Exhibit 10.1

EXECUTION VERSION

LOAN AND SECURITY AGREEMENT

dated as of April 13, 2017

by and among

FORBES ENERGY SERVICES LLC

(as Borrower)

and

FORBES ENERGY INTERNATIONAL, LLC,

TX ENERGY SERVICES, LLC,

C.C. FORBES, LLC,

and

FORBES ENERGY SERVICES LTD.

(as Guarantors)

and

WILMINGTON TRUST, NATIONAL ASSOCIATION

(as Agent)

and

THE LENDERS FROM TIME TO TIME HERETO

(as Lenders)

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TABLE OF CONTENTS

 

 

          Page     ARTICLE I    DEFINITIONS      2  

Section 1.01

 

Accounting Terms

     2  

Section 1.02

 

General Terms

     2  

Section 1.03

 

Uniform Commercial Code Terms

     29  

Section 1.04

 

Certain Matters of Construction

     29     ARTICLE II   

ADVANCES, PAYMENTS

     30  

Section 2.01

 

Term Loans

     30  

Section 2.02

 

Procedure for Borrowing

     30  

Section 2.03

 

Disbursement of Term Loan Proceeds

     30  

Section 2.04

 

Repayment of Term Loans

     30  

Section 2.05

 

Statement of Account.

     31  

Section 2.06

 

Manner of Borrowing and Payment

     31  

Section 2.07

 

Mandatory Prepayments

     32  

Section 2.08

 

Use of Proceeds; Release from Master Account

     33  

Section 2.09

 

Defaulting Lender/Impacted Lender

     34  

Section 2.10

 

Interrelated Businesses

     35     ARTICLE III   

INTEREST AND FEES

     36  

Section 3.01

 

Interest

     36  

Section 3.02

 

Loan Fees

     36  

Section 3.03

 

Computation of Interest and Fees

     36  

Section 3.04

 

Maximum Charges

     36  

Section 3.05

 

Increased Costs

     37  

Section 3.06

 

Capital Adequacy

     37  

Section 3.07

 

Withholding Taxes

     38     ARTICLE IV   

GRANT OF SECURITY INTEREST; COLLATERAL COVENANTS

     39  

Section 4.01

 

Security Interest in the Collateral

     39  

Section 4.02

 

Perfection of Security Interest

     39  

Section 4.03

 

Preservation of Collateral

     40  

Section 4.04

 

Ownership and Location of Collateral

     41  

Section 4.05

 

Defense of Agent’s and Lenders’ Interests

     41  

Section 4.06

 

Books and Records

     41  

Section 4.07

 

Financial Disclosure

     42  

Section 4.08

 

Compliance with Laws

     42  

Section 4.09

 

Inspection of Premises/Appraisals

     42  

Section 4.10

 

Insurance

     42  

 

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Table of Contents (cont.)

 

 

          Page  

Section 4.11

 

Failure to Pay Insurance

     43  

Section 4.12

 

Payment of Taxes

     43  

Section 4.13

 

Payment of Leasehold Obligations

     44  

Section 4.14

 

Accounts and other Receivables

     44  

Section 4.15

 

Maintenance of Equipment

     45  

Section 4.16

 

Exculpation of Liability

     45  

Section 4.17

 

Environmental Matters

     45  

Section 4.18

 

Financing Statements

     47  

Section 4.19

 

Real Property

     47  

Section 4.20

 

Questionnaire

     49  

Section 4.21

 

Post Closing Covenant

     49       ARTICLE V        REPRESENTATIONS AND WARRANTIES    49  

Section 5.01

 

Authority, Etc

     49  

Section 5.02

 

Formation and Qualification

     50  

Section 5.03

 

Survival of Representations and Warranties

     50  

Section 5.04

 

Tax Returns

     50  

Section 5.05

 

Financial Statements

     51  

Section 5.06

 

Corporate Name

     51  

Section 5.07

 

O.S.H.A. and Environmental Compliance

     52  

Section 5.08

 

Solvency; No Litigation, Violation of Law; No ERISA Issues

     52  

Section 5.09

 

Patents, Trademarks, Copyrights and Licenses

     53  

Section 5.10

 

Licenses and Permits

     54  

Section 5.11

 

No Contractual Default

     54  

Section 5.12

 

No Burdensome Restrictions/No Liens

     54  

Section 5.13

 

No Labor Disputes

     54  

Section 5.14

 

Margin Regulations

     54  

Section 5.15

 

Investment Company Act

     54  

Section 5.16

 

Disclosure

     55  

Section 5.17

 

Real Property

     55  

Section 5.18

 

Hedging Agreements

     55  

Section 5.19

 

Conflicting Agreements

     55  

Section 5.20

 

Business and Property of Loan Parties; Inactive Subsidiaries

     55  

Section 5.21

 

Material Contracts

     55  

Section 5.22

 

Capital Structure

     56  

Section 5.23

 

Bank Accounts, Security Accounts, Etc

     57  

Section 5.24

 

OFAC

     57       ARTICLE VI        AFFIRMATIVE COVENANTS    57  

Section 6.01

 

Payment of Fees

     57  

Section 6.02

 

Conduct of Business; Compliance with Laws and Maintenance of Existence and
Assets

     57  

Section 6.03

 

Violations

     58  

Section 6.04

 

Execution of Supplemental Instruments; Further Assurances

     58  

Section 6.05

 

Payment of Indebtedness

     58  

Section 6.06

 

Standards of Financial Statements

     58  

 

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Table of Contents (cont.)

 

         Page       ARTICLE VII       

NEGATIVE COVENANTS

   59  

Section 7.01

 

Merger, Consolidation, Acquisition and Sale of Assets

     59  

Section 7.02

 

Creation of Liens

     61  

Section 7.03

 

Guarantees

     61  

Section 7.04

 

Investments

     61  

Section 7.05

 

Loans

     62  

Section 7.06

 

Dividends and Distributions

     63  

Section 7.07

 

Indebtedness

     63  

Section 7.08

 

Nature of Business

     65  

Section 7.09

 

Transactions with Affiliates

     66  

Section 7.10

 

Leases

     66  

Section 7.11

 

Subsidiaries

     66  

Section 7.12

 

Fiscal Year and Accounting Changes

     67  

Section 7.13

 

Pledge of Credit

     67  

Section 7.14

 

Amendment of Organizational Documents.

     67  

Section 7.15

 

Compliance with ERISA

     67  

Section 7.16

 

Prepayment, Etc. of Money Borrowed

     68  

Section 7.17

 

State of Organization/Names/Locations

     68  

Section 7.18

 

Foreign Assets Control Regulations, Etc

     68       ARTICLE VIII       

CONDITIONS PRECEDENT

   69  

Section 8.01

 

Conditions to Borrowing

     69       ARTICLE IX       

INFORMATION AS TO LOAN PARTIES

   72  

Section 9.01

 

Disclosure of Material Matters Pertaining to Collateral

     72  

Section 9.02

 

Collateral and Related Reports

     72  

Section 9.03

 

Environmental Reports

     72  

Section 9.04

 

Litigation

     72  

Section 9.05

 

Material Occurrences

     73  

Section 9.06

 

Annual Financial Statements

     73  

Section 9.07

 

Quarterly Financial Statements

     74  

Section 9.08

 

Monthly Financial Statements

     74  

Section 9.09

 

Notices re Equityholders

     75  

Section 9.10

 

Additional Information

     75  

Section 9.11

 

Projections

     75  

Section 9.12

 

Notice of Governmental Body Items

     75  

Section 9.13

 

ERISA Notices and Requests

     75  

Section 9.14

 

Notice of Change in Management, Etc

     76  

Section 9.15

 

Additional Documents

     76       ARTICLE X       

EVENTS OF DEFAULT

   76  

Section 10.01

 

Payments

     76  

 

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Table of Contents (cont.)

 

       Page  

Section 10.02

 

Covenants

     77  

Section 10.03

 

Representations and Warranties

     77  

Section 10.04

 

Liens

     77  

Section 10.05

 

Judgments

     77  

Section 10.06

 

Bankruptcy; Insolvency

     77  

Section 10.07

 

Collateral

     78  

Section 10.08

 

Other Agreements

     78  

Section 10.09

 

Change of Control. Any Change of Control shall occur

     78  

Section 10.10

 

Agreement and Other Documents

     78  

Section 10.11

 

Criminal Proceedings

     78  

Section 10.12

 

Collateral Matters

     78  

Section 10.13

 

Orders

     78  

Section 10.14

 

ERISA

     78       ARTICLE XI        LENDERS’ RIGHTS AND REMEDIES AFTER EVENT OF
DEFAULT    79  

Section 11.01

 

Rights and Remedies

     79  

Section 11.02

 

Waterfall

     79  

Section 11.03

 

Agent’s Discretion

     80  

Section 11.04

 

Setoff

     80  

Section 11.05

 

Rights and Remedies not Exclusive

     80  

Section 11.06

 

Commercial Reasonableness

     80       ARTICLE XII        WAIVERS AND JUDICIAL PROCEEDINGS    81  

Section 12.01

 

Waiver of Notice

     81  

Section 12.02

 

Delay

     81  

Section 12.03

 

Jury Waiver

     81  

Section 12.04

 

Waiver of Counterclaims

     82       ARTICLE XIII        EFFECTIVE DATE AND TERMINATION    82  

Section 13.01

 

Term.

     82  

Section 13.02

 

Termination.

     82       ARTICLE XIV        REGARDING AGENT    82  

Section 14.01

 

Appointment

     82  

Section 14.02

 

Nature of Duties

     83  

Section 14.03

 

Lack of Reliance on Agent and Resignation

     83  

Section 14.04

 

Certain Rights of Agent

     84  

Section 14.05

 

Reliance

     84  

Section 14.06

 

Notice of Default

     84  

Section 14.07

 

Indemnification

     85  

Section 14.08

 

Agent in its Individual Capacity

     85  

Section 14.09

 

Actions in Concert

     85  

 

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Table of Contents (cont.)

 

       Page  

Section 14.10

 

Intercreditor Agreements/Subordination Agreements

     85  

Section 14.11

 

Agent Determinations

     85       ARTICLE XV        GUARANTEE    86  

Section 15.01

 

Guarantee; Contribution Rights

     86  

Section 15.02

 

Waivers

     86  

Section 15.03

 

No Defense

     86  

Section 15.04

 

Guarantee of Payment

     87  

Section 15.05

 

Liabilities Absolute

     87  

Section 15.06

 

Waiver of Notice

     88  

Section 15.07

 

Agent’s Discretion

     88  

Section 15.08

 

Reinstatement

     88  

Section 15.09

 

No Marshalling, Etc

     88  

Section 15.10

 

Action Upon Event of Default

     89  

Section 15.11

 

Statute of Limitations

     90  

Section 15.12

 

Interest

     90  

Section 15.13

 

Guarantor’s Investigation

     90  

Section 15.14

 

Termination

     90  

Section 15.15

 

Extension of Guarantee

     91  

Section 15.16

 

Applicability to Borrower

     91  

Section 15.17

 

Limitations Regarding ECP Guarantors.

     91       ARTICLE XVI        MISCELLANEOUS    91  

Section 16.01

 

Governing Law; Consent to Jurisdiction; Etc

     91  

Section 16.02

 

Entire Understanding; Amendments; Lender Replacements; Overadvances

     92  

Section 16.03

 

Successors and Assigns; Participations; New Lenders; Taxes; Syndication

     93  

Section 16.04

 

Application of Payments

     97  

Section 16.05

 

Indemnity/Currency Indemnity

     97  

Section 16.06

 

Notice

     98  

Section 16.07

 

Survival

     99  

Section 16.08

 

Postponement of Subrogation, Etc. Rights

     99  

Section 16.09

 

Severability

     99  

Section 16.10

 

Expenses

     99  

Section 16.11

 

Injunctive Relief

     100  

Section 16.12

 

Consequential Damages

     100  

Section 16.13

 

Captions

     100  

Section 16.14

 

Counterparts; Facsimile or Emailed Signatures

     101  

Section 16.15

 

Construction

     101  

Section 16.16

 

Confidentiality; Sharing Information

     101  

Section 16.17

 

Publicity

     101  

Section 16.18

 

Patriot Act Notice

     102  

Section 16.19

 

Acknowledgement and Consent to Bail-In of EEA Financial Institutions

     102  

Section 16.20

 

Borrower Materials

     102  

 

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Table of Contents (cont.)

 

Schedules:    Page

Schedule C-1 Term Commitments

Schedule 2.04(b) Payment Account; Disbursement of Term Loan Proceeds

Schedule 4.04 Books and Records Locations

Schedule 4.14(c) Location of Chief Executive Offices

Schedule 5.02(a) Jurisdictions of Qualification and Good Standing

Schedule 5.02(b) Subsidiaries

Schedule 5.04 Federal Tax Identification Number

Schedule 5.06 Prior Names

Schedule 5.07 Real Property

Schedule 5.08(b) Litigation / Commercial Tort Claims / Money Borrowed

Schedule 5.08(d) Plans

Schedule 5.09 Intellectual Property, Source Code Escrow Agreements

Schedule 5.13 Labor Disputes

Schedule 5.22 Capital Structure

Schedule 5.23 Bank Accounts

Schedule 7.02 Existing Liens

Schedule 7.08 Existing Indebtedness

Schedule 8.01(j) Litigation

Exhibits:

 

Exhibit A   

Form of Notice of Borrowing Request

Exhibit B   

Form of Notice of Release Request

Exhibit C-1   

Form of US Tax Compliance Certificate (For Foreign Lenders That Are Not
Partnerships For U.S. Federal Income Tax Purposes)

Exhibit C-2   

Form of US Tax Compliance Certificate (For Foreign Participants That Are Not
Partnerships For U.S. Federal Income Tax Purposes)

Exhibit C-3   

Form of US Tax Compliance Certificate (For Foreign Participants That Are
Partnerships For U.S. Federal Income Tax Purposes)

Exhibit C-4   

Form of US Tax Compliance Certificate (For Foreign Lenders That Are Partnerships
For U.S. Federal Income Tax Purposes)

Exhibit D   

Form of Title Agent Service Agreement

Exhibit 2.01   

Form of Promissory Note

Exhibit 5.05   

Financial Projections

Exhibit 9.06   

Form of Compliance Certificate

Exhibit 16.03   

Form of Commitment Transfer Supplement

 

 

- vi -

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LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT, dated April 13, 2017, is entered into by and
among FORBES ENERGY SERVICES LLC, a limited liability company formed under the
laws of the State of Delaware (“Borrower”), TX ENERGY SERVICES, LLC, a limited
liability company formed under the laws of the State of Delaware (“TX Energy”),
C.C. FORBES, LLC, a limited liability company formed under the laws of the State
of Delaware (“C.C.”), FORBES ENERGY INTERNATIONAL, LLC, a limited liability
company formed under the laws of the State of Delaware (“International”), and
FORBES ENERGY SERVICES LTD., a Texas corporation (“Parent”; and together with TX
Energy, C.C., and International, and any other Person that at any time after the
date hereof becomes a Guarantor, each a “Guarantor” and collectively, the
“Guarantors”), the lenders which are now or which hereafter become a party
hereto (each a “Lender” and collectively, the “Lenders”) and Wilmington Trust,
National Association (in its individual capacity, “Wilmington Trust”), as agent
(in such capacity, the “Agent”) for Secured Parties (as hereinafter defined).

WHEREAS, on January 22, 2017 (the “Petition Date”), Borrower and certain of its
subsidiaries (collectively, the “Debtors”) filed a voluntary petition for relief
under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”)
in the United States Bankruptcy Court for the Southern District of Texas –
Corpus Christi Division (the “Bankruptcy Court”), commenced jointly administered
cases under the lead case number 17-20023 (collectively, the “Bankruptcy Case”)
and thereafter continued to operate their businesses as debtors in possession
pursuant to sections 1107 and 1108 of the Bankruptcy Code;

WHEREAS, on January 22, 2017 the Debtors filed a Debtors’ Prepackaged Joint Plan
of Reorganization (as amended, the “Plan of Reorganization”) with the Bankruptcy
Court. The Plan of Reorganization was confirmed by an order of the Bankruptcy
Court in form and substance satisfactory to the Lenders (the “Confirmation
Order”) on March 29, 2017;

WHEREAS, the Borrower is a borrower under that certain Loan and Security
Agreement dated as of September 9, 2011 (as amended, restated, supplemented or
otherwise modified prior to the Closing Date (as defined below), the
“Pre-Petition Credit Agreement”; the commitments thereunder, the “Pre-Petition
Commitments”) among the Loan Parties, the lenders from time to time party
thereto (in such capacity, the “Pre-Petition Lenders”), and Regions Bank, as
agent (in such capacity, the “Pre-Petition Agent”); and

WHEREAS, in connection with the Plan of Reorganization, the Loan Parties have
requested that the Lenders hereunder provide Term Loans under this Agreement,
and the Lenders have indicated their willingness to provide such Term Loans on
the terms and subject to the conditions set forth herein;

IN CONSIDERATION of the mutual covenants and undertakings herein contained, Loan
Parties, Lenders and Agent hereby agree as follows:

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ARTICLE I

DEFINITIONS.

Section 1.01 Accounting Terms.

As used in this Agreement, the Term Note(s), any Other Document, or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.02 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.02 to the extent not
defined, shall have the respective meanings given to them under GAAP.

Section 1.02 General Terms.

For purposes of this Agreement the following terms shall have the following
meanings:

“Accountants” shall have the meaning set forth in Section 9.06.

“Accounts” shall mean and include as to each Loan Party and each of its
Subsidiaries, all of such Loan Party’s and Subsidiary’s “accounts” as defined in
the UCC, whether now owned or hereafter acquired including, without limitation
all present and future rights of such Loan Party to payment of a monetary
obligation, whether or not earned by performance, which is not evidenced by
chattel paper or an instrument, (a) for property that has been or is to be sold,
leased, licensed, assigned, or otherwise disposed of, (b) for services rendered
or to be rendered, (c) for a secondary obligation incurred or to be incurred, or
(d) arising out of the use of a credit or charge card or information contained
on or for use with any such card.

“Affiliate” of any Person shall mean (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any Person who is a director, manager or
officer (i) of such Person, (ii) of any Subsidiary of such Person or (iii) of
any Person described in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or indirect, (A) to vote ten
(10%) percent or more of the Equity Interests having ordinary voting power for
the election of directors or managers (or other comparable body) of such Person,
or (B) to direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.

“Agent” shall have the meaning set forth in the preamble to this Agreement and
shall include its successors and assigns.

“Agreement” shall mean this Loan and Security Agreement, as amended, restated,
modified and supplemented from time to time.

“Approved Fund” shall mean (a) any fund, trust or similar entity that invests in
commercial loans in the ordinary course of business and is advised or managed by
(i) a Lender, (ii) a Controlled Affiliate of a Lender, (iii) the same investment
advisor that manages a Lender or (iv) a Controlled Affiliate of an investment
advisor that manages a Lender or (b) any finance company, insurance company or
other financial institution which temporarily warehouses loans for any Lender or
any Person described in clause (a) above.

“Authority” shall have the meaning set forth in Section 4.17(d).

“Backstop Agreement” means that certain Backstop Agreement, dated the date
hereof, among Parent and the Backstop Lenders (as defined therein).

 

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“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by
the applicable EEA Resolution Authority in respect of any liability of an EEA
Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing
Article 55 of Directive 2014/59/EU of the European Parliament and of the Council
of the European Union, the implementing law for such EEA Member Country from
time to time which is described in the EU Bail-In Legislation Schedule.

“Bankruptcy Case” shall have the meaning set forth in the recitals to this
Agreement.

“Bankruptcy Code” shall have the meaning set forth in the recitals to this
Agreement.

“Bankruptcy Court” shall have the meaning set forth in the recitals to this
Agreement.

“Benefited Lender” shall have the meaning set forth in Section 2.06(c).

“Borrower” shall have the meaning set forth in the preamble to this Agreement
and shall extend to all permitted successors and assigns of such Person.

“Borrower Materials” shall have the meaning set forth in Section 16.20.

“Borrower’s Account” shall have the meaning set forth in Section 2.05.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.

“Capital Expenditures” shall mean, with respect to any Person, capital
expenditures as determined in accordance with GAAP.

“Capital Lease” shall mean any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP as in effect on the date hereof
consistently applied, should be accounted for as a capital lease.

“Cash Equivalents” shall mean: (a) marketable direct obligations issued 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 (1) year from the date of acquisition thereof;
(b) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor’s Corporation or at least P-1 from Moody’s Investors Service, Inc.; (c)
certificates of deposit or bankers’ acceptances maturing within one (1) year
from the date of issuance thereof issued by, or overnight reverse repurchase
agreements from, any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000 and whose debt
obligations, or those of a holding company of which it is a Subsidiary, are
rated not less than A (or the equivalent rating) by a nationally recognized
investment rating agency (an “A Rated Bank”); (d) time deposits maturing no more
than thirty (30) days from the date of creation thereof with A Rated Banks;
(e) mutual funds that invest solely in one or more of the investments described
in clauses (a) through (d) above; and (f) with respect to such investments in
currencies other than Dollars or in jurisdictions other than the United States,
other investments reasonably deemed by a Loan Party to be equivalent to the
investments described in clauses (a) through (e) above.

 

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“Cash Interest Expense” shall mean, without duplication, for any period,
Interest Expense (excluding non-cash items, including, but not limited to, the
following non-cash components of Interest Expense: (a) the amortization of fees
and costs with respect to the transactions contemplated by this Agreement which
have been capitalized as transaction costs, and (b) interest paid in kind).

“Cash Interest Rate” shall mean 5.00% per annum, subject to increase pursuant to
Section 3.01.

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.

“CFC” shall mean a “controlled foreign corporation” as defined in Section 957 of
the Code.

“Change in Tax Law” shall mean the adoption of, or a change in, any treaty, law,
rule or regulation, or in the administration, interpretation or application
thereof by any Governmental Body, or the making or issuance of any request,
rules, guideline, requirement or directive (whether or not having the force of
law) by any Governmental Body, after the date on which the applicable Agent or
Lender becomes a party to this Agreement (or, if such Lender is a non-U.S.
intermediary or flow-through entity for U.S. federal income tax purposes, after
the relevant beneficiary or member of such Lender became such a beneficiary or
member, if later).

“Change of Control” shall mean the occurrence of any event (whether in one or
more transactions) which results in (a) the transfer (in one transaction or a
series of transactions) of all or substantially all of the assets of Parent to
any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act), other than as may be permitted in this Agreement; or (b) the acquisition
by any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act) other than any one or more of the Permitted Holders, of more than fifty
(50%) percent of beneficial ownership, directly or indirectly, of the voting
power of the total outstanding voting Equity Interests of Parent.

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including, without limitation, all net income, gross income, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, present or future stamp, occupation,
court or documentary, recording, filing and property taxes, custom duties, fees,
assessments, Liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including, without
limitation, the PBGC or any environmental agency or superfund), upon the
Collateral, the Obligations, any Loan Party or any Subsidiary of any Loan Party,
or that arise from any payment made under, from the execution, delivery,
performance, enforcement or registration of, from the receipt or perfection of a
security interest under, or otherwise with respect to this Agreement or any
Other Document.

“Closing Date” shall mean April 13, 2017.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time and the regulations promulgated thereunder.

“Collateral” shall mean any and all collateral granted under this Agreement or
any Other Document to secure any and all of the Obligations, including without
limitation all tangible and intangible property of each Loan Party, all personal
property of each Loan Party, all movable and immovable property of each Loan
Party, in each case whether now owned or hereafter acquired and wherever
located, including, but not limited to, the following of each Loan Party:

 

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(a) all Accounts and other Receivables other than Accounts and Receivables
constituting Excluded Assets;

(b) all certificated and uncertificated securities (other than Excluded Equity
Interests);

(c) all chattel paper, including electronic chattel paper;

(d) all Computer Hardware and Software and all rights with respect thereto,
including, any and all licenses, options, warranties, service contracts, program
services, test rights, maintenance rights, supporting information, improvement
rights, renewal rights and indemnifications, and any substitutions,
replacements, additions or model conversions of any of the foregoing;

(e) all Contract Rights;

(f) all commercial tort claims (including, without limitation any commercial
tort claims from time to time described on Schedule 5.08(b) (as such Schedule
5.08(b) may from time to time be updated));

(g) all deposit accounts;

(h) all documents;

(i) all financial assets;

(j) all General Intangibles, including payment intangibles and software;

(k) all Real Property, including fixtures;

(l) all goods (including all Well Service Equipment and all other Equipment and
all Inventory), and all embedded software, accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor;

(m) all instruments;

(n) all Intellectual Property;

(o) all Investment Property;

(p) all of the Equity Interests (other than Excluded Equity Interests) issued by
each Loan Party (other than Parent) and each of their Subsidiaries;

(q) all cash, cash equivalents or other money;

(r) all letter of credit rights;

(s) all security entitlements;

(t) all supporting obligations;

 

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(u) all of each Loan Party’s right, title and interest in and to (i) all of its
respective goods and other property including, but not limited to, all
merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of each Loan Party’s rights as a consignor, a
consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
stoppage in transit, setoff, compensation, detinue, replevin, reclamation and
repurchase; (iii) all supporting obligations and all additional amounts due to
any Loan Party from any Customer relating to the Receivables; (iv) all other
property of any kind whatsoever (other than Real Property) of each Loan Party,
including, but not limited to, warranty claims, relating to any goods; (v) all
of each Loan Party’s Contract Rights, rights of payment which have been earned
under a Contract Right, letter of credit rights (whether or not the letter of
credit is evidenced by a writing), instruments (including promissory notes),
documents, chattel paper (whether tangible or electronic), warehouse receipts,
deposit accounts, money and securities; (vi) if and when obtained by any Loan
Party, all movable and personal property of third parties in which such Loan
Party has been granted a Lien; and (vii) any other goods, movable or personal
property of any kind or description, wherever located, now or hereafter owned or
acquired by any Loan Party; and

(v) all books, records, writings, data bases, information and other property
relating to, used or useful in connection with, or evidencing, embodying,
incorporating or referring to any of the foregoing, and all proceeds, products,
offspring, rents, issues, profits and returns of and from any of the foregoing;

provided, however, that, no Excluded Assets shall be included in Collateral.

“Commitment Percentage” shall mean with respect to any Lender at any time, as
applicable, (a) with respect to such Lender’s Term Loan Commitment, the
percentage (carried out to the ninth decimal place) obtained by dividing
(i) such Lender’s Term Commitment, by (ii) the aggregate amount of Term
Commitments of all Lenders, and (b) with respect to such Lender’s Term Loans,
the percentage (carried out to the ninth decimal place) obtained by dividing
(i) such Lender’s Term Loans, by (ii) the aggregate outstanding principal amount
of all Term Loans.

“Commitment Transfer Supplement” shall mean a document in the form of Exhibit
16.03, properly completed, or otherwise in form and substance reasonably
satisfactory to Agent, and if applicable, to Borrower, by which a Purchasing
Lender purchases and assumes all or a portion of Term Loans made by a Lender
and/or all or a portion of the Term Commitments of a Lender.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

“Compliance Certificate” shall mean the Compliance Certificate executed and
delivered by a Responsible Officer of Borrower pursuant to Sections 9.06, 9.07
and (if applicable) 9.08 in the form of Exhibit 9.06 appended hereto.

“Computer Hardware and Software” shall mean all of each Loan Party’s and each of
its Subsidiary’s rights (including rights as licensee and lessee) with respect
to (a) computer and other electronic data processing hardware, including all
integrated computer systems, central processing units, memory units, display
terminals, printers, computer elements, card readers, tape drives, hard and soft
disk drives, cables, electrical supply hardware, generators, power equalizers,
accessories, peripheral devices and other related computer hardware; (b) all
software and all software programs designed for use on the computers and
electronic data processing hardware described in clause (a) above, including all
operating system software, utilities and application programs in whatsoever form
(source code and object code in magnetic tape, disk or hard copy format or any
other listings whatsoever); (c) any firmware associated with any of the
foregoing; and (d) any documentation for hardware, software and firmware
described in clauses (a), (b) and (c) above, including flow charts, logic
diagrams, manuals, specifications, training materials, charts and pseudo codes.

 

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“Confirmation Order” shall have the meaning set forth in the recitals to this
Agreement.

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Loan Party’s
business or to permit the effectuation and performance of this Agreement and the
Other Documents, including, without limitation, any Consents required under all
applicable federal, state or other applicable law.

“Consolidated Cash Balance” means, at any time, the aggregate amount of cash and
Cash Equivalents, in each case, held or owned by (whether directly or
indirectly) the Parent or its Subsidiaries, or which are otherwise assets of a
nature that would be reflected as cash on the consolidated balance sheet of the
Parent.

“Consolidated Cash Balance Threshold” means $20,000,000.

“Contract Right” shall mean any right of each Loan Party to payment under a
contract for the sale or lease of goods or the rendering of services, which
right is at the time not yet earned by performance.

“Controlled Affiliate” of any Person shall mean any Person which, 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 shall mean the
power, direct or indirect, to (a) vote fifty-one (51%) percent or more of the
Equity Interests having ordinary voting power for the election of directors or
managers (or other comparable body) of such Person, and (b) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise.

“Controlled Group” shall mean all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with any Loan Party, are treated as a single employer under
Section 4001(a)(14) of ERISA.

“Currency Due” shall have the meaning set forth in Section 16.05.

“Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or Contract Right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Loan Party,
pursuant to which such Loan Party is to deliver any personal property or perform
any services.

“Debtors” shall have the meaning set forth in the recitals to this Agreement.

“Default” shall mean an event which, with the giving of notice or passage of
time or both, would constitute an Event of Default.

“Default Rate” shall have the meaning set forth in Section 3.01.

“Defaulting Lender” shall have the meaning set forth in Section 2.09(a).

 

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“Disposition” shall have the meaning set forth in Section 7.01; and “Dispose”
shall have the correlative meaning.

“Dollar” and the sign “$” shall mean lawful money of the United States of
America.

“Dollar Equivalent” shall mean, at any time, (a) as to any amount denominated in
Dollars, the amount thereof at such time, and (b) as to any amount denominated
in a currency other than Dollars, the equivalent amount in Dollars as reasonably
determined by Agent at such time that such amount could be converted into
Dollars by Agent according to prevailing exchange rates selected by Agent.

“EBITDA” shall mean for any period, without duplication, the total of the
following for Loan Parties and their Subsidiaries on a consolidated basis, each
calculated for such period:

(a) Net Income; plus

(b) (without duplication), to the extent included in the calculation of Net
Income, the sum of (i) income and franchise taxes or other taxes based on gross
or net revenues paid or accrued, (ii) Interest Expense, net of interest income,
paid or accrued, (iii) amortization and depreciation, (iv) goodwill impairment
charges and other non-cash charges that will not become cash charges in future
periods, (v) amortization of debt issuance costs and any non-cash, non-recurring
charges relating to, any premiums or penalty paid, write-off of deferred
financing costs or original issue discount or other charges in connection with,
redeeming or otherwise retiring any Indebtedness prior to its stated maturity
and (vi) other non-cash charges that will not become cash charges in future
periods; less

(c) (without duplication), to the extent included in the calculation of Net
Income, the sum of (i) the income of any Person (other than a Loan Party or a
Subsidiary of any Loan Party) in which any Loan Party or a Subsidiary of any
Loan Party has an ownership interest except to the extent such income is
received by any Loan Party or such Subsidiary in a cash distribution during such
period, (ii) gains or losses from sales or other dispositions of assets (other
than sales of Inventory in the normal course of business), (iii) the greater of
(A) $0 and (B) the sum of extraordinary or non-recurring gains less
extraordinary or non-recurring losses, and (iv) the costs incurred by any Loan
Party or a Subsidiary of any Loan Party related to the reorganization effected
pursuant to the Bankruptcy Case whether incurred before or after the
commencement of the Bankruptcy Case; provided, however, positive contributions
to EBITDA from any Non-US Subsidiary that is not a Loan Party shall be
disregarded except to the extent of payments received by a Loan Party from such
Non-US Subsidiary; plus

(d) stock-based compensation expense reported for that period.

“EEA Financial Institution” means (a) any credit institution or investment firm
established in any EEA Member Country which is subject to the supervision of an
EEA Resolution Authority and subject to the Bail-In Legislation, (b) any entity
established in an EEA Member Country which is a parent of an institution
described in clause (a) of this definition, or (c) any institution established
in an EEA Member Country which is a subsidiary of an institution described in
clauses (a) or (b) of this definition and is subject to consolidated supervision
with its parent.

“EEA Member Country” means any of the member states of the European Union,
Iceland, Liechtenstein, and Norway.

 

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“EEA Resolution Authority” means any public administrative authority or any
Person entrusted with public administrative authority of any EEA Member Country
(including any delegee) having responsibility for the resolution of any EEA
Financial Institution.

“Environmental Complaint” shall have the meaning set forth in Section 4.17(d).

“Environmental Laws” shall mean all federal, state, local and other
environmental, land use, zoning, health, chemical use, safety and sanitation
laws, statutes, ordinances and codes relating to the protection of the
environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, formal agency interpretations,
decisions, orders and directives of federal, state, local and other Governmental
Body with respect thereto.

“Equipment” shall mean and include as to each Loan Party and each of its
Subsidiaries, all of such Loan Party’s and Subsidiary’s, whether now owned or
hereafter acquired and wherever located, Well Services Equipment and other
equipment, machinery, apparatus, motor vehicles, fittings, furniture,
furnishings, fixtures, parts, accessories, and all other goods (other than
Inventory) and all replacements and substitutions therefor or accessions
thereto.

“Equity Interests” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock or other equity interests).

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

“ERISA Affiliate” shall mean, with respect to any Loan Party, any trade or
business (whether or not incorporated) that, together with such Loan Party, is
treated as a single employer within the meaning of Sections 414(b), (c), (m) or
(o) of the Code.

“ERISA Event” (a) An event described in Section 4043(c) of ERISA with respect to
a Title IV Plan with respect to which the thirty (30) day notice requirement has
not been waived; (b) the withdrawal of any Loan Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a) (2) of ERISA; (c) the
complete or partial withdrawal of any Loan Party or any ERISA Affiliate from any
Multiemployer Plan; (d) the filing of a notice of intent to terminate a Title IV
Plan or the treatment of a plan amendment as a termination under Section 4041 of
ERISA; (e) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC; (f) the failure by any Loan Party or ERISA
Affiliate to make when due required contributions to a Multiemployer Plan or
Title IV Plan unless such failure is cured within thirty (30) days; (g) the
imposition of a lien under Section 412 or 430 of the Code or Section 303 or 4068
of ERISA on any property (or rights to property, whether real or personal) of
any ERISA Affiliate; (h) a Title IV Plan is in “at risk status” within the
meaning of Code Section 430(i), (i) a Multiemployer Plan is in “endangered
status” or “critical status” within the meaning of Code Section 432(b); (j) an
ERISA Affiliate incurs a substantial cessation of operations within the meaning
of ERISA Section 4062(e), with respect to a Title IV Plan; (k) any other event
or condition that might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of
liability under Section 4069 or 4212(c) of ERISA; (l) the termination of a
Multiemployer Plan under Section 4041A of ERISA or the insolvency of a
Multiemployer Plan under Section 4245 of ERISA; or (m) the revocation of a
Qualified Plan’s qualified or tax exempt status; or (n) the termination of a
Plan described in Section 4064 of ERISA.

 

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“ESOP” shall mean a Plan that is intended to satisfy the requirements of Section
4975(e)(7) of the Code.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule
published by the Loan Market Association (or any successor Person), as in effect
from time to time.

“Event of Default” shall mean the occurrence of any of the events set forth in
Article X.

“Excess Cash” means, at any applicable time, the amount of the Consolidated Cash
Balance in excess of the Consolidated Cash Balance Threshold (other than (i) any
cash held to pay in the ordinary course of business of the Borrower, or any
Guarantor, amounts then due and owing to unaffiliated third parties and for
which such Loan Party has issued checks or has initiated wires or ACH transfers
in order to pay such amounts (or will issue such checks or initiate such wires
or ACH transfers within seven (7) Business Days of such time), (ii) cash of any
Loan Party to be used by any Loan Party within seven (7) Business Days of such
time to make (A) purchase price payments for any acquisitions of any assets or
property by any Loan Party that is permitted under the terms of this Agreement,
(B) repayments or mandatory prepayments of any debt of any Loan Party that is
permitted under the terms of this agreement or (C) payments of interest payable,
(iii) cash being held by any Loan Party that represents the amount of deposits
or advance payments made by customers or others, or (iv) any cash of any Loan
Party constituting deposits or advance payments held in escrow by an
unaffiliated third party subject to customary provisions regarding the payment
and refunding of such deposits or advance payments, including any cash pledged
as collateral in connection with any issued letters of credit or purchasing
cards or credit cards, so long as such cash collateral remains so pledged).

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Excluded Assets” shall mean:

(a) any Excluded Equity Interests;

(b) each instrument, contract (including each Intellectual Property-related
contract and any Accounts and other Receivables arising under such contract),
chattel paper (including, without limitation, any chattel paper evidencing a
Permitted Fixed Asset Financing with respect to Financed Equipment), license,
permit, General Intangible, any Financed Equipment that is subject to a
Permitted Fixed Asset Financing, and other agreement that is with, or issued by,
a Person that is not a Loan Party or Affiliate of any Loan Party, but only
while, and only to the extent that, the grant of a security interest therein
pursuant to this Agreement would result in a default or penalty under, or a
breach or termination of, such instrument, contract, chattel paper (including,
without limitation, any chattel paper evidencing a Permitted Fixed Asset
Financing with respect to Financed Equipment), license, permit, General
Intangible, Permitted Fixed Asset Financing with respect to Financed Equipment,
or other agreement (any such provisions that would result in any of the
foregoing being referred to herein as a “Restriction”; and any such asset or
property, or interest thereon, that is at any time subject to a Restriction
being referred to herein as a “Restricted Asset”), except, in each case, to the
extent that, pursuant to the Code or other applicable law, the grant of a
security interest therein can be made without resulting in a default or penalty
thereunder or breach or termination thereof; provided, that, none of the
foregoing assets and properties, or interests therein, shall constitute Excluded
Assets if (i) the Restriction applicable thereto has been waived or such other
Person has otherwise consented to the creation hereunder of a security interest
in such Restricted Asset, or (ii) such Restriction would be rendered ineffective
pursuant to

 

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Section 9-406, 9-407, 9-408 or 9-409 of Article 9 of the UCC, as applicable, and
as then in effect in any relevant jurisdiction, or any other applicable law
(including the Bankruptcy Code) or principles of equity; provided further, that,
(A) immediately upon the ineffectiveness, lapse or termination of any such
Restriction with respect to a Restricted Asset (a “Non-Restricted Asset”), such
Loan Party shall be deemed to have automatically, without further act by any
Loan Party, Agent, Lenders or any other Person, granted a security interest in,
all its rights, title and interests in and to such Non-Restricted Asset as if
such Restriction had never been in effect; and (B) the foregoing exclusion shall
in no way be construed so as to limit, impair or otherwise affect Agent’s
unconditional continuing security interest in and to all rights, title and
interests of such Loan Party in or to any payment obligations or other rights to
receive monies due or to become due under any such Restricted Asset and in any
such monies and other proceeds of such Restricted Asset, except that, proceeds
of any Financed Equipment that constitutes a Restricted Asset (including,
without limitation, insurance proceeds and sales proceeds at any time arising
with respect to such Financed Equipment) shall also constitute a Restricted
Asset, subject to the immediately preceding clause (A) of this proviso;

(c) applications for any trademarks that have been filed with the U.S. Patent
and Trademark Office on the basis of an “intent-to-use” with respect to such
marks, unless and until a statement of use or amendment to allege use is filed
and accepted by the U.S. Patent and Trademark Office or any other filing is made
or circumstances otherwise change so that the interests of a Loan Party in such
marks is no longer on an “intent-to-use” basis, at which time such marks shall
automatically and without further action by the parties be subject to the
security interests and liens granted by a Loan Party to Agent hereunder;

(d) all interests in Real Property held in a leasehold estate; and

(e) any cash (together with deposit accounts holding cash deposits, any
interest, investment income, related rights and proceeds thereof) pledged as
collateral in connection with any issued letters of credit or purchasing cards
or credit cards, so long as such cash and related collateral remains so pledged,
including, without limitation, all Senior Secured Obligations Cash Collateral
(as defined in the Plan of Reorganization).

“Excluded Equity Interests” shall mean voting Equity Interests issued by a
Non-US Subsidiary that is a CFC representing in excess of sixty-five (65%)
percent (or such greater percentage to the extent such greater percentage would
not result in a material adverse tax consequence to Loan Parties under Treas.
Reg. Section 1.956-2) of the voting Equity Interests of such Non-US Subsidiary.

“Excluded Hedging Obligations” shall have the meaning set forth in the
definition of Obligations.

“Excluded Tax or Taxes” shall mean any of the following Taxes imposed on or with
respect to a Recipient or required to be withheld or deducted from a payment to
a Recipient, (a) Taxes imposed on or measured by net income (however
denominated), franchise Taxes, and branch profits Taxes, in each case,
(i) imposed as a result of such Recipient being organized under the laws of, or
having its principal office or, in the case of any Lender, its applicable
lending office located in, the jurisdiction imposing such Tax (or any political
subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of
a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for
the account of such Lender with respect to an applicable interest in a Term Loan
or Term Commitment pursuant to a law in effect on the date on which (i) such
Lender acquires such interest in the Term Loan or Term Commitment or (ii) such
Lender changes its lending office, except in each case to the extent that,
pursuant to Section 3.07, amounts with respect to such Taxes were payable either
to such Lender’s assignor immediately before such Lender became a party hereto
or to such Lender immediately before it changed its lending office, (c) Taxes
attributable to such Recipient’s failure to comply with Section 16.03(f) and
(d) any U.S. federal withholding Taxes imposed under FATCA.

 

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“Extraordinary Receipts” shall mean any cash received by any Loan Party or any
of their respective Subsidiaries consisting of (a) proceeds of judgments,
proceeds of settlements or other consideration of any kind in connection with
any cause of action, (b) indemnity payments (other than to the extent such
indemnity payments are (i) immediately payable to a Person that is not a Loan
Party or any of their respective Subsidiaries, or (ii) received by a Loan Party
or any of their respective Subsidiaries as reimbursement for any payment
previously made to such Person), (c) any purchase price adjustment (other than a
working capital adjustment) received in connection with any purchase or other
acquisition agreement, (d) tax refunds, (e) pension plan reversions,
(f) proceeds of insurance (other than such proceeds described in Section
2.07(a)) and (g) at any time that an Event of Default has occurred and is
continuing, at the sole discretion of Agent, any other cash received by any Loan
Party or any of their respective Subsidiaries not in the ordinary course of
business (and not consisting of proceeds described in Section 2.07(a) of this
Agreement).

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any current or
future regulations or official interpretations thereof and any agreement entered
into pursuant to Section 1471(b)(1) of the Code.

“Federal Funds Rate” shall mean, for any day, the rate per annum (rounded upward
to the nearest one one-hundredth of one (1/100 of 1%) percent) equal to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided, that, if no such rate is so published on
such next succeeding Business Day, the Federal Funds Rate for such day shall be
the average rate quoted to Agent on such day on such transactions as determined
by Agent in a commercially reasonable manner.

“Fee Letter” shall mean the Fee Letter, dated as of the date hereof, by and
among the Borrower and Agent, as amended, restated, modified and supplemented
from time to time.

“Financed Equipment” shall mean, collectively, all of Loan Parties’ Equipment in
respect of which all or any part of the purchase price or cost of design,
construction, installation or improvement thereof is financed pursuant to a
Capital Lease or Permitted Fixed Asset Financing, together with all proceeds of
such Equipment, including, without limitation, all insurance proceeds and all
sales proceeds.

“Fixed Charge Coverage Ratio” shall mean, with respect to Loan Parties and their
Subsidiaries on a consolidated basis, for any applicable period, the ratio of
(a) EBITDA for such period minus all cash Capital Expenditures (other than
Capital Expenditures financed hereunder or by purchase-money financing
(including vendor financing and third party financing permitted hereunder)
secured by a Lien on the applicable Equipment which constitutes a Permitted
Encumbrance in accordance with clause (f) of such definition of Permitted
Encumbrance) made during such period, to (b) Fixed Charges for such period.

“Fixed Charges” shall mean, as to Loan Parties and their Subsidiaries determined
on a consolidated basis, with respect to any period, the sum of, without
duplication, (a) all Cash Interest Expense during such period (excluding any
write-off of deferred financing costs or original issue discount or other
non-cash charges in connection with redeeming or otherwise retiring any
Indebtedness prior to its stated maturity during such period), plus (b) all
regularly scheduled principal payments of Money Borrowed, Indebtedness with
respect to earn-outs and similar obligations and Indebtedness with respect to

 

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Capital Leases, in each case made or required to be made during such period (and
without duplicating items in (a) and (b) of this definition, the interest
component with respect to Indebtedness under Capital Leases), plus (c) all
income taxes, franchise taxes and other similar taxes paid or required to be
paid during such period in cash, plus (d) all cash dividends or other cash
distributions made or required to be made on account of Equity Interests (other
than those made to a Loan Party) and all repurchases or redemptions of Equity
Interests (other than those made to a Loan Party) made or required to be made
during such period, minus (e) principal payments on notes incurred for the
purpose of paying insurance premiums.

“Foreign Lender” means a Lender that is not a US Person.

“Funds Flow Memorandum” shall mean that certain Forbes Energy Services LLC Funds
Flow Memorandum dated as of the Closing Date and acknowledged by Borrower and
Parent, in form and substance satisfactory to the Required Lenders.

“Funding Fee” shall have the meaning set forth in Section 3.02(a).

“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time, as may be amended from time to time by
the Financial Accounting Standards Board.

“General Intangibles” shall mean and include as to each Loan Party and each of
its Subsidiaries, all of such Loan Party’s and Subsidiary’s general intangibles
(as such term is defined in the UCC), whether now owned or hereafter acquired
including, without limitation, all payment intangibles, choses in action,
commercial tort claims, causes of action, corporate or other business records,
inventions, designs, patents, patent applications, equipment formulations,
manufacturing procedures, quality control procedures, trademarks, service marks,
trade secrets, goodwill, copyrights, design rights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs
and computer software, all claims under guaranties, Liens or other security held
by or granted to such Loan Party or Subsidiary to secure payment of any of the
Receivables by a Customer, all rights of indemnification and all other
intangible property of every kind and nature (other than Receivables).

“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity exercising the legislative,
judicial, regulatory or administrative functions of or pertaining to a
government.

“Guarantee” shall mean the guarantee set forth in Article XV of this Agreement
and any other guarantee of the Obligations of the Borrower now or hereafter
executed by a Guarantor in favor of Agent for its benefit and for the ratable
benefit of Lenders.

“Guarantor” or “Guarantors” shall have the meaning set forth in the preamble to
this Agreement and shall extend to all permitted successors and assigns of such
Persons as well as each other Subsidiary of Parent and the Borrower that becomes
a guarantor of any of the Obligations after the Closing Date pursuant to Section
7.11(a) or otherwise.

“Hazardous Discharge” shall have the meaning set forth in Section 4.17(d).

“Hazardous Substance” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in CERCLA, the Hazardous Substances Transportation Act, as amended
(49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of the New York
State Environmental Conservation Law or any other applicable Environmental Law
and in the regulations adopted pursuant thereto.

 

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“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state or other law, and any other applicable Federal,
state or other laws now in force or hereafter enacted relating to hazardous
waste disposal.

“Hedging Agreements” shall mean an agreement between any Loan Party and any
financial institution that is a rate swap agreement, basis swap, forward rate
agreement, commodity swap, interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement, rate cap agreement rate, floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate
swap agreement, currency option, any other similar agreement (including any
option to enter into any of the foregoing or a master agreement for any of the
foregoing together with all supplements thereto) for the purpose of protecting
against fluctuations in or managing exposure with respect to interest or
exchange rates, currency valuations or commodity prices.

“Impacted Lender” shall mean any Lender that (a) is an Impaired Lender or
(b) fails to promptly provide Agent, upon Agent’s written request, reasonably
satisfactory assurance that such Lender is not, and will not become, a
Defaulting Lender or an Impaired Lender.

“Impaired Lender” shall mean any Lender (a) that has given verbal or written
notice (so long as such notice has not been retracted in writing) to the
Borrower, the Agent or any other Lender or has otherwise publicly announced (and
such announcement has not been retracted in writing) that such Lender believes
it will fail to fund all payments required to be made by it or fund all
purchases of participations required to be funded by it under this Agreement and
the Other Documents, (b) as to which the Agent has (and for so long as Agent
continues to have) a good faith belief that such Lender has defaulted in
fulfilling its obligations (as a lender, agent or letter of credit issuer) under
one or more other syndicated credit facilities or (c) with respect to which one
or more Lender-Related Distress Events has occurred and are continuing with
respect to such Person or any Person that directly or indirectly controls such
Lender and Agent has determined that such Lender may become a Defaulting Lender.
For purposes of this definition, control of a Person shall have the same meaning
as provided in the definition of Affiliate.

“Inactive Subsidiaries” shall mean Forbes Energy Capital, Inc. and any
Subsidiary of a Loan Party that is not conducting business as of the date of
determination and has not conducted business for at least the previous three
(3) months.

“Indebtedness” of a Person at a particular date shall mean (a) all indebtedness
for Money Borrowed of such Person whether direct or guaranteed; (b) that portion
of obligations with respect to Capital Leases that is properly classified as a
liability on a balance sheet in conformity with GAAP consistently applied;
(c) notes payable and drafts accepted representing extensions of credit; (d) any
obligation owed for all or any part of the deferred purchase price of property
or services if the purchase price is due more than six (6) months from the date
the obligation is incurred or is evidenced by a note or similar written
instrument (including, without limitation, the maximum potential amount of all
earn-outs and similar deferred payment obligations regardless of the length of
deferral); (e) all indebtedness secured by any Lien on any property or asset
owned or held by that Person regardless of whether the indebtedness secured
thereby shall have been assumed by that Person or is non-recourse to the credit
of that Person; (f) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise

 

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acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof, or to maintain solvency,
assets, level of income, or other financial condition; (g) all obligations
evidenced by bonds, debentures, notes or similar instruments; (h) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker’s acceptances, drafts or similar documents or instruments issued for such
Person’s account; and (i) all obligations, liabilities and indebtedness of such
Person (marked to market) arising under Hedging Agreements. For the absence of
doubt, “Indebtedness” shall not include (A) accrued expenses incurred in the
ordinary course of business consistent with past practices or (B) trade payables
incurred in the ordinary course of business consistent with past practices and
subsequent to the Petition Date which trade payables under this clause (B) are
outstanding no more than seventy-five (75) days past their invoice date.

“Insignificant Subsidiary” shall mean a subsidiary that, together with other
Insignificant Subsidiaries, accounts for less than 5% of the total consolidated
assets and EBITDA of Parent and its Subsidiaries after the Petition Date.

“Intellectual Property” shall mean all trade secrets and other proprietary
information; trademarks, service marks, business names, Internet domain names,
designs, logos, trade dress, slogans, indicia and other source and/or business
identifiers, and the goodwill of the business relating thereto and all
registrations or applications for registrations which have heretofore been or
may hereafter be issued thereon throughout the world; copyrights (including
copyrights for computer programs and software) and copyright registrations or
applications for registrations which have heretofore been or may hereafter be
issued throughout the world and all tangible property embodying the copyrights;
unpatented inventions (whether or not patentable); patent applications and
patents; industrial designs, industrial design applications and registered
industrial designs; license agreements related to any of the foregoing and
income therefrom; books, records, writings, computer tapes or disks, flow
diagrams, specification sheets, source codes, object codes and other physical
manifestations, embodiments or incorporations of any of the foregoing; the right
to sue for all infringements of any of the foregoing; and all common law and
other rights throughout the world in and to all of the foregoing.

“Interest Expense” shall mean, for any period, as to any Person, as determined
in accordance with GAAP consistently applied, the total interest expense of such
Person, whether paid or accrued during such period but without duplication
(including the interest component of Capital Leases for such period).

“Inventory” shall mean and include as to each Loan Party and each Subsidiary of
each Loan Party, all of such Loan Party’s and Subsidiary’s now owned or
hereafter acquired inventory (as such term is defined in the UCC), goods,
merchandise and other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Loan Party’s or
Subsidiary’s business or used in selling or furnishing such goods, merchandise
and other personal property, all other inventory of such Loan Party or
Subsidiary, and all documents of title or other documents representing them.

“Investment Conditions” shall mean, on any date of determination in connection
with any proposed transaction with respect to which the satisfaction of
Investment Conditions are required hereunder, that (a) Loan Parties and their
Subsidiaries, on a consolidated basis, shall have a Fixed Charge Coverage Ratio
(calculated for the fiscal quarter immediately preceding a fiscal quarter in
which the transaction requiring compliance with the Investment Conditions has
occurred, on a pro forma basis, as if such transaction occurred on the last day
of such preceding quarter) of at least 1.0:1.0 on the date of such proposed
transaction and, in addition, solely in the case of either a proposed Permitted
Acquisition or

 

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proposed Majority Interest JV transaction, on a projected, pro forma basis at
all times during the twelve (12) month period after giving effect to such
proposed Permitted Acquisition or proposed Majority Interest JV transaction and
(c) no Default or Event of Default shall have occurred and be continuing as of
such date or shall exist after giving effect to the consummation of such
proposed transaction

“Investment Property” shall mean any “investment property” as such term is
defined in Section 9-102 of the UCC now owned or hereafter acquired by any Loan
Party or any of its Subsidiaries, wherever located, including (a) all
securities, whether certificated or uncertificated, including stocks, bonds,
interests in limited liability companies, partnership interests, treasuries,
certificates of deposit, and mutual fund shares; (b) all securities entitlements
of any Loan Party or Subsidiary, including the rights of any Loan Party or
Subsidiary to any securities account and the financial assets held by a
securities intermediary in such securities account and any free credit balance
or other money owing by any securities intermediary with respect to that
account; (c) all securities accounts of any Loan Party or Subsidiary; (d) all
commodity contracts of any Loan Party or Subsidiary; and (e) all commodity
accounts held by any Loan Party or Subsidiary.

“IRS” shall mean the United States Internal Revenue Service.

“Judgment Currency” shall have the meaning set forth in Section 16.05.

“JV” shall mean (a) a partnership, joint venture or similar arrangement, or
(b) a corporation, limited liability company or other Person in which Loan
Parties own less than one hundred (100%) percent of the outstanding Equity
Interests.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.

“Lender Default” shall have the meaning set forth in Section 2.09(a).

“Lender-Related Distress Event” shall mean, with respect to any Lender or any
Person that directly or indirectly controls such Lender (each a “Distressed
Person”), a voluntary or involuntary case with respect to such Distressed Person
under the Bankruptcy Code or any similar bankruptcy or insolvency laws of its
jurisdiction of formation, or a custodian, conservator, receiver or similar
official is appointed for such Distressed Person or any substantial party of
such Distressed Person’s assets, or such Distressed Person or any Person that
directly or indirectly controls such Distressed Person is subject to a forced
liquidation, merger, sale or other change of control supported in whole or in
party by guaranties or other support (including, without limitation, the
nationalization or assumption of ownership or operating control) by the U.S.
government or other Governmental Body, or such Distressed Person makes a general
assignment for the benefit of creditors or is otherwise adjudicated as, or
determined by any Governmental Body having regulatory authority over such
Distressed Person or its assets to be, insolvent, bankrupt, or deficient in
meeting any capital adequacy or liquidity standard of any such Governmental
Body. Notwithstanding the foregoing, no Lender-Related Distress Event shall be
deemed to have occurred solely by virtue of the ownership or acquisition of any
Equity Interests in any Lender or any Person that directly or indirectly
controls such Lender by a Governmental Body, so long as such ownership interest
does not result in or provide such Lender with immunity from the jurisdiction of
courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Body) to
reject, repudiate, disavow or disaffirm any contracts or agreements made with
such Lender. For purposes of this definition, control of a Person shall have the
same meaning as provided in the definition of Affiliate.

 

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“Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including, without limitation, any conditional sale or other
title retention agreement, any lease having substantially the same economic
effect as any of the foregoing, and the filing of, or agreement to give, any
financing statement under the UCC or comparable law of any jurisdiction. Any
reference to the Lien of Agent shall be construed in the broadest sense possible
and shall in each case include a security interest and other Lien as the context
implies.

“Loan Party” shall mean, individually, the Borrower and each Guarantor, and
“Loan Parties” shall mean, collectively, the Borrower and the Guarantors.

“Loan Party’s knowledge” or “knowledge of Loan Party” shall mean the actual
knowledge of the President, the Chief Executive Officer, the Executive Vice
President, or the Chief Financial Officer of Parent, without obligation to
conduct further inquiry outside the ordinary course of business.

“Majority Interest JV” shall mean a JV in which Loan Parties own greater than
fifty (50%) percent of the Equity Interests.

“Master Account” shall have the meaning set forth in Section 2.08(b).

“Master Account Control Agreement” shall mean the deposit account control
agreement dated as of the Closing Date among Agent, Borrower and Regions Bank,
as the depositary bank, in form and substance satisfactory to the Required
Lenders and Agent.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, operations, assets, business or prospects of the Loan
Parties and their Subsidiaries taken as a whole, (b) the Loan Parties’ ability
to pay the Obligations or to comply with this Agreement or any Other Document in
accordance with the terms hereof or thereof, (c) the value of the Collateral, or
Agent’s Liens on the Collateral or the priority of any such Lien or (d) Agent’s
ability to realize on the Collateral or otherwise enforce the terms of this
Agreement or any of the Other Documents.

“Material Contracts” shall have the meaning set forth in Section 5.21.

“Minority Interest JV” shall mean any JV that is not a Majority Interest JV.

“Money Borrowed” shall mean (a) Indebtedness for borrowed money arising from the
lending of money by any Person to any Loan Party or any of their respective
Subsidiaries, (b) Indebtedness, whether or not in any such case arising from the
lending by any Person of money to any Loan Party or any of their respective
Subsidiaries, (i) which is represented by notes payable or drafts accepted that
evidence extensions of credit, (ii) which constitutes obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid (other than accounts payable) or that was issued or
assumed as full or partial payment for property, (c) reimbursement obligations
with respect to letters of credit or guaranties of letters of credit, and
(d) Indebtedness of any Loan Party or any of their respective Subsidiaries under
any guarantee of obligations that would constitute Indebtedness for Money
Borrowed under clauses (a), (b) or (c) hereof, if owed directly by any Loan
Party or any of their respective Subsidiaries.

“Mortgages” means the mortgages or deeds of trust delivered pursuant to Section
4.19(a).

 

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“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) and 4001(a)(3) of ERISA.

“Net Income” shall mean, for any period, the aggregate income (or loss) of Loan
Parties and their Subsidiaries for such period, all computed and calculated in
accordance with GAAP consistently applied on a consolidated basis.

“New Common Stock” shall mean shares of the Parent, after reincorporation in
Delaware, to be issued as part of the Plan of Reorganization.

“Non-Restricted Asset” shall have the meaning as set forth in the definition of
Excluded Assets.

“Non-US Subsidiary” shall mean any Subsidiary other than a US Subsidiary.

“Obligations” shall mean and include any and all of each Loan Party’s
Indebtedness and/or liabilities pursuant to or evidenced by this Agreement or
any Other Documents to Agent or Lenders of every kind, nature and description,
direct or indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or hereafter arising,
contractual or tortious, liquidated or unliquidated, regardless of how such
indebtedness or liabilities arise (including all interest accruing after the
commencement of any bankruptcy or similar proceeding whether or not enforceable
in such proceeding) and all obligations of any Loan Party to Agent or Lenders to
perform acts or refrain from taking any action under this Agreement or any Other
Documents.

“OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

“Other Connection Taxes” shall mean, with respect to any Recipient, Taxes
imposed as a result of a present or former connection between such Recipient and
the jurisdiction imposing such Tax (other than connections arising from such
Recipient having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Obligation or Other Document, or sold or assigned an interest in any Obligation
or Other Document).

“Other Documents” shall mean, to the extent applicable, any Term Note, the
Questionnaire, the Fee Letter, the Funds Flow Memorandum, the Master Account
Control Agreement, the Pledge Agreement, the Servicing Agreement, any Guarantee
and any and all other agreements, instruments and documents, including, without
limitation, guaranties, pledges, security agreements, mortgages, deeds of trust,
debentures, control agreements, other collateral documents, subordination
agreements, intercreditor agreements, powers of attorney, consents, and all
other writings heretofore, now or hereafter executed and/or delivered by any
Loan Party to Agent or any Lender in respect of the transactions contemplated by
this Agreement, in each case, as such agreements, instruments and documents are
amended, restated, modified or supplemented from time to time.

“Parent” shall mean Forbes Energy Services Ltd, a Texas corporation.

“Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Term Loans or Term Commitments of such
Lender and who shall have entered into a participation agreement in form and
substance reasonably satisfactory to such Lender.

 

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“Payment Account” shall mean Agent’s account set forth on Schedule 2.04(b) or
such other account of Agent, if any, which Agent may designate by notice to
Borrower and to each Lender to be the Payment Account.

“Payment in Full” or “Paid in Full” shall mean (a) all Term Commitments have
been terminated or expired and (b) all of the Obligations have been paid in full
in cash.

“PBGC” shall mean the Pension Benefit Guaranty Corporation.

“Permitted Acquisition” shall mean the purchase by Borrower or a wholly-owned US
Subsidiary of Borrower that is a Loan Party after the date hereof of all or
substantially all of the assets or property or all of the Equity Interests of
any Person or any business unit or division of such Person (such assets or
Person being referred to herein as the “Target”), or the merger with a Target by
Borrower or a wholly-owned US Subsidiary of Borrower that is a Loan Party,
subject to the satisfaction of each of the following conditions:

(a) Agent shall receive at least ten (10) Business Days’ prior written notice of
such proposed Permitted Acquisition, which notice shall include a reasonably
detailed description of such proposed Permitted Acquisition;

(b) the Target’s assets shall only comprise a business of the type engaged in by
Loan Parties as of the date hereof or ancillary businesses reasonably similar,
related or complementary to the business engaged in by Loan Parties as of the
date immediately preceding the date on which such notice is given, and which
business would not subject Agent or any Lender to regulatory or third party
approvals in connection with the exercise of its rights and remedies under this
Agreement or any Other Documents other than approvals applicable to the exercise
of such rights and remedies with respect to Loan Parties prior to such proposed
Permitted Acquisition;

(c) the total cash and non-cash consideration paid by Loan Parties and their
Subsidiaries (including, without limitation, assumption or incurrence of all
Indebtedness (including without limitation earn-outs and deferred purchase price
obligations)) shall not exceed the Permitted Acquisitions/JV Cap Amount;

(d) Target must have had a positive EBITDA on a cumulative basis for the
immediately preceding four (4) fiscal quarters and no more than one (1) fiscal
quarter during such four fiscal quarter period may have a negative EBITDA;

(e) at or prior to the closing of such proposed Permitted Acquisition, Agent,
for the ratable benefit of each Secured Party, will be granted a first priority
perfected security interest and lien (subject to Permitted Encumbrances) in all
assets and Equity Interests (other than Excluded Assets) acquired in connection
therewith and each Person acquired in connection therewith shall have joined
this Agreement as a Guarantor and each Loan Party and each Person acquired in
connection therewith shall have executed (or caused to be executed) such
documents and taken such actions as may be required by Agent in connection
therewith;

(f) such proposed Permitted Acquisition shall not be hostile and, prior to its
closing, shall have been approved by the board of directors (or other similar
body) and/or the stockholders or other equity holders of the Target;

 

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(g) all material consents necessary for such proposed Permitted Acquisition have
been acquired and such proposed Permitted Acquisition is consummated in
accordance with the applicable acquisition documents and applicable law;

(h) each of the representations and warranties made by any Loan Party in or
pursuant to this Agreement and any Other Document to which it is a party, and
each of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any Other Document shall be true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein) on and as of such date such proposed Permitted
Acquisition is consummated both before and after giving effect thereto as if
made on and as of such date, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and correct in all material
respects (without duplication of any materiality qualifiers already set forth
therein) on and as of such earlier date);

(i) on or prior to the date of such proposed Permitted Acquisition, Agent shall
have received, in form and substance reasonably satisfactory to Agent, copies of
the acquisition agreement (which shall allow collateral assignments of Loan
Parties rights thereunder in favor of the Agent and the Lenders) or merger
agreement, all related agreements and instruments, and all opinions,
certificates, lien search results and other documents reasonably requested by
Agent;

(j) concurrently with delivery of the notice referred to in clause (a) above,
Loan Parties shall have delivered to Agent, in form and substance reasonably
satisfactory to Agent updated versions of the projections most recently
delivered pursuant to Section 9.11(b), covering the 1-year period commencing on
the date of such Permitted Acquisition and otherwise prepared in accordance with
such most recently delivered projections and based upon historical financial
data of a recent date reasonably satisfactory to Agent, taking into account such
Permitted Acquisition; and

(k) both on the date of closing of the proposed Permitted Acquisition and after
giving effect thereto, Loan Parties shall have satisfied the Investment
Conditions;

(l) if the proposed Permitted Acquisition is structured as a merger of the
Target and Borrower or wholly-owned US Subsidiary of Borrower that is a Loan
Party, Borrower or such wholly-owned US Subsidiary must be the survivor of such
merger, or the survivor must assume all Obligations and execute such documents
as may be reasonably required by the Required Lenders subjecting such survivor
to the Agreement and Other Documents as applicable; and

(m) concurrently with consummation of the proposed Permitted Acquisition,
Borrower shall have delivered to Agent a certificate stating that the foregoing
conditions have been satisfied.

“Permitted Acquisitions/JV Cap Amount” shall mean, with respect to both
Permitted Acquisitions and all JV investments permitted pursuant to Section
7.11(b) (“Permitted JV’s”), an aggregate amount (the “Total Acquisitions/JV
Investment Amount”) equal to the sum of (a) the total cash and non-cash
consideration paid by Loan Parties and their Subsidiaries (including, without
limitation, assumption or incurrence of all Indebtedness (including without
limitation earn-outs and deferred purchase price obligations)) in connection
with all Permitted Acquisitions, and (b) the total cash and non-cash
consideration paid and/or invested by Loan Parties and their Subsidiaries in
connection with all Permitted JV’s (including, without limitation, assumption or
incurrence of Indebtedness in connection therewith and all contributions of
capital or other property to all JV’s), which Total Acquisitions/JV Investment
Amount shall in no event exceed for any fiscal year, an amount equal to (such
amount, the

 

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“Annual Acquisitions/JV Cap”) (i) $5,000,000 in the aggregate (the “Annual
Acquisitions/JV Base Amount”) for all Permitted Acquisitions and all Permitted
JV’s for the current fiscal year commencing on January 1, 2017 through and
including December 31, 2017, and (ii) for the fiscal year ending December 31,
2018 and for each successive fiscal year thereafter, an aggregate amount equal
to the Annual Acquisitions/JV Base Amount. For the avoidance of doubt, any
investment in salt water disposal wells up to $15,000,000 in the aggregate shall
not be included in the calculation of the Permitted Acquisitions/JV Cap Amount.

“Permitted Encumbrances” shall mean:

(a) Liens in favor of Agent for the benefit of each Secured Party, which, in
each case, secure Obligations;

(b) inchoate Liens for taxes, assessments or other governmental charges (“Tax
Lien”) not delinquent or being contested in good faith and by appropriate
proceedings by the applicable Loan Party or Subsidiary of a Loan Party and with
respect to which proper accruals have been taken by Loan Parties and the
Subsidiaries; provided, that, (i) no Lien has been filed with respect thereto
or, if any such Lien shall have been filed, a stay of enforcement of any such
Lien shall be in effect, and (ii) the failure to make payment pending any such
contest could not reasonably be expected to result in a Material Adverse Effect;

(c) deposits or pledges to secure obligations under worker’s compensation,
social security or similar laws, or under unemployment insurance, in each case
made in the ordinary course of business and excluding deposits, liens or pledges
under ERISA;

(d) deposits or pledges of cash to secure bids, tenders, contracts (other than
contracts for the payment of money), leases, statutory obligations, surety and
appeal bonds and other obligations of like nature arising in the ordinary course
of the applicable Loan Party’s or Subsidiary’s business;

(e) inchoate mechanics’, workers’, materialmen’s, carriers’, warehousemen’s,
landlords or other like Liens arising in the ordinary course of the applicable
Loan Party’s or Subsidiary’s business with respect to obligations which are
(i) not due or (ii) being contested in good faith and by appropriate proceedings
by the applicable Loan Party or Subsidiary of a Loan Party and with respect to
which proper accruals have been taken by Loan Parties and the Subsidiaries;
provided, that, (i) no Lien has been filed with respect thereto or, if any such
Lien shall have been filed, a stay of enforcement of any such Lien shall be in
effect, and (ii) the failure to make payment pending any such contest could not
reasonably be expected to result in a Material Adverse Effect;

(f) Liens placed upon fixed assets hereafter acquired (including, without
limitation, fixed assets leased pursuant to a Capital Lease or other similar
leasing arrangement or pursuant to a Permitted Fixed Asset Financing) by any
Loan Party or any Subsidiary to secure a portion of the purchase price or
financing thereof incurred prior to, at the time of, or within 120 days after
completion of the acquisition of such fixed assets; provided, that, (i) any such
Lien shall not encumber any property of Loan Parties or their Subsidiaries other
than the fixed assets so purchased or financed, accessories, accessions,
replacements, repairs, modifications and, additions and attachments to such
fixed assets, together with any contracts, leases, subleases, chattel paper,
security deposits with respect thereto and proceeds thereof (including insurance
proceeds), and (ii) the aggregate amount secured by such Liens shall not exceed
the applicable amount provided for in Section 7.07(b);

(g) Liens in existence on the date hereof that are disclosed on Schedule 7.02;

 

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(h) Liens on specific fixed assets (as opposed to any blanket Lien on any asset
type) acquired pursuant to a Permitted Acquisition in existence at the time such
assets are acquired pursuant to such Permitted Acquisition and not created in
contemplation thereof; provided, that such Liens do not attach to any assets
other than the assets acquired pursuant to such Permitted Acquisition;

(i) with respect to any Real Property, Liens consisting of easements, rights of
way and zoning restrictions that do not materially interfere with or impair the
use or operation thereof;

(j) Liens on depository accounts granted or arising in the ordinary course of
business in favor of depositary banks maintaining such depository accounts
solely to the extent they secure customary account fees and charges payable in
respect of such depository accounts;

(k) non-consensual statutory Liens (other than Liens securing the payment of
taxes or ERISA matters) arising in the ordinary course of a Loan Party or
Subsidiary’s business; provided, that, such Liens do not secure Indebtedness or
any other amounts in excess of $1,000,000 in the aggregate which are past due;

(l) Liens arising from (i) operating leases with respect to assets which are not
owned by any Loan Party or any Subsidiary and the precautionary UCC financing
statement filings in respect thereof and (ii) equipment or other materials which
are not owned by any Loan Party or Subsidiary located on the premises of such
Loan Party or Subsidiary (but not in connection with, or as part of, the
financing thereof) from time to time in the ordinary course of business and
consistent with current practices of Loan Parties and their Subsidiaries and the
precautionary UCC financing statement filings in respect thereof;

(m) judgments and other similar Liens arising in connection with court
proceedings that do not constitute an Event of Default;

(n) Liens of a collection bank arising under Section 4-210 of the UCC on items
in the course of collection;

(o) Liens in favor of customs and revenue authorities arising as a matter of law
to secure custom duties which are not past due in connection with the
importation of goods by Loan Parties or their Subsidiaries in the ordinary
course of business;

(p) receipt of deposits and advances from customers in the ordinary course of
business which may create an interest in the Inventory to be sold to such
customers, but which do not constitute contractual Liens granted by a Loan Party
or any Subsidiary; and

(q) Liens granted to secure Indebtedness permitted under Section 7.07(i) in
connection with the financing of insurance premiums, provided, that, (i) such
Liens shall not encumber any property other than the insurance policies in
connection with which such insurance premium financing Indebtedness has been
incurred and any return premiums and dividend payments with respect to such
insurance policies, and (ii) such Liens shall in no event encumber any loss
payments that are at any time payable to any Loan Party and/or to Agent (subject
to Section 2.07(a)) under any such insurance policies; and

(r) Liens on assets described in clause (e) of the definition of Excluded
Assets.

“Permitted Fixed Asset Financing” shall mean any Indebtedness permitted pursuant
to Section 7.07(b).

 

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“Permitted Holders” shall mean (a) certain funds and accounts advised or
sub-advised by Ascribe Capital LLC, Courage Capital Management, LLC, Pacific
Investment Management Company LLC, Phoenix Investment Adviser LLC, and Solace
Capital Partners, L.P. and (b) any Affiliate of a person set forth in clause
(a) of this definition.

“Person” shall mean any individual, sole proprietorship, partnership,
corporation, company, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, institution, public
benefit corporation, joint venture, entity or government (whether federal,
state, county, city, municipal or otherwise, including any instrumentality,
division, agency, body or department thereof).

“Petition Date” shall have the meaning set forth in the recitals to this
Agreement.

“PIK Interest Rate” shall mean, as of any date, the following percentage per
annum corresponding to such date:

 

Date

   PIK Interest Rate  

Closing Date through 12 months after the Closing Date

     7.00 % 

From such date through 12 months thereafter

     9.00 % 

From such date through 12 months thereafter

     11.00 % 

From such date through 12 months thereafter

     13.00 % 

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA, maintained for employees of Loan Parties or any member of the
Controlled Group or any such Plan to which any Loan Party or member of the
Controlled Group is required to contribute on behalf of any of its employees.

“Plan of Reorganization” shall have the meaning set forth in the recitals to
this Agreement.

“Platform” shall have the meaning set forth in Section 16.20.

“Pledge Agreement” shall mean that certain Pledge and Security Agreement dated
the Closing Date among the Loan Parties party thereto and Agent, in form and
substance satisfactory to the Required Lenders and Agent.

“Pre-Petition Credit Agreement’ shall have the meaning set forth in the recitals
to this Agreement.

“Pre-Petition Commitments” shall have the meaning set forth in the recitals to
this Agreement.

“Pre-Petition Lenders” shall have the meaning set forth in the recitals to this
Agreement.

“Pre-Petition Agent” shall have the meaning set forth in the recitals to this
Agreement.

 

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“Prior Defaulting/Impacted Lender” shall mean, as of any date, a Lender that is
not then a Defaulting Lender or an Impacted Lender but was a Defaulting Lender
or an Impacted Lender at any time during the past 365 days.

“Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.05(a).

“Public Lender” shall have the meaning set forth in Section 16.20.

“Purchasing Lender” shall have the meaning set forth in Section 16.03(c).

“Qualified Assignee” shall mean (a) any Lender (other than a Defaulting Lender,
an Impacted Lender or a Prior Defaulting/Impacted Lender), any Controlled
Affiliate of any Lender (other than a Defaulting Lender, an Impacted Lender or a
Prior Defaulting/Impacted Lender) and any Approved Fund (other than with respect
to a Defaulting Lender, an Impacted Lender or a Prior Defaulting/Impacted
Lender); (b) any Person that is not described in the immediately preceding
clause (a) that is organized under the laws of the United States or any state or
district thereof, has total assets in excess of $5 billion, extends asset-based
lending facilities in its ordinary course of business and whose becoming an
assignee would not constitute a prohibited transaction under Section 4975 of
ERISA or any other Applicable Law, and (c) any other Person consented to by the
Required Lenders; provided, that neither any Loan Party nor any Affiliate of any
Loan Party shall qualify as a Qualified Assignee unless consented to by the
Required Lenders in their sole discretion.

“Qualified Plan” shall mean a Plan that is intended to be tax qualified under
Section 401(a) of the Code.

“Questionnaire” shall mean each of the information certificates, each dated as
of the date hereof, executed by each Loan Party in favor of the Agent.

“RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901
et seq., as same may be amended from time to time.

“Real Property” shall mean all of each Loan Party’s and each of their
Subsidiary’s right, title and interest in and to its owned and leased premises.

“Recipient” shall mean, as applicable, (a) the Agent and (b) any Lender, or any
combination thereof (as the context requires).

“Receivables” shall mean and include, as to each Loan Party and each Subsidiary
of each Loan Party, all of such Loan Party’s and Subsidiary’s Accounts, Contract
Rights, instruments (including promissory notes and instruments evidencing
indebtedness owed to Loan Parties and their Subsidiaries by their Affiliates),
documents, chattel paper (whether tangible or electronic), general intangibles
relating to Accounts, drafts and acceptances, and all other forms of obligations
owing to such Loan Party and Subsidiary arising out of or in connection with the
sale, lease or other disposition of Inventory or the rendition of services, all
guarantees and other security therefor, whether secured or unsecured, now
existing or hereafter created, and whether or not specifically sold or assigned
to Agent hereunder.

“Release” shall have the meaning set forth in Section 5.07(c).

“Release Conditions” shall mean:

 

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(a) no later than 12:00 noon New York, New York time, at least one Business Day
prior to the desired release date, the Borrower shall have delivered to Agent a
Notice of Release Request substantially in the form of Exhibit B, which Notice
of Release Request shall constitute a representation and warranty that (a) all
Release Conditions have been satisfied and (b) the funds will be used solely for
purposes set forth in the Rolling Budget;

(b) each of the representations and warranties made by any Loan Party in or
pursuant to this Agreement and any Other Document to which it is a party, and
each of the representations and warranties contained in any certificate,
document or financial or other statement furnished at any time under or in
connection with this Agreement or any Other Document shall be true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein; or in all respects with respect to representations
and warranties made on the Closing Date) on and as of the date of the requested
release as if made on and as of such date, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein) on and as of such earlier date);

(c) no Event of Default or Default shall have occurred and be continuing on such
date, or would exist after giving effect to the release requested to be made, on
such date;

(d) the cash and Cash Equivalents of the Loan Parties that are not Restricted
shall be less than $7,000,000 after giving pro forma effect to the requested
release; and

(e) the Borrower shall have delivered to the Lenders a copy of resolutions of
the board of directors (or equivalent authority) of Parent approving the
requested release and the use of proceeds thereof.

“Reportable Event” shall mean a reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder with respect to which the thirty
(30) day notice requirement has not been waived.

“Required Lenders” shall mean (a) if there are three (3) or more Lenders, at
least two (2) or more Lenders having Commitment Percentages (calculated under
the definition of Commitment Percentages) the aggregate amount of which exceeds
fifty (50%) percent, and (b) if there are either one (1) or two (2) Lenders, all
Lenders.

“Responsible Officer” shall mean with respect to any Person, such Person’s chief
executive officer, president, chief operating officer, chief financial officer
or other officer having substantially the same authority and responsibility with
respect to the matters at hand (or having substantially the same knowledge of
the contents of the certificate, document or other document being delivered).

“Restricted” means, when referring to cash or Cash Equivalents of the Loan
Parties or any of their Subsidiaries, that such cash or Cash Equivalents appear
(or would be required to appear) as “restricted” on a consolidated balance sheet
of the Loan Parties or such Subsidiary (unless such appearance is related to
this Agreement or the Other Documents (or the Liens created thereunder))

“Restricted Accounts” shall mean deposit accounts or other accounts
(a) established and used (and at all times will be used) solely for the purpose
of paying current payroll obligations of Loan Parties (and which do not (and
will not at any time) contain any deposits other than those necessary to fund
current payroll), in each case in the ordinary course of business,
(b) maintained (and at all times will

 

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be maintained) solely in connection with an employee benefit plan, but solely to
the extent that all funds on deposit therein are solely held for the benefit of,
and owned by, employees (and will continue to be so held and owned) pursuant to
such plan, and (c) used in the ordinary course of business for petty cash, the
balance of which shall not exceed $50,000 in the aggregate at any time;
provided, that, without limiting the foregoing, in order for any such deposit
account or other account to constitute a “Restricted Account”, such deposit or
other account must be expressly designated as a “Restricted Account” on Schedule
5.23 (as such schedule may from time to time be updated in accordance with
Section 5.23), which designation shall constitute a representation and warranty
by each Loan Party that such deposit account or other account satisfies the
criteria set forth in this definition to constitute a “Restricted Account”.

“Restricted Asset” shall have the meaning as set forth in the definition of
Excluded Assets.

“Restriction” shall have the meaning as set forth in the definition of Excluded
Assets.

“Rolling Budget” means a projected balance sheet, income statement and cash flow
statement for the Loan Parties and their Subsidiaries on a monthly basis, for
the following 12 calendar months, including any anticipated use of the proceeds
of Term Loans held in the Master Account for each month during such period, in
form and substance reasonably satisfactory to the Lenders.

“Sanctioned Entity” shall mean (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in,
a country that is subject to a sanctions program identified on the list
maintained and published by OFAC and available at or as otherwise published from
time to time as such program may be applicable to such agency, organization or
person.

“Sanctioned Person” shall mean a person named on the list of Specially
Designated Nationals or Blocked Persons maintained by OFAC available at or as
otherwise published from time to time.

“SEC” shall mean the United States Securities and Exchange Commission.

“Secured Party” shall mean Agent and the Lenders; sometimes hereinafter
collectively referred to as “Secured Parties”.

“Senior Unsecured Notes” shall mean, collectively, the 9% Senior Unsecured Notes
due 2019 in the original principal amount of $280,000,000, issued by Parent as
the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced (to the extent not prohibited by this
Agreement).

“Servicing Agreement” shall mean that certain letter agreement dated as of the
Closing Date among Agent, the Loan Parties and the Title Agent, in form and
substance satisfactory to the Required Lenders and Agent.

“Solvent” shall mean, at any time with respect to any Person, that at such time
such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).

 

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“Specified Real Property” shall have the meaning set forth in Section 4.17(a).

“Subordinated Debt” shall mean Indebtedness which is expressly subordinated in
right of payment to the prior payment in full of the Obligations on terms
reasonably acceptable to Agent and, if required by Agent in its sole discretion,
pursuant to a subordination agreement entered into between the Person to whom
such subordinated Indebtedness is owing and Agent, in form and substance
satisfactory to Agent.

“Subscription Agent” shall mean Wilmington Trust, National Association, as
subscription agent.

“Subsidiary” shall mean, with respect to any Person, a corporation, partnership,
limited liability company or other entity of which such Person owns, directly or
indirectly, such number of outstanding shares or other equity interests as to
have more than fifty (50%) percent of the ordinary voting power for the election
of directors or other managers of such corporation, partnership, limited
liability company or other entity. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of
Borrower.

“Target” shall have the meaning as set forth in the definition of Permitted
Acquisition.

“Tax” or “Taxes” shall mean any tax, fee, premium, charge, duty, escheat or
other amount imposed by a Governmental Body and any interest, penalty, or
addition to tax imposed with respect thereto or any applicable law, treaty,
regulation or directive.

“Tax Lien” shall have the meaning as set forth in the definition of Permitted
Encumbrances.

“Term” shall mean the period commencing on the Closing Date and ending on the
Termination Date.

“Term Commitment” shall mean, with respect to each Lender, its Term Commitment,
and, with respect to all Lenders, their Term Commitments, in the aggregate
amounts set forth beside such Lender’s name under the applicable heading on
Schedule C-1 or in the Commitment Transfer Supplement pursuant to which such
Lender became a Lender hereunder, as such amounts may be reduced or increased
from time to time pursuant to assignments made in accordance with the provisions
of this Agreement.

“Term Loans” shall mean the loans made pursuant to Section 2.01.

“Term Note” shall have the meaning set forth in Section 2.01.

“Termination Date” shall have the meaning set forth in Section 13.01.

“Termination Event” shall mean (a) a Reportable Event with respect to any Plan
or Multiemployer Plan; (b) the withdrawal of any Loan Party or any of their
Subsidiaries or any member of the Controlled Group from a Plan or Multiemployer
Plan during a plan year in which such entity was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA; (c) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (d) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (e) any event or condition (i) which

 

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might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan or Multiemployer Plan, or
(ii) that may result in termination of a Multiemployer Plan pursuant to Section
4041A of ERISA; or (f) the partial or complete withdrawal within the meaning of
Sections 4203 and 4205 of ERISA, of any Loan Party, any Subsidiary thereof or
any member of the Controlled Group from a Multiemployer Plan.

“Title Agent” shall mean A.S.A., Inc., or such other entity designated by the
Agent and the Loan Parties as the respective sub-agent for the Agent and the
Loan Parties for the limited purpose of dealing with any motor vehicle forms
relating to or concerning titled vehicles.

“Title IV Plan” shall mean a Plan (other than a Multiemployer Plan), that is
covered by Title IV of ERISA, and that any Loan Party or ERISA Affiliate
maintains, contributes to or has an obligation to contribute to on behalf of
participants who are or were employed by any of them.

“Toxic Substance” shall mean and include any material present on the Real
Property or the leasehold interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state or
other law, or any other applicable federal, state or other laws now in force or
hereafter enacted relating to toxic substances. “Toxic Substance” includes but
is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based
paints.

“Transferee” shall have the meaning set forth in Section 16.03(b).

“Transferee Register” shall have the meaning set forth in Section 16.03(b).

“UCC” shall mean the Uniform Commercial Code as in effect in the State of New
York from time to time.

“Unfunded Pension Liability” shall mean, at any time, the aggregate amount, if
any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of five (5) years following a
transaction which might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by any
Loan Party or any ERISA Affiliate as a result of such transaction.

“US Loan Party” shall mean a Loan Party organized, incorporated or otherwise
formed under the laws of the United States or any State thereof or the District
of Columbia.

“US Person” means any Person that is a “United States person” as defined in
Section 7701(a)(30) of the Code.

“US Subsidiary” shall mean a Subsidiary organized, incorporated or otherwise
formed under the laws of the United States or any State thereof or the District
of Columbia.

“US Tax Compliance Certificate” has the meaning assigned to such term in
Section 16.03(f).

“Waterfall Event” shall mean the occurrence of (a) failure by Borrower to repay
all of the Obligations as of the end of the Term or after the Obligations have
been accelerated, or (b) an Event of Default and the election by the Agent or
the Required Lenders to require that payments and proceeds of Collateral be
applied pursuant to Section 11.02(b).

 

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“Well Services Equipment” shall mean, collectively, (a) oil and natural gas well
service rigs and related Equipment, motor vehicles (including, but not limited
to, fluid trucks, heavy trucks, vacuum trucks and other rolling stock) and
trailers (including but not limited to vacuum trailers) that are used in the
ordinary course of Borrower’s and Guarantors’ well servicing business, and frac
tanks designed to hold mud, water and other fluids that are a byproduct of the
well drilling process.

“Write-Down and Conversion Powers” means, with respect to any EEA Resolution
Authority, the write-down and conversion powers of such EEA Resolution Authority
from time to time under the Bail-In Legislation for the applicable EEA Member
Country, which write-down and conversion powers are described in the EU Bail-In
Legislation Schedule.

Section 1.03 Uniform Commercial Code Terms.

All terms used herein and defined in the UCC, including, the terms accessions,
account debtor, certificated security, chattel paper, commercial tort claim,
deposit account, document, electronic chattel paper, equipment, financial asset,
fixtures, goods, health care insurance receivable, instrument, investment
property, letter-of-credit rights, payment intangibles, proceeds, securities
accounts, security, security entitlement, software, supporting obligations and
uncertificated security, shall have the meaning given therein unless otherwise
defined herein or unless the context provides otherwise.

Section 1.04 Certain Matters of Construction.

The terms “herein”, “hereof” and “hereunder” and other words of similar import
refer to this Agreement as a whole and not to any particular section, paragraph
or subdivision. Each reference to a Section, an Exhibit or a Schedule shall be
deemed to refer to a Section, an Exhibit or a Schedule, as applicable, of this
Agreement unless otherwise specified. The terms “including” and other words of
similar import refer to “including, but not limited” unless otherwise specified.
Any pronoun used shall be deemed to cover all genders. Wherever appropriate in
the context, terms used herein in the singular also include the plural and vice
versa. All references to statutes (including the UCC) and related regulations
shall include any amendments of same and any successor statutes and regulations.
Unless otherwise provided, all references to any instruments or agreements,
including, without limitation, references to this Agreement or any of the Other
Documents, shall include any and all modifications or amendments thereto and any
and all extensions or renewals thereof to the extent not prohibited by this
Agreement or any Other Document. Unless otherwise provided, Dollar ($) baskets
set forth in the representations and warranty, covenants and event of default
provisions of this Agreement (and other similar baskets) are calculated as of
each date of measurement by the Dollar Equivalents thereof as of such date of
measurement. Once an Event of Default occurs, such Event of Default shall remain
in existence and be continuing unless (a) waived in writing by the applicable
Lenders and other Persons in accordance with Section 16.02 or (b) cured (if such
Event of Default is capable of being cured) at any time prior to the date that
Agent and/or Lenders exercise any rights and remedies whatsoever in respect of
such Event of Default under this Agreement or the Other Documents, including,
without limitation, (i) exercise of any rights and remedies under Article XI of
this Agreement, (ii) Agent’s delivery to Borrower or any Loan Party of notice of
occurrence of such Event of Default, and (iii) the election of Agent or the
Required Lenders under Section 3.01 that the outstanding Term Loans and all
other Obligations shall bear interest at the Default Rate. If Agent and/or
Lenders have exercised any rights and remedies, the subject Event of Default
shall remain in existence and be continuing unless waived in writing by the
applicable Lenders and other Persons in accordance with Section 16.02.

 

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ARTICLE II

ADVANCES, PAYMENTS.

Section 2.01 Term Loans.

Subject to the terms and conditions set forth in this Agreement (including,
without limitation, Article VIII), each Lender, severally and not jointly,
agrees to make a simultaneous loan to Borrower on the Closing Date in the amount
of such Lender’s Term Commitment. Term Loans shall be funded by Lenders (as
applicable) in Dollars and shall be repaid in Dollars. To the extent required by
a Lender, the Term Loan made by such Lender shall be evidenced by a promissory
note in substantially the form attached hereto as Exhibit 2.01 (each, a “Term
Note”; it being understood that no such promissory note shall include a grant of
a Lien in favor of any individual Lender). The Term Loans shall be fully funded
on the Closing Date upon Agent’s receipt of funds from Subscription Agent and
all proceeds shall be used in accordance in Section 2.08.

Section 2.02 Procedure for Borrowing.

(a) Borrower shall notify Agent of the request by Borrower to incur Term Loans
hereunder. Such notice shall be in the form of the Notice of Borrowing Request
attached hereto as Exhibit A and shall be required to be delivered by Borrower
to Agent on or prior to 12:00 noon (New York time) on the Business Day that is
one (1) Business Day prior to the date of such requested borrowing. Such notice
shall include (A) the amount of such proposed borrowing, and (B) the date of
such proposed borrowing (which must be a Business Day). Each Lender shall make
the amount of its Commitment Percentage available to the Borrower or otherwise
as described in the Funds Flow Memorandum.

(b) At the option of the Borrower and upon three (3) Business Days’ prior
written notice to Agent, the Borrower may prepay the Term Loans in whole at any
time or in part from time to time, without premium or penalty, but with accrued
interest on the principal being prepaid to the date of such repayment.

Section 2.03 Disbursement of Term Loan Proceeds.

Term Loans shall be disbursed from whichever office or other place Agent or
Lenders, as applicable, may designate prior to the disbursal. During the Term,
the Borrower may request (solely on the Closing Date) and repay, but may not
reborrow, Term Loans, all in accordance with the terms and conditions of this
Agreement. The proceeds of Term Loans requested by the Borrower or deemed to
have been requested by the Borrower under Section 2.02(a) shall, subject to the
terms and conditions of this Agreement with respect to requested Term Loans, be
made available to the Borrower on the Business Day so requested by way of wire
transfer to the bank account(s) designated by Borrower, in immediately available
federal funds or other immediately available funds.

Section 2.04 Repayment of Term Loans.

(a) The Term Loans shall be due and payable in full on the Termination Date
subject to earlier prepayment as herein provided.

(b) All payments (including prepayments) of principal, interest and other
amounts payable hereunder and under each Other Document shall be made to Agent
at the Payment Account set forth on Schedule 2.04(b) not later than 2:00 p.m.
(New York time) on the due date therefor (or, if such due date is not a Business
Day, on the next Business Day) in lawful money of the United States of America
in funds immediately available to Agent. Any payment received by Agent
subsequent to 2:00

 

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p.m. (New York time) on any Business Day (regardless of whether such payment is
due on such Business Day) shall be deemed received by Agent, and shall be
applied to the applicable Obligations intended to be paid thereby, on the next
Business Day.

(c) The Borrower shall pay principal, interest, and all other amounts payable
hereunder and under each Other Document without any deduction whatsoever,
including, but not limited to, any deduction for any setoff or counterclaim.

(d) If, notwithstanding the terms of this Agreement or any Other Document, Agent
or any Lender receives any payment from or on behalf of Borrower or any other
Loan Party in a currency other than Dollars, Agent or such Lender may convert
the payment (including the monetary proceeds of realization upon any Collateral
and any funds then held in a cash collateral account) into Dollars at exchange
rate selected by Agent or such Lender. Borrower shall reimburse Agent and
Lenders on demand for all costs they incur with respect thereto. To the extent
permitted by law, the obligation shall be satisfied only to the extent of the
amount actually received by Agent upon such conversion.

Section 2.05 Statement of Account.

Agent shall maintain, in accordance with its customary procedures, a loan
account record (the “Borrower’s Account”) in the name of the Borrower in which
shall be recorded the date and amount of Term Loans made by Lenders and the date
and amount of each payment in respect thereof; provided, however, that, the
failure by Agent to record the date or amount of the Term Loans or any other
item shall not adversely affect Agent or any Lender under this Agreement or any
Other Document or diminish any obligation of any Loan Party under this Agreement
or any Other Document. Upon request, Agent shall send to Borrower a statement
showing the accounting for the Term Loans made, payments made or credited in
respect thereof, and certain other transactions between Lenders and the
Borrower. The statements shall be deemed correct and binding upon the Borrower
in the absence of manifest error and shall constitute an account stated between
Lenders and the Borrower unless Agent receives a written statement of the
Borrower’s specific exceptions thereto within thirty (30) days after such
statement is received by Borrower. Subject to the preceding sentence, the
records of Agent with respect to the Borrower’s Account shall be conclusive
evidence absent manifest error of the amounts of Term Loans and other charges
thereto and of payments applicable thereto.

Section 2.06 Manner of Borrowing and Payment.

(a) The Term Loans shall be advanced according to the applicable Commitment
Percentages of Lenders.

(b) All proceeds of Collateral, together with each payment (including each
prepayment) by the Borrower on account of the principal of the Term Loans, shall
be applied to the Term Loans pro rata according to the applicable Commitment
Percentages of Lenders. Except as expressly provided herein, all payments
(including prepayments) to be made by the Borrower on account of principal,
interest and fees shall be made in Dollars without setoff or counterclaim and
shall be made to Agent on behalf of the Agent and the Lenders to the Payment
Account, in each case on or prior to the time specified in Section 2.04(b) in
immediately available funds.

(c) If any Lender or Participant (a “Benefited Lender”) shall at any time
receive any payment of all or part of its Term Loan, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s Term
Loan, or interest thereon, and such greater proportionate payment or receipt of
Collateral is not expressly permitted

 

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hereunder, such Benefited Lender shall purchase for cash from the other Lenders
a participation in such portion of each such other Lender’s Term Loan, or shall
provide such other Lender with the benefits of any such Collateral, or the
proceeds thereof, as shall be necessary to cause such Benefited Lender to share
the excess payment or benefits of such Collateral or proceeds ratably with each
of the other Lenders according to their Commitment Percentages thereof;
provided, however, that, if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefited Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the extent of
such recovery, but without interest. Each Lender so purchasing a portion of
another Lender’s Term Loan may exercise all rights of payment (including,
without limitation, rights of set-off) with respect to such portion as fully as
if such Lender were the direct holder of such portion.

(d) Unless Agent shall have been notified in writing, prior to the making of the
Term Loans, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Term Loans available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make (and such Lender unconditionally shall be obligated to make) such amount
available to Agent on demand and, in reliance upon such assumption, make
available to the Borrower a corresponding amount. Agent will promptly notify
Borrower of its receipt of any such notice from a Lender. If such amount is made
available to Agent, such Lender shall pay to Agent on demand an amount equal to
the product of (i) the daily average Federal Funds Rate (computed on the basis
of a year of three hundred sixty (360) days) during such period as quoted by
Agent, times (ii) such amount, times (iii) the number of days to the date on
which such amount becomes immediately available to Agent. A certificate of Agent
submitted to any Lender with respect to any amounts owing under this paragraph
(d) shall be conclusive, in the absence of manifest error. If such amount is not
in fact made available to Agent by such Lender within three (3) Business Days
after request, Agent shall be entitled to recover such an amount, with interest
thereon at the rate per annum then applicable to Term Loans hereunder, on demand
from the Borrower; provided, however, that, Agent’s right to such recovery shall
not prejudice or otherwise adversely affect the Borrower’s rights (if any)
against such Lender.

Section 2.07 Mandatory Prepayments.

Notwithstanding the following, during a Waterfall Event, the order of
application to the Obligations shall be made pursuant to Section 11.02(b) rather
than as is provided in this Section 2.07.

(a) When any Loan Party or any of their Subsidiaries Disposes of any Collateral
or other assets or receives proceeds of property or casualty insurance, within
three (3) Business Days thereof, Loan Parties shall repay Term Loans in an
amount equal to one hundred (100%) percent of the net cash proceeds of such sale
(i.e., gross cash proceeds less the reasonable out-of-pocket costs and expenses
in respect of such Dispositions (including any taxes and similar amounts)) or
all of the cash proceeds of such insurance, as applicable, such repayments to be
made promptly but in no event more than three (3) Business Days following
receipt of such proceeds, and until the date of payment, such proceeds shall be
held in trust for Agent. Such repayments shall be applied to the outstanding
principal amount of the Term Loans until paid in full. Notwithstanding the
foregoing, unless and until an Event of Default has occurred and is continuing
or would result therefrom, such proceeds from Dispositions and insurance
payments that do not exceed $5,000,000 in the aggregate in any fiscal year may
be retained by Loan Parties solely to acquire replacement assets without making
a mandatory prepayment hereunder so long as (1) the fair market value of the
acquired assets is equal to or greater than the fair market value of the assets
which were Disposed or subject to the insurance payment, as applicable, and
(2) the acquired assets are purchased by the applicable Loan Party within one
year of the Disposal of the assets or receipt of the insurance payment, as
applicable. If a Loan Party fails to meet the conditions set forth above, Loan
Parties shall pay the proceeds to Agent to the extent not utilized in such
acquisitions as a repayment of any outstanding Term Loans. The provisions of
this Section 2.07(a) shall not be deemed to be implied consent to any such
Disposition otherwise prohibited by the terms and conditions of this Agreement
or any Other Document.

 

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(b) Within one (1) Business Day of the date of receipt by any Loan Party or any
of its Subsidiaries of any Extraordinary Receipts that exceed $100,000 in the
aggregate after the Closing Date, Borrower shall prepay the outstanding amount
of the Term Loans in an amount equal to one hundred (100%) percent of such
Extraordinary Receipts, net of any reasonable out of pocket fees and expenses
incurred in collecting such Extraordinary Receipts. Such repayments shall be
applied to the outstanding principal amount of the Term Loans until paid in
full. The provisions of this Section 2.07(b) shall not be deemed to be implied
consent to any event giving rise to such Extraordinary Receipts otherwise
prohibited by the terms and conditions of this Agreement.

(c) Within one (1) Business Day of the receipt by any Loan Party or any of its
Subsidiaries of the proceeds of any Indebtedness (other than Indebtedness
permitted pursuant to Section 7.07), Borrower shall prepay the outstanding
amount of the Term Loans in an amount equal to one hundred (100%) percent of
such proceeds, net of any reasonable out of pocket fees and expenses related to
the incurrence of such Indebtedness. Such repayments shall be applied to the
outstanding principal amount of the Term Loans until paid in full. The
provisions of this Section 2.07(c) shall not be deemed to be implied consent to
the incurrence of Indebtedness otherwise prohibited by the terms and conditions
of this Agreement.

(d) Within five (5) Business Days after the delivery of quarterly financial
statements pursuant to Section 9.07, but in any event not later than sixty
(60) days after the end of each fiscal quarter of the Loan Parties, Borrower
shall prepay the outstanding amount of the Term Loans in an amount equal to the
Excess Cash. Such repayments shall be applied to the outstanding principal
amount of the Term Loans until paid in full.

(e) Except as otherwise provided herein, Borrower shall deliver to Agent, at the
time of each prepayment required under this Section 2.07, (i) a certificate
signed by a financial officer of Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent reasonably
practicable, at least three days’ prior written notice of such prepayment. Each
notice of prepayment shall specify the prepayment date and the principal amount
of the Term Loans to be prepaid.

Section 2.08 Use of Proceeds; Release from Master Account.

(a) The Borrower shall use proceeds of the Term Loans hereunder only for:
(i) the payment on account of the Senior Unsecured Notes in an amount equal to
$20,000,000, (ii) the payment of costs, expenses and fees incurred on or prior
to the Closing Date in connection with the preparation, negotiation, execution
and delivery of this Agreement and the Other Documents and (iii) subject to
satisfaction of the Release Conditions and Section 2.08(b), for general
operating, working capital and other general corporate purposes of the Borrower
not otherwise prohibited by the terms hereof.

(b) Notwithstanding anything to the contrary contained herein, the proceeds of
Term Loans which are not used on the Closing Date for the purposes described in
Section 2.08(a) shall be deposited solely into a deposit account of the Borrower
satisfactory to the Required Lenders (the “Master Account”) and held uninvested
in such account subject to satisfaction of the Release Conditions. Upon the
receipt by Agent of a Notice of Release Request acknowledged in writing by the
Required Lenders that the Release Conditions have been satisfied, the Agent
shall release the funds on deposit in the Master Account in the amounts set
forth in the appropriate Notice of Release Request; provided that, upon release
from the Master Account such released funds may not be used for any purpose
other than as set

 

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forth in the most recent Rolling Budget delivered to the Lenders pursuant to
Section 9.11(a). The Master Account shall be subject to the Master Account
Control Agreement and the release of funds held on deposit in the Master Account
shall be restricted and subject to the terms and conditions set forth in this
Agreement and the Master Account Control Agreement. For the avoidance of doubt,
Borrower shall not be required to deliver a Notice of Release Request on the
Closing Date in respect of any payments described in the Funds Flow Memorandum
and Agent shall be authorized to release funds from the Master Account on the
Closing Date to make any such payments.

(c) None of the proceeds of the Term Loans will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purposes of reducing or retiring any Indebtedness which was originally incurred
to purchase or carry any margin security or for any other purpose which might
cause any of the Term Loans to be considered a “purpose credit” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.

Section 2.09 Defaulting Lender/Impacted Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender (i) has become subject to a Bail-In Action, (ii) has refused (if the
refusal constitutes a breach by such Lender of its obligations under this
Agreement) to make available its portion of any Term Loans, (iii) notifies
either Agent or Borrower that it does not intend to make available its portion
of any Term Loans (if the actual refusal would constitute a breach by such
Lender of its obligations under this Agreement), or (iv) failed to fund any
payments required to be made by it under this Agreement or any Other Document
(each, a “Lender Default”), all rights and obligations hereunder of such Lender
(a “Defaulting Lender”) as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.09 while such Lender Default remains in effect.
Notwithstanding the foregoing, no Lender Default shall be deemed to occur with
respect to a Lender, and such Lender shall not constitute a Defaulting Lender
hereunder, if such Lender notifies Agent and Borrower in writing that such
Lender’s refusal or failure to fund any Term Loan or any such payments required
to be made by it hereunder is the result of such Lender’s determination that one
or more conditions precedent to funding as set forth in this Agreement (each of
which conditions precedent, together with any applicable Default or Event of
Default, shall be specifically identified in writing) has not been satisfied.

(b) The obligations of each Lender to make Term Loans shall continue to be based
on their respective Commitment Percentages, and no Commitment Percentage of any
Lender or any pro rata share of any Term Loans required to be advanced by any
Lender shall be increased as a result of a Lender Default. Amounts received in
respect of the Obligations owing to the Lenders shall be applied to reduce the
applicable Obligations owing to each Lender that is not a Defaulting Lender
prior to any such amounts being applied to reduce the Obligations owing to such
Defaulting Lender to the extent that the aggregate amount of outstanding
Obligations owing to such Defaulting Lender is less than what it would have been
if such Lender Default did not occur.

(c) Notwithstanding anything set forth herein to the contrary, a Defaulting
Lender shall not have any voting or consent rights, or be permitted to direct
the Agent, under or with respect to this Agreement or any Other Document or
constitute a “Lender” (or be included in the calculation of “Required Lenders”
hereunder) for any voting or consent rights, or in directing the Agent, under or
with respect to this Agreement or any Other Document; provided, that, the
foregoing shall not permit (i) an increase in the principal amount of such
Defaulting Lender’s Term Commitment, (ii) the reduction of the principal of,
rate of interest on (other than the waiver of any default rate) or fees payable
with respect to any Term Loan of such Defaulting Lender or (iii) unless all
other Lenders affected thereby are treated similarly, the extension of any
scheduled (as opposed to mandatory prepayment) payment date or final maturity
date of the principal among of any Term Loan of such Defaulting Lender.

 

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(d) Other than as expressly set forth in this Section 2.09, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent
pursuant to Section 14.07) and the other parties hereto shall remain unchanged.
Nothing in this Section 2.09 shall be deemed to release any Defaulting Lender
from its obligations under this Agreement and the Other Documents, shall alter
such obligations, shall operate as a waiver of any default by such Defaulting
Lender hereunder, or shall prejudice any rights which the Borrower, Agent or any
Lender may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder. At the option of Agent, any amount payable to a
Defaulting Lender hereunder (whether on account of principal, interest, fees or
otherwise) shall, in lieu of being distributed to such Defaulting Lender, be
retained by Agent as cash collateral for funding obligations of the Defaulting
Lender in respect of any Term Loan (including the obligation to indemnify Agent
pursuant to Section 14.07). The Defaulting Lender’s decision-making and
participation rights and rights to payments hereunder shall be restored only
upon the payment by the Defaulting Lender of its Commitment Percentage of any
Obligations, any participation obligation, or expenses as to which it is
delinquent, together with interest thereon at the rate set forth in Section
2.06(g) hereof from the date when originally due until the date upon which any
such amounts are actually paid.

(e) In the event a Defaulting Lender retroactively cures to the satisfaction of
Agent the breach which caused a Lender to become a Defaulting Lender, then, from
and after the date on which such cure has been so effected, such Defaulting
Lender shall no longer be a Defaulting Lender and shall be treated as a Lender
that is not a Defaulting Lender under this Agreement.

(f) Agent may replace a Defaulting Lender or an Impacted Lender in accordance
with Section 16.02(c).

Section 2.10 Interrelated Businesses.

Loan Parties hereby represent and warrant to Agent and Lenders that (a) Loan
Parties and their respective Subsidiaries make up a related organization of
various entities constituting a single economic and business enterprise so that
Loan Parties and their respective Subsidiaries share an identity of interests
such that any benefit received by any Loan Party or any Subsidiary of any Loan
Party benefits each other Loan Party and each other Subsidiary of Loan Parties;
(b) certain of Loan Parties and their respective Subsidiaries render services to
or for the benefit of other Loan Parties and Subsidiaries, as the case may be,
purchase or sell and supply goods to or from or for the benefit of the others,
make loans, advances and provide other financial accommodations to or for the
benefit of the other Loan Parties and Subsidiaries (including, inter alia, the
payment by Loan Parties and Subsidiaries of creditors of the other Loan Parties
and Subsidiaries and guarantees by Loan Parties and Subsidiaries of indebtedness
of the other Loan Parties and Subsidiaries and provide administrative,
marketing, payroll and management services to or for the benefit of the other
Loan Parties and Subsidiaries), and (c) Loan Parties and their Subsidiaries have
centralized accounting and legal service, common officers and directors and are
identified to creditors as a single economic and business enterprise.

 

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ARTICLE III

INTEREST AND FEES.

Section 3.01 Interest.

Interest on the Term Loans shall be (i) payable in cash to Agent for the benefit
of Lenders in arrears on each January 1, April 1, July 1 and October 1 occurring
prior to the Termination Date (commencing April 1, 2017) at a rate per annum
equal to the Cash Interest Rate on the actual principal amount of Term Loans
outstanding and (ii) capitalized and added to the principal amount of the Term
Loans on the first (1st) day of each calendar quarter (commencing April 1, 2017)
at a rate per annum equal to the PIK Interest Rate on the actual principal
amount of Term Loans outstanding; provided that such interest may, at the
Borrower’s election, be paid in cash, but only if the Borrower shall have
notified the Agent in writing of the Borrower’s intent to pay such interest in
cash no later than three (3) Business Days prior to the applicable interest
payment date (in which case, to the extent paid in cash, such interest shall not
be capitalized or added to the principal amount of the Term Loans in respect of
such calendar quarter). At the election of Agent or the Required Lenders, upon
and after the occurrence of an Event of Default (other than an Event of Default
arising under Section 10.06), and automatically upon and after the occurrence of
an Event of Default arising under Section 10.06, and in each case during the
continuation of any such Event of Default, the Cash Interest Rate shall be
increased by two (2) percentage points per annum (as applicable, the “Default
Rate”). At the election of Agent or the Required Lenders, such Default Rate
shall be applied retroactively to commence on the date of the first (1st)
occurrence of the event giving rise to such Event of Default.

Section 3.02 Loan Fees.

(a) Funding Fee. The Borrower shall pay to the Agent on the Closing Date a
Funding Fee in the amount of $3,000,000 (the “Funding Fee”) for the benefit of
the Lenders on the Closing Date according to their respective Commitment
Percentages.

(b) Other Fees. The Borrower shall pay to Agent and the Lenders the other fees
and amounts set forth in the Backstop Agreement (in accordance with the Funds
Flow Memorandum and the Fee Letter (which fees in the case of the Fee Letter
shall be for Agent’s own account (and not for the account of any Lender)) in the
amounts and at the times specified therein.

Section 3.03 Computation of Interest and Fees.

Interest and fees hereunder shall be computed on the basis of a year of three
hundred sixty (360) days and for the actual number of days elapsed. If any
payment to be made hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the Cash Interest Rate and
the PIK Interest Rate, as applicable, during such extension. Interest shall
accrue on each Term Loan for the day on which the Term Loan is made, and shall
not accrue on a Term Loan, or any portion thereof, for the day on which the Term
Loan or such portion is paid. Each determination by Agent of an interest rate or
fee hereunder shall be conclusive and binding for all purposes, absent manifest
error.

Section 3.04 Maximum Charges.

In no event whatsoever shall interest and other charges charged hereunder exceed
the highest rate permissible under law. In the event interest and other charges
as computed hereunder would otherwise exceed the highest rate permitted under
law, such excess amount shall be first applied to any unpaid principal balance
owed by the Borrower, and if the then remaining excess amount is greater than
the previously unpaid principal balance, Lenders shall promptly refund such
excess amount to the Borrower and the provisions hereof shall be deemed amended
to provide for such permissible rate.

 

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Section 3.05 Increased Costs.

In the event that any applicable law, treaty or governmental regulation, or any
change therein or in the interpretation or application thereof is effected after
the Closing Date (provided, however, that, notwithstanding anything herein to
the contrary, this Section 3.05 shall be deemed to apply to the Dodd-Frank Wall
Street Reform and Consumer Protection Act and to The Basel III Accord published
by The Basel Committee on Banking Supervision, and to all requests, rules,
regulations, guidelines or directives under either of the foregoing or issued in
connection therewith, regardless of the date enacted, adopted or issued, even if
enacted, adopted or issued before the Closing Date), or compliance by any Lender
(for purposes of this Section 3.05, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender or any
Subsidiary of Agent or any Lender) and the office or branch where any Lender
makes or maintains any Term Loans with any request or directive (whether or not
having the force of law) from any central bank or other financial, monetary or
other authority, in each case adopted after the Closing Date, shall:

(a) subject any Lender to any tax (other than any Excluded Tax) of any kind
whatsoever, as a result of a Change in Tax Law, with respect to this Agreement
or any Other Document or change the basis of taxation of payments to any Lender
of principal, fees, interest or any other amount payable in respect thereof
(except for changes in any Excluded Tax);

(b) impose, modify or hold applicable any reserve, special deposit, assessment
or similar requirement against assets held by, or deposits in or for the account
of, advances or loans by, or other credit extended by, any office of any Lender,
including (without limitation) pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or

(c) impose on any Lender any other condition with respect to this Agreement or
any Other Document;

and the result of any of the foregoing is to increase the cost to any Lender of
making, renewing or maintaining its Term Loans hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) in respect of any
of the Term Loans or the Lender’s overall capital, then, in any case the
Borrower shall promptly pay such Lender, upon its demand, such additional amount
as will compensate such Lender for such additional cost or such reduction, as
the case may be. Such Lender shall certify the amount of such additional cost or
reduced amount to Borrower and Agent, and such certification shall be conclusive
absent manifest error. Notwithstanding anything to the contrary in this
Section 3.05, Loan Parties shall not be required to compensate a Lender pursuant
to this Section 3.05 for any amounts incurred more than one hundred eighty
(180) days prior to the date that such Lender notifies Borrower of such Lender’s
intention to claim compensation therefor; provided, that, if the circumstances
giving rise to such claim have a retroactive effect, then such one hundred
eighty (180) day period shall be extended to include the period of such
retroactive effect.

If any Lender requests compensation under this Section 3.05, then such Lender
shall use reasonable efforts to designate a different lending office for funding
or booking such Lender’s Term Loans or to assign its rights and obligations
hereunder to another of its offices, branches or affiliates if, in the judgment
of Agent, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to this Section 3.05 in the future, and (ii) in each case,
would not subject such Lender to any unreimbursed cost or expense and would not
otherwise be disadvantageous to such Lender. Borrower hereby agrees to pay all
reasonable costs and expenses incurred by Agent or such Lender in connection
with any such designation or assignment.

Section 3.06 Capital Adequacy.

(a) In the event that any Lender (for purposes of this Section 3.06, the term
“Lender” shall include Agent or any Lender and any corporation or bank
controlling Agent or any Lender) shall have determined that any applicable law,
rule, regulation or guideline regarding capital adequacy in effect

 

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on the Closing Date, or any change therein effected after the Closing Date, or
any change in the interpretation or administration thereof by any Governmental
Body, central bank or other financial, monetary or other authority, in each case
adopted after the Closing Date, charged with the interpretation or
administration thereof, or compliance by any Lender and the office or branch
where any Lender (as so defined) makes or maintains any Term Loans with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on any Lender’s capital as a
consequence of its obligations hereunder to a level below that which such Lender
could have achieved but for such adoption, change or compliance (taking into
consideration each Lender’s policies with respect to capital adequacy), then,
from time to time, the Borrower shall pay upon demand to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided, however, that, notwithstanding anything herein to the contrary, this
Section 3.06 shall be deemed to apply to the Dodd-Frank Wall Street Reform and
Consumer Protection Act and to The Basel III Accord published by The Basel
Committee on Banking Supervision, and to all requests, rules, regulations,
guidelines or directives under either of the foregoing or issued in connection
therewith, regardless of the date enacted, adopted or issued, even if enacted,
adopted or issued before the Closing Date. In determining such amount or
amounts, such Lender may use any reasonable averaging or attribution methods.
Such Lender shall certify the amount of such reduction and provide a reasonably
detailed calculation thereof to Borrower and Agent. Notwithstanding anything to
the contrary in this Section 3.06, Loan Parties shall not be required to
compensate a Lender pursuant to this Section 3.06 for any amounts incurred more
than one hundred eighty (180) days prior to the date that such Lender notifies
Borrower of such Lender’s intention to claim compensation therefor; provided,
that, if the circumstances giving rise to such claim have a retroactive effect,
then such one hundred eighty (180) day period shall be extended to include the
period of such retroactive effect. The protection of this Section 3.06 shall be
available to each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the applicable law, regulation or condition.

(b) A certificate of such Lender setting forth such amount or amounts as shall
be necessary to compensate such Lender with respect to Section 3.06(a) when
delivered to Borrower and Agent shall be conclusive absent manifest error.

Section 3.07 Withholding Taxes.

Except as otherwise required by law and subject to Section 16.03, each payment
by the Borrower or the Guarantors under this Agreement or the Other Documents
shall be made without withholding or deduction for or on account of any present
or future Taxes or Charges. If any such withholding or deduction for Taxes or
Charges is so required, the Borrower or the Guarantors, as applicable, shall
promptly upon becoming aware that such withholding or deduction is necessary,
notify the Agent and shall make the withholding or deduction, pay the amount
withheld to the appropriate Governmental Body before penalties attach thereto or
interest accrues thereon and except with respect to Excluded Taxes forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received by Agent and each Lender free and clear of such taxes
(including such taxes on such additional amount) is equal to the amount which
that Agent or such Lender (as the case may be) would have received had such
withholding or deduction not been made. Within thirty (30) days of paying any
amount withheld or deducted on account of tax, the Borrower shall deliver to the
Agent evidence (reasonably satisfactory to the Agent) that the appropriate
payment has been paid to the relevant tax authority. If the Agent or any Lender
pays any amount in respect of any such Taxes (other than Excluded Taxes), the
Borrower and the Guarantors shall reimburse the Agent or such Lender for that
payment on demand in the currency in which such payment was made. If the
Borrower or the Guarantors pay any such Taxes, it shall deliver official tax
receipts evidencing that payment or certified copies thereof to the Agent or
Lender on whose account such withholding was made (with a copy to the Agent if
not the recipient of the original) on or before the thirtieth (30th) day after
payment.

 

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ARTICLE IV

GRANT OF SECURITY INTEREST; COLLATERAL COVENANTS.

Section 4.01 Security Interest in the Collateral.

To secure the prompt payment and performance of all of the Obligations to each
Secured Party, each Loan Party hereby collaterally assigns, pledges and grants
to Agent, for the ratable benefit of each Secured Party, a continuing Lien in
and to all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located.

Section 4.02 Perfection of Security Interest.

(a) Except as set forth herein, each Loan Party shall take all action that may
be necessary or desirable, or that Agent may request, so as at all times to
maintain the validity, perfection, enforceability and priority of Agent’s Lien
in the Collateral to the extent required by this Agreement or any Other
Documents. Without limiting the generality of the foregoing, in the case of each
item of Well Services Equipment consisting of titled motor vehicles, each Loan
Party shall (i) promptly after acquiring such title, arrange for the notation of
Agent’s first priority Lien thereon and, if requested by Agent, shall provide
Agent with evidence reasonably satisfactory to Agent that such title has been
submitted to the applicable state motor vehicle department (or equivalent state
Governmental Body), and (ii) after such Loan Party shall have received such
title noting Agent’s first priority Lien thereon, shall promptly deliver such
title to Agent or, at Agent’s direction, to the Title Agent. Notwithstanding the
foregoing, (A) Loan Parties shall not be required to deliver titles to Agent or
Title Agent, or arrange for the notation of Agent’s first priority Lien on such
titles, with respect to (1) light duty pickup trucks, passenger cars and smaller
trailers except upon Agent’s request, which request may be made by Agent, in its
sole discretion, at any time following the Closing Date, or (2) titled motor
vehicles which are financed or subject to a Capital Lease or Permitted Fixed
Asset Financing and are secured by Permitted Encumbrances set forth in
subsection (f) of the definition of Permitted Encumbrances, and so long as the
applicable agreements governing any Permitted Fixed Asset Financing permit the
notation of Agent’s second priority Lien on the titled motor vehicles which are
subject to such Permitted Fixed Asset Financing, then the Loan Parties shall
arrange for the notation of Agent’s second priority Lien (and not a first
priority Lien) on the titles to such motor vehicles, provided, that, Loan
Parties shall be required to deliver titles to Agent or Title Agent and arrange
for the notation of Agent’s first priority Lien thereon with respect to titled
motor vehicles described in this clause (A)(2) promptly after the financing or
Capital Lease with respect thereto has been paid and satisfied in full, other
than as a result of a refinancing thereof permitted by Section 7.07(b), and
(B) Agent’s Lien on any titled motor vehicles which are subject to a Permitted
Fixed Asset Financing shall be subject to the senior and prior Lien thereon held
by the Person who has provided the Permitted Fixed Asset Financing with respect
to such titled motor vehicles. All titles for such Well Services Equipment
consisting of titled motor vehicles (except as provided above) will be held in
the possession of Agent or its bailee, for the benefit of Agent.

(b) Agent may, and each Loan Party hereby irrevocably authorizes Agent to, at
any time and from time to time file in any relevant jurisdiction in accordance
with Section 9-509 of the UCC, financing statements and amendments thereto that
describe the Collateral as “all assets” or similar language of the applicable
Loan Party and which contain any other information required by the UCC for the
sufficiency or filing office acceptance of any financing statements,
continuation statements or amendments. Each Loan Party agrees to furnish any
such information to Agent promptly upon request. Each Loan Party further
irrevocably authorized Agent to file with the United States Patent and Trademark
Office or United States Copyright Office (or any successor office or any similar
office in any other country) such documents as may be necessary or advisable for
the purpose of perfecting, confirming, continuing, enforcing or protecting the
Agent’s Lien granted by each Loan Party without the signature of

 

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any Loan Party, and naming any Loan Party or the Loan Parties as debtors and
Agent as secured party. Agent’s Lien is granted as security only and shall not
subject Agent or any other Secured Party to, or in any way alter or modify, any
obligation or liability of any Loan Party with respect to or arising out of the
Collateral. Notwithstanding anything to the contrary contained herein or in any
Other Document, Agent shall have no responsibility for the preparing, recording,
filing, re-recording or re-filing of any financing statements (amendments or
continuations) or other instruments in any public office, or for otherwise
maintaining the perfection of the Agent’s Lien granted hereunder.

(c) Each Loan Party shall, at any time and from time to time, take such steps as
Agent may request to (i) obtain an acknowledgment, in form and substance
reasonably satisfactory to Agent, of any bailee having possession of any of the
Collateral, stating that the bailee holds such Collateral for Agent, (ii) obtain
“control” of any letter-of-credit rights, deposit accounts (other than
Restricted Accounts) or electronic chattel paper (as such terms are defined in
the UCC with corresponding provisions thereof defining what constitutes
“control” for such items of Collateral), with any agreements establishing
control to be in form and substance reasonably satisfactory to Agent, and
(iii) otherwise ensure the continued perfection and priority of Agent’s Liens in
any of the Collateral for the benefit of the Secured Parties and of its rights
therein. If any Loan Party shall at any time, acquire a “commercial tort claim”
(as such term is defined in the UCC) in excess of Five Hundred Thousand
($500,000) Dollars, such Loan Party shall promptly notify Agent thereof in
writing (which notice shall be deemed to be an update of Schedule 5.08(b)),
therein providing a reasonable description and summary thereof, and upon
delivery thereof to Agent, such Loan Party shall be deemed to thereby have
granted to Agent, for the ratable benefit of each Secured Party (and each Loan
Party hereby grants to Agent, for the ratable benefit of each Secured Party) a
Lien in and to each such commercial tort claim and all proceeds thereof, all
upon the terms of and governed by this Agreement to secure the prompt payment
and performance of all of the Obligations.

(d) Each Loan Party hereby confirms and ratifies all UCC financing statements
filed in favor of Agent with respect to such Loan Party on or prior to the date
of the Agreement.

(e) All charges, expenses and fees Agent may incur in doing any of the foregoing
shall be paid by Loan Parties to Agent promptly upon demand.

Section 4.03 Preservation of Collateral.

Following the occurrence and during the continuance of an Event of Default, in
addition to the rights and remedies set forth in Section 11.01, Agent: (a) may
at any time take such steps as Agent deems necessary or appropriate to protect
Agent’s Lien in and to preserve the Collateral, including, without limitation,
the hiring of such security guards or the placing of other security protection
measures as Agent may deem appropriate; (b) may employ and maintain at any Loan
Party’s premises a custodian who shall have full authority to do all acts
necessary to protect Agent’s interests in the Collateral; (c) may lease
warehouse facilities to which Agent may move all or part of the Collateral;
(d) may use any Loan Party’s owned or leased lifts, hoists, trucks and other
facilities or equipment for handling or removing the Collateral; (e) shall have,
and is hereby granted, a right of ingress and egress to the places where the
Collateral is located, and may proceed over and through any Loan Party’s owned
or leased property; and (f) shall have a non-exclusive, royalty-free, license to
use each Loan Party’s Intellectual Property for the purposes of the completion,
processing and sale of such Loan Party’s Inventory and other assets. At such
time, each Loan Party shall cooperate fully with all of Agent’s commercially
reasonable efforts to preserve the Collateral and will take such actions to
preserve the Collateral as Agent may direct in connection therewith. All of
Agent’s expenses (including fees, disbursements and expenses of counsel) of
preserving the Collateral, including, without limitation, any expenses relating
to any actions by Agent described in this Section 4.03, may, at the election of
the Agent, be charged to the Borrower’s Account and added to the Obligations.

 

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Section 4.04 Ownership and Location of Collateral.

(a) At the time the Collateral becomes subject to Agent’s Lien, each Loan Party
shall be the sole owner of and fully authorized and able to sell, transfer,
pledge and/or grant a first priority Lien (subject to Permitted Encumbrances) in
each and every item of its respective Collateral to Agent; and the Collateral
shall be free and clear of all Liens and encumbrances whatsoever, except for
(i) Permitted Encumbrances, and (ii) in the case of Collateral acquired by a
Loan Party pursuant to a Capital Lease or Permitted Fixed Asset Financing, so
long as such Capital Lease or Permitted Fixed Asset Financing remains in effect,
any restrictions with respect to the sale, transfer, pledge of and/or grant of a
Lien in such Collateral as may be set forth in such Capital Lease or Permitted
Fixed Asset Financing.

(b) Each Loan Party’s books and records shall be located at one of the locations
set forth on Schedule 4.04 (as such Schedule may from time to time be updated in
accordance with Section 7.17) and shall not be removed from such location(s)
without the prior written consent of Agent. Loan Parties shall provide prompt
written notice to Agent following removal of any Well Services Equipment to any
location outside of the United States.

Section 4.05 Defense of Agent’s and Lenders’ Interests.

Until all of the Obligations have been Paid in Full, Agent’s Liens in the
Collateral shall continue in full force and effect. For so long as Agent’s Liens
in the Collateral continue in full force and effect, no Loan Party shall,
without Agent’s prior written consent, pledge, assign, transfer, create, charge
or suffer to exist a Lien upon any part of the Collateral, except for Permitted
Encumbrances. Each Loan Party shall defend Agent’s Liens in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations in accordance with Section 11.01, in addition to
and not in limitation of Agent’s rights and remedies set forth in Section 11.01:
(a) Agent shall have the right to take possession of the indicia of the
Collateral and the Collateral, (b) Loan Parties shall, upon Agent’s demand,
assemble the Collateral in the best manner possible and make it available to
Agent at a place reasonably convenient to Agent, and (c) upon demand by Agent
each Loan Party shall, and Agent may, at its option, instruct all suppliers,
carriers, forwarders, warehouses or others receiving or holding cash, checks,
Inventory, documents or instruments of such Loan Party to deliver same to Agent
(or any Person designated by Agent) and/or subject to Agent’s order and if they
shall come into any Loan Party’s possession, all such Collateral shall be held
by such Loan Party in trust as Agent’s trustee, and such Loan Party will
immediately deliver such Collateral to Agent (or any Person designated by Agent)
in their original form, together with any necessary endorsement.

Section 4.06 Books and Records.

Each Loan Party shall, and shall cause each of its Subsidiaries to, (a) keep
proper books of record and account in which complete and accurate entries will
be made of all dealings or transactions of or in relation to its business and
affairs; (b) set up on its books accruals with respect to all taxes,
assessments, charges, levies and claims; and (c) on a reasonably current basis
set up on its books, from its earnings, allowances against doubtful Receivables,
advances and investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any, due on
required payments and accruals for depreciation, obsolescence, or amortization
of properties), which should be set aside from such earnings in connection with
its business. All determinations pursuant to this subsection shall be made in
accordance with, or as required for reporting by, GAAP consistently applied.

 

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Section 4.07 Financial Disclosure.

Each Loan Party hereby irrevocably authorizes and directs all Accountants and
auditors employed by such Loan Party at any time during the Term to exhibit and
deliver to Agent copies of any of such Loan Party’s and each of its
Subsidiaries’ financial statements, trial balances or other accounting records
of any sort in the Accountant’s or auditor’s possession, and to disclose to
Agent any information such Accountants may have concerning such Loan Party’s and
each of its Subsidiaries’ financial status and business operations. Each Loan
Party hereby authorizes all federal, state and municipal authorities to furnish
to Agent copies of reports or examinations relating to such Loan Party or to any
of its Subsidiaries, whether made by such Loan Party or otherwise.
Notwithstanding the foregoing authorization, so long as no Default or Event if
Default is in existence, Agent will attempt to obtain such information or
materials directly from such Loan Party prior to obtaining such information or
materials from such Accountants, auditors or such authorities.

Section 4.08 Compliance with Laws.

Each Loan Party shall, and shall cause each of its Subsidiaries to, comply in
all respects with all acts, rules, regulations and orders of any Governmental
Body applicable to its respective Collateral or any part thereof or to the
operation of such Person’s business the non-compliance with which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Each Loan Party may, however, contest or dispute any
acts, rules, regulations, orders and directions of those bodies or officials in
any reasonable manner. The Collateral at all times shall be maintained in
accordance in all material respects with the requirements of all insurance
carriers which provide insurance with respect to the Collateral so that such
insurance shall remain in full force and effect.

Section 4.09 Inspection of Premises/Appraisals.

At any time during the existence of an Event of Default, and otherwise at all
reasonable times during normal business hours, Agent (and in the discretion of
the Required Lenders, each Lender, at its sole cost and expense) shall have the
right, at Borrower’s expense, (a) to audit, check, inspect and make abstracts
and copies from each Loan Party’s books, records, audits, correspondence and all
other papers relating to the Collateral and the operation of each Loan Party’s
business and (b) to enter, or to have their agents enter, upon any Loan Party’s
premises at any time during business hours and at any other reasonable time, and
from time to time, for the purpose of inspecting the Collateral (and/or with
respect to Agent (and Persons designated by Agent) appraising the Collateral)
and any and all records pertaining thereto and the operation of such Loan
Party’s business. Notwithstanding anything to the contrary contained herein,
such field examinations shall be conducted (A) at Borrower’s expense, on two
(2) occasions in any twelve (12) month period following the Closing Date, and
(B) so long as no Event of Default shall have occurred and be continuing, at
Lenders’ expense to the extent in excess of such two (2) occasions in any twelve
(12) month period following the Closing Date; except, that, after the occurrence
and during the continuance of an Event of Default, Agent shall have the right to
conduct field examinations at any time and from time to time, in each case at
Borrower’s expense.

Section 4.10 Insurance.

Each Loan Party shall bear the full risk of any loss of any nature whatsoever
with respect to the Collateral. At each Loan Party’s own cost and expense, each
Loan Party shall, and shall cause each of its Subsidiaries to, maintain
insurance in amounts, types and with carriers in each case acceptable to Agent;
provided, that, the Loan Parties’ present insurance coverage and coverage
reasonably consistent with that coverage existing on the date hereof shall be
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Agent. Without limiting the foregoing, each Loan Party shall, and shall cause
each of its Subsidiaries to, (a) keep all its insurable properties insured
against the hazards of fire, flood, those hazards covered by extended coverage
insurance and such other hazards, and for such amounts, not less than as is
customary in the case of companies engaged in businesses similar to such Loan
Party’s business; (b) maintain normal and customary liability insurance against
claims for personal injury, death or property damage suffered by others,
consistent with past practice; and (c) maintain normal and customary consistent
with past practice all such worker’s compensation or similar insurance as may be
required under the laws of any state or jurisdiction in which Loan Party is
engaged in business. Each Loan Party shall (i) furnish Agent with copies of all
policies and evidence of the maintenance of such policies required hereby upon
the request of Agent and (ii) cause all such policies to include appropriate
loss payable endorsements, and/or additional insured endorsements, in form and
substance reasonably satisfactory to Agent, providing with respect to loss
payable endorsements that (A) except as set forth below, all proceeds thereunder
shall be payable to Agent, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days’ prior written notice is given to
Agent (or such shorter period as Agent may agree). If any insurance losses are
paid by check, draft or other instrument payable to any Loan Party and Agent
jointly, Agent may endorse such Loan Party’s name thereon and do such other
things as Agent may deem advisable to reduce the same to cash and apply the same
in accordance with this Agreement. Notwithstanding the foregoing, any Person who
has provided Permitted Fixed Asset Financing with respect to any Equipment or
any Person who is a lessor under any Capital Lease or operating lease permitted
hereunder may be listed, together with Agent, as loss payee and additional
insured under such insurance policies and proceeds thereunder shall be payable
to such Person and Agent as their respective interests shall appear (it being
understood that the interests of such Person in such insurance proceeds shall be
senior to Agent’s interest therein so long as the Permitted Fixed Asset
Financing provided by such Person remains outstanding or such Capital Lease or
operating lease remains in effect).

Section 4.11 Failure to Pay Insurance.

If any Loan Party fails to obtain insurance as hereinabove provided, or to keep
the same in force, Agent, at its option, may, but shall not be obligated to,
obtain such insurance and pay the premium therefor from the Borrower’s Account
and such expenses so paid shall be part of the Obligations.

Section 4.12 Payment of Taxes.

Each Loan Party shall, and shall cause each of its Subsidiaries to, pay, when
due, all federal, state and other material Taxes and all Charges lawfully levied
or assessed upon such Person or any of the Collateral or otherwise in connection
with this Agreement and any Other Document, except for those Taxes and Charges
that are being contested in good faith by appropriate proceedings diligently
pursued and available to such Loan Party, which proceedings (or orders entered
in connection with such proceedings) stay the forfeiture or sale of, or other
enforcement against, the property subject to any such Taxes or Charges and with
respect to which adequate accruals have been set aside on the books of such Loan
Party in accordance with GAAP consistently applied. If any Taxes or Charges
remain unpaid after the date fixed for their payment, or if any claim shall be
made which, in Agent’s opinion, may possibly create a valid Lien on the
Collateral (which is not otherwise a Permitted Encumbrance), Agent may, but
shall not be obligated to, without notice to Loan Parties pay such Taxes or
Charges and each Loan Party hereby indemnifies and holds Agent and each Lender
harmless in respect thereof. The amount of any payment by Agent under this
Section 4.12 may, at the election of Agent, be charged to the Borrower’s Account
and added to the Obligations and, until Loan Parties shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Loan Parties’ credit and Agent shall retain its
Lien in any and all Collateral held by Agent.

 

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Section 4.13 Payment of Leasehold Obligations.

Each Loan Party shall, and shall cause each of its Subsidiaries to, at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent’s
request will provide evidence of having done so, except, in each case, where the
failure to do so could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.

Section 4.14 Accounts and other Receivables.

(a) Locations of Chief Executive Office. Each Loan Party’s chief executive
office is located at the addresses set forth on Schedule 4.14(a) (as such
schedule may from time to time be updated in accordance with Section 7.17).
Until written notice is given to Agent by the Borrower of any other office at
which any Loan Party keeps its records pertaining to Accounts and the other
Receivables, all such records shall be kept at such executive office or
otherwise as set forth on Schedule 4.14(c).

(b) Power of Agent to Act on Loan Parties’ Behalf. After the occurrence and
during the continuance of an Event of Default, Agent shall have the right to
receive, endorse, assign and/or deliver in the name of Agent or any Loan Party
any and all checks, drafts and other instruments for the payment of money
relating to the Accounts and other Receivables of each Loan Party, and each Loan
Party hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Loan Party hereby constitutes Agent or Agent’s
designee as such Loan Party’s attorney with power (i) at any time, to send
verifications of Accounts and other Receivables of each such Loan Party to any
Customer or Person; (ii) at any time, to sign such Loan Party’s name on all
documents or instruments deemed necessary or appropriate by Agent to preserve,
protect, or perfect Agent’s interest in the Collateral and to file same, if such
Loan Party shall have failed to promptly execute and deliver any such documents
or instruments following Agent’s request therefor pursuant to Section 4.02(c);
(iii) after the occurrence and during the continuance of an Event of Default, to
demand payment of the Accounts and other Receivables of each such Loan Party;
(iv) after the occurrence and during the continuance of an Event of Default, to
enforce payment of the Accounts and other Receivables of each such Loan Party by
legal proceedings or otherwise; (v) after the occurrence and during the
continuance of an Event of Default, to exercise all of Loan Parties’ rights and
remedies with respect to the collection of the Accounts, Receivables and any
other Collateral; (vi) after the occurrence and during the continuance of an
Event of Default, to settle, adjust, compromise, extend or renew the Accounts
and other Receivables of each such Loan Party; (vii) after the occurrence and
during the continuance of an Event of Default, to settle, adjust or compromise
any legal proceedings brought to collect Accounts and other Receivables of each
such Loan Party; (viii) after the occurrence and during the continuance of an
Event of Default, to prepare, file and sign such Loan Party’s name on a proof of
claim in bankruptcy or similar document against any Customer or any other Person
obligated with respect to an Account or other Receivable of each such Loan
Party; (ix) to prepare, file and sign such Loan Party’s name on any notice of
Lien, assignment or satisfaction of Lien or similar document in connection with
the Accounts and other Receivables of each such Loan Party; and (x) after the
occurrence and during the continuance of an Event of Default, to do all other
acts and things necessary to carry out this Agreement. All acts of said attorney
or designee are hereby ratified and approved, and said attorney or designee
shall not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence, as determined pursuant to a final, non-appealable order
of a court of competent jurisdiction; this power being coupled with an interest
is irrevocable at all times until all of the

 

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Obligations have been Paid in Full. Agent shall have the right at any time
following the occurrence and during the continuance of an Event of Default, to
change the address for delivery of mail addressed to any Loan Party to such
address as Agent may designate and to receive, open and dispose of all mail
addressed to any Loan Party.

(c) No Liability. Neither Agent nor any Lender shall, except in the event of its
gross negligence or willful misconduct, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts, other Receivables or any instrument received in payment
thereof, or for any damage resulting therefrom. Following the occurrence and at
any time during the continuance of an Event of Default, Agent may, without
notice or consent from any Loan Party, sue upon or otherwise collect, extend the
time of payment of, compromise or settle for cash, credit or upon any terms any
of the Accounts, other Receivables or any other securities, instruments or
insurance applicable thereto and/or release any obligor thereof. Agent is
authorized and empowered to accept following the occurrence and during the
continuance of an Event of Default the return of the goods represented by any of
the Accounts and other Receivables, without notice to or consent by any Loan
Party, all without discharging or in any way affecting any Loan Party’s
liability hereunder.

(d) Adjustments. After the occurrence and during the continuance of an Event of
Default, no Loan Party will, without Agent’s consent, compromise or adjust any
Accounts or other Receivables (or extend the time for payment thereof) of any
such Loan Party or accept any returns of merchandise or grant any additional
discounts, allowances or credits thereon except for those compromises,
adjustments, returns, discounts, credits and allowances in the ordinary course
of business.

Section 4.15 Maintenance of Equipment.

Subject to the reduced levels of maintenance applicable to stacked equipment as
existing during the industry downturn, all Well Services Equipment and other
Equipment used or useful in the conduct of any Loan Party’s business shall be
maintained in good operating condition and repair (reasonable wear and tear
excepted) and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of such Well Services Equipment and
other Equipment shall be maintained and preserved (reasonable wear and tear
excepted). Each Loan Party shall use or operate Well Services Equipment and
other Equipment in compliance with Section 4.08. No Loan Party shall sell or
otherwise Dispose of any of its Well Services Equipment or other Equipment,
except to the extent set forth in Section 7.01.

Section 4.16 Exculpation of Liability.

Nothing herein contained shall be construed to constitute Agent or any Lender as
any Loan Party’s agent for any purpose whatsoever, nor shall Agent or any Lender
be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. Neither Agent nor any Lender, whether by
anything herein or in any assignment or otherwise, assumes any of Loan Party’s
obligations under any contract or agreement to which it is a party, and neither
Agent nor any Lender shall be responsible in any way for the performance by Loan
Party of any of the terms and conditions thereof.

Section 4.17 Environmental Matters.

(a) Loan Parties shall ensure that any parcel of Real Property having a fair
market value in excess of Two Million Five Hundred Thousand ($2,500,000) Dollars
(“Specified Real Property”) remains in compliance with all Environmental Laws
and they shall not place or permit to be placed any Hazardous Substances on any
such Real Property, except as not prohibited by applicable law or appropriate
Governmental Body and except where any such noncompliance or placement could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

 

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(b) Loan Parties shall assure and monitor continued compliance with all
applicable Environmental Laws, except where any failure to comply could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

(c) Loan Parties shall (i) employ in connection with the use of any Specified
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws, except where any such noncompliance could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect and (ii) dispose of any and all Hazardous Waste
generated at such Specified Real Property only at facilities and with carriers
that maintain valid permits under RCRA and any other applicable Environmental
Laws, except where the failure to do so could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect. Loan
Parties shall use their best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Loan Parties in connection with the
transport or disposal of any Hazardous Waste generated at such Specified Real
Property, except where the failure to do so could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.

(d) In the event any Loan Party obtains, gives or receives notice of any Release
or threat of Release of a reportable quantity of any Hazardous Substances at any
Specified Real Property (any such event being hereinafter referred to as a
“Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at such Specified Real Property, demand
letter or complaint, order, citation, or other written notice with regard to any
Hazardous Discharge or violation of Environmental Laws affecting such Specified
Real Property or any Loan Party’s interest therein (any of the foregoing is
referred to herein as an “Environmental Complaint”) from any Person, including
any state agency responsible in whole or in part for environmental matters in
the state in which such Specified Real Property is located or the United States
Environmental Protection Agency (any such Person hereinafter the “Authority”),
then the Borrower shall promptly (but in any case within five (5) Business Days)
give written notice of same to Agent detailing facts and circumstances of which
any Loan Party is aware giving rise to the Hazardous Discharge or Environmental
Complaint. Such information is to be provided to allow Agent to protect its Lien
in any Collateral located at such Specified Real Property and is not intended to
create nor shall it create any obligation upon Agent or any Lender with respect
thereto.

(e) Loan Parties shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral or any Specified
Real Property to any Lien, except where the failure to do so could not
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

(f) During the continuation of an Event of Default, promptly upon the written
request of Agent, Loan Parties shall provide Agent, at Loan Parties’ expense,
with an environmental site assessment or environmental audit report prepared by
an environmental engineering firm acceptable in the reasonable opinion of Agent,
to assess with a reasonable degree of certainty the existence of a Hazardous
Discharge and the potential costs in connection with abatement, cleanup and
removal of any Hazardous Substances found on, under, at or within any Specified
Real Property.

 

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(g) Loan Parties shall defend and indemnify Agent and Lenders and hold Agent,
Lenders and their respective employees, agents, directors and officers harmless
from and against all loss, liability, damage and expense, claims, costs, fines
and penalties, including attorney’s fees, disbursements and costs, suffered or
incurred by Agent or Lenders under or on account of any Environmental Laws,
including, without limitation, the assertion of any Lien thereunder, with
respect to any Hazardous Discharge, the presence of any Hazardous Substances
affecting any Specified Real Property, whether or not the same originates or
emerges from such Real Property or any contiguous real estate, except to the
extent such loss, liability, damage and expense is attributable to any Hazardous
Discharge resulting from actions on the part of Agent or any Lender caused by
(as applicable) Agent’s or such Lender’s gross (not mere) negligence or willful
misconduct, as determined pursuant to a final, non-appealable order of a court
of competent jurisdiction. Loan Parties’ obligations under this Section 4.17
shall arise upon the discovery of the presence of any Hazardous Substances at
such Specified Real Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. Loan Parties’ obligation and the
indemnifications hereunder shall survive the termination of this Agreement.

(h) For purposes of Sections 4.17 and 5.07, all references to any Specified Real
Property shall be deemed to include all of Loan Parties’ and their respective
Subsidiaries’ right, title and interest in and to their respective owned and
leased premises.

Section 4.18 Financing Statements.

As of the Closing Date, except for financing statements being released on or
prior to the Closing Date and the financing statements filed in favor of Agent,
no financing statement covering any of the Collateral or any proceeds thereof is
on file in any public office.

Section 4.19 Real Property.

With respect to each parcel of owned Real Property that is not an Excluded
Asset, within 20 days after the later of the Closing Date and the acquisition of
such Real Property, the Loan Parties shall deliver the following:

(a) a mortgage or deed of trust with respect to such owned Real Property,
together with evidence each such mortgage has been duly executed, acknowledged
and delivered by a duly authorized officer of each party thereto on or before
such date and is in form suitable for filing and recording in all filing or
recording offices that Agent may deem necessary or desirable in order to create
a valid and subsisting perfected Lien on the property described therein in favor
of Agent for the benefit of the Secured Parties and that all filing and
recording taxes and fees have been paid or otherwise provided for in a manner
reasonably satisfactory to Agent;

(b) fully paid American Land Title Association Lender’s Extended Coverage
customary title insurance policies (the “Mortgage Policies”) in form and
substance, with endorsements (including zoning endorsements) and in amounts
reasonably acceptable to Agent, issued, coinsured and reinsured by title
insurers reasonably acceptable to Agent, insuring the Mortgages to be valid
first and subsisting Liens on the property described therein, free and clear of
all defects (including, but not limited to, mechanics’ and materialmen’s Liens)
and encumbrances, excepting only Permitted Encumbrances and providing for such
other affirmative insurance and such customary coinsurance and direct access
reinsurance as Agent may reasonably deem necessary or desirable; provided, with
respect to any property located in a state in which a zoning endorsement is
either not available or is available but only at a premium that is excessive or
requires a legal opinion, a customary zoning compliance letter from the
applicable municipality or a zoning report from Planning and Zoning Resources
Corporation, in each case reasonably satisfactory to Agent, may be delivered in
lieu of a zoning endorsement;

 

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(c) American Land Title Association/American Congress on Surveying and Mapping
form surveys for each of the Real Properties, for which all necessary fees
(where applicable) have been paid, and dated no more than thirty (30) days
before the day of the initial credit extension hereunder, certified to the Agent
and the issuer of the Mortgage Policies in a manner reasonably satisfactory to
the Agent by a land surveyor duly registered and licensed in the states in which
the applicable Real Property is located and acceptable to the Agent, showing all
buildings and other improvements, any off-site improvements, the location of any
easements, parking spaces, rights of way, building set-back lines and other
dimensional regulations and the absence of encroachments, either by such
improvements or on to such property, and other defects, other than encroachments
and other defects that could not reasonably be expected to result in a Material
Adverse Effect; provided, however, notwithstanding the foregoing, new or updated
surveys with respect to any of the Real Properties will not be required if an
existing survey is available for any such Real Properties and the issuer of the
Mortgage Policies is willing to provide survey coverage for the Agent’s Mortgage
Policies on the basis of such existing survey and without the need for a new or
updated survey with respect to such Real Properties;

(d) environmental assessment report with respect to each Real Property in form
and substance satisfactory to Agent;

(e) favorable opinions of local counsel to the Loan Parties in states in which
the owned Real Property is located, with respect to the enforceability and
perfection of the mortgages or deeds of trust that and any related fixture
filings, in form and substance reasonably satisfactory to Agent;

(f) favorable opinions of counsel to the Loan Parties in the states in which the
Loan Parties party to the mortgages and deeds of trust are organized or formed,
with respect to the valid existence, corporate power and authority of such Loan
Parties in the granting of the mortgages or deeds of trust, in form and
substance satisfactory to Agent;

(g) no later than five (5) days prior to the date on which a mortgage with
respect to each Real Property is executed and delivered pursuant to this
Agreement: (A) a a completed standard “life of loan” flood hazard determination
form, (B) if it the improvements to the applicable improved property are located
in an area designated by the Federal Emergency Management Agency as having
special flood or mud slide hazards (a “Flood Hazard Property”), a written
notification to the Borrower (a “Borrower Notice”), (C) the Borrower’s written
acknowledgment of receipt of the Borrower Notice from Agent as to the fact that
such Real Property is a Flood Hazard Property and as to whether the community in
which each such Flood Hazard Property is located is participating in the
National Flood Insurance Program and (D) if the Borrower Notice is required to
be given and flood insurance is available in the community in which the
applicable Initial Mortgaged Property is located, a copy of the flood insurance
policy, copies of the applicable Loan Party’s application for a flood insurance
policy plus proof of premium payment, a declaration page confirming that flood
insurance has been issued, or such other evidence of flood insurance
satisfactory to the Agent and naming the Agent as loss payee on behalf of the
Lenders;

(h) evidence that all other actions reasonably requested by the Agent, that are
necessary in order to create valid and subsisting Liens on the property
described in the mortgage or deed of trust, have been taken; and

(i) evidence that all fees, costs and expenses have been paid in connection with
the preparation, execution, filing and recordation of the Mortgages, including,
without limitation, reasonable attorneys’ fees, filing and recording fees, title
insurance company coordination fees, documentary stamp, mortgage and intangible
taxes and title search charges and other charges incurred in connection with the
recordation of the Mortgages and the other matters described in this
Section 4.19 and as otherwise required to be paid in connection therewith.

 

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Section 4.20 Questionnaire. Borrower represents that each completed
Questionnaire delivered to Agent on the Closing Date is true, complete and
correct in all material respects and the facts contained in each such
Questionnaire are accurate in all material respects. Borrower shall promptly
supplement each Questionnaire to reflect any information hereafter obtained by
Borrower that would require a correction or addition to such Questionnaire.

Section 4.21 Post Closing Covenant.

(a) As promptly as practicable, and in any event within thirty (30) days after
the Closing Date, Agent shall have received duly executed control agreements
relating to the Loan Parties’ depository accounts (other than the Master
Account) with financial institutions granting a security interest therein, which
control agreements shall be in form and substance satisfactory to the Required
Lenders and Agent.

(b) As promptly as practicable, and in any event within ninety (90) days after
the Closing Date, Agent or the Title Agent shall have received all titles for
Well Services Equipment consisting of titled motor vehicles in existence as of
the Closing Date, to the extent required by Section 4.02(a).

(c) The Loan Parties shall have completed the various actions described in
Section 4.19 with respect to Real Property owned as of the Closing Date within
the time periods set forth therein.

ARTICLE V

REPRESENTATIONS AND WARRANTIES.

Each Loan Party represents and warrants as follows:

Section 5.01 Authority, Etc.

Each Loan Party has the requisite limited liability company or corporate power
and authority to enter into this Agreement and the Other Documents and to
perform all its respective Obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Loan Party’s limited liability company or corporate powers, as
applicable, have been duly authorized, are not in contravention of law or the
terms of such Loan Party’s certificate of formation, limited liability company
agreement, certificate of incorporation, by-laws or other applicable constituent
documents or of any material agreement or undertaking to which such Loan Party
is a party or by which such Loan Party is bound, and (b) will not materially
conflict with nor result in any material breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Loan Party under the provisions of
any agreement or instrument to which such Loan Party or its property is a party
or by which it may be bound. The execution, delivery, and performance by each
Loan Party of this Agreement and the Other Documents to which such Loan Party is
a party and the consummation of the transactions contemplated by this Agreement
and the Other Documents do not and will not require any registration with,
Consent, or approval of, or notice to, or other action with or by, any
Government Body, other than Consents or approvals that have been obtained or
waived and that are still in force and effect or complied with, except for
(i) filings and recordings with respect to the Collateral to be made, or
otherwise delivered to the Agent for filing or recordation, as of the Closing
Date, and (ii) filings required under the securities laws of the United States
or subdivisions thereof, and any applicable securities exchanges and except
where the

 

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failure to file same would not have a Material Adverse Effect. This Agreement
and each Other Document has been duly executed and delivered by each Loan Party
that is a party thereto and is a legally valid and binding obligation of such
Loan Party, enforceable against such Loan Party in accordance with its
respective terms, except as enforcement may be limited by equitable principles
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors’ rights generally.

Section 5.02 Formation and Qualification.

(a) Each Loan Party is duly formed or incorporated and in good standing under
the laws of its respective state or other jurisdiction of organization or
incorporation listed on Schedule 5.02(a) (as such schedule may from time to time
be updated in accordance with Section 7.17) and each Loan Party is qualified to
do business and is in good standing in the states and other jurisdictions listed
with respect to that Loan Party on Schedule 5.02(a) (as such schedule may from
time to time be updated in accordance with Section 7.17), which constitute all
states and other jurisdictions in which qualification and good standing are
necessary for such Loan Party to conduct its business and own its property and
where the failure to so qualify could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. The state
organizational number of each Loan Party is set forth on Schedule 5.02(a) (as
such schedule may from time to time be updated in accordance with Section 7.17).
Each Loan Party has delivered to Agent true and complete copies of its
certificate of formation, limited liability company agreement, certificate of
incorporation, by-laws or other applicable constituent documents and will
promptly notify Agent of any amendment or changes thereto.

(b) All of the Subsidiaries of each Loan Party are listed on Schedule 5.02(b)
(as such schedule may from time to time be updated in accordance with Section
7.11(a).

Section 5.03 Survival of Representations and Warranties.

All representations and warranties of such Loan Party contained in this
Agreement and the Other Documents shall be true at the time of such Loan Party’s
execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

Section 5.04 Tax Returns.

Each Loan Party’s federal tax identification number is set forth on Schedule
5.04. Except as otherwise expressly permitted by this Agreement, each Loan Party
and each of its Subsidiaries has (a) filed all federal, state, local and other
tax returns, reports and statements, including information returns, it is
required by law to file, except for those returns which are subject to valid
extensions and (b) paid all Taxes that are due and payable with respect thereto
or otherwise owing, except for taxes that may remain due on such extended
returns. No federal, state, local or other income tax return of any Loan Party
or Subsidiary that has been filed is known by any Loan Party to be under
examination as of the Closing Date. All income tax returns have been timely
filed as of the Closing Date, except for such extension. The provisions for
Taxes on the books of each Loan Party and each of its Subsidiaries are adequate
in all material respects for all years not closed by applicable statutes, and
for its current fiscal year, and no Loan Party nor any of its Subsidiaries has
any knowledge of any material deficiency or additional assessment in connection
therewith not provided for on its books.

 

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Section 5.05 Financial Statements.

(a) The pro forma balance sheet of Loan Parties and their Subsidiaries on a
consolidated basis (the “Pro Forma Balance Sheet”) furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated under
this Agreement and presents fairly in all material respects the pro forma
financial condition of Loan Parties and their Subsidiaries on a consolidated
basis as of the Closing Date after giving effect to the transactions under this
Agreement, and has been prepared in accordance with GAAP, consistently applied.

(b) The twelve (12) month cash flow projections of Loan Parties and their
Subsidiaries on a consolidated basis and their projected balance sheets as of
the Closing Date, in each case through the end of Loan Parties’ fiscal year
ended December 31, 2019, copies of which (along with the Pro Forma Balance
Sheet) are annexed hereto as Exhibit 5.05 were prepared by a Responsible Officer
of Borrower, are based on underlying assumptions which Loan Parties believe
provide a reasonable basis for the projections contained therein in light of
conditions and facts known to Loan Parties at the time such projections were
made and reflect Loan Parties’ good faith judgment.

(c) The consolidated and consolidating balance sheets of Loan Parties, their
Subsidiaries and such other Persons described therein as of December 31, 2015,
and the related statements of income, changes in stockholders’ equity, which
will not be consolidating, and changes in cash flow, which will not be
consolidating, for the period ended on such date, all accompanied by reports
thereon containing opinions without qualification by independent certified
public accountants, copies of which have been delivered to Agent, have been
prepared in accordance with GAAP consistently applied (except for changes in
application in which such accountants concur) and present fairly the
consolidated, and consolidating where applicable, financial position of Loan
Parties and their Subsidiaries at such date and the consolidated, and
consolidating where applicable, results of their operations and changes in
stockholders’ equity and cash flow for such period.

(d) The consolidated and consolidating balance sheets of Loan Parties, their
Subsidiaries and such other Persons described therein as of the monthly period
most recently ended at least thirty (30) days prior to the Closing Date, and the
related statements of income for the period ended on such date, copies of which
have been delivered to Agent, have been prepared in accordance with GAAP,
consistently applied and such balance sheet presents fairly the financial
condition of Loan Parties, their Subsidiaries and such other Persons on a
consolidated basis as of such date, subject to normal year-end audit adjustments
and absence of footnotes, the statement of cash flows and the statement of
changes in shareholders’ equity.

(e) Other than the restructuring resulting in the Bankruptcy Case, since
September 30, 2016, there has been no change in the condition, financial or
otherwise, of the Loan Parties and their Subsidiaries taken as a whole, except
changes which could not reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.

Section 5.06 Corporate Name.

The exact legal name of each Loan Party is set forth in the first paragraph to
this Agreement (or, if such Loan Party is not listed in such first paragraph,
such exact legal name is set forth on Schedule 5.06 (as such schedule may from
time to time be updated in accordance with Section 7.17)). No Loan Party has
been known by any other corporate, limited liability company or partnership name
in the past five (5) years and no Loan Party sells Inventory or has submitted
tax returns under any other name except as set forth on Schedule 5.06 (as such
schedule may from time to time be updated in accordance with Section 7.17), nor
has any Loan Party been the surviving corporation of a merger or consolidation
or acquired all or substantially all of the assets of any Person or has acquired
any assets of any Person outside the ordinary course of business during the
preceding five (5) years except as set forth on Schedule 5.06 (as such schedule
may from time to time be updated in accordance with Section 7.17).

 

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Section 5.07 O.S.H.A. and Environmental Compliance.

(a) Each Loan Party and each of their Subsidiaries has duly complied, and each
of their facilities, businesses, assets, properties and leaseholds are in
compliance, in all material respects with the provisions of the Federal
Occupational Safety and Health Act, RCRA and all other Environmental Laws; there
have been no outstanding citations, notices or orders of non-compliance issued
to any Loan Party or any of their Subsidiaries or relating to its business,
assets, property or leaseholds under any such laws, rules or regulations, except
as could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

(b) Each Loan Party and each of their Subsidiaries has been issued all required
federal, state and local licenses, certificates or permits relating to all
applicable Environmental Laws, except as could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.

(c) (i) There are no visible signs of releases, spills, discharges, leaks or
disposal (each, a “Release”) of Hazardous Substances at, upon, under or within
any owned Real Property or any premises leased by any Loan Party or any of their
Subsidiaries; (ii) there are no underground storage tanks or polychlorinated
biphenyls on the owned Real Property or any premises leased by any Loan Party or
any of their Subsidiaries; (iii) neither the owned Real Property nor any
premises leased by any Loan Party or any of their Subsidiaries has ever been
used as a treatment, storage or disposal facility of Hazardous Waste; and
(iv) no Hazardous Substances are present on the owned Real Property or any
premises leased by any Loan Party or any of their Subsidiaries, excepting such
quantities as are handled in accordance with all applicable manufacturer’s
instructions and governmental regulations and in proper storage containers and
as are necessary for the operation of the commercial business of any Loan Party
or any of their Subsidiaries or of their respective tenants, in each case except
as could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

Section 5.08 Solvency; No Litigation, Violation of Law; No ERISA Issues.

(a) After giving effect to the transactions contemplated by this Agreement and
the Plan of Reorganization, the Borrower is Solvent and Loan Parties and their
Subsidiaries taken as a whole are Solvent.

(b) No Loan Party nor any of their Subsidiaries has (i) except as disclosed in
Schedule 5.08(b), any pending (or, to the knowledge of any Loan Party,
threatened in writing) litigation, arbitration, actions or proceedings which
involve the possibility of having a Material Adverse Effect, (ii) except as
disclosed in Schedule 5.08(b), as of the Closing Date, any pending (or, to the
knowledge of any Loan Party, threatened in writing) litigation, arbitration,
actions or proceedings which involve the possibility of having liability in
excess of $200,000, (iii) except as disclosed in Schedule 5.08(b) (as such
schedule may from time to time be updated by Borrower providing written notice
to Agent of any new commercial tort claims reasonably estimated to exceed Five
Hundred Thousand ($500,000) Dollars), any commercial tort claims, and
(iv) except as disclosed in Schedule 5.08(b), as of the Closing Date and after
giving effect to the transactions contemplated by this Agreement and the Plan of
Reorganization, any Money Borrowed other than the Obligations.

(c) No Loan Party nor any of their Subsidiaries is in violation of any
applicable statute, regulation or ordinance in any respect which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, nor is any Loan Party or any of their Subsidiaries in
violation of any order of any court or Governmental Body which could reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

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(d) Except with respect to Multiemployer Plans, each plan that is intended to
qualify under Section 401 of the Code has been determined by the IRS to qualify
under Section 401 of the Code, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the
Code, and, to each Loan Party’s knowledge, nothing has occurred that would cause
the loss of such qualification or tax exempt status. Each Plan is in compliance
with the applicable provisions of ERISA and the Code, except to the extent that
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. Neither any Loan Party nor ERISA Affiliate has failed to make any
material contribution or pay any material amount due as required by either
Section 412 of the Code or Section 302 of ERISA or the terms of any such Plan.
Neither any Loan Party nor ERISA Affiliate has engaged in a “prohibited
transaction,” as defined in Section 406 of ERISA and Section 4975 of the Code,
in connection with any Plan, that would subject any Loan Party to a material tax
on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of
the Code. Except as set forth in Schedule 5.08(d): (i) no Title IV Plan has any
Unfunded Pension Liability; (ii) no ERISA Event with respect to any Title IV
Plan has occurred or is reasonably expected to occur; (iii) there are no
pending, or to the knowledge of any Loan Party, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Title IV Plan or any Person as fiduciary or
sponsor of any Title IV Plan; (iv) no Loan Party or ERISA Affiliate has incurred
or reasonably expects to incur any liability as a result of a complete or
partial withdrawal from a Multiemployer Plan; (v) within the last five (5) years
no Title IV Plan of any Loan Party or ERISA Affiliate has been terminated,
whether or not in a “standard termination” as that term is used in Section
4041(b)(1) of ERISA, nor has any Title IV Plan of any Loan Party or any ERISA
Affiliate (determined at any time within the last five (5) years) with Unfunded
Pension Liabilities been transferred outside of the Controlled Group of any Loan
Party or ERISA Affiliate (determined at such time); (vi) except in the case of
any ESOP, Equity Interests of all Loan Parties and their ERISA Affiliates makes
up, in the aggregate, no more than ten (10%) percent of fair market value of the
assets of any Title IV Plan measured on the basis of fair market value as of the
latest valuation date of any Title IV Plan; and (vii) no liability under any
Title IV Plan has been satisfied with the purchase of a contract from an
insurance company that is not rated AAA by the Standard & Poor’s Corporation or
an equivalent rating by another nationally recognized rating agency.

Section 5.09 Patents, Trademarks, Copyrights and Licenses.

There are no patents, patent applications or patent licenses owned by the Loan
Parties. All trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, trade names and
assumed names owned or utilized by any Loan Party or any of their Subsidiaries
are set forth on Schedule 5.09 (as such schedule may from time to time be
updated by Borrower providing written notice to Agent of any newly acquired
Intellectual Property rights, so long as Loan Parties have taken (or caused to
be taken) all steps required by Agent to perfect its Lien therein), are valid
and have been duly registered or filed with all appropriate Governmental Body
and constitute all of the Intellectual Property rights which are necessary for
the operation of its business; there is no objection to or pending challenge to
the validity of any such material trademark, copyright, design right or trade
name and no Loan Party nor any Subsidiary of any Loan Party is aware of any
grounds for any challenge. The only trade secrets owned by the Loan Parties
relate to its proprietary customer information. Each trademark, trademark
application, service mark, service mark application, copyright and copyright
application owned or held by any Loan Party or any such Subsidiary and all trade
secrets used by any Loan Party or any such Subsidiary consist of original
material or property developed by such Loan Party or such Subsidiary or was
lawfully acquired by such Loan Party or such Subsidiary from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve
the value thereof from the date of creation or acquisition thereof. With respect
to all software used by any Loan Party, none of such software is subject to any
license agreements, other than in the case of “off the shelf” software utilized
by Loan Parties.

 

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Section 5.10 Licenses and Permits.

Each Loan Party and each Subsidiary of each Loan Party (a) is in compliance with
and (b) has procured and is now in possession of, all material licenses or
permits required by any applicable federal, state, local or other law or
regulation for the operation of its business in each jurisdiction wherein it is
now conducting or proposes to conduct business and where the failure to procure
such licenses or permits could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.

Section 5.11 No Contractual Default.

After giving effect to the Plan of Reorganization, no Loan Party is in default
in the payment or performance of any of its contractual obligations with respect
to which a default thereunder could be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect.

Section 5.12 No Burdensome Restrictions/No Liens.

After giving effect to the Plan of Reorganization, no Loan Party nor any
Subsidiary of any Loan Party is party to any contract or agreement the
performance of which could reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. After giving effect to the Plan
of Reorganization, no Loan Party nor any Subsidiary of any Loan Party has agreed
or consented to cause or permit in the future (upon the happening of a
contingency or otherwise) any of its property, whether now owned or hereafter
acquired, to be subject to a Lien which is not a Permitted Encumbrance.

Section 5.13 No Labor Disputes.

No Loan Party nor any Subsidiary of any Loan Party is involved in any labor
dispute; there are no strikes or walkouts or union organization of any Loan
Party’s or any of such Subsidiary’s employees in existence or threatened in
writing and no labor contract is scheduled to expire during the Term other than
as set forth on Schedule 5.13 (as such schedule may from time to time be updated
by Borrower providing written notice to Agent of any newly arising item, so long
as (i) Loan Parties have taken (or caused to be taken) all steps reasonably
required by Agent with respect thereto and (ii) such items could not reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect).

Section 5.14 Margin Regulations.

No Loan Party nor any Subsidiary of any Loan Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” within the meaning of the quoted term under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect. No part of the proceeds of any Term Loan will be used for
“purchasing” or “carrying” “margin stock” as defined in Regulation U of such
Board of Governors.

Section 5.15 Investment Company Act.

No Loan Party nor any Subsidiary of any Loan Party is an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, nor is it controlled by such a company.

 

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Section 5.16 Disclosure.

No representation or warranty made by or on behalf of any Loan Party or any
Subsidiary of any Loan Party in this Agreement, any Other Document or in any
financial statement, report, certificate or any other document furnished in
connection herewith and no information at any time furnished by or on behalf of
any Loan Party or any Subsidiary of any Loan Party to Agent or any Lender
pursuant hereto or in connection herewith, in each case on the date as of which
such information is dated or certified, when considered as a whole, contains any
untrue statement of a material fact or omits to state any material fact
necessary to make the statements herein or therein not misleading in light of
the circumstances under which they were made.

Section 5.17 Real Property.

Each Loan Party and each of its Subsidiaries owns record title in fee simple or
the leasehold interest to, or, solely with respect to disposal wells, has rights
to operate, the Real Property described on Schedule 5.17 (as such Schedule may
from time to time be updated by written notice from Borrower to Agent), free and
clear of all Liens, except Permitted Encumbrances. The Real Property described
on Schedule 5.17 (as such Schedule may from time to time be updated by written
notice from Borrower to Agent) constitutes all of the Real Property of Loan
Parties.

Section 5.18 Hedging Agreements.

No Loan Party nor any Subsidiary of any Loan Party is a party to any Hedging
Agreement as of the Closing Date.

Section 5.19 Conflicting Agreements.

After giving effect to the Plan of Reorganization, no provision of any mortgage,
indenture, contract, agreement, judgment, decree or order binding on any Loan
Party or affecting the Collateral conflicts with, or requires any Consent which
has not already been obtained, or would in any way prevent the execution,
delivery or performance of the terms of this Agreement or the Other Documents.

Section 5.20 Business and Property of Loan Parties; Inactive Subsidiaries.

Upon and after the Closing Date, Loan Parties and their Subsidiaries do not
propose to engage in any business other than as currently conducted and
businesses reasonably similar, complementary or related thereto. Each Loan Party
and each Subsidiary of a Loan Party owns or leases all the property and
possesses all of the rights and consents necessary for the conduct of the
business of such Loan Party and such Subsidiary as it is presently being
conducted, except as could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect. No Inactive
Subsidiary has, or will at any time have any property or assets, liabilities or
contractual obligations other than (a) those that are de minimis individually
and in the aggregate and (b) liabilities and contractual obligations under this
Agreement and the Other Documents, if any.

Section 5.21 Material Contracts.

The only material agreements to which a Loan Party or a Subsidiary is a party
are set forth in the exhibit list of Parent’s Annual Report on Form 10-K for the
year ended December 31, 2015 and any subsequently filed Quarterly Reports on
Form 10-Q and/or Current Reports on Form 8-K (the “Material Contracts”). As of
the Closing Date after giving effect to the Plan of Reorganization other than
the Material Contracts, there are no (a) employment agreements covering the
management of any Loan Party or any Subsidiary, other than the new employment
agreements for John E. Crisp, Charles C. Forbes,

 

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Jr., L. Melvin Cooper and Steven Macek, (b) collective bargaining agreements or
other labor agreements covering any employees of any Loan Party or any
Subsidiary, (c) agreements for managerial, consulting or similar services to
which any Loan Party or any Subsidiary is a party or by which it is bound,
except for engagement agreements with the professionals advising the Borrower
and the Guarantors in connection with the restructuring resulting in the
Bankruptcy Case, (d) agreements regarding any Loan Party or any Subsidiary, its
assets or operations or any investment therein to which any of its Affiliates is
a party, except for such agreements as are (i) disclosed in Loan Parties’ public
filings with the SEC or (ii) otherwise approved by the independent directors on
Parent’s board of directors and not disclosed in Loan Parties’ public filings
with the SEC, in an aggregate amount for all such agreements described in this
clause (ii) not to exceed (A) $2,000,000 in any fiscal year or (B) $8,000,000 in
the aggregate during the term of this Agreement (in each case under this clause
(ii), taking into account all consideration paid to and/or payable by Loan
Parties pursuant to such agreements, regardless of the nature of the
transactions provided for pursuant to such agreements), (e) patent licenses,
trademark licenses, copyright licenses or other lease or license agreements to
which any Loan Party or any Subsidiary is a party, either as lessor or lessee,
or as licensor or licensee, (f) distribution, marketing or supply agreements to
which any Loan Party or any Subsidiary is a party, (g) customer agreements to
which any Loan Party or any Subsidiary is a party, (h) real estate leases to
which any Loan Party or any Subsidiary is a party, (in each case with respect to
any agreement of the type described in the preceding clauses (a), (b), (c), (d),
(e), (f), (g) and (h), to the extent requiring disclosure as a material contract
in Parent’s filings with the SEC), (i) partnership agreements to which any Loan
Party or any Subsidiary is a partner, limited liability company agreements to
which any Loan Party or any Subsidiary is a member or manager, or joint venture
agreements to which any Loan Party or any Subsidiary is a party, or (j) any
other agreements or instruments to which any Loan Party or any Loan Party is a
party the breach, nonperformance or cancellation of which, would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect. The consummation of the transactions contemplated by this Agreement and
the Other Documents will not give rise to a right of termination in favor of any
party to any Material Contract which would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. Each
Material Contract is in full force and effect and, after giving effect to the
Plan of Reorganization no defaults enforceable against any Loan Party or any
Subsidiary exist thereunder, except as could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. No Loan
Party nor any Subsidiary of any Loan Party has received notice from any party to
any Material Contract stating that it intends to terminate or amend such
contract, except to the extent such termination could not reasonably be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

Section 5.22 Capital Structure.

Schedule 5.22 sets forth the authorized Equity Interests, and owner thereof, of
each of Loan Parties and each of their Subsidiaries as of the Closing Date,
after giving effect to the Plan of Reorganization. All of the Equity Interests
of each of Loan Parties (other than Parent) and each of their Subsidiaries are
owned directly or indirectly by the Borrower. All issued and outstanding Equity
Interests of each of Loan Parties and each of their Subsidiaries are, and with
respect to Parent after giving effect to the Plan of Reorganization the same
are, duly authorized and validly issued, fully paid and non-assessable, and such
Equity Interests were issued in compliance with all applicable laws. All issued
and outstanding Equity Interests of each Loan Party (other than Parent) and each
of their Subsidiaries is free and clear of all Liens other than Permitted
Encumbrances and the Lien in favor of Agent for the benefit of Agent and
Lenders. The identity of the holders of the Equity Interests of each of Loan
Parties (other than Parent) and each of their Subsidiaries and the percentage of
their fully diluted ownership of the Equity Interests of each of Loan Parties
(other than Parent) and each of their Subsidiaries as of the Closing Date is set
forth on Schedule 5.22. No shares of the Equity Interests of any Loan Party or
any of their Subsidiaries, other than those described above, are issued and
outstanding as of the Closing Date. As of

 

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the Closing Date there are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for the
purchase or acquisition from any Loan Party (other than Parent) or any of their
Subsidiaries of any Equity Interests of any such entity.

Section 5.23 Bank Accounts, Security Accounts, Etc.

No Loan Party has any bank accounts, deposit accounts, investments accounts,
securities accounts or any other similar accounts other than the accounts set
forth Schedule 5.23 (as such Schedule may from time to time be updated by
Borrower delivering a written update thereto to Agent, so long as such updates
are approved by Agent (to the extent any such new bank accounts, deposit
accounts, investments accounts, securities accounts or any other similar
accounts are not otherwise permitted hereunder)). The purpose and type of each
such account is specified on Schedule 5.23.

Section 5.24 OFAC.

None of Borrower, any Subsidiary of Borrower or any Affiliate of Borrower:
(a) is a Sanctioned Person, (b) has more than ten (10%) percent of its assets in
Sanctioned Entities or (c) derives more than ten (10%) percent of its operating
income from investments in, or transactions with Sanctioned Persons or
Sanctioned Entities. The proceeds of any Term Loan will not be used and have not
been used to fund any operations in, finance any investments or activities in,
or make any payments to, a Sanctioned Person or a Sanctioned Entity.

ARTICLE VI

AFFIRMATIVE COVENANTS.

Each Loan Party shall at all times until all of the Obligations have been Paid
in Full:

Section 6.01 Payment of Fees.

Promptly following demand, pay to Agent all usual and customary fees and
expenses which Agent incurs in connection with the forwarding of Term Loan
proceeds.

Section 6.02 Conduct of Business; Compliance with Laws and Maintenance of
Existence and Assets.

Conduct, and cause each Subsidiary of each Loan Party to conduct, continuously
and operate actively its business according to business practices and maintain,
and, subject to reduced maintenance for stacked assets during the industry
downturn, cause each Subsidiary of each Loan Party to maintain, all of its
properties useful or necessary in its business in good working order and
condition in all material respects (reasonable wear and tear excepted and except
as may be Disposed of in accordance with the terms of this Agreement (including,
without limitation, Section 7.01)), including, without limitation, all
Intellectual Property and take all actions necessary to enforce and protect the
validity of its Intellectual Property, except for any of its Intellectual
Property which a Loan Party determines is no longer used or useful in the
conduct of its business. Each Loan Party shall, and shall cause each Subsidiary
of each Loan Party to, (a) keep in full force and effect its existence and its
material rights and franchises, except as expressly permitted by this Agreement
(including pursuant to Section 7.01), (b) comply in all material respects with
the laws and regulations governing the conduct of its business where the failure
to do so could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; provided, that, the Inactive Subsidiaries
and Insignificant Subsidiaries may dissolve or merge into a Loan Party and Loan
Parties shall provide written notice thereof to Agent within ten (10) Business
Days of the occurrence thereof, accompanied by the relevant merger agreement and

 

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certificates of merger filed with the applicable Governmental Bodies, and
(c) except as expressly permitted hereunder, make all such reports and pay all
such franchise and other taxes and license fees and do all such other acts and
things as may be lawfully required to maintain its rights, licenses, leases,
powers and franchises under the laws of the United States or any of its
political subdivisions or, based on commercially reasonable efforts, to do so in
any applicable foreign jurisdiction or any political subdivision of any of such
foreign jurisdictions.

Section 6.03 Violations.

Promptly after becoming aware of the same, notify Agent in writing of any
violation of any law, statute, regulation or ordinance of any Governmental Body,
or of any agency thereof, applicable to any Loan Party or any of their
Subsidiaries which could reasonably be expected to have, either individually or
in the aggregate, a Material Adverse Effect.

Section 6.04 Execution of Supplemental Instruments; Further Assurances.

Promptly upon request by Agent, each Loan Party shall take such additional
actions (including, without limitation, execution and delivery of such
supplemental agreements or instruments, statements, assignments and transfers,
or instructions or documents relating to the Collateral) as Agent may require in
its reasonable discretion from time to time in order (a) to carry out more
effectively the purposes of this Agreement or any Other Document, (b) to subject
all of the existing or hereinafter acquired personal property (other than
Excluded Assets and any tangible personal property that is not located in the
United States) of each Loan Party to first-priority perfected Liens (subject
only to Permitted Encumbrances) in favor of Agent to secure the Obligations,
(c) to perfect and maintain the validity, effectiveness and priority of any of
the Liens created, or intended to be created thereby, by this Agreement or any
Other Document to the extent required herein or therein, and (d) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to Agent
and Lenders the rights granted or now or hereafter intended to be granted to
Agent and the Lenders under this Agreement or any Other Document. Without
limiting the generality of the foregoing, each Loan Party shall (and shall cause
each other Loan Party to) guarantee (to the extent not already directly
obligated with respect thereto) all of the Obligations and to grant to Agent,
for the benefit of Agent and Lenders, a Lien in all of such Loan Party’s
existing or hereinafter acquired personal property (other than Excluded Assets)
to secure all of the Obligations; provided, that, no such guarantee or grant
shall be required by a Non-US Subsidiary that is a CFC.

Section 6.05 Payment of Indebtedness.

Each Loan Party shall, and shall cause each Subsidiary of each Loan Party to,
subject at all times to any applicable subordination or intercreditor
arrangement in favor of Agent and/or Lenders, pay, discharge or otherwise
satisfy at or before maturity all its Indebtedness of whatever nature, except
when the failure to do so could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect or when the amount
or validity thereof is currently being contested in good faith by appropriate
proceedings and each Loan Party and each of their Subsidiaries shall have
provided for such reserves as Agent may reasonably deem proper and necessary.

Section 6.06 Standards of Financial Statements.

Each Loan Party shall, and shall cause each Subsidiary of each Loan Party to,
cause all financial statements referred to in Sections 9.06, 9.07, 9.08 and 9.11
as to which GAAP is applicable to present fairly in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments and absence of footnotes, the statement of cash flows and the
statement of changes

 

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in shareholders’ equity) and to be prepared in reasonable detail, but only if
such statement is to be prepared in accordance with GAAP consistently applied,
and in accordance with GAAP consistently applied throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein) and, in the case of
financial statements required by Section 9.06, in a form consistent with what
would be required if filed with an applicable Form 10-K with the SEC.

ARTICLE VII

NEGATIVE COVENANTS.

No Loan Party shall, nor shall any Loan Party permit any of its Subsidiaries to,
at any time prior to the Payment in Full of all of the Obligations:

Section 7.01 Merger, Consolidation, Acquisition and Sale of Assets.

(a) Consummate any merger, consolidation or other reorganization with or into
any other Person or permit any other Person to consolidate with or merge with
it; except, that, (i) a Loan Party may merge or consolidate into another Loan
Party so long as (A) no Event of Default shall have occurred and be continuing,
(B) Borrower shall give Agent at least ten (10) Business Days prior written
notice thereof, (C) if the Borrower is a party to such merger or consolidation
the Borrower shall be the surviving entity, (D) no Loan Party shall merge or
consolidate with a Loan Party that exists under the laws of a country different
than the country in which such Loan Party exists and (E) prior to such merger or
consolidation Loan Parties have taken (or caused to be taken) all steps required
by Agent with respect thereto (including without limitation all steps required
by Agent to maintain Agent’s Lien on the Collateral granted by such Loan
Parties, as well as the priority and effectiveness of such Lien); and (ii) a
Subsidiary of the Borrower that is not a Loan Party may merge or consolidate
into another Subsidiary of the Borrower that is not a Loan Party so long as
(A) no Event of Default shall have occurred and be continuing, and (B) Borrower
shall give Agent at least ten (10) Business Days prior written notice thereof.

(b) Acquire all or a substantial portion of the assets or Equity Interests of
any Person except for investments permitted by Section 7.04.

(c) Directly or indirectly, sell, assign, lease, transfer, abandon or otherwise
dispose of any of its assets or properties (including, without limitation, the
Collateral) to any other Person (each, a “Disposition”), except for:

(i) the sale of Inventory in the ordinary course of business

(ii) (A) the sale, lease, transfer or Disposition of used, worn-out or obsolete
Well Services Equipment and Well Services Equipment no longer used or useful in
the conduct of business of Loan Parties or any of their Subsidiaries having a
fair market value not to exceed $2,500,000 in the aggregate in any fiscal year,
and (B) the sale, lease, transfer or Disposition of machinery and equipment
other than Well Services Equipment and machinery and equipment other than Well
Services Equipment no longer used or useful in the conduct of business of Loan
Parties or any of their Subsidiaries having a fair market value not to exceed
$2,500,000 in the aggregate in any fiscal year;

(iii) provided no Event of Default shall have occurred and be continuing or
result therefrom, the Disposition of assets (other than equity interests of any
of its Subsidiaries) having a fair market value not to exceed $5,000,000 in the
aggregate in any fiscal year;

 

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(iv) the sale, lease, transfer or other Disposition of property by a Loan Party
or a Subsidiary of a Loan Party to any other Loan Party or Subsidiary of a Loan
Party; provided, that, (A) if a Loan Party or any of its assets is subject to a
Disposition, all parties to such Disposition must be Loan Parties, (B) if a Loan
Party organized in the United States or any jurisdiction thereof or any of its
assets is subject to a Disposition, all parties to such Disposition must be Loan
Parties organized in the United States or any jurisdiction thereof, (C) no such
sale, lease, transfer or other Disposition shall be made to Parent, (D) to the
extent such transaction constitutes an investment, such transaction must be
permitted under Section 7.04 and (E) any Lien in favor of Agent on such property
shall continue in all respects and shall not be deemed released or terminated as
a result of such sale, lease, transfer or other Disposition and Loan Parties
shall execute and deliver such agreements, documents and instruments as Agent
may reasonably request with respect thereto;

(v) the grant in the ordinary course of business by any Loan Party or any of
their Subsidiaries after the date hereof of a non-exclusive license of any
Intellectual Property; provided, that, the rights of the licensee shall be
subject to the rights of Agent, and shall not adversely affect, limit or
restrict the rights of Agent to use such Intellectual Property or to sell or
otherwise dispose of any Inventory or other Collateral in connection with the
exercise by Agent of any rights or remedies hereunder or under any of the Other
Documents, or otherwise adversely limit or interfere in any material respect
with the use of any such Intellectual Property by Agent in connection with the
exercise of its rights or remedies hereunder or under any of the Other Documents
or by any Loan Party or Subsidiary;

(vi) the issuance of Equity Interests by Loan Parties; provided, that, (A) no
Loan Party or Subsidiary shall be required to pay any cash dividends,
distributions or repurchase or redeem such Equity Interests or make any other
payments in respect thereof, except as otherwise expressly permitted in
Section 7.06 and (B) neither the Borrower nor any of its Subsidiaries shall
issue any Equity Interests other than to their then current holder(s) of their
Equity Interests, Loan Parties, or, in the case of the Parent, to participants
in the Parent’s Management Incentive Plan;

(vii) the issuance of Equity Interests by Parent consisting of common stock (or
its equivalent) pursuant to an employee stock option plan or grant or similar
equity plan or 401(k) plan of Loan Parties and their Subsidiaries for the
benefit of their employees, directors and officers;

(viii) the abandonment or other disposition of Intellectual Property that is not
material and is no longer used or useful in any material respect in the business
of any Loan Party or any of its Subsidiaries and does not appear on or is
otherwise not affixed to or incorporated in any Inventory or Equipment or have
any material value;

(ix) involuntary Dispositions occurring by reason of casualty or condemnation;

(x) the leasing, occupancy agreements or sub-leasing of Real Property or
Equipment in the ordinary course of business consistent with past practices that
would not materially interfere with the required use of such Real Property or
Equipment by any Loan Party or any of its Subsidiaries;

(xi) transfers of condemned real property as a result of the exercise of
“eminent domain” or other similar policies to the respective governmental
authority or agency that has condemned the same (whether by deed in lieu of
condemnation or otherwise), and transfers of properties that have been subject
to a casualty to the respective insurer of such real property as part of an
insurance settlement; and

 

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(xii) any Disposition of property or assets, or issuance of Equity Interests,
that is permitted under Sections 7.01(a) and 7.06; and

(d) Without limiting the generality of the provisions of Section 7.01(c) above,
Parent shall not cease to own and control, directly or indirectly, one hundred
(100%) percent of the Equity Interests of each Loan Party (or the
successor-in-interest to any such Loan Party permitted hereunder).

Section 7.02 Creation of Liens.

Create or suffer to exist any Lien or transfer upon or against any of its
property or assets now owned or hereafter acquired, except Permitted
Encumbrances.

Section 7.03 Guarantees.

Become liable upon the obligations of any Person by assumption, endorsement or
guarantee thereof or otherwise (other than with respect to the Obligations)
except:

(a) for the endorsement of checks in the ordinary course of business;

(b) that (i) Loan Parties and their Subsidiaries may guarantee Indebtedness or
other obligations of Borrower and its US Subsidiaries that are Loan Parties and
(ii) a Non-US Subsidiary may guarantee Indebtedness or other obligations of
another Non-US Subsidiary (provided if the Non-US Subsidiary that is providing
such guarantee is a Loan Party such other Non-US Subsidiary must also be a Loan
Party); and

(c) guarantees of other Indebtedness permitted by Section 7.07(k).

Section 7.04 Investments.

Purchase or acquire Indebtedness or Equity Interests of, or any other interest
in, any Person, except:

(a) cash or Cash Equivalents;

(b) as expressly permitted pursuant to Section 7.01, Section 7.05, Section 7.06
and Section 7.07;

(c) the endorsement of instruments for collection or deposit in the ordinary
course of business;

(d) obligations under Hedging Agreements permitted under Section 7.07(e);

(e) Equity Interests or other obligations issued to Loan Parties by any Person
(or the representative of such Person) in compromise or settlement of
obligations of such Person owing to Loan Parties (whether or not in connection
with the insolvency, bankruptcy, receivership or reorganization of such a Person
or a composition or readjustment of the debts of such Person) or upon the
foreclosure, perfection or enforcement of any Lien in favor of a Loan Party
securing any such obligations;

 

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(f) Obligations of account debtors to Loan Parties and their Subsidiaries
arising from Accounts which are evidenced by a promissory note made by such
account debtor payable to the applicable Loan Party of Subsidiary; provided,
that, promptly upon the receipt of the original of any such promissory note
issued to any Loan Party from any account debtor in excess of $100,000 in the
aggregate (or regardless of the amount after an Event of Default exists or has
occurred and is continuing at the request of the Required Lenders), such
promissory note(s) shall, upon the request of Agent, be endorsed to the order of
Agent by Loan Parties and promptly delivered to the Required Lenders as so
endorsed;

(g) investments by Loan Parties and their Subsidiaries in the form of Equity
Interests received as part or all of the consideration for the sale of assets
pursuant to a Disposition by any such Loan Party of Subsidiary to the extent
permitted under Section 7.01(c) or otherwise approved by Agent;

(h) the existing investments of any Loan Party or Subsidiary thereof as of the
date hereof in their respective Subsidiaries;

(i) investments made after the date hereof by (i) Parent in another Loan Party,
(ii) a Non-US Subsidiary of a Loan Party in a Non-US Subsidiary of a Loan Party
and (iii) any Loan Party to Forbes Energy Services de México, S. de R. L. de
C.V. or Forbes Energy Services Ltd., Mexican Branch, in an amount not to exceed
in the aggregate $750,000 less the aggregate amount of advances, loans or
extensions of credit made pursuant to Section 7.05(c)(iv);

(j) Permitted Acquisitions;

(k) extensions of trade credit or other advances to customers on commercially
reasonable terms in accordance with normal trade practice or otherwise in the
ordinary course of business;

(l) loans or advances to employees, officers and directors to the extent
permitted in Section 7.05(c); and

(m) investments in Minority Interest JV’s and other investments in any Person
where such investment has a fair market value (measured on the date each such
investment was made and without giving effect to subsequent changes in value);
provided that, (i) no Default or Event of Default has occurred and is continuing
at the time of such investment and after giving effect thereto, (ii) the
aggregate amount of all of such investments made pursuant to this clause
(m) from and after the Closing Date, based on the investment amount on the date
such investments were made, that remain outstanding, shall not exceed $500,000
in the aggregate (A) for that portion of the current fiscal year commencing on
January 1, 2017 through and including December 31, 2017, and (B) for each fiscal
year thereafter and (iii) Loan Parties shall have satisfied the Investment
Conditions at the time of making any such investment and after giving effect
thereto.

Section 7.05 Loans.

Make advances, loans or other extensions of credit to any Person, including,
without limitation, any Subsidiary or Affiliate, except with respect to:

(a) the extension of commercial trade credit in connection with the sale of
Inventory or the provision of services, each in the ordinary course of its
business;

(b) deposits of cash for leases, utilities, worker’s compensation and similar
matters in the ordinary course of business; and

 

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(c) advances, loans or extensions of credit made by (i) Parent to another Loan
Party, (ii) a Loan Party (other than Parent) to another Loan Party, (iii) a
Non-US Subsidiary of a Loan Party to a Non-US Subsidiary of a Loan Party and
(iv) any Loan Party to Forbes Energy Services de México, S. de R. L. de C.V. or
Forbes Energy Services Ltd., Mexican Branch, in an amount not to exceed in the
aggregate $750,000 less the aggregate amount of investments made pursuant to
Section 7.04(i)(iv).

Section 7.06 Dividends and Distributions.

Declare, pay or make any dividend or distribution or payment with respect to:

(a) any shares of the Equity Interests of any Loan Party or any of their
Subsidiaries (other than dividends or distributions payable in its Equity
Interests) or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any such Equity Interests (other than shares
of the Equity Interests of Parent); except, that,

(i) Loan Parties and their Subsidiaries may make payments to their former
employees, officers or directors in connection with the redemption or repurchase
of Equity Interests issued by the Parent to such former employees, officers or
directors upon their termination of employment with Loan Parties and their
Subsidiaries or their death or disability, so long as, (A) the aggregate amount
of all such payments does not exceed $1,000,000 in any fiscal year, subject to
compliance with any applicable Management Incentive Plan or employment
agreement, and (B) for the thirty (30) consecutive day period immediately
preceding each such payment and as of the date of each such payment and after
giving effect thereto, the Loan Parties shall have satisfied the Investment
Conditions; and

(ii) Loan Parties and their Subsidiaries may make dividends and distributions to
other Loan Parties and their Subsidiaries, so long as Investment Conditions have
been satisfied on the date thereof and after giving effect thereto; provided,
that, no such dividends and distributions shall be made to a Non-US Subsidiary
by a US Loan Party; and

(b) any redemption, prepayment (whether mandatory or optional), defeasance,
repurchase or any other payment in respect of any Subordinated Debt, or apply
any of its funds, property or assets to the purchase, redemption or other
retirement of any Subordinated Debt; except, that, mandatory payments may be
made on Subordinated Debt to the extent expressly permitted in any subordination
or intercreditor agreement executed by Agent with respect thereto.

Section 7.07 Indebtedness.

Create, incur, assume or suffer to exist any Indebtedness, except in respect of:

(a) the Obligations;

(b) the incurrence by the Loan Parties of Indebtedness represented by
obligations under Capital Leases, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of financing all or any part
of the purchase price or cost of design, construction, installation or
improvement of property, plant or equipment used in the ordinary course of
business of the Loan Parties or any of their Restricted Subsidiaries, as the
case may be, incurred prior to, at the time of, or within 120 days after
completion of the acquisition, design, construction, installation or improvement
of such property, plant or equipment, in an aggregate principal amount,
including all permitted refinancing Indebtedness incurred to renew, refund,
refinance, replace, defease or discharge any Indebtedness incurred pursuant to
this clause (b), not to exceed, at any time outstanding, $12,000,000 (i) for the
current fiscal year commencing on January 1, 2017 through and including
December 31, 2017, and (ii) for each fiscal year thereafter;

 

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(c) Indebtedness existing on the Closing Date as set forth on Schedule 7.08 and
any refinancings, refundings, renewals or extensions thereof (without shortening
the maturity thereof or increasing the principal amount thereof (excluding
accrued interest, fees, discounts, premiums and expenses));

(d) Indebtedness expressly permitted by Section 7.03 and Section 7.05;

(e) Indebtedness arising under Hedging Agreements which are not entered into for
speculative purposes and are intended to provide protection against fluctuations
in interest rates or foreign currency exchange rates;

(f) Indebtedness in respect of netting services, overdraft protections, employee
credit card programs and otherwise in connection with deposit accounts and
Indebtedness arising from the honoring by a bank or other financial institution
of a check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course of
business; provided, that, such Indebtedness is extinguished within five
(5) Business Days of incurrence;

(g) Indebtedness in respect of bid, performance and surety bonds, including
guarantees or obligations of the Loan Parties with respect to letters of credit
supporting such bid, performance and surety bonds or other forms of credit
enhancement supporting performance obligations under services contracts,
workers’ compensation claims, self-insurance obligations, unemployment
insurance, health, disability and other employee benefits or property, casualty
or liability insurance in each case incurred in the ordinary course of business;
provided, that, upon Agent’s request, Agent shall have received true, correct
and complete copies of all material agreements, documents or instruments
evidencing or otherwise related to such Indebtedness, as duly authorized,
executed and delivered by the parties thereto;

(h) unsecured Indebtedness arising from agreements to provide for customary
indemnification, adjustment of purchase price or similar obligations, earn-outs
or other similar obligations, in each case, incurred in connection with a
Permitted Acquisition or Disposition permitted hereunder; provided, that, in the
case of any proposed payment of any earn-outs or other similar obligations, Loan
Parties shall satisfy the Investment Conditions at the time such obligations
were entered into;

(i) Indebtedness arising pursuant to financing of insurance premiums payable on
insurance policies maintained by or for the benefit of Loan Parties or any of
their Subsidiaries; provided, that, upon Agent’s request, Agent shall have
received true, correct and complete copies of all material agreements, documents
and instruments evidencing or otherwise related to such Indebtedness;

(j) the incurrence by Loan Parties of refinancing Indebtedness in exchange for,
or the net proceeds of which are used to, renew, refund, refinance, replace,
defease or discharge any Indebtedness (other than intercompany Indebtedness)
that was permitted by this Agreement to be incurred under clauses (b), (c), (d)
or (m) of this paragraph;

(k) the incurrence by a Loan Party or any of its Subsidiaries of intercompany
Indebtedness between or among the Loan Parties and their Subsidiaries or between
or among the Loan Parties’ Subsidiaries to the extent permitted by Section 7.05;

 

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(l) the guarantee by a Loan Party of Indebtedness of any other Loan Party or any
of their Subsidiaries, as the case may be, that was permitted to be incurred by
this Agreement; provided that, if the Indebtedness being guaranteed is
subordinated to or pari passu with the Obligations, then the guarantee of such
Indebtedness shall be subordinated to or pari passu with the Obligations, as
applicable, to the same extent as the Indebtedness guaranteed;

(m) the incurrence by the Loan Parties or any of their Subsidiaries of
Indebtedness in respect of workers’ compensation claims and self-insurance
obligations;

(n) Indebtedness incurred in connection with letters of credit, purchasing cards
and credit cards and secured pursuant to clause (r) of the definition of
Permitted Liens; and

(o) additional unsecured Indebtedness of Loan Parties and their Subsidiaries in
an aggregate principal amount not to exceed $5,000,000 at any one time
outstanding.

For purposes of determining compliance with this Section 7.07, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (a) through (n) above,
the Loan Parties will be permitted to classify such item of Indebtedness on the
date of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this Section 7.07, and such item
of Indebtedness will be treated as having been incurred pursuant to such
category. The accrual of interest, the accretion or amortization of original
issue discount, if applicable, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, the reclassification of
preferred stock as Indebtedness due to a change in accounting principles, and
the payment of dividends on preferred stock so reclassified in the form of
additional shares of the same class of preferred stock so reclassified will not
be deemed to be an incurrence of Indebtedness for purposes of this Section 7.07.
Notwithstanding any other provision of this Section 7.07, the maximum amount of
Indebtedness that Loan Parties may incur pursuant to this Section 7.07 shall not
be deemed to be exceeded solely as a result of fluctuations in exchange rates or
currency values.

Section 7.08 Nature of Business.

(a) Substantially change the nature of the business in which it is presently
engaged and similar, related or complementary businesses subsequently engaged
in, nor except as specifically permitted hereby purchase or invest, directly or
indirectly, in any assets or property other than in the ordinary course of
business for assets or property which are useful in, necessary or appropriate
for and are to be used in its business as presently conducted or similar,
related or complementary businesses.

(b) Permit any Inactive Subsidiary to engage in any business, operations or
activity, or hold any property or incur any obligations, other than (i) holding
the issued and outstanding Equity Interests of its Subsidiaries, (ii) paying
taxes, (iii) holding directors’ and shareholders’ meetings, preparing corporate
and similar records and other activities required to maintain its separate
corporate or other legal structure, (iv) preparing reports to, and preparing and
making notices to and filings with, Governmental Bodies and to its holders of
Equity Interests, and (v) activities required by this Agreement and the Other
Documents. Notwithstanding the foregoing, an Inactive Subsidiary may engage in
business, operations or activity, or hold property or incur obligation upon at
least five (5) Business Days prior written notice to Agent and, if such Inactive
Subsidiary is a US Subsidiary and is not already a Loan Party, such Inactive
Subsidiary shall expressly join this Agreement as a Loan Party and shall comply
with the same requirements that would be applicable to a newly formed Subsidiary
pursuant to Section 7.11.

 

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Section 7.09 Transactions with Affiliates.

Directly or indirectly, purchase, acquire or lease any property from, or sell,
transfer or lease any property to, or otherwise deal with, any Affiliate, except
for:

(a) transactions, arrangements and other business activities entered into in the
ordinary course of business, on an arm’s-length basis on terms no less favorable
than terms which would have been obtainable from a Person other than an
Affiliate;

(b) any employment or compensation arrangement or agreement, employee benefit
plan or arrangement, officer or director indemnification agreement or any
similar arrangement or other compensation arrangement entered into in good
faith, for actual services rendered to any Loan Party or any Subsidiary, by any
Loan Party and the Subsidiaries in the ordinary course of business and non-cash
payments, issuance of securities or awards pursuant thereto, and including the
grant of stock options, restricted stock, stock appreciation rights, phantom
stock awards or similar rights to employees and directors in each case approved
by the Board of Directors of such Loan Party;

(c) transactions, arrangements and other business activities with Affiliates in
existence as of the Closing Date that are described in Loan Parties’ Form 10-K
and Form 10-Q filings most recently filed with the SEC or set forth in an
attachment to any employment agreement relating to Loan Party officers; and

(d) transactions among Loan Parties and their Subsidiaries expressly permitted
by Section 7.01(c), Section 7.03(b), Section 7.04(h), Section 7.05(c), Section
7.05(d) and Section 7.06.

Section 7.10 Leases.

After the Closing Date, enter as lessee into any lease arrangement for Equipment
or Real Property (unless capitalized and permitted under Section 7.07) if after
giving effect thereto, aggregate annual rental payments for all leased property
would exceed, for all Loan Parties and their Subsidiaries, an amount equal to
(a) $6,000,000 in the aggregate (i) for the current fiscal year commencing on
January 1, 2017 through and including December 31, 2017, and (ii) for each
fiscal year thereafter, or (b) such higher amount as Agent may approve in its
sole discretion. Any renewal, replacement or extension of any lease or lease
arrangement that exists as of the Closing Date shall not be taken into account
for the purposes of this Section 7.10.

Section 7.11 Subsidiaries.

(a) Form any Subsidiary (other than an Insignificant Subsidiary) unless (i) such
Subsidiary expressly joins in this Agreement as a Loan Party, becomes jointly
and severally liable for, or otherwise guaranties, all of the Obligations and
grants a Lien on substantially all of its assets to secure all of the
Obligations and consents to the pledge of its Equity Interests to secure all of
the Obligations in form and substance reasonably satisfactory to Agent (in each
case, except (A) to the extent that such assets constitute Excluded Assets and
(B) no such guarantee or grant shall be required by a Foreign Subsidiary that is
a CFC, (ii) Agent is provided with a pledge of all of the outstanding Equity
Interests of such Subsidiary (65% of the Equity Interests of any Non-US
Subsidiary) to secure all of the Obligations in form and substance reasonably
satisfactory to Agent (except to the extent that such Equity Interests
constitutes Excluded Assets), and (iii) Agent shall have received fifteen
(15) days prior written notice thereof (along with an update of Schedule
5.02(b)) and all documents, including collateral documents, guaranties,
corporate authority documents and legal opinions, as Agent may require in its
reasonable discretion in connection therewith, all in form and substance
reasonably satisfactory to Agent; provided, that, investments in any Subsidiary
which Loan Parties may form in accordance with this Section 7.11(a) may only be
made to the extent permitted by Section 7.04.

 

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(b) Enter into any JV, unless (i) Loan Parties shall have satisfied the
Investment Conditions at the time of (A) entering into any such JV and (B) each
proposed contribution of capital or other property to such JV and after giving
effect thereto, (ii) any Indebtedness incurred, or to be incurred, by Loan
Parties in connection with such JV must be permitted pursuant to Section 7.07,
(iii) the total cash and non-cash consideration paid and/or invested by Loan
Parties and their Subsidiaries in connection with all JV’s (including, without
limitation, assumption or incurrence of Indebtedness in connection therewith and
all contributions of capital or other property to all JV’s) shall not exceed
(A) in the case of Majority Interest JV’s, the Permitted Acquisitions/JV Cap
Amount, and (B) in the case of Minority Interest JV’s, the amount that is
permitted by Section 7.04(l), and (iv) concurrently with entering into such JV,
Loan Parties shall have validly pledged to Agent, and granted to Agent a Lien in
and upon, for the ratable benefit of Agent and Secured Parties, all of Loan
Parties’ Equity Interests in such JV, subject only to Permitted Encumbrances, to
the extent that such Equity Interests do not constitute an Excluded Asset.

Section 7.12 Fiscal Year and Accounting Changes.

Change its fiscal year-end from December 31, or make any change (a) in
accounting treatment and reporting practices except as required by GAAP
consistently applied or (b) in tax reporting treatment except as required by
law.

Section 7.13 Pledge of Credit.

Now or hereafter pledge Agent’s or any Lender’s credit on any purchases or for
any purpose.

Section 7.14 Amendment of Organizational Documents.

(a) Except as contemplated in connection with the Bankruptcy Case, amend, modify
or waive any term or provision of its certificate of formation, limited
liability company agreement, certificate of incorporation, by-laws, partnership
agreement or other applicable documents relating to such Loan Party’s or
Subsidiary’s formation or governance, or any shareholders agreement, each as in
effect on the Closing Date and after giving effect to the Plan of
Reorganization, unless Agent is provided prior five (5) Business Days’ prior
written notice of any such amendment, modification or waiver and such amendment,
modification or waiver is not materially adverse in any respect to Agent and the
Lenders; or

(b) Amend, modify or waive any term or provision of any Material Contract not
specified in another clause of this Section 7.14, unless Agent is provided prior
five (5) Business Days’ prior written notice of any such amendment, modification
or waiver and such amendment, modification or waiver is not materially adverse
in any respect to Agent and the Lenders.

Section 7.15 Compliance with ERISA.

(a) Maintain, or permit any member of the Controlled Group to maintain, or
become obligated to contribute, or permit any member of the Controlled Group to
become obligated to contribute, to any Title IV Plan, other than those Title IV
Plans disclosed on Schedule 5.08(d), (b) engage, or permit any member of the
Controlled Group to engage, in any non-exempt “prohibited transaction”, as that
term is defined in Section 406 of ERISA and Section 4975 of the Code, (c) fail
to satisfy, or permit any member of the Controlled Group to fail to satisfy the
applicable “minimum funding standard”, as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (d) terminate, or permit any member of the
Controlled Group to terminate, any Title IV Plan where such event could result
in any liability of any Loan Party or any member of the Controlled Group or the
imposition of a Lien on the property of any Loan Party or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (e) assume, or

 

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permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 5.08(d), (f)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan, except to the extent that the failure to
comply, individually or in the aggregate, could not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect,
(g) fail promptly to notify Agent of the occurrence of any Termination Event,
(h) fail to comply, or permit a member of the Controlled Group to fail to
comply, with any material requirements of ERISA or the Code or other applicable
laws in respect of any Plan or (i) fail to meet, or permit any member of the
Controlled Group to fail to meet, all minimum funding requirements under ERISA
or the Code or postpone or delay or allow any member of the Controlled Group to
postpone or delay any funding requirement with respect of any Title IV Plan.

Section 7.16 Prepayment, Etc. of Money Borrowed.

At any time, directly or indirectly, voluntarily prepay any Money Borrowed
(other than the Obligations), or voluntarily repurchase, redeem, retire or
otherwise acquire any Money Borrowed of any Subsidiary of any Loan Party, in
each case prior to the due date thereof; except, that, so long as no Event of
Default shall have occurred and be continuing, Loan Parties may voluntarily
prepay, repurchase, redeem, retire or otherwise acquire any other Indebtedness
for Money Borrowed in an aggregate amount not to exceed $1,000,000 in any twelve
(12) month period following the Closing Date.

Section 7.17 State of Organization/Names/Locations.

Change the jurisdiction in which it is incorporated or otherwise organized as in
effect on the Closing Date after giving effect to the Plan of Reorganization, or
change its legal name (or use a different name), location of chief executive
office or location of any of the Collateral consisting of a Loan Party’s books
and records, unless Borrower has given Agent not less than ten (10) Business
Days’ prior written notice thereof (along with an update of Schedule 4.04,
Schedule 4.14(c), Schedule 5.02(a) and Schedule 5.06, as applicable) and Loan
Parties have taken (or caused to be taken) all steps required by Agent with
respect thereto (including without limitation all steps required by Agent to
maintain Agent’s Lien on such Collateral, as well as the priority and
effectiveness of such Lien); provided, that, no Loan Party shall change its
jurisdiction of incorporation or organization or location of any of its
Collateral to a jurisdiction or location from (a) the continental United States
to outside of the continental United States or (b) one country to another
country.

Section 7.18 Foreign Assets Control Regulations, Etc.

None of the requesting or borrowing of the Term Loans or the use of the proceeds
of any thereof will violate the Trading With the Enemy Act (50 U.S.C. §1 et
seq., as amended) (the “Trading With the Enemy Act”) or any of the foreign
assets control regulations of the United States Treasury Department (31 C.F.R.,
Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or
any enabling legislation or executive order relating thereto (including, but not
limited to (a) Executive order 13224 of September 21, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support
Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (b) the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)). Neither
Borrower nor any other Loan Party is or will become a Sanctioned Entity or
Sanctioned Person as described in the Executive Order, the Trading with the
Enemy Act or the Foreign Assets Control Regulations or engages or will engage in
any dealings or transactions, or be otherwise associated, with any such
Sanctioned Entity or Sanctioned Person.

 

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ARTICLE VIII

CONDITIONS PRECEDENT.

Section 8.01 Conditions to Borrowing.

The agreement of Lenders to make the Term Loans requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Lenders, immediately
prior to or concurrently with the making of such Term Loans, of the following
conditions precedent, all in form and substance acceptable to the Required
Lenders, and to the extent affecting the rights, duties, obligations,
protections, privileges, immunities or indemnities of Agent, Agent:

(a) Agreement. Agent shall have received this Agreement duly executed and
delivered by an authorized officer of each of the parties hereto;

(b) Term Notes. The applicable Lenders shall have received the Term Notes duly
executed and delivered by an authorized officer of the Borrower in favor of such
Lenders;

(c) Filings, Registrations, Recordings and Searches. Each document (including,
without limitation, any UCC financing statement) required by this Agreement, any
Other Document or under law or reasonably requested by the Required Lenders to
be filed, registered or recorded in order to create, in favor of Agent, a
perfected Lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Agent shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto. Agent shall also have received
UCC, tax, judgment and other Lien searches with respect to each Loan Party in
such jurisdictions as the Required Lenders shall require, and the results of
such searches shall be satisfactory to the Required Lenders;

(d) Pre-Petition Credit Agreement. Except with respect to Liens on assets
described in clause (e) or the definition of Excluded Assets, statutory and
depository Liens arising in connection with depository and cash management
arrangements with Pre-Petition Lender, and any other Liens permitted by the Plan
of Reorganization, release of Liens by the Pre-Petition Lenders under the
Prepetition Credit Agreement, payment in full and termination of the
Pre-Petition Commitments and discharge and release of all guarantees in support
of, the Pre-Petition Credit Agreement, in each case pursuant to documentation in
form and substance satisfactory to the Lenders, and receipt by Agent of
satisfactory evidence thereof;

(e) Corporate Proceedings of Loan Parties. Agent shall have received a copy of
the resolutions of the board of directors (or equivalent authority) of each Loan
Party authorizing (i) the execution, delivery and performance of this Agreement
and the Other Documents to which it is a party, and (ii) the granting by each
Loan Party of the Liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of each Loan Party as of the Closing Date;
and, such certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of such
certificate;

(f) Incumbency Certificates of Loan Parties. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Loan Party, dated
as of the Closing Date, as to the incumbency and signature of the officers of
each Loan Party executing this Agreement, any certificate or Other Documents to
be delivered by it pursuant hereto, together with evidence of the incumbency of
such Secretary or Assistant Secretary;

 

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(g) Certificates. Agent shall have received a copy of the certificate of
formation, limited liability company agreement, certificate of incorporation,
by-laws, partnership agreement or other applicable documents relating to each
Loan Party’s formation and governance, and all amendments thereto, certified in
the case of formation documents filed with a Governmental Body by the Secretary
of State or other appropriate official of its jurisdiction of incorporation or
formation and certified in the case of other formation and governance documents
as accurate and complete by the Secretary or Assistant Secretary of each Loan
Party;

(h) Good Standing Certificates. Agent shall have received good standing
certificates for each Loan Party dated not more than thirty (30) days prior to
the Closing Date, issued by the Secretary of State or other appropriate official
of each such Loan Party’s jurisdiction of incorporation or formation and each
jurisdiction where the conduct of each Loan Party’s business activities or the
ownership of its properties necessitates qualification;

(i) Legal Opinion. Agent shall have received the executed legal opinions of Loan
Parties’ U.S. legal counsel which shall cover such matters incident to the
transactions contemplated by this Agreement and the Other Documents as the
Required Lenders may reasonably require and each Loan Party hereby authorizes
and directs such counsel to deliver such opinions to Agent and Lenders;

(j) No Litigation. (i) Except for litigation and claims set forth on Schedule
8.01(j), no litigation, investigation or proceeding before or by any arbitrator
or Governmental Body shall be continuing or threatened in writing against any
Loan Party or against the officers or directors of any Loan Party in connection
with this Agreement and/or the Other Documents or any of the transactions
contemplated thereby and which, in the reasonable opinion of Agent, is deemed
material; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to any Loan Party or the conduct of its business or
inconsistent with the due consummation of the transactions contemplated by this
Agreement shall have been issued by any Governmental Body;

(k) Fees and Expenses. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date pursuant to Section 3.02 and the Fee
Letter and all reimbursable expenses of Agent (including fees, disbursements and
expenses of its counsel) invoiced to date in accordance with this Agreement;

(l) Financial Statements. Agent shall have received a copy of the financial
statements referred to in Section 5.05;

(m) Other Documents. Agent shall have received fully executed copies of the
Funds Flow Memorandum, the Pledge Agreement, the Servicing Agreement and all
other Other Documents to the extent required to be executed on the Closing Date;

(n) Insurance. Agent shall have received insurance certificates and loss payable
endorsements naming Agent as loss payee or additional insured, as applicable,
with respect to Loan Parties’ property and liability insurance policies;

(o) Payment Instructions. Agent shall have received written instructions from
the Borrower directing the application of proceeds of the Term Loan made
pursuant to this Agreement;

(p) Master Account Control Agreement. Agent shall have received the Master
Account Control Agreement;

 

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(q) Consents. Agent shall have received any and all Consents necessary to permit
the effectuation of the transactions contemplated by this Agreement and the
transactions contemplated hereby; and, Agent shall have received such Consents
and waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;

(r) No Adverse Material Change. Other than the restructuring resulting in the
Bankruptcy Case, since September 30, 2016, there shall not have occurred any
event, condition or state of facts which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect;

(s) Motor Vehicle Titles Servicing Agreement. Agent and the Title Agent shall
have entered into the Servicing Agreement, regarding the processing of titles
for Well Services Equipment consisting of titled motor vehicles which are in
existence as of the Closing Date, consistent with Section 4.02(a);

(t) Equity Interests Pledge. Agent shall have received the Pledge Agreement,
executed by each applicable Loan Party in favor of Agent, pursuant to which such
Loan Party shall pledge to Agent and grant to Agent a Lien upon all of the
outstanding Equity Interests of each Subsidiary (other than Equity Interests, if
any, constituting Excluded Assets) of such Loan Party, together with share
powers duly executed in blank and originals of any related share, membership or
other similar certificates;

(u) Shares of Parent. Parent shall have issued to the Lenders on a pro rata
basis based on the funded Term Loans of such Lenders, shares of New Common Stock
constituting an aggregate of 10% of the shares of such New Common Stock issued
in exchange for the Senior Notes in the Plan of Reorganization plus such 10%,
but not including shares issued or issuable under the Management Incentive Plan;

(v) Contract Review. The Required Lenders shall have reviewed all material
contracts of Loan Parties, including, without limitation and to the extent
applicable as determined by the Required Lenders, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to the Required Lenders;

(w) Representations and Warranties. Each of the representations and warranties
made by any Loan Party in or pursuant to this Agreement and any Other Document
to which it is a party, and each of the representations and warranties contained
in any certificate, document or financial or other statement furnished at any
time under or in connection with this Agreement or any Other Document shall be
true and correct in all material respects (without duplication of any
materiality qualifiers already set forth therein; or in all respects with
respect to representations and warranties made on the Closing Date) on and as of
such date as if made on and as of such date, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and correct
in all material respects (without duplication of any materiality qualifiers
already set forth therein) on and as of such earlier date);

(x) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Term Loans
requested to be made, on such date;

(y) Confirmation Order. The Confirmation Order shall have been entered by the
Bankruptcy Court and shall have become final and non-appealable; and

 

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(z) Other. All corporate and other proceedings, and all documents, instruments
and other legal matters in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the Required Lenders
and their counsel, and to the extent affecting the rights, duties, obligations,
protections, privileges, immunities or indemnities of Agent, Agent.

ARTICLE IX

INFORMATION AS TO LOAN PARTIES.

Until all of the Obligations are Paid in Full, each Loan Party shall:

Section 9.01 Disclosure of Material Matters Pertaining to Collateral.

Immediately upon learning thereof, report to Agent all matters materially
affecting the value, enforceability or collectability of any portion of the
Collateral including, without limitation, any Loan Party’s reclamation or
repossession of, or the return to any Loan Party of, a material amount of goods
or claims or disputes asserted by any Customer or other obligor.

Section 9.02 Collateral and Related Reports.

(a) Promptly, deliver to Agent (i) current certificates of insurance and loss
payee endorsements for all insurance policies which Loan Parties and their
Subsidiaries are required to maintain pursuant to Section 4.10, immediately
following the renewal of each such policy and any amendments thereto; and
(ii) such other reports and information as to the Collateral, Loan Parties or
their Subsidiaries as Agent shall request from time to time in its reasonable
discretion;

(b) Promptly upon the occurrence thereof, deliver to Agent notice of termination
or breach of any material contract of a Loan Party or any of their Subsidiaries
which could reasonably be expected to result in a Material Adverse Effect;

(c) All Collateral reporting which shall be provided to Agent pursuant to this
Sections 9.02 shall be delivered to Agent electronically (or other manner
reasonably satisfactory to Agent) and in form and substance satisfactory to
Agent.

Section 9.03 Environmental Reports.

Furnish Agent, concurrently with the delivery of the financial statements
referred to in Section 9.06, with a certificate signed by the Chief Executive
Officer of the Borrower stating, to the best of such officer’s knowledge, that
each Loan Party and each of their respective Subsidiaries is in compliance with
the covenants of this Agreement that relate to Environmental Laws. To the extent
any Loan Party or any Subsidiary of any Loan Party is not in compliance with any
Environmental Laws, the certificate shall set forth with specificity all areas
of non-compliance and the proposed action such Loan Party or Subsidiary, as
applicable, will implement in order to achieve full compliance.

Section 9.04 Litigation.

Promptly (but in any event within five (5) Business Days thereafter) notify
Agent in writing of (or of any judgment, settlement or other material
development in) any litigation, suit or administrative proceeding affecting any
Loan Party or any Subsidiary, whether or not the claim is covered by insurance,
and of (or of any material development in) any suit or administrative
proceeding, which in any such matter could reasonably be expected to (i) result
in liability in excess of $500,000 or (ii) have a Material Adverse Effect.

 

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Section 9.05 Material Occurrences.

Promptly (but in any event within the applicable time period set forth below)
notify Agent in writing upon the occurrence of (a) any Event of Default or
Default, within two (2) Business Days of the occurrence thereof; (b) any event,
development or circumstance whereby any financial statements or other reports
furnished to Agent fail in any material respect to present fairly, in accordance
with GAAP consistently applied, the financial condition or operating results of
any Loan Party or any Subsidiary of any Loan Party as of the date of such
statements, within five (5) Business Days of the occurrence thereof; (c) any
accumulated retirement plan funding deficiency which, if such deficiency
continued for two (2) plan years and was not corrected as provided in
Section 4971 of the Code, could subject any Loan Party or any Subsidiary of any
Loan Party to a tax imposed by Section 4971 of the Code, within ten
(10) Business Days of the occurrence thereof; (d) each and every default by any
Loan Party or any Subsidiary of any Loan Party which might result in the
acceleration of the maturity of any material Indebtedness, including the names
and addresses of the holders of such Indebtedness with respect to which there is
a default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness, in each case within two
(2) Business Days of the occurrence thereof; and (e) any other development in
the business or affairs of any Loan Party or any Subsidiary of any Loan Party
which could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect; in each case describing the nature thereof
and the action Loan Parties or such Subsidiaries propose to take with respect
thereto, in each case within five (5) Business Days of the occurrence thereof.

Section 9.06 Annual Financial Statements.

Furnish Agent and each Lender within ninety (90) days after the end of each
fiscal year of Loan Parties (or, if such due date is not a Business Day, then on
the next Business Day), financial statements of Loan Parties and their
Subsidiaries on a consolidated basis, including, but not limited to, statements
of income and stockholders’ equity and cash flow from the beginning of the
current fiscal year to the end of such fiscal year and the balance sheet as at
the end of such fiscal year, all prepared in accordance with GAAP applied on a
basis consistent with prior practices, and in reasonable detail and reported
upon without qualification by an independent certified public accounting firm
selected by Loan Parties and satisfactory to Agent (the “Accountants”); provided
that BDO USA, LLP is agreed to be satisfactory to Agent as of the Closing Date.
The report of the Accountants shall be accompanied by copies of all management
letters, exception reports or similar letters or reports received by Loan
Parties or their Subsidiaries from the Accountants. In addition, the reports
shall be accompanied by a Compliance Certificate of a Responsible Officer of the
Borrower which shall state that, based on an examination sufficient to permit
such Responsible Officer to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Loan Parties with respect to such event. Loan Parties may elect
to satisfy their obligations under the first sentence of this Section 9.06 with
respect to any fiscal year in which the Parent is a reporting company under the
Exchange Act by the filing of Parent’s Form 10-K with the SEC, and the
availability of same on the SEC’s website shall constitute “furnishing” to Agent
and Lenders of the annual financial statements as required by the first sentence
of this Section 9.06, subject to the time period required by such first sentence
of this Section 9.06. Agent shall have no obligation to monitor whether Loan
Parties post reports, information and documents on the SEC’s website, or collect
any such reports, information and documents from the SEC’s website.

 

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Section 9.07 Quarterly Financial Statements.

Furnish Agent and each Lender with respect to each of Loan Parties’ fiscal
quarters, on or before the earlier to occur of (a) forty-five (45) days after
the end of such fiscal quarter (or, if such due date is not a Business Day, then
on the next Business Day), and (b) at any time when Parent is a reporting
company under the Exchange Act, the date on which the Loan Parties filed their
SEC Form 10-Q for such fiscal quarter, an unaudited balance sheet of Loan
Parties and their Subsidiaries on a consolidated and consolidating basis and
unaudited statements of income of Loan Parties and their Subsidiaries on a
consolidated and consolidating basis reflecting results of operations from the
beginning of the fiscal year to the end of such fiscal quarter and for such
fiscal quarter, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year-end
adjustments that individually and in the aggregate are not material to the
business of Loan Parties or their Subsidiaries. Each such balance sheet and
statement of income shall set forth a comparison of the figures for the current
fiscal quarter and the current year-to-date with the figures for the same fiscal
quarter and year-to-date period of the immediately preceding fiscal year. The
Loan Parties shall also provide to Agent and each Lender within such time
periods a comparison of such financial statements to the projections for such
fiscal period and year-to-date period delivered pursuant to Section 9.11(b). The
financial statements shall be accompanied by a Compliance Certificate signed by
a Responsible Officer of the Borrower, which shall state that, based on an
examination sufficient to permit such Responsible Officer to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Loan Parties with respect
to the events giving rise to such Default or Event of Default. Each Compliance
Certificate shall additionally set forth (i) the aggregate amount of Capital
Expenditures made by Loan Parties during the fiscal quarter in connection with
which such Compliance Certificate is delivered and (ii) the cash and Cash
Equivalents of the Parent and its Subsidiaries that are not Restricted as of the
end of such fiscal quarter. At any time when Parent is a reporting company under
the Exchange Act, Loan Parties may elect to satisfy their obligations under the
first sentence of this Section 9.07 with respect to any fiscal quarter by the
filing of Parent’s Form 10-Q with the SEC, and the availability of same on the
SEC’s website shall constitute “furnishing” to Agent and Lenders of the
quarterly financial statements as required by the first sentence of this
Section 9.07, subject to the time period required by such first sentence of this
Section 9.07. Agent shall have no obligation to monitor whether Loan Parties
post reports, information and documents on the SEC’s website, or collect any
such reports, information and documents from the SEC’s website.

Section 9.08 Monthly Financial Statements.

Furnish Agent and each Lender within thirty (30) days after the end of each
month (or, if such due date is not a Business Day, then on the next Business
Day), an unaudited balance sheet of Loan Parties and their Subsidiaries on a
consolidated and consolidating basis and unaudited statements of income of Loan
Parties and their Subsidiaries on a consolidated and consolidating basis
reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month, prepared on a basis consistent with prior
practices and complete and correct in all material respects, subject to normal
and recurring year-end adjustments that individually and in the aggregate are
not material to the business of Loan Parties or their Subsidiaries, and subject
to the absence of footnotes. Each such balance sheet shall set forth a
comparison to the prior year end audited financial statements and each statement
of income shall set forth a comparison of the figures for (a) the current fiscal
period and the current year-to-date with the figures for the same fiscal period
and year-to-date period of the immediately preceding fiscal year. The Loan
Parties shall also provide to Agent and each Lender within such time periods a
comparison of such financial statements to the projections for such fiscal
period and year-to-date period delivered pursuant to Section 9.11(b). The
financial statements shall be accompanied by a Compliance Certificate signed by
a Responsible Officer of the Borrower, which shall state that, based on an
examination sufficient to permit such Responsible Officer to make an informed
statement, no Default or Event of Default exists, or, if such is not the case,
specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Loan Parties with respect
to the events giving rise to such Default or Event of Default. Each Compliance
Certificate shall additionally set forth the aggregate amount of Capital
Expenditures made by Loan Parties during the month in connection with which such
Compliance Certificate is delivered.

 

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Section 9.09 Notices re Equityholders.

At any time when Parent is a reporting company under the Exchange Act, furnish
promptly to Agent copies of such financial statements, reports and returns as
Parent shall file with the SEC; provided, that, filing with the SEC of Parent’s
annual reports on Form 10 K and current reports on Form 8-K shall constitute
“furnishing” to Agent for purposes of this Section 9.09.

Section 9.10 Additional Information.

Furnish promptly to Agent or any requesting Lender such additional information
as Agent or such Lender shall reasonably request in order to enable Agent or
such Lender to determine whether Loan Parties are in compliance with the terms,
covenants, provisions and conditions of this Agreement and the Other Documents.

Section 9.11 Projections.

(a) Furnish Agent on a quarterly basis on or before the thirtieth (30th) day
after the end of each calendar quarter, a Rolling Budget.

(b) Furnish Agent, no later than fifteen (15) days after the beginning of each
Loan Party’s fiscal years, commencing with Loan Party’s fiscal year which
commences on January 1, 2017, a month by month projection and cash flow of Loan
Parties and their Subsidiaries on a consolidated basis for such fiscal year
(including an income statement for each month and a balance sheet as at the end
of the last month in each fiscal quarter), such projections to be accompanied by
a certificate signed by a Responsible Officer of Borrower to the effect that
such projections have been prepared in good faith on a basis consistent with
Loan Party’s historical financial statements.

Section 9.12 Notice of Governmental Body Items.

Furnish Agent with prompt (and, in any event, not more than five (5) Business
Days) notice of (a) any lapse or other termination of any Consent issued to any
Loan Party or any Subsidiary of any Loan Party by any Governmental Body or any
other Person that is material to the operation of any Loan Party’s or such
Subsidiaries’ business, (b) any refusal by any Governmental Body or any other
Person to renew or extend any such Consent; and (c) copies of any periodic or
special reports filed by any Loan Party or any Subsidiary of any Loan Party with
any Governmental Body or Person, if such reports indicate any material change in
the business, operations, affairs or condition of any Loan Party or any such
Subsidiary, or if copies thereof are requested by Agent or any Lender,
(d) copies of any material notices and other communications from any
Governmental Body or Person which specifically relate to any Loan Party or any
Subsidiary of any Loan Party and (e) any federal, state, local or other income
tax return of any Loan Party or Subsidiary that has been filed becoming the
subject of an audit.

Section 9.13 ERISA Notices and Requests.

Furnish Agent with immediate written notice in the event that (a) any Loan
Party, any Subsidiary of any Loan Party or any member of the Controlled Group
knows or has reason to know that a Termination Event has occurred, together with
a written statement describing such Termination Event and the action, if any,
which such Loan Party, such Subsidiary of any Loan Party or member of the
Controlled Group has taken, is taking, or proposes to take with respect thereto
and, when known, any action taken or

 

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threatened by the IRS, Department of Labor or PBGC with respect thereto, (b) any
Loan Party, any Subsidiary of any Loan Party or any member of the Controlled
Group knows or has reason to know that a prohibited transaction (as defined in
Sections 406 of ERISA and 4975 of the Code) has occurred, together with a
written statement describing such transaction and the action which such Loan
Party, such Subsidiary of any Loan Party or any member of the Controlled Group
has taken, is taking or proposes to take with respect thereto, (c) a funding
waiver request has been filed with respect to any Title IV Plan together with
all communications received by any Loan Party, any Subsidiary of any Loan Party
or any member of the Controlled Group with respect to such request, (d) any
increase in the benefits of any existing Title IV Plan or the establishment of
any new Title IV Plan or the commencement of contributions to any Title IV Plan
to which any Loan Party, any Subsidiary of any Loan Party or any member of the
Controlled Group was not previously contributing shall occur, (e) any Loan
Party, any Subsidiary of any Loan Party or any member of the Controlled Group
shall receive from the PBGC a notice of intention to terminate a Title IV Plan
or to have a trustee appointed to administer a Title IV Plan, together with
copies of each such notice, (f) any Loan Party, any Subsidiary of any Loan Party
or any member of the Controlled Group shall receive any favorable or unfavorable
determination letter from the IRS regarding the qualification of a Title IV
Plan, together with copies of each such letter; (g) any Loan Party, any
Subsidiary of any Loan Party or any member of the Controlled Group shall receive
a notice regarding the imposition of withdrawal liability, together with copies
of each such notice; (h) any Loan Party, any Subsidiary of any Loan Party or any
member of the Controlled Group shall fail to make a required installment or any
other required payment under Section 412 of the Code on or before the due date
for such installment or payment; (i) any Loan Party, any Subsidiary of any Loan
Party or any member of the Controlled Group knows that a (i) Multiemployer Plan
has been terminated, (ii) the administrator or plan sponsor of a Multiemployer
Plan intends to terminate a Multiemployer Plan, or (iii) the PBGC has instituted
or will institute proceedings under Section 4042 of ERISA to terminate a
Multiemployer Plan.

Section 9.14 Notice of Change in Management, Etc.

Furnish Agent with prompt (and, in any event, not more than five (5) Business
Days subsequent to the event) notice of any person either (a) becoming after the
date hereof an executive officer or director of any Loan Party or (b) departing
after the date hereof as an executive officer or director of any Loan Party.

Section 9.15 Additional Documents.

Execute and deliver to Agent, upon request, such documents and agreements as
Agent may, from time to time, request in its reasonable discretion from any Loan
Party to carry out the purposes, terms or conditions of this Agreement and the
Other Documents.

ARTICLE X

EVENTS OF DEFAULT.

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

Section 10.01 Payments. Failure by any Loan Party to pay (a) any payment of
principal or interest on any Term Loans when due and payable, and (b) any other
Obligations within five (5) Business Days of when such Obligations are due and
payable, whether at maturity or by reason of acceleration pursuant to the terms
of this Agreement or any Other Document;

 

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Section 10.02 Covenants. Failure by Loan Parties to perform, keep or observe:

(a) any provision of Sections 4.02, 4.09, 4.10, 6.02(a), 9.05(a), or 9.06 or
Article VII;

(b) any provision of Section 9.04 or 9.05 (other than 9.05(a)), which is not
cured within five (5) days after the date thereof; provided, that, such five
(5) day period shall not apply in the case of any failure to observe any such
provision which is not capable of being cured at all;

(c) any provision of Sections 9.02, 9.08 or 9.11, which is not cured within ten
(10) days after the date thereof; provided, that, (i) such ten (10) day period
shall not apply in the case of any failure to observe any such provision which
is not capable of being cured at all, and (ii) such ten (10) day period shall
not apply in the case of any failure to observe Section 9.08 if Loan Parties
have failed to observe Section 9.08 on three (3) or more occasions during the
twelve (12) months immediately preceding the occurrence of the subject failure;
or

(d) any other provision of this Agreement or any provision of any Other Document
(to the extent such breach is not otherwise embodied in any other provision of
this Article X for which a different grace or cure period is specified or which
constitute an immediate Event of Default under this Agreement or the Other
Documents), which is not cured within thirty (30) days after the earlier to
occur of (i) any Loan Party becoming aware of such failure or (ii) any Lender
providing notice to any Loan Party of such failure; provided, that, such thirty
(30) day period shall not apply in the case of any failure to observe any such
provision which is not capable of being cured at all;

Section 10.03 Representations and Warranties. Any representation or warranty
made or deemed made by any Loan Party in this Agreement or any Other Document or
in any certificate, document or financial or other statement furnished at any
time in connection herewith or therewith shall prove to have been misleading in
any material respect (without duplication of any materiality qualifiers already
set forth herein) on the date when made or deemed to have been made;

Section 10.04 Liens. Except for Permitted Encumbrances, issuance of a notice of
Lien, levy, assessment, injunction or attachment against a material portion of
any Loan Party’s or any Subsidiary of any Loan Party’s property which is not (a)
bonded pending appeal within thirty (30) days, or (b) stayed or lifted pending
appeal within sixty (60) days;

Section 10.05 Judgments. Any (a) judgment or judgments for payment of money are
rendered or judgment Liens for payment of money filed against one or more Loan
Parties or Subsidiaries of Loan Parties for an amount, individually or in the
aggregate, in excess of $500,000, which within sixty (60) days of such rendering
or filing is not either appealed, satisfied, stayed or discharged of record; or
(b) action is taken to enforce any Lien over the assets of any Loan Party (or
any analogous procedure or step is taken in any jurisdiction) for an amount,
individually or in the aggregate, in excess of $500,000;

Section 10.06 Bankruptcy; Insolvency. From and after the Petition Date, except
in connection with the Bankruptcy Case, any Loan Party or any Subsidiary of any
Loan Party shall (a) apply for, consent to or suffer the appointment of, or the
taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (b) admit
in writing its inability, or be generally unable, to pay its debts as they
become due or cease operations of its present business, (c) make a general
assignment for the benefit of creditors, (d) commence a voluntary case under any
state, federal or other bankruptcy laws (as now or hereafter in effect), (e) be
adjudicated a bankrupt or insolvent, (f) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (g) acquiesce
to, or fail to have dismissed, within sixty (60) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (h) take any
action for the purpose of effecting any of the foregoing;

 

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Section 10.07 Collateral. Any Lien created hereunder or provided for hereby or
under any Other Document in any Collateral having a value in excess of $500,000
in the aggregate for any reason ceases to be or is not a valid and perfected
Lien having a first priority interest (except for Permitted Encumbrances);

Section 10.08 Other Agreements. Any default under any documents, instruments or
agreements to which any Loan Party, any Subsidiary or any Loan Party is a party
or by which any of its properties is bound, relating to any Indebtedness (other
than the Obligations) individually or in aggregate in excess of $500,000, which
default continues for more than the applicable cure period, if any, with respect
thereto;

Section 10.09 Change of Control. Any Change of Control shall occur.

Section 10.10 Agreement and Other Documents. Any material provision hereof or of
any of the Other Documents shall for any reason cease to be valid, binding and
enforceable with respect to any party hereto or thereto in accordance with its
terms, or any such party (other than Agent and Lenders) shall challenge the
enforceability hereof or thereof, or shall assert in writing, or take any action
or fail to take any action based on the assertion that any material provision
hereof or of any of the Other Documents has ceased to be or is otherwise not
valid, binding or enforceable in accordance with its terms;

Section 10.11 Criminal Proceedings. The indictment by any Governmental Body of
any Loan Party or any Subsidiary of any Loan Party of which any Loan Party, such
Subsidiary or Agent receives notice, in either case, as to which there is a
reasonable possibility of an adverse determination, in the good faith
determination of Agent, under any criminal statute, or commencement or
threatened commencement of criminal proceedings against such Loan Party or such
Subsidiary, pursuant to which criminal statute or proceedings the penalties or
remedies sought or available include forfeiture of (a) any of the Collateral
having a value in excess of $500,000, or (b) any other property of the Loan
Parties and their Subsidiaries taken as a whole, which is necessary or material
to the conduct of the business of the Loan Parties and their Subsidiaries taken
as a whole;

Section 10.12 Collateral Matters. Any material portion of the Collateral shall
be seized or taken by a Governmental Body, or any Loan Party or the title and
rights of any Loan Party in and to any material portion of the Collateral shall
have become the subject matter of litigation which might, in the opinion of
Agent, upon final determination, result in impairment or loss of a material
portion of the Collateral provided by this Agreement or the Other Documents;

Section 10.13 Orders. The operations of any Loan Party’s or any Subsidiary’s
facilities is interrupted in any material respect by virtue of any
determination, ruling, decision, decree or order of any court or Governmental
Body of competent jurisdiction, and such interruption could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect; or

Section 10.14 ERISA. An event or condition specified in Section 7.15 or
Section 9.13 shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions, any
Loan Party or any member of the Controlled Group shall incur a liability to a
Plan or the PBGC (or both) in excess of $500,000.

 

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ARTICLE XI

LENDERS’ RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.

Section 11.01 Rights and Remedies.

Upon the occurrence of (a) an Event of Default pursuant to Section 10.06, all
Obligations shall be immediately due and payable and this Agreement shall be
deemed terminated, and (b) any of the other Events of Default and at any time
thereafter, Agent may (and at the direction of Required Lenders, shall) declare
that all or any portion of the Obligations shall be immediately due and payable
and Agent or Required Lenders shall have the right to terminate this Agreement.
Upon the occurrence and during the continuance of any Event of Default, Agent
shall have the right to exercise any and all other rights and remedies provided
for herein, under the UCC and at law or equity generally, including, without
limitation, the right to foreclose the Liens granted herein and in the Other
Documents and to realize upon any Collateral by any available judicial procedure
and/or to take possession of and sell any or all of the Collateral with or
without judicial process. Agent may enter any Loan Party’s premises or other
premises without legal process and without incurring liability to any Loan Party
therefor, and Agent may thereupon, or at any time thereafter, in its discretion,
without notice or demand, take the Collateral and remove the same to such place
as Agent may deem advisable and Agent may require Loan Parties to make the
Collateral available to Agent at a convenient place. With or without having the
Collateral at the time or place of sale, Agent may sell the Collateral, or any
part thereof, at public or private sale, at any time or place, in one or more
sales, at such price or prices, and upon such terms, either for cash, credit or
future delivery, as Agent may elect. Except as to that part of the Collateral
which is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Agent shall give Loan Parties
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Loan Parties at least ten (10) days prior to
such sale or sales is reasonable notification. At any public sale Agent or any
Lender may bid for and become the purchaser, and Agent, any Lender or any other
purchaser at any such sale thereafter shall hold the Collateral sold absolutely
free from any claim or right of whatsoever kind, including any equity of
redemption and such right and equity are hereby expressly waived and released by
each Loan Party. Agent may specifically disclaim any warranties of title or the
like at any sale of Collateral. In connection with the exercise of the foregoing
remedies, Agent shall have the right to use all of each Loan Party’s
Intellectual Property and other proprietary rights (subject to any licenses and
other usage rights therein granted in favor of other Persons) which are used in
connection with (i) Inventory for the purpose of disposing of such Inventory and
(ii) Equipment for the purpose of completing the manufacture of unfinished
goods, in each case without any obligation to compensate any Loan Party
therefor.

Section 11.02 Waterfall.

(b) So long as no Waterfall Event has occurred and is continuing and except as
otherwise provided with respect to Defaulting Lenders, all principal and
interest payments, shall be apportioned ratably among the Lenders (according to
their Commitment Percentages thereof) and all payments of fees, costs and
expenses (other than fees, costs or expenses that are for Agent’s or any
Lender’s separate account) shall be apportioned ratably among the Lenders
according to their Commitment Percentages thereof (it being understood that all
costs and expenses due and owing to Agent and not reimbursed by Lenders, shall
first be paid in full before any such payments are made to any of the Lenders).
Payments for the purposes of this clause (a) shall include proceeds of
Collateral received by Agent.

(c) At any time that a Waterfall Event has occurred and is continuing and except
as otherwise provided with respect to Defaulting Lenders, all payments remitted
to Agent and all proceeds of Collateral received by Agent shall be applied to
the Obligations as follows (it being understood that in the event that any
Lender, as opposed to Agent, receives such payment or proceeds from any source
other than Agent, such Lender shall remit such payment or proceeds, as
applicable, to Agent for application to the Obligations as provided in this
Agreement): first, to the Obligations consisting of fees, costs and expenses
(including attorneys’ fees and expenses) due to, or incurred, by Agent in
connection with this Agreement or any Other Document and to interest thereon not
reimbursed by Lenders until paid in full;

 

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second, pro rata to interest due to Lenders upon any of the Term Loans and to
the Obligations consisting of costs and expenses (including attorneys’ fees and
expenses) incurred by Lenders in connection with (and to the extent payable or
reimbursable to Lenders under) this Agreement or any Other Document according to
their respective Commitment Percentages thereof until paid in full; third, pro
rata to fees due to the Lenders in connection with this Agreement or any Other
Document according to their respective Commitment Percentages thereof until paid
in full; and fourth, pro rata to any other Obligations.

(d) If any deficiency shall arise, Loan Parties shall remain liable to Agent and
Lenders therefor. If it is determined by an authority of competent jurisdiction
that a disposition by Agent did not occur in a commercially reasonably manner,
Agent may obtain a deficiency judgment for the difference between the amount of
the Obligation and the amount that a commercially reasonable sale would have
yielded. Agent will not be considered to have offered to retain the Collateral
in satisfaction of the Obligations unless Agent has entered into a written
agreement with Loan Party to that effect.

Section 11.03 Agent’s Discretion.

Agent shall have the right in its reasonable discretion to determine which
rights, Liens or remedies Agent may at any time pursue, relinquish, subordinate,
or modify or to take any other action with respect thereto and such
determination will not in any way modify or affect any of Agent’s or Lenders’
rights hereunder.

Section 11.04 Setoff.

In addition to any other rights and remedies which Agent or any Lender may have
under applicable law, this Agreement or any Other Document, upon the occurrence
and during the continuance of an Event of Default hereunder, Agent or such
Lender and their Affiliates shall have a right to setoff and apply any Loan
Party’s property held by Agent or such Lender, or such Affiliate to reduce the
Obligations, all without notice to Loan Parties. No Lender or Affiliate shall
setoff or apply such property without the prior written consent of Agent.

Section 11.05 Rights and Remedies not Exclusive.

The enumeration of the foregoing rights and remedies is not intended to be
exhaustive and the exercise of any right or remedy shall not preclude the
exercise of any other right or remedies provided for herein or otherwise
provided by law, all of which shall be cumulative and not alternative.

Section 11.06 Commercial Reasonableness.

To the extent that applicable law imposes duties on Agent or any Lender to
exercise remedies in a commercially reasonable manner (which duties cannot be
waived under such law), each Loan Party acknowledges and agrees that it is not
commercially unreasonable for Agent or any Lender (a) to fail to incur expenses
reasonably deemed necessary or appropriate by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (b) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Body or other third party for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors, secondary obligors or other Persons obligated
on Collateral or to remove Liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the

 

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Collateral is of a specialized nature, (f) to contact other Persons, whether or
not in the same business as any Loan Party, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Loan Party acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by Agent or any
Lender would not be commercially unreasonable in the exercise by Agent or any
Lender of remedies against the Collateral and that other actions or omissions by
Agent or any Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to any Loan Party or to impose any duties on Agent or Lenders that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section.

ARTICLE XII

WAIVERS AND JUDICIAL PROCEEDINGS.

Section 12.01 Waiver of Notice.

Each Loan Party hereby waives demand, presentment, protest and notice thereof
with respect to any and all instruments, notice of acceptance hereof, notice of
loans or advances made, credit extended, Collateral received or delivered, or
any other action taken in reliance hereon, and all other demands and notices of
any description, except such as are expressly provided for herein or as
otherwise by law.

Section 12.02 Delay.

No delay or omission on Agent’s or any Lender’s part in exercising any right,
remedy or option shall operate as a waiver of such or any other right, remedy or
option or of any Default or Event of Default.

Section 12.03 Jury Waiver.

EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT
OR ANY OTHER DOCUMENT, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER DOCUMENT, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT
A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

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Section 12.04 Waiver of Counterclaims.

Each Loan Party waives all rights to interpose any claims, deductions, setoffs
or counterclaims of any nature (other than compulsory counterclaims) in any
action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or thereto.

ARTICLE XIII

EFFECTIVE DATE AND TERMINATION.

Section 13.01 Term.

This Agreement, which shall inure to the benefit of and shall be binding upon
the respective successors and permitted assigns of each Loan Party, Agent and
each Lender, shall become effective on the date hereof and shall continue in
full force and effect until the earliest of (a) April 13, 2021, (b) the
acceleration of all Obligations pursuant to the terms of this Agreement or
(c) the date on which this Agreement shall be terminated in accordance with the
provisions hereof or by operation of law (the “Termination Date”). Loan Parties
may terminate this Agreement at any time upon thirty (30) days’ prior written
notice upon Payment in Full of all of the Obligations.

Section 13.02 Termination.

The termination of the Agreement shall not affect any Loan Party’s, Agent’s or
any Lender’s rights, or any of the Obligations arising or incurred prior to the
effective date of such termination, and each of the provisions of this Agreement
and of the Other Documents shall continue to be fully operative until all of the
Obligations have been Paid in Full. The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect, notwithstanding the termination of this Agreement or the
fact that the Borrower’s Account may from time to time be temporarily in a zero
or credit position, until all of the Obligations have been Paid in Full.
Accordingly, each Loan Party waives any rights which it may have under
Section 9-513 of the UCC to demand the filing of termination statements with
respect to the Collateral, and Agent shall not be required to send such
termination statements to each Loan Party, or to file them with any filing
office, until all of the Obligations have been Paid in Full. All
representations, warranties, covenants, waivers and agreements contained herein
and in the Other Documents shall survive termination hereof until all of the
Obligations have been Paid in Full.

ARTICLE XIV

REGARDING AGENT.

Section 14.01 Appointment.

Each Lender hereby designates Wilmington Trust, National Association to act as
Agent for such Lender under this Agreement and the Other Documents. Each Lender
hereby irrevocably appoints, designates and authorizes Agent to enter into a
services agreement with Title Agent in substantially the form attached hereto as
Exhibit D. Each Lender hereby irrevocably authorizes Agent to take such action
on its behalf under the provisions of this Agreement and the Other Documents and
to exercise such powers and to perform such duties hereunder and thereunder as
are specifically delegated to or required of Agent by the terms hereof and
thereof and such other powers as are reasonably incidental thereto. Agent may
perform any of its duties hereunder by or through its agents or employees. As to
any matters not expressly provided for by this Agreement (including without
limitation, collection of the Term Notes) Agent shall not be required to
exercise any discretion or take any action, but shall be

 

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required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding; provided, however, that, Agent shall not
be required to take any action which exposes Agent to liability or which is
contrary to this Agreement or the Other Documents or applicable law unless Agent
is furnished with an indemnification satisfactory to Agent with respect thereto.

Section 14.02 Nature of Duties.

Agent shall have no duties or responsibilities except those expressly set forth
in this Agreement and the Other Documents. None of Agent or any Lender, nor any
of their respective officers, directors, employees or agents shall be (a) liable
for any action taken or omitted by them as such under this Agreement or any
Other Document or in connection herewith or therewith, unless caused by their
gross (not mere) negligence or willful misconduct, as determined pursuant to a
final, non-appealable order of a court of competent jurisdiction, or
(b) responsible in any manner for any recitals, statements, representations or
warranties made by any Loan Party or any officer thereof contained in this
Agreement, or in any of the Other Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by Agent
under or in connection with, this Agreement or any of the Other Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement, or any of the Other Documents or for any failure of Loan
Party to perform its obligations hereunder. Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any of the Other Documents, or to inspect or appraise the
properties, books or records of any Loan Party or any other Person. The duties
of Agent in respect of the Term Loans shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement or any Other Document a
fiduciary relationship in respect of any Secured Party, nor shall the Agent
constitute a trustee in respect of any Secured Party; and nothing in this
Agreement or any Other Document, expressed or implied, is intended to or shall
be so construed as to impose upon Agent any obligations in respect of this
Agreement or any Other Document except as expressly set forth herein or therein.

Section 14.03 Lack of Reliance on Agent and Resignation.

(a) Independently and without reliance upon Agent or any other Lender, each
Lender has made and shall continue to make (i) its own independent investigation
of the financial condition and affairs of each Loan Party and each other Person
in connection with the making and the continuance of the Term Loans hereunder
and the taking or not taking of any action in connection with this Agreement or
any Other Document, and (ii) its own appraisal of the creditworthiness of each
Loan Party and each other Person. Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Lender with any credit
or other information with respect thereto, whether coming into its possession
before making of the Term Loans or at any time or times thereafter except to the
extent, if any, expressly required in this Agreement. Agent shall not be
responsible to any Lender for any recitals, statements, information,
representations or warranties herein or in any agreement, document, certificate
or a statement delivered in connection with or for the execution, effectiveness,
genuineness, validity, enforceability, perfection, priority, collectability or
sufficiency of this Agreement or any Other Document, the Collateral, or of the
financial condition of any Loan Party or any other Person, or be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Agreement, the Term Notes, the Other
Documents, the Collateral, or the financial condition of any Loan Party or any
other Person, or the existence of any Event of Default or any Default.

(b) Agent may resign on thirty (30) days’ written notice to each of Lenders and
Borrower and upon such resignation, the Required Lenders will promptly designate
a successor Agent with the consent to Borrower, which consent of Borrower shall
not be unreasonably withheld, conditioned

 

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or delayed (provided, that, if an Event of Default has occurred and is
continuing, no such consent of Borrower shall be required). If no such successor
Agent is appointed at the end of such thirty (30) day period, Agent may
designate one of the Lenders as a successor Agent, and shall give the Borrower
immediate notice of such appointment. If no Lender accepts such designation,
Required Lenders shall serve as the successor Agent, and Agent shall remain
entitled to so resign.

(c) Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this
Section 14, Section 16.05 and Section 16.10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

Section 14.04 Certain Rights of Agent.

If Agent shall request instructions from Lenders with respect to any act or
action (including failure to act) in connection with this Agreement or any Other
Document, Agent shall be entitled to refrain from such act or taking such action
unless and until Agent shall have received instructions from the Required
Lenders; and Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, Lenders shall not have any right of
action whatsoever against Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.

Section 14.05 Reliance.

Agent shall be entitled to rely, and shall be fully protected in relying, upon
any note, writing, resolution, notice, statement, certificate, telex, teletype
or facsimile message, cablegram, email, order or other document or telephone
message believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person, and, with respect to all legal matters pertaining
to this Agreement and the Other Documents and its duties hereunder, upon advice
of counsel selected by it. Agent may employ agents and attorneys-in-fact and
shall not be liable for the default or misconduct of any such agents or
attorneys-in-fact selected by Agent with reasonable care.

Section 14.06 Notice of Default.

Agent shall not be deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder or under the Other Documents, unless Agent
has received notice from a Lender or the Borrower referring to this Agreement or
the Other Documents, describing such Default or Event of Default and stating
that such notice is a “notice of default”. In the event that Agent receives such
a notice, Agent shall give notice thereof to Lenders. Subject to Section 14.01,
Agent shall take such action with respect to such Default or Event of Default
(including, without limitation, the institution of the Default Rate pursuant to
Section 3.01) as shall be reasonably directed by the Required Lenders; provided,
that, unless and until Agent shall have received such directions, 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 (including, without limitation,
the institution of the Default Rate pursuant to Section 3.01) as it shall deem
advisable in the best interests of Lenders.

 

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Section 14.07 Indemnification.

To the extent Agent is not timely reimbursed and indemnified by Loan Parties,
each Lender promptly will reimburse and indemnify Agent and its officers,
directors, Affiliates, employees, representatives and agents in proportion to
its respective Commitment Percentage from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees, expenses and disbursements of counsel) arising from any
action, litigation, proceeding, dispute or investigation which may be imposed
on, incurred by, or asserted against Agent in any litigation, proceeding,
dispute or investigation instituted or conducted by any Governmental Body or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement or the Other
Documents, on in connection with performing any of its duties, functions or
activities under this Agreement or under any Other Document, or in any way
relating to or arising out of this Agreement or any Other Document whether or
not Agent is a party thereto, except to the extent that any of the foregoing
arises out of the gross (not mere) negligence or willful misconduct of Agent, as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction. Nothing contained in this Section 14.07 shall in any manner limit,
impair, waive or otherwise affect Loan Parties reimbursement and indemnification
Obligations at any time owing to Agent.

Section 14.08 Agent in its Individual Capacity.

Agent may engage in business with any Loan Party as if it were not performing
the duties specified herein, and may accept fees and other consideration from
any Loan Party for services in connection with this Agreement or otherwise
without having to account for the same to Lenders.

Section 14.09 Actions in Concert.

Anything in this Agreement to the contrary notwithstanding, each Lender hereby
agrees with each other Lender and Agent that (a) Agent shall have the exclusive
right to enforce and exercise all rights and remedies of Agent and Lenders
hereunder and under the Other Documents at all times following the occurrence
and during the continuance of an Event of Default, on behalf of Agent and all
Lenders, subject to the direction of Required Lenders as provided for herein,
and (b) no Lender shall take any action to protect or enforce its rights arising
out of this Agreement or the Other Documents (including exercising any rights of
setoff or compensation) without first obtaining the prior written consent of
Agent or Required Lenders, it being the intent of Lenders that any such action
to protect or enforce rights under this Agreement and the Term Notes shall be
taken in concert and at the direction or with the consent of Agent or Required
Lenders.

Section 14.10 Intercreditor Agreements/Subordination Agreements.

Each Lender hereby irrevocably appoints, designates and authorizes Agent to
enter into any subordination or intercreditor agreement pertaining to any
Subordinated Debt, on its behalf and to take such action on its behalf under the
provisions of any such agreement. Each Lender further agrees to be bound by the
terms and conditions of any subordination or intercreditor agreement pertaining
to any Subordinated Debt.

Section 14.11 Agent Determinations.

Each reference in this Agreement to any action, determination, exercise of
discretion or other conduct of similar import by or with respect to “Agent”
shall be deemed to refer to such action, determination, exercise of discretion
or other conduct taken, made or exercised, as the case may be, by the Agent
acting, where applicable, upon written instructions of the Required Lenders,
except with respect to administrative and ministerial matters of Agent, matters
relating to rights, duties, protections, privileges, indemnities and immunities
of Agent, and assignments and transfers in accordance with Section 16.03.

 

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ARTICLE XV

GUARANTEE.

Section 15.01 Guarantee; Contribution Rights.

Each Guarantor hereby unconditionally guarantees, as a primary obligor and not
merely as a surety, jointly and severally with each other Guarantor when and as
due, whether at maturity, by acceleration, by notice of prepayment or otherwise,
the due (whether at the stated maturity, by acceleration or otherwise) and
punctual performance of all Obligations. Each payment made by any Guarantor
pursuant to this Guarantee shall be made in lawful money of the United States in
immediately available funds without offset, counterclaim or deduction of any
kind.

Anything in this Article XV to the contrary notwithstanding, the maximum
liability of each Guarantor under this Article XV shall in no event exceed the
amount which can be guaranteed by such Guarantor under applicable federal and
state laws relating to the insolvency of debtors (after giving effect to the
right of contribution established in the following paragraph). It being
understood that no amendments or other modifications to this Agreement or any of
the Other Documents need to be made to implement the provisions of this
paragraph and instead the implementation of the provisions of this paragraph
shall occur automatically.

Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid
more than its proportionate share of any payment made hereunder, such Guarantor
shall be entitled to seek and receive contribution from and against any other
Guarantor hereunder which has not paid its proportionate share of such payment.
Each Guarantor’s right of contribution shall be subject to the terms and
conditions of Section 15.09(d). The provisions of this paragraph shall in no
respect limit the obligations and liabilities of any Guarantor to Agent and
Lenders, and each Guarantor shall remain liable to Agent and Lenders for the
full amount guaranteed by such Guarantor hereunder.

Section 15.02 Waivers.

Each Guarantor hereby absolutely, unconditionally and irrevocably waives
(a) promptness, diligence, notice of acceptance, notice of presentment of
payment and any other notice hereunder, (b) demand of payment, protest, notice
of dishonor or nonpayment, notice of the present and future amount of the
Obligations and any other notice with respect to the Obligations, (c) any
requirement that Agent or any Lender protect, secure, perfect or insure any Lien
or any property subject thereto or exhaust any right or take any action against
any other Loan Party, or any Person or any Collateral, (d) any other action,
event or precondition to the enforcement hereof or the performance by each such
Guarantor of the Obligations, (e) any defense arising by any lack of capacity or
authority or any other defense of any Loan Party or any notice, demand or
defense by reason of cessation from any cause of Obligations other than Payment
in Full of all of the Obligations, and (f) any defense that any other guarantee
or security was or was to be obtained by Agent or any Lender.

Section 15.03 No Defense.

No invalidity, irregularity, voidableness, voidness or unenforceability of this
Agreement or any Other Document or any other agreement or instrument relating
thereto, or of all or any part of the Obligations or of any collateral security
therefor shall affect, impair or be a defense hereunder.

 

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Section 15.04 Guarantee of Payment.

The Guarantee hereunder is one of payment and performance, not collection, and
the obligations of each Guarantor hereunder are independent of the Obligations
of the other Loan Parties, and a separate action or actions may be brought and
prosecuted against any Guarantor to enforce the terms and conditions of this
Article XV, irrespective of whether any action is brought against any other Loan
Party or other Persons or whether any other Loan Party or other Persons are
joined in any such action or actions. Each Guarantor waives any right to require
that any resort be had by Agent or any Lender to any security held for payment
of the Obligations or to any balance of any deposit account or credit on the
books of Agent or any Lender in favor of any Loan Party or any other Person. No
election to proceed in one form of action or proceedings, or against any Person,
or on any Obligations, shall constitute a waiver of Agent’s right to proceed in
any other form of action or proceeding or against any other Person unless Agent
has expressed any such right in writing. Without limiting the generality of the
foregoing, no action or proceeding by Agent against any Loan Party under any
document evidencing or securing Indebtedness of any Loan Party to Agent shall
diminish the liability of any Guarantor hereunder, except to the extent Agent
receives actual payment on account of Obligations by such action or proceeding,
notwithstanding the effect of any such election, action or proceeding upon the
right of subrogation of any Guarantor in respect of any Loan Party and/or
otherwise.

Section 15.05 Liabilities Absolute.

The liability of each Guarantor hereunder shall be absolute, unlimited and
unconditional and shall not be subject to any reduction, limitation, impairment,
discharge or termination for any reason, including, without limitation, any
claim of waiver, release, surrender, alteration or compromise, and shall not be
subject to any claim, defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of any
Obligation or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor shall not be discharged or impaired, released,
limited or otherwise affected by:

(a) any change in the manner, place or terms of payment or performance, and/or
any change or extension of the time of payment or performance of, release,
renewal or alteration of, or any new agreements relating to any Obligation, any
security therefor, or any liability incurred directly or indirectly in respect
thereof, or any rescission of, or amendment, waiver or other modification of, or
any consent to departure from, this Agreement or any Other Document, including
any increase in the Obligations resulting from the extension of additional
credit to the Borrower or otherwise;

(b) any sale, exchange, release, surrender, loss, abandonment, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Obligations, and/or any offset there
against, or failure to perfect, or continue the perfection of, any Lien in any
such property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guarantee for all or any of the
Obligations;

(c) the failure of Agent or any Lender to assert any claim or demand or to
enforce any right or remedy against the Borrower or any other Loan Party or any
other Person under the provisions of this Agreement or any Other Document or any
other document or instrument executed and delivered in connection herewith or
therewith;

(d) any settlement or compromise of any Obligation, any security therefor or any
liability (including any of those hereunder) incurred directly or indirectly in
respect thereof or hereof, and any subordination of the payment of all or any
part thereof to the payment of any obligation (whether due or not) of any Loan
Party to creditors of any Loan Party other than any other Loan Party;

 

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(e) any manner of application of Collateral, or proceeds thereof, to all or any
of the Obligations, or any manner of sale or other disposition of any Collateral
for all or any of the Obligations or any other assets of any Loan Party; and

(f) any other agreements or circumstance of any nature whatsoever that may or
might in any manner or to any extent vary the risk of any Guarantor, or that
might otherwise at law or in equity constitute a defense available to, or a
discharge of, the Guarantee hereunder and/or the obligations of any Guarantor,
or a defense to, or discharge of, any Loan Party or any other Person or party
hereto or the Obligations or otherwise with respect to the Term Loans or other
financial accommodations to the Borrower pursuant to this Agreement and/or the
Other Documents or otherwise.

Section 15.06 Waiver of Notice.

Except as otherwise contemplated hereunder, Agent shall have the right to do any
of the above without notice to or the consent of any Guarantor and each
Guarantor expressly waives any right to notice of, consent to, knowledge of and
participation in any agreements relating to any of the above or any other
present or future event relating to Obligations whether under this Agreement or
otherwise or any right to challenge or question any of the above and waives any
defenses of such Guarantor which might arise as a result of such actions.

Section 15.07 Agent’s Discretion.

Agent may at any time and from time to time (whether prior to or after the
revocation or termination of this Agreement) without the consent of, or notice
to, any Guarantor, and without incurring responsibility to any Guarantor or
impairing or releasing the Obligations, apply any sums by whomsoever paid or
howsoever realized to any Obligations regardless of what Obligations remain
unpaid.

Section 15.08 Reinstatement.

The Guarantee provisions herein contained shall continue to be effective or be
reinstated, as the case may be, if claim is ever made upon Agent or any Lender
for repayment or recovery of any amount or amounts received by Agent or such
Lender in payment or on account of any of the Obligations and Agent or such
Lender repays all or part of said amount for any reason whatsoever, including,
without limitation, by reason of any judgment, decree or order of any court or
administrative body having jurisdiction over Agent or such Lender or the
respective property of each, or any settlement or compromise of any claim
effected by Agent or such Lender with any such claimant (including any Loan
Party); and in such event each Guarantor hereby agrees that any such judgment,
decree, order, settlement or compromise or other circumstances shall be binding
upon such Guarantor, notwithstanding any revocation hereof or the cancellation
of any note or other instrument evidencing any Obligation, and each Guarantor
shall be and remain liable to Agent and/or Lenders for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by Agent or such Lenders.

Section 15.09 No Marshalling, Etc.

(a) Agent shall not be required to marshal any assets in favor of any Guarantor,
or against or in payment of Obligations.

(b) No Guarantor shall be entitled to claim against any present or future
security held by Agent or any Lender from any Person for Obligations in priority
to or equally with any claim of Agent or any Lender, or assert any claim for any
liability of any Loan Party to any Guarantor in priority to or equally with
claims of Agent or any Lender for Obligations, and no Guarantor shall be
entitled to compete with Agent or any Lender with respect to, or to advance any
equal or prior claim to any security held by Agent or any Lender for
Obligations.

 

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(c) If any Loan Party makes any payment to Agent or any Lender, which payment is
wholly or partly subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to any Person under any federal
or provincial or other statute or at common law or under equitable principles,
then to the extent of such payment, the Obligation intended to be paid shall be
revived and continued in full force and effect as if the payment had not been
made, and the resulting revived Obligation shall continue to be guaranteed,
uninterrupted, by each Guarantor hereunder. Each Lender, upon execution and
delivery hereof or upon succeeding to an interest in the Term Loans and Term
Commitments, as the case may be, represents and warrants as of the Closing Date
or as of the effective date of assignment that it is a Qualified Assignee. Agent
and each Lender may conclusively rely (without any duty of inquiry or further
diligence) on a representation made by another Person that such Person is a
Qualified Assignee for the purpose of establishing that such Person is a
Qualified Assignee for all purposes of this Agreement.

(d) All present and future monies payable by any Loan Party or any other
Guarantor to any Guarantor, whether arising out of a right of subrogation,
contribution or otherwise, are assigned to Agent for its benefit and for the
ratable benefit of Lenders as security for such Guarantor’s liability to Agent
and Lenders hereunder and, except as set forth in the final sentence of this
Section 15.09(d), are postponed and subordinated to Agent’s and Lenders’ prior
right to Payment in Full of all of the Obligations. Except to the extent
prohibited or contemplated otherwise by this Agreement, all monies received by
any Guarantor from any Loan Party shall be held by such Guarantor as agent and
trustee for Agent and Lenders. This assignment, postponement and subordination
shall only terminate when all of the Obligations are Paid in Full.
Notwithstanding anything contained in this Section 15.09(d), absent the
occurrence and continuation of an Event of Default, the Loan Parties shall not
be prohibited from paying any amounts due and owing to any other Loan Party or
any of their Subsidiaries, provided such payment is not otherwise expressly
prohibited by this Agreement. Purchasing Lender, if it is not a Lender, shall
deliver to Agent an administrative questionnaire in a form satisfactory to
Agent.

(e) Each Loan Party acknowledges this assignment, postponement and subordination
and, except as otherwise set forth herein, in the event that an Event of Default
has occurred and is continuing, agrees to make no payments to any Guarantor
without the prior written consent of Agent. Each Loan Party agrees to give full
effect to the provisions hereof.

Section 15.10 Action Upon Event of Default.

Upon the occurrence and during the continuance of any Event of Default, Agent
may and upon written request of the Required Lenders shall, without notice to or
demand upon any Loan Party, any Guarantor or any other Person, declare all or
any portion of the Obligations of such Guarantor hereunder immediately due and
payable, and shall be entitled to enforce the Obligations of each Guarantor.
Upon such declaration by Agent, Agent, Lenders and any of their Affiliates are
hereby authorized at any time and from time to time to set off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other Indebtedness at any time owing by Agent or Lenders to or for
the credit or the account of any Guarantor against any and all of the
Obligations of each Guarantor now or hereafter existing hereunder in accordance
with the terms of this Agreement, whether or not Agent or Lenders shall have
made any demand hereunder against any other Loan Party and although such
Obligations may be contingent and unmatured. The rights of Agent and Lenders
hereunder are in addition to other rights and remedies (including other rights
of set-off) which Agent and Lenders may have. Upon such declaration by Agent,
with respect to any claims (other than those claims referred to in the
immediately preceding paragraph) of any Guarantor against any Loan Party (the

 

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“Claims”), Agent shall have the full right on the part of Agent in its own name
or in the name of such Guarantor to collect and enforce such Claims by legal
action, proof of debt in bankruptcy or other liquidation proceedings, vote in
any proceeding for the arrangement of debts at any time proposed, or otherwise,
Agent and each of its officers being hereby irrevocably constituted
attorneys-in-fact for each Guarantor for the purpose of such enforcement and for
the purpose of endorsing in the name of each Guarantor any instrument for the
payment of money. Each Guarantor will receive as trustee for Agent and will pay
to Agent forthwith upon receipt thereof any amounts which such Guarantor may
receive from any Loan Party on account of the Claims. Each Guarantor agrees that
at no time hereafter will any of the Claims be represented by any notes or other
negotiable instruments or writings, except and in such event they shall either
be made payable to Agent, or if payable to any Guarantor, shall forthwith be
endorsed by such Guarantor to Agent. Each Guarantor agrees that no payment on
account of the Claims or any Lien therein shall be created, received, accepted
or retained during the continuance of any Event of Default nor shall any
financing statement be filed with respect thereto by any Guarantor.

Section 15.11 Statute of Limitations.

Any acknowledgment or new promise, whether by payment of principal or interest
or otherwise and whether by any Loan Party or others (including any Lenders)
with respect to any of the Obligations shall, if the statute of limitations in
favor of any Guarantor against Agent or Lenders shall have commenced to run,
toll the running of such statute of limitations and, if the period of such
statute of limitations shall have expired, prevent the operation of such statute
of limitations.

Section 15.12 Interest.

All amounts due, owing and unpaid from time to time by any Guarantor hereunder
shall bear interest at the Cash Interest Rate and the PIK Interest Rate per
annum, as applicable, then chargeable with respect to Term Loans.

Section 15.13 Guarantor’s Investigation.

Each Guarantor acknowledges receipt of a copy of each of this Agreement and the
Other Documents. Each Guarantor has made an independent investigation of Loan
Parties and of the financial condition of Loan Parties. Neither Agent nor any
Lender has made, and Agent and Lenders do not hereby make, any representations
or warranties as to the income, expense, operation, finances or any other matter
or thing affecting any Loan Party nor has Agent or any Lender made any
representations or warranties as to the amount or nature of the Obligations of
any Loan Party to which this Section 15 applies as specifically herein set
forth, nor has Agent or any Lender or any officer, agent or employee of Agent or
any Lender or any representative thereof, made any other oral representations,
agreements or commitments of any kind or nature, and each Guarantor hereby
expressly acknowledges that no such representations or warranties have been made
and such Guarantor expressly disclaims reliance on any such representations or
warranties.

Section 15.14 Termination.

Subject to reinstatement as provided in Section 15.08, the provisions of this
Article XV shall remain in effect until all of Obligations have been Paid in
Full.

 

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Section 15.15 Extension of Guarantee.

Without prejudice to the generality of this Article XV, each Guarantor expressly
confirms that it intends that the guarantee provided in this Article XV shall
extend from time to time to any (however fundamental) variation, increase,
extension or addition of or to any of the provisions of this Agreement or any
Other Document and/or any facility or amount made available hereunder or
thereunder.

Section 15.16 Applicability to Borrower.

Without limiting any of the Borrower’s obligations under this Agreement or any
Other Document, the Borrower shall also be considered a Guarantor for purposes
of this Article XV to the extent the Borrower is not directly and primarily
obligated with respect to the Obligations.

Section 15.17 Limitations Regarding ECP Guarantors.

Each Guarantor that qualifies as an “eligible contract participant” under
Section 723(a)(2) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act (each an “ECP Guarantor”) hereby jointly and severally, unconditionally and
irrevocably undertakes to provide such funds or other support as may be needed
from time to time by each other Loan Party to fulfill its obligations under this
Agreement in respect of all Obligations at any time arising under Hedging
Agreements (herein collectively referred to as “Hedge Obligations”); provided,
that, each ECP Guarantor that, at the time the Hedge Obligations are incurred,
has total assets in excess of $10,000,000 shall only be liable for the maximum
amount of such liability that can be incurred without resulting in the
obligations of such ECP Guarantor under this Section 15.17, as it relates to
such Loan Party, being determined to be voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer by a final, non-appealable order
of a court of competent jurisdiction, and not for any greater amount. The
obligations of each ECP Guarantor under this Section 15.17 shall remain in full
force and effect until the Obligations have been paid in full in accordance with
the terms of this Agreement. Each ECP Guarantor intends that this Section 15.17
constitute, and this Section 15.17 shall be deemed to constitute, a “keepwell,
support, other agreement” for the benefit of each other Loan Party for all
purposes of Section 1a(18)(A)(v) (II) of the Commodity Exchange Act, provided,
however, that notwithstanding anything to the contrary herein or in any Other
Document, no amount received from any Guarantor shall be applied to any Excluded
Hedging Obligations of such Guarantor.

ARTICLE XVI

MISCELLANEOUS.

Section 16.01 Governing Law; Consent to Jurisdiction; Etc.

This Agreement shall be governed by and construed in accordance with the laws of
the State of New York applied to contracts to be performed wholly within the
State of New York, without regard to conflicts of laws principles. Any judicial
proceeding brought by or against any Loan Party with respect to any of the
Obligations, this Agreement or any Other Document may be brought in any court of
competent jurisdiction located in the County and State of New York, United
States of America, and, by execution and delivery of this Agreement, each Loan
Party accepts for itself and in connection with its properties, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Each Loan Party hereby waives personal service of any and
all process upon it and consents that all such service of process may be made by
registered mail (return receipt requested) directed to Borrower at its address
set forth in Section 16.06 and service so made shall be deemed completed five
(5) days after the same shall have been so deposited in the mails of the United
States of America, or, at Agent’s and/or any Lender’s option, by service upon
Borrower which each Loan Party irrevocably appoints as such Loan Party’s agent
for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall limit the right of Agent or any Lender to bring proceedings against any
Loan Party in the courts of any other jurisdiction. Each Loan

 

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Party waives any objection to jurisdiction and venue of any action instituted
hereunder and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens. Any judicial proceeding by any Loan
Party against Agent or any Lender involving, directly or indirectly, any matter
or claim in any way arising out of, related to or connected with this Agreement
or any Other Document (except to the extent, if any, expressly provided
otherwise in any Other Document), shall be brought only in a federal or state
court located in the City of New York, State of New York.

Section 16.02 Entire Understanding; Amendments; Lender Replacements;
Overadvances.

(a) This Agreement and the Other Documents executed concurrently herewith or on
or after the Closing Date contain the entire understanding between each Loan
Party, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof or thereof. Any
promises, representations, warranties or guarantees of Agent or any Lender to
any Loan Party not herein contained or not contained in any Other Document
executed on or after the Closing Date shall have no force and effect. Neither
this Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by
any course of dealing, or in any manner other than by an agreement in writing
pursuant to clause (b) below. Any Default or Event of Default that occurs
hereunder shall continue unless and until expressly waived in writing pursuant
to clause (b) below. Each Loan Party acknowledges that it has been advised by
counsel in connection with the execution of this Agreement and Other Documents
and is not relying upon oral representations or statements inconsistent with the
terms and provisions of this Agreement.

(b) Agent and the Required Lenders (or Agent with the consent in writing of the
Required Lenders), and the Borrower may, subject to the provisions of this
Section 16.02(b), from time to time enter into written amendments and
supplemental agreements to this Agreement or the Other Documents executed by the
Borrower, for the purpose of adding or deleting any provisions or otherwise
changing, varying or waiving in any manner the rights of Lenders, Agent or Loan
Parties hereunder or thereunder or the conditions, provisions or terms hereof or
thereof or waiving any Default or Event of Default hereunder or thereunder, but
only to the extent specified in such written agreements; provided, however,
that, no such amendment or supplemental agreement shall:

(i) increase the Term Commitment of any Lender without the consent of Agent and
the affected Lender;

(ii) extend the Term or the final scheduled maturity of any Term Loans or the
due date for any amount payable hereunder, or decrease the rate of interest
(other than the waiver of any default rate), reduce the principal amount of any
outstanding Term Loans, or reduce any scheduled (as opposed to mandatory
prepayment) principal payment or fee payable by the Borrower to Agent or a
Lender pursuant to this Agreement or any Other Document, without the consent of
Agent and each such Lender directly affected thereby;

(iii) alter the definition of the term Required Lenders or alter, amend or
modify this Section 16.02(b) without the consent of Agent and all Lenders;

(iv) release all or a substantial portion of the Collateral without the consent
of Agent and all Lenders;

(v) change the rights, duties, obligations, privileges, protections, immunities
or indemnities of Agent without the consent of Agent;

 

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(vi) release of any Loan Party from its Obligations hereunder, except in
accordance with the terms of this Agreement;

(vii) subordinate the priority of the Liens in the Collateral in favor of Agent,
for the benefit of Secured Parties, to any Liens therein held by any other
Person; or

(viii) alter the priority of allocation of payments and proceeds of Collateral
provided for in Section 11.02(b).

Any such amendment or supplemental agreement shall apply equally to each Lender
and shall be binding upon Loan Parties, Lenders and Agent and all future holders
of the Obligations. In the case of any waiver of a Default or Event of Default
pursuant to a waiver provided in accordance with the above provisions of this
Section 16.02(b), Loan Parties, Agent and Lenders shall be restored to their
former positions and rights, and any Default or Event of Default waived shall be
deemed to be cured and not continuing, but no waiver of a specific Default or
Event of Default shall extend to any other Default or Event of Default or any
subsequent Default or Event of Default (whether or not the subsequent Default or
Event of Default is the same as the Default or Event of Default which was
waived), or impair any right consequent thereon.

(c) In the event that (i) Agent requests the consent of a Lender pursuant to
this Section 16.02 and such consent is denied, (ii) a Lender is a Defaulting
Lender, (iii) a Lender is an Impacted Lender or (iv) a Lender is a Prior
Defaulting/Impacted Lender, then, in each case, Agent may, at its option,
require such Lender to assign its Term Loans and Term Commitments to Agent or to
another Lender or to any other Person designated by Agent (a “Designated
Lender”), for a price equal to the then outstanding principal amount of all Term
Loans held by such Lender plus accrued and unpaid interest and fees owing to
such Lender, which interest and fees shall be paid when, and if, collected from
the Borrower. In the event Agent elects to require any Lender to assign such
Lender’s Term Loans and Term Commitments to Agent or to a Designated Lender,
Agent will so notify such Lender in writing within one hundred and eighty
(180) days following such Lender’s denial (or with respect to clauses (ii),
(iii) or (iv)) above, during the time that such Lender is a Defaulting Lender,
an Impacted Lender or a Prior Defaulting/Impacted Lender, as applicable, or
within one hundred and eighty (180) days thereafter, and such Lender will assign
its interest to Agent or the Designated Lender no later than five (5) days
following receipt of such notice pursuant to a Commitment Transfer Supplement
executed by such Lender (or Agent on behalf of such Lender if such Lender
refuses to execute such Commitment Transfer Supplement within such time period;
and each Lender hereby irrevocable authorizes Agent to so execute such a
Commitment Transfer Supplement on its behalf), Agent or the Designated Lender,
as appropriate, and Agent (if Agent is not the Designated Lender).

Section 16.03 Successors and Assigns; Participations; New Lenders; Taxes;
Syndication.

(a) This Agreement and the Other Documents shall be binding upon and inure to
the benefit of each Loan Party, Agent, each Lender, all future holders of the
Obligations and their respective successors and assigns; except, that, no Loan
Party may assign or transfer any of its rights or obligations under this
Agreement or any Other Document (other than pursuant to a merger or
consolidation of Loan Parties permitted hereunder) without the prior written
consent of Agent and each Lender.

(b) Each Loan Party acknowledges that one or more Lenders may at any time and
from time to time sell participating interests in the Term Loans to other
Persons (each such transferee or purchaser of a participating interest, a
“Transferee”). Borrower agrees that each Transferee shall be entitled to the
benefits of Sections 3.05, 3.06 and 3.07 (subject to the requirements and
limitations therein,

 

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and under Section 16.03(f) (it being understood that the documentation required
under Section 16.03(f) shall be delivered to the participating Lender)) to the
same extent as if it were a Lender and had acquired its interest by assignment
pursuant to paragraph (c) of this Section; provided that such Transferee
(A) agrees to be subject to the provisions of Section 3.05 as if it were an
assignee under paragraph (c) of this Section; and (B) shall not be entitled to
receive any greater payment under Sections 3.05 or 3.07, with respect to any
participation, than its participating Lender would have been entitled to
receive, except to the extent such entitlement to receive a greater payment
results from a Change in Tax Law that occurs after the Transferee acquired the
applicable participation. Each Transferee may exercise all rights of payment
(including without limitation rights of set-off) with respect to the portion of
such Term Loans held by it or other Obligations payable hereunder as fully as if
such Transferee were the direct holder thereof; provided, that, Loan Parties
shall not be required to pay to any Transferee more than the amount which it
would have been required to pay to the Lender which granted an interest in its
Term Loans or other Obligations payable hereunder to such Transferee, had such
Lender retained such interest in the Term Loans hereunder or other Obligations
payable hereunder, and in no event shall Loan Parties be required to pay any
such amount arising from the same circumstances and with respect to the same
Term Loans or other Obligations payable hereunder to both such Lender and such
Transferee. Transferee’s rights under Section 16.02 shall be limited to those
items in Section 16.02(b) which require consent of each Lender or each directly
affected Lender, as applicable. Each Lender that sells a participation shall,
acting solely for this purpose as a non-fiduciary agent of the Borrower,
maintain a register on which it enters the name and address of each Transferee
and the principal amounts (and stated interest) of each Transferee’s interest in
the Term Loans hereunder or other Obligations payable hereunder (the “Transferee
Register”); provided that no Lender shall have any obligation to disclose all or
any portion of the Transferee Register (including the identity of any Transferee
or any information relating to a Transferee’s interest in any commitments,
loans, letters of credit or its other obligations under any of the Obligations)
to any Person except to the extent that such disclosure is necessary to
establish that such commitment, loan, letter of credit or other obligation is in
registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. The entries in the Transferee Register shall be conclusive absent
manifest error, and such Lender shall treat each Person whose name is recorded
in the Transferee Register as the owner of such participation for all purposes
of this Agreement notwithstanding any notice to the contrary. For the avoidance
of doubt, the Agent (in its capacity as Agent) shall have no responsibility for
maintaining a Transferee Register. Each Loan Party hereby grants to Agent, for
the ratable benefit of each Secured Party, a continuing Lien in any deposits,
moneys or other property actually or constructively held by such Transferee as
security for the Transferee’s interest in the Term Loans. Neither Agent nor any
Lender (other than the Lender selling a participation) shall have any duty to
any Transferee and may continue to deal solely with the Lender selling a
participation as if no such sale had occurred.

(c) Any Lender may sell, assign or transfer all or any part of its Term Loans
and Term Commitments (and related rights and obligations under this Agreement
and the Other Documents) to Qualified Assignees (each a “Purchasing Lender”), in
minimum amounts of not less than $1,000,000 (except such minimum amount shall
not apply to (i) a sale, assignment or transfer by any Lender to an Affiliate of
such Lender or to a group of new Lenders, each of which is an Affiliate of each
other to the extent that the aggregate amount to be assigned to all such new
Lenders is at least $1,000,000 or (ii) a sale, assignment or transfer by any
Lender of all of its Term Commitments and all of its Term Loans of such Selling
Lender), pursuant to a Commitment Transfer Supplement, executed by a Purchasing
Lender, the transferor Lender, and Agent and delivered to Agent for recording.
Upon such execution, delivery, acceptance and recording, from and after the
transfer effective date determined pursuant to such Commitment Transfer
Supplement, (A) Purchasing Lender thereunder shall be a party to this Agreement
and the Other Documents as a Lender and, to the extent transferred pursuant to
such Commitment Transfer Supplement, have Term Commitments and outstanding Term
Loans, and (B) the transferor Lender thereunder shall, to the extent its Term
Loans and Term Commitments have been transferred pursuant to such Commitment
Transfer Supplement, be released from its obligations under this

 

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Agreement and the Other Documents. Such Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary
to reflect the addition of such Purchasing Lender as a Lender and the resulting
adjustment of the Commitment Percentages arising from the purchase by such
Purchasing Lender of all or a portion of the Term Loans and Term Commitments of
such transferor Lender under this Agreement and the Other Documents. Loan
Parties hereby consent to the addition of such Purchasing Lender as a Lender and
the resulting adjustment of the Commitment Percentages arising from the purchase
by such Purchasing Lender of all or a portion of the Term Loans and Term
Commitments of such transferor Lender. Loan Parties shall execute and deliver
such further documents and do such further acts and things in order to
effectuate the foregoing. Notwithstanding the foregoing, any Lender may assign
all or any portion of the Term Loans or Term Notes held by it to any Federal
Reserve Bank or the United States Treasury as collateral security pursuant to
Regulation A of the Board of Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve Bank; provided, that, any
payment in respect of such assigned Term Loans or Term Notes made by the
Borrower to or for the account of the assigning or pledging Lender in accordance
with the terms of this Agreement shall satisfy the Borrower’s obligations
hereunder in respect to such assigned Term Loans or Term Notes to the extent of
such payment. No such assignment described in the immediately preceding sentence
shall release the assigning Lender from its obligations hereunder.

(d) Agent, acting solely in this situation as a non-fiduciary agent of the
Borrower, shall maintain at its address a copy of each Commitment Transfer
Supplement delivered to it and a register (the “Register”) for the recordation
of the names and addresses of the Term Loans owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and Loan Parties, Agent and Lenders may treat each Person whose
name is recorded in the Register as the owner of the Term Loan recorded therein
for the purposes of this Agreement. The Register shall be available for
inspection by Loan Parties or any Lender at any reasonable time and from time to
time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.

(e) Loan Parties authorize each Lender to disclose to any Transferee or
Purchasing Lender and any prospective Transferee or Purchasing Lender (who
agrees in writing or through electronic media to treat the information as
confidential and use it solely in connection with a proposed transfer under this
Section 16.03) any and all financial and other information in such Lender’s
possession concerning Loan Parties which has been delivered to Agent or such
Lender by or on behalf of Loan Parties pursuant to this Agreement or in
connection with Agent’s or such Lender’s credit evaluation of Loan Parties.

(f) Any Lender that is entitled to an exemption from or reduction of withholding
Tax with respect to payments made under any Obligation shall deliver to the
Borrower and the Agent, at the time or times reasonably requested by the
Borrower or the Agent, such properly completed and executed documentation
reasonably requested by the Borrower or the Agent as will permit such payments
to be made without withholding or at a reduced rate of withholding. In addition,
any Lender, if reasonably requested by the Borrower or the Agent, shall deliver
such other documentation prescribed by applicable law or reasonably requested by
the Borrower or the Agent as will enable the Borrower or the Agent to determine
whether or not such Lender is subject to backup withholding or information
reporting requirements. Notwithstanding anything to the contrary in the
preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section
16.03(f)(i)(A), (i)(B) and (i)(D) below) shall not be required if in the
Lender’s reasonable judgment such completion, execution or submission would
subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

(i) Without limiting the generality of the foregoing,

 

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(A) any Lender that is a US Person shall deliver to the Borrower and the Agent
on or prior to the date on which such Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the reasonable request of the
Borrower or the Agent), executed copies of IRS Form W-9 certifying that such
Lender is exempt from U.S. federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the Recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), whichever of the following is
applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Obligation, executed copies of IRS Form W-8BEN or W-8BEN-E
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “interest” article of such tax treaty and (y) with respect to
any other applicable payments under any Obligation, IRS Form W-8BEN or W-8BEN-E
establishing an exemption from, or reduction of, U.S. federal withholding Tax
pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed copies of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate
substantially in the form of Exhibit C-1 to the effect that such Foreign Lender
is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a
“10 percent shareholder” of the Borrower within the meaning of Section
881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the Code (a “US Tax Compliance Certificate”) and
(y) executed copies of IRS Form W-8BEN or W-8BEN-E; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed copies
of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E,
a US Tax Compliance Certificate substantially in the form of Exhibit C-2 or
Exhibit C-3, IRS Form W-9, and/or other certification documents from each
beneficial owner, as applicable; provided that if the Foreign Lender is a
partnership and one or more direct or indirect partners of such Foreign Lender
are claiming the portfolio interest exemption, such Foreign Lender may provide a
US Tax Compliance Certificate substantially in the form of Exhibit C-4 on behalf
of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower and the Agent (in such number of copies as shall be
requested by the Recipient) on or prior to the date on which such Foreign Lender
becomes a Lender under this Agreement (and from time to time thereafter upon the
reasonable request of the Borrower or the Agent), executed copies of any other
form prescribed by applicable law as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable law to permit the
Borrower or the Agent to determine the withholding or deduction required to be
made; and

 

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(D) if a payment made to a Lender under any Obligation would be subject to U.S.
federal withholding Tax imposed by FATCA if such Lender were to fail to comply
with the applicable reporting requirements of FATCA (including those contained
in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall
deliver to the Borrower and the Agent at the time or times prescribed by law and
at such time or times reasonably requested by the Borrower or the Agent such
documentation prescribed by applicable law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Borrower or the Agent as may be necessary for the Borrower and
the Agent to comply with their obligations under FATCA and to determine that
such Lender has complied with such Lender’s obligations under FATCA or to
determine the amount to deduct and withhold from such payment. Solely for
purposes of this clause (D), “FATCA” shall include any amendments made to FATCA
after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify the Borrower and the Agent in writing
of its legal inability to do so.

Section 16.04 Application of Payments.

Agent shall have the continuing and exclusive right to apply or reverse and
re-apply any payment and any and all proceeds of Collateral to any portion of
the Obligations. To the extent that any Loan Party makes a payment or Agent or
any Lender receives any payment or proceeds of the Collateral for any Loan
Party’s benefit, which are subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or part
thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Agent or such Lender.

Section 16.05 Indemnity/Currency Indemnity.

(a) Each Loan Party shall indemnify Agent, each Lender and each of their
respective officers, directors, Affiliates, employees, representatives and
agents (each, an “Indemnitee”) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, fees and disbursements of counsel) arising from any action,
litigation, proceeding, dispute or investigation which may be imposed on,
incurred by, or asserted against Agent or any Lender in any litigation,
proceeding, dispute or investigation instituted or conducted by any Governmental
Body or any other Person with respect to any aspect of, or any transaction
contemplated by, or referred to in, or any matter related to, this Agreement or
the Other Documents, whether or not Agent or any Lender is a party thereto,
except that no Indemnitee shall be entitled to indemnification hereunder to the
extent that any of the foregoing arises out of the gross (not mere) negligence
or willful misconduct of such Indemnitee as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction. Upon learning of any
matter described above for which any Indemnitee may want to seek indemnity from
any Loan Party, such Indemnitee shall promptly notify each Loan Party of such
matter; provided, that, the failure to do so shall not in any manner limit,
impair or affect the Loan Parties’ indemnification obligations hereunder.
Nothing contained herein or in any Other Document shall prohibit any Loan Party
from seeking contribution or indemnity from any Person other than Agent or a
Lender.

(b) If for the purposes of obtaining or enforcing judgment in any court in any
jurisdiction with respect to this Agreement or any Other Document, it becomes
necessary to convert into the currency of such jurisdiction (the “Judgment
Currency”) any amount due under this Agreement or under any Other Document in
any currency other than the Judgment Currency (the “Currency Due”) (including
any Currency Due for the purposes of Section 2.04) then, to the extent permitted
by law, conversion shall be made at the exchange rate selected by Agent on the
Business Day before the day on

 

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which judgment is given (or for the purposes of Section 2.04 on the Business Day
on which the payment was received by the Agent). In the event that there is a
change in such exchange rate between the Business Day before the day on which
the judgment is given and the date of receipt by the Agent of the amount due,
Borrower shall to the extent permitted by law, on the date of receipt by Agent,
pay such additional amounts, if any, or be entitled to receive reimbursement of
such amount, if any, as may be necessary to ensure that the amount received by
Agent on such date is the amount in the Judgment Currency which (when converted
at such exchange rate on the date of receipt by Agent in accordance with normal
banking procedures in the relevant jurisdiction) is the amount then due under
this Agreement or such Other Document in the Currency Due. If the amount of the
Currency Due (including any Currency Due for purposes of Section 2.04) which the
Agent is so able to purchase is less than the amount of the Currency Due
(including any Currency Due for purposes of Section 2.04) originally due to it,
Borrower shall to the extent permitted by law jointly and severally indemnify
and save Agent and Lenders harmless from and against loss or damage arising as a
result of such deficiency.

Section 16.06 Notice.

Any notice or request required to be given hereunder to any Loan Party or to
Agent or any Lender shall be in writing (except as expressly provided herein) at
their respective addresses set forth below or at such other address as may
hereafter be specified in a notice designated as a notice of change of address
under this Section 16.06. Any notice or request required to be given hereunder
shall be given by (a) email, (b) hand delivery, (c) overnight courier,
(d) registered or certified mail, return receipt requested, or (e) facsimile to
the number set out below (or such other number as may hereafter be specified in
a notice designated as a notice of change of address) with electronic
confirmation of its receipt. Any notice or request required to be given
hereunder shall be deemed given on the earlier of (i) actual receipt thereof,
and (ii) (A) one Business Day following posting thereof by a recognized
overnight courier, (B) three (3) days following posting thereof by registered or
certified mail, return receipt requested, or (C) upon the sending thereof when
sent by email or facsimile with electronic confirmation of its receipt, in each
case addressed to each party at its address set forth below or at such other
address as has been furnished in writing by a party to the other by like notice:

 

If to Agent at:

  

Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

 

Minneapolis, MN 55402

Attention: Forbes Energy Loan

Administrator

Telephone: (612) 217-5637

Facsimile: (612) 217-5651

email: jjames@wilmingtontrust.com

  

With a copy to:

 

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, NY 10018

Telephone: (212) 841-1220

Facsimile: (646) 441-9220

 

email: rhewitt@cov.com

 

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If to a Lender, as specified on the signature pages hereof or in the applicable
Commitment Transfer Supplement.

  

If to the Borrower or any Loan Party:

  

c/o Forbes Energy Services LLC

3000 South Business Hwy 281

South Alice, Texas 78332

Attention: L. Melvin Cooper

Telephone: 361-664-0549

Facsimile: 361-664-0599

email: mcooper@forbesenergyservices.com

With a copy to:

  

c/o Forbes Energy Services LLC

3000 South Business Hwy 281

South Alice, Texas 78332

Attention: John E. Crisp

Telephone: 361-664-0549

Facsimile: 361-664-0599

email: jecrisp@txen.com

Section 16.07 Survival. The obligations of Loan Parties under Sections 14.07,
16.05 and 16.10 shall survive termination of this Agreement and the Other
Documents and Payment in Full of the Obligations.

Section 16.08 Postponement of Subrogation, Etc. Rights.

Except as otherwise provided herein, each Loan Party expressly agrees not to
exercise, until Payment in Full of all of the Obligations, any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution of any other
claim which such Loan Party may now or hereafter have against the other Loan
Parties or other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the other Loan Parties’ property
(including, without limitation, any property which is Collateral for the
Obligations), arising from the existence or performance of this Agreement.

Section 16.09 Severability.

If any part of this Agreement is contrary to, prohibited by, or deemed invalid
under applicable laws or regulations, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given effect so
far as possible.

Section 16.10 Expenses.

The Borrower shall reimburse Agent and Lenders for all costs and expenses
(including without limitation, travel expenses) paid or incurred by Agent and
Lenders in connection with this Agreement and the Other Documents, including,
without limitation:

 

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--------------------------------------------------------------------------------

(a) reasonable attorneys’ fees and disbursements incurred by one principal
outside counsel and one local counsel in each relevant jurisdiction retained by
Agent and one principal outside counsel and one local counsel in each relevant
jurisdiction retained by Lenders in connection with (i) the administration of
this Agreement and the Other Documents, including, without limitation, the
preparation, negotiation, execution and delivery of any amendment or waiver with
respect thereto, and (ii) during the continuance of a Default or Event of
Default, (A) in all efforts made to enforce payment of any Obligations or
collection of or other realization upon any Collateral, (B) in defending or
prosecuting any actions or proceedings arising out of or relating to this
Agreement and the Other Documents, (C) in connection with the enforcement of
this Agreement or any Other Document, and (D) in enforcing Agent’s security
interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise;

(b) attorneys’ fees and expenses, fees and expenses of financial accountants,
advisors, consultants, appraisers and other professionals incurred by Agent and
Lenders and other costs and expenses incurred by Agent and Lenders (i) in
connection with the preparing, negotiating, entering into, performing or
syndicating this Agreement and/or the Other Documents, any amendment, waiver,
consent or other modification with respect thereto and the administration,
work-out or enforcement of this Agreement and the Other Documents (which
expenses incurred or paid pursuant to this clause (i) shall be reasonable), (ii)
in instituting, maintaining, preserving and foreclosing on Liens on any of the
Collateral, whether through judicial proceedings or otherwise, (iii) in
connection with any advice given to Agent or Lenders with respect to its rights
and obligations under this Agreement and all Other Documents or (iv) that Agent
or Lenders reasonably deem necessary or appropriate for the performance and
fulfillment of its functions, powers, and obligations pursuant to this Agreement
and the Other Documents; and

(c) reasonable fees and disbursements incurred by Agent and Lenders in
connection with (i) or any appraisals of Collateral, field examinations,
collateral analysis or monitoring or other business analysis conducted by
outside Persons in connection with this Agreement and the Other Documents (it
being understood that Borrower shall be responsible for the costs and expenses
thereof to the extent provided in Section 4.09 above), and (ii) the Person at
any time retained by Agent to perfect Agent’s Lien upon any Well Services
Equipment consisting of titled motor vehicles.

Section 16.11 Injunctive Relief.

Each Loan Party recognizes that, in the event any Loan Party fails to perform,
observe or discharge any of its obligations or liabilities under this Agreement,
any remedy at law may prove to be inadequate relief to Agent and the Lenders;
therefore, Agent, if Agent so requests, shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
that actual damages are not an adequate remedy.

Section 16.12 Consequential Damages.

None of Agent, any Lender, nor any agent or attorney for any of them, shall be
liable to any Loan Party for special, punitive, exemplary, indirect or
consequential damages arising from any breach of contract, tort or other wrong
relating to the establishment, administration or collection of the Obligations.

Section 16.13 Captions.

The captions at various places in this Agreement are intended for convenience
only and do not constitute and shall not be interpreted as part of this
Agreement.

 

- 100 -

--------------------------------------------------------------------------------

Section 16.14 Counterparts; Facsimile or Emailed Signatures.

This Agreement may be executed in any number of and by different parties hereto
on separate counterparts, all of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same agreement.
Any signature delivered by a party by facsimile or email transmission shall be
deemed to be an original signature hereto.

Section 16.15 Construction.

The parties acknowledge that each party and its counsel have reviewed this
Agreement and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits
thereto.

Section 16.16 Confidentiality; Sharing Information.

(a) Agent, each Lender and each Transferee shall hold all non-public information
designated as confidential and obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with Agent’s, such
Lender’s and such Transferee’s customary procedures for handling confidential
information of this nature; provided, however, that, Agent, each Lender and each
Transferee may disclose such confidential information (i) to its examiners,
affiliates, outside auditors, counsel and other professional advisors, (ii) to
Agent, any Lender or to any prospective Transferees and Purchasing Lenders (who
agrees in writing or through electronic media to treat the information as
confidential and use it solely in connection with a proposed transfer under
Section 16.03), (iii) that ceases to be non-public information through no fault
of Agent or any Lender, (iv) as required or requested by any Governmental Body
or representative thereof or pursuant to legal process, and (v) in response to
any trade credit inquiry with respect to Loan Parties if the Person making such
inquiry is so doing at a Loan Party’s request; provided further, that,
(A) unless specifically prohibited by applicable law or court order, Agent, each
Lender and each Transferee shall use reasonable efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (1) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of Agent, a Lender or a Transferee by such Governmental Body) or
(2) pursuant to legal process, and (B) in no event shall Agent, any Lender or
any Transferee be obligated to return any materials furnished by any Loan Party
other than those documents and instruments in possession of Agent or any Lender
constituting possessory Collateral once all of the Obligations have been Paid in
Full.

(b) Each Loan Party acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to such Loan
Party or one or more of its Affiliates (in connection with this Agreement or
otherwise) by Agent, any Lender or by one or more Subsidiaries or Affiliates of
Agent or such Lender and each Loan Party hereby authorizes Agent and each Lender
to share any information delivered to Agent or such Lender by such Loan Party
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of Agent or such Lender to enter into this Agreement, to any such
Subsidiary or Affiliate of Agent or such Lender, it being understood that any
such Subsidiary or Affiliate of Agent or any Lender receiving such information
shall be bound by the provision of this Section 16.16 as if it were a Lender
hereunder. Such authorization shall survive the repayment of the Obligations and
the termination of this Agreement.

Section 16.17 Publicity.

Each Loan Party hereby authorizes Agent to make appropriate announcements of the
financial arrangement entered into among Loan Parties, Agent and Lenders,
including, without limitation, announcements which are commonly known as
tombstones, in such publications and to such selected

 

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parties as Agent shall in its sole and absolute discretion deem appropriate. In
addition, each Loan Party authorizes Agent to include each Loan Party’s name and
logo in select transaction profiles and client testimonials prepared by Agent
for use in publications, company brochures and other marketing materials of
Agent. Subject to Agent’s prior written approval (which shall not be
unreasonably withheld or delayed), Loan Parties shall have the right to make
appropriate announcements of the financial arrangement entered into among Loan
Parties, Agent and Lenders in such publications and to such selected parties as
Loan Parties deem appropriate; except, that, the Loan Parties shall have the
right to make any disclosure required by law or by applicable SEC regulations
without any requirement to obtain prior written approval.

Section 16.18 Patriot Act Notice.

Each Lender and Agent subject to the USA Patriot Act of 2001 (31 U.S.C. 5318 et
seq.) hereby notifies Loan Parties that, pursuant to Section 326 thereof, it is
required to obtain, verify and record information that identifies Loan Parties,
including the name and address of each Loan Party and other information allowing
such Lender and Agent to identify Loan Parties in accordance with such act.

Section 16.19 Acknowledgement and Consent to Bail-In of EEA Financial
Institutions.

Notwithstanding anything to the contrary herein or in any Other Document or in
any other agreement, arrangement or understanding among any such parties, each
party hereto acknowledges that any liability of any EEA Financial Institution
arising hereunder or under any Other Document, to the extent such liability is
unsecured, may be subject to the Write-Down and Conversion Powers of an EEA
Resolution Authority and agrees and consents to, and acknowledges and agrees to
be bound by: (a) the application of any Write-Down and Conversion Powers by an
EEA Resolution Authority to any such liabilities arising hereunder which may be
payable to it by any party hereto that is an EEA Financial Institution; and
(b) the effects of any Bail-In Action on any such liability, including, if
applicable: (i) a reduction in full or in part or cancellation of any such
liability; (ii) a conversion of all, or a portion of, such liability into shares
or other instruments of ownership in such EEA Financial Institution, its parent
undertaking, or a bridge institution that may be issued to it or otherwise
conferred on it, and that such shares or other instruments of ownership will be
accepted by it in lieu of any rights with respect to any such liability under
this Agreement or any Other Document; or (iii) the variation of the terms of
such liability in connection with the exercise of the Write-Down and Conversion
Powers of any EEA Resolution Authority.

Section 16.20 Borrower Materials.

Borrower hereby acknowledges that (a) Agent may make available to the Lenders
materials and/or information provided by or on behalf of Borrower and the
Guarantors hereunder (collectively, the “Borrower Materials”) by posting the
Borrower Materials on Intralinks or another similar electronic system (the
“Platform”) and (b) certain of the Lenders may be “public-side” Lenders (i.e.,
Lenders that do not wish to receive material non-public information with respect
to the Borrower, the Guarantors, or their securities or subsidiaries) (each, a
“Public Lender”). Borrower hereby agrees that (w) all Borrower Materials that
are to be made available to Public Lenders shall be clearly and conspicuously
marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall
appear prominently on the first page thereof; (x) by marking Borrower Materials
“PUBLIC,” Borrower shall be deemed to have authorized Agent and the Lenders to
treat such Borrower Materials as not containing any material non-public
information with respect to the Borrower, the Guarantors, or their securities or
subsidiaries for purposes of United States federal and state securities laws
(provided, however, that to the extent such Borrower Materials constitute
confidential information, they shall be treated as set forth in

 

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--------------------------------------------------------------------------------

Section 16.16); (y) all Borrower Materials marked “PUBLIC” are permitted to be
made available through a portion of the Platform designated as “Public
Investor;” and (z) Agent shall be entitled to treat any Borrower Materials that
are not marked “PUBLIC” as being suitable only for posting on a portion of the
Platform not marked as “Public Investor.” Notwithstanding the foregoing, the
following Borrower Materials shall be deemed to be marked “PUBLIC”, unless
Borrower notifies Agent promptly prior to their intended distribution that any
such document contains material non-public information: (1) this Agreement and
the Other Documents and (2) notification of changes in the terms of the Term
Loans.

Each Public Lender agrees to cause at least one individual at or on behalf of
such Public Lender to at all times have selected the “Private Side Information”
or similar designation on the content declaration screen of the Platform in
order to enable such Public Lender or its delegate, in accordance with such
Public Lender’s compliance procedures and applicable law, including United
States Federal and state securities laws, to make reference to all Borrower
Materials that are not made available through the “Public Side Information”
portion of the Platform and that may contain material non-public information
with respect to the Borrower, the Guarantors, any Parent or their securities and
subsidiaries for purposes of United States Federal or state securities laws.

The Platform is provided “as is” and “as available.” Agent does not warrant the
accuracy or completeness of any information on the Platform nor the adequacy or
functioning of the Platform, and expressly disclaims liability for any errors or
omissions in the Borrower Materials or any issues involving the Platform. NO
WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
ARTY RIGHTS, OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY AGENT
WITH RESPECT TO BORROWER MATERIALS OR THE PLATFORM. The Lenders acknowledge that
Borrower Materials may include material non-public information of the Loan
Parties and should not be made available to any personnel who do not wish to
receive such information or who may be engaged in investment or other
market-related activities with respect to any Loan Party’s securities. None of
Agent or any related Person thereof shall have any liability to the Loan
Parties, the Lenders or any other Person for losses, claims, damages,
liabilities or expenses of any kind (whether in tort, contract or otherwise)
relating to use by any Person of the Platform or delivery of Borrower Materials
and other information through the Platform.

[Signature pages follow]

 

- 103 -

--------------------------------------------------------------------------------

Each of the parties has signed this Agreement as of the day and year first above
written.

 

BORROWER: FORBES ENERGY SERVICES LLC By:  

/s/ L. Melvin Cooper

 

Name: L. Melvin Cooper

Title: Senior Vice President and

          Chief Financial Officer

 

S-1

--------------------------------------------------------------------------------

GUARANTORS: FORBES ENERGY SERVICES LTD. By:  

/s/ L. Melvin Cooper

 

Name: L. Melvin Cooper

Title: Senior Vice President and

          Chief Financial Officer

FORBES ENERGY INTERNATIONAL, LLC By:  

/s/ L. Melvin Cooper

 

Name: L. Melvin Cooper

Title: Senior Vice President and

          Chief Financial Officer

TX ENERGY SERVICES, LLC By:  

/s/ L. Melvin Cooper

 

Name: L. Melvin Cooper

Title: Senior Vice President and

          Chief Financial Officer

C.C. FORBES, LLC By:  

/s/ L. Melvin Cooper

 

Name: L. Melvin Cooper

Title: Senior Vice President and

          Chief Financial Officer

 

S-2

--------------------------------------------------------------------------------

AGENT: WILMINGTON TRUST, NATIONAL ASSOCIATION By:  

/s/ Joshua G. James

 

Name: Joshua G. James

Title: Vice President

 

S-3

--------------------------------------------------------------------------------

LENDERS: Ascribe II Investments LLC By:  

/s/ Joseph A. Domonkos

Name: Joseph A. Domonkos Title: Authorized Signatory

 

S-4

--------------------------------------------------------------------------------

LENDERS:

Ascribe III Investments LLC By:  

/s/ Joseph A. Domonkos

Name: Joseph A. Domonkos Title: Authorized Signatory

 

S-5

--------------------------------------------------------------------------------

LENDERS: Courage Credit Opportunities Offshore Master Fund III L.P. By:  

/s/ Thomas G. Milne

Name: Thomas G. Milne Title: President, Courage Capital Management, LLC

 

S-6

--------------------------------------------------------------------------------

LENDERS: Courage Credit Opportunities Onshore Fund III, L.P. By:  

/s/ Thomas G. Milne

Name: Thomas G. Milne Title: President, Courage Capital Management, LLC

 

S-7

--------------------------------------------------------------------------------

LENDERS: FIAM High Yield Bond Commingled Pool By:  

/s/ Daniel Campbell

Name: Daniel Campbell Title: Vice President

 

S-8

--------------------------------------------------------------------------------

LENDERS: Fidelity Advisor Series I: Fidelity Advisor High Income Fund By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-9

--------------------------------------------------------------------------------

LENDERS:

Fidelity Advisor Series II: Fidelity Advisor Strategic Income Fund

 

S-10

--------------------------------------------------------------------------------

LENDERS: By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-11

--------------------------------------------------------------------------------

LENDERS: Fidelity Advisory Series I: Fidelity Advisor High Income Advantage Fund
By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-12

--------------------------------------------------------------------------------

LENDERS: Fidelity Central Investment Portfolios LLC: Fidelity High Income
Central Fund 1 By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-13

--------------------------------------------------------------------------------

LENDERS: Fidelity Income Fund: Fidelity Total Bond Fund By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-14

--------------------------------------------------------------------------------

LENDERS: Fidelity School Street Trust: Fidelity Strategic Income Fund By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-15

--------------------------------------------------------------------------------

LENDERS: Fidelity Summer Street Trust: Fidelity Capital & Income Fund By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-16

--------------------------------------------------------------------------------

LENDERS: Fidelity Summer Street Trust: Fidelity Short Duration High Income Fund
By:  

/s/ Colm Hogan

Name: Colm Hogan Title: Authorized Signatory

 

S-17

--------------------------------------------------------------------------------

LENDERS: JLP Credit Opportunity IDF Series Interests of the SALI Multi-Series
Fund, L.P. By:  

/s/ Jeffrey Peskind

Name: Jeffrey Peskind Title: CEO, Phoenix Investment Adviser, LLC, Investment
Subadviser

 

S-18

--------------------------------------------------------------------------------

LENDERS: JLP Credit Opportunity Master Fund Ltd. By:  

/s/ Jeffrey Peskind

Name: Jeffrey Peskind Title: CEO, Phoenix Investment Adviser LLC, Investment
Manager

 

S-19

--------------------------------------------------------------------------------

LENDERS: Mercer QIF Fund PLC – Mercer Investment Fund 1 By:  

/s/ Jeffrey Peskind

Name: Jeffrey Peskind Title: CEO, Phoenix Investment Adviser LLC, Sub-Investment
Manager

 

S-20

--------------------------------------------------------------------------------

LENDERS: PCM Fund Inc. By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-21

--------------------------------------------------------------------------------

LENDERS: PIMCO Corporate & Income Opportunity Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-22

--------------------------------------------------------------------------------

LENDERS: PIMCO Corporate & Income Strategy Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-23

--------------------------------------------------------------------------------

LENDERS: PIMCO Dynamic Credit and Mortgage Income Fund (formerly PIMCO Dynamic
Credit Income Fund) By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-24

--------------------------------------------------------------------------------

LENDERS: PIMCO Global Income Opportunities Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-25

--------------------------------------------------------------------------------

LENDERS: PIMCO Global Stocksplus & Income Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-26

--------------------------------------------------------------------------------

LENDERS: PIMCO High Income Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-27

--------------------------------------------------------------------------------

LENDERS: PIMCO Income Opportunity Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-28

--------------------------------------------------------------------------------

LENDERS: PIMCO Income Strategy Fund By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-29

--------------------------------------------------------------------------------

LENDERS: PIMCO Income Strategy Fund II By:  

/s/ David Brownson

Name:   David Brownson Title:   Vice President

 

S-30

--------------------------------------------------------------------------------

LENDERS:

PIMCO Strategic Income Fund, Inc.

By:  

/s/ David Brownson

Name: David Brownson

Title: Vice President

 

S-31

--------------------------------------------------------------------------------

LENDERS:

Solace Forbes Holdings, LLC

By:  

/s/ Xavier Corzo

Name: Xavier Corzo

Title: Principal

 

S-32

--------------------------------------------------------------------------------

LENDERS:

Variable Insurance Products Fund V: Strategic Income Portfolio

By: /s/ Colm Hogan                                             

Name: Colm Hogan

Title: Authorized Signatory

 

S-33

--------------------------------------------------------------------------------

LENDERS:

Variable Insurance Products Fund: High Income Portfolio By:  

/s/ Colm Hogan

Name: Colm Hogan

Title: Authorized Signatory

 

S-34

--------------------------------------------------------------------------------

Schedule C-1

to

Loan and Security Agreement

Term Commitments

 

Lender

   Term
Commitment  

Ascribe II Investments LLC

   $ 1,519,562.91  

Ascribe III Investments LLC

   $ 14,058,227.59  

Courage Credit Opportunities Offshore Master Fund III L.P.

   $ 2,268,953.48  

Courage Credit Opportunities Onshore Fund III, L.P.

   $ 1,027,671.48  

FIAM High Yield Bond Commingled Pool

   $ 508,928.57  

Fidelity Advisor Series I: Fidelity Advisor High Income Fund

   $ 448,214.29  

Fidelity Advisor Series II: Fidelity Advisor Strategic Income Fund

   $ 670,535.71  

Fidelity Advisory Series I: Fidelity Advisory High Income Advantage

   $ 619,642.86  

Fidelity Central Investment Portfolios LLC: Fidelity High Income Central Fund 1

   $ 730,357.14  

Fidelity Income Fund: Fidelity Total Bond Fund

   $ 1,470,714.29  

Fidelity School Street Trust: Fidelity Strategic Income Fund

   $ 616,964.29  

Fidelity Summer Street Trust: Fidelity Capital & Income Fund

   $ 1,840,178.57  

Fidelity Summer Street Trust: Fidelity Short Duration High Income Fund

   $ 61,607.14  

JLP Credit Opportunity IDF Series Interests of the SALI Multi-Series Fund, L.P.

   $ 113,535.78  

JLP Credit Opportunity Master Fund Ltd.

   $ 3,234,407.36  

Mercer QIF Fund PLC – Mercer Investment Fund 1

   $ 908,286.26  

PCM Fund Inc.

   $ 431,435.97  

PIMCO Corporate & Income Opportunity Fund

   $ 785,213.47  

PIMCO Corporate & Income Strategy Fund

   $ 138,059.51  

PIMCO Dynamic Credit and Mortgage Income Fund (formerly PIMCO Dynamic Credit
Income Fund)

   $ 1,848,362.53  

PIMCO Global Income Opportunities Fund

   $ 2,066,351.23  

PIMCO Global Stocksplus & Income Fund

   $ 66,304.90  

PIMCO High Income Fund

   $ 800,881.41  

PIMCO Income Opportunity Fund

   $ 358,773.07  

PIMCO Income Strategy Fund

   $ 161,674.95  

PIMCO Income Strategy Fund II

   $ 264,311.30  

PIMCO Strategic Income Fund, Inc.

   $ 54,497.18  

Solace Forbes Holdings, LLC

   $ 11,471,882.48  

Variable Insurance Products Fund V: Strategic Income Portfolio

   $ 62,500.00  

Variable Insurance Products Fund: High Income Portfolio

   $ 1,391,964.29  

--------------------------------------------------------------------------------

Schedule 2.04

to

Loan and Security Agreement

Payment Account; Disbursement of Term Loan Proceeds

Wilmington Trust, National Association

1100 North Market Street

Wilmington, DE 19801

ABA

Account No.

Account Name:

Reference:

Attention:

--------------------------------------------------------------------------------

Schedule 4.04

to

Loan and Security Agreement

Books and Records Locations

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 4.14(c)

to

Loan and Security Agreement

Location of Chief Executive Offices

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.02(a)

to

Loan and Security Agreement

Jurisdictions of Qualification and Good Standing

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.02(b)

to

Loan and Security Agreement

Subsidiaries

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.04

to

Loan and Security Agreement

Federal Tax Identification Number

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.06

to

Loan and Security Agreement

Prior Names

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.07

to

Loan and Security Agreement

Real Property

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.08(b)

to

Loan and Security Agreement

Litigation / Commercial Tort Claims / Money Borrowed

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.08(d)

to

Loan and Security Agreement

Plans

None.

--------------------------------------------------------------------------------

Schedule 5.09

to

Loan and Security Agreement

Intellectual Property, Source Code Escrow Agreements

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.13

to

Loan and Security Agreement

Labor Disputes

None.

--------------------------------------------------------------------------------

Schedule 5.22

to

Loan and Security Agreement

Capital Structure

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 5.23

to

Loan and Security Agreement

Bank Accounts

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 7.02

to

Loan and Security Agreement

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 7.08

to

Loan and Security Agreement

Existing Indebtedness

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule 8.01(j)

to

Loan and Security Agreement

Litigation

None.

--------------------------------------------------------------------------------

Exhibit A

to

Loan and Security Agreement

Form of Notice of Borrowing Request

 

To: Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

Minneapolis, MN 55402

Attention: Forbes Energy Loan Administrator

Ladies and Gentlemen:

Reference is made to the Loan and Security Agreement, dated April 13, 2017, by
and among FORBES ENERGY SERVICES LLC, a limited liability company formed under
the laws of the State of Delaware (“Borrower”), TX ENERGY SERVICES, LLC, a
limited liability company formed under the laws of the State of Delaware (“TX
Energy”), C.C. FORBES, LLC, a limited liability company formed under the laws of
the State of Delaware (“C.C.”), FORBES ENERGY INTERNATIONAL, LLC, a limited
liability company formed under the laws of the State of Delaware
(“International”), and FORBES ENERGY SERVICES LTD., a Delaware corporation
(“Parent”; and together with Borrower, TX Energy, C.C. and International, each a
“Loan Party” and collectively, “Loan Parties”), Wilmington Trust, National
Association, in its capacity as agent (in such capacity, “Agent”) pursuant to
the Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions from time to time party to the Loan Agreement as lenders
(individually, each a “Lender” and collectively, “Lenders”), and the Lenders (as
such Loan and Security Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the “Loan
Agreement”). Capitalized terms used and not defined herein shall have the
meaning ascribed to them in the Loan Agreement.

Borrower hereby gives irrevocable notice, pursuant to Section 2.02(a) of the
Loan Agreement, of its request to, on April 13, 2017, incur a Term Loan in the
amount of $50,000,000.

Borrower hereby (a) represents and warrants that all of the conditions contained
in Section 8.01 of the Loan Agreement have been satisfied on and as of the date
hereof, and will continue to be satisfied on and as of the date of the borrowing
requested hereby, before and after giving effect thereto; and (b) affirms the
effectiveness of Agent’s Liens, on behalf of itself and Lenders, pursuant to the
Loan Agreement.

Borrower hereby represents and warrants that the instructions set forth in the
Closing Date Funds Flow Memorandum and Disposition Instructions, copies of which
are attached hereto as Annex A and Annex B, respectively, comply with the Loan
Agreement. Borrower instructs Agent to execute and deliver each such Disposition
Instruction on the Closing Date. In the event any of the amounts set forth in
the Closing Date Funds Flow Memorandum and Disposition Instructions are
incorrect, the Borrower shall be liable for any losses, costs and expenses
arising therefrom.

 

Date:                 , 20                 FORBES ENERGY SERVICES LLC,     as
Borrower     By:  

 

    Name:     Title:

--------------------------------------------------------------------------------

ANNEX A

(Funds Flow Memorandum)

--------------------------------------------------------------------------------

ANNEX B

(Disposition Instructions)

--------------------------------------------------------------------------------

Exhibit B

to

Loan and Security Agreement

Form of Notice of Release Request

 

To: Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

Minneapolis, MN 55402

Attention: Forbes Energy Loan Administrator

Ladies and Gentlemen:

Reference is made to the Loan and Security Agreement, dated April 13, 2017, by
and among FORBES ENERGY SERVICES LLC, a limited liability company formed under
the laws of the State of Delaware (“Borrower”), TX ENERGY SERVICES, LLC, a
limited liability company formed under the laws of the State of Delaware (“TX
Energy”), C.C. FORBES, LLC, a limited liability company formed under the laws of
the State of Delaware (“C.C.”), FORBES ENERGY INTERNATIONAL, LLC, a limited
liability company formed under the laws of the State of Delaware
(“International”), and FORBES ENERGY SERVICES LTD., a Delaware corporation
(“Parent”; and together with Borrower, TX Energy, C.C. and International, each a
“Loan Party” and collectively, “Loan Parties”), Wilmington Trust, National
Association, in its capacity as agent (in such capacity, “Agent”) pursuant to
the Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions from time to time party to the Loan Agreement as lenders
(individually, each a “Lender” and collectively, “Lenders”), and the Lenders (as
such Loan and Security Agreement now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced, the “Loan
Agreement”). Capitalized terms used and not defined herein shall have the
meaning ascribed to them in the Loan Agreement.

Borrower hereby gives irrevocable notice, pursuant to Section 2.08(b) of the
Loan Agreement, of its request to, on                         , 20    , to
release proceeds from the Master Account in the amount of $                    
(the “Release”).

In connection with such Release, the undersigned officer of Borrower hereby
certifies on the date hereof that:

 

  1. The proceeds of the Release will be used for the following purpose (which
purpose is described in the most recent Rolling Budget delivered under the Loan
Agreement, a copy of which is attached as Annex A hereto):

[Insert description]1

 

  2. The representations and warranties made by any Loan Party in or pursuant to
the Loan Agreement and any Other Document to which it is a party, and each of
the representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
the Loan Agreement or any Other Document, are true and correct in all material
respects (without duplication of any materiality qualifiers already set forth
therein; or in all

 

1 

Purpose must be set forth in the Rolling Budget (which must be in form and
substance reasonably satisfactory to the Lenders).

--------------------------------------------------------------------------------

  respects with respect to representations and warranties made on the Closing
Date) on and as of the date hereof and the date of the requested Release, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties were true
and correct in all material respects (without duplication of any materiality
qualifiers already set forth therein) on and as of such earlier date).

 

  3. No Default or Event of Default has occurred or is continuing as of the date
hereof and as of the date of the requested Release, or would exist after giving
effect to the release on the date thereof.

 

  4. The cash and Cash Equivalents of the Loan Parties that are not Restricted
shall be less than $7,000,000 after giving effect to the Release on the date
thereof.

 

  5. Attached hereto as Annex B are the resolutions of the board of directors
(or equivalent authority) of Parent approving the requested Release and the use
of proceeds described in paragraph 1 above, which resolutions remain and will
remain in full force and effect and have not been or will be modified as of the
date hereof or as of the date of the requested Release.

Date:                        , 20        

 

FORBES ENERGY SERVICES LLC, as Borrower

By:  

 

Name:   Title:  

 

ACKNOWLEDGED AND AGREED:

[NAME OF LENDER]

By:  

 

Name: Title:

[NAME OF LENDER]

By:  

 

Name: Title:

--------------------------------------------------------------------------------

Annex A

(Rolling Budget)

--------------------------------------------------------------------------------

Annex B

(Resolutions)

--------------------------------------------------------------------------------

Exhibit C-1

to

Loan and Security Agreement

Form of US Tax Compliance Certificate (For Foreign Lenders That

Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan and Security Agreement dated as of
April 13, 2017 (as amended, supplemented or otherwise modified from time to
time, the “Loan Agreement”), among Forbes Energy Services LLC (the “Borrower”),
Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, and
Forbes Energy Services, Ltd., as guarantors, Wilmington Trust, National
Association (the “Agent”), and each lender from time to time party thereto.

Pursuant to the provisions of Section 16.03(f) of the Loan Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Term Loan(s) (as well as any Term Note(s) evidencing such Term Loan(s))
in respect of which it is providing this certificate, (ii) it is not a “bank”
within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a “ten
percent shareholder” of the Borrower within the meaning of Section 871(h)(3)(B)
of the Code and (iv) it is not a “controlled foreign corporation” related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent and the Borrower with a certificate of
its non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing
this certificate, the undersigned agrees that (1) if the information provided on
this certificate changes, the undersigned shall promptly so inform the Borrower
and the Agent, and (2) the undersigned shall have at all times furnished the
Borrower and the Agent with a properly completed and currently effective
certificate in either the calendar year in which each payment is to be made to
the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF LENDER] By:  

 

Name: Title: Date:                     , 20[     ]

--------------------------------------------------------------------------------

Exhibit C-2

to

Loan and Security Agreement

Form of US Tax Compliance Certificate (For Foreign Participants That

Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan and Security Agreement dated as of
April 13, 2017 (as amended, supplemented or otherwise modified from time to
time, the “Loan Agreement”), among Forbes Energy Services LLC (the “Borrower”),
Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, and
Forbes Energy Services, Ltd., as guarantors, Wilmington Trust, National
Association (the “Agent”), and each lender from time to time party thereto.

Pursuant to the provisions of Section 16.03(f) of the Loan Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a “ten percent shareholder” of the Borrower within the meaning
of Section 871(h)(3)(B) of the Code and (iv) it is not a “controlled foreign
corporation” related to the Borrower as described in Section 881(c)(3)(C) of the
Code.

The undersigned has furnished its participating Lender with a certificate of its
non-U.S. Person status on IRS Form W-8BEN or IRS Form W-8BEN-E. By executing
this certificate, the undersigned agrees that (1) if the information provided on
this certificate changes, the undersigned shall promptly so inform such Lender
in writing, and (2) the undersigned shall have at all times furnished such
Lender with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name: Title: Date:                     , 20[     ]

--------------------------------------------------------------------------------

Exhibit C-3

to

Loan and Security Agreement

Form of US Tax Compliance Certificate (For Foreign Participants That

Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan and Security Agreement dated as of
April 13, 2017 (as amended, supplemented or otherwise modified from time to
time, the “Loan Agreement”), among Forbes Energy Services LLC (the “Borrower”),
Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, and
Forbes Energy Services, Ltd., as guarantors, Wilmington Trust, National
Association (the “Agent”), and each lender from time to time party thereto.

Pursuant to the provisions of Section 16.03(f) of the Loan Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a “bank” extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a “ten percent shareholder” of the
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a “controlled foreign corporation”
related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS
Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or
IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform such Lender and (2) the
undersigned shall have at all times furnished such Lender with a properly
completed and currently effective certificate in either the calendar year in
which each payment is to be made to the undersigned, or in either of the two
calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

 

[NAME OF PARTICIPANT] By:  

 

Name: Title: Date:                     , 20[     ]

--------------------------------------------------------------------------------

Exhibit C-4

to

Loan and Security Agreement

Form of US Tax Compliance Certificate (For Foreign Lenders That

Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Loan and Security Agreement dated as of
April 13, 2017 (as amended, supplemented or otherwise modified from time to
time, the “Loan Agreement”), among Forbes Energy Services LLC (the “Borrower”),
Forbes Energy International, LLC, TX Energy Services, LLC, C.C. Forbes, LLC, and
Forbes Energy Services, Ltd., as guarantors, Wilmington Trust, National
Association (the “Agent”), and each lender from time to time party thereto.

Pursuant to the provisions of Section 16.03(f) of the Loan Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Term
Loan(s) (as well as any Term Note(s) evidencing such Term Loan(s)) in respect of
which it is providing this certificate, (ii) its direct or indirect
partners/members are the sole beneficial owners of such Term Loan(s) (as well as
any Term Note(s) evidencing such Term Loan(s)), (iii) with respect to the
extension of credit pursuant to this Loan Agreement or any Other Document,
neither the undersigned nor any of its direct or indirect partners/members is a
“bank” extending credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business within the meaning of
Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect
partners/members is a “ten percent shareholder” of the Borrower within the
meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a “controlled foreign corporation” related to the
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Agent and the Borrower with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS
Form W-8BEN-E or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN or
IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption. By executing this certificate, the
undersigned agrees that (1) if the information provided on this certificate
changes, the undersigned shall promptly so inform the Borrower and the Agent,
and (2) the undersigned shall have at all times furnished the Borrower and the
Agent with a properly completed and currently effective certificate in either
the calendar year in which each payment is to be made to the undersigned, or in
either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Loan Agreement and used
herein shall have the meanings given to them in the Loan Agreement.

--------------------------------------------------------------------------------

[NAME OF LENDER] By:  

 

Name: Title: Date:                     , 20[     ]

--------------------------------------------------------------------------------

Exhibit D

to

Loan and Security Agreement

Form of Title Agent Service Agreement

[See attached.]

--------------------------------------------------------------------------------

Exhibit 2.01

to

Loan and Security Agreement

Form of Promissory Note

                         , 20    

FOR VALUE RECEIVED, the undersigned ( “Borrower”) hereby, jointly and severally,
promises to pay to                          or its registered assigns (the
“Lender”), in accordance with the provisions of the Loan Agreement (as
hereinafter defined), the principal amount of each Term Loan from time to time
made by the Lender to Borrower under that certain Loan and Security Agreement,
dated April 13, 2017, by and among Borrower, TX ENERGY SERVICES, LLC, a limited
liability company formed under the laws of the State of Delaware (“TX Energy”),
C.C. FORBES, LLC, a limited liability company formed under the laws of the State
of Delaware (“C.C.”), FORBES ENERGY INTERNATIONAL, LLC, a limited liability
company formed under the laws of the State of Delaware (“International”), and
FORBES ENERGY SERVICES LTD., a Delaware corporation (“Parent”; and together with
Borrower, TX Energy, C.C. and International, each a “Loan Party” and
collectively, “Loan Parties”), Wilmington Trust, National Association, in its
capacity as agent (in such capacity, “Agent”), and the lenders from time to time
party thereto (as such Loan and Security Agreement now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or replaced, the
“Loan Agreement”).

Borrower promises to pay interest on the unpaid principal amount of each Term
Loan from the date of such Term Loan until such principal amount is paid in
full, at such interest rates and at such times as provided in the Loan
Agreement. All payments of principal and interest shall be made to the Agent for
the account of the Lender and in same day funds to the Payment Account as set
forth in the Loan Agreement. If any amount is not paid in full when due
hereunder, such unpaid amount shall bear interest, to be paid upon demand, from
the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Loan Agreement.

This Promissory Note (this “Term Note”) is one of the Term Notes referred to in
the Loan Agreement, is entitled to the benefits thereof and may be prepaid in
whole or in part subject to the terms and conditions provided therein. This Term
Note is also entitled to the benefits of the guaranty provided in Article XV of
the Loan Agreement and is secured by the Collateral. Upon the occurrence and
continuation of one or more of the Events of Default specified in the Loan
Agreement, all amounts then remaining unpaid on this Term Note shall become, or
may be declared to be, immediately due and payable all as provided in the Loan
Agreement. Term Loans made by the Lender shall be evidenced by one or more loan
accounts or records maintained by the Lender in the ordinary course of business.
The Lender may also attach schedules to this Term Note and endorse thereon the
date, amount and maturity of its Term Loans and payments with respect thereto.

Each Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Term Note.

--------------------------------------------------------------------------------

THIS TERM NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLIED TO CONTRACTS TO BE PERFORMED WHOLLY WITHIN THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

FORBES ENERGY SERVICES LLC By:  

 

Name:

Title:

 

--------------------------------------------------------------------------------

Exhibit 5.05

to

Loan and Security Agreement

Financial Projections

[See attached.]

--------------------------------------------------------------------------------

Exhibit 9.06

to

Loan and Security Agreement

Form of Compliance Certificate

 

To: Wilmington Trust, National Association

50 South Sixth Street, Suite 1290

Minneapolis, MN 55402

Attention: Forbes Energy Loan Administrator

Ladies and Gentlemen:

I hereby certify to you pursuant to Section [9.06][9.07][9.08] of the Loan
Agreement (as defined below) as follows:

1. I am the duly elected Chief Financial Officer of FORBES ENERGY SERVICES LLC,
a limited liability company formed under the laws of the State of Delaware
(“Borrower”). Capitalized terms used herein without definition shall have the
meanings given to such terms in the Loan and Security Agreement, dated April 13,
2017, by and among Borrower, TX ENERGY SERVICES, LLC, a limited liability
company formed under the laws of the State of Delaware (“TX Energy”), C.C.
FORBES, LLC, a limited liability company formed under the laws of the State of
Delaware (“C.C.”), FORBES ENERGY INTERNATIONAL, LLC, a limited liability company
formed under the laws of the State of Delaware (“International”), and FORBES
ENERGY SERVICES LTD., a Delaware corporation (“Parent”; and together with
Borrower, TX Energy, C.C. and International, each a “Loan Party” and
collectively, “Loan Parties”), Wilmington Trust, National Association, in its
capacity as agent (in such capacity, “Agent”) pursuant to the Loan Agreement (as
hereinafter defined) acting for and on behalf of the financial institutions from
time to time party to the Loan Agreement as lenders (individually, each a
“Lender” and collectively, “Lenders”), and the Lenders (as such Loan and
Security Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”).
Capitalized terms used and not defined herein shall have the meaning ascribed to
them in the Loan Agreement.

2. On behalf of the Loan Parties, I have reviewed the terms of the Loan
Agreement, and have made, or have caused to be made under my supervision, a
review in reasonable detail of the transactions and the financial condition of
Loan Parties and their Subsidiaries during the immediately preceding fiscal
[month][quarter][year].

3. The review described in Section 2 above did not disclose the existence during
or at the end of such fiscal [month][quarter][year], and I have no knowledge of
the existence and continuance on the date hereof, of any condition or event
which constitutes a Default or an Event of Default, except as set forth on
Schedule I attached hereto. Described on Schedule I attached hereto are the
exceptions, if any, to this Section 3 listing, in detail, the nature of the
condition or event, the period during which it has existed and the action which
any Loan Party has taken, is taking, or proposes to take with respect to such
condition or event.

--------------------------------------------------------------------------------

4. On behalf of the Loan Parties, I further certify that, based on the review
described in Section 2 above, no Loan Party nor any of its Subsidiaries has at
any time during or at the end of such fiscal [month][quarter][year], except as
specifically described on Schedule II attached hereto or as permitted by the
Loan Agreement, done any of the following:

(a) Changed its respective corporate name, or transacted business under any
trade name, style, or fictitious name, other than those previously described to
you and set forth in the Loan Agreement or the Other Documents.

(b) Changed the location of its chief executive office, changed its jurisdiction
of incorporation, changed its type of organization or changed the location of or
disposed of any of its properties or assets or established any new asset
locations except as permitted under the Loan Agreement.

(c) Permitted or suffered to exist any security interest in or liens on any of
its properties, whether real or personal, other than a Permitted Encumbrance.

(d) [To be inserted only for Compliance Certificate delivered as of the end of
each fiscal year-end.] To the best of our knowledge, is in compliance in all
material respects with any applicable Environmental Laws. To the extent any Loan
Party or any Subsidiary of any Loan Party is not in compliance with any
Environmental Laws, Schedule III attached hereto shall set forth with
specificity all areas of non-compliance and the proposed action such Loan Party
or Subsidiary, as applicable, will implement in order to achieve full
compliance.

6. There has been no change in the location of any of Loan Parties’ books and
records from those set forth on Schedule 4.04 to the Loan Agreement, except as
set forth on Schedule V, and any Well Services Equipment located outside of the
United States is also set forth on Schedule V.

7. On behalf of the Loan Parties, I further certify that, except as set forth on
Schedule VI hereto:

(a)    All sales, personal property and payroll and other taxes of Loan Parties
are currently paid; and

(b) Loan Parties have not received notice of breach of any material contract of
a Loan party or of any of their Subsidiaries which could reasonably be expected
to result in a Material Adverse Effect.

The foregoing certifications are made and delivered this                     
day of                             , 20    .

Date:                    , 20    

 

Very truly yours, FORBES ENERGY SERVICES LLC, as Borrower By:  

 

Name:  

 

Title:  

 

--------------------------------------------------------------------------------

Schedule I

to

Compliance Certificate

Defaults And Events Of Default

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule II

to

Compliance Certificate

Changes in Representations

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule III

to

Compliance Certificate

Environmental Laws

[to be provided by Borrower]

--------------------------------------------------------------------------------

Schedule IV

to

Compliance Certificate

Covenant 6.9 - Financial Covenant Calculations

--------------------------------------------------------------------------------

Schedule V

to

Compliance Certificate

Locations

[to be provided by Borrower]

--------------------------------------------------------------------------------

Exhibit 16.03

to

Loan and Security Agreement

Form of Commitment Transfer Supplement

This COMMITMENT TRANSFER SUPPLEMENT (this “Supplement”) dated as of
                    , 20     is made between                      (the
“Assignor”) and                      (the “Assignee”).

WITNESSETH:

WHEREAS, Wilmington Trust, National Association, in its capacity as agent (in
such capacity, “Agent”) pursuant to the Loan Agreement (as hereinafter defined)
acting for and on behalf of the financial institutions from time to time party
to the Loan Agreement as lenders (individually, each a “Lender” and
collectively, “Lenders”), and the Lenders have entered or are about to enter
into financing arrangements pursuant to which Lenders may make loans and
advances and provide other financial accommodations to FORBES ENERGY SERVICES
LLC, a limited liability company formed under the laws of the State of Delaware
(“Borrower”), TX ENERGY SERVICES, LLC, a limited liability company formed under
the laws of the State of Delaware (“TX Energy”), C.C. FORBES, LLC, a limited
liability company formed under the laws of the State of Delaware (“C.C.”),
FORBES ENERGY INTERNATIONAL, LLC, a limited liability company formed under the
laws of the State of Delaware (“International”), and FORBES ENERGY SERVICES
LTD., a corporation formed under the laws of the State of Delaware (“Parent”;
and together with Borrower, TX Energy, C.C., and International, each a “Loan
Party” and collectively, “Loan Parties”), as set forth in the Loan and Security
Agreement, dated April 13, 2017, by and among Agent, Lenders, Borrowers and
certain affiliates of Borrowers party thereto as Guarantors (as such Loan and
Security Agreement now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”; all
capitalized terms used but not defined herein shall have the meanings given to
them in the Loan Agreement), and the Other Documents (as defined in the Loan
Agreement);

WHEREAS, as of the date of this Supplement, Assignor held Term Loans or
committed to making Term Loans (the “Committed Term Loans”) to Borrowers in an
aggregate amount not to exceed $                     (the “Term Commitment”);
and

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights and
obligations of Assignor under the Loan Agreement in respect of its Term
Commitment in an amount equal to                     (the “Assigned Commitment
Amount”) on the terms and subject to the conditions set forth herein and
Assignee wishes to accept assignment of such rights and to assume such
obligations from Assignor on such terms and subject to such conditions.

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:

1. Commitment Transfer.

(a) Subject to the terms and conditions of this Supplement, (i) Assignor hereby
sells, transfers and assigns to Assignee, and (ii) Assignee hereby purchases,
assumes and undertakes from Assignor, without recourse and without
representation or warranty (except as provided in this Supplement) an interest
in (A) the Term Commitment and each of the Committed Term Loans of Assignor and
(B) all related rights, benefits, obligations, liabilities and indemnities of
the Assignor under and in connection with the Loan Agreement and the Other
Documents, so that

--------------------------------------------------------------------------------

after giving effect thereto, the Term Commitment of Assignee and the Term
Commitment of Assignor shall be as set forth below and the Pro Rata Share of
Assignee shall be                      (    %)2 percent and the Pro Rata Share
of Assignor shall be                      (    %)3 percent.

(b) With effect on and after the Effective Date (as defined in Section 5
hereof), Assignee shall be a party to the Loan Agreement and succeed to all of
the rights and be obligated to perform all of the obligations of a Lender under
the Loan Agreement, including the requirements concerning confidentiality and
the payment of indemnification, with a Term Commitment in an amount equal to the
Assigned Commitment Amount. Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender. It is the intent of the parties
hereto that the Term Commitment of Assignor shall, as of the Effective Date, be
reduced by an amount equal to the Assigned Commitment Amount and Assignor shall
relinquish its rights and be released from its obligations under the Loan
Agreement to the extent such obligations have been assumed by Assignee.

(c) After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignee’s Term Commitment will be $                    .

(d) After giving effect to the assignment and assumption set forth herein, on
the Effective Date Assignor’s Term Commitment will be $                    .

2. Payments. As consideration for the sale, assignment and transfer contemplated
in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date in
immediately available funds an amount equal to $                    
representing Assignee’s Pro Rata Share of the principal amount of all Committed
Term Loans.

3. Reallocation of Payments. Any interest, fees and other payments accrued to
the Effective Date with respect to the Term Commitment and Committed Term Loans
shall be for the account of Assignor. Any interest, fees and other payments
accrued on and after the Effective Date with respect to the Assigned Commitment
Amount shall be for the account of Assignee. Each of Assignor and Assignee
agrees that it will hold in trust for the other party any interest, fees and
other amounts which it may receive to which the other party is entitled pursuant
to the preceding sentence and pay to the other party any such amounts which it
may receive promptly upon receipt.

4. Independent Credit Decision. Assignee (a) acknowledges that it has received a
copy of the Loan Agreement and the Schedules and Exhibits thereto, together with
copies of the most recent financial statements of each Borrower and its
Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Supplement and (b) agrees that it will, independently and without reliance
upon Assignor, Agent or any Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit and
legal decisions in taking or not taking action under the Loan Agreement.

5. Effective Date. [                    ], 20[    ] [TO BE INSERTED BY THE AGENT
AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFORE.]

 

2  Set forth to at least nine decimals.

3  Set forth to at least nine decimals.

--------------------------------------------------------------------------------

6. Agent.

(a) Assignee hereby appoints and authorizes Wilmington Bank, National
Association, in its capacity as Agent, to take such action as agent on its
behalf to exercise such powers under the Loan Agreement as are delegated to
Agent by Lenders pursuant to the terms of the Loan Agreement.

(b) If Assignor is the Agent, Assignee shall assume no duties or obligations
held by Assignor in its capacity as Agent under the Loan Agreement.

7. Withholding Tax. Assignee (a) represents and warrants to Assignor, Agent and
Borrowers that under applicable law and treaties no tax will be required to be
withheld by Assignee, Agent or Borrowers with respect to any payments to be made
to Assignee hereunder, under the Loan Agreement or under any of the Other
Documents, (b) represents and warrants that attached to this Supplement is any
documentation required to be delivered by it pursuant to Section 16.03(f) of the
Loan Agreement, duly completed and executed by Assignee, and (c) agrees to
comply with all applicable U.S. laws and regulations with regard to such
withholding tax exemption.

8. Representations and Warranties.

(a) Assignor represents and warrants that (i) it is the legal and beneficial
owner of the interest being assigned by it hereunder and that such interest is
free and clear of any security interest, lien, encumbrance or other adverse
claim, (ii) it is duly organized and existing and it has the full power and
authority to take, and has taken, all action necessary to execute and deliver
this Supplement and any other documents required or permitted to be executed or
delivered by it in connection with this Supplement and to fulfill its
obligations hereunder, (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Supplement, and apart
from any agreements or undertakings or filings required by the Loan Agreement,
no further action by, or notice to, or filing with, any Person is required of it
for such execution, delivery or performance, and (iv) this Supplement has been
duly executed and delivered by it and constitutes the legal, valid and binding
obligation of Assignor, enforceable against Assignor in accordance with the
terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights and to general equitable principles.

(b) Assignor makes no representation or warranty and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Loan Agreement or any of the Other Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Loan Agreement or any other instrument or document furnished pursuant
thereto. Assignor makes no representation or warranty in connection with, and
assumes no responsibility with respect to, the solvency, financial condition or
statements of each Borrower or any of its respective Affiliates, or the
performance or observance by any Borrower or any other Person, of any of their
respective obligations under the Loan Agreement or any other instrument or
document furnished in connection therewith.

(c) Assignee represents and warrants that (i) it is duly organized and existing
and it has full power and authority to take, and has taken, all action necessary
to execute and deliver this Supplement and any other documents required or
permitted to be executed or delivered by it in connection with this Supplement,
and to fulfill its obligations hereunder, (ii) no notices to, or consents,
authorizations or approvals of, any Person are required (other than any already
given or obtained) for its due execution, delivery and performance of this
Supplement, and apart from any agreements or undertakings or filings required by
the Loan Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance; (iii) this
Supplement has been duly executed and delivered by it and constitutes the legal,
valid

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and binding obligation of Assignee, enforceable against Assignee in accordance
with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
moratorium, reorganization and other laws of general application relating to or
affecting creditors’ rights to general equitable principles; and (iv) it is a
Qualified Assignee.

9. Further Assurances. Assignor and Assignee each hereby agree to execute and
deliver such other instruments, and take such other action, as either party may
reasonably request in connection with the transactions contemplated by this
Supplement, including the delivery of any notices or other documents or
instruments to Borrower or Agent, which may be required in connection with the
assignment and assumption contemplated hereby.

10. Miscellaneous.

(a) Any amendment or waiver of any provision of this Supplement shall be in
writing and signed by the parties hereto. No failure or delay by either party
hereto in exercising any right, power or privilege hereunder shall operate as a
waiver thereof and any waiver of any breach of the provisions of this Supplement
shall be without prejudice to any rights with respect to any other for further
breach thereof.

(b) All payments made hereunder shall be made without any set-off or
counterclaim.

(c) Assignor and Assignee shall each pay its own costs and expenses incurred in
connection with the negotiation, preparation, execution and performance of this
Supplement, except as provided in the Loan Agreement.

(d) This Supplement may be executed in any number of counterparts and all of
such counterparts taken together shall be deemed to constitute one and the same
instrument.

(e) THIS SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK. Assignor and Assignee each irrevocably submits to
the non-exclusive jurisdiction of any State or Federal court sitting in New
York, New York over any suit, action or proceeding arising out of or relating to
this Supplement and irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such New York State or Federal
court. Each party to this Supplement hereby irrevocably waives, to the fullest
extent it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS SUPPLEMENT,
THE LOAN AGREEMENT, ANY OF THE OTHER DOCUMENTS OR ANY RELATED DOCUMENTS AND
AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER
ORAL OR WRITTEN).

[Signature Page Follows]

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IN WITNESS WHEREOF, Assignor and Assignee have caused this Supplement to be
executed and delivered by their duly authorized officers as of the date first
above written.

 

[ASSIGNOR] By:  

 

Name:  

 

Title:  

 

[ASSIGNEE] By:  

 

Name:  

 

Title:  

 

 

ACCEPTED: WILMINGTON TRUST, NATIONAL ASSOCIATION, as Agent By:  

 

Name:  

 

Title:  

 

[CONSENTED TO: [NAME OF LENDER], as Lender By:  

 

Name:  

 

Title:  

 

[NAME OF LENDER], as Lender By:  

 

Name:  

 

Title:  

]4

 

 

4  To be added only if the consent of the Required Lenders is required by the
terms of the Loan Agreement.