof, the Lenders and the Borrower stipulate and
agree that none of the terms and provisions contained in this Agreement or the
other Loan Documents shall ever be construed to create a contract to pay, as
consideration for the use, forbearance or detention of money, interest at a rate
in excess of the maximum nonusurious interest rate under applicable law (the
“Maximum Rate”) and that for purposes hereof “interest” shall include the
aggregate of all charges which constitute interest under such laws that are
contracted for, charged or received under this Agreement; and in the event that,
notwithstanding the foregoing, under any circumstances the aggregate amounts
taken, reserved, charged, received or paid on the Loans, include amounts which
by applicable law are deemed interest which would exceed the Maximum Rate, then
such excess shall be deemed to be a mistake and each Lender receiving same shall
credit the same on the principal of its Loans (or if such Loans shall have been
paid in full, refund said excess to the Borrower). In the event that the
maturity of any Loans is accelerated by reason of any election of the holder
thereof resulting from any Event of Default under this Agreement or otherwise,
or in the event of any required or permitted prepayment, then such consideration
that constitutes interest may never include more than the Maximum Rate and
excess interest, if any, provided for in this Agreement or otherwise shall be
canceled automatically as of the date of such acceleration or prepayment and, if
theretofore paid, shall be credited on the applicable Loans (or, if the
applicable Loans shall have been paid in full, refunded to the Borrower). In
determining whether or not the interest paid or payable under any specific
contingencies exceeds the Maximum Rate, the Borrower and the Lenders shall to
the maximum extent permitted under applicable law amortize, prorate, allocate
and spread in equal parts during the period of the full stated term of the Loans
all amounts

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74

considered to be interest under applicable law at any time contracted for,
charged, received or reserved in connection with the Obligations. The provisions
of this Section 10.18 shall control over all other provisions of this Agreement
or the other Loan Documents which may be in apparent conflict herewith.
          10.19 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
          10.20 USA PATRIOT Act Notice. Each Lender that is subject to the Act
(as hereinafter defined) and the Administrative Agent (for itself and not on
behalf of any Lender) hereby notifies the Borrower that pursuant to the
requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”), it is required to obtain, verify and record
information that identifies each Loan Party, which information includes the name
and address of each Loan Party and other information that will allow such Lender
or the Administrative Agent, as applicable, to identify each Loan Party in
accordance with the Act.

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75

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

            PARKER DRILLING COMPANY
      By:   /s/ David W. Tucker         Name:   David W. Tucker        Title:  
Treasurer and Assistant Secretary     

            LEHMAN BROTHERS INC., as Arranger
      By:   /s/ Frank P. Turner         Name:   Frank P. Turner        Title:  
Vice President     

            LEHMAN COMMERCIAL PAPER INC.,
as Administrative Agent
      By:   /s/ Ritam Bhalla         Name:   Ritam Bhalla        Title:  
Authorized Signatory     

            BANK OF AMERICA, N.A.,
as Syndication Agent and as Issuing Lender
      By:   /s/ Shelley A. McGregor         Name:   Shelley A. McGregor       
Title:   Senior Vice President     

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Annex A
PRICING GRID

                      Applicable Margin   Applicable Margin Consolidated
Leverage Ratio   for Eurodollar Loans   for Base Rate Loans
³4.00:1.00
    3.00 %     2.00 %
<4.00:1.00 but ³ 3.00:1.00
    2.75 %     1.75 %
<3.00:1.00
    2.50 %     1.50 %

Changes in the Applicable Margin resulting from changes in the Consolidated
Leverage Ratio shall become effective on the date (the “Adjustment Date”) on
which financial statements are delivered to the Lenders pursuant to
Section 6.1(a) or 6.1(b) (but in any event not later than the 45th day after the
end of each of the first three quarterly periods of each fiscal year or the 90th
day after the end of each fiscal year, as the case may be) and shall remain in
effect until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Consolidated Leverage Ratio as at the end of the fiscal period that would have
been covered thereby shall for the purposes of this definition be deemed to be
greater than or equal to 4.00 to 1:00. Each determination of the Consolidated
Leverage Ratio pursuant to this Pricing Grid shall be made for the periods and
in the manner contemplated by Section 7.1(a).

 

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Annex B
EXISTING LETTERS OF CREDIT

 

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Annex C
EXISTING CONTROL AGREEMENTS

 

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SCHEDULE 1.1
BORROWING BASE PROVISIONS
          “Accounts”: accounts receivable of the Borrower or any of its
Subsidiaries arising out of the sales or leasing of goods or services made by
the Borrower or any of its Subsidiaries in the ordinary course of business.
          “Advance Rate”: at any time, the applicable percentage set forth in
clause (a)(i) or (a)(ii) of the definition of “Borrowing Base” or such other
percentage as may become effective in lieu of such applicable percentage in
accordance with paragraph (b) or (c) of such definition.
          “Bank Product Reserves”: at any time, reserves in respect of Bank
Products then provided and outstanding.
          “Borrowing Base”: (a) Subject to paragraphs (b) and (c) below, at any
time, the amount equal at such time to:
          (i) eighty-five percent (85%) of the aggregate Net Amount of Eligible
Accounts Receivable, plus
          (ii) the Net Book Value of the Eligible Rental Equipment multiplied by
the lesser of (A) the Equipment OLV Percentage and (B) one hundred percent
(100%), minus
          (iii) the amount of any reserves established by the Administrative
Agent pursuant to paragraph (b) below.
Notwithstanding the foregoing, in no event shall more than sixty percent (60%)
of the amount of the Borrower Base consist of Eligible Rental Equipment in
reliance on clause (a)(ii) above.
          (b) The Administrative Agent at any time in the exercise of its
Permitted Discretion shall be entitled to (i) establish and increase or decrease
reserves against Eligible Accounts Receivable and Eligible Rental Equipment,
(ii) establish and increase or decrease Bank Products Reserves, (iii) reduce the
Advance Rates to be applied under clauses (a)(i) and (a)(ii) above to a level
below the rates stated therein or (following any such reduction or following any
increase in such Advance Rates pursuant to paragraph (c) below) restore such
Advance Rates to any level equal to or below the Advance Rates stated in clauses
(a)(i) and (a)(ii) above, (iv) impose additional restrictions (or eliminate any
such additional restrictions) to the standards of eligibility set forth in the
respective definitions of “Eligible Accounts Receivable” and “Eligible Rental
Equipment” and (v) establish and increase or decrease a reserve in the amount of
interest payable by the Borrower under the Agreement on Loans and drawings under
Letters of Credit.

 

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          (c) The Administrative Agent at any time in the exercise of its
Permitted Discretion shall be entitled, with the consent of all Revolving Credit
Lenders, to increase the Advance Rates to a level above the rates stated in
clauses (a)(i) and (a)(ii) above.
          “Cost”: in respect of any Quail Rental Assets, the net cost of such
Quail Rental Assets to Quail Tools after all cash and other discounts or other
allowances which may be allowed or taken by Quail Tools against the purchase
price of such Quail Rental Assets.
          “Eligible Accounts Receivable”: Accounts of the Borrower and the
Subsidiary Guarantors payable in Dollars. In determining the amount to be so
included, the face amount of such Accounts shall exclude any such Accounts that
the Administrative Agent determine to be ineligible pursuant to the definition
of the term “Borrowing Base” set forth herein. Unless otherwise approved in
writing by the Administrative Agent, no Account of the Borrower or its
Subsidiaries shall be deemed to be an Eligible Account Receivable if:
          (a) it arises out of a sale made by such Borrower or any of its
Subsidiaries to an Affiliate; or
          (b) (i) in the case of any Account due from an account debtor other
than a Qualified Account Debtor (as defined below), the Account is unpaid more
than (A) 60 days after the original payment due date and/or (B) 90 days after
the original invoice date and (ii) in the case of Accounts due from account
debtors whose long-term unsecured debt obligations are rated at least A by
Moody’s Investors Service, Inc. or A2 by Standard & Poor’s Rating Services
(each, a “Qualified Account Debtor”), the Account is unpaid more than (A)
90 days after the original payment due date and/or (B) 120 days after the
original invoice date; or
          (c) it is from the same account debtor (or any Affiliate thereof) and
fifty percent (50%) or more, in face amount, of all Accounts from such account
debtor (and any Affiliate thereof) are ineligible pursuant to clause (b) above;
or
          (d) the Account, when aggregated with all other Accounts of such
account debtor (and any Affiliate thereof), exceeds ten percent (10%) in face
value of all Accounts of the Borrower and its Subsidiaries combined then
outstanding, to the extent of such excess, provided that (i) Accounts supported
or secured by an irrevocable letter of credit in form and substance satisfactory
to the Administrative Agent, issued by a financial institution satisfactory to
the Administrative Agent, and duly transferred to the Administrative Agent
(together with sufficient documentation to permit direct draws by the
Administrative Agent) shall be excluded to the extent of the face amount of such
letter of credit for the purposes of such calculation and (ii) with respect to
the account debtors listed on the annex attached hereto, the percentage referred
to above shall be deemed to be the percentage set forth on such annex opposite
the name of such account debtor; or
          (e) (i) the account debtor is also a creditor of the Borrower or such
Subsidiary, (ii) the account debtor has disputed its liability on, or the
account debtor has made any claim with respect to, such Account or any other
Account due from such

 

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account debtor to the Borrower or such Subsidiary, which has not been resolved
or (iii) the Account otherwise is or may reasonably be expected to become
subject to any right of setoff by the account debtor or with respect to which
any other claim, counterclaim, chargeback, rebate, allowance or offset has been
asserted; provided that any Account deemed ineligible pursuant to this clause
(e) shall only be ineligible to the extent of the amount owed by the Borrower or
such Subsidiary to the account debtor, the amount of such dispute or claim, or
the amount of such setoff, other claim, counterclaim, chargeback, rebate,
allowance or offset, as applicable; or
          (f) the account debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or if a decree or order for relief has
been entered by a court having jurisdiction over the account debtor in an
involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or if any other petition or other application for relief
under the federal bankruptcy laws has been filed by or against the account
debtor, or if the account debtor has filed a certificate of dissolution under
applicable state law or shall be liquidated, dissolved or wound-up, or shall
authorize or commence any action or proceeding for dissolution, winding-up or
liquidation, or if the account debtor has failed, suspended business, declared
itself to be insolvent, is generally not paying its debts as they become due or
has consented to or suffered a receiver, trustee, liquidator or custodian to be
appointed for it or for all or a significant portion of its assets or affairs
(any such act or event an “Act of Bankruptcy”), unless the payment of Accounts
from such account debtor is secured by assets of, or guaranteed by, in either
case in a manner satisfactory to the Administrative Agent, a Person with respect
to which an Act of Bankruptcy has not occurred and that is acceptable to the
Administrative Agent or, if the Account from such account debtor arises
subsequent to a decree or order for relief with respect to such account debtor
under the federal bankruptcy laws, as now or hereafter in effect, the
Administrative Agent shall have determined that the timely payment and
collection of such Account will not be impaired; or
          (g) the sale is to an account debtor outside of the United States,
Canada or Puerto Rico, unless such account debtor has supplied the Borrower or
such Subsidiary with an irrevocable letter of credit in form and substance
satisfactory to the Administrative Agent, issued by a financial institution
satisfactory to the Administrative Agent and which has been duly transferred to
the Administrative Agent (together with sufficient documentation to permit
direct draws by the Administrative Agent); or
          (h) the sale to the account debtor is on a bill-and-hold, guarantied
sale, sale-and-return, sale on approval or consignment basis or made pursuant to
any other written agreement providing for repurchase or return; or
          (i) the Administrative Agent determines in its Permitted Discretion
that collection of such Account is insecure or that such Account may not be paid
by reason of the account debtor’s financial inability to pay; or
          (j) the account debtor is the United States of America, any State or
any political subdivision, department, agency or instrumentality thereof, unless
the

 

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Borrower or such Subsidiary duly assigns its rights to payment of such Account
to the Agent pursuant to the Collateral Assignment of Claims Act of 1940 (31
U.S.C. § 3727 et seq.) or complies with any similar State or local law as Agent
shall require; or
          (k) the goods giving rise to such Account have not been shipped and
delivered to and accepted by the account debtor or the services giving rise to
such Account have not been performed by the Borrower or such Subsidiary and
accepted by the account debtor or the Account otherwise does not represent a
final sale (except to the extent that such Account arises from a leasing
transaction); or
          (l) any documentation relating to the Account does not comply with all
applicable legal requirements, including, where applicable, the Federal Consumer
Credit Protection Act, the Federal Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System; or
          (m) the Administrative Agent does not have a valid and perfected first
priority security interest in such Account or the Account does not otherwise
conform to the representations and warranties contained in the Credit Agreement,
any Security Document or any of the other Loan Documents; or
          (n) the Accounts are subject to any adverse security deposit, progress
payment or other similar advance made by or for the benefit of the applicable
account debtor; provided, that any Account deemed ineligible pursuant to this
clause (n) shall only be ineligible to the extent of the amount of any such
deposit, payment or other similar advance; or
          (o) the Accounts are evidenced by or arise under any instrument or
chattel paper unless such instruments or chattel paper have been pledged to the
Administrative Agent containing such endorsement as the Administrative Agent
shall require; or
          (p) the account debtor has a presence in a State requiring the filing
of Notice of Business Activities Report or similar report in order to permit the
Borrower or such Subsidiary to seek judicial enforcement in such State of
payment of such Account unless the Borrower or such Subsidiary has qualified to
do business in such State or has filed a Notice of Business Activities Report or
equivalent report for the then current year or such failure to file and
inability to seek judicial enforcement is capable of being remedied without any
material delay or material cost; or
          (q) the Account arises from progress billings or other billing
arrangements such that the obligation of the account debtor with respect to such
Account is conditioned upon the Borrower’s or such Subsidiary’s satisfactory
completion of any further performance under the agreement giving rise thereto;
or
          (r) the Account is deemed by the Administrative Agent in its Permitted
Discretion to be otherwise ineligible for inclusion in the calculation of the
Borrowing Base.

 

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          “Eligible Rental Equipment”: Rental Equipment of Quail Tools. Unless
otherwise approved in writing by the Administrative Agent, no Rental Equipment
shall be Eligible Rental Equipment unless: (i) it is owned solely by Quail Tools
and Quail Tools has good, valid and marketable title thereto; (ii) it is at all
times subject to the Administrative Agent’s valid and duly perfected first
priority security interest granted pursuant to the Guarantee and Collateral
Agreement and no other Lien (other than (x) any Permitted Liens referred to in
Section 7.3(a) of the Credit Agreement or (y) any landlord’s Lien unless a rent
reserve with respect to the relevant leased property has been deducted from the
Borrowing Base in accordance with clause (ii) of the following sentence); (iii)
Quail Tools shall at all times have title to such Rental Equipment and shall
have the ability to direct the disposition thereof (subject only to the rights
of any lessor under any lease in effect with respect to such Rental Equipment)
and it is not located outside the continental United States, the Gulf of Mexico
and Canada; (iv) it is not obsolete, unmerchantable or slow moving, as
determined by the Administrative Agent in its reasonable credit judgment; and
(v) it conforms in all respects to the Warranties and representations set forth
in the Credit Agreement and is fully insured in the manner required by the
Credit Agreement. In no event shall (i) any Rental Equipment held under a Vendor
Lease, (ii) any Rental Equipment held at a leased property (other than Rental
Equipment on active lease located at customer locations in the ordinary course
of business) unless a landlord lien waiver satisfactory in all respects to the
Administrative Agent has been obtained with respect thereto (or, if no landlord
lien waiver has been obtained, a rent reserve equal to three months rent on such
leased property has, if elected by the Administrative Agent in its sole
discretion, been deducted from the Borrowing Base) and (iii) any Rental
Equipment otherwise deemed ineligible by the Administrative Agent in its
Permitted Discretion, constitute Eligible Rental Equipment.
          “Equipment OLV Percentage”: at any time, the percentage equal to (i)
the Net OLV of the Quail Rental Assets as of the date of the then most recent
appraisal of the Quail Rental Assets divided by the Net Book Value of the Quail
Rental Assets as of such date, multiplied by (ii) 50%.
          “Net Amount”: with respect to any Account at any time, the face amount
of such Account on any date less (to the extent not otherwise deducted pursuant
to the definition of “Eligible Account”) any and all returns, rebates, discounts
(which may, at the Administrative Agent’s option, be calculated on shortest
terms), credits, allowances or taxes (including any sales, excise or other
taxes) at any time issued, owing, claimed by any account debtor, granted,
outstanding or payable in connection with, or any interest accrued on the amount
of, such Account at such time.
          “Net Book Value”: (i) Cost minus (ii) accumulated depreciation
calculated (A) in accordance with GAAP and (B) consistently with the Quail
Tools’ accounting practices as of the Closing Date.
          “Net OLV”: as reasonably determined by the Administrative Agent in
good faith based on the most recent appraisal conducted pursuant to the Existing
Credit Facilities or Section 6.11, as applicable, the Value of the Eligible
Rental Equipment that is estimated to be recoverable in an orderly liquidation
of such Equipment (less applicable freight and duty charges, if any), net of
liquidation expenses.

 

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          “Ordinary Course of Business”: with respect to any transaction
involving any Person, the ordinary course of such Person’s business, as
conducted by such Person in accordance with past practices and undertaken by
such Person in good faith and not for the purpose of evading any covenant or
restriction in any Loan Document.
          “Permitted Discretion”: the Administrative Agent’s judgment exercised
in good faith based upon its consideration of any factor which the
Administrative Agent believes in good faith: (a) will or reasonably could be
expected to adversely affect the value of the applicable Revolving Credit
Facility Collateral, the enforceability or priority of the Administrative
Agent’s Liens thereon or the amount which the Agents, the Lenders or any Issuing
Lender would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of such Collateral; (b)
suggests that any collateral report of financial information delivered to the
Administrative Agent by any Person, with respect to the applicable Revolving
Credit Facility Collateral is incomplete, inaccurate or misleading in any
material respect; (c) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving the Borrower or any
Subsidiary of the Borrower or any of the applicable Revolving Credit Facility
Collateral; or (d) creates or reasonably could be expected to create a Default
or Event of Default. In exercising such judgment, the Administrative Agent may
consider such factors already included in or tested by the definition of
Eligible Accounts Receivable or Eligible Rental Equipment, as well as any of the
following: (i) the changes in collection history and dilution with respect the
Account; (ii) changes in demand for, pricing of, or product mix of Rental
Equipment; (iii) changes in any concentration of risk with respect to the
Borrower’s or any of its Subsidiaries Accounts or Rental Equipment; and (iv) any
other factors that change in any material respect the credit risk of lending to
the Borrower on the security of the Borrower’s or any of its Subsidiaries
Accounts or Rental Equipment. The burden of establishing lack of good faith
hereunder shall be on the Borrower.
          “Quail Rental Assets”: all Rental Equipment owned by Quail Tools.
          “Rental Equipment”: Inventory which is of a type offered for lease in
the Ordinary Course of Business as conducted on the Closing Date.
          “Value”: with reference to the value of Equipment, value determined on
the basis of the lower of cost or market of such Equipment in accordance with
GAAP, with the cost thereof calculated on a first-in, first-out basis determined
in accordance with GAAP.
          “Vendor Lease”: a lease pursuant to which Goods are leased from a
Vendor Lessor, whether or not such lease constitutes an operating or a capital
lease under GAAP and whether or not such lease constitutes a true lease or a
secured transaction under the UCC or any other Requirement of Law.
          “Vendor Lessor”: a Person who leases Goods to another Person pursuant
to Vendor Lease.

 

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SCHEDULE 4.4
CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES

 

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SCHEDULE 4.15
SUBSIDIARIES; CAPITAL STOCK

 

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SCHEDULE 4.17
ENVIRONMENTAL MATTERS

 

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SCHEDULE 4.19
UCC FILING JURISDICTIONS

      Loan Party   Filing Office
 
   

 

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SCHEDULE 7.2(d)
EXISTING INDEBTEDNESS

 

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SCHEDULE 7.3(f)
EXISTING LIENS

 

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SCHEDULE 7.5(j)
DISPOSITIONS