Exhibit 10.6

Execution Copy

 

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CREDIT AGREEMENT

dated as of

November 2, 2005

among

TESCO US HOLDING LP,

as US Borrower,

TESCO CORPORATION,

as Canadian Borrower,

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

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J.P. MORGAN SECURITIES INC.,

as Sole Bookrunner and Sole Lead Arranger

 

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TABLE OF CONTENTS

 

          Page

ARTICLE I

  

Definitions

  

SECTION 1.01.

   Defined Terms    1

SECTION 1.02.

   Classification of Loans and Borrowings    18

SECTION 1.03.

   Terms Generally    19

SECTION 1.04.

   Accounting Terms; GAAP    19

ARTICLE II

  

The Credits

  

SECTION 2.01.

   Commitments    20

SECTION 2.02.

   Loans and Borrowings    20

SECTION 2.03.

   Requests for Revolving Borrowings    21

SECTION 2.04.

   Evidence of Debt    21

SECTION 2.05.

   Swingline Loans    22

SECTION 2.06.

   Letters of Credit    23

SECTION 2.07.

   Funding of Borrowings    26

SECTION 2.08.

   Interest Elections    27

SECTION 2.09.

   Termination and Reduction of Commitments    28

SECTION 2.10.

   Repayment of Loans; Evidence of Debt    28

SECTION 2.11.

   Prepayment of Loans    30

SECTION 2.12.

   Fees    30

SECTION 2.13.

   Interest    31

SECTION 2.14.

   Alternate Rate of Interest    32

SECTION 2.15.

   Increased Costs    33

SECTION 2.16.

   Break Funding Payments    33

SECTION 2.17.

   Taxes    34

SECTION 2.18.

   Payments Generally; Pro Rata Treatment; Sharing of Set-offs    35

SECTION 2.19.

   Mitigation Obligations; Replacement of Lenders    37

ARTICLE III

Representations and Warranties

SECTION 3.01.

   Organization; Powers    38

SECTION 3.02.

   Authorization; Enforceability    38

SECTION 3.03.

   Governmental Approvals; No Conflicts    38

SECTION 3.04.

   Financial Condition; No Material Adverse Change    38

SECTION 3.05.

   Properties    39

SECTION 3.06.

   Litigation and Environmental Matters    39

SECTION 3.07.

   Compliance with Laws and Agreements    39

SECTION 3.08.

   Investment and Holding Company Status    39

SECTION 3.09.

   Taxes    39

SECTION 3.10.

   ERISA    40

 

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SECTION 3.11.

   Disclosure    40

SECTION 3.12.

   Alpha Acquisition    40

SECTION 3.13.

   Omega Acquisition    41

SECTION 3.14.

   Labor Matters    41

SECTION 3.15.

   Solvency    42    Target Acquisitions    42

ARTICLE IV

  

Conditions

  

SECTION 4.01.

   Effective Date    42

SECTION 4.02.

   Alpha Term Loans    44

SECTION 4.03.

   Omega Term Loans    45

SECTION 4.04.

   Each Credit Event    46

ARTICLE V

  

Affirmative Covenants

  

SECTION 5.01.

   Financial Statements and Other Information    47

SECTION 5.02.

   Notices of Material Events    48

SECTION 5.03.

   Existence; Conduct of Business    48

SECTION 5.04.

   Payment of Obligations    48

SECTION 5.05.

   Maintenance of Properties; Insurance    48

SECTION 5.06.

   Books and Records; Inspection Rights    49

SECTION 5.07.

   Compliance with Laws    49

SECTION 5.08.

   Use of Proceeds and Letters of Credit    49

SECTION 5.09.

   Collateral Security; Further Assurances    49

ARTICLE VI

  

Negative Covenants

  

SECTION 6.01.

   Indebtedness    50

SECTION 6.02.

   Liens    51

SECTION 6.03.

   Fundamental Changes; Sale of Assets    51

SECTION 6.04.

   Investments, Loans, Advances, Guarantees and Acquisitions    52

SECTION 6.05.

   Swap Agreements    53

SECTION 6.06.

   Restricted Payments    53

SECTION 6.07.

   Transactions with Affiliates    54

SECTION 6.08.

   Restrictive Agreements    54

SECTION 6.09.

   Change of Name or Location; Change of Fiscal Year    54

SECTION 6.10.

   Amendments to Agreements    54

SECTION 6.11.

   Prepayment of Indebtedness    55

SECTION 6.12.

   Leverage Ratio    55

SECTION 6.13.

   Minimum Net Worth    55

SECTION 6.14.

   Fixed Charge Coverage Ratio    55

SECTION 6.15.

   Capital Expenditures    55

 

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ARTICLE VII

  

Events of Default

   41

ARTICLE VIII

  

The Administrative Agent

   43

ARTICLE IX

  

Miscellaneous

  

SECTION 9.01.

   Notices    61

SECTION 9.02.

   Waivers; Amendments    61

SECTION 9.03.

   Expenses; Indemnity; Damage Waiver    62

SECTION 9.04.

   Successors and Assigns    63

SECTION 9.05.

   Survival    66

SECTION 9.06.

   Counterparts; Integration; Effectiveness    66

SECTION 9.07.

   Severability    66

SECTION 9.08.

   Right of Setoff    66

SECTION 9.09.

   Governing Law; Jurisdiction; Consent to Service of Process    67

SECTION 9.10.

   WAIVER OF JURY TRIAL    67

SECTION 9.11.

   Headings    67

SECTION 9.12.

   Confidentiality    68

SECTION 9.13.

   Interest Rate Limitation    68

SECTION 9.14.

   USA PATRIOT Act    68

SECTION 9.15.

   Conversion of Currencies    68

SCHEDULES:

Schedule 2.01 — Commitments

Schedule 3.06 — Disclosed Matters

Schedule 3.12 — Alpha Acquisition Documents

Schedule 3.13 — Omega Acquisition Documents

Schedule 4.01 — Indebtedness to be Refinanced

Schedule 6.01 — Existing Indebtedness

Schedule 6.02 — Existing Liens

Schedule 6.04 — Existing Investments

Schedule 6.08 — Existing Restrictions

EXHIBITS:

Exhibit A — Form of Assignment and Assumption

Exhibit B — Form of Notes

 

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CREDIT AGREEMENT dated as of November 2, 2005, among TESCO US HOLDING LP, TESCO
CORPORATION, the LENDERS party hereto, and JPMORGAN CHASE BANK, N.A., as
Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have
the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are bearing interest at a rate
determined by reference to the Alternate Base Rate.

“Acquisition” means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Parent or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or limited liability company, or division
thereof, whether through purchase of assets, merger or otherwise or
(ii) directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the Equity Interests of a Person.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any
Interest Period, an interest rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as
administrative agent for the Lenders hereunder.

“Administrative Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

“Alpha” means Cheyenne Services, Inc.

“Alpha Acquisition” means the Acquisition of certain assets from Alpha
comprising its casing and tubular running business and inspection services
business, pursuant to the Asset Purchase Agreement among the Parent, Cheyenne
Services, Inc. and Carlos A. Torres and the related Alpha Acquisition Documents.

“Alpha Acquisition Assets” means the assets to be acquired in the Alpha
Acquisition.

“Alpha Acquisition Certificate” shall have the meaning assigned to such term in
Section 4.02(c).

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“Alpha Acquisition Date” means the date the Omega Acquisition is closed in
accordance with the terms hereof.

“Alpha Acquisition Documents” is defined in Section 3.12.

“Alpha Acquisition Transactions” means the execution, delivery and performance
by the Loan Parties and the other parties thereto of the Alpha Acquisition
Documents, the closing of the Alpha Acquisition, and all transactions related
thereto.

“Alpha Term Loan Commitment” means, with respect to each Lender, the commitment
of such Lender to make the Alpha Term Loans, as such commitment may be reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender’s Alpha Term Loan
Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Alpha Term Loan Commitment,
as applicable. The initial aggregate amount of the Lenders’ Alpha Term Loan
Commitments is $20,000,000.

“Alpha Term Loans” means the term loans extended by the Lenders to the US
Borrower pursuant to Section 2.01(b) hereof in an aggregate amount not to exceed
$20,000,000.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus  1/2 of 1%. Any change in the Alternate Base
Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall
be effective from and including the effective date of such change in the Prime
Rate or the Federal Funds Effective Rate, respectively.

“Applicable Percentage” means, with respect to any Lender, the percentage of the
total Revolving Commitments represented by such Lender’s Revolving Commitments.
If the Revolving Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon the Revolving Commitments most
recently in effect, giving effect to any assignments.

“Applicable Rate” means, for any day, with respect to any Eurodollar Loan or
with respect to the commitment fees payable hereunder, as the case may be, the
applicable rate per annum set forth below under the caption “Eurodollar Spread”
or “Commitment Fee Rate”, as the case may be, based upon the Leverage Ratio as
of the most recent determination date:

 

Level

  

Leverage Ratio

   Eurodollar
Spread     Commitment
Fee Rate  

I

   < 1.00    1.25 %   0.25 %

II

   >1.00 and < 1.50    1.50 %   0.30 %

III

   >1.50 and < 2.00    1.75 %   0.35 %

IV

   >2.00    2.00 %   0.40 %

The Applicable Rate shall be determined in accordance with the foregoing table
based on the Leverage Ratio as of the end of each Fiscal Quarter, as calculated
for the four most recently ended consecutive Fiscal Quarters of the Parent.
Adjustments, if any, to the Applicable Rate shall be effective five Business
Days after the Administrative Agent is scheduled to receive the applicable
financials under Section 5.01(a) or (b) and certificate under Section 5.01(c).
If the Parent fails to deliver the financials to the Administrative Agent at the
time required hereunder, then the Applicable Rate shall be set at Level IV until
such financials are so delivered. Notwithstanding anything herein to the
contrary, the Applicable Rate shall be set at Level III as of the Effective Date
hereof.

 

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“Approved Fund” has the meaning assigned to such term in Section 9.04.

“Asset Sale” means any sale, transfer, lease or other disposition (in one
transaction or in a series of transactions) of any asset (in each case, whether
now owned or hereafter acquired) of the Parent of any Subsidiary, excluding
(a) sales and leases of inventory in the ordinary course of business, (b) the
Drillers Technology Sale, (c) sales, transfers, leases or other dispositions
from the Parent of any Subsidiary to a Borrower or Guarantor and sales among
Subsidiaries that are not a Borrower or Guarantor, and (d) sales of drilling
equipment during or at the termination of short term (less than 36 months in
duration) leases, lease purchase or rental agreements thereof to the lessor
under such lease if the intent at the inception of such lease, lease purchase or
rental agreement was for such lessor to purchase such drilling equipment, in
each case in the ordinary course of business and consistent with past practices.

“Assignment and Assumption” means an assignment and assumption entered into by a
Lender and an assignee (with the consent of any party whose consent is required
by Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Availability Period” means the period from and including the Effective Date to
but excluding the earlier of the Revolving Credit Maturity Date and the date of
termination of the Revolving Commitments.

“Banking Services” means each and any of the following bank services provided to
any Borrower or Guarantor by any Lender or any of its Affiliates: (a) commercial
credit cards, (b) stored value cards and (c) treasury management services
(including, without limitation, controlled disbursement, automated clearinghouse
transactions, return items, overdrafts and interstate depository network
services).

“Banking Services Obligations” means any and all obligations of any Borrower or
Guarantor, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services.

“Board” means the Board of Governors of the Federal Reserve System of the United
States of America.

“Borrowers” means the US Borrower and the Canadian Borrower.

“Borrowing” means (a) Revolving Loans of the same Type, made, converted or
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect, (b) Term Loans or portions thereof of the
same Type made, converted or continued on the same date and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect or (c) a
Swingline Loan.

“Borrowing Base” means, at any time, the sum of (a) 80% of Receivables at such
time, plus (b) 40% of Inventory at such time.

“Borrowing Base Certificate” means a certificate, signed by a Financial Officer
of the Parent, a form which is reasonably acceptable to the Administrative Agent
in its discretion.

“Borrowing Request” means a request by a Borrower for a Borrowing in accordance
with Section 2.03.

 

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“Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in Chicago are authorized or required by law to remain
closed; provided that, when used in connection with a Eurodollar Loan, the term
“Business Day” shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market, and when used in
connection with a Swingline Canadian Loan, the term “Business Day” shall also
exclude any day on which commercial banks in Toronto, Ontario are authorized or
required by law to remain closed.

“Canadian Borrower” means the Parent as the borrower of Swingline Canadian Loans
hereunder.

“Canadian Dollars” or “C$” means the lawful currency of Canada.

“Canadian Lender” means any Lender that (a) is incorporated under the laws of
Canada or a province thereof, (b) is an “authorized foreign bank” as defined
under the Income Tax Act (Canada) that will receive all amounts paid or credited
to it with respect to the Swingline Canadian Loans or Letters of Credit for the
account of a Canadian LC Obligor in respect of its “Canadian banking business”
for the purposes of the Income Tax Act (Canada) or (c) the Minister of National
Revenue is satisfied that payments made to it hereunder would not be subject to
Canadian withholding taxes pursuant to Regulation 805(2) of the Income Tax Act
(Canada).

“Canadian Pension Plan” means any “pension plan” or “plan” that is subject to
the funding requirements of the Pension Benefits Act (Ontario) or applicable
pension benefits legislation in any other Canadian jurisdiction and is
applicable to employees resident in Canada of a Parent or any of its
Subsidiaries.

“Canadian Welfare Plan” means any medical, health, hospitalization, insurance or
other employee benefit or welfare plan or arrangement applicable to employees
resident in Canada of a Parent or any of its Subsidiaries.

“Capital Lease Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Control” means the occurrence of any of the following events: (a) the
Parent ceases to own directly or indirectly 100% of the Equity Interests in the
US Borrower; (b) the Parent ceases to own, either directly or indirectly, 100%
of the Equity Interests in any of its material U.S. or Canadian Subsidiaries
other than the US Borrower other than (i) as a result of a sale of asset or
merger permitted under Section 6.03, (ii) any directors’ qualifying shares
mandated by applicable law, and (iii) with respect to any Subsidiary that is
organized in a foreign jurisdiction, to the extent that such Subsidiary is
required by the applicable laws and regulations of such foreign jurisdiction to
be partially owned by the government of such foreign jurisdiction or individual
or corporate citizens of such foreign jurisdiction; (c) any “person” or “group”
(as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, but excluding any employee benefit plan of such person or its
subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan) becomes the “beneficial
owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of
1934, except that a person or group shall be deemed to have “beneficial
ownership” of all securities that such person or group has the right to acquire
(such right, an “option right”), whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of 35% or more of
the equity

 

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securities of the Parent entitled to vote for members of the board of directors
or equivalent governing body of the Parent on a fully-diluted basis (and taking
into account all such securities that such person or group has the right to
acquire pursuant to any option right); or (d) during any period of 12
consecutive months, a majority of the members of the board of directors or other
equivalent governing body of the Parent cease to be composed of individuals
(i) who were members of that board or equivalent governing body on the first day
of such period, (ii) whose election or nomination to that board or equivalent
governing body was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a majority of
that board or equivalent governing body, or (iii) whose election or nomination
to that board or other equivalent governing body was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body.

“Change in Law” means (a) the adoption of any law, rule or regulation after the
date of this Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or,
for purposes of Section 2.15(b), by any lending office of such Lender or by such
Lender’s or the Issuing Bank’s holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.

“Class”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or
Swingline Loans.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means, collectively, the “Collateral” under and as defined in, and
any other assets upon which a Lien has been granted by, any of the Collateral
Documents.

“Collateral Documents” means, collectively, the Security Agreements, the
Guaranties and all other agreements or documents granting or perfecting a Lien
in favor of the Administrative Agent for the benefit of the Lenders or otherwise
providing support for the Secured Obligations at any time, as any of the
foregoing may be amended or modified from time to time.

“Commitments” means the Revolving Commitments and the Term Loan Commitments.

“Consolidated Capital Expenditures” means, with reference to any period, the
Capital Expenditures of the Parent and its Subsidiaries calculated on a
consolidated basis for such period.

“Consolidated EBITDA” means Consolidated Net Income plus, to the extent deducted
from revenues in determining Consolidated Net Income, (a) Consolidated Interest
Expense, (b) expense for taxes paid or accrued net of tax refunds,
(c) depreciation, (d) amortization, (e) non-cash charges relating to any
compensation deduction as a result of the grant of any stock or other Equity
Interests to employees, officers or directors, (f) non-cash foreign currency
exchange gains and losses, (g) extraordinary non-cash losses incurred other than
in the ordinary course of business, and (h) other non-cash losses and expenses
determined in accordance with GAAP (including any non-cash losses and expenses
attributable to the conversion from Canadian GAAP to U.S. GAAP), minus, to the
extent included in Consolidated Net Income, extraordinary gains realized other
than in the ordinary course of business and all non-cash gains or other income
determined in accordance with GAAP (including any non-cash gains or other income
attributable to the conversion from Canadian GAAP to U.S. GAAP), all calculated
for the Parent and its Subsidiaries on a consolidated basis.

 

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“Consolidated Fixed Charges” means, with reference to any period, without
duplication, Consolidated Interest Expense paid in cash, plus scheduled
principal payments on Indebtedness paid or payable during such period, plus for
each Fiscal Quarter in 2006, $2,500,000, plus Restricted Payments with respect
to any Equity Interests of the Parent paid in cash.

“Consolidated Funded Indebtedness” means at any time the (a) all obligations of
the Parent and its Subsidiaries for borrowed money or with respect to deposits
or advances of any kind, (b) all obligations of the Parent and its Subsidiaries
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of the Parent and its Subsidiaries upon which interest charges are
customarily paid, (d) all obligations of the Parent and its Subsidiaries under
conditional sale or other title retention agreements relating to property
acquired by such Person, (e) all obligations of the Parent and its Subsidiaries
in respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by the Parent and its Subsidiaries, whether or not
the Indebtedness secured thereby has been assumed, and (g) any other
Indebtedness or other financial accommodation (excluding current accounts
payable incurred in the ordinary course of business) of the Parent and its
Subsidiaries which in accordance with GAAP would be shown as a liability on a
consolidated balance sheet, all as calculated on a consolidated basis for the
Parent and its Subsidiaries.

“Consolidated Interest Expense” means, with reference to any period, the
interest expense of the Parent and its Subsidiaries calculated on a consolidated
basis for such period.

“Consolidated Net Income” means, with reference to any period, the net income
(or loss) of the Parent and its Subsidiaries calculated on a consolidated basis
for such period.

“Consolidated Net Worth” means at any time the consolidated stockholders’ equity
of the Parent and its Subsidiaries calculated on a consolidated basis as of such
time.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

“Default” means any event or condition which constitutes an Event of Default or
which upon notice, lapse of time or both would, unless cured or waived, become
an Event of Default.

“Defaulting Lender” means any Lender with respect to which a Lender Default is
in effect.

“Disclosed Matters” means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 3.06.

“Disqualified Stock” means any Equity Interest that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part.

“Dollar Equivalent” means, on any date of determination (a) with respect to any
amount in Dollars, such amount, and (b) with respect to any amount in any other
currency, the equivalent in Dollars of such amount, determined by the
Administrative Agent pursuant to Section 1.05 using the Exchange Rate with
respect to such currency at the time in effect under the provisions of such
Section.

 

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“Dollar”, “dollar” or “$” refers to lawful money of the United States of
America.

“Drillers Technology Sale” means the sale by the Parent and its Subsidiaries of
their investment in Drillers Technology Corp. to Saxon Energy Services, Inc. for
the sale price of approximately C$10,000,000.

“Effective Date” means the date on which the conditions specified in
Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to public
health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Parent or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Equity Interests” means shares of capital stock, partnership interests,
membership interests in a limited liability company, beneficial interests in a
trust or other equity ownership interests in a Person, and any warrants, options
or other rights entitling the holder thereof to purchase or acquire any such
equity interest.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Borrower or Guarantor, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Borrower or Guarantor or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by any Borrower or Guarantor or any
ERISA Affiliate from the PBGC or a plan administrator of any notice relating to
an intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by any Borrower or Guarantor or any of
its ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by any
Borrower or Guarantor or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from any Borrower or Guarantor or any ERISA Affiliate of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.

 

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“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Event of Loss” means, with respect to any assets, any of the following: (a) any
loss, destruction or damage of such assets; (b) any pending or threatened
institution of any proceedings for the condemnation or seizure of such assets or
for the exercise of any right of eminent domain; or (c) any actual condemnation,
seizure or taking, by exercise of the power of eminent domain or otherwise, of
such assets, or confiscation of such assets or the requisition of the use of
such assets.

“Exchange Rate” means on any day, for purposes of determining the Dollar
Equivalent of any currency other than Dollars, the rate at which such currency
may be exchanged into Dollars at the time of determination on such day on the
Reuters Currency pages, if available, for such currency. In the event that such
rate does not appear on any Reuters Currency pages, the Exchange Rate shall be
determined by reference to such other publicly available service for displaying
exchange rates as may be reasonably determined by the Administrative Agent, or,
in the absence of such service, such Exchange Rate shall instead be the
arithmetic average of the spot rates of exchange of the Administrative Agent in
the market where its foreign currency exchange operations in respect of such
currency are then being conducted, at or about such time as the Administrative
Agent shall elect after determining that such rates shall be the basis for
determining the Exchange Rate, on such date for the purchase of Dollars for
delivery two Business Days later; provided that if at the time of any such
determination, for any reason, no such spot rate is being quoted, the
Administrative Agent may use any reasonable method it deems appropriate to
determine such rate, and such determination shall be conclusive absent manifest
error.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of the Borrowers hereunder, (a) income or franchise
taxes imposed on (or measured by) its net income by the United States of
America, or by the jurisdiction (or any political subdivision thereof) under the
laws of which such recipient is organized or resident or deemed resident or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located, (b) any branch profits taxes imposed
by the United States of America or any similar tax imposed by any other
jurisdiction in which the US Borrower is located and (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by a Borrower under
Section 2.19(b)), any withholding tax that is imposed on amounts payable to such
Foreign Lender at the time such Foreign Lender becomes a party to this Agreement
(or designates a new lending office) or is attributable to such Foreign Lender’s
failure to comply with Section 2.17(e), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of a
new lending office (or assignment), to receive additional amounts from the
Borrowers with respect to such withholding tax pursuant to Section 2.17(a).

“Federal Funds Effective Rate” means, for any day, the weighted average (rounded
upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average (rounded upwards, if necessary, to
the next 1/100 of 1%) of the quotations for such day for such transactions
received by the Administrative Agent from three Federal funds brokers of
recognized standing selected by it.

 

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“Financial Officer” means the chief financial officer, principal accounting
officer, treasurer or controller of the Parent.

“Fiscal Quarter” means any of the quarterly accounting periods of the Parent
ending on March 31, June 30, September 30 and December 31 of each year.

“Fiscal Year” means any of the annual accounting periods of the Parent ending on
December 31 of each year.

“Fixed Charge Coverage Ratio” means, the ratio, determined as of the end of each
of Fiscal Quarter of the Parent for the most-recently ended four Fiscal
Quarters, of (a) Consolidated EBITDA minus taxes to (b) Consolidated Fixed
Charges, all calculated for the Parent and its Subsidiaries on a consolidated
basis.

“Foreign Lender” means any Lender that is organized under the laws of a
jurisdiction other than that in which the US Borrower is located. For purposes
of this definition, the United States of America, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

“GAAP” means generally accepted accounting principles in the United States of
America or Canada, as applicable.

“Governmental Authority” means the government of the United States of America,
any other nation or any political subdivision thereof, whether state or local,
and any agency, authority, instrumentality, regulatory body, court, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business or customary and
reasonable indemnity obligations entered into in connection with any acquisition
or disposition of assets permitted under this Agreement.

“Guarantor” means each Subsidiary and each other Person required to execute and
deliver a Guaranty under Section 5.09(a)(i), and each Borrower shall also be a
Guarantor with respect to the Secured Obligations of the other Borrower.

“Guaranty” means each guaranty executed by a Guarantor, which shall be in form
and substance satisfactory to the Administrative Agent.

 

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“Hazardous Materials” means all explosive or radioactive substances or wastes
and all hazardous or toxic substances, wastes or other pollutants, including
petroleum or petroleum distillates, asbestos or asbestos containing materials,
polychlorinated biphenyls, radon gas, infectious or medical wastes and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.

“Indebtedness” of any Person means, without duplication, (a) all obligations of
such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid, (d) all obligations of
such Person under conditional sale or other title retention agreements relating
to property acquired by such Person, (e) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person,
(h) all Off-Balance Sheet Liabilities of such Person, (i) all obligations under
any Disqualified Stock of such Person, (j) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty and (k) all obligations, contingent or otherwise, of
such Person in respect of bankers’ acceptances. The Indebtedness of any Person
shall include the Indebtedness of any other entity (including any partnership in
which such Person is a general partner) to the extent such Person is liable
therefor as a result of such Person’s ownership interest in or other
relationship with such entity, except to the extent the terms of such
Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Interest Election Request” means a request by the US Borrower to convert or
continue a Borrowing in accordance with Section 2.08.

“Interest Payment Date” means (a) with respect to any ABR Loan (other than a
Swingline Loan), the last day of each March, June, September and December,
(b) with respect to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part and, in the case of a
Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs at
intervals of three months’ duration after the first day of such Interest Period,
and (c) with respect to any Swingline Loan, the day that such Loan is required
to be repaid or as otherwise required by the Swingline Lender.

“Interest Period” means with respect to any Eurodollar Borrowing, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter or such other periods agreed to by all Lenders, as the US Borrower
may elect; provided, that (i) if any Interest Period would end on a day other
than a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such
next succeeding Business Day would fall in the next calendar month, in which
case such Interest Period shall end on the next preceding Business Day and
(ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such Interest
Period) shall end on the last Business Day of the last calendar month of such
Interest Period. For purposes hereof, the date of a Borrowing initially shall be
the date on which such Borrowing is made and, in the case of a Revolving
Borrowing, thereafter shall be the effective date of the most recent conversion
or continuation of such Borrowing.

“Inventory” means the inventory of the Parent and its Subsidiaries, determined
on a consolidated basis and in accordance with GAAP.

 

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“Issuing Bank” means JPMorgan Chase Bank, N.A., in its capacity as the issuer of
Letters of Credit hereunder, and its successors in such capacity as provided in
Section 2.06(i). The Issuing Bank may, in its discretion, arrange for one or
more Letters of Credit to be issued by Affiliates of the Issuing Bank, in which
case the term “Issuing Bank” shall include any such Affiliate with respect to
Letters of Credit issued by such Affiliate and, for purposes of issuing Letters
of Credit to any Canadian LC Obligor, “Issuing Bank” shall mean JPMorgan Chase
Bank, N.A., Toronto Branch.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Letter
of Credit.

“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of
all outstanding Letters of Credit at such time plus (b) the aggregate amount of
all LC Disbursements that have not yet been reimbursed by or on behalf of the US
Borrower at such time. The LC Exposure of any Lender at any time shall be its
Applicable Percentage of the total LC Exposure at such time.

“LC Obligor” means any Borrower, any Guarantor or, if acceptable to the Issuing
Bank, any other Subsidiary.

“Lender Default” means (i) the refusal (which has not been retracted) of a
Lender to make available its portion of any Borrowing, to acquire participations
in a Swingline Loan pursuant to Section 2.05 or to fund its portion of any
unreimbursed payment under Section 2.06(e), or (ii) a Lender having notified in
writing the applicable Borrower and/or the Administrative Agent that it does not
intend to comply with its obligations under Section 2.05, 2.06 or 2.07.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that
shall have become a party hereto pursuant to an Assignment and Assumption, other
than any such Person that ceases to be a party hereto pursuant to an Assignment
and Assumption. Unless the context otherwise requires, the term “Lenders”
includes the Swingline Lender.

“Letter of Credit” means any letter of credit issued pursuant to this Agreement.

“Leverage Ratio” means, as of the end of any Fiscal Quarter of the Parent, the
ratio of (a) Consolidated Funded Indebtedness at such time to (b) Consolidated
EBITDA, as calculated for the four consecutive Fiscal Quarters of the Parent
then ending.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the “LIBO Rate” with respect to such
Eurodollar Borrowing for such Interest Period shall be the rate at which dollar
deposits of $5,000,000 and for a maturity comparable to such Interest Period are
offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

 

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“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of
such asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities to the extent
that any such right is intended to have an effect equivalent to that of a
security interest in such securities.

“Loan Documents” means this Agreement, any Note, the Collateral Documents, any
subordination agreement and any other agreement, instrument or other document
executed in connection therewith.

“Loan Party” means any Borrower or any Guarantor.

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this
Agreement.

“Local Time” means (a) with respect to a Loan or Borrowing denominated in
Dollars, Chicago time, and (b) with respect to any Swingline Canadian Loan,
Toronto time.

“Material Adverse Effect” means a material adverse effect on (a) the business,
assets, operations or condition, financial or otherwise, of the Parent and the
Subsidiaries taken as a whole, (b) the ability of any Loan Party to perform any
of its obligations under any Loan Document or (c) the rights of or benefits
available to the Lenders under any Loan Document.

“Material Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the Parent and its Subsidiaries in an aggregate principal amount
exceeding $5,000,000. For purposes of determining Material Indebtedness, the
“principal amount” of the obligations of the Parent or any Subsidiary in respect
of any Swap Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that the Parent or such Subsidiary would be
required to pay if such Swap Agreement were terminated at such time.

“Moody’s” means Moody’s Investors Service, Inc.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3)
of ERISA to which any Borrower or Guarantor or ERISA Affiliate is making or
accruing any obligation to make contributions.

“Net Cash Proceeds” means, without duplication (a) in connection with any sale
or other disposition of any asset or any settlement by, or receipt of payment in
respect of, any property insurance claim or condemnation award, the cash
proceeds (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or purchase price
adjustment receivable or otherwise, but only as and when received) of such sale,
settlement or payment, net of reasonable and documented attorneys’ fees,
accountants’ fees, investment banking fees, consultants’ fees, real estate
commissions, survey costs, title insurance premiums, transfer taxes, deed or
mortgage recording taxes, amounts required to be applied to the repayment of
Indebtedness secured by a Lien expressly permitted hereunder on any asset which
is the subject of such sale, insurance claim or condemnation award (other than
any Lien in favor of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders) and other customary fees actually incurred
in connection therewith and net of taxes paid or reasonably estimated to be
payable as a result thereof and (b) in connection with any issuance or sale of
any Equity Interests or debt securities or instruments or the incurrence of
loans, the cash proceeds received from such

 

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issuance or incurrence, net of investment banking fees, reasonable and
documented attorneys’ fees, accountants’ fees, underwriting discounts and
commissions and other reasonable and customary fees and expenses actually
incurred in connection therewith.

“Obligations” means all unpaid principal of and accrued and unpaid interest on
the Loans, the LC Exposure, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrowers and of the
Guarantors to the Lenders or to any Lender, the Administrative Agent or any
Related Party arising under the Loan Documents.

“Off-Balance Sheet Liability” of a Person means (i) any obligation under a sale
and leaseback transaction which is not a Capital Lease Obligation, (ii) any
so-called “synthetic lease” or “tax ownership operating lease” transaction
entered into by such Person, (iii) the amount of obligations outstanding under
the legal documents entered into as part of any asset securitization or similar
transaction on any date of determination that would be characterized as
principal if such asset securitization or similar transaction were structured as
a secured lending transaction rather than as a purchase or (iv) any other
transaction (excluding operating leases for purposes of this clause (iv)) which
is the functional equivalent of or takes the place of borrowing but which does
not constitute a liability on the balance sheet of such Person; in all of the
foregoing cases, calculated based on the aggregate outstanding amount of
obligations outstanding under the legal documents entered into as part of any
such transaction on any date of determination that would be characterized as
principal if such transaction were structured as a secured lending transaction,
whether or not shown as a liability on a consolidated balance sheet of such
Person, in a manner reasonably satisfactory to the Administrative Agent.

“Omega” means Lamb Energy Services, L.L.C. and Tong Specialty L.L.C.

“Omega Acquisition” means the Acquisition of certain assets from Omega
comprising their casing and tubular running business and inspection services
businesses, pursuant to the Asset Purchase Agreement among the Parent, Lamb
Energy Services, L.L.C., Tong Specialty LES, Inc. SESI, L.L.C., Edward Lamb,
Donald Daigle and Stacey Reaux and the related Omega Acquisition Documents.

“Omega Acquisition Assets” means the assets to be acquired in the Omega
Acquisition.

“Omega Acquisition Certificate” shall have the meaning assigned to such term in
Section 4.03(c).

“Omega Acquisition Date” means the date the Omega Acquisition is closed in
accordance with the terms hereof.

“Omega Acquisition Documents” is defined in Section 3.13.

“Omega Acquisition Transactions” means the execution, delivery and performance
by the Loan Parties and the other parties thereto of the Omega Acquisition
Documents, the closing of the Omega Acquisition, and all transactions related
thereto.

“Omega Term Loan Commitment” means, with respect to each Lender, the commitment
of such Lender to make the Omega Term Loans, as such commitment may be reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender’s Omega Term Loan
Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption
pursuant to which such Lender shall have assumed its Omega Term Loan Commitment,
as applicable. The initial aggregate amount of the Lenders’ Omega Term Loan
Commitments is $30,000,000.

 

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“Omega Term Loans” means the term loans extended by the Lenders to the US
Borrower pursuant to Section 2.01(c) hereof in an aggregate amount not to exceed
$30,000,000.

“Other Taxes” means any and all present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies arising from any
payment made hereunder or from the execution, delivery or enforcement of, or
otherwise with respect to, this Agreement.

“Parent” means Tesco Corporation, an Alberta, Canada corporation.

“Participant” has the meaning set forth in Section 9.04.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in
ERISA and any successor entity performing similar functions.

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested
in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other
like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 90 days or are being
contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of
Default under clause (k) of Article VII; and

(f) easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of the Parent or any Subsidiary;

provided that the term “Permitted Encumbrances” shall not include any Lien
securing Indebtedness.

“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which
are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;

(b) investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s;

 

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(c) investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 270 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof or Canada which has a
combined capital and surplus and undivided profits of not less than $500,000,000
or any foreign bank which has a combined capital and surplus and undivided
profits of not less than $500,000,000 that ate rated at least “A-1” by S&P or
“P-1” by Moody’s or any comparable rating from any comparable foreign rating
agency;

(d) fully collateralized repurchase agreements with a term of not more than 30
days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (c) above; and

(e) money market funds that (i) comply with the criteria set forth in Securities
and Exchange Commission Rule 2a-7 under the Investment Company Act of 1940,
(ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of
at least $5,000,000,000.

“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which any Borrower, Guarantor or ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Planned Rig Sales” means the sale by the Parent, Tesco Corporation (US), or
certain of their Affiliates to Turnkey E & P, Inc. of four land based drilling
rigs and related inventory, contracts and assets.

“Prime Rate” means the rate of interest per annum publicly announced from time
to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.

“Receivables” means the account receivables, generated in the ordinary course of
business as a result of goods sold or leased or for services rendered, of the
Parent and its Subsidiaries, determined on a consolidated basis and valued in
accordance with GAAP.

“Register” has the meaning set forth in Section 9.04.

“Related Parties” means, with respect to any specified Person, such Person’s
Affiliates and the respective directors, officers, employees, agents and
advisors of such Person and such Person’s Affiliates.

“Replacement Assets” means the assets acquired in the Alpha Acquisition or the
Omega Acquisition to be owned by the applicable SPVs for not more than 180 days
after the date of the closing of the Alpha Acquisition or the Omega Acquisition,
as the case may be.

“Reports” is defined in Section 9.03.

 

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“Required Lenders” means, at any time, Lenders having Revolving Credit
Exposures, unused Commitments and Term Loans representing more than 66-2/3% of
the sum of the total Revolving Credit Exposures, unused Commitments and Term
Loans at such time. The Revolving Credit Exposure, unused Commitments and Term
Loan of any Defaulting Lender shall be disregarded in determining Required
Lenders at any time.

“Restricted Payment” means (i) any dividend or other distribution (whether in
cash, securities or other property) with respect to any Equity Interests in the
Parent or any Subsidiary, or (ii) any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such Equity Interests in the Parent or any Subsidiary or any option,
warrant or other right to acquire any such Equity Interests in the Parent or any
Subsidiary.

“Revolving Commitment” means, with respect to each Lender, the commitment of
such Lender to make Revolving Loans and to acquire participations in Letters of
Credit and Swingline Loans hereunder, expressed as an amount representing the
maximum aggregate amount of such Lender’s Revolving Credit Exposure hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.09
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender’s
Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and
Assumption pursuant to which such Lender shall have assumed its Revolving
Commitment, as applicable. The initial aggregate amount of the Lenders’
Revolving Commitments is $50,000,000.

“Revolving Credit Exposure” means, with respect to any Lender at any time, the
sum of the outstanding principal amount of such Lender’s Revolving Loans and its
LC Exposure and Swingline Exposure at such time.

“Revolving Credit Maturity Date” means October 31, 2008.

“Revolving Loan” means a Loan made pursuant to Section 2.01(a).

“SEC” means the Securities and Exchange Commission or any Governmental Authority
succeeding to any or all of the functions of the Securities and Exchange
Commission.

“Secured Obligations” means, collectively, (i) the Obligations, (ii) the Banking
Services Obligations and (iii) the Swap Agreement Obligations owing to one or
more Lenders or their Affiliates.

“Security Agreement” means each security agreement, general security agreement,
pledge agreement, pledge and security agreement and similar agreement and any
other agreement from any Loan Party granting a Lien on any of its personal
property (including without limitation any Equity Interests owned by such Loan
Party), each in form and substance acceptable to the Administrative Agent
entered into by any Loan Party at any time for the benefit of the Administrative
Agent and the Lenders pursuant to this Agreement, as amended or modified from
time to time.

“S&P” means Standard & Poor’s.

“SPV” means Black Gold Acquisitions Inc., JP Cheyenne LLC, Tesco Alpha
Acquisitions LP, JP Tong LLC and Tesco Omega Acquisitions LP established solely
to effect the transaction or transactions to acquire certain assets in the
Target Acquisitions as part of a like-kind exchange under Section 1031 of the
Code.

 

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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.

“Subordinated Indebtedness” of a Person means any Indebtedness of such Person
the payment of which is subordinated to payment of the Secured Obligations and
is subject to such other terms to the written reasonable satisfaction of the
Administrative Agent and the Required Lenders.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the parent in the
parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, controlled or held, or (b) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Parent.

“Swap Agreement” means any agreement with respect to any swap, forward, future
or derivative transaction or option or similar agreement involving, or settled
by reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Parent or the
Subsidiaries shall be a Swap Agreement.

“Swap Agreement Obligations” means any and all obligations of the Parent or any
of its Subsidiaries, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) owing to any Lender or any of
its Affiliates under any and all Swap Agreements.

“Swingline Canadian Loans” means Swingline Loans made to the Canadian Borrower.

“Swingline Exposure” means, at any time, the aggregate principal amount of all
Swingline Loans outstanding at such time. The Swingline Exposure of any Lender
at any time shall be its Applicable Percentage of the total Swingline Exposure
at such time.

“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of
Swingline Loans hereunder and, for purposes of making Swingline Canadian Loans,
shall mean JPMorgan Chase Bank, N.A., Toronto Branch.

 

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“Swingline Loan” means a Loan made pursuant to Section 2.05.

“Target Acquisition Documents” means the Alpha Acquisition Documents and the
Omega Acquisition Documents.

“Target Acquisition Transactions” means the execution, delivery and performance
by the Loan Parties of the Target Acquisition Documents, the closing of the
Target Acquisitions, and all transactions related thereto.

“Target Acquisitions” means the Alpha Acquisition and the Omega Acquisition.

“Targets” means Cheyenne Services, Inc., Lamb Energy Services, L.L.C. and Tong
Specialty L.L.C.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

“Term Loan Commitments” means, with respect to each Lender, the Alpha Term Loan
Commitment and the Omega Loan Commitment of such Lender. The initial aggregate
amount of the Lenders’ Term Loan Commitments is $50,000,000.

“Term Loan Maturity Date” means October 31, 2010.

“Term Loans” means the Alpha Term Loan and the Omega Term Loan.

“Transactions” means the execution, delivery and performance by the Borrowers of
this Agreement, the borrowing of Loans, the use of the proceeds thereof and the
issuance of Letters of Credit hereunder and the Target Acquisition Transactions.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the
rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

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

“US Borrower” means Tesco US Holding LP, a Nevada limited partnership.

“Wholly-Owned Subsidiary” of a Person means, any Subsidiary all of the
outstanding Equity Interests of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person.

“Withdrawal Liability” means liability of any Borrower, Guarantor or ERISA
Affiliate to a Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving
Loan”) or by Type (e.g., a “Eurodollar Loan”) or by Class and Type (e.g., a
“Eurodollar Revolving Loan”). Borrowings also may be classified and referred to
by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Eurodollar
Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).

 

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SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Parent notifies the Administrative Agent that the Parent requests an amendment
to any provision hereof to eliminate the effect of any change occurring after
the date hereof in GAAP or in the application thereof on the operation of such
provision or to eliminate the effect of any change occurring after the date
hereof in whether generally accepted accounting principles in the United States
of America or in Canada are used by the Parent and its Subsidiaries (or if the
Administrative Agent notifies the Parent that the Required Lenders request an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change in GAAP or in the application
thereof, then such provision shall be interpreted on the basis of GAAP as in
effect and applied immediately before such change shall have become effective
until such notice shall have been withdrawn or such provision amended in
accordance herewith. For purposes of calculating the financial covenants, any
Acquisition or any sale or other disposition outside the ordinary course of
business by the Parent or any of the Subsidiaries of any asset or group of
related assets in one or a series of related transactions, including the
incurrence of any Indebtedness and any related financing or other transactions
in connection with any of the foregoing, occurring during the period for which
such ratios are calculated shall be deemed to have occurred on the first day of
the relevant period for which such ratios were calculated on a pro forma basis
reasonably acceptable to the Administrative Agent.

SECTION 1.05. Foreign Currency Calculations. (a) For purposes of determining the
Dollar Equivalent of any Advance denominated in Canadian Dollars or any related
amount, the Administrative Agent shall determine the Exchange Rate as of the
applicable date with respect to each requested or outstanding Advance
denominated in Canadian Dollars and shall apply such Exchange Rates to determine
such amount (in each case after giving effect to any Advance to be made or
repaid on or prior to the applicable date for such calculation).

(b) For purposes of any determination hereunder, all amounts incurred,
outstanding or proposed to be incurred or outstanding in currencies other than
Dollars shall be translated into Dollars at the currency exchange rates in
effect on the date of such determination; provided that no Default shall arise
as a result of any limitation set forth in Dollars in Section 6.01 or 6.02 being
exceeded solely as a result of changes in currency exchange rates from those
rates applicable at the time or times Indebtedness or Liens were initially
consummated in reliance on the exceptions under such Sections. For purposes of
any

 

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determination under Section 6.03, 6.04 or 6.05, the amount of each asset
disposition, investment or other applicable transaction denominated in a
currency other than Dollars shall be translated into Dollars at the currency
exchange rate in effect on the date such investment, disposition or other
transaction is consummated. Such currency exchange rates shall be determined in
good faith by the Borrowers.

ARTICLE II

The Credits

SECTION 2.01. Commitments. (a) Revolving Credit Commitments. Subject to the
terms and conditions set forth herein, each Lender agrees to make Revolving
Loans to the US Borrower from time to time during the Availability Period in an
aggregate principal amount that will not result in (i) such Lender’s Revolving
Credit Exposure exceeding such Lender’s Commitment, (ii) the total Revolving
Credit Exposures exceeding the total Revolving Commitments or (iii) the total
Revolving Credit Exposures exceeding the Borrowing Base. Within the foregoing
limits and subject to the terms and conditions set forth herein, the US Borrower
may borrow, prepay and reborrow Revolving Loans.

(b) Alpha Term Loan Commitments. Subject to the terms and conditions set forth
herein, each Lender agrees to make an Alpha Term Loan to the US Borrower at one
time on or before November 30, 2005 in an aggregate principal amount equal to
such Lender’s Alpha Term Loan Commitment.

(c) Omega Term Loan Commitments. Subject to the terms and conditions set forth
herein, each Lender agrees to make an Omega Term Loan to the US Borrower at one
time on or before November 30, 2005 in an aggregate principal amount equal to
such Lender’s Omega Term Loan Commitment.

SECTION 2.02. Loans and Borrowings. (a) Each Revolving Loan and Term Loan shall
be made as part of a Borrowing consisting of Revolving Loans or Term Loans, as
the case may be, made by the Lenders ratably in accordance with their respective
Commitments. The failure of any Lender to make any Loan required to be made by
it shall not relieve any other Lender of its obligations hereunder; provided
that the Commitments of the Lenders are several and no Lender shall be
responsible for any other Lender’s failure to make Loans as required.

(b) Subject to Section 2.14, each Revolving Borrowing and Term Loan Borrowing
shall be comprised entirely of ABR Loans or Eurodollar Loans as the US Borrower
may request in accordance herewith. Each Swingline Loan to the US Borrower shall
be an ABR Loan and Swingline Canadian Loan shall bear interest and be subject to
such other terms as may be agreed upon from time to time by the Canadian
Borrower and the Swingline Lender in any separate letter agreement or otherwise
agreed upon between the Canadian Borrower and the Swingline Lender. Each Lender
at its option may make any Eurodollar Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the obligation of the US Borrower to repay such
Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 and not less than $1,000,000. At the time that each ABR Borrowing is
made, such Borrowing shall be in an aggregate amount that is an integral
multiple of $100,000 and not less than $500,000; provided that an ABR Borrowing
may be in an aggregate amount that is equal to the entire unused balance of the
total Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by

 

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Section 2.06(e). Borrowings of more than one Type and Class may be outstanding
at the same time; provided that there shall not at any time be more than a total
of six Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the US Borrower shall
not be entitled to request, or to elect to convert or continue, any Borrowing if
the Interest Period requested with respect thereto would end after the Term Loan
Maturity Date in the case of the Term Loan or the Revolving Credit Maturity Date
in the case of any Revolving Loan.

SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or a
Term Loan Borrowing, the US Borrower shall notify the Administrative Agent of
such request by telephone (a) in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., Chicago time, three Business Days before the date of the
proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00
a.m., Chicago time, one Business Day before the date of the proposed Borrowing;
provided that any such notice of an ABR Revolving Borrowing to finance the
reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be
given not later than 12:00 noon, Chicago time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the Administrative Agent
of a written Borrowing Request in a form approved by the Administrative Agent
and signed by the US Borrower. Each such telephonic and written Borrowing
Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and

(v) the location and number of the US Borrower’s account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.07.

If no election as to the Type of Revolving Borrowing or Term Loan Borrowing is
specified, then the requested Revolving Borrowing or Term Loan Borrowing shall
be an ABR Borrowing. If no Interest Period is specified with respect to any
requested Eurodollar Borrowing, then the US Borrower shall be deemed to have
selected an Interest Period of one month’s duration. Promptly following receipt
of a Borrowing Request in accordance with this Section, the Administrative Agent
shall advise each Lender of the details thereof and of the amount of such
Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Evidence of Debt. (a) Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the US Borrower to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.

(b) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrowers to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender’s share thereof.

 

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(c) The entries made in the accounts maintained pursuant to paragraph (a) or (b)
of this Section shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided that the failure of any Lender or the
Administrative Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrowers to repay the Loans in
accordance with the terms of this Agreement.

(d) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Borrowers shall prepare, execute and deliver to such
Lender a promissory note payable to the order of such Lender (or, if requested
by such Lender, to such Lender and its registered assigns) and in the form
attached hereto as Exhibit B. Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 9.04) be represented by one or more promissory notes in such
form payable to the order of the payee named therein (or, if such promissory
note is a registered note, to such payee and its registered assigns).

SECTION 2.05. Swingline Loans. (a) Subject to the terms and conditions set forth
herein, the Swingline Lender may, in its reasonable discretion, make Swingline
Loans to a Borrower from time to time during the Availability Period, in an
aggregate principal amount at any time outstanding that will not result in
(i) the Dollar Equivalent of the aggregate principal amount of outstanding
Swingline Loans exceeding $10,000,000, (ii) the sum of the total Revolving
Credit Exposures exceeding the total Revolving Commitments, or (iii) the total
Revolving Credit Exposures exceeding the Borrowing Base; provided that the
Swingline Lender shall not make a Swingline Loan to refinance an outstanding
Swingline Loan. Within the foregoing limits and subject to the terms and
conditions set forth herein, each Borrower may borrow, prepay and reborrow
Swingline Loans, provided that all Swingline Loans to the Canadian Borrower
shall be made by JPMorgan Chase Bank, N.A., Toronto Branch.

(b) To request a Swingline Loan, a Borrower shall notify the Administrative
Agent of such request by telephone (confirmed by telecopy), not later than 12:00
noon, Local Time, on the day of a proposed Swingline Loan or pursuant to such
other procedures and requirements agreed upon between such Borrower and the
Swingline Lender. Each such notice shall be irrevocable and shall specify the
requested date (which shall be a Business Day) and amount of the requested
Swingline Loan. The Administrative Agent will promptly advise the Swingline
Lender of any such notice received from a Borrower. If the Swingline Lender
determines in its discretion to make such Swingline Loan, and such Borrower and
the Swingline Lender have agreed upon the interest rate and other applicable
terms, such Swingline Loan shall be made available to a Borrower by means of a
credit to the general deposit account of the applicable Borrower with the
Swingline Lender (or, in the case of a Swingline Loan made to finance the
reimbursement of an LC Disbursement as provided in Section 2.06(e), by
remittance to the Issuing Bank) by 3:00 p.m., Local Time, on the requested date
of such Swingline Loan.

(c) The Swingline Lender may by written notice given to the Administrative Agent
not later than 10:00 a.m., Local Time, on any Business Day require the Lenders
to acquire participations on such Business Day in all or a portion of the
Swingline Loans outstanding. Such notice shall specify the aggregate amount of
Swingline Loans in which Lenders will participate. Any Swingline Loan
outstanding in Canadian Dollars shall, upon the giving of such notice by the
Swingline Lender, immediately and automatically be converted to and
redenominated in Dollars equal to the Dollar Equivalent thereof and shall bear
interest at the greater of the Alternate Base Rate or the rate otherwise
applicable to such Swingline Loan. Promptly upon receipt of such notice, the
Administrative Agent will give notice thereof to each Lender, specifying in such
notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each
Lender hereby absolutely and unconditionally agrees, upon receipt of notice as
provided above, to pay to the Administrative Agent, for the account of the
Swingline Lender,

 

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such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and
Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Swingline
Lender the amounts so received by it from the Lenders. The Administrative Agent
shall notify the applicable Borrower of any participations in any Swingline Loan
acquired pursuant to this paragraph, and thereafter payments in respect of such
Swingline Loan shall be made to the Administrative Agent and not to the
Swingline Lender. Any amounts received by the Swingline Lender from a Borrower
(or other party on behalf of a Borrower) in respect of a Swingline Loan after
receipt by the Swingline Lender of the proceeds of a sale of participations
therein shall be promptly remitted to the Administrative Agent; any such amounts
received by the Administrative Agent shall be promptly remitted by the
Administrative Agent to the Lenders that shall have made their payments pursuant
to this paragraph and to the Swingline Lender, as their interests may appear;
provided that any such payment so remitted shall be repaid to the Swingline
Lender or to the Administrative Agent, as applicable, if and to the extent such
payment is required to be refunded to a Borrower for any reason. The purchase of
participations in a Swingline Loan pursuant to this paragraph shall not relieve
any Borrower of any default in the payment thereof.

SECTION 2.06. Letters of Credit. (a) General. Subject to the terms and
conditions set forth herein, the US Borrower may request the issuance of Letters
of Credit for its own account or the account of any LC Obligor, in a form
reasonably acceptable to the Administrative Agent and the Issuing Bank, at any
time and from time to time during the Availability Period. In the event any
Letter of Credit is to be issued to any LC Obligor other than the US Borrower,
such LC Obligor shall execute and deliver such letter of credit application or
other agreement requested by the Issuing Bank and the US Borrower and such LC
Obligor shall be jointly and severally liable for all LC Exposure with respect
to such Letter of Credit. Letters of Credit may be denominated in Dollars,
Canadian Dollars or any other currency acceptable to the Administrative Agent
that is freely available, freely transferable and freely convertible into
Dollars. In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the any LC Obligor to, or entered
into by the any LC Obligor with, the Issuing Bank relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the US Borrower shall hand
deliver or telecopy (or transmit by electronic communication, if arrangements
for doing so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative Agent (reasonably in advance of the requested date of issuance,
amendment, renewal or extension) a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the Issuing Bank, the US Borrower and any other LC
Obligor requesting such Letter of Credit also shall submit a letter of credit
application on the Issuing Bank’s standard form in connection with any request
for a Letter of Credit or such other agreement reasonably requested by the
Issuing Bank. A Letter of Credit shall be issued, amended, renewed or extended
only if (and upon issuance, amendment, renewal or extension of each Letter of
Credit the US

 

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Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension (i) the Dollar Equivalent of the
LC Exposure shall not exceed $15,000,000, (ii) the sum of the Dollar Equivalent
of the total Revolving Credit Exposures shall not exceed the total Revolving
Commitments and (iii) the Dollar Equivalent of the total Revolving Credit
Exposures shall not exceed the Borrowing Base.

(c) Expiration Date. Each Letter of Credit shall expire at or prior to the close
of business on the earlier of (i) the date one year after the date of the
issuance of such Letter of Credit (or, in the case of any renewal or extension
thereof, one year after such renewal or extension) and (ii) the date that is
five Business Days prior to the Revolving Credit Maturity Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants
to each Lender, and each Lender hereby acquires from the Issuing Bank, a
participation in such Letter of Credit equal to such Lender’s Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the US Borrower and
other applicable LC Obligors on the date due as provided in paragraph (e) of
this Section, or of any reimbursement payment required to be refunded to the US
Borrower or any other applicable LC Obligor for any reason. Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including any
amendment, renewal or extension of any Letter of Credit or the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.

(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement in respect
of a Letter of Credit, the US Borrower and each other applicable LC Obligor
shall reimburse such LC Disbursement by paying to the Administrative Agent an
amount equal to such LC Disbursement not later than 12:00 noon, Chicago time, on
the date that such LC Disbursement is made, if the US Borrower shall have
received notice of such LC Disbursement prior to 10:00 a.m., Chicago time, on
such date, or, if such notice has not been received by the US Borrower prior to
such time on such date, then not later than 12:00 noon, Chicago time, on (i) the
Business Day that the US Borrower receives such notice, if such notice is
received prior to 10:00 a.m., Chicago time, on the day of receipt, or (ii) the
Business Day immediately following the day that the US Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that the US Borrower may, subject to the conditions to borrowing set
forth herein, request in accordance with Section 2.03 or 2.05 that such payment
be financed with an ABR Revolving Borrowing or Swingline Loan in an equivalent
amount and, to the extent so financed, the US Borrower’s and any other
applicable LC Obligor’s obligation to make such payment shall be discharged and
replaced by the resulting ABR Revolving Borrowing or Swingline Loan. If any LC
Obligor fails to make such payment when due, (x) such payment obligation
outstanding in any currency other than Dollars shall be immediately and
automatically converted to and redenominated in Dollars equal to the Dollar
Equivalent thereof and shall bear interest at the Alternate Base Rate and
(y) the Administrative Agent shall notify each Lender of the applicable LC
Disbursement, the payment then due from any LC Obligor in respect thereof and
such Lender’s Applicable Percentage thereof. Promptly following receipt of such
notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from any LC Obligor, in the same manner as
provided in Section 2.07 with respect to Loans made by such Lender (and
Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the
Lenders), and the Administrative Agent shall promptly pay to the Issuing Bank
the amounts so received by it from the Lenders. Promptly following receipt by
the Administrative Agent of any payment

 

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from any LC Obligor pursuant to this paragraph, the Administrative Agent shall
distribute such payment to the Issuing Bank or, to the extent that Lenders have
made payments pursuant to this paragraph to reimburse the Issuing Bank, then to
such Lenders and the Issuing Bank as their interests may appear. Any payment
made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for
any LC Disbursement (other than the funding of ABR Revolving Loans or a
Swingline Loan as contemplated above) shall not constitute a Loan and shall not
relieve any LC Obligor of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. Each LC Obligor’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein, (ii) any draft or
other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, any LC Obligor’s obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of any Letter of Credit or any
payment or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding sentence), or any error, omission,
interruption, loss or delay in transmission or delivery of any draft, notice or
other communication under or relating to any Letter of Credit (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of the
Issuing Bank; provided that the foregoing shall not be construed to excuse the
Issuing Bank from liability to any LC Obligor to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by each LC Obligor to the extent permitted by applicable law)
suffered by any LC Obligor that are caused by the Issuing Bank’s failure to
exercise care when determining whether drafts and other documents presented
under a Letter of Credit comply with the terms thereof. The parties hereto
expressly agree that, in the absence of gross negligence or wilful misconduct on
the part of the Issuing Bank (as finally determined by a court of competent
jurisdiction or mutually agreed upon by the Issuing Bank and all other parties),
the Issuing Bank shall be deemed to have exercised care in each such
determination. In furtherance of the foregoing and without limiting the
generality thereof, the parties agree that, with respect to documents presented
which appear on their face to be in substantial compliance with the terms of a
Letter of Credit, the Issuing Bank may, in its sole discretion, either accept
and make payment upon such documents without responsibility for further
investigation, regardless of any notice or information to the contrary, or
refuse to accept and make payment upon such documents if such documents are not
in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The Issuing Bank shall, promptly following its
receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall promptly notify the
Administrative Agent and the US Borrower by telephone (confirmed by telecopy) of
such demand for payment and whether the Issuing Bank has made or will make an LC
Disbursement thereunder; provided that any failure to give or delay in giving
such notice shall not relieve any LC Obligor of its obligation to reimburse the
Issuing Bank and the Lenders with respect to any such LC Disbursement.

 

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(h) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then,
unless such LC Disbursement has been paid in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date such LC Disbursement is reimbursed in full, at the rate per annum then
applicable to ABR Revolving Loans; provided that, if any LC Obligor fails to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section, then Section 2.13(c) shall apply. Interest accrued pursuant to this
paragraph shall be for the account of the Issuing Bank, except that interest
accrued on and after the date of payment by any Lender pursuant to paragraph
(e) of this Section to reimburse the Issuing Bank shall be for the account of
such Lender to the extent of such payment.

(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any
time by written agreement among the US Borrower, the Administrative Agent, the
replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent
shall notify the Lenders of any such replacement of the Issuing Bank. At the
time any such replacement shall become effective, the US Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,
(i) the successor Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the US Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with LC Exposure representing greater than 50% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph, the US Borrower shall deposit in an account with the Administrative
Agent, in the name of the Administrative Agent and for the benefit of the
Lenders, an amount in cash equal to the LC Exposure as of such date plus any
accrued and unpaid interest thereon; provided that the obligation to deposit
such cash collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to the US Borrower
described in clause (h) or (i) of Article VII. Such deposit shall be held by the
Administrative Agent as collateral for the payment and performance of the
obligations of the LC Obligors under this Agreement. The Administrative Agent
shall have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on the investment
of such deposits, which investments shall be made at the option and sole
discretion of the Administrative Agent and at the US Borrower’s risk and
expense, such deposits shall not bear interest. Interest or profits, if any, on
such investments shall accumulate in such account. Moneys in such account shall
be applied by the Administrative Agent to reimburse the Issuing Bank for LC
Disbursements for which it has not been reimbursed and, to the extent not so
applied, shall be held for the satisfaction of the reimbursement obligations of
the LC Obligors for the LC Exposure at such time or, if the maturity of the
Loans has been accelerated (but subject to the consent of Lenders with LC
Exposure representing greater than 50% of the total LC Exposure), be applied to
satisfy other obligations of the Borrowers under this Agreement. If the US
Borrower is required to provide an amount of cash collateral hereunder as a
result of the occurrence of an Event of Default, such amount (to the extent not
applied as aforesaid) shall be returned to the US Borrower within three Business
Days after all Events of Default have been cured or waived.

SECTION 2.07. Funding of Borrowings. (a) Each Lender shall make each Loan to be
made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds by 12:00 noon, Chicago time, to the account of the
Administrative Agent most recently designated by it for such purpose by notice
to the Lenders; provided that Swingline Loans shall be made as provided in

 

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Section 2.05. The Administrative Agent will make such Loans available to the US
Borrower by promptly crediting the amounts so received, in like funds, to an
account of the US Borrower maintained with the Administrative Agent and
designated by the US Borrower in the applicable Borrowing Request or in such
other manner as agreed upon between the Administrative Agent and the US
Borrower; provided that ABR Revolving Loans made to finance the reimbursement of
an LC Disbursement as provided in Section 2.06(e) shall be remitted by the
Administrative Agent to the Issuing Bank.

(b) Unless the Administrative Agent shall have received notice from a Lender
prior to the proposed date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender’s share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the US Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the US Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the US Borrower
to but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the US Borrower, the interest
rate applicable to ABR Loans. If such Lender pays such amount to the
Administrative Agent, then such amount shall constitute such Lender’s Loan
included in such Borrowing.

SECTION 2.08. Interest Elections. (a) Each Borrowing initially shall be of the
Type specified in the applicable Borrowing Request and, in the case of a
Eurodollar Borrowing, shall have an initial Interest Period as specified in such
Borrowing Request. Thereafter, the US Borrower may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the case of
a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section. The US Borrower may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing. This Section shall not apply to Swingline Borrowings, which
may not be converted or continued.

(b) To make an election pursuant to this Section, the US Borrower shall notify
the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the US Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the US Borrower.

(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions thereof,
the portions thereof to be allocated to each resulting Borrowing (in which case
the information to be specified pursuant to clauses (iii) and (iv) below shall
be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election
Request, which shall be a Business Day;

 

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(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period
to be applicable thereto after giving effect to such election, which shall be a
period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the US Borrower shall be deemed to have
selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender’s portion of each resulting Borrowing.

(e) If the US Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided herein, at
the end of such Interest Period such Borrowing shall be converted to an ABR
Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing and the Administrative Agent, at the request of
the Required Lenders, so notifies the US Borrower, then, so long as an Event of
Default is continuing (i) no outstanding Borrowing may be converted to or
continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

SECTION 2.09. Termination and Reduction of Commitments. (a) Unless previously
terminated, the Commitments shall terminate on the Revolving Credit Maturity
Date.

(b) The US Borrower may at any time terminate, or from time to time reduce, the
Commitments; provided that (i) each reduction of the Commitments shall be in an
amount that is an integral multiple of $1,000,000 and not less than $5,000,000
and (ii) the US Borrower shall not terminate or reduce the Commitments if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.11, the Revolving Credit Exposures would exceed the total Revolving
Commitments.

(c) The US Borrower shall notify the Administrative Agent of any election to
terminate or reduce the Commitments under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the US Borrower
pursuant to this Section shall be irrevocable; provided that a notice of
termination of the Commitments delivered by the US Borrower may state that such
notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the US Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of the Commitments
shall be permanent. Each reduction of the Commitments shall be made ratably
among the Lenders in accordance with their respective Commitments.

SECTION 2.10. Repayment of Loans. (a) The US Borrower hereby unconditionally
promises to pay to the Administrative Agent for the account of each Lender the
then unpaid principal amount of each Revolving Loan on the Revolving Credit
Maturity Date. The Borrowers hereby unconditionally promise to pay to the
Swingline Lender the then unpaid principal amount of each Swingline Loan on the
earlier of the Revolving Credit Maturity Date or the demand by the Swingline
Lender in its discretion.

 

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(b) If at any time the Dollar Equivalent of the aggregate Revolving Credit
Exposure of all Lenders exceeds (i) the total Revolving Commitments or (ii) the
Borrowing Base, the Borrowers shall promptly repay such excess. If any such
excess remains after repayment in full of all outstanding Revolving Loans and
Swingline Loans, the US Borrower shall provide cash collateral for the LC
Exposure in the manner set forth herein to the extent required to eliminate such
excess.

(c) The US Borrower shall pay the Term Loans in sixteen (16) consecutive
quarterly principal installments, each in the amount of $3,125,000 and each
payable on the last Business Day of each January, April, July and October,
commencing on the last Business Day of January, 2007, and with the last such
installment due on the Term Loan Maturity Date.

(d) In addition to all other payments of the Term Loans required hereunder,
unless the Leverage Ratio was less than 1.0 to 1.0 as of the most recently ended
Fiscal Quarter prior to such sale, the US Borrower shall prepay the Term Loans
by an amount equal to 50% of all of the Net Cash Proceeds from any Asset Sale or
Event of Loss, provided that:

(i) With respect to Net Cash Proceeds from the sale of any rental fleet assets
and other plant, property, and equipment assets, such Net Cash Proceeds may be
used to purchase similar rental fleet assets and other plant, property, and
equipment assets of comparable value, subject to the following conditions:
(x) no Default exists on the date of such sale or of the proposed expenditure to
purchase similar rental fleet assets and other plant, property, and equipment
assets of comparable value, (y) such Net Cash Proceeds shall be used to purchase
similar rental fleet assets and other plant, property, and equipment assets of
comparable value within 270 days following the date of such sale and (z) any
such amounts in excess of $5,000,000 in the aggregate in any Fiscal Year shall
be deposited in escrow with the Administrative Agent, to be paid out when such
similar rental fleet assets and other plant, property, and equipment assets of
comparable value are purchased; provided that, if any of the foregoing
conditions are not satisfied at any time then all such Net Cash Proceeds,
whether held in escrow, held by the Borrowers or otherwise, shall then used to
prepay the Term Loans by the amount thereof.

(ii) With respect to Net Cash Proceeds from insurance paid with respect to any
Event of Loss, such Net Cash Proceeds may used to replace, rebuild or repair the
assets for which such Net Cash Proceeds were paid, subject to the following
conditions: (x) no Default exists on the date of such Event of Loss or of the
proposed expenditure to replace, rebuild or repair, (y) the Parent delivers a
certificate to Administrative Agent within 10 Business Days of such Event of
Loss stating that such Net Cash Proceeds shall be used to replace, rebuild or
repair such assets or other capital assets used or useful in the Borrowers’
business within 270 days following the date of such Event of Loss (which
certificate shall set forth the estimates of the proceeds to be so expended and
when they will be expended) and such replacement, rebuilding or repair is
completed within 365 days following the date of such Event of Loss, and (z) any
such amounts in excess of $5,000,000 in the aggregate in any Fiscal Year shall
be deposited in escrow with Administrative Agent, to be paid out from time to
time as work progresses based on such documents and other conditions as the
Administrative Agent may reasonably require; provided that, if any of the
foregoing conditions are not satisfied at any time then all such Net Cash
Proceeds, whether held in escrow, held by the Borrower or otherwise, shall then
used to prepay the Term Loans by the amount thereof.

(e) In addition to all other payments of the Term Loans required hereunder, the
US Borrower shall prepay the Term Loans by an amount equal to 50% of the Net
Cash Proceeds from the issuance or other sale of any Equity Interests of the
Parent or any of its Subsidiaries in excess of

 

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$10,000,000 after the Effective Date, other than (i) such Net Cash Proceeds used
exclusively for Acquisitions permitted hereunder and (ii) Net Cash Proceeds as a
result of the purchase of any Equity Interests of the Parent by employees,
officers or directors of the Parent or its Subsidiaries that are not material.

(f) In addition to all other payments of the Term Loans required hereunder, the
US Borrower shall prepay the Term Loans by an amount equal to 50% of the Net
Cash Proceeds of any Subordinated Indebtedness incurred by the Parent or any of
its Subsidiaries.

(g) All prepayments of the Term Loans (whether mandatory under this Section 2.10
or optional under Section 2.11) up to $13,000,000 in aggregate amount shall be
applied to principal installments on the Term Loans in the inverse order of
maturity and all such prepayments in excess of $13,000,000 in aggregate amount
shall be applied pro rata to all principal installments on the Term Loans.

SECTION 2.11. Prepayment of Loans. (a) The Borrowers shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (b) of this Section.

(b) The Borrowers shall notify the Administrative Agent (and, in the case of
prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than noon, Chicago time, three Business Days
before the date of prepayment, (ii) in the case of prepayment of an ABR
Borrowing, not later than noon, Chicago time, one Business Day before the date
of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later
than 12:00 noon, Toronto time, on the date of prepayment or such other time
agreed to between the applicable Borrower and the Swingline Lender. Each such
notice shall be irrevocable and shall specify the prepayment date and the
principal amount of each Borrowing or portion thereof to be prepaid; provided
that, if a notice of prepayment is given in connection with a conditional notice
of termination of the Commitments as contemplated by Section 2.09, then such
notice of prepayment may be revoked if such notice of termination is revoked in
accordance with Section 2.09. Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders of
the contents thereof. Each partial prepayment of any Borrowing shall be in an
amount that would be permitted in the case of an advance of a Borrowing of the
same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be
applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.13.

SECTION 2.12. Fees. (a) The Borrowers agree to pay to the Administrative Agent
for the account of each Lender an unused commitment fee at a per annum rate
equal to the Applicable Rate (i) on the average daily amount by which each such
Lender’s Revolving Commitment exceeds the outstanding principal amount of such
Lender’s Revolving Loans and its LC Exposure, during the period from and
including the Effective Date to but excluding the date on which such Revolving
Commitment terminates and (ii) on the average daily amount by which each such
Lender’s Term Loan Commitments exceeds the outstanding principal amount of such
Lender’s Term Loans, during the period from and including the Effective Date to
but excluding the earlier of the date on which the Term Loans are made or
November 30, 2005. Swingline Loans shall not count as usage of the Revolving
Commitment of any Lender’s Revolving Commitment for purposes of determining such
commitment fees. Accrued commitment fees shall be payable in arrears on third
Business Day after the last day of March, June, September and December of each
year and on the date on which the any applicable Commitment terminates,
commencing on the first such date to occur after the date hereof. All commitment
fees shall be computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).

 

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(b) The Borrowers agree to pay (i) to the Administrative Agent for the account
of each Lender a participation fee with respect to its participations in Letters
of Credit, which shall accrue at the same Applicable Rate used to determine the
interest rate applicable to Eurodollar Revolving Loans on the average daily
amount of such Lender’s LC Exposure (excluding any portion thereof attributable
to unreimbursed LC Disbursements) during the period from and including the
Effective Date to but excluding the later of the date on which such Lender’s
Commitment terminates and the date on which such Lender ceases to have any LC
Exposure, and (ii) to the Issuing Bank a fronting fee, which shall accrue at the
rate of 0.125% per annum on the average daily amount of the LC Exposure
(excluding any portion thereof attributable to unreimbursed LC Disbursements)
during the period from and including the Effective Date to but excluding the
later of the date of termination of the Commitments and the date on which there
ceases to be any LC Exposure, provided that such fee shall not be less than
$200, as well as the Issuing Bank’s standard fees with respect to the issuance,
amendment, renewal or extension of any Letter of Credit or processing of
drawings thereunder. Participation fees and fronting fees accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all such fees
shall be payable on the date on which the Commitments terminate and any such
fees accruing after the date on which the Commitments terminate shall be payable
on demand. Any other fees payable to the Issuing Bank pursuant to this paragraph
shall be payable within 10 days after demand. All participation fees and
fronting fees shall be computed on the basis of a year of 360 days and shall be
payable for the actual number of days elapsed (including the first day but
excluding the last day).

(c) The Borrowers agree to pay to the Administrative Agent, for its own account,
fees payable in the amounts and at the times separately agreed upon between any
Borrower and the Administrative Agent.

(d) All fees payable hereunder shall be paid on the dates due, in immediately
available funds, to the Administrative Agent (or to the Issuing Bank, in the
case of fees payable to it) for distribution, in the case of commitment fees and
participation fees, to the Lenders. Once paid, fees shall not be refundable
under any circumstances.

SECTION 2.13. Interest. (a) The Loans comprising each ABR Borrowing (including
each Swingline Loan) shall bear interest at the Alternate Base Rate.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Rate.

(c) Notwithstanding the foregoing, during the continuance of an Event of Default
the Required Lenders may, at their option, by notice to the Borrowers (which
notice may be revoked at the option of the Required Lenders notwithstanding any
provision of Section 9.02 requiring unanimous consent of the Lenders to changes
in interest rates), declare that (i) each Eurodollar Loan shall bear interest
for the remainder of the applicable Interest Period at the rate otherwise
applicable to such Interest Period plus 2% per annum, (ii) the rate of each
participation fee payable under Section 2.12(b)(i) with respect to Letters of
Credit shall be increased by 2% per annum and (iii) each ABR Loan shall bear
interest at a rate per annum equal to the Alternate Base Rate in effect from
time to time plus 2% per annum, provided that, during the continuance of an
Event of Default under clause (h) or (i) of Article VII, the rates set forth in
clauses (i), (ii) and (iii) above shall be applicable to all Loans and Letters
of Credit without any election or action on the part of the Administrative Agent
or any Lender.

 

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(d) Accrued interest on each Loan shall be payable in arrears on each Interest
Payment Date for such Loan and, in the case of Revolving Loans, upon termination
of the Commitments; provided that (i) interest accrued pursuant to paragraph
(c) of this Section shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving
Loan prior to the end of the Availability Period), accrued interest on the
principal amount repaid or prepaid shall be payable on the date of such
repayment or prepayment and (iii) in the event of any conversion of any
Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Prime Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and in each case shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate
or LIBO Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.

(f) For the purposes of the Interest Act (Canada) hereunder (i) whenever
interest payable pursuant to this Agreement is calculated with respect to any
monetary obligation relating to Loans to the Canadian Borrower on the basis of a
period other than a calendar year (the “Calculation Period”), each rate of
interest determined pursuant to such calculation expressed as an annual rate is
equivalent to such rate as so determined, multiplied by the actual number of
days in the calendar year in which the same is to be ascertained and divided by
the number of days in the Calculation Period; (ii) the principle of deemed
reinvestment of interest with respect to any monetary obligation relating to
Loans in Canadian Dollars shall not apply to any interest calculation under this
agreement, and (iii) the rates of interest with respect to any monetary
obligation relating to Loans to the Canadian Borrower stipulated in this
Agreement are intended to be nominal rates and not effective rates or yields.

SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period
will not adequately and fairly reflect the cost to such Lenders (or Lender) of
making or maintaining their Loans (or its Loan) included in such Borrowing for
such Interest Period;

then the Administrative Agent shall give notice thereof to the US Borrower and
the Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the US Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing; provided that if the circumstances
giving rise to such notice affect only one Type of Borrowings, then the other
Type of Borrowings shall be permitted.

 

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SECTION 2.15. Increased Costs. (a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Lender (except any such reserve requirement reflected in the
Adjusted LIBO Rate) or the Issuing Bank; or

(ii) impose on any Lender or the Issuing Bank or the London interbank market any
other condition affecting this Agreement or Eurodollar Loans made by such Lender
or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
Issuing Bank of participating in, issuing or maintaining any Letter of Credit or
to reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise), then the
US Borrower will pay to such Lender or the Issuing Bank, as the case may be,
such additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.

(b) If any Lender or the Issuing Bank determines that any Change in Law
regarding capital requirements has or would have the effect of reducing the rate
of return on such Lender’s or the Issuing Bank’s capital or on the capital of
such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of
this Agreement or the Loans made by, or participations in Letters of Credit held
by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level
below that which such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company could have achieved but for such Change in Law (taking
into consideration such Lender’s or the Issuing Bank’s policies and the policies
of such Lender’s or the Issuing Bank’s holding company with respect to capital
adequacy), then from time to time the Borrowers will pay to such Lender or the
Issuing Bank, as the case may be, such additional amount or amounts as will
compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or
amounts necessary to compensate such Lender or the Issuing Bank or its holding
company, as the case may be, as specified in paragraph (a) or (b) of this
Section shall be delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay such Lender or the Issuing Bank, as the
case may be, the amount shown as due on any such certificate within 10 days
after receipt thereof.

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation pursuant to this Section shall not constitute a waiver of such
Lender’s or the Issuing Bank’s right to demand such compensation; provided that
the Borrowers shall not be required to compensate a Lender or the Issuing Bank
pursuant to this Section for any increased costs or reductions incurred more
than 180 days prior to the date that such Lender or the Issuing Bank, as the
case may be, notifies the Borrowers of the Change in Law giving rise to such
increased costs or reductions and of such Lender’s or the Issuing Bank’s
intention to claim compensation therefor; provided further that, if the Change
in Law giving rise to such increased costs or reductions is retroactive, then
the 180-day period referred to above shall be extended to include the period of
retroactive effect thereof.

SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default),
(b) the conversion of any Eurodollar Loan other than on the last day of the
Interest Period applicable thereto, (c) the failure to borrow, convert, continue
or prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under
Section 2.11(b) and is revoked in accordance therewith), or (d) the

 

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assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the US Borrower pursuant
to Section 2.19, then, in any such event, the US Borrower shall compensate each
Lender for the loss, cost and expense attributable to such event. In the case of
a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the eurodollar
market. A certificate of any Lender setting forth the amount or amounts that
such Lender is entitled to receive pursuant to this Section shall be delivered
to the US Borrower and shall be conclusive absent manifest error. The US
Borrower shall pay such Lender the amount shown as due on any such certificate
within 10 days after receipt thereof.

SECTION 2.17. Taxes. (a) Any and all payments by or on account of any obligation
of the Borrowers hereunder shall be made free and clear of and without deduction
for any Indemnified Taxes or Other Taxes; provided that if the Borrowers shall
be required to deduct any Indemnified Taxes or Other Taxes from such payments,
then (i) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section) the Administrative Agent, Lender or Issuing Bank (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrowers shall make such deductions and
(iii) the Borrowers shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.

(b) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

(c) The Borrowers shall indemnify the Administrative Agent, each Lender and the
Issuing Bank, within 10 days after written demand therefor, for the full amount
of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such
Lender or the Issuing Bank, as the case may be, on or with respect to any
payment by or on account of any obligation of the Borrowers hereunder (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section) and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate setting forth the amount
of such payment or liability delivered to the Borrowers by a Lender or the
Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a
Lender or the Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes
by the Borrowers to a Governmental Authority, the Borrowers shall deliver to the
Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

(e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which the US Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the US Borrower (with a copy to
the Administrative Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
or reasonably requested by

 

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the US Borrower as will permit such payments to be made without withholding or
at a reduced rate. In addition, any Foreign Lender, if requested by the US
Borrower or the Administrative Agent, shall deliver such other documentation
prescribed by applicable law or reasonably requested by the Borrower or the
Administrative Agent as will enable the Borrower or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements.

(f) If the Administrative Agent or a Lender determines that it has received a
refund or credit of any Taxes or Other Taxes as to which it has been indemnified
by the Borrowers or with respect to which the Borrowers has paid additional
amounts pursuant to this Section 2.17, it shall pay over such refund to the
Borrowers (but only to the extent of indemnity payments made, or additional
amounts paid, by the Borrowers under this Section 2.17 with respect to the Taxes
or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of
the Administrative Agent or such Lender and without interest (other than any
interest paid by the relevant Governmental Authority with respect to such
refund); provided, that the Borrowers, upon the request of the Administrative
Agent or such Lender, agrees to repay the amount paid over to the Borrowers
(plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event
the Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This Section shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to the
Borrowers or any other Person.

(g) If JPMorgan Chase Bank, N.A., Toronto Branch shall not be a Canadian Lender
at any time after the Effective Date, then JPMorgan Chase Bank, N.A., Toronto
Branch shall use reasonable efforts to designate a different lending office for
funding or booking the Swingline Canadian Loans hereunder or issuing Letters of
Credit for the account of any Canadian LC Obligor or to assign its rights and
obligations hereunder to another of its offices, branches or Affiliates that is
a Canadian Lender or, if no such office, branch or Affiliate exists and no
Default exists, use reasonable efforts to assign its functions as the Issuing
Bank for Letters of Credit to any Canadian LC Obligor and as the Swingline
Lender to the Canadian Borrower to a lender that is either a Canadian Lender or
would, upon taking such an assignment, be a Canadian Lender. The Borrowers
hereby agree to pay all costs and expenses incurred by the Administrative Agent,
JPMorgan Chase Bank, N.A., Toronto Branch, any of its Affiliates or any Lender
in connection with any such designation or assignment. All parties hereto agree
to execute such agreements as reasonably requested by the Administrative Agent
to effect such designation or assignment.

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
(a) The Borrowers shall make each payment required to be made by it hereunder
(whether of principal, interest, fees or reimbursement of LC Disbursement) by
noon Local Time, on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may,
in the discretion of the Administrative Agent, be deemed to have been received
on the next succeeding Business Day for purposes of calculating interest
thereon. All such payments shall be made to the Administrative Agent at its
offices designated to the Borrowers from time to time, except payments to be
made directly to the Issuing Bank or Swingline Lender as expressly provided
herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03
shall be made directly to the Persons entitled thereto. The Administrative Agent
shall distribute any such payments received by it for the account of any other
Person to the appropriate recipient promptly following receipt thereof. If any
payment hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments hereunder shall be made in dollars.

 

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(b) If at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC
Disbursements, interest and fees then due hereunder, such funds shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
and unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed LC
Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Revolving Loans, Term Loans or participations in LC Disbursements or
Swingline Loans resulting in such Lender receiving payment of a greater
proportion of the aggregate amount of its Revolving Loans, Term Loans and
participations in LC Disbursements and Swingline Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans of other Lenders to the extent necessary so
that the benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Revolving Loans, Term Loans and participations in LC
Disbursements and Swingline Loans; provided that (i) if any such participations
are purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrowers pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans or participations
in LC Disbursements to any assignee or participant, other than to the Parent or
any Subsidiary or Affiliate thereof (as to which the provisions of this
paragraph shall apply). The Borrowers consent to the foregoing and agrees, to
the extent it may effectively do so under applicable law, that any Lender
acquiring a participation pursuant to the foregoing arrangements may exercise
against the Borrowers rights of set-off and counterclaim with respect to such
participation as fully as if such Lender were a direct creditor of the Borrowers
in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the
Borrowers prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the Issuing Bank hereunder that the
Borrowers will not make such payment, the Administrative Agent may assume that
the Borrowers have made such payment on such date in accordance herewith and
may, in reliance upon such assumption, distribute to the Lenders or the Issuing
Bank, as the case may be, the amount due. In such event, if a Borrower has not
in fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or Issuing Bank with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by the
Administrative Agent in accordance with banking industry rules on interbank
compensation.

(e) If any Lender shall fail to make any payment required to be made by it
pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(d) or 9.03(c), then
the Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender’s obligations under
such Sections until all such unsatisfied obligations are fully paid.

 

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(f) All proceeds of any realization on the Collateral pursuant to the Collateral
Documents and any payments received by the Administrative Agent or any Lender
subsequent to and during the continuance of any Event of Default, subject to the
obligations secured thereby, shall be allocated and distributed by the Agent as
follows:

(i) First, to the payment of all fees, costs, expenses and other amounts owing
to the Administrative Agent, including without limitation all reasonable
attorneys’ fees, in connection with the enforcement of the Collateral Documents
and otherwise administering the Loan Documents;

(ii) Second, to payment of any Secured Obligations pro rata among those parties
to whom such Secured Obligations are due in accordance with the amounts owing to
each of them, provided that the proceeds of any realization on the Collateral
may be altered by the Administrative Agent, with the consent of the Lenders, in
a manner to maximize the recovery by all Lenders and their Affiliates and which
would not decrease the recovery of any Lender; and

(iii) Third, to the Borrowers, their Subsidiaries or such other Person as may be
legally entitled thereto

The order and priority set forth in this Section 2.18(f) and the related
provisions are set forth solely to determine the rights and priorities of the
Administrative Agent and the Lenders as among themselves, and the order and
priority may at any time be changed by the Lenders without the consent of the
Borrowers, provided that the order or priority of any payment to the
Administrative Agent may only be changed with the consent of the Administrative
Agent.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders. (a) If any Lender
requests compensation under Section 2.15, or if a Borrower is required to pay
any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to Section 2.17, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder to
another of its offices, branches or Affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce amounts
payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and would
not otherwise be disadvantageous to such Lender. The Borrowers hereby agree to
pay all reasonable costs and expenses incurred by any Lender in connection with
any such designation or assignment.

(b) If any Lender requests compensation under Section 2.15, or if a Borrower is
required to pay any additional amount to any Lender or any Governmental
Authority for the account of any Lender pursuant to Section 2.17, or if any
Lender is a Defaulting Lender, then such Borrower may, at its sole expense and
effort, upon notice to such Lender and the Administrative Agent, require such
Lender to assign and delegate, without recourse (in accordance with and subject
to the restrictions contained in Section 9.04), all its interests, rights and
obligations under this Agreement to an assignee that shall assume such
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that (i) such Borrower shall have received the prior
written consent of the Administrative Agent (and if a Commitment is being
assigned, the Issuing Bank), which consent shall not unreasonably be withheld,
(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements and
Swingline Loans, accrued interest thereon, accrued fees and all other amounts
payable to it hereunder, from the assignee (to the extent of such outstanding
principal and accrued interest and fees) or such Borrower (in the case of all
other amounts) and (iii) in the case of any such assignment resulting from a
claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling such Borrower to require such
assignment and delegation cease to apply.

 

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ARTICLE III

Representations and Warranties

In order to induce the Lenders and the Administrative Agent to enter into this
Agreement, each Borrower represents and warrants to each Lender and the
Administrative Agent, that the following statements are true, correct and
complete (it being understood and agreed that the representations and warranties
made on the Effective Date are deemed to be made concurrently with, and giving
effect to, the consummation of the Transactions):

SECTION 3.01. Organization; Powers. Each of the Parent and its Subsidiaries is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has all requisite power and authority to carry
on its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions are within each
Borrower’s corporate, limited partnership or similar powers and have been duly
authorized by all necessary corporate, limited partnership or similar action
and, if required, stockholder, partnership or similar action. This Agreement has
been duly executed and delivered by each Borrower and constitutes a legal, valid
and binding obligation of each Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a
proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not
require any consent or approval of, registration or filing with, or any other
action by, any Governmental Authority, except such as have been obtained or made
and are in full force and effect, (b) will not violate any applicable law or
regulation or the charter, by-laws or other organizational documents of the
Parent or any of its material Subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon the Parent or any of its material
Subsidiaries or its assets, or give rise to a right thereunder to require any
payment to be made by the Parent or any of its material Subsidiaries, and
(d) except as required under the Loan Documents, will not result in the creation
or imposition of any Lien on any asset of the Parent or any of its material
Subsidiaries, other than Liens permitted under Section 6.02.

SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The Parent
has heretofore furnished to the Lenders its consolidated balance sheet and
statements of income, stockholders equity and cash flows (i) as of and for the
2004 Fiscal Year, reported on by PricewaterhouseCoopers LLP, independent public
accountants, and (ii) as of and for the second Fiscal Quarter of the 2005 Fiscal
Year, certified by its chief financial officer. Such financial statements
present fairly, in all material respects, the financial position and results of
operations and cash flows of the Parent and its consolidated Subsidiaries as of
such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.

(b) Since the end of the 2004 Fiscal Year, there has been no material adverse
change in the business, assets, operations or condition, financial or otherwise,
of the Parent and its Subsidiaries, taken as a whole.

 

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SECTION 3.05. Properties. (a) Each of the Parent and its Subsidiaries has good
title to, or valid leasehold interests in, all its real and personal property
material to its business, except for minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes, and all such real and
personal property is free and clear of any Lien except for Liens permitted under
Section 6.02. Each Collateral Document is effective to create in favor of the
Administrative Agent a legal, valid, perfected and enforceable security interest
in the Collateral.

(b) Each of the Parent and its Subsidiaries owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Parent and its Subsidiaries
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions,
suits or proceedings by or before any arbitrator or Governmental Authority
pending against or, to the knowledge of the Parent, threatened against or
affecting the Parent or any of its Subsidiaries (i) as to which there is a
reasonable possibility of an adverse determination and that, if adversely
determined, could reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect or (ii) that involve this Agreement or the
Transactions. The Disclosed Matters could not reasonably be expected to result
in a Material Adverse Effect.

(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect, neither the Parent nor any of its
Subsidiaries (i) has failed to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under any
Environmental Law, (ii) has become subject to any Environmental Liability,
(iii) has received notice of any claim with respect to any Environmental
Liability or (iv) knows of any basis for any Environmental Liability.

(c) Since the date of this Agreement, there has been no change in the status of
the Disclosed Matters that, individually or in the aggregate, has resulted in,
or reasonably be expected to materially increased the likelihood of, a Material
Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements. Each of the Parent and its
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. No Default has occurred and is
continuing.

SECTION 3.08. Investment and Holding Company Status. Neither the Parent nor any
of its Subsidiaries is (a) an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940 or (b) a “holding company”
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935.

SECTION 3.09. Taxes. Each of the Parent and its Subsidiaries has timely filed or
caused to be filed all Tax returns and reports required to have been filed and
has paid or caused to be paid all Taxes required to have been paid by it, except
(a) Taxes that are being contested in good faith by appropriate proceedings and
for which the Parent or such Subsidiary, as applicable, has set aside on its
books adequate reserves or (b) to the extent that the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

 

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SECTION 3.10. Pension Plans. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent financial statements reflecting such amounts, exceed by more
than $1,000,000 the fair market value of the assets of such Plan, and the
present value of all accumulated benefit obligations of all underfunded Plans
(based on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $1,000,000 the fair
market value of the assets of all such underfunded Plans. No Borrower or
Subsidiary has a material contingent liability with respect to any
post-retirement benefit under a Canadian Welfare Plan. With respect to Canadian
Pension Plans: (a) no steps have been taken to terminate any Canadian Pension
Plan (wholly or in part) which could result in any Borrower or Subsidiary being
required to make an additional contribution to the Canadian Pension Plan; (b) no
contribution failure has occurred with respect to any Canadian Pension Plan
sufficient to give rise to a lien or charge under any applicable pension
benefits laws of any other jurisdiction; and (c) no condition exists and no
event or transaction has occurred with respect to any Canadian Pension Plan
which is reasonably likely to result in any Borrower or Subsidiary incurring any
material liability, fine or penalty. Each Canadian Pension Plan is in compliance
in all material respects with all applicable pension benefits and tax laws;
(i) all contributions (including employee contributions made by authorized
payroll deductions or other withholdings) required to be made to the appropriate
funding agency in accordance with all applicable laws and the terms of each
pension plan have been made in accordance with all applicable laws and the terms
of each Canadian Pension Plan; (ii) all liabilities under each Canadian Pension
Plan are funded, on a going concern and solvency basis, in accordance with the
terms of the respective Canadian Pension Plans, the requirements of applicable
pension benefits laws and of applicable regulatory authorities and the most
recent actuarial report filed with respect to the Canadian Pension Plan and
there is no accumulated funding deficit with respect to any Canadian Pension
Plan; and (iii) no event has occurred and no conditions exist with respect to
any Canadian Pension Plan that has resulted or could reasonably be expected to
result in any Canadian Pension Plan having its registration revoked or refused
by any administration of any relevant pension benefits regulatory authority or
being required to pay any taxes or penalties under any applicable pension
benefits or tax laws.

SECTION 3.11. Disclosure. The Parent has disclosed to the Lenders all
agreements, instruments and corporate or other restrictions to which it or any
of its Subsidiaries is subject, and all other matters known to it, that,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information furnished by or on behalf of the Parent to the
Administrative Agent or any Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Parent represents only that
such financial information was prepared in good faith based upon assumptions
believed to be reasonable at the time such projections were made.

SECTION 3.12. Alpha Acquisition. All agreements and documents to be executed or
delivered in connection with the Alpha Acquisition are listed on Schedule 3.12
hereof (the “Alpha Acquisition Documents”). Simultaneously with the making of
the Alpha Term Loans hereunder, the Alpha Acquisition shall be closed in
accordance with the Alpha Acquisition Documents and in accordance with all laws,
rules and regulations, whether foreign or domestic, and all orders or other

 

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determinations of any Governmental Authority. Complete and correct copies of all
Alpha Acquisition Documents have been delivered to the Administrative Agent
before the Alpha Acquisition Date. All conditions precedent required as of
closing under the Alpha Acquisition Documents to complete the Alpha Acquisition
have been completed or waived on or before the Alpha Acquisition Date. The total
consideration paid or payable (including without limitation all Indebtedness
assumed, guaranties or other liabilities incurred, all deferred payments and all
other direct or indirect consideration) for the Alpha Acquisition will not
exceed $24,000,000 and substantially all costs and expenses in connection with
the Alpha Acquisition are described in the flow of funds memo delivered to the
Administrative Agent prior to the Alpha Acquisition Date. Upon the closing of
the Alpha Acquisition, the US Borrower shall have a first priority, enforceable
and perfected security interest in all assets and Equity Interests of each SPV
in connection with the Alpha Acquisition, including with limitation all
Replacement Assets owned by each such SPV, which will be collaterally assigned
to the Administrative Agent under the Collateral Documents. All representations
in the Alpha Acquisition Certificate are true and correct in all material
respects. To the Parent’s knowledge, since June 30, 2005 there has been no
material adverse change in the business, property, prospects, condition
(financial or otherwise) or results of operations of either Alpha and its
Subsidiaries taken as a whole.

SECTION 3.13. Omega Acquisition. All agreements and documents to be executed or
delivered in connection with the Omega Acquisition are listed on Schedule 3.13
hereof (the “Omega Acquisition Documents”). Simultaneously with the making of
the Omega Term Loans hereunder, the Omega Acquisition shall be closed in
accordance with the Omega Acquisition Documents and in accordance with all laws,
rules and regulations, whether foreign or domestic, and all orders or other
determinations of any Governmental Authority. Complete and correct copies of all
Omega Acquisition Documents have been delivered to the Administrative Agent
before the Omega Acquisition Date. All conditions precedent required as of
closing under the Omega Acquisition Documents to complete the Omega Acquisition
have been completed or waived on or before the Omega Acquisition Date. The total
consideration paid or payable (including without limitation all Indebtedness
assumed, guaranties or other liabilities incurred, all deferred payments and all
other direct or indirect consideration) for the Omega Acquisition will not
exceed $32,000,000 and substantially all costs and expenses in connection with
the Omega Acquisition are described in the flow of funds memo delivered to the
Administrative Agent prior to the Omega Acquisition Date. Upon the closing of
the Omega Acquisition, the US Borrower shall have a first priority, enforceable
and perfected security interest in all assets and Equity Interests of each SPV
in connection with the Omega Acquisition, including with limitation all
Replacement Assets owned by each such SPV, which will be collaterally assigned
to the Administrative Agent under the Collateral Documents. All representations
in the Omega Acquisition Certificate are true and correct in all material
respects. To the Parent’s knowledge, since June 30, 2005 there has been no
material adverse change in the business, property, prospects, condition
(financial or otherwise) or results of operations of either Omega and its
Subsidiaries taken as a whole.

SECTION 3.14. Labor Matters. Except as would not reasonably be expected to have
a Material Adverse Effect , (a) there are no strikes, lockouts or slowdowns
against the Parent or any Subsidiary pending or, to the knowledge of the
Borrowers, threatened, (b) the hours worked by and payments made to employees of
the Borrower and the Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Federal, state, local or foreign law
dealing with such matters, and (c) all payments due from the Parent or any
Subsidiary, or for which any claim may be made against the Parent or any
Subsidiary, on account of wages and employee health and welfare insurance and
other benefits, have been paid or accrued as a liability on the books of the
Parent or such Subsidiary. The consummation of the Transactions will not give
rise to any right of termination or right of renegotiation on the part of any
union under any collective bargaining agreement to which the Parent or any
Subsidiary is bound.

 

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SECTION 3.15. Solvency. (a) the fair value of the assets of each Loan Party, at
a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (b) the present fair saleable value of the property of
each Loan Party will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(c) each Loan Party will be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) each Loan Party will not have unreasonably small capital with
which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted following the Effective Date.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. The obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective until the date on which each of the following conditions is satisfied
(or waived in accordance with Section 9.02):

(a) The Administrative Agent (or its counsel) shall have received from each
party thereto either (i) a counterpart of each Loan Document signed on behalf of
each party thereto or (ii) written evidence satisfactory to the Administrative
Agent (which may include telecopy transmission of a signed signature page of
this Agreement) that each party thereto has signed a counterpart of this
Agreement.

(b) The Administrative Agent shall have received such written opinion (addressed
to the Administrative Agent and the Lenders and dated the Effective Date) of
counsels for the Borrowers and the Guarantors, in form and substance
satisfactory to the Lenders, and covering such other matters relating to the
Borrowers, the Guarantors, this Agreement or the Transactions as the Required
Lenders shall reasonably request. The Borrowers hereby request such counsels to
deliver such opinion.

(c) The Administrative Agent shall have received such documents and certificates
as the Administrative Agent or its counsel may reasonably request relating to
the organization, existence and good standing of each Borrower and Guarantor,
the authorization of the Transactions and any other legal matters relating to
the Borrowers, Guarantors, this Agreement or the Transactions, all in form and
substance satisfactory to the Administrative Agent and its counsel.

(d) The Administrative Agent shall have received a certificate, dated the
Effective Date and signed by the President, a Vice President or a Financial
Officer of the Parent, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 4.04.

(e) The Administrative Agent shall have received all fees and other amounts due
and payable on or prior to the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by the Borrowers hereunder.

(f) The Administrative Agent shall have received a fully executed original of a
pay-off letter reasonably satisfactory to the Administrative Agent
(i) confirming that all of the Loan

 

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Parties’ obligations under the Indebtedness described on Schedule 4.01 hereto
has been paid in full and (ii) releasing all Liens in connection therewith.

(g) The Administrative Agent shall have received all Lien and other searches
that the Administrative Agent deems necessary, the Loan Parties shall have
delivered UCC termination statements or amendments to existing UCC financing
statements with respect to any filings against the Collateral as may be
requested by the Administrative Agent and shall have authorized the filing of
such termination statements or amendments, the Administrative Agent shall have
been authorized to file any UCC and PPSA financing statements that the
Administrative Agent deems necessary to perfect its Liens in the Collateral and
Liens creating a first priority security interest in the Collateral in favor of
the Administrative Agent shall have been perfected.

(h) The Parent shall have delivered a Borrowing Base Certificate which
calculates the Borrowing Base as of the end of the most recently ended month
prior to the Effective Date.

(i) All legal (including tax implications) and regulatory matters, including,
but not limited to compliance with applicable requirements of Regulations U, T
and X of the Board shall be satisfactory to the Administrative Agent and the
Lenders.

(j) The Parent shall have delivered evidence of insurance coverage in form,
scope, and substance reasonably satisfactory to the Administrative Agent.

(k) The Administrative Agent shall have received satisfactory pro forma and
projected financial statements for the Parent and its Subsidiaries.

(l) The Administrative Agent shall have received a certificate from a Financial
Officer concerning the solvency and other appropriate factual information with
respect to the Parent and its Subsidiaries in form and substance satisfactory to
the Administrative Agent with respect to solvency.

(m) The Administrative Agent shall have received reasonably satisfactory results
of due diligence investigations of Alpha and Omega (including without limitation
liabilities and contingent liabilities (e.g., environmental, retiree medical
benefits, ERISA, etc.) and contractual obligations and a review of financial
statements of Alpha satisfactory to the Administrative Agent).

(n) There shall be no material adverse change in Alpha or Omega or their
business, operations, property or condition (financial or otherwise) as
reflected in the financial statements for Alpha and Omega delivered to the
Administrative Agent prior to the Effective Date.

(o) All legal (including tax implications) and regulatory matters shall be
reasonably satisfactory to the Administrative Agent and all due diligence
reviews of all litigation of the Parent and its Subsidiaries.

(p) All conditions to the funding of the Alpha Term Loans or the Omega Term
Loans shall be satisfied and either the Alpha Term Loans or the Omega Term Loans
shall be made simultaneously with the first Revolving Loans, Swingline Loans and
Letters of Credit hereunder.

(q) The Loan Parties shall have delivered such other documents and taken such
other actions as the Administrative Agent, the LC Issuer, any Lender or their
respective counsel may

 

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have reasonably requested, including without limitation all such documents and
other actions with respect to the Collateral.

The Administrative Agent shall notify the Borrowers and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.02) at
or prior to 3:00 p.m., Chicago time, on November 2, 2005 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).

SECTION 4.02. Alpha Term Loans. The obligation of each Lender to make the Alpha
Term Loans is also subject to the satisfaction of the following conditions:

(a) The Parent and its Subsidiaries shall have obtained all material
Governmental Authorizations and all material consents of other Persons, in each
case that are necessary in connection with the Alpha Acquisition and the other
transactions contemplated by the Alpha Acquisition Documents, and each of the
foregoing shall be in full force and effect. All applicable waiting periods
shall have expired without any action being taken by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
completion of the Alpha Acquisition or the financing thereof. No action, request
for stay, petition for review or rehearing, reconsideration, or appeal with
respect to any of the foregoing shall be pending, and the time for any
applicable Governmental Authority to take action to set aside its consent on its
own motion shall have expired.

(b) The Administrative Agent shall have received all Alpha Acquisition Documents
and shall be reasonably satisfied with the form, structure and terms of the
Alpha Acquisition and all related transactions, the legal and the regulatory
aspects of the Alpha Acquisition and all related transactions and all other
legal (including tax implications), financial and regulatory matters relating to
the Alpha Acquisition and related transactions.

(c)(x) All conditions precedent to the Alpha Acquisition shall have been
satisfied or waived pursuant to the Alpha Acquisition Documents; and (y) the
Administrative Agent shall have received a certificate (the “Alpha Acquisition
Certificate”) of the Parent stating that the Alpha Acquisition will be
consummated substantially in accordance with the Alpha Acquisition Documents and
this Agreement on the Alpha Acquisition Date and containing such other
certifications as may be reasonably required by the Administrative Agent.

(d) The Administrative Agent shall have received a certificate from a Financial
Officer concerning the solvency and other appropriate factual information with
respect to the Parent and its Subsidiaries in form and substance satisfactory to
the Administrative Agent with respect to solvency.

(e) The Administrative Agent shall have received reasonably satisfactory results
of due diligence investigations of Alpha (including without limitation
liabilities and contingent liabilities (e.g., environmental, retiree medical
benefits, ERISA, etc.) and contractual obligations and a review of financial
statements of Alpha satisfactory to the Administrative Agent).

(f) There shall be no material adverse change in Alpha or its business,
operations, property or condition (financial or otherwise) as reflected in the
financial statements for Alpha delivered to the Administrative Agent prior to
the Alpha Acquisition Date.

 

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(g) All legal (including tax implications) and regulatory matters shall be
reasonably satisfactory to the Administrative Agent and all due diligence
reviews of all litigation of the Parent and its Subsidiaries.

(h) The Loan Parties shall have delivered such other documents and taken such
other actions as the Administrative Agent, the LC Issuer, any Lender or their
respective counsel may have reasonably requested, including without limitation
all such documents and other actions with respect to the Collateral.

The Administrative Agent shall notify the Borrowers and the Lenders of the Alpha
Acquisition Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., Chicago time, on
November 30, 2005 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

SECTION 4.03. Omega Term Loans. The obligation of each Lender to make the Omega
Term Loans is also subject to the satisfaction of the following conditions:

(a) The Parent and its Subsidiaries shall have obtained all material
Governmental Authorizations and all material consents of other Persons, in each
case that are necessary in connection with the Omega Acquisition and the other
transactions contemplated by the Omega Acquisition Documents, and each of the
foregoing shall be in full force and effect. All applicable waiting periods
shall have expired without any action being taken by any competent authority
which would restrain, prevent or otherwise impose adverse conditions on the
completion of the Omega Acquisition or the financing thereof. No action, request
for stay, petition for review or rehearing, reconsideration, or appeal with
respect to any of the foregoing shall be pending, and the time for any
applicable Governmental Authority to take action to set aside its consent on its
own motion shall have expired.

(b) The Administrative Agent shall have received all Omega Acquisition Documents
and shall be reasonably satisfied with the form, structure and terms of the
Omega Acquisition and all related transactions, the legal and the regulatory
aspects of the Omega Acquisition and all related transactions and all other
legal (including tax implications), financial and regulatory matters relating to
the Omega Acquisition and related transactions.

(c)(x) All conditions precedent to the Omega Acquisition shall have been
satisfied or waived pursuant to the Omega Acquisition Documents; and (y) the
Administrative Agent shall have received a certificate (the “Omega Acquisition
Certificate”) of the Parent stating that the Omega Acquisition will be
consummated substantially in accordance with the Omega Acquisition Documents and
this Agreement on the Omega Acquisition Date and containing such other
certifications as may be reasonably required by the Administrative Agent.

(d) The Administrative Agent shall have received a certificate from a Financial
Officer concerning the solvency and other appropriate factual information with
respect to the Parent and its Subsidiaries in form and substance satisfactory to
the Administrative Agent with respect to solvency.

(e) The Administrative Agent shall have received reasonably satisfactory results
of due diligence investigations of Omega (including without limitation
liabilities and contingent

 

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liabilities (e.g., environmental, retiree medical benefits, ERISA, etc.) and
contractual obligations and a review of financial statements of Omega
satisfactory to the Administrative Agent).

(f) There shall be no material adverse change in Omega or its business,
operations, property or condition (financial or otherwise) as reflected in the
financial statements for Omega delivered to the Administrative Agent prior to
the Omega Acquisition Date.

(g) All legal (including tax implications) and regulatory matters shall be
reasonably satisfactory to the Administrative Agent and all due diligence
reviews of all litigation of the Parent and its Subsidiaries.

(h) The Loan Parties shall have delivered such other documents and taken such
other actions as the Administrative Agent, the LC Issuer, any Lender or their
respective counsel may have reasonably requested, including without limitation
all such documents and other actions with respect to the Collateral.

The Administrative Agent shall notify the Borrowers and the Lenders of the Omega
Acquisition Date, and such notice shall be conclusive and binding.
Notwithstanding the foregoing, the obligations of the Lenders to make Loans and
of the Issuing Bank to issue Letters of Credit hereunder shall not become
effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 9.02) at or prior to 3:00 p.m., Chicago time, on
November 30, 2005 (and, in the event such conditions are not so satisfied or
waived, the Commitments shall terminate at such time).

SECTION 4.04. Each Credit Event. The obligation of each Lender to make a Loan on
the occasion of any Borrowing, and of the Issuing Bank to issue, amend, renew or
extend any Letter of Credit, is subject to the satisfaction of the following
conditions:

(a) The representations and warranties of each Loan Party set forth in this
Agreement or in any other Loan Document shall be true and correct in all
material respects on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, except to the extent such representations and warranties are
expressly limited to any earlier date (in which case such representations and
warranties shall be true and correct in all material respects on and as of such
earlier date).

(b) At the time of and immediately after giving effect to such Borrowing or the
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable, no Default shall have occurred and be continuing.

(c) In the case of any Letter of Credit to be issued for the account of an LC
Obligor other than the Borrower, such LC Obligor shall execute and deliver all
agreements, resolutions, certificates and other documents requested by the
Issuing Bank.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrowers on the date thereof as to the matters specified in paragraphs (a) and
(b) of this Section.

 

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ARTICLE V

Affirmative Covenants

Until the Commitments have expired or been terminated and the principal of and
interest on each Loan and all fees payable hereunder shall have been paid in
full and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrowers covenant and agree with
the Lenders that:

SECTION 5.01. Financial Statements; Ratings Change and Other Information. The
Parent will furnish to the Administrative Agent and each Lender:

(a) within 105 days (or such earlier date as the Parent may be required to file,
after giving effect to any applicable extensions that have been granted, its
applicable annual report by the rules and regulations of the SEC or any
applicable stock exchange) after the end of each Fiscal Year of the Parent, its
audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous Fiscal Year,
all reported on by PricewaterhouseCoopers LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated and consolidating
financial statements present fairly in all material respects the financial
condition and results of operations of the Parent and its consolidated
subsidiaries on a consolidated and consolidating basis in accordance with GAAP
consistently applied;

(b) within 50 days (or such earlier date as the Parent may be required to file,
after giving effect to any applicable extensions that have been granted, its
applicable quarterly report by the rules and regulations of the SEC or any
applicable stock exchange) after the end of each of the first three Fiscal
Quarters of each Fiscal Year of the Parent, the consolidated balance sheet and
related statements of operations and cash flows for the Parent and the
Subsidiaries as of the end of and for such Fiscal Quarter, all certified by one
of its Financial Officers as presenting fairly in all material respects the
financial condition and results of operations of the Parent and its consolidated
Subsidiaries on a consolidated basis in accordance with GAAP consistently
applied, subject to normal year-end audit adjustments and the absence of
footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or,
with respect to the months of March, June and September, clause (b) above, a
certificate on behalf of the Parent from a Financial Officer of the Parent
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed calculations
demonstrating compliance with Sections 6.12, 6.13, 6.14 and 6.15 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of such
change on the financial statements accompanying such certificate;

(d) concurrently with any delivery of financial statements under clause
(a) above, a certificate of the accounting firm that reported on such financial
statements stating whether they obtained knowledge during the course of their
examination of such financial statements of any Default (which certificate may
be limited to the extent required by accounting rules or guidelines);

(e) within 30 days after the end of each of each month, and at such other times
as may be requested by the Administrative Agent, as of the period then ended, a
Borrowing Base Certificate and supporting information requested by the
Administrative Agent in connection therewith;

 

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(f) promptly after the same become publicly available, copies of all periodic
and other reports, proxy statements and other materials filed by the Parent or
any Subsidiary with the SEC or any successor agency, the Toronto Stock Exchange,
NASDAQ or with any other securities exchange, or distributed by the Parent to
its shareholders generally, as the case may be;

(g) promptly following any request therefor, such other information regarding
the operations, business affairs and financial condition of the Parent or any
Subsidiary, or compliance with the terms of this Agreement, as the
Administrative Agent or any Lender may reasonably request.

SECTION 5.02. Notices of Material Events. The Parent will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting the Parent or any
Subsidiary thereof that, if adversely determined, could reasonably be expected
to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other
ERISA Events that have occurred, could reasonably be expected to result in
liability of the Parent and its Subsidiaries in an aggregate amount exceeding
$250,000; and

(d) any other development that results in, or could reasonably be expected to
result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement on
behalf of the Parent from a Financial Officer of the Parent setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Parent will, and will cause
each of its Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.04. Payment of Obligations. The Parent will, and will cause each the
US Borrower, each Guarantor and, except to the extent it would not reasonably be
expected to result in a Material Adverse Effect, its other Subsidiaries to, pay
its obligations, including Tax liabilities, that, if not paid, could result in a
Material Adverse Effect before the same shall become delinquent or in default,
except where (a) the validity or amount thereof is being contested in good faith
by appropriate proceedings, (b) the Parent or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP and
(c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Parent will, and will
cause each of its Subsidiaries to, (a) keep and maintain all property material
to the conduct of its business in good working order and condition, ordinary
wear and tear excepted, and (b) maintain, with financially sound and reputable
insurance companies, insurance in such amounts and against such risks as are
customarily maintained by companies engaged in the same or similar businesses
operating in the same or similar locations.

 

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SECTION 5.06. Books and Records; Inspection Rights. The Parent will, and will
cause each of its Subsidiaries to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Parent will, and will cause each
of its Subsidiaries to, permit any representatives designated by the
Administrative Agent or any Lender, upon reasonable prior notice, to visit and
inspect its properties, to examine and make extracts from its books and records,
and to discuss its affairs, finances and condition with its officers and
independent accountants and permit any representatives designated by the
Administrative Agent to conduct field examinations of the Collateral, all at
such reasonable times and as often as reasonably requested. The Parent shall
take all action to ensure that the Administrative Agent and the Lenders shall be
entitled to rely on annual audited financial statements of the Parent and its
Subsidiaries.

SECTION 5.07. Compliance with Laws. The Parent will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders of any
Governmental Authority applicable to it or its property, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds and Letters of Credit. The proceeds of the Loans
and Letters of Credit will be used only to refinance existing obligations of the
Borrowers and the Guarantors and for the Target Acquisitions, other permitted
Acquisitions, working capital needs and capital expenditures. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations T, U and X.

SECTION 5.09. Collateral Security; Further Assurances.(a) To guarantee or secure
the payment when due of the Secured Obligations, the Borrowers shall execute and
deliver, or cause to be executed and delivered, to the Lenders and the
Administrative Agent Collateral Documents granting or providing for the
following:

(i) Guaranties of all present and future U.S. and Canadian Subsidiaries of the
Parent and each Borrower.

(ii) Security Agreements granting a first priority, enforceable Lien and
security interest, subject only to Liens permitted by Section 6.02, on all
present and future accounts, chattel paper, commercial tort claims, deposit
accounts, documents, farm products, fixtures, chattel paper, equipment, general
intangibles, goods, instruments, inventory, investment property,
letter-of-credit rights (as those terms are defined in the UCC) and all other
personal property of the Borrowers and each Guarantor.

(iii) All other security and collateral described in the Collateral Documents.

(b) The Parent agrees that it will promptly notify the Administrative Agent of
the formation or acquisition of any Subsidiary or the acquisition of any assets
on which a Lien is required to be granted under 5.09(a)(ii) or (iii) and that is
not covered by existing Collateral Documents. The Parent agrees that it will
promptly execute and deliver, and cause each Subsidiary to execute and deliver,
promptly upon the request of the Administrative Agent, such additional
Collateral Documents and other agreements, documents and instruments, each in
form and substance satisfactory to the Administrative Agent, sufficient to grant
to the Administrative Agent, for the benefit of the Lenders and the
Administrative Agent, the Guaranties and Liens contemplated by this Agreement
and the Collateral Documents. The Parent shall deliver, and cause each Guarantor
to deliver, to the Administrative Agent all original instruments payable to it
and all securities and other certificates for any Equity Interests held by it
with any endorsements thereto and transfer powers with respect thereto
reasonably required by the Administrative Agent. Additionally, the Parent shall
execute and deliver, and cause each Subsidiary to execute and deliver, promptly
upon the request of the Administrative

 

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Agent, such certificates, legal opinions, insurance, lien searches,
environmental reports, organizational and other charter documents, resolutions
and other documents and agreements as the Administrative Agent may request in
connection therewith. Without limiting the foregoing, the Parent agrees that it
will deliver, and cause each Guarantor to deliver, within 45 days after the
Effective Date, all additional Collateral Documents and opinions of counsel
requested by the Administrative Agent with respect to (x) the pledge of the
Equity Interests of all material Subsidiaries, including the material
Subsidiaries that are not organized in the U.S. and Canada, and (y) the
perfection of the security interests in the deposit accounts of the Borrowers
and Guarantors. The Borrowers will provide evidence that the US Borrower has
acquired the Replacement Assets in accordance with Section 1031 of the Code and
Rev.Proc. 2000-37, promptly upon the acquisition thereof. The Borrowers shall
deliver, and cause each Guarantor to deliver, to the Administrative Agent all
agreements and documents requested by the Administrative Agent to ensure that
the US Borrower has a first priority, enforceable and perfected security
interest in all assets and Equity Interests of each SPV, including without
limitation all Replacement Assets owned by each such SPV, and that such security
interests and the obligations secured thereby are collaterally assigned to the
Administrative Agent under the Collateral Documents. The Parent shall use
commercially reasonable efforts to cause each lessor of real property to any
Borrower or Guarantor where any Collateral valued in excess of $2,500,000 is
located in the U.S. or Canada to execute and deliver to the Administrative Agent
an agreement in form and substance reasonably acceptable to the Administrative
Agent duly executed on behalf of such lessor waiving any distraint, lien and
similar rights with respect to any property subject to the Collateral Documents
and agreeing to permit the Administrative Agent to enter such premises in
connection therewith. The Borrowers shall execute and deliver, and cause each
Guarantor to execute and deliver, promptly upon the request of the
Administrative Agent, such agreements and instruments evidencing any
intercompany loans or other advances among the Parent and the Subsidiaries, or
any of them, and all such intercompany loans or other advances shall be, and are
hereby made, subordinate and junior to the Secured Obligations and no payments
may be made on such intercompany loans or other advances upon and during the
continuance of a Default unless otherwise agreed to by the Administrative Agent.

ARTICLE VI

Negative Covenants

Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees payable hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements shall
have been reimbursed, the Borrowers covenant and agree with the Lenders that:

SECTION 6.01. Indebtedness. The Parent will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:

(a) Indebtedness created hereunder;

(b) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof;

(c) Indebtedness of a Borrower to any Guarantor and of any Guarantor to a
Borrower or any other Guarantor;

(d) Guarantees by the Parent of Indebtedness of any Subsidiary and by any
Subsidiary of Indebtedness of the Parent or any other Subsidiary;

 

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(e) Indebtedness of the Parent or any Subsidiary incurred to finance the
acquisition, construction or improvement of any fixed or capital assets,
including Capital Lease Obligations and any Indebtedness assumed in connection
with the acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and replacements of
any such Indebtedness that do not increase the outstanding principal amount
thereof; provided that (i) such Indebtedness is incurred prior to or within 90
days after such acquisition or the completion of such construction or
improvement and (ii) the aggregate principal amount of Indebtedness permitted by
this clause (f) shall not exceed $10,000,000 at any time outstanding;

(f) Subordinated Indebtedness;

(g) Indebtedness under any Swap Agreement Obligation owing to any Lender or any
Affiliate of a Lender; and

(h) Other unsecured Indebtedness in aggregate outstanding amount not to exceed
$15,000,000 minus the amount of outstanding Indebtedness permitted by
Section 6.01(e).

SECTION 6.02. Liens. The Parent will not, and will not permit any Subsidiary to,
create, incur, assume or permit to exist any Lien on any property or asset now
owned or hereafter acquired by it, or assign or sell any income or revenues
(including accounts receivable) or rights in respect of any thereof, except:

(a) Permitted Encumbrances and Liens created under this Agreement or any
Collateral Document;

(b) any Lien on any property or asset of the Parent or any Subsidiary existing
on the date hereof and set forth in Schedule 6.02; provided that (i) such Lien
shall not apply to any other property or asset of the Parent or any Subsidiary
and (ii) such Lien shall secure only those obligations which it secures on the
date hereof and extensions, renewals and replacements thereof that do not
increase the outstanding principal amount thereof; and

(c) Liens on fixed or capital assets acquired, constructed or improved by the
Parent or any Subsidiary; provided that (i) such security interests secure
Indebtedness permitted by Section 6.01(e), (ii) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (iii) the
Indebtedness secured thereby does not exceed the cost of acquiring, constructing
or improving such fixed or capital assets and (iv) such security interests shall
not apply to any other property or assets of the Parent or any Subsidiary.

SECTION 6.03. Fundamental Changes; Sale of Assets. (a) The Parent will not, and
will not permit any Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing (i) any
Subsidiary may merge into a Borrower in a transaction in which a Borrower is the
surviving corporation, (ii) any Subsidiary may merge into any Subsidiary in a
transaction in which the surviving entity is a Subsidiary, and (iii) any
Subsidiary that is not material may liquidate or dissolve if the Parent
determines in good faith that such liquidation or dissolution is in the best
interests of the Parent and is not materially disadvantageous to the Lenders;
provided that any such merger involving a Person that is not a Wholly-Owned
Subsidiary immediately prior to such merger shall not be permitted unless also
permitted by Section 6.04.

 

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(b) The Parent will not, and will not permit any of its Subsidiaries to, engage
to any material extent in any business other than businesses of the type
conducted by the Parent and its Subsidiaries on the date of execution of this
Agreement and businesses reasonably related thereto.

(c) The Parent will not, and will not permit any Subsidiary to sell, transfer,
lease or otherwise dispose of (in one transaction or in a series of
transactions) any of its assets (in each case, whether now owned or hereafter
acquired, but excluding the sale of inventory in the ordinary course of its
business), except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing, the following
sales and other dispositions may be made: (i) the Planned Rig Sales; (ii) the
Drillers Technology Sale; (iii) sales of obsolete assets not exceeding
$5,000,000 in any fiscal year, without carry-over of unused amounts from
previous fiscal years; (iv) sales of rental fleet assets and other plant,
property, and equipment assets held for lease or sale provided that 100% of the
Net Cash Proceeds of such sales or lease-purchases are used within 270 days
after the receipt of such proceeds to purchase similar rental fleet assets and
other plant, property, and equipment assets of comparable value;
(v) dispositions of assets outside of the ordinary course of business up to an
aggregate net book value equal to $5,000,000 during any Fiscal Year; and
(vi) sales from the Parent of any Subsidiary to a Borrower or Guarantor and
sales among Subsidiaries that are not a Borrower or Guarantor. In the case of
any such sale or other disposition made in accordance with the provisions of the
preceding sentence, (x) the Borrowers or such Subsidiary must comply with the
provisions of Section 2.10, and (y) such assets may not be sold for an amount
which is less than fair market value.

SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. The
Parent will not, and will not permit any of its Subsidiaries to, purchase, hold
or acquire (including pursuant to any merger with any Person that was not a
Wholly-Owned Subsidiary prior to such merger) any Equity Interests, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or make any Acquisition,
except:

(a) Permitted Investments;

(b) investments and loans existing on the date hereof and set forth in
Schedule 6.04, without any increase of the outstanding amount thereof as reduced
from time to time;

(c) investments by the Borrowers in the Equity Interests of Guarantors;

(d) loans or advances made by the Borrowers to any Guarantor, made by any
Subsidiary to any Borrower or Guarantor, provided that any such loan or advance
by any Subsidiary shall be on terms reasonably satisfactory to the
Administrative Agent and shall be subordinated to the Secured Obligations
hereunder in a manner satisfactory to Administrative Agent;

(e) Guarantees constituting Indebtedness permitted by Section 6.01;

(f) Guarantees, investments, loans or advances not otherwise permitted by this
Section 6.04 not in excess of $10,000,000 in the aggregate;

(g) the Target Acquisitions in accordance with the terms of this Agreement; and

 

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(h) Acquisitions, provided that: (i) before and after giving pro forma effect
thereto (as of the end of the most recently ended Fiscal Quarter of the Parent),
no Default exists or would be caused thereby and the representations and
warranties contained in the Loan Documents shall be true and correct on and as
of the date thereof (both before and after such Acquisition is consummated,
except to the extent such representations and warranties are expressly limited
to any earlier date (in which case such representations and warranties shall be
true and correct in all material respects on and as of such earlier date)) as if
made on the date such Acquisition is consummated, (ii) if such Acquisition
involves the acquisition of Equity Interests, the consummation of such
Acquisition has been recommended by the Board of Directors and management of the
target of such Acquisition, (iii) at least 5 Business Days’ prior to the
consummation of such Acquisition, the Parent shall have provided to the Lenders
a certificate of a Financial Officer attaching pro forma computations acceptable
to the Administrative Agent to demonstrate compliance with all financial
covenants hereunder, (iv) at least 5 Business Days’ prior to the consummation of
such Acquisition, the Parent shall have delivered drafts all acquisition
documents and other agreements and documents relating to such Acquisition which
shall not materially differ from the final documentation for such Acquisition,
and the Administrative Agent shall have completed a satisfactory review thereof
and completed such other due diligence satisfactory to the Administrative Agent,
(v) both before and after giving effect to such Acquisition, the US Borrower is
and will be able to borrow at least $10,000,000 of additional Revolving Loans,
(vi) the target of such Acquisition is in the oil field services business, and
(vii) the aggregate consideration paid or payable in connection with any such
Acquisition and permitted by this proviso, including without limitation any
Indebtedness assumed in connection therewith, all guarantees or other
liabilities incurred in connection therewith, and all deferred payments and
other direct or indirect consideration in connection therewith, shall not exceed
(x) when aggregated with all other Acquisitions since the Effective Date,
$75,000,000 (y) when aggregated with all other Acquisitions in such fiscal year,
$50,000,000 or (y) $30,000,000 for any single Acquisition.

SECTION 6.05. Swap Agreements. The Parent will not, and will not permit any of
its Subsidiaries to, enter into any Swap Agreement, except (a) Swap Agreements
entered into to hedge or mitigate risks to which the Parent or any Subsidiary
has actual exposure (other than those in respect of Equity Interests of the
Parent or any of its Subsidiaries), and (b) Swap Agreements entered into in
order to effectively cap, collar or exchange interest rates (from fixed to
floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or investment of the Parent or
any Subsidiary.

SECTION 6.06. Restricted Payments. The Parent will not, and will not permit any
of its Subsidiaries to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment, except (a) the Parent may declare and pay
dividends with respect to its Equity Interests payable solely in additional
shares of its common stock, (b) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests; (c) the Parent and each
Subsidiary thereof may purchase, redeem or otherwise acquire shares of its
common stock or other common Equity Interests or warrants or options to acquire
any such shares with the proceeds received from the substantially concurrent
issue of new shares of its common stock or other common Equity Interests; and
(d) the Parent may make Restricted Payments in an aggregate amount in any Fiscal
Year not to exceed $5,000,000 plus 50% of Consolidated Net Income from the
previous Fiscal Year (with no carry-over), provided that, before and after
giving pro forma effect to such Restricted Payments, no Default exists or would
be caused thereby, the representations and warranties contained in the Loan
Documents shall be true and correct on and as of the date thereof (both before
and after giving pro forma effect thereto) as if made on such date and the US
Borrower is and will be able to borrow at least $10,000,000 of additional
Revolving Loans.

 

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SECTION 6.07. Transactions with Affiliates. The Parent will not, and will not
permit any of its Subsidiaries to, sell, lease or otherwise transfer any
property or assets to, or purchase, lease or otherwise acquire any property or
assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Parent or such Subsidiary than could be
obtained on an arm’s-length basis from unrelated third parties, (b) transactions
between or among the Borrowers and the Guarantors not involving any other
Affiliate, and (c) any Restricted Payment permitted by Section 6.06.

SECTION 6.08. Restrictive Agreements. The Parent will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into, incur or permit
to exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Parent or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets, or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Parent or any other Subsidiary or to Guarantee Indebtedness of the Parent or any
other Subsidiary; provided that (i) the foregoing shall not apply to
restrictions and conditions imposed by law or by this Agreement, (ii) the
foregoing shall not apply to restrictions and conditions existing on the date
hereof identified on Schedule 6.08 (or any amendment or modification thereof not
expanding the scope of, any such restriction or condition), (iii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases
restricting the assignment thereof.

SECTION 6.09. Change of Name or Location; Change of Fiscal Year. No Loan Party
shall (a) change its name as it appears in official filings in the state of its
incorporation or organization, (b) change its chief executive office, principal
place of business, mailing address, corporate offices or warehouses or locations
at which Collateral is held or stored, or the location of its records concerning
the Collateral as set forth in the Security Agreements, (c) change the type of
entity that it is, (d) change its organization identification number, if any,
issued by its state of incorporation or other organization, or (e) change its
state of incorporation or organization, in each case, unless the Administrative
Agent shall have received at least thirty days prior written notice of such
change and the Administrative Agent shall have acknowledged in writing that
either (1) such change will not adversely affect the validity, perfection or
priority of the Administrative Agent’s security interest in the Collateral, or
(2) any reasonable action requested by the Administrative Agent in connection
therewith has been completed or taken (including any action to continue the
perfection of any Liens in favor of the Administrative Agent, on behalf of
Lenders, in any Collateral), provided that, any new location shall be in the
U.S. or Canada. No Loan Party shall change its Fiscal Year.

SECTION 6.10. Amendments to Agreements. No Loan Party will, nor will any Loan
Party permit its Subsidiary to, amend, supplement or otherwise modify (a) its
articles of incorporation, charter, certificate of formation, by-laws or other
organizational document, (b) any instrument or agreement evidencing or relating
to any Subordinated Indebtedness or (c) any Target Acquisition Document, except
to the extent, in each instance, such amendment, supplement or other
modification would not increase in any material respect any obligation of the
Parent or any Subsidiary or adversely affect the rights and interests of the
Parent, any Subsidiary or any Lender in any material respect.

 

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SECTION 6.11. Prepayment of Indebtedness; Subordinated Indebtedness.

(a) No Loan Party shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness prior to its scheduled maturity, other
than (i) the Obligations and the Indebtedness described on Schedule 4.01 hereto;
(ii) Indebtedness secured by Liens permitted by Section 6.02 if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
herewith; and (iii) Indebtedness permitted hereunder upon any permitted
refinancing thereof in accordance therewith.

(b) No Loan Party shall make any amendment or modification to the indenture,
note or other agreement evidencing or governing any Subordinated Indebtedness,
or directly or indirectly voluntarily prepay, defease or in substance defease,
purchase, redeem, retire or otherwise acquire, any Subordinated Indebtedness.

SECTION 6.12. Leverage Ratio. The Parent will not permit the Leverage Ratio,
determined as of the end of each of its Fiscal Quarters for the then
most-recently ended four Fiscal Quarters, to be greater than 2.5 to 1.0 at any
time.

SECTION 6.13. Minimum Net Worth. The Parent will at all times maintain
Consolidated Net Worth of not less than the sum of (a) $185,000,000, plus
(b) 50% of positive Consolidated Net Income earned in the last Fiscal Quarter of
the 2005 Fiscal Year and in each Fiscal Year beginning with the 2006 Fiscal
Year, plus (c) 75% of the amount by which Consolidated Net Worth is increased
pursuant to any issuance of any Equity Interests of the Parent after the
Effective Date.

SECTION 6.14. Fixed Charge Coverage Ratio. The Parent will not permit the Fixed
Charge Coverage Ratio, determined as of the end of each of its Fiscal Quarters
for the then most-recently ended four Fiscal Quarters, to be less (a) 1.75 to
1.0 as of the end of any Fiscal Quarter ending after the Effective Date but
before the end of the 2006 Fiscal Year or (b) 2.25 to 1.0 as of the end of the
2006 Fiscal Year or the end of any Fiscal Quarter ending thereafter.

SECTION 6.15. Consolidated Capital Expenditures. The Parent will not permit
Consolidated Capital Expenditures, determined as of the end of each of its
Fiscal Quarters for the then most-recently ended four Fiscal Quarters, to be
greater than the sum of (a) 60% of Consolidated EBITDA for the then
most-recently ended four Fiscal Quarters plus (b) the Net Cash Proceeds from
Asset Sales for the then most-recently ended four Fiscal Quarters.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) any Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the same
shall become due and payable, whether at the due date thereof or at a date fixed
for prepayment thereof or otherwise;

(b) any Borrower shall fail to pay any interest on any Loan or any fee or any
other amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of three Business Days;

 

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(c) any representation or warranty made or deemed made by or on behalf of the
Parent or any Subsidiary in or in connection with this Agreement, any other Loan
Document or any amendment or modification hereof or waiver thereof, or in any
report, certificate, financial statement or other document furnished pursuant to
or in connection with this Agreement or any amendment or modification hereof or
waiver hereunder, shall prove to have been incorrect in all material respects
when made;

(d) any Borrower shall fail to observe or perform any covenant, condition or
agreement contained in Section 5.02, 5.03 (with respect to any Borrower’s
existence) or 5.08 or in Article VI;

(e) any Borrower or any Guarantor shall fail to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clause (a), (b) or (d) of this Article) or any other Loan Document, and such
failure shall continue unremedied for a period of 15 days after notice thereof
from the Administrative Agent to the Parent (which notice will be given at the
request of any Lender);

(f) the Parent or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable, and such
failure shall continue after expiration of any applicable grace or cure period;

(g) any event or condition occurs that results in any Material Indebtedness
becoming due prior to its scheduled maturity or that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or holders
of any Material Indebtedness or any trustee or agent on its or their behalf to
cause any Material Indebtedness to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
provided that this clause (g) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition
shall be filed seeking (i) liquidation, reorganization or other relief in
respect of the Parent or any Subsidiary or its debts, or of a substantial part
of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect (including without
limitation the Bankruptcy Code of the United States, the Bankruptcy and
Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act (Canada))
or (ii) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Parent or any Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree approving
or ordering any of the foregoing shall be entered;

(i) the Parent or any Subsidiary shall (i) voluntarily commence any proceeding
or file any petition seeking liquidation, reorganization or other relief under
any Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect (including without limitation the Bankruptcy Code
of the United States, the Bankruptcy and Insolvency Act (Canada) and the
Companies’ Creditors Arrangement Act (Canada)), (ii) consent to the institution
of, or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Article, (iii) apply for or consent to
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Parent or any Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors or (vi) take any action for the purpose of effecting any of
the foregoing;

 

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(j) the Parent or any Subsidiary shall become unable, admit in writing its
inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in
excess of $2,500,000 shall be rendered against the Parent, any Subsidiary or any
combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively stayed, or
any action shall be legally taken by a judgment creditor to attach or levy upon
any assets of the Parent or any Subsidiary to enforce any such judgment;

(l) an ERISA Event or the institution of any steps by any Borrower or Guarantor
or any of their respective Subsidiaries or any applicable regulatory authority
to terminate a Canadian Pension Plan (wholly or in part) shall have occurred
that, when taken together with all other such other events that have occurred,
could reasonably be expected, in the opinion of the Required Lenders, to result
in liability of the Parent and its Subsidiaries in an aggregate amount exceeding
$2,500,000 in any year;

(m) Any Collateral Document shall fail to remain in full force or effect or any
action shall be taken to discontinue or to assert the invalidity or
unenforceability of any Collateral Document, or any Loan Party shall fail to
comply with any of the terms or provisions of any Collateral Document if the
failure continues beyond any period of grace provided for in the applicable
Collateral Document, or any Collateral Document granting a Lien shall for any
reason fail to create a valid and perfected first priority security interest in
any Collateral purported to be covered thereby or subordination to be created
thereunder, except as permitted by the terms of this Agreement or any Collateral
Document;

(n) (i) either Target Acquisition shall be unwound, reversed or otherwise
rescinded in whole or in any material part for any reason, (ii) the Parent or
any of its Subsidiaries shall agree to any amendment to, or waiver of any rights
under, or otherwise change any terms of, any Target Acquisition Document without
the prior written consent of the Required Lenders, (iii) either SPV shall engage
in any trade or business (other than leasing the Replacement Assets to the
Parent or its Subsidiaries), or own any assets (other than the Replacement
Assets to be owned by it) or incur any Indebtedness (other than owing to the US
Borrower and secured by its assets) or (iv) the US Borrower shall fail to own,
free and clear of all Liens other than Liens under the Collateral Documents and
Permitted Encumbrances, the Replacement Assets acquired in each Target
Acquisition before the date 180 days after the date such Target Acquisition is
closed and to have acquired such Replacement Assets in accordance with
Section 1031 of the Code and Rev.Proc. 2000-37; or

(o) a Change in Control shall occur;

then, and in every such event (other than an event with respect to a Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrowers, take either
or both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrowers accrued hereunder,
shall become due and payable immediately, without presentment, demand,

 

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protest or other notice of any kind, all of which are hereby waived by the
Borrowers; and in case of any event with respect to a Borrower described in
clause (h) or (i) of this Article, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Borrowers accrued hereunder,
shall automatically become due and payable, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrowers.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as are delegated to
the Administrative Agent by the terms hereof, together with such actions and
powers as are reasonably incidental thereto.

The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with the Parent or any Subsidiary or other Affiliate
thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those
expressly set forth herein. Without limiting the generality of the foregoing,
(a) the Administrative Agent shall not be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred and is continuing,
(b) the Administrative Agent shall not have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated hereby that the Administrative Agent is required
to exercise in writing as directed by the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02), and (c) except as expressly set forth herein, the
Administrative Agent shall not have any duty to disclose, and shall not be
liable for the failure to disclose, any information relating to the Parent or
any of its Subsidiaries that is communicated to or obtained by the bank serving
as Administrative Agent or any of its Affiliates in any capacity. The
Administrative Agent shall not be liable for any action taken or not taken by it
with the consent or at the request of the Required Lenders (or such other number
or percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 9.02) or in the absence of its own gross negligence or
wilful misconduct. The Administrative Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrowers or a Lender, and the Administrative Agent
shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein, (iv) the validity, enforceability, effectiveness or genuineness of
this Agreement or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere herein, other
than to confirm receipt of items expressly required to be delivered to the
Administrative Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by

 

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it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for the Borrowers), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its
rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as
provided in this paragraph, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank and the Borrowers. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor.
If no successor shall have been so appointed by the Required Lenders and shall
have accepted such appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring Administrative Agent
may, on behalf of the Lenders and the Issuing Bank, appoint a successor
Administrative Agent. Upon the acceptance of its appointment as Administrative
Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. The fees payable by the Borrowers to
a successor Administrative Agent shall be the same as those payable to its
predecessor unless otherwise agreed between the Borrowers and such successor.
After the Administrative Agent’s resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
retiring Administrative Agent, its sub-agents and their respective Related
Parties in respect of any actions taken or omitted to be taken by any of them
while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon
the Administrative Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.

The Administrative Agent shall have no obligation whatsoever to any of the
Lenders to assure that the Collateral exists or is owned by the Loan Parties or
is cared for, protected, or insured or has been encumbered, or that the Liens
granted to the Administrative Agent therein have been properly or sufficiently
or lawfully created, perfected, protected, or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure, or fidelity, or to continue exercising, any of the
rights, authorities, and powers granted or available to the Administrative Agent
pursuant to any of the Loan Documents, it being understood and agreed that in
respect of the Collateral, or any act, omission, or event related thereto, the
Administrative Agent may act in any manner it may deem appropriate, in its sole
discretion given the Administrative Agent’s own interest in the Collateral in
its capacity as one of the Lenders and that the Administrative Agent shall have
no other duty or liability whatsoever to any Lender as to any of the foregoing.

Each Lender hereby appoints each other Lender as its agent for the purpose of
perfecting Liens, for the benefit of the Administrative Agent and the Lenders,
in assets which, in accordance with

 

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Article 9 of the UCC or any other applicable law can be perfected only by
possession. Should any Lender (other than the Administrative Agent) obtain
possession of any such Collateral, such Lender shall notify the Administrative
Agent thereof, and, promptly upon the Administrative Agent’s request therefor
shall deliver such Collateral to the Administrative Agent or otherwise deal with
such Collateral in accordance with the Administrative Agent’s instructions.

Each Lender hereby agrees as follows: (a) such Lender is deemed to have
requested that the Administrative Agent furnish such Lender, promptly after it
becomes available, a copy of each Report prepared by or on behalf of the
Administrative Agent; (b) such Lender expressly agrees and acknowledges that
neither the Administrative Agent nor any Related Party (i) makes any
representation or warranty, express or implied, as to the completeness or
accuracy of any Report or any of the information contained therein, or
(ii) shall be liable for any information contained in any Report; (c) such
Lender expressly agrees and acknowledges that the Reports are not comprehensive
audits or examinations, that the Administrative Agent, any of its Related
Parties or any other party performing any audit or examination will inspect only
specific information regarding the Loan Parties and will rely significantly upon
the Loan Parties’ books and records, as well as on representations of the Loan
Parties’ personnel and that the Administrative Agent and its Related Parties
undertake no obligation to update, correct or supplement the Reports; (d) such
Lender agrees to keep all Reports confidential and strictly for its internal
use, not share the Report with any Loan Party and not to distribute any Report
to any other Person except as otherwise permitted pursuant to this Agreement;
and (e) without limiting the generality of any other indemnification provision
contained in this Agreement, such Lender agrees (i) that neither the
Administrative Agent nor any of its Related Parties shall be liable to such
Lender or any other Person receiving a copy of the Report for any inaccuracy or
omission contained in or relating to a Report, (ii) to conduct its own due
diligence investigation and make credit decisions with respect to the Loan
Parties based on such documents as such Lender deems appropriate without any
reliance on the Reports or on the Administrative Agent or any of its Related
Parties, (iii) to hold the Administrative Agent and any such other Person
preparing a Report harmless from any action the indemnifying Lender may take or
conclusion the indemnifying Lender may reach or draw from any Report in
connection with any Credit Extensions that the indemnifying Lender has made or
may make to the Loan Parties, or the indemnifying Lender’s participation in, or
the indemnifying Lender’s purchase of, any Obligations and (iv) to pay and
protect, and indemnify, defend, and hold the Administrative Agent and any such
other Person preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including reasonable
attorney fees) incurred by the Administrative Agent and any such other Person
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.

The Lenders hereby empower and authorize the Administrative Agent to execute and
deliver to the Loan Parties on their behalf the Collateral Documents and all
related agreements, documents or instruments as shall be necessary or
appropriate to effect the purposes of the Collateral Documents.

The Lenders hereby empower and authorize the Administrative Agent to execute and
deliver to the Loan Parties on their behalf any agreements, documents or
instruments as shall be necessary or appropriate to effect any releases or
subordinations of Collateral which shall be permitted by the terms hereof or of
any other Loan Document (whether pursuant to a permitted sale or otherwise) or
which shall otherwise have been approved by the Required Lenders in writing.

 

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ARTICLE IX

Miscellaneous

SECTION 9.01. Notices. (a) Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to the Borrowers, to it at 11330 Brittmore Drive, Houston, Texas 77041,
Attention Michael Kearney, CFO (at such telecopy numbers to be determined and
supplied by the Borrowers);

(ii) if to the Administrative Agent, Issuing Bank or Swingline Lender, to
JPMorgan Chase Bank, N.A. at such address and other contact information as from
time to time supplied to the parties hereto by the Administrative Agent; and

(iii) if to any other Lender, to it at its address (or telecopy number) set
forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered
or furnished by electronic communications pursuant to procedures approved by the
Administrative Agent; provided that the foregoing shall not apply to notices
pursuant to Article II unless otherwise agreed by the Administrative Agent and
the applicable Lender. The Administrative Agent or a Borrower may, in its
discretion, agree to accept notices and other communications to it hereunder by
electronic communications pursuant to procedures approved by it; provided that
approval of such procedures may be limited to particular notices or
communications.

(c) Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.

SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative
Agent, the Issuing Bank or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent, the Issuing Bank and the Lenders hereunder are cumulative
and are not exclusive of any rights or remedies that they would otherwise have.
No waiver of any provision of this Agreement or consent to any departure by the
Borrowers therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) of this Section, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. Without limiting the generality of the foregoing, the making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any
Default, regardless of whether the Administrative Agent, any Lender or the
Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any provision hereof may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Borrowers and the Required Lenders or by the Borrowers and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender or increase the aggregate amount of all
Commitments, (ii) reduce the

 

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principal amount of any Loan or LC Disbursement or reduce the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of
each Lender affected thereby, (iii) postpone the scheduled date of payment of
the principal amount of any Loan or LC Disbursement, or any interest thereon, or
any fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment, without
the written consent of each Lender affected thereby, (iv) change Section 2.18(b)
or (c) in a manner that would alter the pro rata sharing of payments required
thereby, without the written consent of each Lender, (v) release all or
substantially all of the Collateral without the written consent of each Lender,
(vi) release the Guarantor without the written consent of each Lender, or
(vii) change any of the provisions of this Section or the definition of
“Required Lenders” or any other provision hereof specifying the number or
percentage of Lenders required to waive, amend or modify any rights hereunder or
make any determination or grant any consent hereunder, without the written
consent of each Lender; provided further that no such agreement shall amend,
modify or otherwise affect the rights or duties of the Administrative Agent, the
Issuing Bank or the Swingline Lender hereunder without the prior written consent
of the Administrative Agent, the Issuing Bank or the Swingline Lender, as the
case may be.

(c) If, in connection with any proposed amendment, waiver or consent (a
“Proposed Change”) requiring the consent of all Lenders, the consent of the
Required Lenders is obtained, but the consent of other Lenders is not obtained
(any such Lender whose consent is not obtained being referred to herein as a
“Non-Consenting Lender”), then, so long as the Administrative Agent is not a
Non-Consenting Lender, the Borrowers may elect to replace such Non-Consenting
Lender as a Lender party to this Agreement, provided that, concurrently with
such replacement, (i) another bank or other entity which is reasonably
satisfactory to the Borrowers and the Administrative Agent shall agree, as of
such date, to purchase for cash the Advances and other Obligations due to the
Non-Consenting Lender pursuant to an Assignment Agreement and to become a Lender
for all purposes under this Agreement and to assume all obligations of the
Non-Consenting Lender to be terminated as of such date and to comply with the
requirements of Section 9.04 applicable to assignments, and (ii) the Borrowers
shall pay to such Non-Consenting Lender in same day funds on the day of such
replacement (1) all interest, fees and other amounts then accrued but unpaid to
such Non-Consenting Lender by the Borrowers hereunder to and including the date
of termination, and (2) an amount, if any, equal to the payment which would have
been due to such Lender on the day of such replacement under Section 2.16 had
the Loans of such Non-Consenting Lender been prepaid on such date rather than
sold to the replacement Lender.

SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrowers shall pay
(i) all reasonable out-of-pocket expenses incurred by the Administrative Agent
and its Affiliates, including the reasonable fees, charges and disbursements of
counsel for the Administrative Agent, in connection with the syndication of the
credit facilities provided for herein, the preparation and administration of
this Agreement and any of the other Loan Documents (including without limitation
the Collateral and any additional filings, documents, examinations or other
actions with respect thereto) or any amendments, modifications or waivers of the
provisions hereof (whether or not the transactions contemplated hereby or
thereby shall be consummated), (ii) all reasonable out-of-pocket expenses
incurred by the Issuing Bank in connection with the issuance, amendment, renewal
or extension of any Letter of Credit or any demand for payment thereunder and
(iii) all out-of-pocket expenses incurred by the Administrative Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of any
counsel for the Administrative Agent, the Issuing Bank or any Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement, including its rights under this Section, or in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

(b) The Borrowers shall indemnify the Administrative Agent, the Issuing Bank and
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an

 

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“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the
use of the proceeds therefrom (including any refusal by the Issuing Bank to
honor a demand for payment under a Letter of Credit if the documents presented
in connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of Hazardous
Materials on or from any property owned or operated by the Parent or any of its
Subsidiaries, or any Environmental Liability related in any way to the Parent or
any of its Subsidiaries, or (iv) any actual or prospective claim, litigation,
investigation or proceeding relating to any of the foregoing, whether based on
contract, tort or any other theory and regardless of whether any Indemnitee is a
party thereto; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee.

(c) To the extent that the Borrowers fail to pay any amount required to be paid
by it to the Administrative Agent, the Issuing Bank or the Swingline Lender
under paragraph (a) or (b) of this Section, each Lender severally agrees to pay
to the Administrative Agent, the Issuing Bank or the Swingline Lender, as the
case may be, such Lender’s Applicable Percentage (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such
unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent, the Issuing Bank or the Swingline
Lender in its capacity as such.

(d) To the extent permitted by applicable law, the Borrowers shall not assert,
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after written
demand therefor.

SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby (including any Affiliate of
the Issuing Bank that issues any Letter of Credit), except that (i) the
Borrowers may not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by the Borrowers without such consent shall be null and
void) and (ii) no Lender may assign or otherwise transfer its rights or
obligations hereunder except in accordance with this Section. Nothing in this
Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants (to the extent provided in paragraph (c) of this
Section) and, to the extent expressly contemplated hereby, the Related Parties
of each of the Administrative Agent, the Issuing Bank and the Lenders) any legal
or equitable right, remedy or claim under or by reason of this Agreement.

(b)(i) Subject to the conditions set forth in paragraph (b)(ii) below, any
Lender may assign to one or more assignees all or a portion of its rights and
obligations under this Agreement

 

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(including all or a portion of its Commitment and the Loans at the time owing to
it) with the prior written consent (such consent not to be unreasonably
withheld) of:

(A) the Borrowers, provided that no consent of the Borrowers shall be required
for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if
an Event of Default has occurred and is continuing, any other assignee;

(B) the Administrative Agent, provided that no consent of the Administrative
Agent shall be required for an assignment of all or any portion of a Term Loan
to a Lender, an Affiliate of a Lender or an Approved Fund; and

(C) the Issuing Bank, provided that no consent of the Issuing Bank shall be
required for an assignment of all or any portion of a Term Loan.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender
or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any Class, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $5,000,000 or, in the case of a
Term Loan, $1,000,000 unless each of the Borrowers and the Administrative Agent
otherwise consent, provided that no such consent of the Borrowers shall be
required if an Event of Default has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement,
provided that this clause shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in
respect of one Class of Commitments or Loans;

(C) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; and

(D) the assignee, if it shall not be a Lender, shall deliver to the
Administrative Agent an Administrative Questionnaire.

For the purposes of this Section 9.04(b), the term “Approved Fund” has the
following meaning:

“Approved Fund” means any Person (other than a natural person) that is engaged
in making, purchasing, holding or investing in bank loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an
Affiliate of an entity that administers or manages a Lender.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(iv)
of this Section, from and after the effective date specified in each Assignment
and Assumption the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this Agreement
(and, in the case of an Assignment and Assumption covering

 

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all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this Section 9.04 shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section.

(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices a copy of each Assignment and
Assumption delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”). The entries in the Register shall be deemed
conclusive absent manifest error, and the Borrowers, the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrowers, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

(v) Upon its receipt of a duly completed Assignment and Assumption executed by
an assigning Lender and an assignee, the assignee’s completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register; provided that if
either the assigning Lender or the assignee shall have failed to make any
payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e),
2.07(b), 2.18(d) or 9.03(c), the Administrative Agent shall have no obligation
to accept such Assignment and Assumption and record the information therein in
the Register unless and until such payment shall have been made in full,
together with all accrued interest thereon. No assignment shall be effective for
purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.

(c)(i) Any Lender may, without the consent of the Borrowers, the Administrative
Agent, the Issuing Bank or the Swingline Lender, sell participations to one or
more banks or other entities (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it); provided that (A) such Lender’s
obligations under this Agreement shall remain unchanged, (B) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (C) the Borrowers, the Administrative Agent, the Issuing
Bank and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations under this
Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce this Agreement and to approve any amendment, modification or waiver of
any provision of this Agreement; provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any amendment, modification or waiver described in the first proviso to
Section 9.02(b) that affects such Participant. Subject to paragraph (c)(ii) of
this Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 2.15, 2.16 and 2.17 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 9.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.18(c) as though it were a
Lender.

(ii) A Participant shall not be entitled to receive any greater payment under
Section 2.15 or 2.17 than the applicable Lender would have been entitled to
receive with respect to the participation

 

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sold to such Participant, unless the sale of the participation to such
Participant is made with the Borrowers’ prior written consent. A Participant
that would be a Foreign Lender if it were a Lender shall not be entitled to the
benefits of Section 2.17 unless the Borrowers are notified of the participation
sold to such Participant and such Participant agrees, for the benefit of the
Borrowers, to comply with Section 2.17(e) as though it were a Lender.

(d) Any Lender may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement to secure obligations of such
Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section shall not apply to any
such pledge or assignment of a security interest; provided that no such pledge
or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender
as a party hereto.

SECTION 9.05. Survival. All covenants, agreements, representations and
warranties made by the Borrowers herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit, regardless of any investigation made by
any such other party or on its behalf and notwithstanding that the
Administrative Agent, the Issuing Bank or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as the principal of or any accrued interest on any Loan or any fee or any
other amount payable under this Agreement is outstanding and unpaid or any
Letter of Credit is outstanding and so long as the Commitments have not expired
or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article
VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent and the other Loan Documents constitute the entire contract among the
parties relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in Section 4.01, this Agreement shall become
effective when it shall have been executed by the Administrative Agent and when
the Administrative Agent shall have received counterparts hereof which, when
taken together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid,
illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability
without affecting the validity, legality and enforceability of the remaining
provisions hereof; and the invalidity of a particular provision in a particular
jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be
continuing, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or

 

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demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrowers against any of and all the obligations of the Borrowers now or
hereafter existing under this Agreement held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this Agreement and
although such obligations may be unmatured. The rights of each Lender under this
Section are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) This Agreement shall be construed in accordance with and governed by the law
of the State of New York.

(b) Each Borrower hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of the Supreme Court of the State
of New York sitting in New York County and of the United States District Court
of the Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement
against each Borrower or its properties in the courts of any jurisdiction.

(c) Each Borrower hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising
out of or relating to this Agreement in any court referred to in paragraph
(b) of this Section. Each of the parties hereto hereby irrevocably waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 9.01. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents
used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.

 

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SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing
Bank and the Lenders agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed to keep such Information confidential), (b) to the
extent requested by any regulatory authority, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(d) to any other party to this Agreement, (e) in connection with the exercise of
any remedies hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to
(i) any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement or
(ii) any actual or prospective counterparty (or its advisors) to any swap or
derivative transaction relating to any Borrower and its obligations, (g) with
the consent of the Borrowers or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or
(ii) becomes available to the Administrative Agent, the Issuing Bank or any
Lender on a nonconfidential basis from a source other than the Borrowers. For
the purposes of this Section, “Information” means all information received from
the Borrowers relating to the Borrowers or their business, other than any such
information that is available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis prior to disclosure by the Borrowers;
provided that, in the case of information received from the Borrowers after the
date hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under applicable law (collectively the “Charges”), shall exceed the maximum
lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken,
received or reserved by the Lender holding such Loan in accordance with
applicable law, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect of such Loan but were not payable as a result of the
operation of this Section shall be cumulated and the interest and Charges
payable to such Lender in respect of other Loans or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.

SECTION 9.14. USA PATRIOT Act. Each Lender that is subject to the requirements
of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the “Act”) hereby notifies each Borrower that pursuant to the
requirements of the Act, it is required to obtain, verify and record information
that identifies each Borrower, which information includes the name and address
of each Borrower and other information that will allow such Lender to identify
each Borrower in accordance with the Act.

SECTION 9.15. Conversion of Currencies. (a) If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto agrees, to the fullest extent
that it may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures in the relevant jurisdiction
the first currency could be purchased with such other currency on the Business
Day immediately preceding the day on which final judgment is given.

 

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(b) The obligations of each Borrower and LC Obligor in respect of any sum due to
any party hereto or any holder of the obligations owing hereunder (the
“Applicable Creditor”) shall, notwithstanding any judgment in a currency (the
“Judgment Currency”) other than the currency in which such sum is stated to be
due hereunder (the “Agreement Currency”), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers and LC
Obligors contained in this Section 9.15 shall survive the termination of this
Agreement and the payment of all other amounts owing hereunder.

 

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

 

TESCO CORPORATION /s/ Julio M. Quintana

Julio M. Quintana

President & Chief Executive Officer

 

/s/ Michael C. Kearney

Michael C. Kearney

Executive Vice President & Chief

Financial Officer

 

TESCO US HOLDING LP

By: TESCO CANADA INTERNATIONAL INC.,

its sole general partner

/s/ Rob Van Walleghem

Rob Van Walleghem

President

 

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JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent By   /s/
Cynthia C. Goodwin  

Name: Cynthia C. Goodwin

Title: Senior Vice President

 

JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as the Canadian Swingline Lender and
Issuing Bank to Canadian LC Obligors By   /s/ Michael N. Tam  

Name: Michael N. Tam

Title: Vice President

 

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EXHIBIT A

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of
the Effective Date set forth below and is entered into by and between [Insert
name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the
“Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Administrative Agent as contemplated below (i) all of the Assignor’s rights and
obligations in its capacity as a Lender under the Credit Agreement and any other
documents or instruments delivered pursuant thereto to the extent related to the
amount and percentage interest identified below of all of such outstanding
rights and obligations of the Assignor under the respective facilities
identified below (including any letters of credit, guarantees, and swingline
loans included in such facilities) and (ii) to the extent permitted to be
assigned under applicable law, all claims, suits, causes of action and any other
right of the Assignor (in its capacity as a Lender) against any Person, whether
known or unknown, arising under or in connection with the Credit Agreement, any
other documents or instruments delivered pursuant thereto or the loan
transactions governed thereby or in any way based on or related to any of the
foregoing, including contract claims, tort claims, malpractice claims, statutory
claims and all other claims at law or in equity related to the rights and
obligations sold and assigned pursuant to clause (i) above (the rights and
obligations sold and assigned pursuant to clauses (i) and (ii) above being
referred to herein collectively as the “Assigned Interest”). Such sale and
assignment is without recourse to the Assignor and, except as expressly provided
in this Assignment and Assumption, without representation or warranty by the
Assignor.

 

1.   Assignor:    _____________________________ 2.   Assignee:   
_____________________________      [and is an Affiliate/Approved Fund of
[identify Lender]2 ] 3.   Borrower(s):    _____________________________ 4.  
Administrative Agent:    ______________________, as the administrative agent
under the Credit                      Agreement 5.   Credit Agreement:    The
Credit Agreement dated as of _______, 2005 among Tesco Corporation, the Lenders
parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the
other agents parties thereto

 

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2

Select as applicable.

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6. Assigned Interest:

 

Facility Assigned

  

Aggregate Amount of

Commitment/Loans for

all Lenders

  

Amount of

Commitment/Loans

Assigned

  

Percentage Assigned of

Commitment/Loans

   $    $    %    $    $    %    $    $    %

Effective Date:                              , 20    [TO BE INSERTED BY
ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF
TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Assumption are hereby agreed to:

 

ASSIGNOR [NAME OF ASSIGNOR] By:        Title:

 

ASSIGNEE [NAME OF ASSIGNEE] By:        Title:

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[Consented to and] Accepted: JPMORGAN CHASE BANK, N.A., as Administrative Agent
By        Title:

 

[Consented to:] TESCO CORPORATION By        Title:

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ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1. Assignor. The Assignor (a) represents and warrants that (i) it is the legal
and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is
free and clear of any lien, encumbrance or other adverse claim and (iii) it has
full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Loan
Documents or any collateral thereunder, (iii) the financial condition of the
Borrowers, any of their Subsidiaries or Affiliates or any other Person obligated
in respect of any Loan Document or (iv) the performance or observance by the
Borrowers, any of their Subsidiaries or Affiliates or any other Person of any of
their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement, (ii) it satisfies the
requirements, if any, specified in the Credit Agreement that are required to be
satisfied by it in order to acquire the Assigned Interest and become a Lender,
(iii) from and after the Effective Date, it shall be bound by the provisions of
the Credit Agreement as a Lender thereunder and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 5.01 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Assumption and to purchase the Assigned Interest on the basis of which it has
made such analysis and decision independently and without reliance on the
Administrative Agent or any other Lender, and (v) if it is a Foreign Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Administrative Agent, the Assignor or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent shall
make all payments in respect of the Assigned Interest (including payments of
principal, interest, fees and other amounts) to the Assignor for amounts which
have accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and
inure to the benefit of, the parties hereto and their respective successors and
assigns. This Assignment and Assumption may be executed in any number of
counterparts, which together shall constitute one instrument. Delivery of an
executed counterpart of a signature page of this Assignment and Assumption by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

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EXHIBIT B

NOTE

[Date]        

                    , a                     (the “Borrower”), promises to pay to
the order of                                          (the “Lender”) the
aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to the Credit Agreement (as hereinafter defined), in
immediately available funds at the main office of JPMorgan Chase Bank, N.A. in
Chicago, Illinois, as Administrative Agent, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the Credit
Agreement. The Borrower shall pay the principal of and accrued and unpaid
interest on the Loans in full on the Revolving Credit Maturity Date and shall
make such mandatory payments as are required to be made under the terms of the
Credit Agreement.

The Lender shall, and is hereby authorized to, record on the schedule attached
hereto, or to otherwise record in accordance with its usual practice, the date
and amount of each Loan and the date and amount of each principal payment
hereunder.

This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement dated as of                     , 2005 (which,
as it may be amended or modified and in effect from time to time, is herein
called the “Credit Agreement”), among the Borrower, the lenders party thereto,
including the Lender, and JPMorgan Chase Bank, N.A., as Agent, to which Credit
Agreement reference is hereby made for a statement of the terms and conditions
governing this Note, including the terms and conditions under which this Note
may be prepaid or its maturity date accelerated. This Note is secured pursuant
to the Collateral Documents and guaranteed pursuant to the Guaranty, all as more
specifically described in the Credit Agreement, and reference is made thereto
for a statement of the terms and provisions thereof. Capitalized terms used
herein and not otherwise defined herein are used with the meanings attributed to
them in the Credit Agreement.

 

   By       

Name:

Title: