Exhibit 10.2

 

 

 

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TERM LOAN AND
SECURITY AGREEMENT

 

dated as of April 21, 2006

 

among

 

LARCLAY, L.P.,

 

as Borrower,

 

THE LENDERS FROM TIME TO TIME PARTY HERETO,

and

 

MERRILL LYNCH CAPITAL,

 

a division of Merrill Lynch Business Financial Services Inc.,

as Administrative Agent for the Lenders

 

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Table of Contents

 

 

 

Page

 

 

 

ARTICLE I. DEFINITIONS

 

1

Section 1.1

 

Specific Terms

 

1

Section 1.2

 

Other Terms

 

12

Section 1.3

 

UCC Filing

 

12

Section 1.4

 

Computations of Time; Other Definitional Provisions

 

12

 

 

 

 

 

ARTICLE II. THE LOAN

 

13

Section 2.1

 

Commitment

 

13

Section 2.2

 

Note

 

13

Section 2.3

 

Repayment of Principal

 

13

Section 2.4

 

Interest

 

14

Section 2.5

 

Payments

 

15

Section 2.6

 

Conditions of Lender’s Initial Obligation

 

17

Section 2.7

 

Conditions Precedent to Subsequent Loan Advances

 

17

Section 2.8

 

Use of Loan Proceeds

 

18

Section 2.9

 

Fees

 

19

Section 2.10

 

Voluntary Prepayment

 

19

Section 2.11

 

Sharing of Payments, Etc.

 

19

Section 2.12

 

Status of Lenders

 

20

 

 

 

 

 

ARTICLE III. GENERAL PROVISIONS

 

21

Section 3.1

 

Representations and Warranties

 

21

Section 3.2

 

Financial and Other Information

 

24

Section 3.3

 

Other Covenants

 

25

Section 3.4

 

Collateral

 

29

Section 3.5

 

Events of Default

 

35

Section 3.6

 

Remedies

 

36

Section 3.7

 

Administrative Agent

 

40

Section 3.8

 

Miscellaneous

 

44

 

 

 

 

 

Exhibits:

 

 

 

 

 

 

 

Schedule 1

-

 

Lender Loan Commitments

 

A

-

 

Collateral

B

-

 

Certificate of Compliance

C

-

 

Promissory Note

D – 1

-

 

Limited Guaranty

D – 2

-

 

Unlimited Guaranty

 

i

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TERM LOAN AND SECURITY AGREEMENT

 

TERM LOAN AND SECURITY AGREEMENT (the “Loan Agreement”) dated as of April 21,
2006, among LARCLAY, L.P., a limited partnership organized and existing under
the laws of the State of Texas having its principal office at Six Desta Drive,
Suite 6500, Midland, Texas 79705 (together with its successors and permitted
assigns, “Borrower”), each of the lenders that is a signatory hereto or which
becomes a signatory hereto pursuant to Section 3.8(t) hereof (individually,
together with its successors and assigns, a “Lender” and collectively, the
“Lenders”), and MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business
Financial Services Inc., a corporation organized and existing under the laws of
the State of Delaware having its principal office at 222 North LaSalle Street,
16th Floor, Chicago, Illinois 60601, as agent for the Lenders (the
“Administrative Agent”).  Capitalized terms used herein and not otherwise
defined herein are used with the meanings ascribed thereto in the Definitions
Section of this Loan Agreement.

 

In consideration of $10, other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and the covenants and agreements
herein contained, Borrower, Administrative Agent and each Lender hereby agree as
follows, intending to be legally bound:

 

ARTICLE I.  DEFINITIONS

 

SECTION 1.1             SPECIFIC TERMS.  IN ADDITION TO TERMS DEFINED ELSEWHERE
IN THIS LOAN AGREEMENT, WHEN USED HEREIN THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS:

 

“Administrative Agent” has the meaning assigned to it in the introductory
paragraph hereof.

 

“Adverse Environmental Condition” means (i) the existence or the continuation of
the existence of an Environmental Contamination (including, without limitation,
a sudden or non-sudden accidental or non-accidental Environmental
Contamination), or exposure to any substance, chemical, material, pollutant,
Hazardous Substance, odor or audible noise or other release or emission in, into
or onto the environment (including without limitation, the air, ground, water or
any surface) at, in, by, from or related to any Collateral, (ii) the
environmental aspect of the transportation, storage, treatment or disposal of
materials in connection with the operation of any Collateral, or (iii) the
violation, or alleged violation, of any Environmental Law, permits or licenses
of, by or from any Governmental Agency or court relating to environmental
matters connected with any of the Collateral.

 

“Affiliate” of any Person means any Person directly or indirectly controlled by,
controlling or under common control with such first Person.  For the purposes of
this definition “control” of any Person includes (a) with respect to any
corporation or other Person having voting shares or the equivalent and elected
directors, managers, or Persons performing similar functions, the ownership or
power to vote, directly or indirectly shares or the equivalent representing
fifty percent (50%) or more of the power to vote in the election of directors,
managers or Persons performing similar functions (other than as a

 

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limited partner of such other Person) and (b) the ability to direct the business
and affairs of any Person by acting as a general partner, manager or otherwise.

 

“Applicable Law” means all laws, judgments, decrees, ordinances and regulations
and any other governmental rules, orders and determinations and all requirements
having the force of law, now or hereafter enacted, made or issued, whether or
not presently contemplated, including (without limitation) compliance with all
requirements of zoning laws and labor laws, compliance with which is required
with respect to the Collateral, whether or not such compliance shall require
structural, unforeseen or extraordinary changes to any of the Collateral or the
operation, occupancy or use thereof.

 

“Approved Fund” means, with respect to any Lender, 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) such Lender, (b) an
Affiliate of such Lender or (c) an entity or an Affiliate of an entity that
administers, operates or manages such Lender.

 

“Assignment and Acceptance” means an agreement by which an assignment is made
pursuant to Section 3.8(t) hereof, in form and substance reasonably satisfactory
to Administrative Agent.

 

“Assignment Fee” has the meaning given in Section 3.8 (t)(i).

 

“Bankruptcy Event” means any of the following: (i) a proceeding under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
liquidation, winding up or receivership law or statute shall be commenced, filed
or consented to by any Credit Party; or (ii) any such proceeding shall be filed
against any Credit Party and shall not be dismissed or withdrawn within sixty
(60) days after filing; or (iii) any Credit Party shall make a general
assignment for the benefit of creditors; or (iv) any Credit Party shall
generally fail to pay or admit in writing its inability to pay its debts as they
become due; or (v) any Credit Party shall be adjudicated a bankrupt or
insolvent; or (vi) any Credit Party shall take advantage of any other law or
procedure for the relief of debtors or shall take any action for the purpose of
or with a view towards effecting any of the foregoing; or (vii) a receiver,
trustee, custodian, fiscal agent or similar official for any Credit Party or for
any substantial part of any of their respective property or assets shall be
sought by such Credit Party or appointed.

 

“Base Location” means the physical location of the Collateral when it is not
under contract, mobilizing or de-mobilizing, which Base Location is set forth on
Exhibit A attached hereto.

 

“Borrower” has the meaning assigned to it in the introductory paragraph hereof.

 

“Business Day” means any day other than a Saturday, a Sunday, and any day on
which banking institutions located in the State of Illinois are authorized by
law or other governmental action to close.

 

“Certificate of Compliance” means a duly executed certificate, in substantially
the same form as Exhibit B attached hereto, of the General Partner of Borrower,
certifying as to the matters set forth in such certificate.

 

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“Closing Date” means the date upon which all conditions precedent to Lenders’
obligation to make the first advance under the Loan shall have been met or
waived to the satisfaction of all Lenders.

 

“Code” means the Internal Revenue Code of 1986.

 

“Collateral,” wherever located, means (i) the twelve (12) Rigs referred-to on
Exhibit A attached hereto, which Collateral includes replacements, accessories,
additions, accessions, attachments, appurtenances, modifications, upgrades,
improvements and substitutions to any of the foregoing; all records relating in
any way to the foregoing (including, without limitation, any computer software,
whether on tape, disk, card, strip, cartridge or any other form); and all
products and proceeds of any of the foregoing (including without limitation,
insurance payable by reason of loss or damage to the foregoing), (ii) all of
Borrower’s now owned as well as hereafter acquired parts, equipment and
inventory related to the Collateral that do not customarily bear serial numbers;
and all products and proceeds of any of the foregoing (including, without
limitation, insurance payable by reason of loss or damage to the foregoing), and
(iii) the Drilling Services Contract.  As of the date of this Loan Agreement,
Collateral includes the Operating Rigs described on Exhibit A-1, parts
Collateral includes the yard inventory described on Exhibit A-2, and the
Drilling Services Contract.

 

“Commitment Expiration Date” means February 28, 2007 at 2:00 p.m.

 

“Credit Party” and “Credit Parties” means, individually or collectively,
Borrower and all Guarantors.

 

“CWEI” means Clayton Williams Energy, Inc., a Delaware corporation.

 

“Default” means either an “Event of Default” as defined in Section 3.5 hereof,
or an event which with the giving of notice, passage of time, or both, would
constitute such an Event of Default.

 

“Default Rate” means an annual interest rate equal to the lesser of (i) five
(5.00%) percentage points over the Interest Rate or (ii) the highest interest
rate permitted to be contracted for, charged, reserved, taken or received by
applicable law.

 

“Disqualified Capital Stock” means any Stock 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 for any
consideration other than other Stock (which would not constitute Disqualified
Capital Stock), pursuant to a sinking fund obligation or otherwise, or is
convertible or exchangeable for Indebtedness or redeemable for any consideration
other than other Stock (which would not constitute Disqualified Capital Stock)
at the option of the holder thereof, in whole or in part, on or prior to the
date that is one year after the earlier of (a) the Maturity Date and (b) the
date on which there are no Loans or other obligations hereunder outstanding and
all of the commitments are terminated.

 

“Dollars,” “$” or “USD” means lawful currency of the United States of America.

 

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“Drilling Services Contract” means the Drilling Contract for Multiple Rigs,
dated as of April 21, 2006, between Borrower and CWEI, each related Drilling
Contract (as defined in such agreement) and the Operating Agreement for Drilling
Rigs dated as of April 20, 2006 executed by and between Borrower and Lariat
Services, Inc.

 

“Eligible Assignee” means (a) a commercial bank organized under the laws of the
United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company, insurance
company, or other financial institution or fund that is engaged in making,
purchasing, or otherwise investing in commercial loans in the ordinary course of
its business and having (together with its Affiliates) total assets in excess of
$250,000,000, (d) a Lender, any Affiliate (other than individuals) or Approved
Fund of a Lender, and (e) during the continuation of a Default, any other Person
so long as the assigning Lender provides at least five (5) Business Days prior
written notice to Administrative Agent of such assignment; provided, however, in
order for any assignee to be a party to this Agreement, such assignee must be
exempt from withholding taxes.

 

“Environmental Claim” means any accusation, allegation, notice of violation,
claim, demand, abatement or other order on direction (conditional or otherwise)
by any governmental authority or any Person for personal injury (including
sickness, disease or death), tangible or intangible property damage, damage to
the environment or other adverse affects on the environment, or for fines,
penalties or restrictions, resulting from or based upon any Adverse
Environmental Condition.

 

“Environmental Contamination” means any actual or threatened release, spill,
emission, leaking, pumping, injection, presence, deposit, abandonment, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment, or into or out of any of the Collateral, including, without
limitation, the movement of any Hazardous Substance or other substance through
or in the air, soil, surface water, groundwater or property which is not in
compliance with applicable Environmental Laws.

 

“Environmental Law” means any present or future federal, foreign, state or local
law, ordinance, order, rule or regulation and all judicial, administrative and
regulatory decrees, judgments and orders, pertaining to health, industrial
hygiene, the use, disposal or transportation of Hazardous Substances,
Environmental Contamination, or pertaining to the protection of the environment,
including, but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”) (42 U.S.C. § 9601 et seq.), the
Hazardous Material Transportation Act (49 U.S.C. § 1801 et seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Air Act
(42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
§ 1361 et seq.), the Occupational Safety and Health Act (19 U.S.C. § 651 et
seq.), the Hazardous and Solid Waste Amendments (42 U.S.C. § 2601 et seq.), as
these laws have been or may be amended or

 

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supplemented, and any successor thereto, and any analogous foreign, state or
local statutes, and the rules, regulations and orders promulgated pursuant
thereto.

 

“Environmental Loss” means any loss, cost, damage, liability, deficiency, fine,
penalty or expense (including, without limitation, reasonable attorneys’ fees,
engineering and other professional or expert fees), investigation, removal,
cleanup and remedial costs (voluntarily or involuntarily incurred) and damages
to, loss of the use of or decrease in value of the Collateral arising out of or
related to any Adverse Environmental Condition.

 

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.

 

“Event of Loss” means the occurrence whereby any tangible Collateral having a
value in excess of $250,000 or more is damaged beyond repair, lost, totally
destroyed or confiscated.

 

“Event of Loss Prepayment” has the meaning given in Section 3.4(i).

 

“Excluded Taxes” means, with respect to the Administrative Agent or any Lender,
(a) income or franchise taxes imposed on or measured by its net income (however
denominated) by the jurisdiction (or any political subdivision thereof) under
the laws of which such recipient is organized 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 Borrower is
located, (c) franchise taxes imposed by the State of Texas or other Governmental
Agency on either the Administrative Agent or the Lenders as a result of doing
business in the State of Texas or other jurisdiction, and (d) in the case of a
Foreign Lender, 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 or inability to comply with Section 2.12.

 

“Facility Fee” means a fully-earned, non-refundable facility fee of $375,000, of
which $375,000 has already been paid by Borrower to Administrative Agent.

 

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

 

“Funding Source” has the meaning given in Section 3.8 (t)(v).

 

“GAAP” means the generally accepted accounting principles in effect in the
United States of America from time to time.

 

“General Funding Conditions” means (A) each of the following conditions to the
first Loan advance by Lenders hereunder: (i) no Default or Event of Default
shall have occurred and be continuing or would result from the making of any
such loan or advance hereunder by Lenders; (ii) there shall not have occurred
and be continuing any Material

 

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Adverse Effect and Administrative Agent shall continue to be satisfied with the
financial condition of Borrower; (iii) all representations and warranties of all
of the Credit Parties herein or in any of the Loan Documents shall then be true
and correct in all material respects (except those that relate to a specific
date and were true and correct on such date); (iv) Lenders shall have received
this Loan Agreement and all of the other Loan Documents duly executed, and filed
or recorded or in a form suitable for filing and recording where applicable, all
of which shall be in form and substance satisfactory to Lenders; (v) the
Facility Fee shall have been paid in full; (vi) Administrative Agent shall have
received evidence satisfactory to it as to the ownership of the Collateral and
the perfection and priority of Administrative Agent’s Liens and security
interests thereon, (vii) Administrative Agent shall have received evidence
satisfactory to it of the insurance required hereby or by any of the Loan
Documents; (viii) Administrative Agent shall have received (1) resolutions of
the Board of Directors or General Partner, as applicable, of each Credit Party
authorizing the Loan and the execution, delivery and performance of the Loan
Documents, (2) an incumbency certificate of and each Credit Party,
(3) governmental certificates of good standing and existence of each Credit
Party, (4) certified articles of incorporation or other formation document and
bylaws or other operating agreement or regulations of each Credit Party and
(5) an opinion of Borrower’s counsel covering matters as are customary in loan
transactions and covering such additional matters as Administrative Agent may
reasonably request; and (ix) Administrative Agent shall have received such other
documents and information as Administrative Agent may reasonably request, and
(B) each of the following conditions to any subsequent Loan advance made by
Lenders hereunder:  (i) no Default or Event of Default shall have occurred and
be continuing or would result from the making of any such loan or advance
hereunder by Lender; (ii) there shall not have occurred and be continuing any
Material Adverse Effect; (iii) all representations and warranties of Borrower
herein or in any of the Loan Documents shall then be true and correct in all
material respects (except those that relate to a specific date and were true and
correct on such date); and (iv) Administrative Agent shall have received
evidence satisfactory to it as to the description and ownership of any
additional Rigs being financed with such advance and the perfection and priority
of Administrative Agent’s Liens and security interests thereon.

 

“General Partner” means Larclay GP, LLC, a Texas limited liability company.

 

“Governmental Agencies” means any government or any state, department or other
political subdivision thereof or governmental body, agency, authority,
department or commission having jurisdiction over Borrower or its properties
(including without limitation any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation, partnership or other entity directly or
indirectly owned by the foregoing.

 

“Guaranteed Indebtedness” means, as to any Person, any obligation of such Person
guaranteeing any indebtedness, lease, dividend, or other obligation (“primary
obligations”) of any other Person (the “primary obligor”) in any manner,
including any obligation or arrangement of such guaranteeing Person (whether or
not contingent):  (i) to purchase or repurchase any such primary obligation;
(ii) to advance or supply funds (A) for the purchase or payment of any such
primary obligation or (B) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net

 

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worth or solvency or any balance sheet condition of the primary obligor;
(iii) to purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation; or (iv) to indemnify the
owner of such primary obligation against loss in respect thereof.

 

“Guarantor” means CWEI and each Subsidiary that executes a Guaranty pursuant to
Section 3.3(g).

 

“Guaranty” means, in the case of CWEI, the Guaranty delivered by CWEI pursuant
to Section 3.4(l) substantially in the form of Exhibit D-1 hereto, and in the
case of any Subsidiary, a guaranty delivered by such Subsidiary pursuant to
Section 3.3(g), substantially in the form of Exhibit D-2.

 

“Hazardous Substances” means and includes hazardous substances as defined in
CERCLA; oil of any kind, petroleum products and their by-products, including,
but not limited to, sludge or residue; asbestos containing materials;
polychlorinated biphenyls; any and all other hazardous or toxic substances;
hazardous waste, as defined in CERCLA; medical waste; infectious waste; those
substances listed in the United States Department of Transportation Table
(49 C.F.R. § 172.101); explosives; radioactive materials; and all other
pollutants, contaminants and other substances regulated or controlled by the
Environmental Laws and any other substance that requires special handling in its
collection, storage, treatment or disposal under the Environmental Laws.

 

“Indebtedness” of any Person means, without duplication, (i) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property or
services (including reimbursement and all other obligations with respect to
surety bonds, letters of credit and bankers’ acceptances, whether or not
matured, but not including accounts payable and accrued expenses, liabilities,
or other obligations to pay the deferred purchase price of property or services,
from time to time incurred in the ordinary course of business which are not
greater than sixty (60) days past the date of invoice or which are being
contested in good faith by appropriate action and for which adequate reserves
have been maintained in accordance with GAAP); (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments; (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property); (iv) all capital lease obligations;
(v) all Guaranteed Indebtedness; and (vi) all Indebtedness referred to in
clauses (i), (ii), (iii), (iv) or (v) above secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien upon or in property (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes.

 

“Interest Period” means each calendar month occurring during the period
commencing with the month of the Closing Date through and including the calendar
month of the Maturity Date; provided, however, that no Interest Period shall
commence

 

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or extend past the Maturity Date and the Loan shall bear interest at the Default
Rate after the Maturity Date.

 

“Interest Rate” means, with respect to the Loan for any Interest Period, a rate
per annum equal to the sum of the LIBOR Rate for such Interest Period plus three
hundred and twenty-five (325) basis points.

 

“LC Event” means that the Letter of Credit shall not have been renewed or
extended for at least an additional one year period (and such renewal or
extension received by Administrative Agent) no later than 30 days prior to the
then current expiry date thereof unless the following documents have been
delivered to Administrative Agent:  (i) the CWEI Guaranty, and (ii) a
Secretary’s Certificate certifying the signature and incumbency of the Person
signing the CWEI Guaranty and the authorizing resolutions therefor.

 

“Lender” and “Lenders” have the meanings assigned to them in the introductory
paragraph hereof.

 

“Letter of Credit” means that letter of credit in the amount of $19,000,000,
issued by a financial institution reasonably acceptable to Administrative Agent
for the account of CWEI and for the benefit of Administrative Agent, for itself
and each Lender party to this Loan Agreement.

 

“LIBOR Rate” means, with respect to the Loan for any Interest Period, an
interest rate per annum (rounded upward to the next higher whole multiple of
one-sixteenth percent if such rate is not such a multiple), equal to the rate
per annum (rounded upwards to the next higher whole multiple of one-sixteenth
percent if such rate is not such a multiple) as determined on the basis of the
average of the rates offered by a majority of the banks in the London interbank
market for deposits in U.S. Dollars for one (1) month, to the extent the rates
as published in the “Bloomberg Professional Service, Screen BAAM” on the
Business Day next preceding the first day of such Interest Period (provided,
however, that with respect to the first Interest Period of the Loan, on the
third Business Day next preceding the first day of such Interest Period).

 

“Lien” means any interest in property securing an obligation owed to, or a claim
by, a Person other than the owner of the property, whether such interest is
based on the common law, statute or contract, and whether such obligation or
claim is fixed or contingent, and including but not limited to the lien or
security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes.

 

“Loan” means a term installment loan in an amount not to exceed $75,000,000
made, or to be made, pursuant to this Loan Agreement.

 

“Loan Agreement” has the meaning assigned to it in the introductory paragraph
hereof.

 

“Loan Documents” means this Loan Agreement, the Note, the Guaranty, the Letter
of Credit, any indenture, and all other security and other instruments,
assignments, consents, certificates, certifications and agreements of any kind
relating to any of the

 

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Obligations, whether obtained, authorized, authenticated, executed, sent or
received concurrently with or subsequent to this Loan Agreement, or which
evidence the creation, guaranty or collateralization of any of the Obligations
or the granting or perfection of Liens or security interests upon any Collateral
or any other collateral for the Obligations, including any modifications,
amendments or restatements of the foregoing.

 

“Loan Purpose” means the purpose for which the proceeds of the Loan will be
used; to wit:  (i) to finance improvements to, and refurbishment of, Rigs,
(ii) to acquire Rigs, and (iii) to repay loans or advances made by CWEI to
Borrower to the extent such loans or advances were made for a Loan Purpose.

 

“Location of Tangible Collateral” means, at any time,  the physical location of
the Collateral when it is not at its Base Location.

 

“Majority Lenders” shall mean those Lenders holding at least sixty six percent
(66%) of the Loan.

 

“Material Adverse Effect” means any act, event, condition or circumstance which
materially and adversely changes or affects (a) the business, operations,
condition (financial or otherwise), performance or assets of Borrower and its
Subsidiaries or CWEI and its Subsidiaries, in each case taken as a whole,
(b) the ability of any Credit Party to perform its obligations under any Loan
Document to which it is a party or by which it is bound or (c) the
enforceability of any Loan Document.

 

“Maturity Date” means the date that is the fifth anniversery of the Closing
Date.

 

“Net OLV” means the appraised orderly liquidation value of any particular item
of Collateral, minus the fair market value of tubulars, minus an amount equal to
ten percent (10%) of the appraised orderly liquidation value (being an estimate
of the cost of marshalling, storage, make-ready and sale expenses).

 

“Note” has the meaning given in Section 2.2.

 

“OFAC” has the meaning given in Section 3.8(r).

 

“Obligations” means all present and future liabilities, indebtedness and
obligations of Borrower to Administrative Agent and Lenders under the Loan
Documents, whether now existing or hereafter arising, whether direct or
indirect, absolute or contingent, due or to become due, primary or secondary or
joint or several, and, without limiting the generality of the foregoing, shall
include principal, accrued interest (including without limitation interest
accruing after the filing of any petition in bankruptcy), all advances made by
or on behalf of Administrative Agent or Lenders under the Loan Agreement and
other Loan Documents, collection and other costs and expenses incurred by or on
behalf of Administrative Agent or Lenders, whether incurred before or after
judgment, and all present and future liabilities, indebtedness and obligations
of Borrower under the Notes issued pursuant hereto and this Loan Agreement.

 

“Operating Rig Collateral” means Operating Rigs in the Collateral pool.

 

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“Operating Rigs” means Rigs that are operating or are fully capable of operation
and meet customary industry standards for Rigs under contract for drilling.

 

“Other Taxes” has the meaning given in Section 2.5(a).

 

“Participant Register” has the meaning given in Section 3.8(t)(v).

 

“Payment Date” means the first day of the calendar month immediately succeeding
the Closing Date and the first day of each successive calendar month thereafter
through and including the Maturity Date; provided that if the first day of any
calendar month is not a Business Day, then the Payment Date for such calendar
month shall be the next succeeding Business Day.

 

“Permitted Liens” means:  (a) Liens for Taxes, assessments or other governmental
charges or levies which are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP; (b) Liens in connection with workers’ compensation,
unemployment insurance or other social security, old age pension or public
liability obligations which are not delinquent or which are being contested in
good faith by appropriate action and for which adequate reserves have been
maintained in accordance with GAAP; (c) statutory landlord’s liens, operators’,
vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’,
workers’, materialmen’s, construction or other like Liens arising by operation
of law in the ordinary course of business or incident to drilling operations,
each of which is in respect of obligations that are not delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP, provided that any such
Lien referred to in this clause does not materially impair the use of the
property covered by such Lien for the purposes for which such property is held
by Borrower or materially impair the value of such property subject thereto;
(d) contractual Liens which arise in the ordinary course of business under
agreements which are usual and customary in the drilling or oil and gas business
and are for claims that are not delinquent or which are being contested in good
faith by appropriate action and for which adequate reserves have been maintained
in accordance with GAAP, provided that any such Lien referred to in this clause
does not materially impair the use of the property covered by such Lien for the
purposes for which such property is held by Borrower or materially impair the
value of such property subject thereto; (e) Liens arising solely by virtue of
any statutory or common law provision relating to banker’s liens, rights of
set-off or similar rights and remedies and burdening only deposit accounts or
other funds maintained with a creditor depository institution, provided that no
such deposit account is a dedicated cash collateral account or is subject to
restrictions against access by the depositor in excess of those set forth by
applicable regulations and no such deposit account is intended by Borrower to
provide collateral to the depository institution; (f) easements, restrictions,
servitudes, permits, conditions, covenants, exceptions or reservations in any
property which in the aggregate do not materially impair the use of such
property for the purposes of which such property is held or materially impair
the value of such property subject thereto; (g) Liens on cash or securities
pledged to secure performance of tenders, surety and appeal bonds, government
contracts, performance and return of money bonds, bids, trade contracts, leases,
statutory obligations, regulatory obligations and other obligations of a like
nature incurred in the ordinary course of business; (h) judgment and attachment
Liens not giving rise to an

 

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Event of Default, provided that any appropriate legal proceedings which may have
been duly initiated for the review of such judgment shall not have been finally
terminated or the period within which such proceeding may be initiated shall not
have expired and no action to enforce such Lien has been commenced; (i) Liens in
favor of Administrative Agent or that otherwise secure the Obligations; and
(j) any other Liens expressly permitted herein or in writing by Administrative
Agent.

 

“Person” means any natural person and any corporation, partnership (general,
limited or otherwise), limited liability company, trust, association, joint
venture, governmental body or Governmental Agency or other entity having legal
status of any kind.

 

“Prepayment Premium” has the meaning given in Section 2.10(c).

 

“Prime Rate” means with respect to any Interest Period, the rate publicly
announced in New York, New York from time to time as the prime rate of JPMorgan
Chase Bank N.A. (or any successor thereof) (“JPMorgan”).  The Prime Rate shall
be determined by Administrative Agent at the close of business two (2) Business
Days before a Payment Date, and shall be effective to but not including the next
applicable Payment Date.  The Prime Rate is not intended to be the lowest rate
of interest charged by JPMorgan or the Lenders in connection with extensions of
credit to debtors.

 

“Register” has the meaning given in Section 3.8 (t)(iii).

 

“Registered Loans” has the meaning given in Section 3.8(t)(iii).

 

“Related Lender Assignment” means an assignment of all or any portion of a Loan
made by a Lender to an Affiliate of such Lender or an Approved Fund of such
Lender.

 

“Related Party Register” has the meaning given in Section 3.8 (t)(iii).

 

“Responsible Officer” means, as to Borrower, the Chief Executive Officer, the
President, any financial officer or any Vice President of General Partner.

 

“Restricted Payment” means (i) any dividend or distribution (whether in cash,
securities or other property) with respect to any Stock in Borrower, or 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 Stock in Borrower or any
option, warrant or other right to acquire Stock in Borrower; or (ii) any payment
or distribution made in respect of any subordinated Indebtedness of Borrower or
its Subsidiaries by Borrower or its Subsidiaries in violation of any
subordination or other agreement made in favor of Administrative Agent.

 

“Rig” means a drilling rig and its substructure, engine, braking system, drill
pipe, drill collar and related equipment and parts (including spare parts
related to such Rig); provided, however, that the lack of, or inability to
obtain drill pipe, does not mean such rig or rigs are not operable or are
excluded from the definition of Operating Rig.

 

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“Stock” means all certificated and uncertificated shares, options, warrants,
membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation,
partnership, limited liability company or equivalent entity whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

 

“Subsidiary” means as to any particular parent entity, any corporation,
partnership, limited liability company or other entity (whether now existing or
hereafter organized or acquired) in which more than fifty percent (50%) of the
outstanding equity ownership interests having voting rights as of any applicable
date of determination, shall be owned directly, or indirectly through one or
more Subsidiaries, by such parent entity.

 

“Taxes” means any present or future taxes, levies, duties, imposts, fees,
deductions, withholdings or other charges imposed by any Governmental Agency,
including any interest, additions to tax or penalties with respect thereto.

 

“Trigger Date” shall have the meaning given in Section 3.4(i).

 

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

 

“USA Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
(Title III of Pub. L. 107-56, signed into law October 26, 2001).

 

SECTION 1.2             OTHER TERMS.  EXCEPT AS OTHERWISE DEFINED HEREIN, ALL
TERMS USED IN THIS LOAN AGREEMENT WHICH ARE DEFINED IN THE UCC SHALL HAVE THE
MEANINGS SET FORTH IN THE UCC AND ACCOUNTING TERMS NOT DEFINED HEREIN SHALL HAVE
THE MEANING ASCRIBED TO THEM IN GAAP.

 

SECTION 1.3             UCC FILING.  BORROWER HEREBY AUTHORIZES ADMINISTRATIVE
AGENT TO FILE A RECORD OR RECORDS (AS DEFINED OR OTHERWISE SPECIFIED UNDER THE
UCC), INCLUDING, WITHOUT LIMITATION, FINANCING STATEMENTS, IN ALL JURISDICTIONS
AND WITH ALL FILING OFFICES AS ADMINISTRATIVE AGENT MAY REASONABLY DETERMINE
(OTHER THAN ANY BROAD DESCRIPTION SUCH AS “ALL ASSETS” OF BORROWER OR WORDS OF
SIMILAR EFFECT) ARE NECESSARY OR ADVISABLE TO PERFECT THE SECURITY INTEREST
GRANTED TO ADMINISTRATIVE AGENT HEREIN. SUCH FINANCING STATEMENTS MAY DESCRIBE
THE COLLATERAL IN THE SAME MANNER AS DESCRIBED HEREIN OR MAY CONTAIN AN
INDICATION OR DESCRIPTION OF COLLATERAL THAT DESCRIBES SUCH PROPERTY IN ANY
OTHER MANNER AS ADMINISTRATIVE AGENT MAY DETERMINE, IN ITS SOLE DISCRETION, IS
NECESSARY, ADVISABLE OR PRUDENT TO ENSURE THE PERFECTION OF THE SECURITY
INTEREST IN THE COLLATERAL GRANTED TO ADMINISTRATIVE AGENT HEREIN.  BORROWER
AGREES NOT TO FILE ANY CORRECTIVE OR TERMINATION STATEMENTS OR PARTIAL RELEASES
WITH RESPECT TO ANY UCC STATEMENTS FILED BY ADMINISTRATIVE AGENT PURSUANT TO
THIS LOAN AGREEMENT WITHOUT ADMINISTRATIVE AGENT’S PRIOR WRITTEN CONSENT, WHICH
CONSENT SHALL NOT BE UNREASONABLY WITHHELD, CONDITIONED OR DELAYED.

 

SECTION 1.4             COMPUTATIONS OF TIME; OTHER DEFINITIONAL PROVISIONS.  IN
THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS IN THE COMPUTATION OF PERIODS
OF TIME FROM A SPECIFIED DATE TO A LATER SPECIFIED DATE, THE WORD “FROM” MEANS
“FROM AND INCLUDING” AND THE WORDS “TO” AND “UNTIL” MEAN “TO BUT EXCLUDING.” 
REFERENCES IN THIS LOAN AGREEMENT TO ANY CONTRACT OR AGREEMENT SHALL BE A
REFERENCE TO SUCH CONTRACT OR AGREEMENT AS THE SAME MAY BE AMENDED,

 

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AMENDED AND RESTATED, SUPPLEMENTED, RENEWED, EXTENDED, OR OTHERWISE MODIFIED
FROM TIME TO TIME IN ACCORDANCE WITH ITS TERMS.

 

ARTICLE II.  THE LOAN

 

SECTION 2.1             COMMITMENT.  SUBJECT TO THE TERMS AND CONDITIONS HEREOF,
EACH LENDER AGREES, SEVERALLY AND NOT JOINTLY, TO MAKE ITS PERCENTAGE SHARE OF
THE LOAN, AS SET FORTH ON SCHEDULE 1 HERETO, AVAILABLE TO BORROWER IN MULTIPLE
ADVANCES, AS REQUESTED BY BORROWER IN ACCORDANCE HEREWITH, FROM THE CLOSING DATE
THROUGH THE COMMITMENT EXPIRATION DATE FOR THE LOAN PURPOSE OR AS OTHERWISE
ALLOWED BY SECTION 2.8, AND BORROWER AGREES TO BORROW ALL AMOUNTS AVAILABLE FROM
LENDERS TO SATISFY THE LOAN PURPOSE OR AS OTHERWISE ALLOWED BY SECTION 2.8.

 

SECTION 2.2             NOTE.  THE LOAN WILL BE EVIDENCED BY THOSE CERTAIN
PROMISSORY NOTES EXECUTED OF EVEN DATE HEREWITH BY BORROWER, PAYABLE TO THE
ORDER OF ADMINISTRATIVE AGENT FOR THE BENEFIT OF LENDERS AND ISSUED PURSUANT TO
THIS LOAN AGREEMENT, SUBSTANTIALLY IN THE FORM OF EXHIBIT C ATTACHED HERETO (THE
“NOTE”).  THE NOTE IS HEREBY INCORPORATED AS A PART HEREOF AS IF FULLY SET FORTH
HEREIN.

 

SECTION 2.3             REPAYMENT OF PRINCIPAL.

 

(A)           BORROWER SHALL PAY TO ADMINISTRATIVE AGENT, FOR THE ACCOUNT OF
EACH LENDER, THE OUTSTANDING PRINCIPAL AMOUNT OF THE LOAN, IN MONTHLY PRINCIPAL
INSTALLMENTS ON EACH PAYMENT DATE THAT OCCURS ON AND AFTER APRIL 1, 2007, AS
FOLLOWS:

 

(I)            FOR EACH PAYMENT DATE OCCURRING DURING THE PERIOD FROM AND
INCLUDING APRIL 1, 2007 THROUGH AND INCLUDING MARCH 1, 2008, AN EQUAL MONTHLY
PRINCIPAL INSTALLMENT EQUAL TO 1/12 OF 35% OF THE OUTSTANDING PRINCIPAL AMOUNT
OF THE LOAN ON APRIL 1, 2007;

 

(II)           FOR EACH PAYMENT DATE OCCURRING DURING THE PERIOD FROM AND
INCLUDING APRIL 1, 2008 THROUGH AND INCLUDING MARCH 1, 2010, AN EQUAL MONTHLY
PRINCIPAL INSTALLMENT EQUAL TO 1/24 OF 50% OF THE OUTSTANDING PRINCIPAL AMOUNT
OF THE LOAN ON APRIL 1, 2007; AND

 

(III)          FOR EACH PAYMENT DATE OCCURRING DURING THE PERIOD FROM AND
INCLUDING APRIL 1, 2010 THROUGH AND INCLUDING MARCH 1, 2011, AN EQUAL MONTHLY
PRINCIPAL INSTALLMENT EQUAL TO 1/12 OF 15% OF THE OUTSTANDING PRINCIPAL AMOUNT
OF THE LOAN ON APRIL 1, 2007.

 

(B)           ADDITIONALLY, BORROWER SHALL PAY TO ADMINISTRATIVE AGENT, FOR THE
ACCOUNT OF EACH LENDER, THE REMAINING PRINCIPAL BALANCE OF THE LOAN ON THE
MATURITY DATE.

 

(C)           THE LOAN SHALL BE EVIDENCED BY AND REPAYABLE IN ACCORDANCE WITH
THE TERMS HEREOF AND OF THE NOTE.

 

(D)           IF, ON THE COMMITMENT EXPIRATION DATE, THE NET OLV OF THE
OPERATING RIGS (INCLUDING COLLATERAL RELATED RIG EQUIPMENT, PARTS AND TOOLS)
EXCEEDS SEVENTY-FIVE PERCENT (75%) OF THE THEN OUTSTANDING PRINCIPAL BALANCE OF
THE LOAN, BORROWER SHALL PREPAY THE LOAN TO THE EXTENT OF SUCH EXCESS ON
MARCH 1, 2007.

 

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(E)           PAYMENTS OF PRINCIPAL AND INTEREST SHALL BE MADE BY AUTOMATED
CLEARING HOUSE DEBIT OF IMMEDIATELY AVAILABLE FUNDS FROM THE ACCOUNT DESIGNATED
BY BORROWER IN THE AUTOMATED CLEARING HOUSE DEBIT AUTHORIZATION EXECUTED BY
BORROWER IN CONNECTION WITH THE LOAN AGREEMENT, OR BY WIRE TRANSFER OF
IMMEDIATELY AVAILABLE FUNDS TO LASALLE BANK, 135 SOUTH LASALLE STREET, CHICAGO,
ILLINOIS 60603, ABA 071000505, ACCOUNT NAME:  MLBFS EQUIPMENT FINANCE, ACCOUNT
#5800393166, ATTENTION:  MLC EQUIPMENT FINANCE, REFERENCE LARCLAY, L.P., OR SUCH
OTHER ADDRESS AS ADMINISTRATIVE AGENT SHALL HAVE DESIGNATED TO BORROWER IN
WRITING, AND SHALL BE EFFECTIVE UPON RECEIPT.

 

SECTION 2.4             INTEREST.

 

(A)           BORROWER SHALL PAY INTEREST, IN ARREARS, ON THE UNPAID PRINCIPAL
AMOUNT OF THE LOAN FROM THE CLOSING DATE UNTIL THE PRINCIPAL AMOUNT OF THE LOAN
IS PAID IN FULL, ON EACH PAYMENT DATE AT A RATE OF INTEREST PER ANNUM (COMPUTED
ON THE BASIS OF A 360-DAY YEAR AND ACTUAL DAYS ELAPSED) EQUAL TO THE INTEREST
RATE; PROVIDED, HOWEVER, THAT ALL INTEREST ACCRUED ON THE LOAN AND UNPAID ON THE
MATURITY DATE SHALL BE PAID ON THE MATURITY DATE.

 

(B)           IF PRIOR TO THE COMMENCEMENT OF ANY INTEREST PERIOD FOR THE LOAN,
ADMINISTRATIVE AGENT SHALL DETERMINE THAT BY REASON OF CIRCUMSTANCES AFFECTING
THE LONDON INTERBANK MARKET ADEQUATE AND REASONABLE MEANS DO NOT EXIST FOR
ASCERTAINING THE INTEREST RATE BASED ON THE LIBOR RATE FOR SUCH INTEREST PERIOD
OR ADMINISTRATIVE AGENT IS ADVISED BY THE MAJORITY LENDERS THAT THE INTEREST
RATE FOR SUCH INTEREST PERIOD WILL NOT ADEQUATELY AND FAIRLY REFLECT THE COST TO
SUCH LENDERS OF MAKING OR MAINTAINING THEIR LOAN FOR SUCH INTEREST PERIOD, THEN
ADMINISTRATIVE AGENT SHALL GIVE NOTICE THEREOF TO BORROWER AND LENDERS BY
TELEPHONE OR TELECOPY AS PROMPTLY AS PRACTICABLE THEREAFTER AND, UNTIL
ADMINISTRATIVE AGENT NOTIFIES BORROWER AND LENDERS THAT THE CIRCUMSTANCES GIVING
RISE TO SUCH NOTICE NO LONGER EXIST, THE LOAN SHALL BEAR INTEREST AT THE PRIME
RATE DURING SUCH INTEREST PERIOD.

 

(C)           IF ANY PAYMENT REQUIRED UNDER THIS LOAN AGREEMENT OR THE NOTE IS
NOT PAID WITHIN FIVE (5) DAYS AFTER SUCH PAYMENT IS DUE, THEN, UNLESS WAIVED
PURSUANT TO SECTION 3.8(S) HEREOF, BORROWER SHALL PAY, AT ADMINISTRATIVE AGENT’S
REQUEST, A LATE CHARGE (THE “LATE CHARGE”) EQUAL TO FIVE PERCENT (5.00%) OF THE
AMOUNT OF SUCH PAYMENT TO COMPENSATE LENDERS FOR ADMINISTRATIVE EXPENSES AND
OTHER COSTS OF DELINQUENT PAYMENTS.  EACH SUCH LATE CHARGE MAY BE ASSESSED UPON
NOTICE, SHALL BE IMMEDIATELY DUE AND PAYABLE AND SHALL BE IN ADDITION TO ALL
OTHER RIGHTS AND REMEDIES AVAILABLE TO ADMINISTRATIVE AGENT AND LENDERS.  IF AN
EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, OR IF ANY PRINCIPAL OF OR
INTEREST ON THE LOAN OR ANY FEE OR OTHER AMOUNT PAYABLE BY BORROWER HEREUNDER IS
NOT PAID WHEN DUE, WHETHER AT STATED MATURITY, UPON ACCELERATION OR OTHERWISE,
THEN THE PRINCIPAL AMOUNT OF THE LOAN OUTSTANDING AND ANY OVERDUE AMOUNT (IN THE
CASE OF A FAILURE TO PAY AMOUNTS WHEN DUE) MAY, AT THE ELECTION OF
ADMINISTRATIVE AGENT, BEAR INTEREST, AFTER AS WELL AS BEFORE JUDGMENT, AT A RATE
PER ANNUM EQUAL TO THE DEFAULT RATE; PROVIDED, HOWEVER, THAT IF THE SOLE EVENT
OF DEFAULT IS FAILURE TO MAKE A PAYMENT REQUIRED UNDER THIS LOAN AGREEMENT AND
BORROWER HAS PAID A LATE CHARGE IN RESPECT OF SUCH PAYMENT, INTEREST ON ACCOUNT
OF SUCH EVENT OF DEFAULT WILL NOT BE CHARGED DURING THE MONTH IN WHICH SUCH LATE
CHARGE WAS PAID UNLESS ANOTHER EVENT OF DEFAULT OCCURS DURING SUCH MONTH.

 

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(D)           IN NO EVENT SHALL ANY INTEREST RATE PROVIDED FOR IN THIS LOAN
AGREEMENT OR THE NOTE EXCEED THE MAXIMUM RATE PERMITTED BY THE THEN APPLICABLE
LAW.  IT IS THE INTENTION OF THE PARTIES HERETO TO STRICTLY COMPLY WITH
APPLICABLE USURY LAWS; ACCORDINGLY, IT IS AGREED THAT, NOTWITHSTANDING ANY
PROVISION TO THE CONTRARY IN THIS LOAN AGREEMENT, IN THE NOTES, OR IN THE OTHER
LOAN DOCUMENTS, IN NO EVENT SHALL THIS LOAN AGREEMENT, THE NOTES, OR THE OTHER
LOAN DOCUMENTS BE CONSTRUED TO CHARGE, CONTRACT FOR OR REQUIRE THE PAYMENT OR
PERMIT THE COLLECTION OF INTEREST IN EXCESS OF THE MAXIMUM AMOUNT PERMITTED BY
APPLICABLE LAW.  IF ANY SUCH EXCESS INTEREST IS CONTRACTED FOR, CHARGED OR
RECEIVED UNDER THIS LOAN AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR IN
THE EVENT THAT ALL OF THE PRINCIPAL BALANCE SHALL BE PREPAID, SO THAT UNDER ANY
OF SUCH CIRCUMSTANCES THE AMOUNT OF INTEREST CONTRACTED FOR, CHARGED OR RECEIVED
ON THE PRINCIPAL BALANCE SHALL EXCEED THE MAXIMUM AMOUNT OF INTEREST PERMITTED
BY APPLICABLE LAW, THEN IN SUCH EVENT (I) THE PROVISIONS OF THIS
SECTION 2.4(D) SHALL GOVERN AND CONTROL, (II) NEITHER BORROWER, ANY GUARANTOR OR
ANY OTHER PERSON OR ENTITY NOW OR HEREAFTER LIABLE FOR THE PAYMENT THEREOF SHALL
BE OBLIGATED TO PAY THE AMOUNT OF SUCH INTEREST TO THE EXTENT THAT IT IS IN
EXCESS OF THE MAXIMUM AMOUNT OF INTEREST PERMITTED BY APPLICABLE LAW, (III) ANY
SUCH EXCESS WHICH MAY HAVE BEEN COLLECTED SHALL BE EITHER APPLIED AS A CREDIT
AGAINST THE THEN UNPAID PRINCIPAL BALANCE OR REFUNDED TO BORROWER, AT THE OPTION
OF THE LENDERS, AND (IV) THE EFFECTIVE RATE OF INTEREST SHALL BE AUTOMATICALLY
REDUCED TO THE MAXIMUM LAWFUL CONTRACT RATE ALLOWED UNDER APPLICABLE LAW AS NOW
OR HEREAFTER CONSTRUED BY THE COURTS HAVING JURISDICTION THEREOF.  IT IS FURTHER
AGREED THAT WITHOUT LIMITATION OF THE FOREGOING, ALL CALCULATIONS OF THE RATE OF
INTEREST CONTRACTED FOR, CHARGED OR RECEIVED UNDER THIS LOAN AGREEMENT, THE NOTE
AND THE OTHER LOAN DOCUMENTS WHICH ARE MADE FOR THE PURPOSE OF DETERMINING
WHETHER SUCH RATE EXCEEDS THE MAXIMUM LAWFUL CONTRACT RATE, SHALL BE MADE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, BY AMORTIZING, PRORATING, ALLOCATING AND
SPREADING IN EQUAL PARTS DURING THE PERIOD OF THE FULL STATED TERM OF THE
INDEBTEDNESS EVIDENCED HEREBY, ALL INTEREST AT ANY TIME CONTRACTED FOR, CHARGED
OR RECEIVED FROM BORROWER OR OTHERWISE BY THE LENDERS IN CONNECTION WITH SUCH
INDEBTEDNESS; PROVIDED, HOWEVER, THAT IF ANY APPLICABLE STATE LAW IS AMENDED OR
THE LAW OF THE UNITED STATES OF AMERICA PREEMPTS ANY APPLICABLE STATE LAW, SO
THAT IT BECOMES LAWFUL FOR THE LENDERS TO RECEIVE A GREATER SIMPLE INTEREST PER
ANNUM RATE THAN IS PRESENTLY ALLOWED, BORROWER AGREES THAT, ON THE EFFECTIVE
DATE OF SUCH AMENDMENT OR PREEMPTION AS THE CASE MAY BE, THE LAWFUL MAXIMUM
HEREUNDER SHALL BE INCREASED TO THE MAXIMUM SIMPLE INTEREST PER ANNUM RATE
ALLOWED BY THE HIGHER OF THE AMENDED STATE LAW OR THE LAW OF THE UNITED STATES
OF AMERICA.

 

SECTION 2.5             PAYMENTS.

 

(A)           THE PAYMENT OBLIGATIONS OF BORROWER UNDER THE NOTE AND ALL OTHER
AMOUNTS PAYABLE UNDER THIS LOAN AGREEMENT SHALL BE PAID TO ADMINISTRATIVE AGENT
AT SUCH ADDRESS AS ADMINISTRATIVE AGENT MAY DESIGNATE (NOT LESS THAN THREE
(3) BUSINESS DAYS PRIOR TO THE DUE DATE THEREFOR), NOT LATER THAN 2:00 P.M.
CENTRAL TIME ON THE DUE DATE THEREOF, IN LAWFUL MONEY OF THE UNITED STATES.  ALL
AMOUNTS RECEIVED BY ADMINISTRATIVE AGENT HEREUNDER OR UNDER THE NOTE SHALL BE
DISBURSED RATABLY TO THE LENDERS ON THE FIRST BUSINESS DAY IMMEDIATELY FOLLOWING
THE DATE ADMINISTRATIVE AGENT RECEIVES SUCH AMOUNT AND IN ACCORDANCE WITH THE
PROVISIONS OF THIS LOAN AGREEMENT.  ALL PAYMENTS UNDER THE LOAN DOCUMENTS SHALL
BE MADE (I) WITHOUT SETOFF, COUNTERCLAIM OR CONDITION AND (II) FREE AND CLEAR
OF, AND WITHOUT DEDUCTION FOR OR ON ACCOUNT OF, ANY INDEMNIFIED TAXES; PROVIDED
THAT IF THE BORROWER IS REQUIRED BY APPLICABLE LAW TO MAKE ANY

 

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DEDUCTION OR WITHHOLDING ON ACCOUNT OF ANY INDEMNIFIED TAXES FROM ANY PAYMENT
DUE UNDER THIS LOAN AGREEMENT, THEN:  (A) BORROWER SHALL NOTIFY ADMINISTRATIVE
AGENT PROMPTLY AS SOON AS IT BECOMES AWARE OF SUCH REQUIREMENT AND SHALL REMIT
PROMPTLY THE AMOUNT OF SUCH TAXES TO THE APPROPRIATE TAXATION AUTHORITY, AND IN
ANY EVENT PRIOR TO THE DATE ON WHICH PENALTIES ATTACH THERETO; AND (B) SUCH
PAYMENT SHALL BE INCREASED BY SUCH AMOUNT AS MAY BE NECESSARY TO ENSURE THAT
ADMINISTRATIVE AGENT RECEIVES A NET AMOUNT, AFTER DEDUCTION OF SUCH INDEMNIFIED
TAXES, EQUAL TO THE FULL AMOUNT WHICH ADMINISTRATIVE AGENT WOULD HAVE RECEIVED
HAD SUCH PAYMENT NOT BEEN SUBJECT TO SUCH DEDUCTION OR WITHHOLDING OF
INDEMNIFIED TAXES.  IN ADDITION, BORROWER AGREES TO PAY TO THE RELEVANT
GOVERNMENTAL AGENCY IN ACCORDANCE WITH APPLICABLE LAW ANY PRESENT OR FUTURE
STAMP OR DOCUMENTARY TAXES OR ANY OTHER EXCISE OR PROPERTY TAXES, CHARGES OR
SIMILAR LEVIES THAT ARISE FROM ANY PAYMENT MADE HEREUNDER OR FROM THE EXECUTION,
DELIVERY OR REGISTRATION OF, OR OTHERWISE WITH RESPECT TO, THIS LOAN AGREEMENT
OR THE NOTE (“OTHER TAXES”).  BORROWER SHALL DELIVER TO ADMINISTRATIVE AGENT AN
OFFICIAL RECEIPT (OR, IF AN OFFICIAL RECEIPT IS NOT AVAILABLE, SUCH OTHER
EVIDENCE OF PAYMENT AS SHALL BE REASONABLY SATISFACTORY TO ADMINISTRATIVE AGENT
OR LENDERS) IN RESPECT OF ANY OTHER TAXES PAYABLE HEREUNDER PROMPTLY AFTER
PAYMENT OF SUCH OTHER TAXES.  BORROWER SHALL INDEMNIFY ADMINISTRATIVE AGENT AND
THE LENDERS IN RESPECT OF INDEMNIFIED TAXES OR OTHER TAXES PAID BY
ADMINISTRATIVE AGENT OR ANY LENDER WHETHER OR NOT SUCH INDEMNIFIED TAXES OR
OTHER TAXES WERE CORRECTLY OR LEGALLY ASSERTED AND SHALL SUPPLY COPIES OF
APPLICABLE TAX RECEIPTS OR OTHER EVIDENCE OF PAYMENT REASONABLY SATISFACTORY TO
ADMINISTRATIVE AGENT.  SUCH INDEMNIFICATION SHALL BE PAID WITHIN TEN
(10) BUSINESS DAYS FROM THE DATE ON WHICH ADMINISTRATIVE AGENT OR LENDER MAKES
WRITTEN DEMAND THEREFOR SPECIFYING IN REASONABLE DETAIL THE NATURE AND AMOUNT OF
SUCH INDEMNIFIED TAXES OR OTHER TAXES.

 

(B)           IF ANY PAYMENT TO BE MADE BY BORROWER SHALL BECOME DUE ON A DAY
WHICH IS NOT A BUSINESS DAY, SUCH PAYMENT SHALL BE MADE ON THE NEXT SUCCEEDING
BUSINESS DAY.

 

(C)           EACH PAYMENT TO BE MADE ON A PAYMENT DATE AND ALL PREPAYMENTS, AND
OTHER PAYMENTS SHALL BE APPLIED (I) EXCEPT WHILE AN EVENT OF DEFAULT EXISTS,
FIRST TO THE PAYMENT OF ACCRUED AND UNPAID INTEREST ON THE LOAN, THEN TO THE
PAYMENT OF FEES AND EXPENSES ON THE LOAN, AND THEN TO THE PAYMENT OF PRINCIPAL
DUE UNDER THE NOTE (IN INVERSE ORDER OF MATURITY EXCEPT FOR REGULARLY SCHEDULED
PAYMENTS), AND (II) WHILE AN EVENT OF DEFAULT EXISTS, TO THE OBLIGATIONS IN SUCH
ORDER AND MANNER AS ADMINISTRATIVE AGENT AND THE LENDERS MAY ELECT.

 

(D)           BORROWER SHALL INDEMNIFY THE LENDERS AND ADMINISTRATIVE AGENT ON
DEMAND AGAINST ALL COSTS, EXPENSES, LIABILITIES AND LOSSES (INCLUDING FUNDING
LOSSES) INCURRED AS A RESULT OF OR IN CONNECTION WITH (A) ANY POSTPONEMENT OF
THE CLOSING DATE OCCURRING BECAUSE OF ONE OR MORE OF THE CONDITIONS PRECEDENT
SET FORTH IN ARTICLE II SHALL NOT HAVE BEEN SATISFIED OR WAIVED AS A RESULT OF
BORROWER’S FAILURE TO SATISFY SUCH CONDITION AND/OR (B) ANY PAYMENT OF PRINCIPAL
OF THE LOAN MADE ON A BUSINESS DAY WHICH IS NOT A PAYMENT DATE.  THE ABOVE
INDEMNITIES ARE SEPARATE AND INDEPENDENT OBLIGATIONS OF BORROWER AND APPLY
IRRESPECTIVE OF ANY INDULGENCE GRANTED BY THE LENDERS OR ADMINISTRATIVE AGENT.

 

(E)           IF ADMINISTRATIVE AGENT OR A LENDER DETERMINES, IN ITS SOLE
DISCRETION, THAT IT HAS RECEIVED A REFUND OF ANY INDEMNIFIED TAXES OR OTHER
TAXES AS TO WHICH IT HAS BEEN INDEMNIFIED BY THE BORROWER OR WITH RESPECT TO
WHICH THE BORROWER HAS PAID ADDITIONAL

 

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AMOUNTS PURSUANT TO THIS SECTION 2.5, IT SHALL PAY OVER SUCH REFUND TO THE
BORROWER (BUT ONLY TO THE EXTENT OF INDEMNITY PAYMENTS MADE, OR ADDITIONAL
AMOUNTS PAID, BY THE BORROWER UNDER THIS SECTION 2.5 WITH RESPECT TO THE
INDEMNIFIED TAXES OR OTHER TAXES GIVING RISE TO SUCH REFUND), NET OF ALL
OUT-OF-POCKET EXPENSES OF ADMINISTRATIVE AGENT OR SUCH LENDER AND WITHOUT
INTEREST (OTHER THAN ANY INTEREST PAID BY THE RELEVANT GOVERNMENTAL AGENCY WITH
RESPECT TO SUCH REFUND); PROVIDED, THAT THE BORROWER, UPON THE REQUEST OF
ADMINISTRATIVE AGENT OR SUCH LENDER, AGREES TO REPAY THE AMOUNT PAID OVER TO THE
BORROWER TO ADMINISTRATIVE AGENT OR SUCH LENDER IN THE EVENT ADMINISTRATIVE
AGENT OR SUCH LENDER IS REQUIRED TO REPAY SUCH REFUND TO SUCH GOVERNMENTAL
AGENCY. THIS SECTION SHALL NOT BE CONSTRUED TO REQUIRE 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 BORROWER OR ANY OTHER PERSON.

 

(F)            IF THE BORROWER IS REQUIRED TO INDEMNIFY OR PAY ANY ADDITIONAL
AMOUNT TO ADMINISTRATIVE AGENT, ANY LENDER, OR TO ANY GOVERNMENTAL AGENCY FOR
THE ACCOUNT OF ANY LENDER, PURSUANT TO THIS SECTION 2.5, THEN THE BORROWER MAY,
AT ITS SOLE EXPENSE AND EFFORT, UPON NOTICE TO SUCH LENDER AND ADMINISTRATIVE
AGENT, REQUIRE SUCH LENDER TO ASSIGN AND DELEGATE, WITHOUT RECOURSE, ALL OF ITS
INTERESTS, RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT TO AN ELIGIBLE ASSIGNEE
THAT SHALL ASSUME SUCH OBLIGATIONS (WHICH ASSIGNEE MAY BE ANOTHER LENDER, IF A
LENDER ACCEPTS SUCH ASSIGNMENT) PROVIDED THAT SUCH ASSIGNMENT WILL RESULT IN A
REDUCTION IN SUCH PAYMENTS THEREAFTER.

 

SECTION 2.6             CONDITIONS OF LENDER’S INITIAL OBLIGATION.  THE CLOSING
DATE AND LENDERS’ OBLIGATION TO MAKE ADVANCES UNDER THE LOAN ON AND AFTER THE
CLOSING DATE PURSUANT TO THIS SECTION 2.6 ARE SUBJECT TO THE PRIOR FULFILLMENT
OR WAIVER BY ADMINISTRATIVE AGENT AND EACH LENDER OF EACH OF THE FOLLOWING
CONDITIONS:  (A) ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A WRITTEN REQUEST FROM
BORROWER THAT AN ADVANCE UNDER THE LOAN BE FUNDED IN ACCORDANCE WITH THE TERMS
HEREOF, TOGETHER WITH A WRITTEN DIRECTION FROM BORROWER AS TO THE METHOD OF
PAYMENT AND PAYEE(S) OF THE PROCEEDS OF SUCH ADVANCE UNDER THE LOAN, WHICH
REQUEST AND DIRECTION SHALL HAVE BEEN RECEIVED BY ADMINISTRATIVE AGENT NOT LESS
THAN TWO (2) BUSINESS DAYS PRIOR TO ANY REQUESTED FUNDING DATE;
(B) ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A COPY OF INVOICES, BILLS OF SALE,
PAYOFF LETTERS OR OTHER APPLICABLE EVIDENCE REASONABLY SATISFACTORY TO IT THAT
THE PROCEEDS OF THE LOAN WILL SATISFY OR FULFILL THE LOAN PURPOSE; (C) THE
COMMITMENT EXPIRATION DATE SHALL NOT THEN HAVE OCCURRED; (D) DELIVERY OF THE
LETTER OF CREDIT TO ADMINISTRATIVE AGENT; (E) THE AGGREGATE PRINCIPAL AMOUNT OF
ALL ADVANCES UNDER THE LOAN PURSUANT TO THIS SECTION 2.6 SHALL NOT EXCEED THE
FACE AMOUNT OF THE LETTER OF CREDIT (I.E. $19,000,000); AND (F) EACH OF THE
GENERAL FUNDING CONDITIONS, AS MAY BE APPLICABLE, SHALL THEN HAVE BEEN MET OR
SATISFIED TO THE REASONABLE SATISFACTION OF ADMINISTRATIVE AGENT AND EACH
LENDER.

 

SECTION 2.7                                      CONDITIONS PRECEDENT TO
SUBSEQUENT LOAN ADVANCES.

 

(A)           FIRST THREE OPERATING RIGS.  LENDERS’ OBLIGATION TO MAKE ANY LOAN
ADVANCE AGAINST THE FIRST THREE OPERATING RIGS OR ANCILLARY SUPPORT EQUIPMENT
PURSUANT TO THIS SECTION 2.7(A) IS IN EACH CASE SUBJECT TO THE PRIOR FULFILLMENT
OR WAIVER BY ADMINISTRATIVE AGENT AND MAJORITY LENDERS OF EACH OF THE FOLLOWING
CONDITIONS:  (A) ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A WRITTEN REQUEST FROM
BORROWER THAT AN ADVANCE BE FUNDED IN ACCORDANCE WITH THE TERMS HEREOF, TOGETHER
WITH A WRITTEN DIRECTION FROM BORROWER AS TO THE METHOD OF PAYMENT AND
PAYEE(S) OF THE PROCEEDS OF SUCH ADVANCE, WHICH REQUEST AND DIRECTION SHALL HAVE
BEEN RECEIVED BY ADMINISTRATIVE AGENT

 

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NOT LESS THAN THREE (3) BUSINESS DAYS PRIOR TO ANY REQUESTED FUNDING DATE AND
SHALL IDENTIFY THE RIGS INCLUDED IN ESTABLISHING THE NET OLV OF THE OPERATING
RIG COLLATERAL; (B) THE COMMITMENT EXPIRATION DATE SHALL NOT THEN HAVE OCCURRED;
(C) EACH OF THE GENERAL FUNDING CONDITIONS AS MAY BE APPLICABLE SHALL THEN HAVE
BEEN MET OR SATISFIED TO THE REASONABLE SATISFACTION OF ADMINISTRATIVE AGENT;
(D) WITH RESPECT TO ANCILLARY SUPPORT EQUIPMENT OR OPERATING RIGS FOR WHICH AN
ADVANCE IS REQUESTED (I) WITH RESPECT TO THE FIRST THREE OPERATING RIGS SELECTED
BY BORROWER, THE AMOUNT OF THE ADVANCE SHALL NOT EXCEED ONE HUNDRED PERCENT
(100%) OF THE NET OLV OF SUCH OPERATING RIG AND WITH RESPECT TO ANCILLARY
SUPPORT EQUIPMENT, THE AMOUNT OF SUCH ADVANCE SHALL NOT EXCEED ONE HUNDRED
PERCENT (100%) OF THE NET OLV OF ANCILLARY SUPPORT EQUIPMENT PURCHASED IN THE
UNITED STATES, (II) SUCH RIG SHALL BE AN OPERATING RIG, AND (III) ADMINISTRATIVE
AGENT SHALL HAVE RECEIVED SUCH APPRAISALS OR RE-APPRAISALS OF THE COLLATERAL
FROM VALUATION SOURCES REASONABLY ACCEPTABLE TO IT AS IT MAY REQUIRE AND SHALL
HAVE RECEIVED EVIDENCE REASONABLY SATISFACTORY TO IT THAT BORROWER OWNS, OR
AFTER GIVING EFFECT TO THE APPLICATION OF THE PROCEEDS OF THE REQUESTED ADVANCE,
WILL OWN SUCH RIG, FREE AND CLEAR OF ANY LIENS OTHER THAN THE PERMITTED LIENS;
AND (E) AFTER GIVING EFFECT TO THE REQUESTED ADVANCE, THE AGGREGATE AMOUNT
OUTSTANDING ON THE LOAN SHALL NOT EXCEED ONE HUNDRED PERCENT (100%) OF THE NET
OLV OF THE OPERATING RIG COLLATERAL, PLUS ONE HUNDRED PERCENT (100%) OF THE NET
OLV OF ANCILLARY SUPPORT EQUIPMENT PURCHASED IN THE UNITED STATES, PLUS THE FACE
AMOUNT OF THE LETTER OF CREDIT (I.E., $19,000,000).

 

(B)           OTHER OPERATING RIGS.  LENDERS’ OBLIGATION TO MAKE ANY LOAN
ADVANCE AFTER ADVANCES AGAINST THE FIRST THREE OPERATING RIGS IS IN EACH CASE
SUBJECT TO THE PRIOR FULFILLMENT OR WAIVER BY ADMINISTRATIVE AGENT AND MAJORITY
LENDERS OF EACH OF THE FOLLOWING CONDITIONS:  (A) ADMINISTRATIVE AGENT SHALL
HAVE RECEIVED A WRITTEN REQUEST FROM BORROWER THAT AN ADVANCE BE FUNDED IN
ACCORDANCE WITH THE TERMS HEREOF, TOGETHER WITH A WRITTEN DIRECTION FROM
BORROWER AS TO THE METHOD OF PAYMENT AND PAYEE(S) OF THE PROCEEDS OF SUCH
ADVANCE, WHICH REQUEST AND DIRECTION SHALL HAVE BEEN RECEIVED BY ADMINISTRATIVE
AGENT NOT LESS THAN THREE (3) BUSINESS DAYS PRIOR TO ANY REQUESTED FUNDING DATE
AND SHALL IDENTIFY THE RIGS INCLUDED IN ESTABLISHING THE NET OLV OF THE
OPERATING RIG COLLATERAL; (B) THE COMMITMENT EXPIRATION DATE SHALL NOT THEN HAVE
OCCURRED; (C) EACH OF THE GENERAL FUNDING CONDITIONS AS MAY BE APPLICABLE SHALL
THEN HAVE BEEN MET OR SATISFIED TO THE REASONABLE SATISFACTION OF ADMINISTRATIVE
AGENT; AND (D) WITH RESPECT TO EACH OPERATING RIG IN RESPECT OF WHICH AN ADVANCE
IS REQUESTED (I) SUCH RIG SHALL NOT HAVE BEEN COVERED BY ANY ADVANCE UNDER
SECTION 2.6 OR SECTION 2.7(A), (II) THE AMOUNT OF THE ADVANCE SHALL NOT EXCEED
SEVENTY FIVE PERCENT (75%) OF THE NET OLV OF SUCH OPERATING RIG, (III) SUCH RIG
SHALL BE AN OPERATING RIG, AND (IV) ADMINISTRATIVE AGENT SHALL HAVE RECEIVED
SUCH APPRAISALS OR RE-APPRAISALS OF THE COLLATERAL FROM VALUATION SOURCES
REASONABLY ACCEPTABLE TO IT AS IT MAY REQUIRE AND SHALL HAVE RECEIVED EVIDENCE
REASONABLY SATISFACTORY TO IT THAT BORROWER OWNS, OR AFTER GIVING EFFECT TO THE
APPLICATION OF THE PROCEEDS OF THE REQUESTED ADVANCE, WILL OWN SUCH RIG, FREE
AND CLEAR OF ANY LIENS OTHER THAN THE PERMITTED LIENS.

 

SECTION 2.8             USE OF LOAN PROCEEDS.  THE PROCEEDS OF THE LOAN SHALL BE
USED BY BORROWER SOLELY FOR A LOAN PURPOSE, OR, WITH THE PRIOR WRITTEN CONSENT
OF ADMINISTRATIVE AGENT AND MAJORITY LENDERS, WHICH CONSENT SHALL NOT BE
UNREASONABLY WITHHELD, CONDITIONED OR DELAYED, FOR OTHER LAWFUL BUSINESS
PURPOSES OF BORROWER NOT PROHIBITED HEREBY. BORROWER AGREES THAT UNDER NO
CIRCUMSTANCES WILL THE PROCEEDS OF THE LOAN BE USED: (A) FOR PERSONAL, FAMILY OR
HOUSEHOLD PURPOSES OF ANY PERSON WHATSOEVER, OR (B) TO PURCHASE, CARRY OR TRADE
IN SECURITIES, OR

 

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REPAY DEBT INCURRED TO PURCHASE, CARRY OR TRADE IN SECURITIES, OR (C) TO PAY ANY
AMOUNT TO MERRILL LYNCH AND CO., INC. OR ANY OF ITS SUBSIDIARIES, OTHER THAN
MERRILL LYNCH BANK USA, MERRILL LYNCH BANK & TRUST CO. OR ANY SUBSIDIARY OF
EITHER OF THEM (INCLUDING ADMINISTRATIVE AGENT AND MERRILL LYNCH CREDIT
CORPORATION).

 

SECTION 2.9             FEES.  IN CONSIDERATION OF THE AGREEMENT BY LENDERS TO
EXTEND THE LOAN TO BORROWER IN ACCORDANCE WITH AND SUBJECT TO THE TERMS HEREOF,
BORROWER HAS HERETOFORE PAID THE FACILITY FEE TO ADMINISTRATIVE AGENT FOR THE
BENEFIT OF LENDERS. BORROWER ACKNOWLEDGES AND AGREES THAT THE FACILITY FEE HAS
BEEN FULLY EARNED BY LENDERS, AND THAT IT WILL NOT UNDER ANY CIRCUMSTANCES BE
REFUNDABLE.

 

SECTION 2.10           VOLUNTARY PREPAYMENT.

 

(A)           ON OR AFTER THE DATE THAT IS TWO (2) YEARS AFTER THE CLOSING DATE,
BORROWER MAY PREPAY IN FULL OR IN PART THE OUTSTANDING PRINCIPAL AMOUNT OF THE
LOAN ON ANY PAYMENT DATE AFTER GIVING AT LEAST THREE (3) BUSINESS DAYS PRIOR
NOTICE OF SUCH PREPAYMENT AND PAYMENT TO THE LENDER OF ACCRUED AND UNPAID
INTEREST THEREON AND THE PREPAYMENT PREMIUM REFERRED TO BELOW, IF ANY.  ANY
NOTICE OF PREPAYMENT HEREUNDER SHALL BE IRREVOCABLE.

 

(B)           THE LENDERS SHALL APPLY PAYMENTS RECEIVED PURSUANT TO THIS
SECTION 2.10 IN ACCORDANCE WITH SECTION 2.5(C) ABOVE.

 

(C)           PREPAYMENTS MADE UNDER THIS SECTION 2.10 SHALL INCLUDE A
“PREPAYMENT PREMIUM” AS FOLLOWS:

 

(I)            IF MADE ON OR AFTER THE SECOND ANNIVERSARY BUT ON OR PRIOR TO THE
THIRD ANNIVERSARY OF THE CLOSING DATE, ONE AND ONE-HALF PERCENT (1.5%) OF THE
AGGREGATE PRINCIPAL AMOUNT PREPAID; PROVIDED, THAT BORROWER MAY MAKE A ONE-TIME
PREPAYMENT IN AN AMOUNT UP TO $10,000,000 IN PRINCIPAL WITHOUT A PREPAYMENT
PREMIUM ON EITHER OR EACH OF (A) THE SECOND ANNIVERSARY DATE OF THE CLOSING
DATE, OR (B) THE THIRD ANNIVERSARY DATE OF THE CLOSING DATE;

 

(II)           IF MADE AFTER THE THIRD ANNIVERSARY OF THE CLOSING DATE, BUT ON
OR BEFORE THE FOURTH ANNIVERSARY OF THE CLOSING DATE, ONE PERCENT (1%) OF THE
AGGREGATE PRINCIPAL AMOUNT PREPAID; AND

 

(III)          IF MADE AFTER THE FOURTH ANNIVERSARY OF THE CLOSING DATE,
ONE-HALF OF ONE PERCENT (0.5%) OF THE AGGREGATE PRINCIPAL AMOUNT PREPAID.

 

SECTION 2.11           SHARING OF PAYMENTS, ETC.  BORROWER AGREES THAT, IN
ADDITION TO (AND WITHOUT LIMITATION OF) ANY RIGHT OF SET-OFF, BANKERS’ LIEN OR
COUNTERCLAIM A LENDER MAY OTHERWISE HAVE, EACH LENDER SHALL BE ENTITLED, AT ITS
OPTION AFTER AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING TO OFFSET
BALANCES HELD BY IT FOR THE ACCOUNT OF BORROWER AT ANY OF ITS OFFICES AGAINST
ANY PRINCIPAL OF OR INTEREST ON ANY PORTION OF THE LOAN ATTRIBUTABLE TO SUCH
LENDER HEREUNDER OR ANY OTHER OBLIGATION OF BORROWER HEREUNDER WHICH IS NOT PAID
(REGARDLESS OF WHETHER SUCH BALANCES ARE THEN DUE TO BORROWER), IN WHICH CASE IT
SHALL PROMPTLY NOTIFY BORROWER AND ADMINISTRATIVE AGENT THEREOF, PROVIDED THAT
SUCH LENDER’S FAILURE TO GIVE SUCH NOTICE SHALL NOT AFFECT THE VALIDITY
THEREOF.  IF A LENDER SHALL OBTAIN PAYMENT OF ANY PRINCIPAL OF OR INTEREST ON
ANY PORTION OF THE LOAN ATTRIBUTABLE TO IT UNDER THIS LOAN AGREEMENT OR OTHER
OBLIGATION THEN DUE

 

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HEREUNDER TO SUCH LENDER, THROUGH THE EXERCISE OF ANY RIGHT OF SET-OFF OR LIEN
GRANTED UNDER SECTION 3.7(M) BELOW, BANKERS’ LIEN, COUNTERCLAIM OR SIMILAR
RIGHT, OR OTHERWISE, IT SHALL PROMPTLY PURCHASE FROM THE OTHER LENDERS
PARTICIPATIONS IN THE LOAN ATTRIBUTABLE TO IT, OR THE OTHER OBLIGATIONS OF
BORROWER HEREUNDER OF, THE OTHER LENDERS IN SUCH AMOUNTS, AND MAKE SUCH OTHER
ADJUSTMENTS FROM TIME TO TIME AS SHALL BE EQUITABLE TO THE END THAT ALL THE
LENDERS SHALL SHARE THE BENEFIT OF SUCH PAYMENT (NET OF ANY EXPENSES WHICH MAY
BE INCURRED BY SUCH LENDER IN OBTAINING OR PRESERVING SUCH BENEFIT) PRO RATA IN
ACCORDANCE WITH THEIR RESPECTIVE PORTIONS OF THE LOAN.  TO SUCH END, ALL THE
LENDERS SHALL MAKE APPROPRIATE ADJUSTMENTS AMONG THEMSELVES (BY THE RESALE OF
PARTICIPATIONS SOLD OR OTHERWISE) IF SUCH PAYMENT IS RESCINDED OR MUST OTHERWISE
BE RESTORED.  BORROWER AGREES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, THAT ANY LENDER SO PURCHASING A PARTICIPATION IN THE LOAN
MAY EXERCISE ALL RIGHTS OF SET-OFF, BANKERS’ LIEN, COUNTERCLAIM OR SIMILAR
RIGHTS WITH RESPECT TO SUCH PARTICIPATION AS FULLY AS IF SUCH LENDER WERE A
DIRECT HOLDER OF THE LOAN OR OTHER OBLIGATIONS IN THE AMOUNT OF SUCH
PARTICIPATION.  NOTHING CONTAINED HEREIN SHALL REQUIRE ANY LENDER TO EXERCISE
ANY SUCH RIGHT OR SHALL AFFECT THE RIGHT OF ANY LENDER TO EXERCISE, AND RETAIN
THE BENEFITS OF EXERCISING, ANY SUCH RIGHT WITH RESPECT TO ANY OTHER
INDEBTEDNESS OR OBLIGATIONS OF BORROWER TO SUCH LENDER.

 

SECTION 2.12           STATUS OF LENDERS.  (A) ANY FOREIGN LENDER THAT IS
ENTITLED TO AN EXEMPTION FROM OR REDUCTION OF WITHHOLDING TAX UNDER THE LAW OF
THE JURISDICTION IN WHICH BORROWER IS RESIDENT FOR TAX PURPOSES, OR ANY TREATY
TO WHICH SUCH JURISDICTION IS A PARTY, WITH RESPECT TO PAYMENTS HEREUNDER OR
UNDER ANY OTHER LOAN DOCUMENT SHALL DELIVER TO BORROWER (WITH A COPY TO
ADMINISTRATIVE AGENT), AT THE TIME OR TIMES PRESCRIBED BY APPLICABLE LAW OR
REASONABLY REQUESTED BY BORROWER OR ADMINISTRATIVE AGENT, SUCH PROPERLY
COMPLETED AND EXECUTED DOCUMENTATION PRESCRIBED BY APPLICABLE LAW AS WILL PERMIT
SUCH PAYMENTS TO BE MADE WITHOUT WITHHOLDING OR AT A REDUCED RATE OF
WITHHOLDING.  IN ADDITION, ANY LENDER, IF REQUESTED BY BORROWER OR
ADMINISTRATIVE AGENT, SHALL DELIVER SUCH OTHER DOCUMENTATION PRESCRIBED BY
APPLICABLE LAW OR REASONABLY REQUESTED BY BORROWER OR ADMINISTRATIVE AGENT AS
WILL ENABLE BORROWER OR ADMINISTRATIVE AGENT TO DETERMINE WHETHER OR NOT SUCH
LENDER IS SUBJECT TO BACKUP WITHHOLDING OR INFORMATION REPORTING REQUIREMENTS.

 

(B)           WITHOUT LIMITING THE GENERALITY OF THE FOREGOING CLAUSE (A), IN
THE EVENT THAT BORROWER IS RESIDENT FOR TAX PURPOSES IN THE UNITED STATES, ANY
FOREIGN LENDER SHALL DELIVER TO BORROWER AND ADMINISTRATIVE AGENT (IN SUCH
NUMBER OF COPIES AS SHALL BE REQUESTED BY THE RECIPIENT) ON OR PRIOR TO THE DATE
ON WHICH SUCH FOREIGN LENDER BECOMES A LENDER UNDER THIS AGREEMENT (AND FROM
TIME TO TIME THEREAFTER UPON THE REQUEST OF BORROWER OR ADMINISTRATIVE AGENT,
BUT ONLY IF SUCH FOREIGN LENDER IS LEGALLY ENTITLED TO DO SO), WHICHEVER OF THE
FOLLOWING IS APPLICABLE:

 

(I)            DULY COMPLETED COPIES OF INTERNAL REVENUE SERVICE FORM W 8BEN
CLAIMING ELIGIBILITY FOR BENEFITS OF AN INCOME TAX TREATY TO WHICH THE UNITED
STATES IS A PARTY,

 

(II)           DULY COMPLETED COPIES OF INTERNAL REVENUE SERVICE FORM W 8ECI,

 

(III)          IN THE CASE OF A FOREIGN LENDER CLAIMING THE BENEFITS OF THE
EXEMPTION FOR PORTFOLIO INTEREST UNDER SECTION 881(C) OF THE CODE, (X) A
CERTIFICATE TO THE EFFECT THAT SUCH FOREIGN LENDER IS NOT (A) A “BANK” WITHIN
THE MEANING OF SECTION 881(C)(3)(A) OF THE CODE, (B) A “10 PERCENT SHAREHOLDER”
OF BORROWER WITHIN THE MEANING OF SECTION 881(C)(3)(B) OF THE CODE, OR (C) A
“CONTROLLED

 

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FOREIGN CORPORATION” DESCRIBED IN SECTION 871(H) OR 881(C)(3)(C) OF THE CODE AND
(Y) DULY COMPLETED COPIES OF INTERNAL REVENUE SERVICE FORM W 8BEN, OR

 

(IV)          ANY OTHER FORM PRESCRIBED BY APPLICABLE LAW AS A BASIS FOR
CLAIMING EXEMPTION FROM OR A REDUCTION IN UNITED STATES FEDERAL WITHHOLDING TAX
DULY COMPLETED TOGETHER WITH SUCH SUPPLEMENTARY DOCUMENTATION AS MAY BE
PRESCRIBED BY APPLICABLE LAW TO PERMIT BORROWER TO DETERMINE THE WITHHOLDING OR
DEDUCTION REQUIRED TO BE MADE.

 

ARTICLE III.  GENERAL PROVISIONS

 

SECTION 3.1             REPRESENTATIONS AND WARRANTIES.  BORROWER REPRESENTS AND
WARRANTS TO ADMINISTRATIVE AGENT AND EACH LENDER THAT:

 

(A)           ORGANIZATION AND EXISTENCE.  BORROWER IS A LIMITED PARTNERSHIP,
DULY ORGANIZED AND VALIDLY EXISTING IN GOOD STANDING UNDER THE LAWS OF ITS
JURISDICTION OF ORGANIZATION, WHICH IS TEXAS; THE ORGANIZATIONAL NUMBER ASSIGNED
TO BORROWER BY SUCH JURISDICTION IS 800643753; BORROWER IS QUALIFIED TO DO
BUSINESS AND IN GOOD STANDING IN EACH OTHER JURISDICTION WHERE THE NATURE OF ITS
BUSINESS OR THE PROPERTY OWNED BY IT MAKE SUCH QUALIFICATION NECESSARY EXCEPT
WHERE THE FAILURE TO SO QUALIFY WOULD NOT REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT; AND, WHERE APPLICABLE, EACH CREDIT PARTY IS DULY
ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE STATE OF
ITS FORMATION AND IS QUALIFIED TO DO BUSINESS AND IN GOOD STANDING IN EACH OTHER
JURISDICTION WHERE THE NATURE OF ITS BUSINESS OR THE PROPERTY OWNED BY IT MAKE
SUCH QUALIFICATION NECESSARY EXCEPT WHERE THE FAILURE TO SO QUALIFY WOULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

(B)           EXECUTION, DELIVERY AND PERFORMANCE.  EACH CREDIT PARTY HAS THE
REQUISITE ORGANIZATIONAL POWER AND AUTHORITY TO ENTER INTO AND PERFORM ITS
OBLIGATIONS UNDER THE LOAN DOCUMENTS TO WHICH IT IS A PARTY.  BORROWER HOLDS ALL
NECESSARY PERMITS, LICENSES, CERTIFICATES OF OCCUPANCY AND OTHER GOVERNMENTAL
AUTHORIZATIONS AND APPROVALS REQUIRED IN ORDER TO OWN OR OPERATE BORROWER’S
BUSINESS EXCEPT WHERE THE FAILURE TO HOLD ANY OF THE FOREGOING WOULD NOT
REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT OR SUBJECT THE
COLLATERAL TO A LIEN, SEIZURE OR FORFEITURE.  THE EXECUTION, DELIVERY AND
PERFORMANCE BY BORROWER OF THIS LOAN AGREEMENT AND BY EACH OF THE OTHER CREDIT
PARTIES OF SUCH OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY:  (I) HAVE
BEEN DULY AUTHORIZED BY ALL REQUISITE ORGANIZATIONAL ACTION, (II) DO NOT AND
WILL NOT VIOLATE OR CONFLICT WITH ANY LAW, ORDER OR OTHER GOVERNMENTAL
REQUIREMENT, (III) DO NOT AND WILL NOT VIOLATE OR CONFLICT WITH ANY OF THE
AGREEMENTS, INSTRUMENTS OR DOCUMENTS WHICH FORMED OR GOVERN ANY OF THE CREDIT
PARTIES, AND (IV) DO NOT AND WILL NOT BREACH OR VIOLATE ANY OF THE PROVISIONS
OF, AND WILL NOT RESULT IN A DEFAULT BY ANY OF THE CREDIT PARTIES UNDER, ANY
OTHER AGREEMENT, INSTRUMENT OR DOCUMENT TO WHICH IT IS A PARTY OR IS SUBJECT.

 

(C)           NOTICES AND APPROVALS.  EXCEPT AS MAY HAVE BEEN GIVEN OR OBTAINED,
OR WILL BE MADE IN CONNECTION WITH THE PERFECTION OF SECURITY INTERESTS GRANTED
BY BORROWER IN THE COLLATERAL, NO NOTICE TO OR CONSENT OR APPROVAL OF ANY
GOVERNMENTAL AGENCY OR OTHER THIRD PARTY WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, ANY OTHER CREDITOR) IS REQUIRED IN CONNECTION WITH THE EXECUTION,
DELIVERY OR PERFORMANCE BY ANY CREDIT PARTY OF THIS LOAN AGREEMENT, THE NOTE AND
THE OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY.

 

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(D)                                 ENFORCEABILITY.  THE LOAN DOCUMENTS TO WHICH
ANY CREDIT PARTY IS A PARTY ARE THE RESPECTIVE LEGAL, VALID AND BINDING
OBLIGATIONS OF SUCH CREDIT PARTY, ENFORCEABLE AGAINST IT OR THEM, AS THE CASE
MAY BE, IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, EXCEPT AS ENFORCEABILITY MAY
BE LIMITED BY BANKRUPTCY AND OTHER SIMILAR LAWS AFFECTING THE RIGHTS OF
CREDITORS GENERALLY OR BY GENERAL PRINCIPLES OF EQUITY.

 

(E)                                  COLLATERAL.  EXCEPT FOR PERMITTED LIENS AND
PRIORITIES AFFORDED TO ANY PERMITTED LIEN: (I) BORROWER HAS GOOD AND MARKETABLE
TITLE TO THE COLLATERAL, (II) NONE OF THE COLLATERAL IS SUBJECT TO ANY LIEN,
ENCUMBRANCE OR SECURITY INTEREST, AND (III) UPON THE FILING OF ALL UNIFORM
COMMERCIAL CODE FINANCING STATEMENTS AUTHENTICATED OR OTHERWISE AUTHORIZED BY
BORROWER WITH RESPECT TO THE COLLATERAL IN THE APPROPRIATE
JURISDICTION(S) AND/OR THE COMPLETION OF ANY OTHER ACTION REQUIRED BY APPLICABLE
LAW TO PERFECT ITS LIENS AND SECURITY INTERESTS, ADMINISTRATIVE AGENT WILL HAVE
VALID AND PERFECTED FIRST LIENS AND SECURITY INTERESTS UPON ALL OF THE
COLLATERAL.  WITHOUT LIMITING THE FOREGOING:

 

(A)                              BORROWER AGREES THAT IT WILL:  (I) NOT CHANGE
THE STATE WHERE IT IS ORGANIZED; (II) NOT CHANGE ITS NAME; AND (III) NOT CHANGE
ITS TYPE OF ORGANIZATION, IN EACH CASE, WITHOUT PROVIDING ADMINISTRATIVE AGENT
WITH THIRTY (30) DAYS PRIOR WRITTEN NOTICE.

 

(B)                                THE TANGIBLE COLLATERAL IS AND WILL REMAIN
TANGIBLE PERSONAL PROPERTY AND IS NOT AND SHALL NOT CONSTITUTE REAL PROPERTY
FIXTURES.  THE TANGIBLE COLLATERAL IS REMOVABLE FROM AND IS NOT ESSENTIAL TO THE
PREMISES AT WHICH THE TANGIBLE COLLATERAL IS LOCATED.  EXCEPT AS NOTED ON
EXHIBIT A ATTACHED HERETO, THE TANGIBLE COLLATERAL IS CAPABLE OF SATISFYING ITS
INTENDED BUSINESS FUNCTION AND NO ADDITIONAL PROPERTY IS REQUIRED TO BE ADDED TO
THE TANGIBLE COLLATERAL IN ORDER TO SATISFY SUCH BUSINESS FUNCTION.

 

(C)                                IF ANY OF THE COLLATERAL IS, AT ANY TIME, IN
THE POSSESSION OF A BAILEE, BORROWER SHALL PROMPTLY NOTIFY ADMINISTRATIVE AGENT
AND SHALL ASSIST ADMINISTRATIVE AGENT IN OBTAINING AN ACKNOWLEDGMENT FROM THE
BAILEE THAT IS HOLDING THE COLLATERAL FOR THE BENEFIT OF ADMINISTRATIVE AGENT
AND LENDERS.

 

(D)                               ALL OF THE TANGIBLE COLLATERAL IS AND WILL BE
KEPT AT THE BASE LOCATION EXCEPT WHEN UNDER CONTRACT, MOBILIZING, OR
DE-MOBILIZING.

 

(E)                                 NONE OF THE COLLATERAL WILL BE REMOVED FROM
THE CONTINENTAL UNITED STATES.

 

(F)                                 WITHIN THE PAST SIX YEARS, BORROWER HAS NOT
CHANGED ITS NAME, DONE BUSINESS UNDER ANY OTHER NAME, OR MERGED OR BEEN THE
SURVIVING ENTITY OF ANY MERGER, EXCEPT AS DISCLOSED IN WRITING TO ADMINISTRATIVE
AGENT PRIOR TO THE CLOSING DATE.

 

(F)                                    FINANCIAL STATEMENTS; ETC.  EXCEPT AS
EXPRESSLY SET FORTH IN BORROWER’S FINANCIAL STATEMENTS, ALL FINANCIAL STATEMENTS
OF BORROWER AND CWEI FURNISHED TO ADMINISTRATIVE AGENT HAVE BEEN PREPARED IN
CONFORMITY WITH GAAP, CONSISTENTLY APPLIED, AND PRESENT FAIRLY, IN ALL MATERIAL
RESPECTS, THE FINANCIAL CONDITION OF IT AS AT SUCH DATES AND THE RESULTS OF ITS
OPERATIONS FOR THE PERIODS THEN ENDED (SUBJECT, IN THE CASE OF INTERIM UNAUDITED
FINANCIAL STATEMENTS, TO NORMAL YEAR-END ADJUSTMENTS AND THE INCLUSION

 

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OF FOOTNOTES); AND SINCE THE MOST RECENT DATE COVERED BY SUCH FINANCIAL
STATEMENTS, THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN ANY SUCH FINANCIAL
CONDITION OR OPERATION.  ALL WRITTEN INFORMATION THAT HAS BEEN OR WILL HEREAFTER
BE MADE AVAILABLE TO ADMINISTRATIVE AGENT IS, AND WILL BE, AS OF THE DATES ON
WHICH SUCH INFORMATION WAS PROVIDED OR RELATES, CORRECT IN ALL MATERIAL RESPECTS
AND DOES NOT, AND WILL NOT, AS OF THE DATES ON WHICH SUCH INFORMATION WAS OR IS
TO BE PROVIDED OR TO WHICH SUCH INFORMATION RELATES, CONTAIN ANY UNTRUE
STATEMENTS OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY IN
ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN NOT MISLEADING IN LIGHT OF THE
CIRCUMSTANCES UNDER WHICH SUCH STATEMENTS WERE OR ARE MADE; PROVIDED THAT, WITH
RESPECT TO PROJECTED FINANCIAL INFORMATION, BORROWER REPRESENTS ONLY THAT SUCH
INFORMATION WAS PREPARED IN GOOD FAITH BASED ON ASSUMPTIONS BELIEVED TO BE
REASONABLE AT THE TIME.

 

(G)                                 LITIGATION; COMPLIANCE WITH ALL LAWS.  NO
LITIGATION, ARBITRATION, ADMINISTRATIVE OR GOVERNMENTAL PROCEEDINGS ARE PENDING
OR, TO THE KNOWLEDGE OF BORROWER, THREATENED AGAINST ANY CREDIT PARTY, WHICH
WOULD, IF ADVERSELY DETERMINED, MATERIALLY AND ADVERSELY AFFECT (I) SUCH CREDIT
PARTY’S INTEREST IN THE COLLATERAL OR THE LIENS AND SECURITY INTERESTS OF
ADMINISTRATIVE AGENT HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS, OR (II) THE
FINANCIAL CONDITION OF SUCH CREDIT PARTY OR ITS CONTINUED OPERATIONS.  EACH
CREDIT PARTY IS IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH ALL LAWS,
REGULATIONS, REQUIREMENTS AND APPROVALS APPLICABLE TO SUCH CREDIT PARTY.

 

(H)                                 TAX RETURNS.  ALL FEDERAL, STATE AND LOCAL
TAX RETURNS, REPORTS AND STATEMENTS REQUIRED TO BE FILED BY ANY CREDIT PARTY
HAVE BEEN FILED WITH THE APPROPRIATE GOVERNMENTAL AGENCIES AND ALL TAXES DUE AND
PAYABLE BY ANY CREDIT PARTY HAVE BEEN TIMELY PAID EXCEPT (A) TAXES THAT ARE
BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND FOR WHICH SUCH
CREDIT PARTY HAS SET ASIDE ON ITS BOOKS ADEQUATE RESERVES IN ACCORDANCE WITH
GAAP OR (B) TO THE EXTENT THAT ANY SUCH FAILURE TO FILE OR PAY WILL NOT
MATERIALLY AND ADVERSELY AFFECT EITHER THE LIENS AND SECURITY INTERESTS OF
ADMINISTRATIVE AGENT HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS, THE FINANCIAL
CONDITION OF ANY CREDIT PARTY, OR ITS CONTINUED OPERATIONS.

 

(I)                                     RELATIONSHIP WITH MERRILL LYNCH. 
NEITHER BORROWER NOR ANY SHAREHOLDER OR OTHER PERSON THAT CONTROLS BORROWER IS
(I) AN EXECUTIVE OFFICER OR DIRECTOR OF MERRILL LYNCH & CO., INC. OR ANY OF ITS
SUBSIDIARIES OR AFFILIATES, OR (II) A HOLDER OF MORE THAN TEN PERCENT (10%) OF
ANY CLASS OF VOTING SECURITIES OF MERRILL LYNCH & CO., INC. OR ANY OF ITS
SUBSIDIARIES OR AFFILIATES.  FOR PURPOSES OF THIS REPRESENTATION, “CONTROL”
MEANS THE POWER TO VOTE TWENTY-FIVE PERCENT (25%) OR MORE OF ANY CLASS OF VOTING
SECURITIES; THE ABILITY TO CONTROL THE ELECTION OF A MAJORITY OF DIRECTORS; OR
THE POWER TO EXERCISE A CONTROLLING INFLUENCE OVER MANAGEMENT POLICIES.

 

(J)                                     NO DEFAULT.  NO “DEFAULT” OR “EVENT OF
DEFAULT” (EACH AS DEFINED IN THIS LOAN AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS) HAS OCCURRED AND IS CONTINUING.

 

(K)                                  NO OUTSIDE BROKER.  EXCEPT FOR EMPLOYEES OF
ADMINISTRATIVE AGENT, MERRILL LYNCH, PIERCE, FENNER & SMITH FINANCIAL CONSULTANT
(“MLPF&S”) OR ONE OF THEIR AFFILIATES OR AS DESCRIBED IN WRITING BY BORROWER TO
ADMINISTRATIVE AGENT, BORROWER HAS NOT IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED HEREBY DIRECTLY OR INDIRECTLY ENGAGED OR DEALT WITH, AND WAS NOT
INTRODUCED OR REFERRED TO ADMINISTRATIVE AGENT OR ANY LENDER BY, ANY BROKER OR
OTHER LOAN ARRANGER.

 

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(L)                                     MATERIAL ADVERSE CHANGE.  SINCE
DECEMBER 31, 2005, THERE HAS BEEN NO CHANGE WHICH WOULD REASONABLY BE EXPECTED
TO HAVE A MATERIAL ADVERSE EFFECT.

 

(M)                               ENVIRONMENTAL MATTERS.  IN THE ORDINARY COURSE
OF ITS BUSINESS, THE OFFICERS OF BORROWER CONSIDER THE EFFECT OF ENVIRONMENTAL
LAWS ON THE BUSINESS OF BORROWER, IN THE COURSE OF WHICH THEY IDENTIFY AND
EVALUATE POTENTIAL RISKS AND LIABILITIES ACCRUING TO BORROWER DUE TO
ENVIRONMENTAL LAWS.  ON THE BASIS OF THIS CONSIDERATION, BORROWER HAS CONCLUDED
THAT ENVIRONMENTAL LAWS AND ENVIRONMENTAL CLAIMS WOULD NOT REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON BORROWER AS OF THE CLOSING DATE. 
NEITHER BORROWER NOR ANY SUBSIDIARY HAS RECEIVED ANY WRITTEN NOTICE OF A
MATERIAL ENVIRONMENTAL CLAIM OR TO THE EFFECT THAT ITS OPERATIONS ARE NOT IN
MATERIAL COMPLIANCE WITH ANY OF THE REQUIREMENTS OF APPLICABLE ENVIRONMENTAL
LAWS OR ARE THE SUBJECT OF ANY FEDERAL OR STATE INVESTIGATION EVALUATING WHETHER
ANY REMEDIAL ACTION IS NEEDED TO RESPOND TO A RELEASE OF ANY TOXIC OR HAZARDOUS
WASTE OR SUBSTANCE INTO THE ENVIRONMENT, WHICH NON-COMPLIANCE OR REMEDIAL ACTION
WOULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON BORROWER.

 

(N)                                 INVESTMENT COMPANY ACT. BORROWER IS NOT AN
“INVESTMENT COMPANY” OR A COMPANY “CONTROLLED” BY AN “INVESTMENT COMPANY”,
WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED.

 

Each of the foregoing representations and warranties has been and will be relied
upon as an inducement to Lenders to make Loan advances.

 

SECTION 3.2                                      FINANCIAL AND OTHER
INFORMATION.  BORROWER SHALL FURNISH OR CAUSE TO BE FURNISHED TO ADMINISTRATIVE
AGENT DURING THE TERM OF THIS LOAN AGREEMENT ALL OF THE FOLLOWING:

 

(A)                                  ANNUAL FINANCIAL STATEMENTS.  WITHIN ONE
HUNDRED AND TWENTY (120) DAYS AFTER THE END OF EACH FISCAL YEAR OF BORROWER, A
COPY OF ITS ANNUAL AUDITED CONSOLIDATED BALANCE SHEET AND RELATED STATEMENTS OF
OPERATIONS, PARTNERS’ EQUITY AND CASH FLOWS AS OF THE END OF SUCH FISCAL YEAR.

 

(B)                                 CERTIFICATES OF COMPLIANCE.  AT THE SAME
TIMES THAT FINANCIAL STATEMENTS ARE DUE UNDER SECTION 3.3(A), A CERTIFICATE OF
COMPLIANCE, DULY EXECUTED BY THE GENERAL PARTNER OF BORROWER, IN THE FORM OF
EXHIBIT B ATTACHED HERETO, OR SUCH OTHER FORM AS REASONABLY REQUIRED BY
ADMINISTRATIVE AGENT FROM TIME TO TIME.

 

(C)                                  QUARTERLY FINANCIAL STATEMENTS.  WITHIN
SIXTY (60) DAYS AFTER THE END OF EACH OF THE FIRST THREE FISCAL QUARTERS OF EACH
FISCAL YEAR OF BORROWER, A COPY OF ITS UNAUDITED CONSOLIDATED BALANCE SHEET AND
RELATED STATEMENTS OF OPERATIONS, PARTNERS’ EQUITY AND CASH FLOWS AS OF THE END
OF SUCH FISCAL QUARTER.

 

(D)                                 OTHER INFORMATION.  SUCH OTHER INFORMATION
AS ADMINISTRATIVE AGENT MAY FROM TIME TO TIME REASONABLY REQUEST RELATING TO
BORROWER, ANY CREDIT PARTY OR THE COLLATERAL.

 

(E)                                  GENERAL AGREEMENTS WITH RESPECT TO
FINANCIAL INFORMATION.  BORROWER AGREES THAT EXCEPT AS OTHERWISE SPECIFIED
HEREIN OR OTHERWISE AGREED TO IN WRITING BY ADMINISTRATIVE AGENT: (I) ALL ANNUAL
FINANCIAL STATEMENTS REQUIRED TO BE FURNISHED BY BORROWER TO ADMINISTRATIVE
AGENT HEREUNDER WILL BE PREPARED BY EITHER THE CURRENT

 

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INDEPENDENT ACCOUNTANTS FOR BORROWER OR OTHER INDEPENDENT ACCOUNTANTS OF
RECOGNIZED STANDING REASONABLY ACCEPTABLE TO ADMINISTRATIVE AGENT, AND (II) ALL
OTHER FINANCIAL INFORMATION REQUIRED TO BE FURNISHED TO ADMINISTRATIVE AGENT
HEREUNDER WILL BE CERTIFIED AS PRESENTING FAIRLY, IN ALL MATERIAL RESPECTS, THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF BORROWER, BY THE PARTY WHO HAS
PREPARED SUCH INFORMATION, AND, IN THE CASE OF INTERNALLY PREPARED INFORMATION,
CERTIFIED AS PRESENTING FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF BORROWER, BY THE CHIEF FINANCIAL OFFICER
OF THE PERSON PROVIDING THE INFORMATION.

 

SECTION 3.3                                      OTHER COVENANTS.  BORROWER
FURTHER AGREES DURING THE TERM OF THIS LOAN AGREEMENT THAT:

 

(A)                                  FINANCIAL RECORDS; INSPECTION; COLLATERAL
AUDIT.  EACH CREDIT PARTY WILL:  (I) MAINTAIN AT ITS PRINCIPAL PLACE OF BUSINESS
COMPLETE AND ACCURATE BOOKS AND RECORDS, AND MAINTAIN ALL OF ITS FINANCIAL
RECORDS IN A MANNER CONSISTENT WITH THE FINANCIAL STATEMENTS HERETOFORE
FURNISHED TO ADMINISTRATIVE AGENT, OR PREPARED ON SUCH OTHER BASIS AS MAY BE
APPROVED IN WRITING BY ADMINISTRATIVE AGENT; AND (II) PERMIT ADMINISTRATIVE
AGENT OR ITS DULY AUTHORIZED REPRESENTATIVES, UPON REASONABLE NOTICE AND AT
REASONABLE TIMES, TO INSPECT BORROWER’S AND ITS SUBSIDIARIES’ PROPERTIES (BOTH
REAL AND PERSONAL), OPERATIONS, BOOKS AND RECORDS.  FURTHER, BORROWER AGREES
THAT ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO REQUIRE A FULL OR UPDATED
APPRAISAL OF ALL COLLATERAL, AT BORROWER’S EXPENSE, UPON REASONABLE REQUEST, IN
THE EVENT THAT THE AVERAGE UTILIZATION RATE OF THE RIGS AT SUCH TIME IN ANY
FISCAL QUARTER FALLS BELOW SEVENTY-FIVE PERCENT (75%).

 

(B)                                 TAXES.  EACH CREDIT PARTY WILL PAY WHEN DUE
ALL OF ITS RESPECTIVE TAXES, ASSESSMENTS AND OTHER GOVERNMENTAL CHARGES,
HOWSOEVER DESIGNATED, AND ALL OTHER LIABILITIES AND OBLIGATIONS, EXCEPT
(A) WHERE THE VALIDITY OR AMOUNT THEREOF IS BEING CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS AND ADEQUATE RESERVES HAVE BEEN SET ASIDE ON ITS BOOKS
IN ACCORDANCE WITH GAAP OR (B) TO THE EXTENT THAT ANY SUCH FAILURE TO FILE OR
PAY WILL NOT MATERIALLY AND ADVERSELY AFFECT EITHER THE LIENS AND SECURITY
INTERESTS OF ADMINISTRATIVE AGENT HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS,
THE FINANCIAL CONDITION OF ANY CREDIT PARTY OR ITS CONTINUED OPERATIONS.

 

(C)                                  COMPLIANCE WITH LAWS AND AGREEMENTS.  NO
CREDIT PARTY WILL VIOLATE (I) ANY LAW, REGULATION OR OTHER GOVERNMENTAL
REQUIREMENT, ANY JUDGMENT OR ORDER OF ANY COURT OR GOVERNMENTAL AGENCY; (II) ANY
AGREEMENT, INSTRUMENT OR DOCUMENT WHICH IS MATERIAL TO ITS OPERATIONS OR TO THE
OPERATION OR USE OF ANY COLLATERAL, IN EACH CASE AS CONTEMPLATED BY THE LOAN
DOCUMENTS; OR (III) ANY AGREEMENT, INSTRUMENT OR DOCUMENT TO WHICH IT IS A PARTY
OR BY WHICH IT IS BOUND, IN EACH CASE, IF ANY SUCH VIOLATION WILL MATERIALLY AND
ADVERSELY AFFECT EITHER THE LIENS AND SECURITY INTERESTS OF ADMINISTRATIVE AGENT
HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS, THE FINANCIAL CONDITION OF ANY
CREDIT PARTY, OR ITS CONTINUED OPERATIONS.

 

(D)                                 NO USE OF ADMINISTRATIVE AGENT OR LENDERS’
NAME.  NO CREDIT PARTY WILL DIRECTLY OR INDIRECTLY PUBLISH, DISCLOSE OR
OTHERWISE USE IN ANY ADVERTISING OR PROMOTIONAL MATERIAL, OR PRESS RELEASE OR
INTERVIEW, THE NAME, LOGO OR ANY TRADEMARK OF ADMINISTRATIVE AGENT, ANY LENDER,
MLPF&S, MERRILL LYNCH AND CO., INC. OR ANY OF THEIR AFFILIATES, EXCEPT AS
REQUIRED IN ANY APPLICABLE SECURITIES FILING.  ANY PRESS RELEASE MENTIONING THIS
LOAN FACILITY MUST BE (I) FACTUAL ONLY AS TO THE MAKING OF THE LOAN AND NOT HAVE
THE

 

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APPEARANCE OF AN ENDORSEMENT, AND (II) EXPRESSLY PRE-APPROVED BY ADMINISTRATIVE
AGENT’S EQUIPMENT FINANCE SENIOR TRANSACTION ATTORNEY.

 

(E)                                  NOTIFICATION BY BORROWER.  BORROWER SHALL
PROVIDE ADMINISTRATIVE AGENT WITH PROMPT WRITTEN NOTIFICATION OF: (I) ANY
DEFAULT OR EVENT OF DEFAULT; (II) ANY MATERIAL ADVERSE CHANGE IN THE BUSINESS,
FINANCIAL CONDITION OR OPERATIONS OF ANY CREDIT PARTY; (III) ANY INFORMATION
WHICH INDICATES THAT ANY FINANCIAL STATEMENTS OF ANY CREDIT PARTY FAIL IN ANY
MATERIAL RESPECT TO PRESENT FAIRLY, IN ALL MATERIAL RESPECTS, THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS PURPORTED TO BE PRESENTED IN SUCH
STATEMENTS; (IV) ANY THREATENED OR PENDING LITIGATION INVOLVING ANY CREDIT PARTY
THAT IF ADVERSELY ADJUDICATED AGAINST A CREDIT PARTY WOULD REASONABLY BE
EXPECTED TO RESULT IN A MATERIAL ADVERSE EFFECT; (V) ANY EVENT OF LOSS OR ANY
ATTACHMENT, LIEN, JUDICIAL PROCESS, ENCUMBRANCE OR CLAIM AFFECTING OR INVOLVING
ANY COLLATERAL OTHER THAN A PERMITTED LIEN; AND (VI) ANY CHANGE IN BORROWER’S
OUTSIDE ACCOUNTANTS.  EACH NOTIFICATION BY BORROWER PURSUANT HERETO SHALL
SPECIFY THE EVENT OR INFORMATION CAUSING SUCH NOTIFICATION, AND, TO THE EXTENT
APPLICABLE, SHALL SPECIFY THE STEPS BEING TAKEN TO RECTIFY OR REMEDY SUCH EVENT
OR INFORMATION.

 

(F)                                    ENTITY ORGANIZATION.  EACH CREDIT PARTY
WHICH IS AN ENTITY WILL (I) REMAIN (A) VALIDLY EXISTING AND IN GOOD STANDING IN
THE STATE OF ITS ORGANIZATION AND (B) QUALIFIED TO DO BUSINESS AND IN GOOD
STANDING IN EACH OTHER STATE WHERE THE NATURE OF ITS BUSINESS OR THE PROPERTY
OWNED BY IT MAKE SUCH QUALIFICATION NECESSARY EXCEPT WHERE THE FAILURE TO SO
QUALIFY WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT, AND
(II) MAINTAIN SUCH GOVERNMENTAL PERMITS, LICENSES AND AUTHORIZATIONS AS ARE
REQUIRED IN CONNECTION WITH ITS BUSINESS TO PREVENT THE OCCURRENCE OF A MATERIAL
ADVERSE EFFECT; PROVIDED THAT THE FOREGOING SHALL NOT PROHIBIT ANY ACTION NOT
PROHIBITED BY SECTION 3.3(F) OR PROHIBIT CWEI FROM PARTICIPATING IN ANY MERGER,
CONSOLIDATION, AMALGAMATION OR TRANSFER OF ASSETS.  BORROWER SHALL GIVE
ADMINISTRATIVE AGENT NOT LESS THAN THIRTY (30) DAYS PRIOR WRITTEN NOTICE OF ANY
CHANGE IN NAME (INCLUDING ANY FICTITIOUS NAME) OR CHIEF EXECUTIVE OFFICE, PLACE
OF BUSINESS, OR AS APPLICABLE, THE JURISDICTION OF ORGANIZATION OR PRINCIPAL
OFFICE.

 

(G)                                 MERGER, CHANGE IN BUSINESS; ETC.  EXCEPT
UPON THE PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT AND MAJORITY LENDERS,
WHICH CONSENT WILL NOT BE UNREASONABLY DELAYED, CONDITIONED OR WITHHELD,
BORROWER WILL NOT, AND WILL NOT PERMIT ANY SUBSIDIARY TO, (I) FORM ANY
SUBSIDIARY, UNLESS PROMPTLY AFTER THE FORMATION THEREOF, SUCH SUBSIDIARY
EXECUTES AND DELIVERS TO ADMINISTRATIVE AGENT A GUARANTY, (II) CONSUMMATE ANY
MERGER OR CONSOLIDATION WITH, OR PURCHASE OR OTHERWISE ACQUIRE ALL OR
SUBSTANTIALLY ALL OR A MATERIAL PART OF THE ASSETS OF, OR ANY MATERIAL STOCK,
PARTNERSHIP, JOINT VENTURE OR OTHER EQUITY INTEREST IN, ANY PERSON, EXCEPT FOR
ANY SUCH ACTION IN WHICH BORROWER SHALL BE THE SURVIVING PARTY, (III) OR SELL,
DISPOSE OF OR TRANSFER ANY COLLATERAL, (IV) SELL, DISPOSE OF OR TRANSFER ANY
ASSETS OTHER THAN COLLATERAL IN EXCESS OF $100,000 IN THE AGGREGATE IN ANY ONE
FISCAL YEAR, EXCEPT FOR SALES IN THE ORDINARY COURSE OF BUSINESS; (V) ENGAGE IN
ANY MATERIAL BUSINESS SUBSTANTIALLY DIFFERENT FROM ITS BUSINESS IN EFFECT AS OF
THE DATE OF APPLICATION BY BORROWER FOR CREDIT FROM ADMINISTRATIVE AGENT, OR
CEASE OPERATING ANY SUCH MATERIAL BUSINESS; OR (VI) CAUSE OR PERMIT ANY OTHER
PERSON TO ASSUME OR SUCCEED TO ANY MATERIAL BUSINESS OR OPERATIONS OF BORROWER
OR A SUBSIDIARY.

 

(H)                                 IDENTIFICATION OF COLLATERAL.  BORROWER HAS
INFORMED ADMINISTRATIVE AGENT THAT BORROWER HAS ASSIGNED TO EACH RIG
CONSTITUTING COLLATERAL A SPECIFIC NUMBER, AND AS

 

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OF THE CLOSING DATE, SUCH NUMBERS ARE LISTED ON THE EXHIBIT A ATTACHED HERETO. 
BORROWER SHALL NOT CHANGE THE NUMBER ASSIGNED TO EACH RIG CONSTITUTING
COLLATERAL WITHOUT PROVIDING ADMINISTRATIVE AGENT WITH AT LEAST TEN
(10) BUSINESS DAYS PRIOR WRITTEN NOTICE THEREOF.

 

(I)                                     ANNUAL RENTAL EXPENSE.  BORROWER SHALL
NOT PERMIT THE AGGREGATE AMOUNT OF ALL OPERATING RENTAL EXPENSES (EXCLUDING
EXPENSES PASSED-THROUGH TO OPERATORS UNDER DRILLING CONTRACTS) IN ANY FISCAL
YEAR TO EXCEED $500,000.

 

(J)                                     ENVIRONMENTAL COMPLIANCE.  EXCEPT, IN
EACH CASE, WHERE THE FAILURE TO SO COMPLY COULD NOT REASONABLY BE EXPECTED TO
HAVE A MATERIAL ADVERSE EFFECT, BORROWER WILL CONDUCT ITS BUSINESS OPERATIONS,
HANDLE, STORE, TRANSMIT, DISCHARGE, EMIT, RELEASE AND DISPOSE OF HAZARDOUS
SUBSTANCES, AND SO LONG AS ANY OBLIGATIONS REMAINS OUTSTANDING, WILL USE THE
COLLATERAL SO AS TO COMPLY WITH ALL ENVIRONMENTAL LAWS IN ALL MATERIAL RESPECTS
AND WILL AVOID ENVIRONMENTAL CONTAMINATION; AND BORROWER, SO LONG AS ANY
OBLIGATIONS REMAINS OUTSTANDING, WILL CONTINUE TO HAVE IN FULL FORCE AND EFFECT
ALL FEDERAL, STATE AND LOCAL LICENSES, PERMITS, ORDERS AND APPROVALS REQUIRED TO
OPERATE THE COLLATERAL IN COMPLIANCE WITH ALL ENVIRONMENTAL LAWS IN ALL MATERIAL
RESPECTS.

 

(K)                                  INDEBTEDNESS.  BORROWER SHALL NOT, AND
SHALL NOT PERMIT ANY SUBSIDIARY TO, CREATE, INCUR, ASSUME OR PERMIT TO EXIST ANY
INDEBTEDNESS, EXCEPT:

 

(i)                                     the Notes or other Obligations arising
under the Loan Documents or any guaranty of or suretyship arrangement for the
Notes or other Obligations arising under the Loan Documents;

 

(ii)                                  Indebtedness under capital leases not to
exceed $600,000;

 

(iii)                               Indebtedness associated with bonds or surety
obligations required by Governmental Agencies or third-parties in connection
with drilling operations in the ordinary course of business;

 

(iv)                              endorsements of negotiable instruments for
collection in the ordinary course of business;

 

(v)                                 intercompany Indebtedness between Borrower
and any Subsidiary of Borrower that is a Guarantor; provided that any such
Indebtedness owed by either the Borrower or a Subsidiary of Borrower shall be
subordinated to the Obligations on terms set forth in the relevant Guaranty or
subordination agreement, as applicable;

 

(vi)                              unsecured subordinated Indebtedness (other
than described in clause (v) above) on terms and conditions satisfactory to the
Administrative Agent;

 

(vii)                           Loans and advances made by CWEI to Borrower
prior to the Closing Date; provided that all such loans are repaid at the time
of the first advance on the Loan; and

 

(viii)                        other Indebtedness not to exceed $1,000,000 in the
aggregate at any one time outstanding.

 

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For avoidance of doubt, the parties confirm that ordinary course of business
accounts payable and accrued expenses of the type found in clause (i) of the
definition of Indebtedness are not Indebtedness.

 

(L)                                     LIENS.  EXCEPT FOR PERMITTED LIENS,
LIENS SECURING THE OBLIGATIONS, AND LIENS ON NON-COLLATERAL ASSETS AND THE
PROCEEDS THEREOF SECURING THE INDEBTEDNESS REFERRED TO IN SECTION 3.3(K) ABOVE,
BORROWER SHALL NOT CREATE OR PERMIT TO EXIST ANY LIENS ON ANY PROPERTY OR ASSETS
OF BORROWER OR ITS SUBSIDIARIES.

 

(M)                               RESTRICTED PAYMENTS.  BORROWER SHALL NOT MAKE
OR PERMIT ANY RESTRICTED PAYMENT.

 

(N)                                 INVESTMENTS, LOANS AND ADVANCES.  BORROWER
WILL NOT, AND WILL NOT PERMIT ANY SUBSIDIARY TO, MAKE OR PERMIT TO REMAIN
OUTSTANDING ANY INVESTMENT IN, OR LOAN OR ADVANCE TO, ANY PERSON (AN
“INVESTMENT”), EXCEPT THAT THE FOREGOING RESTRICTION SHALL NOT APPLY TO:.

 

(I)                                     INVESTMENTS REFLECTED IN THE FINANCIAL
STATEMENTS OF THE BORROWER ON THE CLOSING DATE OR ARE OTHERWISE DISCLOSED TO THE
LENDERS ON THE CLOSING DATE;

 

(II)                                  ACCOUNTS RECEIVABLE ARISING IN THE
ORDINARY COURSE OF BUSINESS;

 

(III)                               DIRECT OBLIGATIONS OF THE UNITED STATES OR
ANY AGENCY THEREOF, OR OBLIGATIONS GUARANTEED BY THE UNITED STATES OR ANY AGENCY
THEREOF, IN EACH CASE MATURING WITHIN ONE YEAR FROM THE DATE OF CREATION
THEREOF;

 

(IV)                              COMMERCIAL PAPER MATURING WITHIN ONE YEAR FROM
THE DATE OF CREATION THEREOF RATED IN THE HIGHEST GRADE BY S&P OR MOODY’S;

 

(V)                                 DEPOSITS MATURING WITHIN ONE YEAR FROM THE
DATE OF CREATION THEREOF WITH, INCLUDING CERTIFICATES OF DEPOSIT ISSUED BY, ANY
LENDER OR ANY OFFICE LOCATED IN THE UNITED STATES OF ANY OTHER BANK OR TRUST
COMPANY WHICH IS ORGANIZED UNDER THE LAWS OF THE UNITED STATES OR ANY STATE
THEREOF, HAS CAPITAL, SURPLUS AND UNDIVIDED PROFITS AGGREGATING AT LEAST
$100,000,000 (AS OF THE DATE OF SUCH BANK OR TRUST COMPANY’S MOST RECENT
FINANCIAL REPORTS) AND HAS A SHORT TERM DEPOSIT RATING OF NO LOWER THAN A2 OR
P2, AS SUCH RATING IS SET FORTH FROM TIME TO TIME, BY S&P OR MOODY’S,
RESPECTIVELY;

 

(VI)                              DEPOSITS IN MONEY MARKET FUNDS INVESTING
EXCLUSIVELY IN INVESTMENTS DESCRIBED IN CLAUSES (III), (IV) AND (V) ABOVE;

 

(VII)                           INVESTMENTS MADE BY BORROWER IN OR TO THE
GUARANTORS (OTHER THAN CWEI) AND MADE BY ANY GUARANTOR IN OR TO BORROWER OR ANY
OTHER GUARANTOR;

 

(VIII)                        INVESTMENTS IN STOCK, OBLIGATIONS OR SECURITIES
RECEIVED IN SETTLEMENT OF DEBTS ARISING FROM INVESTMENTS PERMITTED UNDER THIS
SECTION 3.3(N) OWING TO BORROWER OR ANY OTHER SUBSIDIARY AS A RESULT OF A
BANKRUPTCY OR OTHER INSOLVENCY PROCEEDING OF THE OBLIGOR IN RESPECT OF SUCH
DEBTS OR UPON THE ENFORCEMENT OF ANY LIEN IN FAVOR OF BORROWER OR ANY OF ITS
SUBSIDIARIES; AND

 

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(IX)                                OTHER INVESTMENTS NOT TO EXCEED $250,000 IN
THE AGGREGATE AT ANY TIME.

 

(O)                                 TRANSACTIONS WITH AFFILIATES.  BORROWER WILL
NOT CONDUCT ANY TRANSACTIONS WITH ANY OF ITS AFFILIATES EXCEPT (I) ON TERMS THAT
ARE FAIR AND REASONABLE AND NO LESS FAVORABLE TO BORROWER THAN THOSE THAT COULD
BE OBTAINED IN A COMPARABLE TRANSACTION AT THE TIME OF SUCH TRANSACTION IN
ARM’S-LENGTH DEALINGS WITH A PERSON WHO IS NOT SUCH AN AFFILIATE AND (II) IN
COMPLIANCE WITH ALL APPLICABLE LAWS.

 

(P)                                 NEGATIVE PLEDGE.  BORROWER WILL NOT ENTER
INTO OR SUFFER TO EXIST ANY AGREEMENT PROHIBITING OR CONDITIONING A CREATION OR
ASSUMPTION OF ANY LIEN UPON ANY OF THE COLLATERAL (WHETHER NOW OWNED OR
HEREAFTER ACQUIRED) EXCEPT IN FAVOR OF ADMINISTRATIVE AGENT.

 

(Q)                                 AMENDMENTS TO PARTNERSHIP DOCUMENTS AND
DRILLING CONTRACTS.  BORROWER WILL NOT (A) AMEND ITS LIMITED PARTNERSHIP
AGREEMENT OR CERTIFICATE OF LIMITED PARTNERSHIP; AND (B) AMEND OR MODIFY, OR
PERMIT THE AMENDMENT OR MODIFICATION OF THE DRILLING SERVICES CONTRACT, IN EACH
CASE WITHOUT THE PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT.

 

(R)                                    ERISA.  BORROWER WILL NOT INCUR
LIABILITIES UNDER TITLE IV OF ERISA EXCEPT TO THE EXTENT THAT SUCH LIABILITIES
WOULD NOT REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT.

 

SECTION 3.4                                      COLLATERAL.

 

(A)                                  PLEDGE OF COLLATERAL.  TO SECURE PAYMENT
AND PERFORMANCE OF THE OBLIGATIONS, BORROWER HEREBY PLEDGES, ASSIGNS, TRANSFERS
AND SETS OVER TO ADMINISTRATIVE AGENT, FOR ITSELF AND EACH OF THE LENDERS, AND
GRANTS TO ADMINISTRATIVE AGENT FIRST LIENS AND SECURITY INTERESTS IN AND UPON
ALL OF THE COLLATERAL, SUBJECT ONLY TO PERMITTED LIENS.

 

(B)                                 LIENS.  EXCEPT UPON THE PRIOR WRITTEN
CONSENT OF ADMINISTRATIVE AGENT, BORROWER SHALL NOT CREATE OR PERMIT TO EXIST
ANY LIEN, ENCUMBRANCE OR SECURITY INTEREST UPON OR WITH RESPECT TO ANY
COLLATERAL NOW OWNED OR HEREAFTER ACQUIRED OTHER THAN PERMITTED LIENS.

 

(C)                                  PERFORMANCE OF OBLIGATIONS.  BORROWER SHALL
PERFORM ALL OF ITS OBLIGATIONS AND ALL OTHER MATERIAL OBLIGATIONS OWING ON
ACCOUNT OF OR WITH RESPECT TO THE COLLATERAL; IT BEING UNDERSTOOD THAT NOTHING
HEREIN, AND NO ACTION OR INACTION BY ADMINISTRATIVE AGENT, UNDER THIS LOAN
AGREEMENT OR OTHERWISE, SHALL BE DEEMED AN ASSUMPTION BY ADMINISTRATIVE AGENT OF
ANY OF BORROWER’S SAID OBLIGATIONS.

 

(D)                                 SALES AND COLLECTIONS.  BORROWER SHALL NOT
SELL, TRANSFER OR OTHERWISE DISPOSE OF ANY COLLATERAL, EXCEPT THAT SO LONG AS NO
EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, BORROWER MAY IN THE
ORDINARY COURSE OF ITS BUSINESS:  (I) SELL ANY INVENTORY NORMALLY HELD BY
BORROWER FOR SALE (BORROWER ACKNOWLEDGING THAT THE RIGS ARE NOT INVENTORY HELD
FOR SALE), (II) LEASE THE RIGS AND OTHER RIG COLLATERAL ON AN OPERATING BASIS,
(III) USE OR CONSUME ANY MATERIALS AND SUPPLIES NORMALLY HELD BY BORROWER FOR
USE OR CONSUMPTION, (IV) SELL, TRANSFER OR OTHERWISE DISPOSE OF EQUIPMENT OR
PARTS THAT ARE OBSOLETE OR NO LONGER NECESSARY FOR THE BUSINESS OF BORROWER
EXCEPT TO THE EXTENT (A) THE

 

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AGGREGATE VALUE OF ALL SUCH SALES, TRANSFERS AND DISPOSALS DOES NOT EXCEED
$100,000 OR (B) SUCH EQUIPMENT OR PARTS ARE PROMPTLY REPLACED BY EQUIPMENT OR
PARTS OF AT LEAST COMPARABLE VALUE AND USE, AND (V) COLLECT ALL OF ITS ACCOUNTS
RECEIVABLE AND COMPROMISE AND SETTLE ITS ACCOUNTS RECEIVABLE IN THE ORDINARY
COURSE OF ITS BUSINESS.

 

(E)                                  ALTERATIONS AND MAINTENANCE.  EXCEPT UPON
THE PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT, BORROWER SHALL NOT MAKE OR
PERMIT ANY MATERIAL ALTERATIONS TO ANY TANGIBLE COLLATERAL WHICH WOULD
MATERIALLY REDUCE OR IMPAIR ITS MARKET VALUE OR UTILITY. BORROWER SHALL AT ALL
TIMES (I) KEEP THE TANGIBLE COLLATERAL IN GOOD CONDITION AND REPAIR, ORDINARY
WEAR AND TEAR AND OBSOLESCENCE EXCEPTED, (II) PROTECT THE COLLATERAL AGAINST
LOSS, DAMAGE OR DESTRUCTION, (III) MAINTAIN, SERVICE, TEST AND INSPECT THE
COLLATERAL (A) SUBSTANTIALLY IN ACCORDANCE WITH MANUFACTURER’S RECOMMENDATIONS,
AND SO AS TO MAINTAIN IN FULL FORCE AND EFFECT ANY MAINTENANCE WARRANTIES,
(B) IN MATERIAL COMPLIANCE WITH APPLICABLE LAW AND THE REQUIREMENTS OF
INSURANCE, (C) AT A STANDARD CONSISTENT WITH INDUSTRY PRACTICES, AND (D) IN ALL
EVENTS NOT LESS THAN BORROWER’S STANDARD PRACTICES FOR SIMILAR EQUIPMENT OWNED,
OPERATED OR LEASED BY BORROWER AND (IV) PAY OR CAUSE TO BE PAID ALL OBLIGATIONS
ARISING FROM THE REPAIR AND MAINTENANCE OF SUCH COLLATERAL, AS WELL AS ALL
OBLIGATIONS WITH RESPECT TO ANY LOCATION OF TANGIBLE COLLATERAL (E.G., ALL
OBLIGATIONS UNDER ANY LEASE, MORTGAGE OR BAILMENT AGREEMENT), EXCEPT FOR ANY
SUCH OBLIGATIONS BEING CONTESTED BY BORROWER IN GOOD FAITH BY APPROPRIATE
PROCEEDINGS TO THE EXTENT THERE IS NOT A RISK OF LOSS, FORFEITURE OR FORECLOSURE
OF COLLATERAL.  BORROWER SHALL PERMIT ANY PERSON DESIGNATED BY ADMINISTRATIVE
AGENT, DURING NORMAL BUSINESS HOURS UPON REASONABLE NOTICE TO VISIT, INSPECT AND
SURVEY THE TANGIBLE COLLATERAL, ITS CONDITION, USE AND OPERATION, AND THE
RECORDS MAINTAINED IN CONNECTION THEREWITH.  NONE OF ADMINISTRATIVE AGENT OR ANY
OF ITS DESIGNEES SHALL HAVE ANY DUTY TO MAKE ANY SUCH INSPECTION AND SHALL NOT
INCUR ANY LIABILITY OR OBLIGATION BY REASON OF NOT MAKING ANY SUCH INSPECTION. 
THE FAILURE OF ANY SUCH PARTY TO OBJECT TO ANY CONDITION OR PROCEDURE OBSERVED
OR OBSERVABLE IN THE COURSE OF AN INSPECTION HEREUNDER SHALL NOT BE DEEMED TO
WAIVE OR MODIFY ANY OF THE TERMS OF THIS LOAN AGREEMENT WITH RESPECT TO SUCH
CONDITION OR PROCEDURE.

 

(F)                                    LOCATION.  ON OR BEFORE THE CLOSING DATE,
BORROWER SHALL DELIVER TO ADMINISTRATIVE AGENT INFORMATION REGARDING THE BASE
LOCATION OF EACH RIG THAT COMPRISES THE COLLATERAL.  IN NO EVENT SHALL BORROWER
CAUSE OR PERMIT ANY COLLATERAL TO BE REMOVED FROM THE UNITED STATES WITHOUT THE
EXPRESS PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT.  BORROWER SHALL MAINTAIN
A SIGN ON EACH DRILLING RIG CONSTITUTING COLLATERAL, WHICH SIGN SHALL
(I) INDICATE THAT SUCH DRILLING RIG IS THE PROPERTY OF BORROWER, AND
(II) DISPLAY THE NUMBER THAT HAS BEEN ASSIGNED TO SUCH DRILLING RIG BY
BORROWER.  BORROWER WILL KEEP ITS BOOKS AND RECORDS AT ITS PRINCIPAL OFFICE
ADDRESS SPECIFIED IN THE FIRST PARAGRAPH OF THIS LOAN AGREEMENT.  BORROWER WILL
NOT CHANGE THE ADDRESS WHERE BOOKS AND RECORDS ARE KEPT, ITS ORGANIZATIONAL
NUMBER OR ITS TAXPAYER IDENTIFICATION NUMBER WITHOUT PROVIDING ADMINISTRATIVE
AGENT WITH THIRTY (30) DAYS PRIOR WRITTEN NOTICE.

 

(G)                                 INSURANCE.

 

(I)                                     COVERAGE.  WITHOUT LIMITING ANY OF THE
OTHER OBLIGATIONS OR LIABILITIES OF BORROWER UNDER THE LOAN DOCUMENTS, BORROWER
SHALL, DURING THE TERM OF THIS LOAN AGREEMENT, CARRY AND MAINTAIN, WITH RESPECT
TO COLLATERAL LISTED HEREUNDER, AT ITS OWN EXPENSE, AT LEAST THE MINIMUM
INSURANCE COVERAGE AS STATED

 

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BELOW, WITH INSURERS HAVING A MINIMUM A.M. BEST RATING OF “A- VII”, AND BE IN
SUCH FORM, WITH TERMS, CONDITIONS, LIMITS AND DEDUCTIBLES AS SHALL BE REASONABLY
ACCEPTABLE TO ADMINISTRATIVE AGENT.  BORROWER SHALL ALSO CARRY AND MAINTAIN ANY
OTHER INSURANCE THAT ADMINISTRATIVE AGENT MAY REASONABLY REQUIRE FROM TIME TO
TIME.

 

(A)                              ALL RISK OR SPECIAL FORM PROPERTY INSURANCE,
INSURING THE COLLATERAL AGAINST PHYSICAL LOSS OR DAMAGE FROM PERILS INCLUDING
BUT NOT LIMITED TO FIRE AND EXTENDED COVERAGE, WINDSTORM, COLLAPSE, FLOOD, AND
EARTH MOVEMENT.  COVERAGE SHALL BE WRITTEN IN THE GREATER OF THE THEN CURRENT
OBLIGATIONS OR REPLACEMENT COST VALUE IN AN AMOUNT REASONABLY ACCEPTABLE TO
ADMINISTRATIVE AGENT.  SUCH INSURANCE POLICY SHALL CONTAIN AN ENDORSEMENT
WAIVING ANY COINSURANCE REQUIREMENT AND CONTAINING DEDUCTIBLES IN AMOUNTS
CONSISTENT WITH INDUSTRY STANDARDS, BUT IN NO EVENT GREATER THAN $250,000.

 

(B)                                COMMERCIAL GENERAL LIABILITY INSURANCE
INCLUDING BUT NOT LIMITED TO POLLUTION LIABILITY (WHICH MAY BE PROVIDED UNDER A
SEPARATE POLICY), PRODUCTS/COMPLETED OPERATIONS, BLANKET CONTRACTUAL LIABILITY,
ENVIRONMENTAL LIABILITY, PREMISES/OPERATIONS, INDEPENDENT CONTRACTORS, PERSONAL
INJURY, FIRE LEGAL LIABILITY, LOSS OF USE, AND EMPLOYEE BENEFITS LIABILITY WITH
EACH WRITTEN ON AN OCCURRENCE BASIS (EXCEPT EMPLOYEE BENEFITS LIABILITY, WHICH
WILL BE WRITTEN ON A CLAIMS-MADE BASIS) AND WITH A LIMIT OF NOT LESS THAN
$10,000,000 FOR BODILY INJURY AND PROPERTY DAMAGE.  DEDUCTIBLES, IF ANY, SHALL
BE CONSISTENT WITH INDUSTRY STANDARDS.  SUCH INSURANCE SHALL NOT CONTAIN AN
EXCLUSION FOR PUNITIVE OR EXEMPLARY DAMAGES WHERE INSURABLE BY LAW.

 

(C)                                WORKERS’ COMPENSATION INSURANCE IN ACCORDANCE
WITH STATUTORY PROVISIONS AND EMPLOYER’S LIABILITY IN AN AMOUNT NOT LESS THAN
$1,000,000.  SUCH COVERAGE SHALL NOT CONTAIN ANY OCCUPATIONAL DISEASE
EXCLUSIONS.  ALL SUCH INSURANCE WILL BE COMPULSORY AND NOT ELECTIVE.  ANY
DEDUCTIBLE CONTAINED UNDER THE POLICY WILL BE DISCLOSED TO ADMINISTRATIVE AGENT.

 

(D)                               AUTOMOBILE LIABILITY AND AUTOMOBILE PHYSICAL
DAMAGE INSURANCE (AS APPROPRIATE) COVERING ALL OWNED, RENTED, NON-OWNED AND
HIRED VEHICLES WRITTEN ON AN OCCURRENCE BASIS WITH A COMBINED SINGLE LIMIT OF
NOT LESS THAN $1,000,000 FOR BODILY INJURY AND PROPERTY DAMAGE.  THE LIABILITY
DEDUCTIBLE, IF ANY, SHALL NOT BE GREATER THAN $5,000 PER OCCURRENCE.

 

(E)                                 EXCESS OR UMBRELLA LIABILITY INSURANCE
WRITTEN ON AN OCCURRENCE BASIS IN AN AMOUNT NOT LESS THAN $10,000,000 PROVIDING
COVERAGE ON A FOLLOW-FORM BASIS IN EXCESS OF THE INSURANCE LIMITS AND TERMS
REQUIRED UNDER SECTION 3.4(G)(I)(B).  ANY DIFFERENCES IN COVERAGE TERMS UNDER
THIS POLICY WILL BE FULLY DISCLOSED TO ADMINISTRATIVE AGENT.

 

(F)                                 OTHER INSURANCE IN SUCH AMOUNTS AS MAY FROM
TIME TO TIME BE REASONABLY REQUIRED BY ADMINISTRATIVE AGENT.

 

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(II)                                  ENDORSEMENTS.  BORROWER SHALL CAUSE ALL
INSURANCE POLICIES CARRIED AND MAINTAINED IN ACCORDANCE WITH THIS LOAN AGREEMENT
TO BE ENDORSED TO ADMINISTRATIVE AGENT, ITS SUCCESSORS AND ASSIGNS AS INDICATED
BELOW:

 

(A)                              AS A LOSS PAYEE AS ITS INTEREST MAY APPEAR WITH
RESPECT TO THE COLLATERAL UNDER THE ALL RISK/SPECIAL FORM WITH AN ENDORSEMENT TO
PROVIDE FOR PAYMENT OF LOSSES TO ADMINISTRATIVE AGENT.  (UNLESS AN EVENT OF
DEFAULT EXISTS, BORROWER MAY BE A JOINT PAYEE ON INSURANCE CHECKS.)  ANY
OBLIGATION IMPOSED UPON BORROWER, INCLUDING BUT NOT LIMITED TO THE OBLIGATION TO
PAY PREMIUMS AND/OR COVERAGE DEDUCTIBLES, SHALL BE THE SOLE OBLIGATION OF
BORROWER AND NOT AN OBLIGATION OF ADMINISTRATIVE AGENT.

 

(B)                                WITH RESPECT TO PROPERTY POLICIES DESCRIBED
IN THE SUBSECTION “COVERAGE” (I) THE INTERESTS OF ADMINISTRATIVE AGENT SHALL NOT
BE INVALIDATED BY ANY ACTION OR INACTION OF BORROWER OR ANY OTHER PERSON, AND
SHALL INSURE ADMINISTRATIVE AGENT REGARDLESS OF ANY BREACH OR VIOLATION BY
BORROWER OR ANY OTHER PERSON, OF ANY WARRANTIES, DECLARATIONS OR CONDITIONS OF
SUCH POLICIES.

 

(C)                                INASMUCH AS SUCH POLICIES ARE WRITTEN TO
COVER MORE THAN ONE INSURED, ALL TERMS, CONDITIONS, INSURING AGREEMENTS AND
ENDORSEMENTS, WITH THE EXCEPTION OF THE LIMITS OF LIABILITY, SHALL OPERATE IN
THE SAME MANNER AS IF THERE WERE A SEPARATE POLICY COVERING EACH INSURED.

 

(D)                               THE INSURERS PROVIDING THE COVERAGE REQUIRED
HEREUNDER SHALL WAIVE ALL RIGHTS OF SUBROGATION AGAINST ADMINISTRATIVE AGENT,
ANY RIGHT OF SETOFF OR COUNTERCLAIM AND ANY OTHER RIGHT TO DEDUCTION, WHETHER BY
ATTACHMENT OR OTHERWISE.

 

(E)                                 SUCH INSURANCE SHALL BE PRIMARY WITHOUT
RIGHT OF CONTRIBUTION OF ANY OTHER INSURANCE CARRIED BY OR ON BEHALF OF
ADMINISTRATIVE AGENT WITH RESPECT TO ITS INTERESTS AS SUCH IN THE COLLATERAL.

 

(F)                                 IF SUCH INSURANCE IS CANCELED FOR ANY REASON
WHATSOEVER, INCLUDING NONPAYMENT OF PREMIUM, OR ANY MATERIAL CHANGES ARE MADE IN
THE COVERAGE WHICH ADVERSELY AFFECT THE INTERESTS OF ADMINISTRATIVE AGENT, SUCH
CANCELLATION OR CHANGE SHALL NOT BE EFFECTIVE AS TO ADMINISTRATIVE AGENT UNTIL
THIRTY (30) DAYS, EXCEPT FOR NON-PAYMENT OF PREMIUM WHICH SHALL NOT BE EFFECTIVE
AS TO ADMINISTRATIVE AGENT UNTIL TEN (10) BUSINESS DAYS, IN EACH CASE AFTER
RECEIPT BY ADMINISTRATIVE AGENT OF WRITTEN NOTICE SENT BY REGISTERED MAIL FROM
SUCH INSURER.

 

(G)                                UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT HEREUNDER, BORROWER IRREVOCABLY, APPOINTS
ADMINISTRATIVE AGENT AS BORROWER’S TRUE AND LAWFUL ATTORNEY (AND AGENT-IN FACT)
FOR THE PURPOSE OF MAKING, SETTLING AND ADJUSTING CLAIMS UNDER SUCH POLICIES,
ENDORSING THE NAME OF BORROWER ON ANY CHECK, DRAFT, INSTRUMENT OR OTHER ITEM OF
PAYMENT FOR THE PROCEEDS OF SUCH POLICIES AND FOR MAKING ALL DETERMINATIONS AND
DECISIONS WITH RESPECT TO SUCH POLICIES.

 

(H)                               ADMINISTRATIVE AGENT SHALL BE NAMED AS AN
ADDITIONAL INSURED WITH RESPECT TO THE COMMERCIAL GENERAL LIABILITY AND EXCESS
OR UMBRELLA LIABILITY. 

 

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ANY OBLIGATION IMPOSED UPON BORROWER, INCLUDING BUT NOT LIMITED TO THE
OBLIGATION TO PAY PREMIUMS AND/OR COVERAGE DEDUCTIBLES, SHALL BE THE SOLE
OBLIGATION OF BORROWER AND NOT AN OBLIGATION OF ADMINISTRATIVE AGENT.

 

(III)                               CERTIFICATIONS.  ON THE CLOSING DATE WITH
RESPECT TO THE COLLATERAL HEREUNDER AS OF SUCH DATE, AND AT EACH POLICY RENEWAL,
BUT NOT LESS THAN ANNUALLY WITH RESPECT TO ALL COLLATERAL, BORROWER SHALL
PROVIDE TO ADMINISTRATIVE AGENT AN ACORD 27 — EVIDENCE OF PROPERTY INSURANCE AND
LOSS PAYABLE ENDORSEMENTS FOR SUCH PROPERTY POLICY, AND AN ACORD 25 CERTIFICATE
OF LIABILITY INSURANCE FOR GENERAL LIABILITY, WORKERS’ COMPENSATION, AUTOMOBILE
LIABILITY, UMBRELLA OR EXCESS LIABILITY POLICIES.  ALL CERTIFICATES SHALL
IDENTIFY THE INSURANCE CARRIERS, THE TYPE OF INSURANCE, THE LIMITS, DEDUCTIBLES,
AND TERMS THEREOF AND SHALL SPECIFICALLY LIST THE SPECIAL PROVISIONS DELINEATED
FOR SUCH INSURANCE REQUIRED BY THIS SECTION.  BORROWER SHALL FURNISH TO
ADMINISTRATIVE AGENT A CERTIFICATE SIGNED BY A DULY AUTHORIZED REPRESENTATIVE OF
THE INSURER, SHOWING THE INSURANCE THEN MAINTAINED BY OR ON BEHALF OF BORROWER
PURSUANT TO THIS SECTION AND STATING THAT SUCH INSURANCE COMPLIES WITH THE TERMS
HEREOF, TOGETHER WITH EVIDENCE OF PAYMENT OF PREMIUMS.

 

(IV)                              FORCED PLACEMENT.  IN THE EVENT THAT AT ANY
TIME THE INSURANCE REQUIRED BY THIS SECTION SHALL BE REDUCED OR CEASE TO BE
MAINTAINED, THEN (WITHOUT LIMITING THE RIGHTS OF ADMINISTRATIVE AGENT HEREUNDER
IN RESPECT OF THE DEFAULT WHICH ARISES AS A RESULT OF SUCH FAILURE)
ADMINISTRATIVE AGENT MAY AT ITS OPTION, MAINTAIN THE INSURANCE REQUIRED HEREBY
IN SUCH EVENT.  BORROWER SHALL REIMBURSE ADMINISTRATIVE AGENT UPON DEMAND FOR
THE COST THEREOF WITH INTEREST THEREON AT A RATE PER ANNUM EQUAL TO THE DEFAULT
RATE, BUT IN NO EVENT SHALL THE RATE OF INTEREST EXCEED THE MAXIMUM RATE
PERMITTED BY LAW.

 

(H)                                 USE.  BORROWER AGREES THAT THE TANGIBLE
COLLATERAL WILL BE USED BY BORROWER SOLELY IN THE CONDUCT OF ITS BUSINESS AND IN
A MANNER COMPLYING IN ALL MATERIAL RESPECTS WITH ALL APPLICABLE LAWS AND ANY
APPLICABLE INSURANCE POLICIES.  ALL TANGIBLE COLLATERAL SHALL AT ALL TIMES
REMAIN PERSONAL PROPERTY OF BORROWER REGARDLESS OF THE DEGREE OF ITS ANNEXATION
TO ANY REAL PROPERTY AND SHALL NOT BY REASON OF ANY INSTALLATION IN, OR
AFFIXATION TO, REAL OR PERSONAL PROPERTY BECOME A PART THEREOF.  BORROWER SHALL
OBTAIN AND DELIVER TO ADMINISTRATIVE AGENT FROM ANY PERSON HAVING AN INTEREST IN
PROPERTY WHERE THE TANGIBLE COLLATERAL IS TO BE STORED FOR FORTY-FIVE (45) DAYS
OR MORE (EXCLUDING, HOWEVER, PRINCIPAL JOB SITES AND PROPERTY ON WHICH
COLLATERAL IS LOCATED WHILE BEING MOBILIZED OR DEMOBILIZED), WAIVERS OF ANY
LIEN, ENCUMBRANCE OR INTEREST WHICH SUCH PERSON MIGHT HAVE OR HEREAFTER OBTAIN
OR CLAIM WITH RESPECT TO THE TANGIBLE COLLATERAL.

 

(I)                                     EVENT OF LOSS.  BORROWER SHALL AT ITS
EXPENSE PROMPTLY REPAIR ALL MATERIAL REPAIRABLE DAMAGE TO ANY TANGIBLE
COLLATERAL.  IN THE EVENT THAT THERE IS AN EVENT OF LOSS, THEN, ON OR BEFORE THE
FIRST TO OCCUR (THE “TRIGGER DATE”) OF (I) NINETY (90) DAYS AFTER THE OCCURRENCE
OF SUCH EVENT OF LOSS, OR (II) TEN (10) BUSINESS DAYS AFTER THE DATE ON WHICH
EITHER BORROWER OR ADMINISTRATIVE AGENT SHALL RECEIVE ANY PROCEEDS OF INSURANCE
ON ACCOUNT OF SUCH EVENT OF LOSS (UNLESS THE “EVENT OF LOSS PREPAYMENT” (AS
DEFINED BELOW) IS DEFERRED AS PROVIDED IN THE PENULTIMATE SENTENCE OF THIS
SECTION 3.4(I)), OR ANY UNDERWRITER OF INSURANCE ON SUCH COLLATERAL SHALL ADVISE
EITHER BORROWER OR ADMINISTRATIVE AGENT THAT IT DISCLAIMS LIABILITY IN RESPECT
OF SUCH EVENT OF LOSS, BORROWER SHALL, AT BORROWER’S OPTION, EITHER REPLACE THE
COLLATERAL SUBJECT TO SUCH EVENT

 

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OF LOSS WITH COMPARABLE COLLATERAL FREE OF ALL LIENS OTHER THAN PERMITTED LIENS
(IN WHICH EVENT BORROWER SHALL BE ENTITLED TO UTILIZE THE PROCEEDS OF INSURANCE
ON ACCOUNT OF SUCH EVENT OF LOSS FOR SUCH PURPOSE, AND MAY RETAIN ANY EXCESS
PROCEEDS OF SUCH INSURANCE), OR PERMANENTLY PREPAY THE OBLIGATIONS BY AN AMOUNT
EQUAL TO THE ACTUAL CASH VALUE OF SUCH COLLATERAL AS DETERMINED BY EITHER THE
INSURANCE COMPANY’S PAYMENT (PLUS ANY APPLICABLE DEDUCTIBLE) OR, IN ABSENCE OF
INSURANCE COMPANY PAYMENT, AS REASONABLY DETERMINED BY ADMINISTRATIVE AGENT (THE
“EVENT OF LOSS PREPAYMENT”); IT BEING FURTHER UNDERSTOOD THAT ANY SUCH EVENT OF
LOSS PREPAYMENT SHALL CAUSE AN IMMEDIATE PERMANENT REDUCTION IN THE LOAN IN THE
AMOUNT OF SUCH PREPAYMENT AND SHALL NOT REDUCE THE AMOUNT OF ANY FUTURE
REDUCTIONS IN THE LOAN THAT MAY BE REQUIRED HEREUNDER.  NOTWITHSTANDING THE
FOREGOING AND PROVIDED THAT (I) NO EVENT OF DEFAULT HAS OCCURRED OR IS
CONTINUING AND (II) THE INSURANCE PROCEEDS SHALL BE DEPOSITED WITH
ADMINISTRATIVE AGENT AS CASH COLLATERAL FOR THE OBLIGATIONS, BORROWER MAY DEFER
ANY REQUIRED EVENT OF LOSS PREPAYMENT FOR UP TO NINETY (90) DAYS IN THE CASE OF
COLLATERAL OTHER THAN DERRICKS AND DRILL PIPE AND ONE HUNDRED AND FIFTY (150)
DAYS IN THE CASE OF DERRICKS AND DRILL PIPE FROM THE TRIGGER DATE FOR THE
PURPOSE OF REPAIRING COLLATERAL OR LOCATING AND ACQUIRING COMPARABLE REPLACEMENT
EQUIPMENT THAT SHALL CONSTITUTE COLLATERAL FREE OF ALL LIENS OTHER THAN
PERMITTED LIENS IF BORROWER IS PROCEEDING WITH DILIGENCE AND IN GOOD FAITH TO
REPAIR, REPLACE, OR ACQUIRE COMPARABLE REPLACEMENT EQUIPMENT.  NOTWITHSTANDING
THE FOREGOING, IF AT THE TIME OF OCCURRENCE OF SUCH EVENT OF LOSS OR ANY TIME
THEREAFTER PRIOR TO REPLACEMENT OR THE EVENT OF LOSS PREPAYMENT, AS AFORESAID,
AN EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING HEREUNDER, THEN
ADMINISTRATIVE AGENT MAY AT ITS SOLE OPTION, EXERCISABLE AT ANY TIME WHILE SUCH
EVENT OF DEFAULT SHALL BE CONTINUING, REQUIRE BORROWER TO EITHER REPLACE SUCH
COLLATERAL OR PREPAY THE OBLIGATIONS, AS AFORESAID.

 

(J)                                     NOTICE OF CERTAIN EVENTS.  BORROWER
SHALL GIVE ADMINISTRATIVE AGENT PROMPT NOTICE OF ANY ATTACHMENT, LIEN, JUDICIAL
PROCESS, ENCUMBRANCE, OR CLAIM AFFECTING OR INVOLVING THE COLLATERAL OTHER THAN
A PERMITTED LIEN.

 

(K)                                  INDEMNIFICATION.  BORROWER SHALL INDEMNIFY,
DEFEND AND SAVE ADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST
ANY AND ALL CLAIMS, LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, REASONABLE ATTORNEYS’ FEES AND EXPENSES) OF ANY NATURE WHATSOEVER
WHICH MAY BE ASSERTED AGAINST OR INCURRED BY ADMINISTRATIVE AGENT OR ANY LENDER
ARISING OUT OF OR IN ANY MANNER OCCASIONED BY (I) THE OWNERSHIP, COLLECTION,
POSSESSION, USE OR OPERATION OF ANY COLLATERAL, (II) ENVIRONMENTAL CLAIMS OR
ENVIRONMENTAL LOSS ATTRIBUTABLE TO A CREDIT PARTY OR (III) ANY FAILURE BY
BORROWER TO PERFORM ANY OF ITS OBLIGATIONS HEREUNDER OR UNDER THE OTHER LOAN
DOCUMENTS; EXCLUDING, HOWEVER, FROM SAID INDEMNITY ANY SUCH CLAIMS, LIABILITIES,
ETC. ARISING DIRECTLY OUT OF THE WILLFUL WRONGFUL ACT OR GROSS NEGLIGENCE OF
ADMINISTRATIVE AGENT OR A LENDER.  THIS INDEMNITY SHALL SURVIVE THE EXPIRATION
OR TERMINATION OF THIS LOAN AGREEMENT AS TO ALL MATTERS ARISING OR ACCRUING
PRIOR TO SUCH EXPIRATION OR TERMINATION.

 

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(L)                                     LETTER OF CREDIT MATTERS.

 

(I)                                     PROVIDED NO EVENT OF DEFAULT HAS
OCCURRED AND IS THEN CONTINUING, ONCE THE NET OLV OF THE OPERATING RIGS EQUALS
ONE HUNDRED PERCENT (100%) OF THE OUTSTANDING PRINCIPAL AMOUNT OF THE LOAN,
ADMINISTRATIVE AGENT WILL CONTEMPORANEOUSLY RELEASE THE LETTER OF CREDIT TO
BORROWER UPON RECEIPT OF THE CWEI GUARANTY AND A SECRETARY’S CERTIFICATE
CERTIFYING THE SIGNATURE AND INCUMBENCY OF THE PERSON SIGNING THE CWEI GUARANTY
AND THE AUTHORIZING RESOLUTIONS THEREFOR.

 

(II)                                  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IN THE LETTER OF CREDIT, OR IN ANY OTHER LOAN DOCUMENT,
ADMINISTRATIVE AGENT SHALL ONLY HAVE THE RIGHT (WHICH RIGHT MAY BE EXERCISED
WITHOUT NOTICE, OPPORTUNITY TO CURE OR OTHER RESTRAINT) TO DRAW ON THE LETTER OF
CREDIT (X) IF AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING TO THE EXTENT
NECESSARY TO PAY AMOUNTS IN RESPECT OF THE OBLIGATIONS THAT ARE THEN DUE AND
PAYABLE HEREUNDER, AND (Y) UPON THE OCCURRENCE OF A BANKRUPTCY EVENT OR AN LC
EVENT, IN WHICH CASE AMOUNTS SO DRAWN SHALL BE APPLIED TO PREPAY THE LOAN
PURSUANT TO SECTION 2.10(C).

 

SECTION 3.5                                      EVENTS OF DEFAULT.  THE
OCCURRENCE OF ANY OF THE FOLLOWING EVENTS SHALL CONSTITUTE AN “EVENT OF DEFAULT”
UNDER THIS LOAN AGREEMENT:

 

(A)                                  FAILURE TO PAY.  BORROWER SHALL FAIL TO PAY
WHEN DUE ANY PRINCIPAL, INTEREST, FEE OR OTHER AMOUNT UNDER ANY LOAN DOCUMENT
WHEN AND AS THE SAME SHALL BECOME DUE AND PAYABLE AND ANY SUCH FAILURE TO PAY
SHALL CONTINUE UNREMEDIED FOR FIVE (5) BUSINESS DAYS.

 

(B)                                 FAILURE TO PERFORM.  ANY CREDIT PARTY SHALL
DEFAULT IN THE PERFORMANCE OR OBSERVANCE OF ANY COVENANT OR AGREEMENT ON ITS
PART TO BE PERFORMED OR OBSERVED UNDER THIS LOAN AGREEMENT, THE NOTE OR ANY OF
THE OTHER LOAN DOCUMENTS (NOT CONSTITUTING AN EVENT OF DEFAULT UNDER ANY OTHER
CLAUSE OF THIS SECTION), AND SUCH DEFAULT SHALL CONTINUE UNREMEDIED FOR TWENTY
(20) BUSINESS DAYS AFTER THE EARLIER OF (I) WRITTEN NOTICE THEREOF SHALL HAVE
BEEN GIVEN BY ADMINISTRATIVE AGENT TO BORROWER, OR (II) A RESPONSIBLE OFFICER OF
BORROWER HAS, OR IN THE EXERCISE OF REASONABLE DILIGENCE SHOULD HAVE HAD,
KNOWLEDGE OF SUCH DEFAULT.

 

(C)                                  BREACH OF WARRANTY.  ANY REPRESENTATION OR
WARRANTY MADE BY ANY CREDIT PARTY CONTAINED IN THIS LOAN AGREEMENT, THE NOTE OR
ANY OF THE OTHER LOAN DOCUMENTS SHALL AT ANY TIME PROVE TO HAVE BEEN INCORRECT
IN ANY MATERIAL RESPECT WHEN MADE.

 

(D)                                 DEFAULT UNDER OTHER MERRILL LYNCH
AGREEMENT.  A DEFAULT OR EVENT OF DEFAULT BY ANY CREDIT PARTY SHALL OCCUR UNDER
THE TERMS OF ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT WITH ADMINISTRATIVE
AGENT, MLPF&S OR ANY OF THEIR AFFILIATES, AND ANY REQUIRED NOTICE SHALL HAVE
BEEN GIVEN AND REQUIRED PASSAGE OF TIME SHALL HAVE ELAPSED.

 

(E)                                  BANKRUPTCY EVENT; LC EVENT.  ANY BANKRUPTCY
EVENT OR LC EVENT SHALL OCCUR.

 

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(F)                                    DEFAULT UNDER OTHER AGREEMENTS.  ANY
EVENT SHALL OCCUR WHICH RESULTS IN A DEFAULT THAT IS NOT WAIVED OR CURED WITHIN
ANY APPLICABLE CURE PERIOD BY ANY CREDIT PARTY OF ANY AGREEMENT (I) EVIDENCING
ANY INDEBTEDNESS OR OTHER OBLIGATIONS OF ANY CREDIT PARTY OF $500,000 OR MORE IN
THE AGGREGATE IF THE EFFECT OF SUCH DEFAULT IS TO CAUSE OR PERMIT THE HOLDER OF
SUCH INDEBTEDNESS TO CAUSE SUCH INDEBTEDNESS TO BECOME DUE OR BE PREPAID IN FULL
PRIOR TO ITS STATED MATURITY DATE; OR (II) INVOLVING ANY CREDIT PARTY, THE
BREACH OF WHICH WOULD HAVE A MATERIAL ADVERSE EFFECT (OTHER THAN ANY OF THE
FOREGOING DESCRIBED IN THE PRECEDING CLAUSE (I) AND (II) THE VALIDITY OF WHICH
IS BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS FOR WHICH ADEQUATE
RESERVES HAVE BEEN ESTABLISHED ON THE BOOKS OF THE APPLICABLE CREDIT PARTY IN
ACCORDANCE WITH GAAP).

 

(G)                                 COLLATERAL IMPAIRMENT OR LAPSE IN INSURANCE
COVERAGE.  THE LOSS, THEFT OR DESTRUCTION OF ANY COLLATERAL, THE OCCURRENCE OF
ANY MATERIAL DETERIORATION OR IMPAIRMENT OF ANY COLLATERAL OR ANY MATERIAL
DECLINE OR DEPRECIATION IN THE VALUE OR MARKET PRICE THEREOF (WHETHER ACTUAL OR
REASONABLY ANTICIPATED), WHICH CAUSES ANY COLLATERAL, IN THE SOLE REASONABLE
OPINION OF ADMINISTRATIVE AGENT, TO BECOME UNSATISFACTORY AS TO VALUE OR
CHARACTER; OR ANY LEVY, ATTACHMENT, SEIZURE OR CONFISCATION OF THE COLLATERAL
WHICH IS NOT RELEASED WITHIN TEN (10) BUSINESS DAYS; OR THE FAILURE TO MAINTAIN
INSURANCE IN ACCORDANCE WITH SECTION 3.4(G).

 

(H)                                 CONTESTED OBLIGATION.  (I) ANY OF THE LOAN
DOCUMENTS SHALL FOR ANY REASON CEASE TO BE, OR ARE ASSERTED BY ANY CREDIT PARTY
NOT TO BE A LEGAL, VALID AND BINDING OBLIGATIONS OF ANY CREDIT PARTY,
ENFORCEABLE IN ACCORDANCE WITH THEIR TERMS; OR (II) THE VALIDITY, PERFECTION OR
PRIORITY OF ADMINISTRATIVE AGENT’S FIRST LIEN AND SECURITY INTEREST ON ANY OF
THE COLLATERAL (SUBJECT TO PERMITTED LIENS) IS CONTESTED BY ANY CREDIT PARTY OR
ANY PERSON; OR (III) ANY CREDIT PARTY SHALL OR SHALL ATTEMPT TO REPUDIATE,
REVOKE, CONTEST OR DISPUTE, IN WHOLE OR IN PART SUCH CREDIT PARTY’S MATERIAL
OBLIGATIONS UNDER ANY LOAN DOCUMENT.

 

(I)                                     JUDGMENTS.  ONE OR MORE JUDGMENTS FOR
THE PAYMENT OF MONEY IN AN AGGREGATE AMOUNT IN EXCESS OF $500,000 (TO THE EXTENT
NOT COVERED BY INSURANCE) SHALL BE RENDERED AGAINST ANY CREDIT PARTY AND THE
SAME SHALL REMAIN UNDISCHARGED FOR A PERIOD OF THIRTY (30) CONSECUTIVE DAYS
DURING WHICH EXECUTION SHALL NOT BE EFFECTIVELY STAYED.

 

(J)                                     CHANGE IN CONTROL.  (I) GENERAL PARTNER
SHALL CEASE BEING THE GENERAL PARTNER OF BORROWER, OR (II) CWEI AND LARIAT
SERVICES, INC. SHALL CEASE TO OWN, DIRECTLY OR THROUGH AFFILIATES, NINETY NINE
PERCENT (99%) OF THE STOCK OF BORROWER; PROVIDED, HOWEVER, THAT ADMINISTRATIVE
AGENT AND LENDERS AGREE THAT THE DILUTIONS OF PERCENTAGE OWNERSHIP RESULTING
FROM THE ISSUANCE OF ADDITIONAL STOCK FOR FAIR VALUE SHALL NOT CAUSE A VIOLATION
OF THIS SECTION 3.5(J).

 

(K)                                  DISSOLUTION.  THE DISSOLUTION OR THE FILING
FOR DISSOLUTION OF ANY CREDIT PARTY.

 

SECTION 3.6                                      REMEDIES.

 

(A)                                  REMEDIES UPON DEFAULT.  UPON THE OCCURRENCE
AND DURING THE CONTINUANCE OF ANY EVENT OF DEFAULT, ADMINISTRATIVE AGENT MAY AT
ITS SOLE OPTION DO ANY ONE OR MORE

 

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OR ALL OF THE FOLLOWING, AT SUCH TIME AND IN SUCH ORDER AS ADMINISTRATIVE AGENT
MAY IN ITS SOLE DISCRETION CHOOSE:

 

(I)                                     TERMINATION.  ADMINISTRATIVE AGENT MAY
WITHOUT NOTICE TERMINATE ITS OBLIGATION TO EXTEND ANY CREDIT TO OR FOR THE
BENEFIT OF BORROWER (IT BEING UNDERSTOOD, HOWEVER, THAT UPON THE OCCURRENCE OF
ANY BANKRUPTCY EVENT ALL SUCH OBLIGATIONS SHALL AUTOMATICALLY TERMINATE WITHOUT
ANY ACTION ON THE PART OF ADMINISTRATIVE AGENT OR LENDERS).

 

(II)                                  ACCELERATION.  ADMINISTRATIVE AGENT MAY
DECLARE THE PRINCIPAL OF AND INTEREST AND ANY PREMIUM ON THE NOTE, AND ALL OTHER
OBLIGATIONS TO BE FORTHWITH DUE AND PAYABLE, WHEREUPON ALL SUCH AMOUNTS SHALL BE
IMMEDIATELY DUE AND PAYABLE, WITHOUT PRESENTMENT, DEMAND FOR PAYMENT, PROTEST
AND NOTICE OF PROTEST, NOTICE OF DISHONOR, NOTICE OF ACCELERATION, NOTICE OF
INTENT TO ACCELERATE OR OTHER NOTICE OR FORMALITY OF ANY KIND, ALL OF WHICH ARE
HEREBY EXPRESSLY WAIVED; PROVIDED, HOWEVER, THAT UPON THE OCCURRENCE OF ANY
BANKRUPTCY EVENT ALL SUCH PRINCIPAL, INTEREST, PREMIUM AND OTHER OBLIGATIONS
SHALL AUTOMATICALLY BECOME DUE AND PAYABLE WITHOUT ANY ACTION ON THE PART OF
ADMINISTRATIVE AGENT.

 

(III)                               EXERCISE OTHER RIGHTS.  ADMINISTRATIVE AGENT
MAY EXERCISE ANY OR ALL OF THE REMEDIES OF A SECURED PARTY UNDER APPLICABLE LAW
AND IN EQUITY, INCLUDING, BUT NOT LIMITED TO, THE UCC, AND ANY OR ALL OF ITS
OTHER RIGHTS AND REMEDIES UNDER THE LOAN DOCUMENTS.

 

(IV)                              POSSESSION.  ADMINISTRATIVE AGENT MAY REQUIRE
BORROWER TO MAKE THE COLLATERAL AND THE RECORDS PERTAINING TO THE COLLATERAL
AVAILABLE TO ADMINISTRATIVE AGENT AT A PLACE DESIGNATED BY ADMINISTRATIVE AGENT
WHICH IS REASONABLY CONVENIENT TO BORROWER, OR MAY TAKE POSSESSION OF THE
COLLATERAL AND THE RECORDS PERTAINING TO THE COLLATERAL WITHOUT THE USE OF ANY
JUDICIAL PROCESS AND WITHOUT ANY PRIOR NOTICE TO BORROWER TO THE EXTENT
PERMITTED BY APPLICABLE LAW.  ADMINISTRATIVE AGENT’S SOLE DUTY WITH RESPECT TO
THE CUSTODY, SAFE-KEEPING, AND PHYSICAL PRESERVATION OF ANY COLLATERAL IN ITS
POSSESSION, UNDER SECTION 9.207 OF THE UCC OR OTHERWISE, SHALL BE TO DEAL WITH
SUCH COLLATERAL IN THE SAME MANNER AS ADMINISTRATIVE AGENT DEALS WITH SIMILAR
PROPERTY FOR ITS OWN ACCOUNT.

 

(V)                                 SALE.  ADMINISTRATIVE AGENT MAY SELL ANY OR
ALL OF THE COLLATERAL AT PUBLIC OR PRIVATE SALE UPON SUCH TERMS AND CONDITIONS
AS ADMINISTRATIVE AGENT MAY REASONABLY DEEM PROPER, WHETHER FOR CASH, ON CREDIT,
OR FOR FUTURE DELIVERY, IN BULK OR IN LOTS. ADMINISTRATIVE AGENT MAY PURCHASE
ANY COLLATERAL AT ANY SUCH SALE FREE OF BORROWER’S RIGHT OF REDEMPTION, IF ANY,
WHICH BORROWER EXPRESSLY WAIVES TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW. 
THE NET PROCEEDS OF ANY SUCH PUBLIC OR PRIVATE SALE AND ALL OTHER AMOUNTS
ACTUALLY COLLECTED OR RECEIVED BY ADMINISTRATIVE AGENT PURSUANT HERETO, AFTER
DEDUCTING ALL COSTS AND EXPENSES INCURRED AT ANY TIME IN THE COLLECTION OF THE
OBLIGATIONS AND IN THE PROTECTION, COLLECTION AND SALE OF THE COLLATERAL, WILL
BE APPLIED TO THE PAYMENT OF THE OBLIGATIONS, WITH ANY REMAINING PROCEEDS PAID
TO BORROWER OR WHOEVER ELSE MAY BE ENTITLED THERETO, AND WITH BORROWER AND EACH
GUARANTOR (SUBJECT, HOWEVER, TO APPROPRIATE LIMITATIONS, IF ANY, CONTAINED IN
EACH RESPECTIVE GUARANTY) REMAINING LIABLE FOR ANY AMOUNT REMAINING UNPAID AFTER
SUCH APPLICATION.  ADMINISTRATIVE

 

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AGENT HAS NO OBLIGATION TO REPAIR, REFURBISH OR OTHERWISE PREPARE THE COLLATERAL
FOR SALE, LEASE OR OTHER USE OR DISPOSITION AS AUTHORIZED HEREIN.  IF
ADMINISTRATIVE AGENT SELLS ANY COLLATERAL UPON CREDIT, BORROWER WILL RECEIVE
CREDIT AGAINST THE OBLIGATIONS ONLY FOR CASH PAYMENTS MADE BY THE PURCHASER TO
ADMINISTRATIVE AGENT.  IF THE PURCHASER FAILS TO PAY THE PURCHASE PRICE, THEN
ADMINISTRATIVE AGENT MAY RESELL THE COLLATERAL, TO THE EXTENT PERMITTED BY
APPLICABLE LAW.

 

(VI)                              DELIVERY OF CASH, CHECKS, ETC.  ADMINISTRATIVE
AGENT MAY REQUIRE BORROWER TO FORTHWITH UPON RECEIPT, TRANSMIT AND DELIVER TO
ADMINISTRATIVE AGENT IN THE FORM RECEIVED, ALL CASH, CHECKS, DRAFTS AND OTHER
INSTRUMENTS FOR THE PAYMENT OF MONEY (PROPERLY ENDORSED, WHERE REQUIRED, SO THAT
SUCH ITEMS MAY BE COLLECTED BY ADMINISTRATIVE AGENT) WHICH MAY BE RECEIVED BY
BORROWER AT ANY TIME IN FULL OR PARTIAL PAYMENT OF ANY COLLATERAL, AND REQUIRE
THAT BORROWER NOT COMMINGLE ANY SUCH ITEMS WHICH MAY BE SO RECEIVED BY BORROWER
WITH ANY OTHER OF ITS FUNDS OR PROPERTY BUT INSTEAD HOLD THEM SEPARATE AND APART
AND IN TRUST FOR ADMINISTRATIVE AGENT UNTIL DELIVERY IS MADE TO ADMINISTRATIVE
AGENT.

 

(VII)                           NOTIFICATION OF ACCOUNT DEBTORS.  ADMINISTRATIVE
AGENT MAY NOTIFY ANY ACCOUNT DEBTOR OF BORROWER THAT ITS ACCOUNT OR CHATTEL
PAPER HAS BEEN ASSIGNED TO ADMINISTRATIVE AGENT AND DIRECT SUCH ACCOUNT DEBTOR
TO MAKE PAYMENT DIRECTLY TO ADMINISTRATIVE AGENT OF ALL AMOUNTS DUE OR BECOMING
DUE WITH RESPECT TO SUCH ACCOUNT OR CHATTEL PAPER; AND ADMINISTRATIVE AGENT MAY
ENFORCE PAYMENT AND COLLECT, BY LEGAL PROCEEDINGS OR OTHERWISE, SUCH ACCOUNT OR
CHATTEL PAPER.

 

(VIII)                        CONTROL OF COLLATERAL.  ADMINISTRATIVE AGENT MAY
OTHERWISE TAKE CONTROL IN ANY LAWFUL MANNER OF ANY CASH OR NON-CASH ITEMS OF
PAYMENT OR PROCEEDS OF COLLATERAL AND OF ANY REJECTED, RETURNED, STOPPED IN
TRANSIT OR REPOSSESSED GOODS INCLUDED IN THE COLLATERAL AND ENDORSE BORROWER’S
NAME ON ANY ITEM OF PAYMENT ON OR PROCEEDS OF THE COLLATERAL.

 

(B)                                 POWER OF ATTORNEY.  EFFECTIVE UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, BORROWER HEREBY
IRREVOCABLY APPOINTS ADMINISTRATIVE AGENT AS ITS ATTORNEY-IN-FACT, WITH FULL
POWER OF SUBSTITUTION, IN ITS PLACE AND STEAD AND IN ITS NAME OR IN THE NAME OF
ADMINISTRATIVE AGENT, TO FROM TIME TO TIME IN ADMINISTRATIVE AGENT’S SOLE
DISCRETION TAKE ANY ACTION AND TO EXECUTE ANY INSTRUMENT WHICH ADMINISTRATIVE
AGENT MAY DEEM NECESSARY OR ADVISABLE TO REALIZE UPON THE COLLATERAL, INCLUDING,
BUT NOT LIMITED TO, TO RECEIVE, ENDORSE AND COLLECT ALL CHECKS, DRAFTS AND OTHER
INSTRUMENTS FOR THE PAYMENT OF MONEY MADE PAYABLE TO BORROWER INCLUDED IN THE
COLLATERAL.  THE POWERS OF ATTORNEY GRANTED TO ADMINISTRATIVE AGENT IN THIS LOAN
AGREEMENT ARE COUPLED WITH AN INTEREST AND ARE IRREVOCABLE UNTIL THE OBLIGATIONS
HAVE BEEN INDEFEASIBLY PAID IN FULL AND FULLY SATISFIED AND ALL OBLIGATIONS OF
ADMINISTRATIVE AGENT UNDER THIS LOAN AGREEMENT HAVE BEEN TERMINATED.

 

(C)                                  REMEDIES ARE SEVERABLE AND CUMULATIVE.  ALL
RIGHTS AND REMEDIES OF ADMINISTRATIVE AGENT HEREIN ARE SEVERABLE AND CUMULATIVE
AND IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES AVAILABLE IN THE NOTE, THE
OTHER LOAN DOCUMENTS, AT LAW OR IN EQUITY, AND ANY ONE OR MORE OF SUCH RIGHTS
AND REMEDIES MAY BE EXERCISED SIMULTANEOUSLY OR SUCCESSIVELY.

 

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(D)                                 NO MARSHALLING.  ADMINISTRATIVE AGENT SHALL
BE UNDER NO DUTY OR OBLIGATION TO (I) PRESERVE, PROTECT OR MARSHALL THE
COLLATERAL; (II) PRESERVE OR PROTECT THE RIGHTS OF ANY CREDIT PARTY OR ANY OTHER
PERSON CLAIMING AN INTEREST IN THE COLLATERAL; (III) REALIZE UPON THE COLLATERAL
IN ANY PARTICULAR ORDER OR MANNER, (IV) SEEK REPAYMENT OF ANY OBLIGATIONS FROM
ANY PARTICULAR SOURCE; (V) PROCEED OR NOT PROCEED AGAINST ANY CREDIT PARTY
PURSUANT TO ANY GUARANTY OR SECURITY AGREEMENT OR AGAINST ANY CREDIT PARTY UNDER
THE LOAN DOCUMENTS, WITH OR WITHOUT ALSO REALIZING ON THE COLLATERAL;
(VI) PERMIT ANY SUBSTITUTION OR EXCHANGE OF ALL OR ANY PART OF THE COLLATERAL;
OR (VII) RELEASE ANY PART OF THE COLLATERAL FROM THE LOAN AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS (EXCEPT TO THE EXTENT SUCH COLLATERAL IS PERMITTED TO
BE SOLD OR OTHERWISE DISPOSED OF HEREUNDER, IN WHICH CASE, EACH LENDER HEREBY
AUTHORIZES ADMINISTRATIVE AGENT, AND ADMINISTRATIVE AGENT HEREBY AGREES, TO
RELEASE SUCH COLLATERAL), WHETHER OR NOT SUCH SUBSTITUTION OR RELEASE WOULD
LEAVE ADMINISTRATIVE AGENT ADEQUATELY SECURED.

 

(E)                                  NOTICES.  TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY WAIVES AND RELEASES
ADMINISTRATIVE AGENT OF AND FROM ANY AND ALL LIABILITIES AND PENALTIES FOR
FAILURE OF ADMINISTRATIVE AGENT TO COMPLY WITH ANY STATUTORY OR OTHER
REQUIREMENT IMPOSED UPON ADMINISTRATIVE AGENT RELATING TO NOTICES OF SALE,
HOLDING OF SALE OR REPORTING OF ANY SALE, AND BORROWER WAIVES ALL RIGHTS OF
REDEMPTION OR REINSTATEMENT FROM ANY SUCH SALE.  ANY NOTICES REQUIRED UNDER
APPLICABLE LAW SHALL BE REASONABLY AND PROPERLY GIVEN TO BORROWER IF GIVEN BY
ANY OF THE METHODS PROVIDED HEREIN AT LEAST TEN (10) DAYS PRIOR TO TAKING
ACTION.  ADMINISTRATIVE AGENT SHALL HAVE THE RIGHT TO POSTPONE OR ADJOURN ANY
SALE OR OTHER DISPOSITION OF COLLATERAL AT ANY TIME WITHOUT GIVING NOTICE OF ANY
SUCH POSTPONED OR ADJOURNED DATE.  IN THE EVENT ADMINISTRATIVE AGENT SEEKS TO
TAKE POSSESSION OF ANY OR ALL OF THE COLLATERAL BY COURT PROCESS, BORROWER
FURTHER IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY BONDS AND
ANY SURETY OR SECURITY RELATING THERETO REQUIRED BY ANY STATUTE, COURT RULE OR
OTHERWISE AS AN INCIDENT TO SUCH POSSESSION, AND ANY DEMAND FOR POSSESSION PRIOR
TO THE COMMENCEMENT OF ANY SUIT OR ACTION.

 

(F)                                    APPLICATION OF FUNDS.  AFTER THE EXERCISE
OF REMEDIES PROVIDED FOR IN SECTION 3.6 ABOVE (OR AFTER THE LOANS HAVE
AUTOMATICALLY BECOME IMMEDIATELY DUE AND PAYABLE), ANY AMOUNTS RECEIVED ON
ACCOUNT OF THE OBLIGATIONS SHALL BE APPLIED BY ADMINISTRATIVE AGENT IN THE
FOLLOWING ORDER:

 

FIRST, TO PAYMENT OF THAT PORTION OF THE OBLIGATIONS CONSTITUTING FEES,
INDEMNITIES, EXPENSES AND OTHER AMOUNTS (INCLUDING FEES, CHARGES AND
DISBURSEMENTS OF COUNSEL TO ADMINISTRATIVE AGENT AND AMOUNTS PAYABLE UNDER
ARTICLE II) PAYABLE TO ADMINISTRATIVE AGENT IN ITS CAPACITY AS SUCH;

 

SECOND, TO PAYMENT OF THAT PORTION OF THE OBLIGATIONS CONSTITUTING FEES,
INDEMNITIES AND OTHER AMOUNTS (OTHER THAN PRINCIPAL AND INTEREST) PAYABLE TO THE
LENDERS (INCLUDING FEES, CHARGES AND DISBURSEMENTS OF COUNSEL TO THE RESPECTIVE
LENDERS AND AMOUNTS PAYABLE UNDER ARTICLE II), RATABLY AMONG THEM IN PROPORTION
TO THE RESPECTIVE AMOUNTS DESCRIBED IN THIS CLAUSE SECOND PAYABLE TO THEM;

 

THIRD, TO PAYMENT OF THAT PORTION OF THE OBLIGATIONS CONSTITUTING ACCRUED AND
UNPAID INTEREST ON THE LOANS AND OTHER OBLIGATIONS, RATABLY AMONG THE

 

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LENDERS IN PROPORTION TO THE RESPECTIVE AMOUNTS DESCRIBED IN THIS CLAUSE THIRD
PAYABLE TO THEM;

 

FOURTH, TO PAYMENT OF THAT PORTION OF THE OBLIGATIONS CONSTITUTING UNPAID
PRINCIPAL OF THE LOANS, RATABLY AMONG THE LENDERS IN PROPORTION TO THE
RESPECTIVE AMOUNTS DESCRIBED IN THIS CLAUSE FOURTH HELD BY THEM; AND

 

LAST, THE BALANCE, IF ANY, AFTER ALL OF THE OBLIGATIONS HAVE BEEN INDEFEASIBLY
PAID IN FULL, TO BORROWER OR AS OTHERWISE REQUIRED BY APPLICABLE LAW.

 

SECTION 3.7                                      ADMINISTRATIVE AGENT.

 

(A)                                  APPOINTMENT AND DUTIES OF ADMINISTRATIVE
AGENT.

 

(I)                                     THE PARTIES HERETO AGREE THAT MERRILL
LYNCH CAPITAL, A DIVISION OF MERRILL LYNCH BUSINESS FINANCIAL SERVICES INC.
SHALL ACT, SUBJECT TO THE TERMS AND CONDITIONS OF THIS SECTION 3.7, AS
ADMINISTRATIVE AGENT AND TO THE EXTENT SET FORTH HEREIN EACH LENDER HEREBY
IRREVOCABLY APPOINTS, AUTHORIZES, EMPOWERS AND DIRECTS ADMINISTRATIVE AGENT TO
TAKE SUCH ACTION ON ITS BEHALF AND TO EXERCISE SUCH POWERS AS ARE SPECIFICALLY
DELEGATED TO ADMINISTRATIVE AGENT HEREIN OR ARE REASONABLY INCIDENTAL THERETO IN
CONNECTION WITH THE ADMINISTRATION OF AND THE ENFORCEMENT OF ANY RIGHTS OR
REMEDIES WITH RESPECT TO THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS.  IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT THE OBLIGATIONS OF
ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS ARE ONLY THOSE EXPRESSLY SET FORTH
IN THIS LOAN AGREEMENT.  ADMINISTRATIVE AGENT SHALL USE REASONABLE DILIGENCE TO
EXAMINE THE FACE OF EACH DOCUMENT RECEIVED BY IT HEREUNDER TO DETERMINE WHETHER
SUCH DOCUMENTS, ON THEIR FACE, APPEAR TO BE WHAT THEY PURPORT TO BE.  HOWEVER,
ADMINISTRATIVE AGENT SHALL NOT UNDER ANY DUTY TO EXAMINE INTO AND PASS UPON THE
VALIDITY OR GENUINENESS OF ANY DOCUMENTS RECEIVED BY IT HEREUNDER AND
ADMINISTRATIVE AGENT SHALL BE ENTITLED TO ASSUME THAT ANY OF THE SAME WHICH
APPEARS REGULAR ON ITS FACE IS GENUINE AND VALID AND WHAT IT PURPORTS TO BE.

 

(II)                                  EXCEPT AS OTHERWISE SET FORTH IN THE
PROVISIONS OF SECTION 3.8(S) OF THIS LOAN AGREEMENT, ADMINISTRATIVE AGENT SHALL
ACT PURSUANT TO THE INSTRUCTIONS OF THE MAJORITY LENDERS IN ALL MATTERS RELATING
TO THE LOAN DOCUMENTS.

 

(B)                                 DISCRETION AND LIABILITY OF ADMINISTRATIVE
AGENT.  SUBJECT TO SECTIONS 3.7(A)(II) ABOVE AND 3.7(C) AND 3.7(E) BELOW,
ADMINISTRATIVE AGENT SHALL BE ENTITLED TO USE ITS DISCRETION WITH RESPECT TO
EXERCISING OR REFRAINING FROM EXERCISING ANY RIGHTS WHICH MAY BE VESTED IN IT
UNDER ANY OF THE LOAN DOCUMENTS OR OTHERWISE, OR WITH RESPECT TO TAKING OR
REFRAINING FROM TAKING ANY ACTION OR ACTIONS WHICH IT MAY BE ABLE TO TAKE UNDER
ANY OF THE LOAN DOCUMENTS.  NEITHER ADMINISTRATIVE AGENT NOR ANY OF ITS
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE LIABLE FOR
ANY ACTION TAKEN OR OMITTED BY IT HEREUNDER OR IN CONNECTION HEREWITH, EXCEPT
FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.  ADMINISTRATIVE AGENT SHALL
INCUR NO LIABILITY UNDER, OR IN RESPECT OF THIS LOAN AGREEMENT OR THE OTHER LOAN
DOCUMENTS BY ACTING UPON A NOTICE, CERTIFICATE, WARRANTY OR OTHER PAPER OR
INSTRUMENT REASONABLY BELIEVED BY IT TO BE GENUINE OR AUTHENTIC OR TO BE SIGNED
BY THE PROPER PARTY OR PARTIES, OR WITH RESPECT TO ANYTHING WHICH IT MAY DO

 

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OR REFRAIN FROM DOING IN THE REASONABLE EXERCISE OF ITS JUDGMENT, OR WHICH MAY
SEEM TO IT TO BE NECESSARY OR DESIRABLE IN THE PREMISES.

 

(C)                                  EVENT OF DEFAULT.

 

(I)                                     ADMINISTRATIVE AGENT SHALL BE ENTITLED
TO ASSUME THAT NO DEFAULT OR EVENT WHICH WOULD CONSTITUTE A DEFAULT AFTER NOTICE
OR LAPSE OF TIME, OR BOTH, HAS OCCURRED AND IS CONTINUING, UNLESS ADMINISTRATIVE
AGENT HAS ACTUAL KNOWLEDGE OF SUCH FACTS OR HAS RECEIVED NOTICE FROM BORROWER OR
A GUARANTOR OR FROM A LENDER IN WRITING THAT SUCH LENDER CONSIDERS THAT A
DEFAULT OR EVENT WHICH WOULD CONSTITUTE A DEFAULT AFTER NOTICE OR LAPSE OF TIME,
OR BOTH, HAS OCCURRED AND IS CONTINUING AND WHICH SPECIFIES THE NATURE THEREOF.

 

(II)                                  IN THE EVENT THAT ADMINISTRATIVE AGENT
SHALL ACQUIRE ACTUAL KNOWLEDGE OF ANY DEFAULT OR EVENT WHICH WOULD CONSTITUTE A
DEFAULT AFTER NOTICE OR LAPSE OF TIME, OR BOTH, OR SHALL HAVE RECEIVED NOTICE
FROM BORROWER, A GUARANTOR OR A LENDER AS PROVIDED IN SECTION 3.7(C)(I) ABOVE,
ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY (EITHER ORALLY, CONFIRMED IN WRITING,
OR IN WRITING) THE LENDERS OF SUCH DEFAULT OR EVENT AND SHALL TAKE SUCH ACTION
AND ASSERT SUCH RIGHTS AS ARE CONTEMPLATED UNDER THIS LOAN AGREEMENT AND IN AN
EMERGENCY, OR IF REQUESTED IN WRITING BY THE MAJORITY LENDERS SHALL, TAKE SUCH
ACTION AND ASSERT SUCH RIGHTS AS ARE CONTEMPLATED UNDER THIS LOAN AGREEMENT.  TO
THE EXTENT NOT OTHERWISE PAID BY BORROWER, ADMINISTRATIVE AGENT SHALL BE
INDEMNIFIED PRO RATA BY THE LENDERS AGAINST ANY LIABILITY OR EXPENSES (EXCEPT
FOR ANY LIABILITY OR EXPENSES CAUSED BY ADMINISTRATIVE AGENT’S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT), INCLUDING, BUT NOT LIMITED TO, TRAVEL EXPENSES AND
EXTERNAL COUNSEL FEES AND EXPENSES, INCURRED IN CONNECTION WITH TAKING SUCH
ACTION AS ADMINISTRATIVE AGENT, AND NOT AS A LENDER.  ADMINISTRATIVE AGENT MAY
REFRAIN FROM ACTING IN ACCORDANCE WITH ANY INSTRUCTIONS FROM THE MAJORITY
LENDERS UNTIL IT SHALL HAVE BEEN INDEMNIFIED TO ITS SATISFACTION AGAINST ANY AND
ALL COSTS AND EXPENSES WHICH IT WILL OR MAY EXPEND OR INCUR IN COMPLYING WITH
SUCH INSTRUCTIONS.

 

(D)                                 CONSULTATION.  WHEN ACTING IN CONNECTION
WITH THIS LOAN AGREEMENT, OR THE OTHER LOAN DOCUMENTS, ADMINISTRATIVE AGENT MAY,
WITH THE CONSENT OF THE MAJORITY LENDERS, ENGAGE AND PAY FOR THE ADVICE AND
SERVICES OF ANY LAWYERS, ACCOUNTANTS, SURVEYORS, APPRAISERS OR OTHER EXPERTS
WHOSE ADVICE OR SERVICES MAY TO IT APPEAR NECESSARY, EXPEDIENT OR DESIRABLE AND
ADMINISTRATIVE AGENT SHALL BE ENTITLED TO FULLY RELY UPON ANY OPINION OR SUCH
ADVICE SO OBTAINED.

 

(E)                                  COMMUNICATIONS TO AND FROM ADMINISTRATIVE
AGENT.  WHEN ANY NOTICE, APPROVAL, CONSENT, WAIVER OR OTHER COMMUNICATION OR
ACTION IS REQUIRED OR MAY BE DELIVERED BY THE LENDERS HEREUNDER OR THE OTHER
LOAN DOCUMENTS, ACTION BY ADMINISTRATIVE AGENT (UPON THE DIRECTION, APPROVAL OR
CONSENT OF EACH LENDER, ALL LENDERS OR THE MAJORITY LENDERS, AS APPLICABLE
PURSUANT TO THE REQUIREMENTS SET FORTH IN THIS LOAN AGREEMENT) SHALL BE
EFFECTIVE FOR ALL PURPOSES HEREUNDER.  BORROWER AND THE GUARANTORS MAY RELY ON
ANY COMMUNICATION FROM ADMINISTRATIVE AGENT HEREUNDER OR THE OTHER LOAN
DOCUMENTS, AND NEED NOT INQUIRE INTO THE PROPRIETY OF OR AUTHORIZATION FOR SUCH
COMMUNICATION.  UPON RECEIPT BY ADMINISTRATIVE AGENT FROM BORROWER, THE

 

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GUARANTORS OR ANY LENDER OF ANY COMMUNICATION IT WILL, IN TURN, PROMPTLY FORWARD
SUCH COMMUNICATION TO THE LENDERS; PROVIDED, HOWEVER, THAT ADMINISTRATIVE AGENT
SHALL NOT BE LIABLE FOR ANY COSTS, EXPENSES OR LOSSES ARISING FROM ANY FAILURE
TO SO FORWARD ANY SUCH COMMUNICATION UNLESS CAUSED BY THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF ADMINISTRATIVE AGENT.

 

(F)                                    LIMITATIONS OF AGENCY.  NOTWITHSTANDING
ANYTHING IN THE LOAN DOCUMENTS, EXPRESSED OR IMPLIED, IT IS AGREED BY THE
PARTIES HERETO, THAT ADMINISTRATIVE AGENT WILL ACT UNDER THE LOAN DOCUMENTS AS
ADMINISTRATIVE AGENT SOLELY FOR THE LENDERS AND ONLY TO THE EXTENT SPECIFICALLY
SET FORTH HEREIN, AND WILL, UNDER NO CIRCUMSTANCES, BE CONSIDERED TO BE AN AGENT
OR FIDUCIARY OF ANY NATURE WHATSOEVER IN RESPECT TO ANY OTHER PERSON. 
ADMINISTRATIVE AGENT, IN ITS INDIVIDUAL CAPACITY, MAY GENERALLY ENGAGE IN ANY
BUSINESS WITH BORROWER AND THE GUARANTORS OR ANY OF THEIR AFFILIATES AS IF IT
WAS NOT ADMINISTRATIVE AGENT.

 

(G)                                 NO REPRESENTATIONS OR WARRANTY.

 

(I)                                     NO LENDER (INCLUDING ADMINISTRATIVE
AGENT) MAKES TO ANY OTHER LENDER ANY REPRESENTATION OR ANY WARRANTY, EXPRESSED
OR IMPLIED, OR ASSUMES ANY RESPONSIBILITY WITH RESPECT TO THE LOAN OR THE
EXECUTION, CONSTRUCTION OR ENFORCEABILITY OF THE LOAN DOCUMENTS OR ANY
INSTRUMENT OR AGREEMENT EXECUTED BY BORROWER, THE GUARANTORS OR ANY OTHER PERSON
IN CONNECTION THEREWITH.

 

(II)                                  ADMINISTRATIVE AGENT TAKES NO
RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF ANY INFORMATION CONCERNING
BORROWER AND THE GUARANTORS DISTRIBUTED BY ADMINISTRATIVE AGENT IN CONNECTION
WITH THE LOAN NOR FOR THE TRUTH OF ANY REPRESENTATION OR WARRANTY GIVEN OR MADE
HEREIN, NOR FOR THE VALIDITY, EFFECTIVENESS, ADEQUACY OR ENFORCEABILITY OF THIS
LOAN AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

 

(H)                                 LENDER CREDIT DECISION.  EACH LENDER
ACKNOWLEDGES THAT IT HAS INDEPENDENT OF AND WITHOUT RELIANCE UPON ANY OTHER
LENDER (INCLUDING ADMINISTRATIVE AGENT) OR ANY INFORMATION PROVIDED BY ANY OTHER
LENDER (INCLUDING ADMINISTRATIVE AGENT) AND BASED ON THE FINANCIAL STATEMENTS OF
BORROWER AND THE GUARANTORS AND SUCH OTHER DOCUMENTS AND INFORMATION AS IT HAS
DEEMED APPROPRIATE, MADE ITS OWN CREDIT ANALYSIS AND DECISION TO ENTER INTO THIS
LOAN AGREEMENT.  EACH LENDER ALSO ACKNOWLEDGES THAT IT WILL, INDEPENDENT OF AND
WITHOUT RELIANCE UPON ANY OTHER LENDER (INCLUDING ADMINISTRATIVE AGENT) AND
BASED ON SUCH DOCUMENTS AND INFORMATION AS IT SHALL DEEM APPROPRIATE AT THAT
TIME, CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN TAKING OR NOT TAKING ACTION
UNDER THIS LOAN AGREEMENT AND ANY OTHER DOCUMENTS RELATING THERETO.

 

(I)                                     INDEMNITY.  NOTWITHSTANDING ANY OF THE
PROVISIONS HEREOF, TO THE EXTENT ADMINISTRATIVE AGENT HAS NOT BEEN SO
INDEMNIFIED BY BORROWER, THE LENDERS SHALL SEVERALLY, PRO RATA IN RESPECT OF
THEIR RESPECTIVE COMMITMENTS TO MAKE LOANS, INDEMNIFY ADMINISTRATIVE AGENT
AGAINST ANY AND ALL LOSSES, COSTS, LIABILITIES, DAMAGES OR EXPENSES, INCLUDING
BUT NOT LIMITED TO, REASONABLE TRAVEL EXPENSES AND EXTERNAL COUNSEL’S REASONABLE
FEES AND EXPENSES, ARISING FROM, OR IN CONNECTION WITH, ITS PERFORMANCE AS
ADMINISTRATIVE AGENT HEREUNDER AND NOT CAUSED BY ITS GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

 

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(J)                                     RESIGNATION.  ADMINISTRATIVE AGENT MAY
RESIGN AS SUCH AT ANY TIME UPON AT LEAST THIRTY (30) DAYS’ PRIOR NOTICE TO
BORROWER AND THE LENDERS, PROVIDED THAT SUCH RESIGNATION SHALL NOT TAKE EFFECT
UNTIL A SUCCESSOR AGENT HAS BEEN APPOINTED.  IN THE EVENT OF A RESIGNATION BY
ADMINISTRATIVE AGENT, THE LENDERS (IN CONSULTATION WITH BORROWER, PROVIDED NO
DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING) SHALL PROMPTLY
APPOINT A SUCCESSOR AGENT FROM AMONG THE LENDERS.

 

(K)                                  DISBURSEMENTS AND DISTRIBUTIONS.  ON THE
DATE OF EACH LOAN ADVANCE, ADMINISTRATIVE AGENT SHALL DISBURSE EACH LENDER’S PRO
RATA PORTION OF THE LOAN TO OR AT THE DIRECTION OF BORROWER PURSUANT TO THIS
LOAN AGREEMENT, TO THE EXTENT RECEIVED BY ADMINISTRATIVE AGENT FROM SUCH
LENDER.  ADMINISTRATIVE AGENT SHALL BE RESPONSIBLE FOR PROMPTLY DISTRIBUTING, ON
THE BUSINESS DAY IMMEDIATELY FOLLOWING THE DATE RECEIVED BY ADMINISTRATIVE
AGENT, EACH LENDER’S SHARE OF ALL NET AMOUNTS RECEIVED BY ADMINISTRATIVE AGENT
UNDER ANY OF THE LOAN DOCUMENTS PURSUANT TO THE LOAN AGREEMENT AMONG
ADMINISTRATIVE AGENT AND THE LENDERS DATED THE DATE HEREOF.  EACH LENDER SHALL
BE RESPONSIBLE FOR DESIGNATING BY WRITTEN NOTICE TO ADMINISTRATIVE AGENT THE
ACCOUNT TO WHICH SUCH DISTRIBUTION SHALL BE DEPOSITED.

 

(L)                                     LIMITATION OF SUITS.  ALL RIGHTS OF
ACTION AND CLAIMS UNDER THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS OF THE
LENDERS SHALL BE PROSECUTED AND ENFORCED ONLY BY ADMINISTRATIVE AGENT.  THE
LENDERS AGREE THAT THEY SHALL NOT INDEPENDENTLY INSTITUTE ANY PROCEEDINGS,
JUDICIAL OR OTHERWISE, TO ENFORCE THEIR RIGHTS AGAINST BORROWER UNDER THIS LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS.  HOWEVER, NOTWITHSTANDING ANYTHING
CONTAINED IN THIS SECTION 3.7(L), THE LENDERS SHALL ALWAYS RETAIN THEIR ABILITY
TO RETAIN INDEPENDENT COUNSEL AND TO PROTECT THEIR RIGHTS UNDER THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

(M)                               RIGHT OF SETOFF.  SUBJECT TO THE PROVISIONS OF
SECTION 2.11 HEREOF, UPON THE OCCURRENCE AND DURING THE CONTINUATION OF ANY
EVENT OF DEFAULT, THE LENDERS EACH ARE HEREBY AUTHORIZED AT ANY TIME AND FROM
TIME TO TIME, WITHOUT NOTICE TO BORROWER (ANY SUCH NOTICE BEING EXPRESSLY WAIVED
BY BORROWER), TO SETOFF AND APPLY ANY AND ALL DEPOSITS (GENERAL OR SPECIAL, TIME
OR DEMAND, PROVISIONAL OR FINAL, WHETHER OR NOT SUCH SETOFF RESULTS IN ANY LOSS
OF INTEREST OR OTHER PENALTY, AND INCLUDING WITHOUT LIMITATION ALL CERTIFICATES
OF DEPOSIT) AT ANY TIME HELD BY THE LENDERS AND ALL OF THE INDEBTEDNESS ARISING
IN CONNECTION WITH THIS LOAN AGREEMENT IRRESPECTIVE OF WHETHER OR NOT SUCH
LENDER WILL HAVE MADE ANY DEMAND UNDER THIS LOAN AGREEMENT, THE NOTE OR ANY
OTHER LOAN DOCUMENT.  BORROWER ALSO HEREBY GRANTS TO EACH OF THE LENDERS A
SECURITY INTEREST IN AND HEREBY TRANSFERS, ASSIGNS, SETS OVER AND CONVEYS TO
EACH OF THE LENDERS, AS SECURITY FOR PAYMENT OF THE LOAN, ALL SUCH DEPOSITS,
FUNDS OR PROPERTY OF BORROWER OR INDEBTEDNESS OF ANY LENDER TO BORROWER.  SHOULD
THE RIGHT OF ANY LENDER TO REALIZE FUNDS IN ANY MANNER SET FORTH HEREINABOVE BE
CHALLENGED AND ANY APPLICATION OF SUCH FUNDS BE REVERSED, WHETHER BY COURT ORDER
OR OTHERWISE, THE LENDERS SHALL MAKE RESTITUTION OR REFUND TO BORROWER PRO RATA
IN ACCORDANCE WITH THEIR RESPECTIVE PORTIONS OF THE LOAN.  EACH LENDER AGREES TO
PROMPTLY NOTIFY BORROWER AND ADMINISTRATIVE AGENT AFTER ANY SUCH SETOFF AND
APPLICATION, PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE WILL NOT AFFECT THE
VALIDITY OF SUCH SETOFF AND APPLICATION.  THE RIGHTS OF ADMINISTRATIVE AGENT AND
THE LENDERS UNDER THIS SECTION 3.7(M) ARE IN ADDITION TO OTHER RIGHTS AND
REMEDIES (INCLUDING WITHOUT LIMITATION OTHER RIGHTS OF SETOFF) WHICH
ADMINISTRATIVE AGENT OR THE LENDERS MAY HAVE.  NOTHING CONTAINED HEREIN SHALL
AFFECT THE RIGHT OF ANY LENDER TO EXERCISE, AND RETAIN THE

 

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BENEFITS OF EXERCISING, ANY SUCH RIGHT WITH RESPECT TO ANY OTHER INDEBTEDNESS OR
OBLIGATION OF BORROWER TO SUCH LENDER.

 

SECTION 3.8                                      MISCELLANEOUS.

 

(A)                                  NON-WAIVER.  NO FAILURE OR DELAY ON THE
PART OF ADMINISTRATIVE AGENT IN EXERCISING ANY RIGHT, POWER OR REMEDY PURSUANT
TO THIS LOAN AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS SHALL
OPERATE AS A WAIVER THEREOF, AND NO SINGLE OR PARTIAL EXERCISE OF ANY SUCH
RIGHT, POWER OR REMEDY SHALL PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF, OR
THE EXERCISE OF ANY OTHER RIGHT, POWER OR REMEDY.  EXCEPT AS OTHERWISE EXPRESSLY
PROVIDED HEREIN, NO NOTICE TO OR DEMAND ON BORROWER SHALL IN ANY CASE ENTITLE
BORROWER TO ANY OTHER OR FURTHER NOTICE OR DEMAND IN SIMILAR OR OTHER
CIRCUMSTANCES.

 

(B)                                 DISCLOSURE.  SUBJECT TO SECTION 3.8(C),
BORROWER HEREBY IRREVOCABLY AUTHORIZES ADMINISTRATIVE AGENT AND EACH OF ITS
AFFILIATES, TO AT ANY TIME (WHETHER OR NOT AN EVENT OF DEFAULT SHALL HAVE
OCCURRED) OBTAIN FROM AND DISCLOSE TO EACH OTHER ANY AND ALL FINANCIAL AND OTHER
INFORMATION ABOUT BORROWER.  BORROWER FURTHER IRREVOCABLY AUTHORIZES
ADMINISTRATIVE AGENT TO CONTACT, INVESTIGATE, INQUIRE AND OBTAIN REFERENCES AND
OTHER INFORMATION ON BORROWER FROM CREDIT REPORTING SERVICES AND AGENCIES,
FORMER OR CURRENT CREDITORS, AND OTHER PERSONS AND SOURCES (INCLUDING, WITHOUT
LIMITATION, ANY AFFILIATE OF ADMINISTRATIVE AGENT) AND TO PROVIDE TO ANY
REFERENCES, CREDIT REPORTING SERVICES AND AGENCIES, CREDITORS AND OTHER PERSONS
AND SOURCES (INCLUDING, WITHOUT LIMITATION, AFFILIATES OF ADMINISTRATIVE AGENT)
ALL FINANCIAL, CREDIT AND OTHER INFORMATION OBTAINED BY ADMINISTRATIVE AGENT
RELATING TO BORROWER.

 

(C)                                  CONFIDENTIALITY.  EACH OF ADMINISTRATIVE
AGENT AND THE LENDERS AGREES TO MAINTAIN THE CONFIDENTIALITY OF THE INFORMATION
(AS DEFINED BELOW), EXCEPT THAT INFORMATION MAY BE DISCLOSED (I) 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), (II) TO THE
EXTENT REQUESTED BY ANY REGULATORY AUTHORITY, (III) TO THE EXTENT REQUIRED BY
APPLICABLE LAWS OR REGULATIONS OR BY ANY SUBPOENA OR SIMILAR LEGAL PROCESS,
(IV) TO ANY OTHER PARTY TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, (V) IN
CONNECTION WITH THE EXERCISE OF ANY REMEDIES HEREUNDER OR UNDER ANY OTHER LOAN
DOCUMENT OR ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR THE ENFORCEMENT OF RIGHTS HEREUNDER OR THEREUNDER,
(VI) SUBJECT TO AN AGREEMENT CONTAINING PROVISIONS SUBSTANTIALLY THE SAME AS
THOSE OF THIS SECTION, TO ANY ASSIGNEE OF OR PARTICIPANT IN, OR ANY PROSPECTIVE
ASSIGNEE OF OR PARTICIPANT IN, ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS
AGREEMENT, (VII) WITH THE CONSENT OF BORROWER OR (VIII) TO THE EXTENT SUCH
INFORMATION (A) BECOMES PUBLICLY AVAILABLE OTHER THAN AS A RESULT OF A BREACH OF
THIS SECTION OR (B) BECOMES AVAILABLE TO ADMINISTRATIVE AGENT OR ANY LENDER ON A
NONCONFIDENTIAL BASIS FROM A SOURCE OTHER THAN ANY CREDIT PARTY.  FOR THE
PURPOSES OF THIS SECTION, “INFORMATION” MEANS ALL INFORMATION RECEIVED FROM ANY
CREDIT PARTY RELATING TO BORROWER OR ANY OTHER CREDIT PARTY AND THEIR
BUSINESSES, OTHER THAN ANY SUCH INFORMATION THAT IS AVAILABLE TO ADMINISTRATIVE
AGENT OR ANY LENDER ON A NONCONFIDENTIAL BASIS PRIOR TO DISCLOSURE BY BORROWER
OR ANY OTHER CREDIT PARTY.

 

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(D)                                 COMMUNICATIONS.  DELIVERY OF THE LOAN
AGREEMENT, INSTRUMENT, NOTICE OR OTHER DOCUMENT MAY, AT THE DISCRETION OF
ADMINISTRATIVE AGENT, BE BY ELECTRONIC TRANSMISSION.  EXCEPT AS REQUIRED BY LAW
OR OTHERWISE PROVIDED HEREIN OR IN A WRITING EXECUTED BY THE PARTY TO BE BOUND,
ALL NOTICES DEMANDS, REQUESTS, ACCOUNTINGS, LISTINGS, STATEMENTS, ADVICES OR
OTHER COMMUNICATIONS TO BE GIVEN UNDER THE LOAN DOCUMENTS SHALL BE IN WRITING,
AND SHALL BE SERVED EITHER PERSONALLY, BY DEPOSIT WITH A REPUTABLE OVERNIGHT
COURIER WITH CHARGES PREPAID, OR BY DEPOSIT IN THE UNITED STATES MAIL BY
CERTIFIED MAIL RETURN RECEIPT REQUIRED.  NOTICES MAY BE ADDRESSED TO BORROWER AS
SET FORTH AT ITS ADDRESS SHOWN IN THE PREAMBLE HERETO, OR AT SUCH OTHER ADDRESS
DESIGNATED IN WRITING BY BORROWER OR AT ANY OFFICE TO WHICH BILLING AND ACCOUNT
STATEMENTS ARE SENT; TO ADMINISTRATIVE AGENT AT ITS ADDRESS SHOWN IN THE
PREAMBLE HERETO, OR AT SUCH OTHER ADDRESS DESIGNATED IN WRITING BY
ADMINISTRATIVE AGENT.  ANY SUCH COMMUNICATION SHALL BE DEEMED TO HAVE BEEN GIVEN
UPON, IN THE CASE OF PERSONAL DELIVERY THE DATE OF DELIVERY, ONE BUSINESS DAY
AFTER DEPOSIT WITH AN OVERNIGHT COURIER, TWO (2) BUSINESS DAYS AFTER DEPOSIT IN
THE UNITED STATES BY CERTIFIED MAIL (RETURN RECEIPT REQUIRED), OR RECEIPT OF
ELECTRONIC TRANSMISSION (WHICH SHALL BE PRESUMED TO BE THREE HOURS AFTER THE
TIME OF TRANSMISSION UNLESS AN ERROR MESSAGE IS RECEIVED BY THE SENDER), EXCEPT
THAT ANY NOTICE OF CHANGE OF ADDRESS SHALL NOT BE EFFECTIVE UNTIL ACTUALLY
RECEIVED.

 

(E)                                  COSTS AND EXPENSES.  BORROWER AGREES TO PAY
ON DEMAND ALL REASONABLE FEES, COSTS AND EXPENSES IN CONNECTION (I) WITH THE
PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, AMENDMENT AND ENFORCEMENT OF
THIS LOAN AGREEMENT, THE NOTE, THE OTHER LOAN DOCUMENTS AND ANY OTHER DOCUMENTS
TO BE DELIVERED HEREUNDER AND THEREUNDER (INCLUDING, WITHOUT LIMITATION, THE
APPRAISAL AND INSPECTION REPORTS REQUIRED TO BE PAID BY IT HEREUNDER) AND ANY
AMENDMENT, MODIFICATION OR SUPPLEMENT HERETO OR THERETO, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND OUT-OF-POCKET EXPENSES OF COUNSEL FOR THE
LENDERS AND ADMINISTRATIVE AGENT, AND ANY SPECIAL COUNSEL ASSOCIATED WITH THEM,
AND WITH RESPECT THERETO AND THE FILING OF ANY DOCUMENT OR INSTRUMENT IN
CONNECTION WITH ANY OF THE FOREGOING, (II) WITH RESPECT TO REASONABLE FEES AND
OUT OF POCKET EXPENSES OF COUNSEL FOR ADVISING THE LENDERS AND ADMINISTRATIVE
AGENT AS TO THEIR RIGHTS AND RESPONSIBILITIES UNDER THIS LOAN AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AFTER A DEFAULT OR EVENT OF DEFAULT, OR BOTH,
SHALL HAVE OCCURRED, AND (III) WITH ANY FILING OR RECORDING OF ANY DOCUMENT OR
INSTRUMENT.  BORROWER HAS HERETOFORE DELIVERED TO ADMINISTRATIVE AGENT A DEPOSIT
IN THE AMOUNT OF $250,000.00, TO BE APPLIED AGAINST COSTS AND EXPENSES DESCRIBED
IN THIS SECTION.

 

(F)                                    RIGHT TO PERFORM OBLIGATIONS.  IF
BORROWER SHALL FAIL TO DO ANY ACT OR THING WHICH IT HAS COVENANTED TO DO UNDER
THIS LOAN AGREEMENT OR ANY OF THE LOAN DOCUMENTS, OR ANY REPRESENTATION OR
WARRANTY ON THE PART OF BORROWER CONTAINED IN THIS LOAN AGREEMENT OR ANY OF THE
LOAN DOCUMENTS SHALL BE BREACHED, THEN ADMINISTRATIVE AGENT MAY, IN ITS SOLE
DISCRETION, AFTER FIVE (5) BUSINESS DAYS WRITTEN NOTICE IS SENT TO BORROWER (OR
SUCH LESSER NOTICE, INCLUDING NO NOTICE, AS IS REASONABLE UNDER THE
CIRCUMSTANCES), DO THE SAME OR CAUSE IT TO BE DONE OR REMEDY ANY SUCH BREACH,
AND MAY EXPEND ITS FUNDS FOR SUCH PURPOSE.  ANY AND ALL REASONABLE AMOUNTS SO
EXPENDED BY ADMINISTRATIVE AGENT SHALL BE REPAYABLE TO ADMINISTRATIVE AGENT BY
BORROWER UPON DEMAND, WITH INTEREST AT THE INTEREST RATE DURING THE PERIOD FROM
AND INCLUDING THE DATE FUNDS ARE SO EXPENDED BY ADMINISTRATIVE AGENT TO THE DATE
OF REPAYMENT, AND ALL SUCH AMOUNTS SHALL BE ADDITIONAL OBLIGATIONS.  THE PAYMENT
OR PERFORMANCE BY ADMINISTRATIVE AGENT OF ANY OF BORROWER’S OBLIGATIONS
HEREUNDER SHALL NOT RELIEVE BORROWER OF SAID OBLIGATIONS OR OF THE

 

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CONSEQUENCES OF HAVING FAILED TO PAY OR PERFORM THE SAME, AND SHALL NOT WAIVE OR
BE DEEMED A CURE OF ANY DEFAULT.

 

(G)                                 FURTHER ASSURANCES.  BORROWER AGREES TO DO
SUCH FURTHER ACTS AND THINGS AND TO EXECUTE AND DELIVER TO ADMINISTRATIVE AGENT
SUCH ADDITIONAL LOAN AGREEMENTS, INSTRUMENTS AND DOCUMENTS AS ADMINISTRATIVE
AGENT MAY REASONABLY REQUIRE OR DEEM ADVISABLE TO ESTABLISH, PERFECT AND
MAINTAIN ADMINISTRATIVE AGENT’S SECURITY INTERESTS AND LIENS UPON THE
COLLATERAL, INCLUDING, BUT NOT LIMITED TO: (I) EXECUTING FINANCING STATEMENTS OR
AMENDMENTS THERETO WHEN AND AS REASONABLY REQUESTED BY ADMINISTRATIVE AGENT; AND
(II) IF IN THE REASONABLE JUDGMENT OF ADMINISTRATIVE AGENT IT IS REQUIRED BY
LOCAL LAW, CAUSING THE OWNERS AND/OR MORTGAGEES OF THE REAL PROPERTY ON WHICH
ANY COLLATERAL MAY BE LOCATED TO EXECUTE AND DELIVER TO ADMINISTRATIVE AGENT
WAIVERS OR SUBORDINATIONS REASONABLY SATISFACTORY TO ADMINISTRATIVE AGENT WITH
RESPECT TO ANY RIGHTS IN SUCH COLLATERAL.

 

(H)                                 INTERPRETATION; CONSTRUCTION.  (I) CAPTIONS
AND SECTION AND PARAGRAPH HEADINGS IN THIS LOAN AGREEMENT ARE INSERTED ONLY AS A
MATTER OF CONVENIENCE, AND SHALL NOT AFFECT THE INTERPRETATION HEREOF; (II) NO
PROVISION OF THIS LOAN AGREEMENT SHALL BE CONSTRUED AGAINST A PARTICULAR PERSON
OR IN FAVOR OF ANOTHER PERSON MERELY BECAUSE OF WHICH PERSON (OR ITS
REPRESENTATIVE) DRAFTED OR SUPPLIED THE WORDING FOR SUCH PROVISION; AND
(III) WHERE THE CONTEXT REQUIRES: (A) USE OF THE SINGULAR OR PLURAL INCORPORATES
THE OTHER, AND (B) PRONOUNS AND MODIFIERS IN THE MASCULINE, FEMININE OR NEUTER
GENDER SHALL BE DEEMED TO REFER TO OR INCLUDE THE OTHER GENDERS.

 

(I)                                     GOVERNING LAW.  THIS LOAN AGREEMENT, THE
NOTE AND, UNLESS OTHERWISE EXPRESSLY PROVIDED THEREIN, EACH OF THE OTHER LOAN
DOCUMENTS, SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF
ILLINOIS, NOT INCLUDING ITS CONFLICT OF LAW PROVISIONS.

 

(J)                                     SEVERABILITY OF PROVISIONS.  WHENEVER
POSSIBLE, EACH PROVISION OF THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW.  ANY PROVISION OF THIS LOAN AGREEMENT, THE NOTE OR ANY OF THE
OTHER LOAN DOCUMENTS WHICH IS PROHIBITED OR UNENFORCEABLE IN ANY JURISDICTION
SHALL, AS TO SUCH JURISDICTION, BE INEFFECTIVE ONLY TO THE EXTENT OF SUCH
PROHIBITION OR UNENFORCEABILITY WITHOUT INVALIDATING THE REMAINING PROVISIONS OF
THIS LOAN AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS OR AFFECTING THE
VALIDITY OR ENFORCEABILITY OF SUCH PROVISION IN ANY OTHER JURISDICTION.

 

(K)                                  TERM.  THIS LOAN AGREEMENT SHALL BECOME
EFFECTIVE WHEN EXECUTED BY ADMINISTRATIVE AGENT AND WHEN IT SHALL HAVE RECEIVED
COUNTERPARTS HEREOF, WHEN TAKEN TOGETHER, BEAR THE SIGNATURES OF THE OTHER
PARTIES HERETO, AND SUBJECT TO THE TERMS HEREOF, SHALL CONTINUE IN EFFECT SO
LONG THEREAFTER AS THERE SHALL BE ANY MONEYS OWING HEREUNDER OR UNDER THE NOTE,
OR THERE SHALL BE ANY OTHER OBLIGATIONS OUTSTANDING. BORROWER HEREBY WAIVES
NOTICE OF ACCEPTANCE OF THIS LOAN AGREEMENT BY ADMINISTRATIVE AGENT.

 

(L)                                     EXHIBITS.  THE EXHIBITS TO THIS LOAN
AGREEMENT ARE HEREBY INCORPORATED AND MADE A PART HEREOF AND ARE AN INTEGRAL
PART OF THIS LOAN AGREEMENT.

 

(M)                               COUNTERPARTS; FACSIMILES.  THIS LOAN AGREEMENT
MAY BE EXECUTED IN ONE OR MORE COUNTERPARTS WHICH, WHEN TAKEN TOGETHER,
CONSTITUTE ONE AND THE SAME LOAN

 

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AGREEMENT.  SIGNATURES TRANSMITTED BY FACSIMILE OR OTHER ELECTRONIC MEANS SHALL
BE EFFECTIVE AS ORIGINALS.

 

(N)                                 JURISDICTION; WAIVER.  BORROWER ACKNOWLEDGES
THAT THIS LOAN AGREEMENT IS BEING ACCEPTED BY ADMINISTRATIVE AGENT AND LENDERS
IN PARTIAL CONSIDERATION OF ADMINISTRATIVE AGENT’S AND LENDERS’ RIGHT AND
OPTION, IN THEIR SOLE DISCRETION, TO ENFORCE THE LOAN DOCUMENTS IN EITHER THE
STATE OF ILLINOIS OR IN ANY OTHER JURISDICTION WHERE CUSTOMER OR ANY COLLATERAL
MAY BE LOCATED.  BORROWER IRREVOCABLY SUBMITS ITSELF TO JURISDICTION IN THE
STATE OF ILLINOIS AND VENUE IN ANY STATE OR FEDERAL COURT IN THE COUNTY OF COOK
FOR SUCH PURPOSES, AND BORROWER WAIVES ANY AND ALL RIGHTS TO CONTEST SAID
JURISDICTION AND VENUE AND THE CONVENIENCE OF ANY SUCH FORUM, AND ANY AND ALL
RIGHTS TO REMOVE SUCH ACTION FROM STATE TO FEDERAL COURT.  BORROWER FURTHER
WAIVES ANY RIGHTS TO COMMENCE ANY ACTION AGAINST LENDER IN ANY JURISDICTION
EXCEPT IN THE COUNTY OF COOK AND STATE OF ILLINOIS.  BORROWER AGREES THAT ALL
SUCH SERVICE OF PROCESS SHALL BE MADE BY MAIL OR MESSENGER DIRECTED TO IT IN THE
SAME MANNER AS PROVIDED FOR NOTICES TO BORROWER IN THIS LOAN AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT OR THREE (3) DAYS AFTER THE SAME SHALL HAVE BEEN POSTED TO BORROWER OR
BORROWER’S AGENT.  NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT OF
ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF ADMINISTRATIVE AGENT OR ANY LENDER TO
BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN THE COURTS OF
ANY OTHER JURISDICTION.

 

(O)                                 JURY WAIVER.  ADMINISTRATIVE AGENT, LENDERS
AND BORROWER HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES
AGAINST THE OTHER PARTY WITH RESPECT TO ANY MATTER RELATING TO, ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THE LOAN, THE OBLIGATIONS, THIS LOAN AGREEMENT, ANY
OF THE OTHER LOAN DOCUMENTS AND/OR ANY OF THE TRANSACTIONS WHICH ARE THE SUBJECT
MATTER OF THIS LOAN AGREEMENT.

 

(P)                                 SURVIVAL.  ALL REPRESENTATIONS, WARRANTIES,
AGREEMENTS AND COVENANTS CONTAINED IN THE LOAN DOCUMENTS SHALL SURVIVE THE
SIGNING AND DELIVERY OF THE LOAN DOCUMENTS, AND ALL OF THE WAIVERS MADE AND
INDEMNIFICATION OBLIGATIONS UNDERTAKEN BY BORROWER SHALL SURVIVE THE
TERMINATION, DISCHARGE OR CANCELLATION OF THE LOAN DOCUMENTS.

 

(Q)                                 BORROWER’S ACKNOWLEDGMENTS.  BORROWER
ACKNOWLEDGES THAT BORROWER (I) HAS HAD AMPLE OPPORTUNITY TO CONSULT WITH COUNSEL
AND SUCH OTHER PARTIES AS DEEMED

 

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ADVISABLE PRIOR TO SIGNING AND DELIVERING THIS LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS; (II) UNDERSTANDS THE PROVISIONS OF THIS LOAN AGREEMENT AND THE OTHER
LOAN DOCUMENTS, INCLUDING ALL WAIVERS CONTAINED THEREIN; AND (III) SIGNS AND
DELIVERS THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS FREELY AND
VOLUNTARILY, WITHOUT DURESS OR COERCION.

 

(R)                                    CUSTOMER IDENTIFICATION — USA PATRIOT ACT
NOTICE; OFAC AND BANK SECRECY ACT.  ADMINISTRATIVE AGENT HEREBY NOTIFIES
BORROWER AND EACH CREDIT PARTY THAT PURSUANT TO THE REQUIREMENTS OF THE USA
PATRIOT ACT, AND ADMINISTRATIVE AGENT’S POLICIES AND PRACTICES, ADMINISTRATIVE
AGENT IS REQUIRED TO OBTAIN, VERIFY AND RECORD CERTAIN INFORMATION AND
DOCUMENTATION THAT IDENTIFIES BORROWER AND EACH CREDIT PARTY, WHICH INFORMATION
INCLUDES THE NAME AND ADDRESS OF BORROWER AND EACH CREDIT PARTY AND SUCH OTHER
INFORMATION THAT WILL ALLOW ADMINISTRATIVE AGENT TO IDENTIFY BORROWER AND EACH
CREDIT PARTY IN ACCORDANCE WITH THE USA PATRIOT ACT.  IN ADDITION, BORROWER
SHALL (A) ENSURE THAT NO PERSON WHO OWNS A CONTROLLING INTEREST IN OR OTHERWISE
CONTROLS BORROWER OR ANY SUBSIDIARY OF BORROWER IS OR SHALL BE LISTED ON THE
SPECIALLY DESIGNATED NATIONALS AND BLOCKED PERSON LIST OR OTHER SIMILAR LISTS
MAINTAINED BY THE OFFICE OF FOREIGN ASSETS CONTROL (“OFAC”), THE DEPARTMENT OF
THE TREASURY OR INCLUDED IN ANY EXECUTIVE ORDERS, (B) NOT USE OR PERMIT THE USE
OF THE PROCEEDS OF THE LOAN TO VIOLATE ANY OF THE FOREIGN ASSET CONTROL
REGULATIONS OF OFAC OR ANY ENABLING STATUTE OR EXECUTIVE ORDER RELATING THERETO,
AND (C) COMPLY, AND CAUSE ITS SUBSIDIARIES TO COMPLY, WITH ALL APPLICABLE LAWS.

 

(S)                                  AMENDMENT.

 

(I)                                     NEITHER THIS LOAN AGREEMENT NOR ANY
OTHER LOAN DOCUMENT, NOR ANY PROVISION HEREOF OR THEREOF, INCLUDING WITHOUT
LIMITATION THIS SECTION 3.8(S), MAY BE AMENDED, MODIFIED, WAIVED, DISCHARGED OR
TERMINATED, OR ANY CONSENT RELATED THERETO GRANTED, ORALLY, BUT ONLY BY AN
INSTRUMENT IN WRITING SIGNED BY BORROWER AND MAJORITY LENDERS; PROVIDED,
HOWEVER, THAT NO SUCH AMENDMENT, MODIFICATION, WAIVER, DISCHARGE, TERMINATION OR
CONSENT SHALL, WITHOUT THE CONSENT OF EACH LENDER (A) EXTEND THE MATURITY DATE,
EXTEND THE TIME OF PAYMENT FOR OR REDUCE THE AMOUNT OF ANY SCHEDULED PRINCIPAL
REPAYMENT, OR REDUCE THE RATE OR EXTEND THE TIME OF PAYMENT OF INTEREST ON THE
LOAN OR NOTE (EXCEPT THAT ADMINISTRATIVE AGENT MAY, IN ITS DISCRETION, WITHOUT
THE CONSENT OF ANY OF THE LENDERS, BUT UPON NOTICE TO THE LENDERS, SO LONG AS NO
OTHER DEFAULT THEN EXISTS HEREUNDER, WAIVE (I) THE APPLICABILITY OF UP TO TWO
(2) LATE CHARGES DURING THE TERM OF THE LOAN, SO LONG AS THE PAYMENT TO WHICH
SUCH LATE CHARGE RELATES WAS PAID WITHIN TEN (10) DAYS AFTER SUCH PAYMENT WAS
DUE AND (II) THE APPLICABILITY OF A DEFAULT RATE INCREASE FOR UP TO THIRTY (30)
DAYS IF BORROWER HAS PAID A LATE CHARGE WITH RESPECT TO THE PAST-DUE PAYMENT
GIVING RISE TO SUCH OTHERWISE INCREASED INTEREST RATE) OR REDUCE THE PRINCIPAL
AMOUNT THEREOF, (B) RELEASE ANY RIG OR OTHER MATERIAL AMOUNT OF COLLATERAL FOR
THE LOAN (EXCEPT AS EXPRESSLY PROVIDED IN THE LOAN DOCUMENTS), (C) AMEND, MODIFY
OR WAIVE ANY PROVISION OF THIS SECTION 3.8(S), (D) CHANGE THE PERCENTAGE
SPECIFIED IN THE DEFINITION OF MAJORITY LENDERS, (E) CONSENT TO THE ASSIGNMENT
OR TRANSFER BY BORROWER OF ANY OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS, (F) AMEND, MODIFY OR WAIVE ANY PROVISION
IN THIS LOAN AGREEMENT OR IN ANY OTHER LOAN DOCUMENT TO THE EXTENT PROVIDING FOR
PAYMENTS OR PREPAYMENTS ON THE NOTE

 

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TO BE APPLIED PRO RATA AMONG THE LENDERS, OR (G) RELEASE ANY GUARANTOR FROM ITS
GUARANTY (EXCEPT AS SET FORTH IN ITS GUARANTY); PROVIDED, FURTHER, THAT NO SUCH
AMENDMENT, MODIFICATION, WAIVER, DISCHARGE, TERMINATION OR CONSENT SHALL
(I) INCREASE THE LOAN COMMITMENT OF ANY LENDER OVER THE AMOUNT THEREOF THEN IN
EFFECT WITHOUT THE CONSENT OF SUCH LENDER OR (II) WITHOUT THE CONSENT OF
ADMINISTRATIVE AGENT, AMEND, MODIFY OR WAIVE ANY PROVISION RELATING TO THE
RIGHTS OR OBLIGATIONS OF ADMINISTRATIVE AGENT.

 

(II)                                  THIS LOAN AGREEMENT SHALL BE BINDING UPON
AND INURE TO THE BENEFIT OF BORROWER, THE GUARANTORS, ADMINISTRATIVE AGENT AND
THE LENDERS, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS, EXCEPT THAT BORROWER
AND THE GUARANTORS SHALL NOT HAVE THE RIGHT TO ASSIGN THEIR RIGHTS HEREUNDER OR
ANY INTEREST HEREIN WITHOUT THE PRIOR WRITTEN CONSENT OF ADMINISTRATIVE AGENT
AND ALL THE LENDERS.

 

(T)                                    ASSIGNMENTS AND PARTICIPATIONS.

 

(I)                                     EACH LENDER SHALL HAVE THE RIGHT TO
ASSIGN ALL OR ANY PORTION OF ITS PORTION OF THE LOAN OUTSTANDING UNDER THIS LOAN
AGREEMENT OR THE NOTE TO ANY ELIGIBLE ASSIGNEE, SO LONG AS, AT LEAST FIVE
(5) BUSINESS DAYS PRIOR TO THE EFFECTIVENESS OF SUCH ASSIGNMENT (EXCEPT IN THE
CASE OF A RELATED LENDER ASSIGNMENT, WHICH SHALL BE GOVERNED BY THE PROVISIONS
OF SECTION 3.8(T)(II) BELOW) (A) AN ASSIGNMENT AND ACCEPTANCE WITH RESPECT TO
SUCH ASSIGNMENT IS DELIVERED TO ADMINISTRATIVE AGENT AND (B) THE ASSIGNING
LENDER OR THE ASSIGNEE PAYS TO ADMINISTRATIVE AGENT A TRANSFER FEE IN AN AMOUNT
EQUAL TO $3,500.00 (THE “ASSIGNMENT FEE”), AT WHICH TIME SUCH ELIGIBLE ASSIGNEE
SHALL BECOME ENTITLED TO THE BENEFITS, AND SUBJECT TO THE REQUIREMENTS AND
OBLIGATIONS, OF THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS.

 

(II)                                  A LENDER MAY EFFECT A RELATED LENDER
ASSIGNMENT WITHOUT PAYING THE ASSIGNMENT FEE AND WITHOUT DELIVERING AN
ASSIGNMENT AND ACCEPTANCE TO ADMINISTRATIVE AGENT OR TO ANY OTHER PERSON;
PROVIDED, HOWEVER, THAT (A) BORROWER AND ADMINISTRATIVE AGENT MAY CONTINUE TO
DEAL SOLELY AND DIRECTLY WITH SUCH ASSIGNING LENDER UNTIL THE DATE THAT IS FIVE
(5) BUSINESS DAYS AFTER AN ASSIGNMENT AND ACCEPTANCE HAS BEEN DELIVERED TO
ADMINISTRATIVE AGENT FOR RECORDATION IN THE REGISTER, (B) THE FAILURE OF SUCH
ASSIGNING LENDER TO DELIVER AN ASSIGNMENT AND ACCEPTANCE TO ADMINISTRATIVE AGENT
SHALL NOT AFFECT THE LEGALITY, VALIDITY, OR BINDING EFFECT OF SUCH ASSIGNMENT AS
BETWEEN SUCH ASSIGNING LENDER AND SUCH ASSIGNEE, AND (C) AN ASSIGNMENT AND
ACCEPTANCE BETWEEN THE ASSIGNING LENDER AND AN AFFILIATE OF SUCH LENDER OR
APPROVED FUND OF SUCH LENDER SHALL BE EFFECTIVE AS OF THE DATE SPECIFIED IN SUCH
ASSIGNMENT AND ACCEPTANCE, ONCE RECORDED ON THE RELATED PARTY REGISTER (AS
DEFINED BELOW).  SUBJECT TO THE PROVISIONS OF THIS SECTION 3.8(T), BORROWER
AGREES THAT EACH ASSIGNEE PARTY TO A RELATED LENDER ASSIGNMENT SHALL BE ENTITLED
TO THE BENEFITS, AND SUBJECT TO THE REQUIREMENTS AND OBLIGATIONS, OF THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS TO THE SAME EXTENT AS IF IT HAD
CONSUMMATED SUCH ASSIGNMENT AND ACCEPTANCE BY DELIVERY OF AN ASSIGNMENT AND
ACCEPTANCE TO ADMINISTRATIVE AGENT.

 

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(III)          ADMINISTRATIVE AGENT SHALL, ON BEHALF OF AND ACTING SOLELY FOR
THIS PURPOSE AS THE NON-FIDUCIARY AGENT OF BORROWER, MAINTAIN, OR CAUSE TO BE
MAINTAINED AT ADMINISTRATIVE AGENT’S OFFICE WHERE BORROWER MAKES PAYMENTS DUE
HEREUNDER, A COPY OF EACH ASSIGNMENT AND ACCEPTANCE DELIVERED TO AND ACCEPTED BY
IT AND A REGISTER (THE “REGISTER”) FOR THE RECORDATION OF THE NAMES AND
ADDRESSES OF THE LENDERS AND THE COMMITMENTS OF, AND THE PRINCIPAL AMOUNT OF THE
LOANS (AND STATED INTEREST THEREON) (THE “REGISTERED LOANS”).  IN THE CASE OF
ANY RELATED LENDER ASSIGNMENT, THE LENDER MAKING SUCH RELATED LENDER ASSIGNMENT
SHALL, ON BEHALF OF AND ACTING SOLELY FOR THIS PURPOSE AS THE NON-FIDUCIARY
AGENT OF BORROWER, MAINTAIN A COMPARABLE REGISTER (THE “RELATED PARTY
REGISTER”).  THE ENTRIES IN THE REGISTER (OR, IN THE CASE OF A RELATED LENDER
ASSIGNMENT, THE RELATED PARTY REGISTER) SHALL BE CONCLUSIVE AND BINDING FOR ALL
PURPOSES, ABSENT MANIFEST ERROR.  BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS
SHALL TREAT EACH PERSON WHOSE NAME IS RECORDED IN THE REGISTER (AND ANY LENDER
THAT MAKES A RELATED LENDER ASSIGNMENT SHALL TREAT EACH PERSON WHOSE NAME IS
RECORDED IN THE RELATED PARTY REGISTER) AS A LENDER HEREUNDER FOR ALL PURPOSES
OF THIS LOAN AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE RIGHT TO RECEIVE
PAYMENTS OF PRINCIPAL AND INTEREST HEREUNDER.  THE REGISTER AND THE RELATED
PARTY REGISTER SHALL BE AVAILABLE FOR INSPECTION BY BORROWER AT ANY REASONABLE
TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR NOTICE.  A REGISTERED LOAN MAY
BE ASSIGNED OR SOLD IN WHOLE OR IN PART ONLY BY REGISTRATION OF SUCH ASSIGNMENT
OR SALE ON THE REGISTER OR THE RELATED PARTY REGISTER.  ANY ASSIGNMENT OR SALE
OF ALL OR PART OF SUCH REGISTERED LOAN MAY BE EFFECTED ONLY BY REGISTRATION OF
SUCH ASSIGNMENT OR SALE ON THE REGISTER OR THE RELATED PARTY REGISTER.  WITHIN
THIRTY (30) DAYS (FIVE (5) BUSINESS DAYS IN THE EVENT OF A RELATED LENDER
ASSIGNMENT) AFTER ITS RECEIPT OF A COMPLETED ASSIGNMENT AND ACCEPTANCE EXECUTED
BY AN ASSIGNING LENDER AND AN ASSIGNEE, AND THE ASSIGNMENT FEE IF REQUIRED BY
THE PROVISIONS OF THIS SECTION 3.8(T), ADMINISTRATIVE AGENT OR LENDER, AS THE
CASE MAY BE, SHALL RECORD THE INFORMATION CONTAINED THEREIN IN THE REGISTER OR
THE RELATED PARTY REGISTER.

 

(IV)          EACH LENDER MAY SELL PARTICIPATIONS TO ONE OR MORE BANKS OR OTHER
ENTITIES IN OR TO ALL OR A PORTION OF ITS RIGHTS AND OBLIGATIONS UNDER THIS LOAN
AGREEMENT AND THE OTHER LOAN DOCUMENTS (INCLUDING, WITHOUT LIMITATION, ALL OR A
PORTION OF ITS COMMITMENTS TO MAKE LOANS OR THE LOANS MADE BY IT); PROVIDED,
THAT (A) SUCH LENDER’S OBLIGATIONS UNDER THIS LOAN AGREEMENT (INCLUDING WITHOUT
LIMITATION, ITS COMMITMENTS TO MAKE LOANS HEREUNDER) AND THE OTHER LOAN
DOCUMENTS SHALL REMAIN UNCHANGED; (B) SUCH LENDER SHALL REMAIN SOLELY
RESPONSIBLE TO THE OTHER PARTIES HERETO FOR THE PERFORMANCE OF SUCH OBLIGATIONS,
AND BORROWER, ADMINISTRATIVE AGENT 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 LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS; AND (C) A
PARTICIPANT SHALL NOT BE ENTITLED TO REQUIRE SUCH LENDER TO TAKE OR OMIT TO TAKE
ANY ACTION HEREUNDER EXCEPT THAT A PARTICIPANT THAT IS AN AFFILIATE OR APPROVED
FUND OF THE PARTICIPATING LENDER MAY REQUIRE SUCH LENDER TO OBTAIN SUCH
PARTICIPANT’S APPROVAL BEFORE SUCH PARTICIPATING LENDER APPROVES ANY (I) ACTION
DIRECTLY EFFECTING AN EXTENSION OF THE MATURITY DATES OR DECREASE IN THE
PRINCIPAL AMOUNT OF THE LOANS, (II) ACTION DIRECTLY EFFECTING AN EXTENSION OF
THE DUE DATES OR A DECREASE IN THE RATE OF INTEREST PAYABLE ON THE LOANS OR THE
FEES PAYABLE UNDER THIS LOAN AGREEMENT, OR (III) ACTIONS DIRECTLY EFFECTING A
RELEASE OF ALL OR A SUBSTANTIAL

 

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PORTION OF THE COLLATERAL OR ANY CREDIT PARTY (EXCEPT AS SET FORTH IN THIS LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENT).

 

(V)           IN THE EVENT THAT ANY LENDER SELLS PARTICIPATIONS IN A REGISTERED
LOAN, SUCH LENDER SHALL, ON BEHALF OF AND ACTING SOLELY FOR THIS PURPOSE AS A
NON-FIDUCIARY AGENT OF BORROWER, MAINTAIN A REGISTER ON WHICH IT ENTERS THE NAME
OF ALL PARTICIPANTS IN THE REGISTERED LOANS HELD BY IT AND THE PRINCIPAL AMOUNT
(AND STATED INTEREST THEREON) OF THE PORTION OF THE REGISTERED LOAN WHICH IS THE
SUBJECT OF THE PARTICIPATION (THE “PARTICIPANT REGISTER”).  A REGISTERED LOAN
MAY BE PARTICIPATED IN WHOLE OR IN PART ONLY BY REGISTRATION OF SUCH
PARTICIPATION ON THE PARTICIPANT REGISTER (AND EACH REGISTERED NOTE SHALL
EXPRESSLY SO PROVIDE).  ANY PARTICIPATION OF SUCH REGISTERED LOAN MAY BE
EFFECTED ONLY BY THE REGISTRATION OF SUCH PARTICIPATION ON THE PARTICIPANT
REGISTER.  THE PARTICIPANT REGISTER SHALL BE AVAILABLE FOR INSPECTION BY
BORROWER AT ANY REASONABLE TIME AND FROM TIME TO TIME UPON REASONABLE PRIOR
NOTICE.  FURTHER, ANY LENDER SHALL HAVE THE RIGHT, WITHOUT NOTICE OR THE PAYMENT
OF AN ASSIGNMENT FEE, TO ENCUMBER OR HYPOTHECATE ITS INTEREST TO ANY FUNDING
SOURCE OR PARTICIPANT (COLLECTIVELY, FOR PURPOSES OF THIS PARAGRAPH, A “FUNDING
SOURCE”) AS LONG AS SUCH FUNDING SOURCE MAINTAINS A “BLIND” STATUS AND SUCH
LENDER CONTINUES TO ACT IN ITS CAPACITY AS A LENDER HEREUNDER NOTWITHSTANDING
THE FUNDING SOURCE.

 

(VI)          EXCEPT TO THE EXTENT SET FORTH IN SECTION 3.8(T)(IV) ABOVE,
NEITHER ANY PARTICIPANT OF A REGISTERED LOAN NOR ANY FUNDING SOURCE SHALL BE
ENTITLED TO THE BENEFITS, OR SUBJECT TO THE REQUIREMENTS AND OBLIGATIONS, OF
THIS LOAN AGREEMENT, AND BORROWER AND ADMINISTRATIVE AGENT MAY CONTINUE TO DEAL
SOLELY AND DIRECTLY WITH THE PARTICIPATING, ENCUMBERING OR HYPOTHECATING LENDER.

 

(U)           INTEGRATION.  THIS LOAN AGREEMENT, TOGETHER WITH THE OTHER LOAN
DOCUMENTS, CONSTITUTES THE ENTIRE UNDERSTANDING AND REPRESENTS THE FULL AND
FINAL AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF,
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR WRITTEN AGREEMENTS OR PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS OF THE PARTIES.  WITHOUT LIMITING THE FOREGOING,
BORROWER ACKNOWLEDGES THAT: (I) NO PROMISE OR COMMITMENT HAS BEEN MADE TO IT BY
ADMINISTRATIVE AGENT, ANY LENDER, MLPF&S OR ANY OF THEIR RESPECTIVE EMPLOYEES,
AGENTS OR REPRESENTATIVES TO MAKE ANY LOAN ON ANY TERMS OTHER THAN AS EXPRESSLY
SET FORTH HEREIN, OR TO MAKE ANY OTHER LOAN OR OTHERWISE EXTEND ANY OTHER CREDIT
TO BORROWER OR ANY OTHER PARTY; AND (II) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
HEREIN, THIS LOAN AGREEMENT SUPERSEDES AND REPLACES ANY AND ALL PROPOSALS,
LETTERS OF INTENT AND APPROVAL AND COMMITMENT LETTERS FROM ADMINISTRATIVE AGENT
OR ANY LENDER TO BORROWER, NONE OF WHICH SHALL BE CONSIDERED A LOAN DOCUMENT. 
NO AMENDMENT OR MODIFICATION OF ANY OF THE LOAN DOCUMENTS TO WHICH BORROWER IS A
PARTY SHALL BE EFFECTIVE UNLESS IN A

 

51

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WRITING SIGNED BY ADMINISTRATIVE AGENT, MAJORITY OR ALL LENDERS, AS THE CASE
MAY REQUIRE, AND BORROWER.

 

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

 

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This Loan Agreement and the other Loan Documents are executed under seal and are
intended to take effect as sealed instruments.

 

IN WITNESS WHEREOF, this Loan Agreement has been executed as of the day and year
first above written.

 

LARCLAY, L.P.,

 

By:  Larclay GP, LLC, its general partner,
a Texas limited liability company

 

By:

/s/ Michael L. Pollard

 

 

Michael L. Pollard

 

Manager

 

 

Accepted at Chicago, Illinois:

MERRILL LYNCH CAPITAL,
a division of Merrill Lynch Business Financial Services Inc., as Administrative
Agent

 

By:

/s/ Steve Coley

 

 

Steve Coley

 

Vice President, Group Credit Manager

 

 

MERRILL LYNCH CAPITAL,
a division of Merrill Lynch Business Financial Services Inc., as a Lender

 

By:

/s/ Steve Coley

 

 

Steve Coley

 

Vice President, Group Credit Manager

 

 

Signature Page to Term Loan and Security Agreement

 

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Schedule 1

Lender Loan Commitments

 

 

Name of Lender

 

Loan Commitment

 

Percentage Share of Loan
Commitment

 

MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business Financial Services
Inc.

 

$

75,000,000.00

 

100

%

 

Schedule 1 to Term Loan and Security Agreement

 

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