Exhibit 10.2

Execution Version

AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN

AND SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

WITH

FLOTEK INDUSTRIES, INC.,

CESI CHEMICAL, INC.,

CESI MANUFACTURING, LLC,

MATERIAL TRANSLOGISTICS, INC.,

TELEDRIFT COMPANY,

TURBECO, INC.,

USA PETROVALVE, INC., and

FLORIDA CHEMICAL COMPANY, INC. (f/k/a FLOTEK ACQUISITION INC.)

(AS BORROWERS),

PNC CAPITAL MARKETS LLC

(LEAD ARRANGER),

AND VARIOUS LENDERS

May 10, 2013

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TABLE OF CONTENTS

 

        Page  

I.

 

DEFINITIONS

    2   

1.1.

 

Accounting Terms

    2   

1.2.

 

General Terms

    2   

1.3.

 

Uniform Commercial Code Terms

    37   

1.4.

 

Certain Matters of Construction

    37   

II.

 

ADVANCES, PAYMENTS

    38   

2.1.

 

Revolving Advances

    38   

2.2.

 

Procedures for Requesting Revolving Advances; Procedures for Selection of
Applicable Interest Rates for All Advances

    39   

2.3.

 

Term Loans

    41   

2.4.

 

Swing Loans

    42   

2.5.

 

Disbursement of Advance Proceeds

    43   

2.6.

 

Making and Settlement of Advances

    44   

2.7.

 

Maximum Advances

    45   

2.8.

 

Manner and Repayment of Advances

    46   

2.9.

 

Repayment of Excess Advances

    47   

2.10.

 

Statement of Account

    47   

2.11.

 

Letters of Credit

    47   

2.12.

 

Issuance of Letters of Credit

    48   

2.13.

 

Requirements For Issuance of Letters of Credit

    48   

2.14.

 

Disbursements, Reimbursement

    49   

2.15.

 

Repayment of Participation Advances

    50   

2.16.

 

Documentation

    51   

2.17.

 

Determination to Honor Drawing Request

    51   

2.18.

 

Nature of Participation and Reimbursement Obligations

    51   

2.19.

 

Liability for Acts and Omissions

    53   

2.20.

 

Mandatory Prepayments

    54   

2.21.

 

Use of Proceeds

    56   

2.22.

 

Defaulting Lender

    56   

2.23.

 

Payment of Obligations

    58   

2.24.

 

Increase in Maximum Revolving Advance Amount

    59   

III.

 

INTEREST AND FEES

    61   

3.1.

 

Interest

    61   

3.2.

 

Letter of Credit Fees

    62   

3.3.

 

Facility Fee

    63   

3.4.

 

Fee Letter and Other Fees

    63   

3.5.

 

Computation of Interest and Fees

    63   

3.6.

 

Maximum Charges

    63   

3.7.

 

Increased Costs

    64   

3.8.

 

Basis For Determining Interest Rate Inadequate or Unfair

    65   

 

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3.9.

 

Capital Adequacy

    66   

3.10.

 

Taxes

    66   

3.11.

 

Replacement of Lenders

    69   

IV.

  COLLATERAL: GENERAL TERMS     69   

4.1.

 

Security Interest in the Collateral

    69   

4.2.

 

Perfection of Security Interest

    70   

4.3.

 

Preservation of Collateral

    71   

4.4.

 

Ownership and Location of Collateral

    71   

4.5.

 

Defense of Agent’s and Lenders’ Interests

    72   

4.6.

 

Inspection of Premises

    72   

4.7.

 

Appraisals

    73   

4.8.

 

Receivables; Deposit Accounts and Securities Accounts

    73   

4.9.

 

Inventory

    76   

4.10.

 

Maintenance of Equipment

    76   

4.11.

 

Exculpation of Liability

    76   

4.12.

 

Financing Statements

    77   

4.13.

 

Vehicle Titles

    77   

V.

  REPRESENTATIONS AND WARRANTIES     77   

5.1.

 

Authority

    77   

5.2.

 

Formation and Qualification

    78   

5.3.

 

Survival of Representations and Warranties

    78   

5.4.

 

Tax Returns

    78   

5.5.

 

Financial Statements

    78   

5.6.

 

Entity Names

    79   

5.7.

 

O.S.H.A. Environmental Compliance and Flood Insurance

    79   

5.8.

 

Solvency; No Litigation, Violation, Indebtedness or Default; ERISA Compliance

    80   

5.9.

 

Patents, Trademarks, Copyrights and Licenses

    81   

5.10.

 

Licenses and Permits

    82   

5.11.

 

Default of Indebtedness

    82   

5.12.

 

No Default

    82   

5.13.

 

No Burdensome Restrictions

    82   

5.14.

 

No Labor Disputes

    82   

5.15.

 

Margin Regulations

    82   

5.16.

 

Investment Company Act

    82   

5.17.

 

Disclosure

    83   

5.18.

 

[Reserved]

    83   

5.19.

 

Delivery of Merger Agreement

    83   

5.20.

 

Swaps

    83   

5.21.

 

Business and Property of Borrowers

    83   

5.22.

 

Ineligible Securities

    83   

5.23.

 

[Reserved]

    83   

5.24.

 

Equity Interests

    83   

5.25.

 

Commercial Tort Claims

    84   

5.26.

 

Letter of Credit Rights

    84   

 

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5.27.

 

Material Contracts

    84   

5.28.

 

Inactive Subsidiaries

    84   

VI.

  AFFIRMATIVE COVENANTS     84   

6.1.

 

Compliance with Laws

    84   

6.2.

 

Conduct of Business and Maintenance of Existence and Assets

    84   

6.3.

 

Books and Records

    85   

6.4.

 

Payment of Taxes

    85   

6.5.

 

Financial Covenants

    85   

6.6.

 

Insurance

    86   

6.7.

 

Payment of Indebtedness and Leasehold Obligations

    87   

6.8.

 

Environmental Matters

    87   

6.9.

 

Standards of Financial Statements

    88   

6.10.

 

[Reserved]

    88   

6.11.

 

Execution of Supplemental Instruments

    88   

6.12.

 

Exercise of Rights

    88   

6.13.

 

Government Receivables

    88   

6.14.

 

Membership / Partnership Interests

    88   

6.15.

 

Post-Closing Obligations

    88   

VII.

  NEGATIVE COVENANTS     89   

7.1.

 

Merger, Consolidation, Acquisition and Sale of Assets

    89   

7.2.

 

Creation of Liens

    89   

7.3.

 

Guarantees

    89   

7.4.

 

Investments

    90   

7.5.

 

Loans

    90   

7.6.

 

Capital Expenditures

    90   

7.7.

 

Dividends

    90   

7.8.

 

Indebtedness

    90   

7.9.

 

Nature of Business

    90   

7.10.

 

Transactions with Affiliates

    90   

7.11.

 

[Reserved]

    90   

7.12.

 

Subsidiaries

    90   

7.13.

 

Fiscal Year and Accounting Changes

    91   

7.14.

 

Pledge of Credit

    91   

7.15.

 

Amendment of Organizational Documents

    91   

7.16.

 

Compliance with ERISA

    91   

7.17.

 

Prepayment of Indebtedness

    91   

7.18.

 

Other Agreements

    91   

7.19.

 

Membership / Partnership Interests

    91   

7.20.

 

Inactive Subsidiaries

    92   

VIII.

  CONDITIONS PRECEDENT     92   

8.1.

 

Conditions to Initial Advances

    92   

8.2.

 

Conditions to Each Advance

    96   

 

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IX.   INFORMATION AS TO CREDIT PARTIES     96   

9.1.

 

Disclosure of Material Matters

    96   

9.2.

 

Schedules

    96   

9.3.

 

Environmental Reports

    97   

9.4.

 

Litigation

    98   

9.5.

 

Material Occurrences

    98   

9.6.

 

Government Receivables

    98   

9.7.

 

Annual Financial Statements

    98   

9.8.

 

Quarterly Financial Statements

    98   

9.9.

 

Monthly Financial Statements

    99   

9.10.

 

Other Reports

    99   

9.11.

 

Additional Information

    99   

9.12.

 

Projected Operating Budget

    99   

9.13.

 

Variances From Operating Budget

    99   

9.14.

 

Notice of Suits, Adverse Events

    100   

9.15.

 

ERISA Notices and Requests

    100   

9.16.

 

Additional Documents

    100   

9.17.

 

Updates to Certain Schedules

    100   

9.18.

 

Financial Disclosure

    101   

9.19.

 

Appraisals and Field Examinations

    101    X.   EVENTS OF DEFAULT     101   

10.1.

 

Nonpayment

    101   

10.2.

 

Breach of Representation

    101   

10.3.

 

Financial Information

    102   

10.4.

 

Judicial Actions

    102   

10.5.

 

Noncompliance

    102   

10.6.

 

Judgments

    102   

10.7.

 

Bankruptcy

    102   

10.8.

 

Material Adverse Effect

    102   

10.9.

 

Lien Priority

    103   

10.10.

 

Cross Default

    103   

10.11.

 

Breach of Guaranty or Pledge Agreement

    103   

10.12.

 

Change of Control

    103   

10.13.

 

Invalidity

    103   

10.14.

 

Seizures

    103   

10.15.

 

Operations

    103   

10.16.

 

Pension Plans

    103   

10.17.

 

Reportable Compliance Event

    104   

10.18.

 

Licenses

    104    XI.   LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT     104   

11.1.

 

Rights and Remedies

    104   

11.2.

 

Agent’s Discretion

    106   

11.3.

 

Setoff

    106   

11.4.

 

Rights and Remedies not Exclusive

    106   

11.5.

 

Allocation of Payments After Event of Default

    106   

 

iv

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XII.   WAIVERS AND JUDICIAL PROCEEDINGS     107   

12.1.

 

Waiver of Notice

    107   

12.2.

 

Delay

    107   

12.3.

 

Jury Waiver

    107    XIII.   EFFECTIVE DATE AND TERMINATION     108   

13.1.

 

Term

    108   

13.2.

 

Termination

    108    XIV.   REGARDING AGENT     108   

14.1.

 

Appointment

    108   

14.2.

 

Nature of Duties

    109   

14.3.

 

Lack of Reliance on Agent

    109   

14.4.

 

Resignation of Agent; Successor Agent

    110   

14.5.

 

Certain Rights of Agent

    110   

14.6.

 

Reliance

    110   

14.7.

 

Notice of Default

    111   

14.8.

 

Indemnification

    111   

14.9.

 

Agent in its Individual Capacity

    111   

14.10.

 

Delivery of Documents

    111   

14.11.

 

Borrowers’ Undertaking to Agent

    112   

14.12.

 

No Reliance on Agent’s Customer Identification Program

    112   

14.13.

 

Other Agreements

    112    XV.   BORROWING AGENCY PROVISION AND COMMON ENTERPRISE     112   

15.1.

 

Borrowing Agency Provisions

    112   

15.2.

 

Waiver of Subrogation

    113   

15.3.

 

Common Enterprise

    113    XVI.   MISCELLANEOUS     114   

16.1.

 

Governing Law

    114   

16.2.

 

Entire Understanding

    114   

16.3.

 

Successors and Assigns; Participations

    118   

16.4.

 

Application of Payments

    120   

16.5.

 

Indemnity

    121   

16.6.

 

Notice

    122   

16.7.

 

Survival

    124   

16.8.

 

Severability

    124   

16.9.

 

Expenses

    124   

16.10.

 

Injunctive Relief

    125   

16.11.

 

Consequential Damages

    125   

16.12.

 

Captions

    125   

16.13.

 

Counterparts; Facsimile Signatures

    125   

16.14.

 

Construction

    125   

16.15.

 

Confidentiality; Sharing Information

    125   

 

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16.16.

 

Publicity

    126   

16.17.

 

Certifications From Banks and Participants; USA PATRIOT Act

    126   

16.18.

 

Anti-Money Laundering/International Trade Law Compliance

    127   

16.19.

 

Concerning Joint and Several Liability of Borrowers

    127   

16.20.

 

No Advisory or Fiduciary Relationship

    129   

16.21.

 

Non-Applicability of Chapter 346

    130   

16.22.

 

BORROWERS’ WAIVER OF RIGHTS UNDER TEXAS DECEPTIVE TRADE PRACTICES ACT

    130   

16.23.

 

Amendment and Restatement

    130   

 

vi

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LIST OF EXHIBITS AND SCHEDULES

Exhibits

 

Exhibit 1.2(a)    Form of Borrowing Base Certificate Exhibit 1.2(b)    Form of
Compliance Certificate Exhibit 2.1(a)    Form of Revolving Credit Note Exhibit
2.3(a)    Form of Term Note Exhibit 2.4(a)    Form of Swing Loan Note Exhibit
5.5(b)    Financial Projections Exhibit 8.1(c)    Form of Financial Condition
Certificate Exhibit 16.3    Form of Commitment Transfer Supplement

Schedules

 

Schedule 1.2    Permitted Encumbrances Schedule 4.4(a)(iv)    Equipment and
Inventory Locations; Place of Business, Chief Executive Office, Real Property
Schedule 4.4(b)(ii)    Warehouse Locations of Inventory Schedule 4.4(b)(iii)   
Place of Business, Chief Executive Office Schedule 4.4(b)(iv)    Location of
Real Property Schedule 4.8    Deposit and Investment Accounts Schedule 5.1   
Consents Schedule 5.2(a)    States of Qualification and Good Standing Schedule
5.2(b)    Subsidiaries Schedule 5.2(c)    Accrued and Unpaid Dividends Schedule
5.4    Federal Tax Identification Number Schedule 5.6    Prior Names Schedule
5.7    Environmental Schedule 5.8(b)(i)    Litigation Schedule 5.8(b)(ii)   
Indebtedness Schedule 5.8(d)    Plans Schedule 5.9    Intellectual Property,
Source Code Escrow Agreements Schedule 5.10    Licenses and Permits Schedule
5.14    Labor Disputes Schedule 5.21    Business of Borrowers Schedule 5.24   
Equity Interests Schedule 5.25    Commercial Tort Claims Schedule 5.26    Letter
of Credit Rights Schedule 5.27    Material Contracts Schedule 6.15   
Post-Closing Obligations Schedule 7.3    Guarantees

 

vii

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AMENDED AND RESTATED REVOLVING CREDIT, TERM LOAN AND SECURITY

AGREEMENT

Amended and Restated Revolving Credit, Term Loan and Security Agreement dated as
of May 10, 2013 among FLOTEK INDUSTRIES, INC., a corporation organized under the
laws of the State of Delaware (“Holdings”), CESI CHEMICAL, INC., a corporation
organized under the laws of the State of Oklahoma (“CESI Chemical”), CESI
MANUFACTURING, LLC, a limited liability company organized under the laws of the
State of Oklahoma (“CESI Manufacturing”), MATERIAL TRANSLOGISTICS, INC., a
corporation organized under the laws of the State of Texas (“MTI”), TELEDRIFT
COMPANY, a corporation organized under the laws of the State of Delaware
(“Teledrift”), TURBECO, INC., a corporation organized under the laws of the
State of Texas (“Turbeco”), USA PETROVALVE, INC., a corporation organized under
the laws of the State of Texas (“USA Petrovalve”), FLOTEK ACQUISITION INC., a
corporation organized under the laws of the State of Delaware (“Acquisition
Sub”) and (upon the consummation of the transactions contemplated by the Merger
Agreement (as hereinafter defined) of FLORIDA CHEMICAL COMPANY, INC., a
corporation organized under the laws of the State of Florida, with and into
Acquisition Sub, which will be renamed “FLORIDA CHEMICAL COMPANY, INC.” pursuant
to such merger) FLORIDA CHEMICAL COMPANY, INC., a corporation organized under
the laws of the State of Delaware (“Florida Chemical”; and together with
Holdings, CESI Chemical, CESI Manufacturing, MTI, Teledrift, Turbeco, USA
Petrovalve, and each Person joined hereto as a borrower from time to time,
collectively, jointly and severally, the “Borrowers”, and each individually a
“Borrower”), the financial institutions which are now or which hereafter become
a party hereto (collectively, the “Lenders” and each individually a “Lender”),
PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for itself and as agent for the
other Lenders (PNC, together with its successors and assigns in such capacity,
the “Agent”) and PNC CAPITAL MARKETS, LLC, as lead arranger for the Lenders.

RECITALS

WHEREAS, on September 23, 2011 (the “Original Closing Date”), Holdings, CESI
Chemical, CESI Manufacturing, MTI, Sooner Energy Services, LLC, Teledrift,
Turbeco, USA Petrovalve, certain Lenders, and Agent entered into that certain
Revolving Credit and Security Agreement (as amended prior to the date hereof,
the “Original Credit Agreement”);

WHEREAS, the Borrowers have requested Agent and Lenders amend and restate the
Original Credit Agreement, as set forth herein to, among other things,
(a) permit the transactions contemplated by the Merger Agreement, (b) make other
amendments as set forth in this Agreement, (c) pay fees and expenses associated
with the foregoing, and (d) to provide for the ongoing working capital
requirements of the Borrower;

WHEREAS, pursuant to the terms and conditions set forth herein, Borrowers, Agent
and Lenders agree to amend and restate the Original Credit Agreement as set
forth herein;

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NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and undertakings herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Borrowers, Lenders and Agent hereby
agree as follows:

 

I. DEFINITIONS.

1.1. Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined shall have the respective meanings given to them under GAAP; provided,
however that, whenever such accounting terms are used for the purposes of
determining compliance with financial covenants in this Agreement, such
accounting terms shall be defined in accordance with GAAP as consistently
applied in preparation of the audited financial statements of Borrowers for the
fiscal year ended December 31, 2012.

1.2. General Terms. For purposes of this Agreement the following terms shall
have the following meanings set forth below:

“Accountants” shall have the meaning set forth in Section 9.7 hereof.

“Acquisition Agreement” shall mean any purchase agreement entered into by any
Borrower in connection with a Permitted Acquisition, in each case, including all
exhibits, annexes, schedules and attachments thereto.

“Acquisition Sub” shall have the meaning set forth in the introductory paragraph
hereto.

“Additional Term Loan” shall have the meaning set forth in Section 2.3(a)
hereof.

“Adjusted EBITDA” shall mean for any period the sum of (i) net income (or loss)
of Holdings and its Subsidiaries on a consolidated basis for such period
(excluding extraordinary gains), plus (ii) all interest expense of Holdings and
its Subsidiaries on a consolidated basis for such period, plus (iii) all charges
against income of Holdings and its Subsidiaries for such period for federal,
state and local taxes plus (iv) depreciation expenses for such period, plus
(v) amortization expenses for such period plus (vi) non-cash income reduction
adjustments derived from or related to stock-based compensation.

“Advance Rates” shall have the meaning set forth in Section 2.1(a)(y)(ii)
hereof.

“Advances” shall mean and include the Revolving Advances, Letters of Credit, the
Swing Loans and the Term Loan.

“Affected Lender” shall have the meaning set forth in Section 3.11 hereof.

“Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, manager, member, managing
member, general partner or officer (i) of such Person, (ii) of any Subsidiary of
such Person or (iii) of any Person described in clause (a) above. For purposes
of this definition, control of a Person shall mean the power, direct or
indirect, (x) to vote (A) with respect to any Person (other than Holdings or any
Borrower), ten percent (10%) or more of the Equity Interests having ordinary
voting power for the election of directors of such Person or other Persons
performing similar functions for any such Person, or (B) with respect to
Holdings or any Borrower, twenty percent (20%) or more of the Equity Interests
having ordinary

 

2

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voting power for the election of directors of such Person or other Persons
performing similar functions for any such Person, or (y) to direct or cause the
direction of the management and policies of such Person whether by ownership of
Equity Interests, contract or otherwise.

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

“Agreement” shall mean this Amended and Restated Revolving Credit, Term Loan and
Security Agreement, as the same may be amended, amended and restated, replaced
and restated, extended, supplemented and/or otherwise modified from time to
time.

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
highest of (a) the Base Rate in effect on such day, (b) the sum of the Federal
Funds Open Rate in effect on such day plus one half of one percent (0.5%), and
(c) the sum of the Daily LIBOR Rate in effect on such day plus one percent (1%),
so long as a Daily LIBOR Rate is offered, ascertainable and not unlawful.

“Anti-Terrorism Laws” shall mean any Laws relating to terrorism, trade sanctions
programs and embargoes, import/export licensing, money laundering or bribery,
all as amended, supplemented or replaced from time to time.

“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, Other Document or contract in question,
including all applicable common law and equitable principles, all provisions of
all applicable state, federal and foreign constitutions, statutes, rules,
regulations, treaties, directives and orders of any Governmental Body, and all
orders, judgments and decrees of all courts and arbitrators.

“Applicable Margin” for Revolving Advances and the Term Loan shall mean, for
(i) the period from the Closing Date through and including December 31, 2013,
the applicable percentage determined by reference to the following grid for
Level I, and (ii) thereafter, a rate per annum determined by reference to the
following grid:

 

Level

  

Facility Usage

   LIBOR Rate
Loans –
Revolving
Advances     LIBOR
Rate Loans
– Term
Loans     Base Rate
Loans –
Revolving
Advances     Base Rate
Loans –
Term
Loans  

Level I

  

If Average Undrawn Availability is greater than 35% of the Maximum Revolving
Advance Amount

     1.50 %      2.25 %      0.50 %      1.25 % 

Level II

  

If Average Undrawn Availability is greater than 20% but less than or equal to
35% of the Maximum Revolving Advance Amount

     1.75 %      2.50 %      0.75 %      1.50 % 

Level III

  

If Average Undrawn Availability is less than or equal to 20% of the Maximum
Revolving Advance Amount

     2.00 %      2.75 %      1.00 %      1.75 % 

 

3

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Adjustments, if any, in the Applicable Margin shall be implemented quarterly, on
a prospective basis, based upon Agent’s calculation of the prior quarter’s
Average Undrawn Availability commencing on December 31, 2013 and continuing on
the last day of each fiscal quarter thereafter, effective as of the first day of
the second month in the fiscal quarter immediately following such applicable
quarter (i.e. February 1st, May 1st, August 1st and November 1st, as
applicable). If an Event of Default has occurred and is continuing at the time
any reduction in the Applicable Margin is to be implemented, that reduction
shall be deferred until the first day of the first fiscal month following the
date on which such Event of Default is waived or cured. Nothing set forth in
this definition shall limit the applicability of the Default Rate upon the
occurrence and during the continuance of an Event of Default.

If the Borrowers shall fail to deliver the financial statements, certificates
and/or other information required under Section 9.2 by the dates required
pursuant to such sections, each Applicable Margin shall be conclusively presumed
to equal the highest Applicable Margin specified in the pricing table set forth
above until the date of delivery of such financial statements, certificates
and/or other information, at which time the rate will be adjusted based upon the
Average Undrawn Availability reflected in such statements.

If, as a result of any restatement of, or other adjustment to, the financial
statements of Borrowers or for any other reason, Agent determines that (a) the
Average Undrawn Availability as previously calculated as of any applicable date
was inaccurate, and (b) a proper calculation of the Average Undrawn Availability
would have resulted in different pricing for any period, then (i) if the proper
calculation of the Average Undrawn Availability would have resulted in higher
pricing for such period, the Borrowers shall automatically and retroactively be
delegated to pay to Agent, promptly upon demand by Agent, an amount equal to the
excess of the amount of interest and fees that should have been paid for such
period over the amount of interest and fees actually paid for such period; and
(ii) if the proper calculation of the Average Undrawn Availability would have
resulted in lower pricing for such period, Lenders shall have no obligation to
repay interest or fees to the Borrowers; provided, that, if as a result of any
restatement or other event a proper calculation of the Average Undrawn
Availability would have resulted in higher pricing for one or more periods and
lower pricing for one or more other periods (due to the shifting of income or
expenses from one period to another period or any similar reason), then the
amount payable by the Borrowers pursuant to clause (i) above shall be based upon
the excess, if any, of the amount of interest and fees that should have been
paid for all applicable periods over the amounts of interest and fees actually
paid for such periods.

“Application Date” shall have the meaning set forth in Section 2.8(b) hereof.

“Approvals” shall have the meaning set forth in Section 5.7(b) hereof.

 

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“Approved Electronic Communication” shall mean each notice, demand,
communication, information, document and other material transmitted, posted or
otherwise made or communicated by e-mail, E-Fax, the StuckyNet System©, or any
other equivalent electronic service agreed to by Agent, whether owned, operated
or hosted by Agent, any Lender, any of their Affiliates or any other Person,
that any party is obligated to, or otherwise chooses to, provide to Agent
pursuant to this Agreement or any Other Document, including any financial
statement, financial and other report, notice, request, certificate and other
information material; provided, that, Approved Electronic Communications shall
not include any notice, demand, communication, information, document or other
material that Agent specifically instructs a Person to deliver in physical form.

“Authorized Officer” shall mean the President, Executive Vice President, Finance
Treasurer, or other authorized officer approved by Agent.

“Average Undrawn Availability” shall mean, for any fiscal quarter, the sum of
Borrower’s Undrawn Availability for each day during such quarter, divided by the
number of days in such quarter, as evidenced by the monthly Borrowing Base
Certificates delivered hereunder.

“Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.

“Benefited Lender” shall have the meaning set forth in Section 2.6(e) hereof.

“Blocked Account Bank” shall have the meaning set forth in Section 4.8(h)
hereof.

“Blocked Accounts” shall have the meaning set forth in Section 4.8(h) hereof.

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

“Borrowers’ Account” shall have the meaning set forth in Section 2.10 hereof.

“Borrowing Agent” shall mean Holdings.

“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2(a) and in detail satisfactory to Agent in its sole discretion,
duly executed by an Authorized Officer of the Borrowing Agent and delivered to
Agent, appropriately completed, by which such officer shall certify to Agent the
Formula Amount, Undrawn Availability, and Borrower’s Average Undrawn
Availability, and calculations thereof as of the date of such certificate.

“Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any LIBOR Rate Loans, such day must also be a day on which dealings
are carried on in the London interbank market.

 

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“Capital Expenditures” shall mean expenditures made or liabilities incurred for
the acquisition of any fixed assets or improvements (or of any replacements or
substitutions thereof or additions thereto) which have a useful life of more
than one (1) year and which, in accordance with GAAP, would be classified as
capital expenditures. Capital Expenditures shall include the total principal
portion of Capitalized Lease Obligations.

“Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower or
any of its Subsidiaries represented by obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP.

“CESI Chemical” shall have the meaning set forth in the introductory paragraph
hereto.

“CESI Manufacturing” shall have the meaning set forth in the introductory
paragraph hereto.

“Change in Law” means the occurrence, after the date of this Agreement, of any
of the following: (a) the adoption or taking effect of any law, rule, regulation
or treaty, (b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental Body
or (c) the making or issuance of any request, guideline or directive (whether or
not having the force of law) by any Governmental Body; provided that,
notwithstanding anything herein to the contrary, (i) the Dodd-Frank Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (ii) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States
regulatory authorities, in each case pursuant to Basel III, shall in each case
be deemed to be a “Change in Law”, regardless of the date enacted, adopted or
issued.

“Cash Management Liabilities” shall have the meaning provided in the definition
of “Cash Management Products and Services.”

“Cash Management Products and Services” shall mean agreements or other
arrangements under which Agent or any Lender or any Affiliate of Agent or a
Lender provides any of the following products or services to any of Borrowers:
(a) credit cards; (b) credit card processing services; (c) debit cards and
stored value cards; (d) purchase cards; (e) ACH transactions; (f) cash
management and treasury management services and products, including controlled
disbursement accounts or services, lockboxes, automated clearinghouse
transactions, overdrafts, interstate depository network services; or (g) foreign
currency exchange and foreign currency swaps and hedges. The indebtedness,
obligations and liabilities of any Borrower to the provider of any Cash
Management Products and Services (including all obligations and liabilities
owing to such provider in respect of any returned items deposited with such
provider) (the “Cash Management Liabilities”) shall be “Obligations” hereunder,
guaranteed obligations under the Guaranty and secured obligations under the
Guarantor Security Agreement, as applicable, and otherwise treated as
Obligations for purposes of each of the Other Documents (other than any
Lender-Provided Interest Rate Hedge). The Liens securing the Cash Management
Products and Services shall be pari passu with the Liens securing the all other
Obligations under this Agreement and the Other Documents, subject to the express
provisions of Section 11.5.

 

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

“Change in Law” shall mean the occurrence, after the Closing Date, of any of the
following: (a) the adoption or taking effect of any Applicable Law; (b) any
change in any Applicable Law or in the administration, implementation,
interpretation or application thereof by any Governmental Body; or (c) the
making or issuance of any request, rule, guideline or directive (whether or not
having the force of law) by any Governmental Body; provided, that,
notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street
Reform and Consumer Protection Act and all requests, rules, regulations,
guidelines, interpretations or directives thereunder or issued in connection
therewith (whether or not having the force of Applicable Law) and (y) all
requests, rules, regulations, guidelines, interpretations or directives
promulgated by the Bank for International Settlements, the Basel Committee on
Banking Supervision (or any successor or similar authority) or the United States
or foreign regulatory authorities (whether or not having the force of law), in
each case pursuant to Basel III, shall in each case be deemed to be a Change in
Law regardless of the date enacted, adopted, issued, promulgated or implemented.

“Change of Control” shall mean the occurrence of any of the following events
subsequent to the Closing Date: any “person” or “group” (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act) other than another
Borrower or the Permitted Investors, shall own, directly or indirectly, Equity
Interests in any Borrower representing a majority of the aggregate ordinary
voting power represented by the issued and outstanding Equity Interests of any
Borrower, respectively (including for the purposes of the calculation of
percentage ownership, any Equity Interests into which any Equity Interests of
any Borrower held by any of such “person” or “group” that are convertible or for
which any such Equity Interests of any Borrower or of any other Person may be
exchanged and any Equity Interests issuable to such “person” or “group” upon
exercise of any warrants, options or similar rights which may at the time of
calculation be held by such “person” or “group”) or to have the power, directly
or indirectly, to vote or direct the voting securities having a majority of the
ordinary voting power for the election of directors of any Borrower (other than
pursuant to proxies or consents solicited by Holdings in connection with a
meeting of the stockholders of Holdings or a written consent in lieu thereof).

“Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.

“CIP Regulations” shall have the meaning set forth in Section 14.12 hereof.

 

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“Claims” shall have the meaning set forth in Section 16.5 hereof.

“Closing Date” shall mean May 10, 2013 or such other date as may be agreed to in
writing by the parties hereto.

“Code” shall mean the Internal Revenue Code of 1986, as the same may be amended
or supplemented from time to time, and any successor statute of similar import,
and the rules and regulations promulgated thereunder, as from time to time in
effect.

“Collateral” shall mean and include all right, title and interest of each
Borrower in all of the following property and assets of such Borrower, in each
case whether now existing or hereafter arising or created and whether now owned
or hereafter acquired and wherever located:

(a) all Receivables and all supporting obligations relating thereto;

(b) all equipment and fixtures;

(c) all general intangibles (including all payment intangibles and all software)
and all supporting obligations related thereto;

(d) all Inventory;

(e) all Subsidiary Stock, securities, investment property, and financial assets;

(f) all contract rights, rights of payment which have been earned under a
contract rights, chattel paper (including electronic chattel paper and tangible
chattel paper), commercial tort claims (whether now existing or hereafter
arising); documents (including all warehouse receipts and bills of lading),
deposit accounts, goods, instruments (including promissory notes), letters of
credit (whether or not the respective letter of credit is evidenced by a
writing) and letter-of-credit rights, cash, certificates of deposit, insurance
proceeds (including hazard, flood and credit insurance), security agreements,
eminent domain proceeds, condemnation proceeds, tort claim proceeds and all
supporting obligations;

(g) all ledger sheets, ledger cards, files, correspondence, records, books of
account, business papers, computers, computer software (owned by any Borrower or
in which it has an interest), computer programs, tapes, disks and documents,
including all of such property relating to the property described in clauses
(a) through (f) of this definition; and

(h) all proceeds and products of the property described in clauses (a) through
(g) of this definition, in whatever form. It is the intention of the parties
that if Agent shall fail to have a perfected Lien in any particular property or
assets of any Borrower for any reason whatsoever, but the provisions of this
Agreement and/or of the Other Documents, together with all financing statements
and other public filings relating to Liens filed or recorded by Agent against
Borrowers, would be sufficient to create a perfected Lien in any property or
assets that such Borrower may receive upon the sale, lease, license, exchange,
transfer or disposition of such particular property or assets, then all such
“proceeds” of such particular property or assets shall be included in the
Collateral as original collateral that is the subject of a direct and original
grant of a security interest as provided for herein and in the Other Documents
(and not merely as proceeds (as defined in Article 9 of the Uniform Commercial
Code) in which a security interest is created or arises solely pursuant to
Section 9-315 of the Uniform Commercial Code).

 

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Notwithstanding the forgoing, Collateral shall not include any Excluded
Property; provided, that, notwithstanding any of the foregoing, the term
“Collateral” shall include any and all proceeds arising from such Excluded
Property to the extent that the assignment or encumbering of such proceeds is
not subject to the same or similar prohibitions or restrictions.

“Collateral Assignment of Acquisition Agreement” shall mean any document
collaterally assigning a Borrower’s rights and remedies under the Merger
Agreement or any Acquisition Agreement to Agent, the terms and conditions of
which shall be satisfactory to Agent in its sole discretion.

“Collateral Assignment of Escrow Agreement” shall mean that certain Collateral
Assignment of Escrow Agreement, dated as of the date hereof among Holdings,
Agent, the stockholders of Target and CenterState Bank of Florida, N.A., the
terms and conditions of which shall be satisfactory to Agent in its sole
discretion.

“Commitment Transfer Supplement” shall mean a document substantially in the form
of Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.)
and any successor statute, and any rule, regulation, or order promulgated
thereunder, in each case as amended from time to time.

“Compliance Authority” shall mean each and all of the (a) U.S. Treasury
Department/Office of Foreign Assets Control, (b) U.S. Treasury
Department/Financial Crimes Enforcement Network, (c) U.S. State
Department/Directorate of Defense Trade Controls, (d) U.S. Commerce
Department/Bureau of Industry and Security, (e) the U.S. Internal Revenue
Service, (f) the U.S. Justice Department, and (g) the U.S. Securities and
Exchange Commission.

“Compliance Certificate” shall mean a compliance certificate substantially in
the form of Exhibit 1.2(b) hereto to be signed by an Authorized Officer of
Borrowing Agent.

“Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower’s
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, the Merger Agreement, any Acquisition Agreement, or any agreement
executed in connection with a Permitted Acquisition, including any Consents
required under all Applicable Laws.

“Consigned Inventory” shall mean Inventory of any Borrower that is in the
possession of another Person on a consignment, sale or return, or other basis
that does not constitute a final sale and acceptance of such Inventory.

 

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“Contract Rate” shall have the meaning set forth in Section 3.1 hereof.

“Controlled Group” shall mean, at any time, each Borrower and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control and all other entities which, together with
any Borrower, are treated as a single employer under Section 414 of the Code.

“Covered Entity” shall mean each Borrower, each Borrower’s Affiliates and
Subsidiaries, all Guarantors, pledgors of Collateral, all owners of the
foregoing, and all brokers or other agents of any Borrower acting in any
capacity in connection with the Obligations.

“Credit Party” shall mean, at each relevant time of determination, (i) each
Borrower, (ii) each Guarantor, and (iii) any other Person that is now or
hereafter becomes a party to this Agreement as a “Borrower” or party to any
Other Document as a “Guarantor”; and “Credit Parties” means collectively all
such Persons.

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

“Customs” shall have the meaning set forth in Section 2.13(b) hereof.

“Daily LIBOR Rate” shall mean, for any day, the rate per annum determined by
Agent by dividing (x) the Published Rate by (y) a number equal to 1.00 minus the
Reserve Percentage.

“Debt Payments” shall mean for any period, in each case, all cash actually
expended by any Borrower to make: (a) interest payments on any Advances
hereunder, plus (b) payments for all fees, commissions and charges set forth
herein and with respect to any Advances, plus (c) payments on Capitalized Lease
Obligations, plus (d) payments with respect to any other Indebtedness for
borrowed money.

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

“Default Rate” shall have the meaning set forth in Section 3.1 hereof.

“Defaulting Lender” shall mean any Lender that: (a) has failed, within two
(2) Business Days of the date required to be funded or paid, to (i) fund any
portion of its Revolving Commitment Percentage or Term Loan Commitment
Percentage, as applicable, of Advances, (ii) if applicable, fund any portion of
its Participation Commitment in Letters of Credit or Swing Loans or (iii) pay
over to Agent, the Issuer, the Swing Loan Lender or any Lender any other amount
required to be paid by it hereunder, unless, in the case of clause (i) above,
such Lender notifies Agent in writing that such failure is the result of such
Lender’s good faith determination that a condition precedent to funding
(specifically identified and including a particular Default or Event of Default,
if any) has not been satisfied; (b) has notified Borrowers or Agent in writing,

 

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or has made a public statement to the effect, that it does not intend or expect
to comply with any of its funding obligations under this Agreement (unless such
writing or public statement indicates that such position is based on such
Lender’s good faith determination that a condition precedent (specifically
identified and including a particular Default or Event of Default, if any) to
funding a loan under this Agreement cannot be satisfied) or generally under
other agreements in which it commits to extend credit; (c) has failed, within
two (2) Business Days after request by Agent, acting in good faith, to provide a
certification in writing from an authorized officer of such Lender that it will
comply with its obligations (and is financially able to meet such obligations)
to fund prospective Advances and, if applicable, participations in then
outstanding Letters of Credit and Swing Loans under this Agreement; provided,
that, such Lender shall cease to be a Defaulting Lender pursuant to this clause
(c) upon Agent’s receipt of such certification in form and substance
satisfactory to Agent; (d) has become the subject of an Insolvency Event; or
(e) has failed at any time to comply with the provisions of Section 2.6(e) with
respect to purchasing participations from the other Lenders, whereby such
Lender’s share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of Lenders.

“Depository Accounts” shall have the meaning set forth in Section 4.8(h) hereof.

“Designated Lender” shall have the meaning set forth in Section 16.2(d) hereof.

“Document” shall have the meaning given to the term “document” in the Uniform
Commercial Code.

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

“Domestic Rate Loan” shall mean any Advance that bears interest based upon the
Alternate Base Rate.

“Drawing Date” shall have the meaning set forth in Section 2.14(b) hereof.

“EBITDA” shall mean for any period the sum of (i) net income (or loss) of
Holdings and its Subsidiaries on a consolidated basis for such period (excluding
extraordinary gains), plus (ii) all interest expense of Holdings and its
Subsidiaries on a consolidated basis for such period, plus (iii) all charges
against income of Holdings and its Subsidiaries for such period for federal,
state and local taxes plus (iv) depreciation expenses for such period, plus
(v) amortization expenses for such period.

“Eligible Equipment” shall mean and include with respect to each Borrower, all
such equipment owned and held by such Borrower at one of Borrower’s locations in
the continental United States that (i) Agent, in its reasonable discretion,
deems to be eligible based on any credit or collateral considerations as agent
deems reasonable and appropriate from time to time and (ii) is subject to a
perfected, first priority security interest in favor of Agent, free of all Liens
of any Person other than Permitted Encumbrances.

“Eligible Inventory” shall mean and include as to Borrowers, Inventory
(excluding work-in process) held for sale comprised solely of (a) chemicals used
in oil and gas well cementing, stimulation, acidizing, drilling and production,
(b) pumping system components, electric

 

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submersible pumps, gas separators, production valves and related products,
(c) spare replacements parts that (i) are not held for sale or lease, (ii) are
in a category or of a type of Collateral addressed or identified in the most
recent NOLV Appraisal accepted by Agent and (iii) are used to maintain
Borrowers’ Inventory and equipment and (d) mud motors and “measurement while
drilling” products that do not, in Agent’s opinion (exercised in its Permitted
Discretion), constitute Rental Fleet Tools, in each case, valued at the lower of
cost or market value, determined on an average cost basis, which is not, in
Agent’s opinion (exercised in its Permitted Discretion), obsolete, slow moving
or unmerchantable and which Agent, in its Permitted Discretion, shall not deem
ineligible Inventory, based on such considerations as Agent may from time to
time deem appropriate including whether the Inventory is subject to a perfected,
first priority security interest in favor of Agent and no other Lien (other than
a Permitted Encumbrance). Without limiting the foregoing, Inventory shall not be
Eligible Inventory if it (i) does not conform to all standards imposed by any
Governmental Body which has regulatory authority over such goods or the use or
sale thereof, (ii) is in transit, (iii) is comprised of Rental Fleet Tools,
(iv) is located outside the United States or at a location that is not otherwise
in compliance with this Agreement, (v) constitutes Consigned Inventory, (vi) is
the subject of an Intellectual Property Claim; (vii) is subject to a License
Agreement or other agreement that limits, conditions or restricts Borrower’s or
Agent’s right to sell or otherwise dispose of such Inventory, unless Agent is a
party to a Licensor/Agent Agreement with the Licensor under such License
Agreement; or (viii) or is situated at a location not owned by Borrower unless
the owner or occupier of such location has executed in favor of Agent a Lien
Waiver Agreement or reserves are established pursuant to Section 2.1(a)(y)(iv)
of this Agreement in an amount equal to at least three (3) months rent for such
location. Notwithstanding anything herein to the contrary, (i) Eligible
Inventory shall not include Inventory being acquired pursuant to a trade Letter
of Credit if such trade Letter of Credit remains outstanding and (ii) no
Inventory shall be Eligible Inventory to the extent such Inventory was acquired
by a Borrower pursuant to (i) the transactions contemplated by the Merger
Agreement or (ii) an acquisition (including, without limitation, a Permitted
Acquisition), in each case, unless Agent has completed field examinations and
received appraisals with respect to such Inventory, the results of which are
reasonably satisfactory in form and substance to Agent.

“Eligible Receivables” shall mean and include, each Receivable of a Borrower
arising in the Ordinary Course of Business and which Agent, in its Permitted
Discretion, shall deem to be an Eligible Receivable, based on such
considerations as Agent may from time to time deem appropriate. A Receivable
shall not be deemed eligible unless such Receivable is subject to Agent’s first
priority perfected security interest and no other Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence
satisfactory to Agent. In addition, no Receivable shall be an Eligible
Receivable if:

(a) it arises out of a sale made by any Borrower to an Affiliate of any Borrower
or to a Person controlled by an Affiliate of any Borrower;

(b) it is due or unpaid more than ninety (90) days after the original invoice
date;

 

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(c) fifty percent (50%) or more of the Receivables from such Customer are not
deemed Eligible Receivables hereunder; such percentage may, in Agent’s Permitted
Discretion, be increased or decreased from time to time;

(d) any covenant, representation or warranty contained in this Agreement with
respect to such Receivable has been breached;

(e) an Insolvency Event shall have occurred with respect to such Customer;

(f) the sale related to such Receivable is to a Customer with respect to a
location outside the United States of America or a province of Canada that has
not adopted the Personal Property Security Act of Canada, unless the sale is on
letter of credit, guaranty or acceptance terms, in each case acceptable to Agent
in its sole discretion;

(g) the sale to the Customer is on a bill-and-hold, progress bill, guaranteed
sale, sale-and-return, sale on approval, consignment or any other repurchase or
return basis or is evidenced by chattel paper;

(h) Agent believes, in the exercise of its Permitted Discretion, that collection
of such Receivable is insecure or that such Receivable may not be paid by reason
of the Customer’s financial inability to pay;

(i) the Customer is the United States of America, any state or any department,
agency or instrumentality of any of them, unless the applicable Borrower assigns
its right to payment of such Receivable to Agent pursuant to and in accordance
with the Assignment of Claims Act of 1940, as amended (31 U.S.C.
Sub-Section 3727 et seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise
complied with other applicable statutes or ordinances;

(i) the goods giving rise to such Receivable have not been delivered to and
accepted by the Customer or the services giving rise to such Receivable have not
been fully performed by the applicable Borrower and accepted by the Customer or
the Receivable otherwise does not represent a final sale;

(j) the Receivables of the Customer exceed a credit limit determined by Agent,
in its Permitted Discretion, to the extent such Receivable exceeds such limit;

(k) the Receivable is subject to any offset, deduction, defense, dispute,
credits or counterclaim (but such Receivable shall only be ineligible to the
extent of such offset, deduction, defense or counterclaim), the Customer is also
a creditor or supplier of a Borrower or the Receivable is contingent in any
respect or for any reason;

(l) the applicable Borrower has made any agreement with any Customer for any
deduction therefrom, except for discounts or allowances made in the Ordinary
Course of Business of such Borrower for prompt payment, all of which discounts
or allowances are reflected in the calculation of the face value of each
respective invoice related thereto, but with respect to a Receivable subject to
a deduction or claim, only to the extent of the maximum potential amount of such
deduction or claim against the applicable Receivable;

 

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(m) any return, rejection or repossession of the merchandise has occurred or the
rendition of services has been disputed;

(n) such Receivable is not payable to a Borrower; or

(o) such Receivable is not otherwise satisfactory to Agent as determined in by
Agent in the exercise of its Permitted Discretion.

Notwithstanding anything herein to the contrary, no Receivables shall be
Eligible Receivables to the extent such Receivables were acquired by a Borrower
pursuant to (i) the transactions contemplated by the Merger Agreement or (ii) an
acquisition (including, without limitation, a Permitted Acquisition), in each
case, unless Agent has completed field examinations with respect to such
Receivable, the results of which are reasonably satisfactory in form and
substance to Agent.

“Environmental Complaint” shall have the meaning set forth in Section 9.3(b)
hereof.

“Environmental Laws” shall mean all federal, state and local environmental, land
use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes as well as common laws, relating to the protection of the
environment, human health and/or governing the use, storage, treatment,
generation, transportation, processing, handling, production or disposal of
Hazardous Materials and the rules, regulations, policies, guidelines,
interpretations, decisions, orders and directives of federal, state,
international and local Governmental Bodies and authorities with respect
thereto.

“Equity Interests” shall mean, with respect to any Person, any and all shares,
rights to purchase, options, warrants, general, limited or limited liability
partnership interests, member interests, participation or other equivalents of
or interest in (regardless of how designated) equity of such Person, whether
voting or nonvoting, including common stock, preferred stock, convertible
securities or any other “equity security” (as such term is defined in Rule
3a11-1 of the General Rules and Regulations promulgated by the SEC under the
Exchange Act), including in each case all of the following rights relating to
such Equity Interests, whether arising under the Organizational Documents of the
Person issuing such Equity Interests (the “issuer”) or under the applicable laws
of such issuer’s jurisdiction of organization relating to the formation,
existence and governance of corporations, limited liability companies or
partnerships or business trusts or other legal entities, as the case may be:
(i) all economic rights (including all rights to receive dividends and
distributions) relating to such Equity Interests; (ii) all voting rights and
rights to consent to any particular action(s) by the applicable issuer;
(iii) all management rights with respect to such issuer; (iv) in the case of any
Equity Interests consisting of a general partner interest in a partnership, all
powers and rights as a general partner with respect to the management,
operations and control of the business and affairs of the applicable issuer;
(v) in the case of any Equity Interests consisting of the membership/limited
liability company interests of a managing member in a limited liability company,
all powers and rights as a managing member with respect to the management,
operations and control of the business and affairs of the applicable issuer;
(vi) all rights to designate or appoint or vote for or remove any officers,
directors, manager(s), general partner(s) or managing member(s) of such issuer
and/or any members of any board of members/managers/partners/directors that may
at any time have any

 

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rights to manage and direct the business and affairs of the applicable issuer
under its Organizational Documents as in effect from time to time or under
Applicable Law; (vii) all rights to amend the Organizational Documents of such
issuer, (viii) in the case of any Equity Interests in a partnership or limited
liability company, the status of the holder of such Equity Interests as a
“partner”, general or limited, or “member” (as applicable) under the applicable
Organizational Documents and/or Applicable Law; and (ix) all certificates
evidencing such Equity Interests.

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

“Event of Default” shall have the meaning set forth in Article X hereof.

“Excess Cash Flow” shall mean, for any fiscal period, in each case for Holdings
and its Subsidiaries on a consolidated basis, EBITDA, minus each of the
following, to the extent actually paid in cash during such fiscal period,
Unfunded Capital Expenditures, taxes, dividends and distributions, and Debt
Payments.

“Excess Funding Borrower” shall have the meaning set forth in Section 16.19(h)
hereof.

“Excess Payment” shall have the meaning set forth in Section 16.19(h) hereof.

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

“Excluded Property” means (i) general intangible, Leasehold Interest, permit,
license or other rights under contracts instruments or other documents if (but
only to the extent that) the grant of a security interest therein would
constitute a violation of a valid and enforceable restriction in favor of a
third party (except to the extent such prohibition is unenforceable pursuant to
the provisions of Article 9 of the Uniform Commercial Code), unless and until
any required consents shall have been obtained, (ii) equipment owned by any
Borrower that is subject to a purchase money lien or a capital lease obligation
if (but only to the extent that and only for so long as such purchase money
Indebtedness or capital lease restricts the granting of a Lien therein to Agent)
the grant of a security interest therein would constitute a violation of a valid
and enforceable restriction in favor of a third party, unless any required
consents shall have been obtained, or (iii) monies, checks, securities or other
items on deposit or otherwise held in deposit accounts or trust accounts
specifically and exclusively used for payroll, payroll taxes, deferred
compensation and other employee wage and benefit payments to or for the direct
benefit of such Borrower’s employees.

“Excluded Swap Obligation” means, with respect to any guarantor of any Swap
Obligation, if, and to the extent that, all or a portion of the guaranty of such
guarantor of, or the grant by such guarantor of a security interest to secure,
such Swap Obligation (or any guaranty thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such guarantor’s failure for any reason to constitute an
“eligible contract participant” as defined in the Commodity Exchange Act and the
regulations thereunder at the time the guaranty of such guarantor or the grant
of such security interest becomes effective with respect to such Swap
Obligation. If a Swap Obligation arises under a

 

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master agreement governing more than one swap, such exclusion shall apply only
to the portion of such Swap Obligation that is attributable to swaps for which
such guaranty or security interest is or becomes illegal.

“Excluded Taxes” shall mean, with respect to Agent, any Lender, Participant,
Swing Loan Lender Issuer or any other recipient of any payment to be made by or
on account of any Obligations, (a) taxes imposed on or measured by its overall
net income (however denominated), and franchise taxes imposed on it (in lieu of
net income taxes), 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, Participant, Swing Loan Lender
or Issuer, 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 any Borrower is located, (c) 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 hereto (or
designates a new lending office) or is attributable to such Foreign Lender’s
failure or inability (other than as a result of a Change in Law) to comply with
Section 3.10(e), except to the extent that such Foreign Lender or Participant
(or its assignor or seller of a participation, if any) was entitled, at the time
of designation of a new lending office (or assignment or sale of a
participation), to receive additional amounts from Borrowers with respect to
such withholding tax pursuant to Section 3.10(a), or (d) any Taxes imposed on
any “withholding payment” payable to such recipient as a result of the failure
of such recipient to satisfy the requirements set forth in the FATCA after
December 31, 2012.

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

“Federal Funds Effective Rate” for any day shall mean the rate per annum (based
on a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided that, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

“Federal Funds Open Rate” for any day shall mean the rate per annum (based on a
year of 360 days and actual days elapsed) which is the daily federal funds open
rate as quoted by ICAP North America, Inc. (or any successor) as set forth on
the Bloomberg Screen BTMM for that day opposite the caption “OPEN” (or on such
other substitute Bloomberg Screen that displays such rate), or as set forth on
such other recognized electronic source used for the purpose of displaying such
rate as selected by PNC (an “Alternate Source”) (or if such rate for such day
does not appear on the Bloomberg Screen BTMM (or any substitute screen) or on
any Alternate Source, or if there shall at any time, for any reason, no longer
exist a Bloomberg

 

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Screen BTMM (or any substitute screen) or any Alternate Source, a comparable
replacement rate determined by PNC at such time (which determination shall be
conclusive absent manifest error); provided, however that, if such day is not a
Business Day, the Federal Funds Open Rate for such day shall be the “open” rate
on the immediately preceding Business Day. If and when the Federal Funds Open
Rate changes, the rate of interest with respect to any advance to which the
Federal Funds Open Rate applies will change automatically without notice to
Borrowers, effective on the date of any such change.

“Fee Letter” shall mean that certain Second Amended and Restated Fee Letter,
dated as of the date hereof, among Agent and the Borrowers, as the same may be
amended, restated, supplemented or modified from time to time.

“Fixed Charge Coverage Ratio” shall mean, with respect to any fiscal period, the
ratio of (a) EBITDA of Holdings and its Subsidiaries on a consolidated basis,
minus Unfunded Capital Expenditures made during such period, minus cash taxes
paid during such period, minus all cash distributions and cash dividends made
during such period to (b) all Debt Payments during such period.

“Flood Laws” shall mean all Applicable Laws relating to policies and procedures
that address requirements placed on federally regulated lenders under the
National Flood Insurance Reform Act of 1994 and other Applicable Laws related
thereto.

“Florida Chemical” shall have the meaning set forth in the introductory
paragraph hereto.

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

“Foreign Subsidiary” shall mean any Subsidiary of any Person that is not
organized or incorporated in the United States, any State or territory thereof
or the District of Columbia.

“Formula Amount” shall have the meaning set forth in Section 2.1(a) hereof.

“Funded Debt” shall mean, with respect to any Person, without duplication, all
Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one
(1) year from issuance, or is directly or indirectly renewable or extendible at
such Person’s option under a revolving credit or similar agreement obligating
the lender or lenders to extend credit over a period of more than one (1) year
from the date of creation thereof, and specifically including Capitalized Lease
Obligations, current maturities of long-term debt, revolving credit and short
term debt extendible beyond one (1) year at the option of the debtor, and also
including, in the case of Borrowers, the Obligations and, without duplication,
Indebtedness consisting of guaranties of Funded Debt of other Persons.

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

 

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“Governmental Acts” shall mean any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Body.

“Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to a government
(including any supra-national bodies such as the European Union or the European
Central Bank) and any group or body charged with setting financial accounting or
regulatory capital rules or standards (including, without limitation, the
Financial Accounting Standards Board, the Bank for International Settlements or
the Basel Committee on Banking Supervision) or any successor or similar
authority to any of the foregoing.

“Guarantor” shall mean each Subsidiary (other than Foreign Subsidiaries or the
Inactive Subsidiaries) of Holdings that is not a “Borrower” hereunder and any
other Person who may hereafter guarantee payment or performance of the whole or
any part of the Obligations; and “Guarantors” means collectively all such
Persons.

“Guarantor Security Agreement” shall mean any security agreement executed by any
Guarantor in favor of Agent securing the Obligations or the Guaranty of such
Guarantor, in form and substance satisfactory to Agent.

“Guaranty” shall mean any guaranty of the Obligations executed by a Guarantor in
favor of Agent for its benefit and for the ratable benefit of Lenders, in form
and substance satisfactory to Agent.

“Hazardous Discharge” shall have the meaning set forth in Section 9.3(b) hereof.

“Hazardous Materials” shall mean, without limitation, any flammable explosives,
radon, radioactive materials, asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum and petroleum products, methane, hazardous
materials, Hazardous Wastes, hazardous or Toxic Substances or related materials
as defined in or subject to regulation under Environmental Laws.

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or Applicable Laws now in force or hereafter enacted relating to
hazardous waste disposal.

“Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge.”

“Holdings” shall have the meaning set forth in the introductory paragraph
hereto.

“Inactive Subsidiaries” shall mean collectively, Flotek Ecuador Management, LLC,
a Texas limited liability company, Flotek Ecuador Investments, LLC, a Texas
limited liability company, and FlotekChemical Ecuador CIA, LTDA.

“Increasing Lender” shall have the meaning set forth in Section 2.24(a) hereof.

 

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“Indebtedness” shall mean, as to any Person at any time, any and all
indebtedness, obligations or liabilities (whether matured or unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or several) of such Person for or in respect of: (a) borrowed money; (b) amounts
received under or liabilities in respect of any note purchase or acceptance
credit facility, and all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (c) all Capitalized Lease
Obligations; (d) reimbursement obligations (contingent or otherwise) under any
letter of credit agreement, banker’s acceptance agreement or similar
arrangement; (e) obligations under any Interest Rate Hedge or other interest
rate management device, foreign currency exchange agreement, currency swap
agreement, commodity price protection agreement or other interest or currency
exchange rate or commodity price hedging arrangement; (f) any other advances of
credit made to or on behalf of such Person or other transaction (including
forward sale or purchase agreements, capitalized leases and conditional sales
agreements) having the commercial effect of a borrowing of money entered into by
such Person to finance its operations or capital requirements including to
finance the purchase price of property or services and all obligations of such
Person to pay the deferred purchase price of property or services (but not
including trade payables and accrued expenses incurred in the Ordinary Course of
Business which are not represented by a promissory note or other evidence of
indebtedness); (g) all Equity Interests of such Person subject to repurchase or
redemption rights or obligations (excluding repurchases or redemptions at the
sole option of such Person); (h) all indebtedness, obligations or liabilities
secured by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are otherwise an obligation of such Person; (i) all
obligations of such Person for “earnouts”, purchase price adjustments, profit
sharing arrangements, deferred purchase money amounts and similar payment
obligations or continuing obligations of any nature of such Person arising out
of purchase and sale contracts; (j) off-balance sheet liabilities and/or pension
plan liabilities of such Person; (k) obligations arising under bonus, deferred
compensation, incentive compensation or similar arrangements, other than those
arising in the Ordinary Course of Business; and (l) any guaranty of any
indebtedness, obligations or liabilities of a type described in the foregoing
clauses (a) through (k).

“Indemnified Party” shall have the meaning set forth in Section 16.5 hereof.

“Indemnified Taxes” shall mean Taxes other than Excluded Taxes.

“Ineligible Security(ies)” shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

“Insolvency Event” shall mean, with respect to any Person, including without
limitation any Lender, such Person or such Person’s direct or indirect parent
company (a) becomes the subject of a bankruptcy or insolvency proceeding
(including any proceeding under Title 11 of the United States Code), or
regulatory restrictions, (b) has had a receiver, conservator, trustee,
administrator, custodian, assignee for the benefit of creditors or similar
Person charged with the reorganization or liquidation of its business appointed
for it or has called a meeting of its creditors, (c) admits in writing its
inability, or be generally unable, to pay its debts as they become due or cease
operations of its present business, (d) with respect to a Lender, such Lender is
unable to perform hereunder due to the application of Applicable Law, or (e) in
the good faith determination of Agent, has taken any action in furtherance of,
or indicating its consent to,

 

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approval of, or acquiescence in, any such proceeding or appointment of a type
described in clause(a) or (b); provided, that, an Insolvency Event shall not
result solely by virtue of any ownership interest, or the acquisition of any
ownership interest, in such Person or such Person’s direct or indirect parent
company by a Governmental Body or instrumentality thereof if, and only if, such
ownership interest does not result in or provide such Person with immunity from
the jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Person (or such
Governmental Body or instrumentality) to reject, repudiate, disavow or disaffirm
any contracts or agreements made by such Person.

“Intellectual Property” shall mean property constituting a patent, copyright,
trademark (or any application in respect of the foregoing), service mark,
copyright, copyright application, trade name, trade name application, domain
name, domain name application, mask work, trade secrets, design right, assumed
name or license or other right to use any of the foregoing under Applicable Law.

“Intellectual Property Claim” shall mean the assertion, by any means, by any
Person of a claim that any Borrower’s ownership, use, marketing, sale or
distribution of any Inventory, equipment, Intellectual Property or other
property or asset is violative of any ownership of or right to use any
Intellectual Property of such Person.

“Intellectual Property Security Agreement” shall mean that certain Amended and
Restated Intellectual Property Security Agreement, dated as of the Closing Date
between Borrower and Agent, the form and substance of which shall be
satisfactory to Agent.

“Interest Period” shall mean the period provided for any LIBOR Rate Loan
pursuant to Section 2.2(b) hereof.

“Interest Rate Hedge” shall mean an interest rate exchange, collar, cap, swap,
floor, adjustable strike cap, adjustable strike corridor or similar agreements
entered into by any Credit Party in order to provide protection to, or minimize
the impact upon, such Credit Party and/or their respective Subsidiaries of
increasing floating rates of interest applicable to Indebtedness.

“Internet Posting” shall have the meaning set forth in Section 16.6 hereof.

“Inventory” shall mean and include as to each Borrower all of such Borrower’s
inventory (as defined in Article 9 of the Uniform Commercial Code) and all of
such Borrower’s goods, merchandise and other personal property, wherever
located, to be furnished under any consignment arrangement, contract of service
or held for sale or lease, all raw materials, work in process, finished goods
and materials and supplies of any kind, nature or description which are or might
be used or consumed in such Borrower’s business or used in selling or furnishing
such goods, merchandise and other personal property, and all Documents.

“Inventory Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(ii) hereof.

“ISP98 Rules” shall have the meaning set forth in Section 2.12(b) hereof.

“Issuer” shall mean (i) Agent in its capacity as the issuer of Letters of Credit
under this Agreement and (ii) any other Person which Agent in its discretion
shall designate as the issuer of and cause to issue any particular Letter of
Credit under this Agreement in place of Agent as issuer.

 

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“Joint Obligations” shall have the meaning set forth in Section 16.19(h) hereof.

“Law(s)” shall mean any law(s) (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, issued guidance, release, ruling,
order, executive order, injunction, writ, decree, bond judgment authorization or
approval, lien or award of or any settlement arrangement with any Governmental
Body, foreign or domestic.

“Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender pursuant to Section 16.3(c). For
the purpose of provision of this Agreement or any Other Document which provides
for the granting of a security interest or other Lien to Agent for the benefit
of Lenders as security for the Obligations, “Lenders” shall include any
Affiliate of a Lender to which such Obligation (specifically including any
Hedging Obligation and any Cash Management Obligation) is owed.

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which Agent confirms in writing prior
to the execution thereof: (a) is documented in a standard International Swap
Dealer Association Master Agreement; (b) provides for the method of calculating
the reimbursable amount of the provider’s credit exposure thereunder in a
reasonable and customary manner; and (c) is entered into for hedging (rather
than speculative) purposes. The liabilities of any Borrower to the provider of
any Lender-Provided Interest Rate Hedge (the “Hedge Liabilities”) shall be
“Obligations” hereunder, guaranteed obligations under any Guaranty and secured
obligations under any Guarantor Security Agreement, as applicable, and otherwise
treated as Obligations for purposes of each of the Other Documents. The Liens
securing the Hedge Liabilities shall be pari passu with the Liens securing all
other Obligations under this Agreement and the Other Documents, subject to the
express provisions of Section 11.5 hereof.

“Letter of Credit Application” shall have the meaning set forth in
Section 2.12(a) hereof.

“Letter of Credit Borrowing” shall have the meaning set forth in Section 2.14(d)
hereof.

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2(a)
hereof

“Letter of Credit Sublimit” shall mean $10,000,000.

“Letters of Credit” shall have the meaning set forth in Section 2.11 hereof.

“LIBOR Rate” shall mean for any LIBOR Rate Loan for the then current Interest
Period relating thereto, the interest rate per annum determined by Agent by
dividing (the resulting quotient rounded upwards, if necessary, to the nearest
1/100th of 1% per annum) (a) the rate which appears on the Bloomberg Page BBAM1
(or on such other substitute Bloomberg page that displays rates at which US
dollar deposits are offered by leading banks in the London interbank deposit
market), or the rate which is quoted by another source selected by Agent which
has been approved by the British Bankers’ Association as an authorized
information vendor for the

 

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purpose of displaying rates at which U.S. dollar deposits are offered by leading
banks in the London interbank deposit market (a “LIBOR Alternate Source”), at
approximately 11:00 a.m., London time, two (2) Business Days prior to the
commencement of such Interest Period as the London interbank offered rate for
U.S. Dollars for an amount comparable to such LIBOR Rate Loan and having a
borrowing date and a maturity comparable to such Interest Period (or if there
shall at any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or
any substitute page) or any LIBOR Alternate Source, a comparable replacement
rate determined by Agent at such time (which determination shall be conclusive
absent manifest error)), by (b) a number equal 1.00 minus the Reserve
Percentage. The LIBOR Rate may also be expressed by the following formula:

 

Average of London interbank offered rates quoted by Bloomberg or

appropriate Successor as shown on

   Bloomberg Page BBAM1    LIBOR Rate =    1.00 – Reserve Percentage   

The LIBOR Rate shall be adjusted with respect to any LIBOR Rate Loan that is
outstanding on the effective date of any change in the Reserve Percentage as of
such effective date. Agent shall give reasonably prompt notice to the Borrowing
Agent of the LIBOR Rate as determined or adjusted in accordance herewith, which
determination shall be conclusive absent manifest error.

“LIBOR Rate Loan” shall mean any Advance that bears interest based on the LIBOR
Rate.

“License Agreement” shall mean any agreement between any Borrower and a Licensor
pursuant to which such Borrower is authorized to use any Intellectual Property
in connection with the manufacturing, marketing, sale or other distribution of
any Inventory of such Borrower or otherwise in connection with such Borrower’s
business operations.

“Licensor” shall mean any Person from whom any Borrower obtains the right to use
(whether on an exclusive or non-exclusive basis) any Intellectual Property in
connection with such Borrower’s manufacture, marketing, sale or other
distribution of any Inventory or otherwise in connection with such Borrower’s
business operations.

“Licensor/Agent Agreement” shall mean an agreement between Agent and a Licensor,
in form and content satisfactory to Agent, by which Agent is given the
unqualified right, vis-a-vis such Licensor, to enforce Agent’s Liens with
respect to and to dispose of any Borrower’s Inventory with the benefit of any
Intellectual Property applicable thereto, irrespective of such Borrower’s
default under any License Agreement with such Licensor.

“Lien” shall mean any mortgage, deed of trust, deemed or statutory trust,
pledge, hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset or property of any kind or nature whatsoever including any adverse
right or claim conditional sale or other title retention agreement, any lease
having

 

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substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.

“Lien Waiver Agreement” shall mean an agreement which is executed in favor of
Agent by a Person who owns or occupies premises at which any Collateral may be
located, or by a Person who has possession or control of any Collateral, from
time to time in form and substance satisfactory to Agent in its sole discretion.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, results of operations, assets, business or properties of
the Credit Parties, taken as a whole, (b) the Borrowers’ (taken as a whole)
ability to duly and punctually pay or perform the Obligations in accordance with
the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of
the benefits of Agent’s and each Lender’s rights and remedies under this
Agreement and the Other Documents.

“Material Contract” shall mean any agreement, document, instrument, contract or
other arrangement to which Holdings or any of its Subsidiaries is a party (other
than this Agreement and the Other Documents) concerning an amount in excess of
$1,000,000 for which the nonperformance, cancellation or failure to renew could
reasonably be expected to have a Material Adverse Effect, together with those
agreements and arrangements listed on Schedule 5.27 (if any), as each is
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time to the extent permitted by this Agreement.

“Maximum Loan Amount” shall mean $125,000,000 plus any increases in accordance
with Section 2.24 less repayments of the Term Loan.

“Maximum Revolving Advance Amount” shall mean $75,000,000 plus any increases in
accordance with Section 2.24.

“Maximum Swing Loan Advance Amount” shall mean $7,500,000; provided, that, upon
the effective date of each increase in the Maximum Revolving Advance Amount in
accordance with Section 2.24, the Maximum Swing Loan Advance Amount shall
increase by an amount equal to ten percent (10%) of the amount of such increase
in the Maximum Revolving Advance Amount.

“Maximum Undrawn Amount” shall mean, with respect to any outstanding Letter of
Credit as of any date, the amount of such Letter of Credit that is or may become
available to be drawn, including all automatic increases provided for in such
Letter of Credit, whether or not any such automatic increase has become
effective.

“Merger Agreement” shall mean that certain Agreement and Plan of Merger by and
among Holdings, Acquisition Sub, Target, and the stockholders of Target dated as
of the date hereof.

“Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 16.3(d) hereof.

 

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“MTI” shall have the meaning set forth in the introductory paragraph hereto.

“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Sections
3(37) or 4001(a)(3) of ERISA to which contributions are required or, within the
preceding five plan years, were required by any Borrower or any member of the
Controlled Group.

“Multiple Employer Plan” shall mean a Plan which has two or more contributing
sponsors (including any Borrower or any member of the Controlled Group) at least
two of whom are not under common control, as such a plan is described in
Section 4064 of ERISA.

“Negative Pledge” shall mean collectively, those certain Negative Pledge
Agreements, in each case, dated as of the Closing Date, between the Credit
Parties named therein and Agent, in recordable form and otherwise in form and
substance satisfactory to Agent.

“New Lender” shall have the meaning set forth in Section 2.24(a) hereof.

“NOLV Appraisal” shall have the meaning set forth in Section 9.19 hereof.

“Non-Defaulting Lender” shall mean, at any time, any Revolving Lender that is
not a Defaulting Lender at such time.

“Note(s)” shall mean collectively, the Revolving Credit Note, the Term Note, the
Swing Loan Note and any additional promissory note evidencing the Obligations
under this Agreement, each as amended, restated, extended, supplemented or
otherwise modified from time to time.

“Notice” shall have the meaning set forth in Section 16.6 hereof.

“Obligations” shall mean and include any and all loans (including without
limitation, all Advances), advances, debts, liabilities, obligations (including
without limitation all reimbursement obligations and cash collateralization
obligations with respect to Letters of Credit issued hereunder), covenants and
duties owing by any Credit Party to Issuer, any Lender, Swing Loan Lender or
Agent (or to any other direct or indirect subsidiary or affiliate of Issuer,
Swing Loan Lender, any Lender or Agent) of any kind or nature, present or future
(including any interest or other amounts accruing thereon, any fees accruing
under or in connection therewith, any costs and expenses of any Person payable
by any Borrower and any indemnification obligations payable by any Borrower
arising or payable after maturity, or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to any Borrower, whether or not a claim for post-filing or
post-petition interest, fees or other amounts is allowable or allowed in such
proceeding), whether or not evidenced by any note, guaranty or other instrument,
whether arising under any agreement, instrument or document. (including this
Agreement, the Other Documents, Lender-Provided Interest Rate Hedges and any
Cash Management Products and Services) whether or not for the payment of money,
whether arising by reason of an extension of credit, opening or issuance of a
letter of credit, loan, equipment lease, establishment of any purchase card or
similar facility or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts or deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of Agent’s or
any Lender’s non-receipt of or inability to collect funds or otherwise not being
made whole in

 

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connection with depository transfer check or other similar arrangements, whether
direct or indirect (including those acquired by assignment or participation),
absolute or contingent, joint or several, due or to become due, now existing or
hereafter arising, contractual or tortious, liquidated or unliquidated,
regardless of how such indebtedness or liabilities arise or by what agreement or
instrument they may be evidenced or whether evidenced by any agreement or
instrument, including, but not limited to, (i) any and all of any Credit Party’s
Indebtedness and/or liabilities (and any and all indebtedness, obligations
and/or liabilities of any Subsidiary of any Credit Party) under this Agreement,
the Other Documents or under any other agreement between Issuer, Agent or
Lenders and any Borrower and any amendments, extensions, renewals or increases
and all costs and expenses of Issuer, Agent and any Lender incurred in the
documentation, negotiation, modification, enforcement, collection or otherwise
in connection with any of the foregoing, including but not limited to reasonable
attorneys’ fees and expenses and all obligations of any Borrower to Issuer,
Agent or Lenders to perform acts or refrain from taking any action, (ii) all
Hedge Liabilities and (iii) all Cash Management Liabilities. The liabilities of
any Borrower to the provider of any Lender-Provided Interest Rate Hedge shall be
“Obligations” hereunder, “Liabilities” under the Guaranty and “Obligations”
under the Guarantor Security Agreement and otherwise treated as Obligations for
purposes of each of the Other Documents; provided that, notwithstanding any
provision herein or in any Other Document, the Obligations, the “Liabilities”
under any Guaranty and the “Obligations” under any Guarantor Security Agreement
shall not include any Excluded Swap Obligations.

“Order” shall have the meaning set forth in Section 2.19(b) hereof.

“Ordinary Course of Business” shall mean, with respect to any Borrower, the
ordinary course of such Borrower’s business as conducted on the Closing Date.

“Original Closing Date” shall have the meaning set forth in the recitals hereto.

“Original Credit Agreement” shall have the meaning set forth in the recitals
hereto.

“Original Term Loan” shall have the meaning set forth in Section 2.3(a) hereof.

“Organizational Documents” shall mean, with respect to any Person, any charter,
articles or certificate of incorporation, certificate of organization,
registration or formation, certificate of partnership or limited partnership,
bylaws, operating agreement, limited liability company agreement, or partnership
agreement of such Person and any and all other applicable documents relating to
such Person’s formation, organization or entity governance matters (including
any shareholders’ or equity holders’ agreement or voting trust agreement) and
specifically includes, without limitation, any certificates of designation for
preferred stock or other forms of preferred equity.

“Other Documents” shall mean the Notes, each Negative Pledge, the Perfection
Certificates, the Fee Letter, any Collateral Assignment of Acquisition
Agreement, Collateral Assignment of Escrow Agreement, any Guaranty, any
Guarantor Security Agreement, any Pledge Agreement, any Lender-Provided Interest
Rate Hedge, the Intellectual Property Security Agreement and any and all other
agreements, instruments and documents, including any lien subordination
agreements, acknowledgements, estoppels, consents, certificates, opinions,

 

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standstill, non-disturbance or intercreditor agreements, guaranties, pledges,
powers of attorney, consents, interest or currency swap agreements or other
similar agreements and all other writings heretofore, now or hereafter executed
by any Credit Party and/or delivered to Agent or any Lender in respect of the
transactions contemplated by this Agreement, in each case together with all
extensions, renewals, amendments, supplements, modifications, substitutions and
replacements thereto and thereof.

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

“Out-of-Formula Loans” shall have the meaning set forth in Section 16.2(e)
hereof.

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly, fifty percent (50%) or more of the Equity Interests issued by
such Person having ordinary voting power to elect a majority of the members of
the board of directors of such Person, or any other similar governing body of
such Person.

“Participant” shall mean each Person who, pursuant to Section 16.3(b), shall be
granted the right by any Lender to participate in any of the Advances and who
shall have entered into a participation agreement in form and substance
satisfactory to such Lender.

“Participation Advance” shall have the meaning set forth in Section 2.14(d)
hereof.

“Participation Commitment” shall mean the obligation hereunder of each Lender
holding a Revolving Commitment to buy a participation equal to its Revolving
Commitment Percentage (subject to any reallocation pursuant to
Section 2.22(b)(iii) hereof) in the Swing Loans made by Swing Loan Lender
hereunder as provided for in Section 2.4(c) hereof and in the Letters of Credit
issued hereunder as provided for in Section 2.14(a) hereof.

“Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.

“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA or any successor.

“Pension Benefit Plan” shall mean at any time any “employee pension benefit
plan” as defined in Section 3(2) of ERISA (including a Multiple Employer Plan,
but not a Multiemployer Plan) which is covered by Title IV of ERISA or is
subject to the minimum funding standards under Sections 412, 430 or 436 of the
Code and either (i) is maintained or to which contributions are required by
Borrowers or any member of the Controlled Group or (ii) has at any time within
the preceding five (5) years been maintained or to which contributions have been
required by Borrowers or any entity which was at such time a member of the
Controlled Group.

 

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“Perfection Certificates” shall mean, collectively, the information
questionnaires and the responses thereto provided by Borrowing Agent on behalf
of the Credit Parties and delivered to Agent.

“Permitted Acquisitions” shall mean any acquisition by any Borrower, whether by
purchase, merger or otherwise, of all or substantially all of the assets of, all
of the Equity Interests of, or a business line or unit or a division of, any
Person. Any such acquisition must meet, at a minimum, the following conditions
(unless waived in writing by Agent):

(a) Agent shall have received at least thirty (30) Business Days’ prior written
notice of such proposed acquisition, which notice shall include a reasonably
detailed description of such proposed acquisition;

(b) all transactions in connection therewith shall be consummated in accordance
with all Applicable Laws and in conformity with all applicable Governmental
Acts;

(c) immediately prior to, and after giving effect thereto, no Default or Event
of Default shall have occurred and be continuing or would result therefrom;

(d) the business and assets acquired by such Borrower, or in the case of a joint
venture, formed, in such acquisition shall be clear and free of all Liens (other
than Permitted Encumbrances);

(e) any Person or assets or division as acquired in accordance herewith shall be
in same business or lines of business in which Borrowers are engaged as of the
Closing Date or businesses or lines of business that are reasonably related or
incidental thereto;

(f) the acquisition shall have been approved by the board of directors or other
governing body or controlling Person of the Person acquired or the Person from
whom such assets or division is acquired;

(g) in the case of a merger or consolidated, the applicable Borrower shall be
the continuing and surviving entity;

(h) at or prior to the closing of such acquisition, Agent shall be granted a
first priority perfected Lien (subject to Permitted Encumbrances) in the assets
and Equity Interests of such acquisition target or newly formed Subsidiary of
the applicable Borrower in connection with such acquisition and such acquisition
target or newly formed Subsidiary shall become a Borrower hereunder or a
Guarantor (to be determined by Agent in its sole discretion), in each case,
pursuant to Section 7.12;

(i) immediately prior to, and after giving effect thereto, Holdings and its
Subsidiaries on a consolidated basis shall be in pro forma compliance with the
financial covenants set forth in Section 6.5 of this Agreement;

 

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(j) concurrently with the delivery of the notice referred to in clause
(a) above, Borrowing Agent shall have delivered to Agent, in form and substance
satisfactory to Agent in its sole discretion:

(i) a pro forma consolidated balance sheet, income statement and cash flow
statement of Holdings and its Subsidiaries on a consolidated basis (the
“Permitted Acquisition Pro Forma”), based on recent financial statements, which
shall be complete and shall fairly present in all material respects the assets,
liabilities, financial condition and results of operations of Holdings and its
Subsidiaries in accordance with GAAP consistently applied, but taking into
account such Permitted Acquisition, and such Permitted Acquisition Pro Forma
shall reflect that (y) on a pro forma basis, Holdings and its Subsidiaries would
have complied with all financial covenants set forth in Section 6.5 of this
Agreement (after giving effect to such Permitted Acquisition and all Revolving
Advances funded in connection therewith as if made on the first day of such
period), and (z) on a pro forma basis, no Default or Event of Default has
occurred and is continuing or would result after giving effect to such proposed
Acquisition; and

(ii) a certificate of an Authorized Officer of Holdings to the effect that
Holdings and its Subsidiaries on a consolidated basis will be solvent upon the
consummation of the proposed acquisition;

(k) on or prior to the date of such proposed acquisition, Agent shall have
received, in form and substance reasonably satisfactory to Agent, copies of the
acquisition agreement and related agreements and instruments, and all opinions,
certificates, lien search results and other documents reasonably requested by
Agent;

(l) after giving effect to such acquisition, Borrowers shall have an Undrawn
Availability of at least $10,000,000 (as evidenced by a Borrowing Base
Certificate and any supplemental schedules, in form and substance satisfactory
to Agent, calculated as of the date of such acquisition); and

(m) the aggregate consideration (including the amount of any liabilities assumed
by Holdings and/or its Subsidiaries), paid by Holdings and/or its Subsidiaries
(i) for any such acquisition shall not exceed $5,000,000 and (ii) for all such
acquisitions made during the term of this Agreement shall not exceed
$15,000,000.

“Permitted Discretion” means a determination made in good faith and in the
exercise (from the perspective of a secured asset-based lender) of commercially
reasonable business judgment.

“Permitted Encumbrances” shall mean: (a) Liens in favor of Agent for the benefit
of Agent and Lenders, including without limitation, Liens securing Hedge
Liabilities and Cash Management Products and Services; (b) Liens for taxes,
assessments or other governmental charges not delinquent or being Properly
Contested; provided, that the Lien shall have no effect on the priority of the
Liens in favor of Agent or the value of the assets in which Agent has such a
Lien and a stay of enforcement of any such Lien shall be in effect; (c) deposits
or pledges to secure obligations under worker’s compensation, social security or
similar laws, or under unemployment insurance; (d) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds and other obligations of
like nature arising in the Ordinary Course of Business; (e) Liens arising by
virtue of the rendition, entry or issuance against any Borrower or any
Subsidiary, or any property of any Borrower or any Subsidiary, of any judgment,
writ, order, or decree to the extent the

 

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rendition, entry, issuance or continued existence of such judgment, writ, order
or decree (or any event or circumstance relating thereto) has not resulted in
the occurrence of an Event of Default under Section 10.6 hereof; (f) mechanics’,
workers’, materialmen’s or other like Liens arising in the Ordinary Course of
Business with respect to obligations which are not due or which are being
Properly Contested; (g) Liens placed upon fixed assets hereafter acquired to
secure a portion of the purchase price thereof; provided, that, (I) any such
lien shall not encumber any other property of any Borrower and (II) the
aggregate amount of Indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year shall not exceed the amount permitted in
Section 7.6 hereof; (h) other Liens incidental to the conduct of any Borrower’s
business or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from or impair Agent’s or
Lenders’ rights in and to the Collateral or the value of any Borrower’s property
or assets or which do not materially impair the use thereof in the operation of
any Borrower’s business; and (i) Liens disclosed on Schedule 1.2; provided,
that, such Liens shall secure only those obligations which they secure on the
Closing Date and shall not subsequently apply to any other property or assets of
any Borrower other than the property and assets to which they apply as of the
Closing Date.

“Permitted Indebtedness” shall mean: (a) Indebtedness to Lenders (including any
Lender-Provided Interest Rate Hedge); (b) Indebtedness incurred for Capital
Expenditures permitted under Section 7.6 hereof; (c) purchase money Indebtedness
in an amount, when aggregated with Indebtedness permitted pursuant to clause
(d) hereof, not to exceed $1,000,000 in the aggregate; (d) unsecured
Indebtedness in an amount, when aggregated with purchase money Indebtedness
permitted pursuant to clause (c) hereof, not to exceed $1,000,000 in the
aggregate, so long as such Indebtedness is unsecured, on terms and conditions
satisfactory to Agent in its sole discretion, and subordinated in right of
payment to the payment in full of the Obligations pursuant to the terms of a
Subordination Agreement; (e) Indebtedness of any Credit Party to any other
Credit Party in an aggregate amount not to exceed $500,000; (f) Indebtedness
assumed under the Merger Agreement; (g) unsecured Indebtedness subject only to
Permitted Encumbrances (other than clauses (j) and (k) of the definition of
Permitted Encumbrances) that is assumed in connection with a Permitted
Acquisition, so long as such Indebtedness does not exceed $1,500,000 in the
aggregate during the Term or $500,000 for any Permitted Acquisition; and
(h) Indebtedness that is due under any Interest Rate Hedge, so long as such
Interest Rate Hedge (i) is provided by a financial institutions acceptable to
Agent in its sole discretion, (ii) is documented in a standard International
Swap Dealer Association Agreement, (iii) provides for the method of calculating
the reimbursable amount of the provider’s credit exposure in a reasonable and
customary manner, (iv) is entered into for hedging (rather than speculative)
purposes.

“Permitted Investments” shall mean investments in: (a) obligations issued or
guaranteed by the United States of America or any agency thereof; (b) commercial
paper with maturities of not more than 180 days and a published rating of not
less than A-1 or P-1 (or the equivalent rating); (c) certificates of time
deposit and bankers’ acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency; (d) U.S. money market funds
that invest solely in obligations issued or guaranteed by the United States of
America or an agency thereof; and (e) Permitted Loans.

 

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“Permitted Investors” means all of the following, without duplication: (i) the
members of management of the Borrowers on the Closing Date, and (ii) the holders
of the Equity Interests of Borrowers as of the Closing Date.

“Permitted Loans” shall mean: (a) the extension of trade credit by a Borrower to
its Customer(s), in the Ordinary Course of Business in connection with a sale of
Inventory or rendition of services, in each case on open account terms;
(b) loans to employees in the Ordinary Course of Business not to exceed as to
all such loans the aggregate amount of $100,000 at any time outstanding; and
(c) loans to Credit Parties to the extent permitted by clause (e) of the
definition of Permitted Indebtedness.

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

“Petrovalve Delaware” shall mean Petrovalve, Inc., a Delaware corporation.

“Plan” shall mean any employee benefit plan within the meaning of Section 3(3)
of ERISA (including a Pension Benefit Plan and a Multiemployer Plan, as defined
herein) maintained by any Borrower or any member of the Controlled Group or to
which any Borrower or any member of the Controlled Group is required to
contribute.

“Pledge Agreements” shall mean (i) that certain Amended and Restated Pledge
Agreement executed by Holdings in favor of Agent dated as of the Closing Date,
(ii), that certain Pledge Agreement executed by CESI Chemical in favor of Agent
dated as of the Closing Date, (iii) that certain Pledge Agreement executed by
Flotek International in favor of Agent dated as of the Closing Date, (iv) that
certain Pledge Agreement executed by Petrovalve Delaware in favor of Agent dated
as of the Closing Date, (v) that certain Pledge Agreement executed by CESI
Manufacturing in favor of Agent dated as of the Closing Date, (vi) that certain
Pledge Agreement executed by Florida Chemical in favor of Agent dated as of the
Closing Date and (vii) any other pledge agreements executed subsequent to the
Closing Date by any other Person to secure the Obligations.

“PNC” shall have the meaning set forth in the preamble to this Agreement and
shall extend to all of its affiliates, successors and assigns.

“Pro Forma Balance Sheet” shall have the meaning set forth in Section 5.5(a)
hereof.

“Pro Forma Financial Statements” shall have the meaning set forth in
Section 5.5(b) hereof.

“Projections” shall have the meaning set forth in Section 5.5(b) hereof.

 

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“Properly Contested” shall mean, in the case of any Indebtedness, Lien or taxes,
as applicable, of any Person that are not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay the
same or concerning the amount thereof: (a) such Indebtedness, Lien or taxes, as
applicable, are being properly contested in good faith by appropriate
proceedings promptly instituted and diligently conducted; (b) such Person has
established appropriate reserves as shall be required in conformity with GAAP;
(c) the non-payment of such Indebtedness or taxes will not have a Material
Adverse Effect or will not result in the forfeiture of any assets of such
Person; (d) no Lien is imposed upon any of such Person’s assets with respect to
such Indebtedness or taxes unless such Lien (x) does not attach to any
Receivables or Inventory, (y) is at all times junior and subordinate in priority
to the Liens in favor of Agent (except only with respect to property taxes that
have priority as a matter of applicable state law) and, (z) enforcement of such
Lien is stayed during the period prior to the final resolution or disposition of
such dispute; and (e) if such Indebtedness or Lien, as applicable, results from,
or is determined by the entry, rendition or issuance against a Person or any of
its assets of a judgment, writ, order or decree, enforcement of such judgment,
writ, order or decree is stayed pending a timely appeal or other judicial
review.

“Pro Rata Share” shall have the meaning set forth in Section 16.19(h) hereof.

“Protective Advances” shall have the meaning set forth in Section 16.2(f)
hereof.

“Published Rate” shall mean the rate of interest published each Business Day in
the Wall Street Journal “Money Rates” listing under the caption “London
Interbank Offered Rates” for a one-month period (or, if no such rate is
published therein for any reason, then the Published Rate shall be the LIBOR
Rate for a one-month period as published in another publication selected by
Agent).

“Purchasing CLO” shall have the meaning set forth in Section 16.3(d) hereof.

“Purchasing Lender” shall have the meaning set forth in Section 16.3(c) hereof.

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

“Real Property” shall mean all of the owned and leased premises identified on
Schedule 4.4(b)(iv) hereto or in and to any other premises or real property that
are hereafter owned or leased by any Credit Party.

“Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts (as defined in Article 9 of the Uniform Commercial Code) and
all of such Borrower’s contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
contract rights, instruments, documents and chattel paper, and drafts and
acceptances, credit card receivables and all other forms of obligations owing to
such Borrower arising out of or in connection with the sale or lease of
Inventory or the rendition of services, all supporting obligations, guarantees
and other security therefor, whether secured or unsecured, now existing or
hereafter created, and whether or not specifically sold or assigned to Agent
hereunder.

 

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“Receivables Advance Rate” shall have the meaning set forth in
Section 2.1(a)(y)(i) hereof.

“Register” shall have the meaning set forth in Section 16.3(e) hereof.

“Reimbursement Obligation” shall have the meaning set forth in Section 2.14(b)
hereof.

“Releases” shall have the meaning set forth in Section 5.7(c)(i) hereof.

“Rental Fleet Tools” shall mean Inventory owned by a Borrower which is held for
rental to Customers. Any stabilizers, reamers, wipers, jars, shock subs,
wireless survey “measurement whole drilling” tools and mud motors shall
constitute “Rental Fleet Tools” unless Borrowers establish their respective
status as Eligible Inventory to the satisfaction of Agent in its Permitted
Discretion.

“Replacement Lender” shall have the meaning set forth in Section 3.11 hereof.

“Replacement Notice” shall have the meaning set forth in Section 3.11 hereof.

“Reportable Compliance Event” shall mean that any Covered Entity becomes a
Sanctioned Person, or is indicted, arraigned, investigated or custodially
detained, or receives an inquiry from regulatory or law enforcement officials,
in connection with any Anti-Terrorism Law or any predicate crime to any
Anti-Terrorism Law, or self-discovers facts or circumstances implicating any
aspect of its operations with the actual or possible violation of any
Anti-Terrorism Law.

“Required Lenders” shall mean Lenders (not including the Swing Loan Lender (in
its capacity as such Swing Loan Lender) or any Defaulting Lender) holding at
least fifty-one percent (51%) of either (a) the aggregate of (x) the Revolving
Commitment Amounts of all Lenders (excluding any Defaulting Lender) and
(y) outstanding principal amount of the Term Loan, or (b) after the termination
of all commitments of Lenders hereunder, the sum of (x) the outstanding
Revolving Advances and Term Loans, and (y) (i) the aggregate of the Maximum
Undrawn Amount of all outstanding Letters of Credit and outstanding Swing Loans
multiplied by (ii) the Revolving Commitments of all Lenders as most recently in
effect excluding any Defaulting Lender; provided, however, if there are fewer
than three (3) Lenders, Required Lenders shall mean all Lenders (excluding any
Defaulting Lender).

“Reserve Percentage” shall mean as of any day the maximum effective percentage
in effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”.

“Revolving Advances” shall mean Advances made other than Letters of Credit, the
Term Loan and the Swing Loans.

“Revolving Commitment” shall mean, as to any Lender, the obligation of such
Lender (if applicable), to make Revolving Advances and participate in Swing
Loans and Letters of Credit, in an aggregate principal and/or face amount not to
exceed the Revolving Commitment Amount (if any) of such Lender.

 

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“Revolving Commitment Amount” shall mean, (i) as to any Lender other than a New
Lender, the Revolving Commitment amount (if any) set forth below such Lender’s
name on the signature page hereto (or, in the case of any Lender that became
party to this Agreement after the Closing Date pursuant to Section 16.3(c) or
(d) hereof, the Revolving Commitment amount (if any) of such Lender as set forth
in the applicable Commitment Transfer Supplement), and (ii) as to any Lender
that is a New Lender, the Revolving Commitment amount provided for in the
joinder signed by such New Lender under Section 2.24(a)(x), in each case as the
same may be adjusted upon any increase by such Lender pursuant to Section 2.24
hereof, or any assignment by or to such Lender pursuant to Section 16.3(c) or
(d) hereof.

“Revolving Commitment Percentage” shall mean, (i) as to any Lender other than a
New Lender, the Revolving Commitment Percentage (if any) set forth below such
Lender’s name on the signature page hereof (or, in the case of any Lender that
became party to this Agreement after the Closing Date pursuant to
Section 16.3(c) or (d) hereof, the Revolving Commitment Percentage (if any) of
such Lender as set forth in the applicable Commitment Transfer Supplement), and
(ii) as to any Lender that is a New Lender, the Revolving Commitment Percentage
provided for in the joinder signed by such New Lender under Section 2.24(a)(ix),
in each case as the same may be adjusted upon any increase in the Maximum
Revolving Advance Amount pursuant to Section 2.24 hereof, or any assignment by
or to such Lender pursuant to Section 16.3(c) or (d) hereof.

“Revolving Credit Note” shall mean, collectively, the promissory notes referred
to in Section 2.1(a) hereof.

“Revolving Interest Rate” shall mean (a) with respect to Revolving Advances that
are Domestic Rate Loans and Swing Loans, an interest rate per annum equal to the
sum of the Applicable Margin plus the Alternate Base Rate and (b) with respect
to LIBOR Rate Loans, the sum of the Applicable Margin plus the LIBOR Rate.

“Sanctioned Country” shall mean a country subject to a sanctions program
maintained by any Compliance Authority.

“Sanctioned Person” shall mean any individual person, group, regime, entity or
thing listed or otherwise recognized as a specially designated, prohibited,
sanctioned or debarred person or entity, or subject to any limitations or
prohibitions (including but not limited to the blocking of property or rejection
of transactions), under any order or directive of any Compliance Authority or
otherwise subject to, or specially designated under, any sanctions program
maintained by any Compliance Authority.

“SEC” shall mean the Securities and Exchange Commission or any successor
thereto.

“Secured Parties” shall mean, collectively, Agent, Issuer, Swing Loan Lender and
Lenders, together with any affiliates of Agent or any Lender to whom any Hedging
Obligations or Cash Management Liabilities are owed and with each other holder
of any of the Obligations, and the respective participants, successors and
assigns of each of them.

 

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“Securities Act” shall mean the Securities Act of 1933, as amended.

“Settlement” shall have the meaning set forth in Section 2.6(d) hereof.

“Settlement Date” shall have the meaning set forth in Section 2.6(d) hereof.

“Subordination Agreement(s)” shall mean (a) any agreement among any Borrower, a
subordinating creditor of such Borrower and Agent, on behalf other Lenders,
pursuant to which, among other things, the Indebtedness owing and/or any Lien
granted to such subordinated creditor is subordinated to the prior payment and
satisfaction of the Obligations and Loan of Agent and (b) any note, indenture,
note purchase agreement or similar instrument or agreement, pursuant to which
the Indebtedness evidenced thereby or issued thereunder is subordinated to the
Obligations by the express terms of such note, indenture, note purchase
agreement or similar instrument or agreement, in each case, in form and
substance satisfactory to Agent in its sole discretion.

“Subsidiary” of any Person shall mean a corporation or other entity, the Equity
Interests of which, having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the members of the board of directors (or other body performing
similar functions) of such entity, are owned, directly or indirectly, by such
Person. References to Subsidiaries of any Borrower in the provisions of this
Agreement shall not be construed to imply any consent by Agent or Lenders to the
formation or acquisition of any such Subsidiaries other than as expressly
permitted hereunder.

“Subsidiary Stock” shall mean (a) with respect to the Equity Interests issued to
a Borrower by any Subsidiary, one hundred percent (100%) of such issued and
outstanding Equity Interests, and (b) with respect to any Equity Interests
issued to a Borrower by any Foreign Subsidiary (i) one hundred percent (100%) of
such issued and outstanding Equity Interests not entitled to vote (within the
meaning of Treas. Reg. Section 1.956(c)(2)) and (ii) sixty-six percent (66%) (or
such greater percentage that, due to a change in an Applicable Law after the
date hereof, (x) could not reasonably be expected to cause the undistributed
earnings of such Subsidiary as determined for United States federal income tax
purposes to be treated as a deemed dividend to such Borrower and (y) could not
reasonably be expected to cause any material adverse tax consequences) of such
issued and outstanding Equity Interests entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)).

“Supermajority Lenders” shall mean Lenders (not including the Swing Loan Lender
(in its capacity as such Swing Loan Lender) or any Defaulting Lender) holding at
least seventy-five percent (75%) of either (a) the aggregate of (x) the
Revolving Commitment Amounts of all Lenders (excluding any Defaulting Lender)
and (y) outstanding principal amount of the Term Loan, or (b) after the
termination of all commitments of Lenders hereunder, the sum of (x) the
outstanding Revolving Advances and Term Loans, and (y) (i) the aggregate of the
Maximum Undrawn Amount of all outstanding Letters of Credit and outstanding
Swing Loans multiplied by (ii) the Revolving Commitments of all Lenders as most
recently in effect excluding any Defaulting Lender; provided, however, if there
are fewer than three (3) Lenders, Required Lenders shall mean all Lenders
(excluding any Defaulting Lender).

 

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“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or
perform under any agreement, contract or transaction that constitutes a “swap”
within the meaning of section 1a(47) of the Commodity Exchange Act.

“Swing Loan Lender” shall mean PNC, in its capacity as lender of the Swing
Loans.

“Swing Loan Note” shall mean the promissory note described in Section 2.4(a)
hereof.

“Swing Loan Request” shall mean a request for Swing Loans made in accordance
with in Section 2.4(a)(i) hereof.

“Swing Loans” shall mean, collectively, Advances made by PNC to Borrowers
pursuant to Section 2.4 hereof.

“Swing Loan Request” shall have the meaning set forth in Section 2.4(b) hereof.

“Swing Loans” shall mean the Advances made pursuant to Section 2.4 hereof.

“Target” shall mean Florida Chemical Company, Inc., a corporation formed under
the laws of the State of Florida.

“Taxes” shall mean all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Body, including any interest, additions to tax or penalties
applicable thereto.

“Teledrift” shall have the meaning set forth in the introductory paragraph
hereto.

“Term” shall have the meaning set forth in Section 13.1 hereof.

“Term Loan” shall have the meaning set forth in Section 2.3(a) hereof.

“Term Loan Commitment” shall mean, as to any Lender, the obligation of such
Lender (if applicable), to fund a portion of the Term Loan in an aggregate
principal equal to the Term Loan Commitment Amount (if any) of such Lender.

“Term Loan Commitment Amount” shall mean, as to any Lender, the term loan
commitment amount (if any) set forth below such Lender’s name on the signature
page hereof (or, in the case of any Lender that became party to this Agreement
after the Closing Date pursuant to Section 16.3(c) or (d) hereof, the term loan
commitment amount (if any) of such Lender as set forth in the applicable
Commitment Transfer Supplement), as the same may be adjusted upon any assignment
by or to such Lender pursuant to Section 16.3(c) or (d) hereof.

“Term Loan Commitment Percentage” shall mean, as to any Lender, the Term Loan
Commitment Percentage (if any) set forth below such Lender’s name on the
signature page hereof (or, in the case of any Lender that became party to this
Agreement after the Closing Date pursuant to Section 16.3(c) or (d) hereof, the
Term Loan Commitment Percentage (if any) of such Lender as set forth in the
applicable Commitment Transfer Supplement), as the same may be adjusted upon any
assignment by or to such Lender pursuant to Section 16.3(c) or (d) hereof.

 

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“Term Loan Rate” shall mean (a) with respect to Term Loans that are Domestic
Rate Loans, an interest rate per annum equal to the sum of the Applicable Margin
plus the Alternate Base Rate and (b) with respect to Term Loans that are LIBOR
Rate Loans, the sum of the Applicable Margin plus the LIBOR Rate.

“Term Note” shall mean, collectively, the promissory notes described in
Section 2.3(a) hereof.

“Termination Event” shall mean: (a) a Reportable Event with respect to any Plan;
(b) the withdrawal of any Borrower or any member of the Controlled Group from a
Plan during a plan year in which such entity was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA or a cessation of operations that is
treated as such a withdrawal under Section 4062(e) of ERISA; (c) the providing
of notice of intent to terminate a Plan in a distress termination described in
Section 4041(c) of ERISA; (d) the commencement of proceedings by the PBGC to
terminate a Plan; (e) any event or condition (a) which might constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; (f) the partial or
complete withdrawal within the meaning of Section 4203 or 4205 of ERISA, of any
Borrower or any member of the Controlled Group from a Multiemployer Plan;
(g) notice that a Multiemployer Plan is subject to Section 4245 of ERISA; or
(h) the imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not diligent, upon any Borrower or any member of the Controlled
Group.

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

“Transactions” shall have the meaning set forth in Section 5.5(a) hereof.

“Transferee” shall have the meaning set forth in Section 16.3(d) hereof.

“Trigger Period” shall mean the period commencing on the day that a Default or
an Event of Default occurs or Borrowers’ Average Undrawn Availability has been
less than $10,000,000 (as evidenced by a Borrowing Base Certificate and any
supporting schedules, in form and substance satisfactory to Agent, calculated as
of the last day of such of such calendar month).

“Turbeco” shall have the meaning set forth in the introductory paragraph hereto.

“UCP” shall have the meaning set forth in Section 2.12(b) hereof.

“Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount, minus the amount of reserves (if any) established in accordance with
Section 2.1(a)(y)(iv), minus the Maximum Undrawn Amount of all outstanding
Letters of Credit, minus (b) the sum of (i) the outstanding amount of Advances
(other than the Term Loan) plus (ii) all amounts due and owing to any

 

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Borrower’s trade creditors which are outstanding sixty (60) days or more past
their due date, plus (iii) fees and expenses incurred in connection with the
Transactions for which Borrowers are liable but which have not been paid or
charged to Borrowers’ Account, plus (iv) all other past due Indebtedness
(excluding trade payables) included in the calculation of clause (iii) above.

“Unfunded Capital Expenditures” shall mean, as to any Borrower, without
duplication, a Capital Expenditure funded (a) from such Borrower’s internally
generated cash flow or (b) with the proceeds of a Revolving Advance or Swing
Loan.

“Uniform Commercial Code” shall have the meaning set forth in Section 1.3
hereof.

“USA Petrovalve” shall have the meaning set forth in the introductory paragraph
hereto.

“USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

“Vehicle Title” shall have the meaning set forth in Section 4.13 hereof.

1.3. Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of Texas from time to time (the
“Uniform Commercial Code”) shall have the meaning given therein unless otherwise
defined herein. Without limiting the foregoing, the terms “accounts”, “chattel
paper” (and “electronic chattel paper” and “tangible chattel paper”),
“commercial tort claims”, “deposit accounts”, “documents”, “equipment”,
“financial asset”, “fixtures”, “general intangibles”, “goods”, “instruments”,
“inventory”, “investment property”, “letter-of-credit rights”, “payment
intangibles”, “proceeds”, “promissory note” “securities”, “software” and
“supporting obligations” as and when used in the description of Collateral shall
have the meanings given to such terms in Articles 8 or 9 of the Uniform
Commercial Code. To the extent the definition of any category or type of
collateral is expanded by any amendment, modification or revision to the Uniform
Commercial Code, such expanded definition will apply automatically as of the
date of such amendment, modification or revision.

1.4. Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All references to statutes and related regulations shall include any
amendments of same and any successor statutes and regulations. Unless otherwise
provided, all references to any instruments or agreements to which Agent is a
party, including references to any of the Other Documents, shall include any and
all modifications, supplements or amendments thereto, any and all restatements
or replacements thereof and any and all extensions or renewals thereof. Except
as otherwise expressly provided for herein, all references herein to the time of
day shall mean the time in New York, New York. Unless otherwise provided, all
financial calculations shall be performed with Inventory valued on a first-in,
first-out basis. Whenever the words “including”

 

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or “include” shall be used, such words shall be understood to mean “including,
without limitation” or “include, without limitation”. A Default or Event of
Default shall be deemed to exist at all times during the period commencing on
the date that such Default or Event of Default occurs to the date on which such
Default or Event of Default is waived in writing pursuant to this Agreement or,
in the case of a Default, is cured within any period of cure expressly provided
for in this Agreement; and an Event of Default shall “continue” or be
“continuing” until such Event of Default has been waived in writing by the
Required Lenders. Any Lien referred to in this Agreement or any of the Other
Documents as having been created in favor of Agent, any agreement entered into
by Agent pursuant to this Agreement or any of the Other Documents, any payment
made by or to or funds received by Agent pursuant to or as contemplated by this
Agreement or any of the Other Documents, or any act taken or omitted to be taken
by Agent, shall, unless otherwise expressly provided, be created, entered into,
made or received, or taken or omitted, for the benefit or account of Agent and
Lenders. Wherever the phrase “to the best of Borrowers’ knowledge” or words of
similar import relating to the knowledge or the awareness of any Borrower or its
representative officers or representatives are used in this Agreement or Other
Documents, such phrase shall mean and refer to (i) the actual knowledge of an
Authorized Officer of any Borrower or (ii) the knowledge that an Authorized
Officer would have obtained if he/she had engaged in a good faith and diligent
performance of his/her duties, including the making of such reasonably specific
inquiries as may be necessary of the employees or agents of such Borrower and a
good faith attempt to ascertain the existence or accuracy of the matter to which
such phrase relates. All covenants hereunder shall be given independent effect
so that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or otherwise
within the limitations of, another covenant shall not avoid the occurrence of a
default if such action is taken or condition exists. In addition, all
representations and warranties hereunder shall be given independent effect so
that if a particular representation or warranty proves to be incorrect or is
breached, the fact that another representation or warranty concerning the same
or similar subject matter is correct or is not breached will not affect the
incorrectness of a breach of a representation or warranty hereunder.

 

II. ADVANCES, PAYMENTS.

2.1. Revolving Advances.

(a) Amount of Revolving Advances. Subject to the terms and conditions set forth
in this Agreement specifically including Section 2.1(b), each Lender, severally
and not jointly, will make Revolving Advances to Borrowers in aggregate amounts
outstanding at any time equal to such Lender’s Revolving Commitment Percentage
of the lesser of (x) the Maximum Revolving Advance Amount, less the outstanding
amount of Swing Loans, less the aggregate Maximum Undrawn Amount of all
outstanding Letters of Credit or (y) an amount equal to the sum of:

(i) up to eighty-five percent (85%), subject to the provisions to Section 2.1(b)
hereof (the “Receivables Advance Rate”), of Eligible Receivables, plus

(ii) up to the lesser of (A) seventy-percent (70%), subject to the provisions to
Section 2.1(b) hereof, of the Eligible Inventory, (B) eighty-five percent (85%),
subject to the provisions to Section 2.1(b) hereof, of the value percentage of
the appraised net

 

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orderly liquidation value of Eligible Inventory (as evidenced by an Inventory
appraisal satisfactory to Agent in its sole discretion exercised in good faith)
and (C) $50,000,000 in the aggregate at any one time (“Inventory Advance Rate”
and together with the Receivables Advance Rate, collectively, the “Advance
Rates”), minus

(iii) the aggregate Maximum Undrawn Amount of all outstanding Letters of Credit,
minus

(iv) such reserves as Agent may deem proper and necessary in the exercise of its
Permitted Discretion from time to time.

The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and (ii) minus
(y) Section 2.1(a)(y)(iv) at any time and from time to time shall be referred to
as the “Formula Amount”. Subject to the provisions of Section 2.1(b), the
Formula Amount applicable at any time shall be calculated as set forth in the
Borrowing Base Certificate delivered pursuant to Section 9.2 and approved by
Agent in its sole discretion. The Revolving Advances shall be evidenced by one
or more secured promissory notes, substantially in the form attached hereto as
Exhibit 2.1(a) (as the same may be amended, amended and restated, renewed,
replaced, supplemented and/or otherwise modified from time to time,
collectively, the “Revolving Credit Note”).

(b) Discretionary Rights. The Advance Rates may be increased or decreased by
Agent at any time and from time to time in the exercise of its Permitted
Discretion. Each Borrower consents to any such increases or decreases and
acknowledges that decreasing the Advance Rates or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. Prior to
the occurrence of an Event of Default or Default, Agent shall endeavor to give
Borrowing Agent three (3) days prior written notice of any modification of the
Advance Rates; provided, however, no Credit Party nor any of their respective
Affiliates shall have any right of action whatsoever against Agent for, and
Agent shall not be liable for any damages resulting from, the failure of Agent
to provide the notice contemplated in this sentence. The rights of Agent under
this subsection are subject to the provisions of Section 16.2(b).

2.2. Procedures for Requesting Revolving Advances; Procedures for Selection of
Applicable Interest Rates for All Advances.

(a) Borrowing Agent on behalf of any Borrower may notify Agent prior to 10:00
a.m. on a Business Day of a Borrower’s request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or other charges under this Agreement or any other
agreement with Agent or Lenders, or with respect to any other Obligation under
this Agreement, become due unless Borrowing Agent has elected a LIBOR Rate Loan
therefor in accordance with subsection (b) below, same shall be deemed a request
for a Revolving Advance maintained as a Domestic Rate Loan as of the date such
payment is due, in the amount required to pay in full such interest, fee, charge
or Obligation, and such request shall be irrevocable.

(b) Notwithstanding the provisions of subsection (a) above, in the event any
Borrower desires to obtain a LIBOR Rate Loan for any Advance (other than a Swing
Loan), Borrowing Agent shall give Agent written notice by no later than 10:00
a.m. on the day which is

 

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three (3) Business Days prior to the date such LIBOR Rate Loan is to be
borrowed, specifying (i) the date of the proposed borrowing (which shall be a
Business Day), (ii) the type of borrowing and the amount of such Advance to be
borrowed, which amount shall be in a minimum amount of $1,000,000 and in
integral multiples of $500,000 thereafter, and (iii) the duration of the first
Interest Period therefor. Interest Periods for LIBOR Rate Loans shall be for one
(1), two (2) or three (3) months; provided, that, if an Interest Period would
end on a day that is not a Business Day, it shall end on the next succeeding
Business Day unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding Business Day. No
LIBOR Rate Loan shall be made available to any Borrower during the continuance
of a Default or an Event of Default. After giving effect to each requested LIBOR
Rate Loan, including those which are converted from a Domestic Rate Loan under
Section 2.2(e), there shall not be outstanding more than four (4) LIBOR Rate
Loans, in the aggregate.

(c) Each Interest Period of a LIBOR Rate Loan shall commence on the date such
LIBOR Rate Loan is made and shall end on such date as Borrowing Agent may elect
as set forth in subsection (b)(iii) above; provided, that, the exact length of
each Interest Period shall be determined in accordance with the practice of the
interbank market for offshore Dollar deposits and no Interest Period shall end
after the last day of the Term.

(d) Borrowing Agent shall elect the initial Interest Period applicable to a
LIBOR Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(e), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 10:00 a.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such LIBOR Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent with respect to any LIBOR Rate Loan, Borrowing
Agent shall be deemed to have elected to convert such LIBOR Rate Loan to a
Domestic Rate Loan subject to Section 2.2(e) below.

(e) Provided, that, no Default or Event of Default shall have occurred and be
continuing, Borrowing Agent may, on the last Business Day of the then current
Interest Period applicable to any outstanding LIBOR Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount; provided, that, any
conversion of a LIBOR Rate Loan shall be made only on the last Business Day of
the then current Interest Period applicable to such LIBOR Rate Loan. If
Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent
written notice by no later than 10:00 a.m. (i) on the day which is three
(3) Business Days prior to the date on which such conversion is to occur with
respect to a conversion from a Domestic Rate Loan to a LIBOR Rate Loan, or
(ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur (which date shall be the last Business Day of the
Interest Period for the applicable LIBOR Rate Loan) with respect to a conversion
from a LIBOR Rate Loan to a Domestic Rate Loan, specifying, in each case, the
date of such conversion, the loans to be converted and if the conversion is to a
LIBOR Rate Loan, the duration of the first Interest Period therefor.

(f) At its option and upon written notice given prior to 10:00 a.m. at least
three (3) Business Days prior to the date of such prepayment, any Borrower may,
subject to

 

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Section 2.2(g) hereof, prepay the LIBOR Rate Loans in whole at any time or in
part from time to time with accrued interest on the principal being prepaid to
the date of such repayment. Such Borrower shall specify the date of prepayment
of Advances which are LIBOR Rate Loans and the amount of such prepayment. In the
event that any prepayment of a LIBOR Rate Loan is required or permitted on a
date other than the last Business Day of the then current Interest Period with
respect thereto, such Borrower shall indemnify Agent and Lenders therefor in
accordance with Section 2.2(g) hereof.

(g) Each Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses or expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any
default by any Borrower in the payment of the principal of or interest on any
LIBOR Rate Loan or failure by any Borrower to complete a borrowing of, a
prepayment of or conversion of or to a LIBOR Rate Loan after notice thereof has
been given, including, but not limited to, any interest payable by Agent or
Lenders to lenders of funds obtained by it in order to make or maintain its
LIBOR Rate Loans hereunder. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Agent or any Lender to Borrowing
Agent shall be conclusive absent manifest error.

(h) Notwithstanding any other provision hereof, if any Applicable Law, treaty,
regulation or directive, or any change therein or in the interpretation or
application thereof, including without limitation any Change in Law, shall make
it unlawful for Lenders or any Lender (for purposes of this subsection (h), the
term “Lender” shall include any Lender and the office or branch where any Lender
or any Person controlling such Lender makes or maintains any LIBOR Rate Loans)
to make or maintain its LIBOR Rate Loans, the obligation of Lenders (or such
affected Lender) to make LIBOR Rate Loans hereunder shall forthwith be cancelled
and Borrowers shall, if any affected LIBOR Rate Loans are then outstanding,
promptly upon request from Agent, either pay all such affected LIBOR Rate Loans
or convert such affected LIBOR Rate Loans into loans of another type. If any
such payment or conversion of any LIBOR Rate Loan is made on a day that is not
the last day of the Interest Period applicable to such LIBOR Rate Loan,
Borrowers shall pay Agent, upon Agent’s request, such amount or amounts set
forth in clause (g) above. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall
be conclusive absent manifest error.

2.3. Term Loans

(a) Term Loan. Lenders severally made an advance (the “Original Term Loan”) in
the original principal amount of $25,000,000. As of the Closing Date, the
outstanding principal balance of the Original Term Loan is $23,809,523.80.
Subject to the terms and conditions of this Agreement, each Lender, severally
and not jointly, will make an additional term loan to Borrowers on the Closing
Date in the amount equal to such Lender’s Term Loan Commitment Percentage of
$26,190,476.20 (the “Additional Term Loan”). The Additional Term Loan, as
refinanced by the Original Term Loan shall be deemed a single term loan (the
“Term Loan”) which shall be in an aggregate principal amount not to exceed
$50,000,000. The Term Loan shall be advanced on the Closing Date and shall be,
with respect to principal, payable as follows, subject to acceleration upon the
occurrence of an Event of Default under this Agreement or termination of this
Agreement: (a) commencing June 1, 2013, and continuing on

 

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the first Business Day of each and every calendar month thereafter, Borrowers
shall pay to Agent equal monthly payments of principal in the aggregate amount
of $595,238.09 (which amount has been agreed to by Borrowers and Lenders and
based upon a seven (7) year principal amortization schedule) and (b) the entire
outstanding principal balance of this Term Loan, together with all accrued and
unpaid interest, shall be due and payable in full, in cash, on the last day of
the Term, if not sooner, by Borrowers; provided, however, if the principal
amount of the Term Loan at any time outstanding exceeds an amount equal to
eighty-five percent (85%) of the appraised net orderly liquidation value of
Eligible Equipment (based on the most recent NOLV Appraisal received by Agent),
Borrowers shall immediately prepay, upon request of Agent, the Term Loan in an
amount sufficient to eliminate excess. The Term Loan shall be evidenced by one
or more secured promissory notes (collectively, the “Term Note”) in
substantially the form attached hereto as Exhibit 2.3(a). The Term Loan may
consist of Domestic Rate Loans or LIBOR Rate Loans, or a combination thereof, as
Borrowing Agent may request; and in the event that Borrowers desire to obtain or
extend any portion of the Term Loan as a LIBOR Rate Loan or to convert any
portion of the Term Loan from a Domestic Rate Loan to a LIBOR Rate Loan,
Borrowing Agent shall comply with the notification requirements set forth in
Sections 2.2(b) and/or (e) and the provisions of Sections 2.2(b) through
(h) shall apply. Once repaid, the Term Loan may not be re-borrowed.

(b) [Reserved].

2.4. Swing Loans.

(a) Subject to the terms and conditions set forth in this Agreement, and in
order to minimize the transfer of funds between Lenders and Agent for
administrative convenience, Agent, Lenders holding Revolving Commitments and
Swing Loan Lender agree that in order to facilitate the administration of this
Agreement, Swing Loan Lender may, at its election and option made in its sole
discretion cancelable at any time for any reason whatsoever, make swing loan
advances (“Swing Loans”) available to Borrowers as provided for in this
Section 2.4 at any time or from time to time after the date hereof to, but not
including, the expiration of the Term, in an aggregate principal amount up to
but not in excess of the Maximum Swing Loan Advance Amount; provided, that, the
outstanding aggregate principal amount of Swing Loans and the Revolving Advances
at any one time outstanding shall not exceed an amount equal to the lesser of
(i) the Maximum Revolving Advance Amount less the Maximum Undrawn Amount of all
outstanding Letters of Credit or (ii) the Formula Amount. All Swing Loans shall
be Domestic Rate Loans only. Borrowers may borrow (at the option and election of
Swing Loan Lender), repay and reborrow (at the option and election of Swing Loan
Lender) Swing Loans and Swing Loan Lender may make Swing Loans as provided in
this Section 2.4 during the period between Settlement Dates. All Swing Loans
shall be evidenced by a secured promissory note (the “Swing Loan Note”)
substantially in the form attached hereto as Exhibit 2.4(a). Swing Loan Lender’s
agreement to make Swing Loans under this Agreement is cancelable at any time for
any reason whatsoever and the making of Swing Loans by Swing Loan Lender from
time to time shall not create any duty or obligation, or establish any course of
conduct, pursuant to which Swing Loan Lender shall thereafter be obligated to
make Swing Loans in the future.

 

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(b) Upon either (x) any request by Borrowing Agent for a Revolving Advance made
pursuant to Section 2.2(a) hereof or (y) the occurrence of any deemed request by
Borrowers for a Revolving Advance pursuant to the provisions of the last
sentence of Section 2.2(a) hereof, Swing Loan Lender may elect, in its sole
discretion, to have such request or deemed request treated as a request for a
Swing Loan, and may advance same day funds to Borrowers as a Swing Loan;
provided, that, notwithstanding anything to the contrary provided for herein,
Swing Loan Lender may not make Swing Loan Advances if Swing Loan Lender has been
notified by Agent or by Required Lenders that one or more of the applicable
conditions set forth in Section 8.2 of this Agreement have not been satisfied or
the Revolving Commitments have been terminated for any reason.

(c) Upon the making of a Swing Loan (whether before or after the occurrence of a
Default or Event of Default and regardless of whether a Settlement has been
requested with respect to such Swing Loan), each Lender holding a Revolving
Commitment shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from Swing Loan Lender, without
recourse or warranty, an undivided interest and participation in such Swing Loan
in proportion to its Revolving Commitment Percentage. Swing Loan Lender or Agent
may, at any time, require Lenders holding Revolving Commitments to fund such
participations by means of a Settlement as provided for in Section 2.6(d) below.
From and after the date, if any, on which any Lender holding a Revolving
Commitment is required to fund, and funds, its participation in any Swing Loans
purchased hereunder, Agent shall promptly distribute to such Lender its
Revolving Credit Percentage of all payments of principal and interest and all
proceeds of Collateral received by Agent in respect of such Swing Loan;
provided, that, no Lender holding a Revolving Commitment shall be obligated in
any event to make Revolving Advances in an amount in excess of its Revolving
Commitment Amount minus its Participation Commitment (taking into account any
reallocations under Section 2.22) of the Maximum Undrawn Amount of all
outstanding Letters of Credit.

2.5. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers’ Account on Agent’s books. The proceeds of each
Revolving Advance or Swing Loan requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Sections 2.2(a),
2.6(b) or 2.14 hereof shall, (i) with respect to requested Revolving Advances,
to the extent Lenders make such Revolving Advances in accordance with
Section 2.2(a), 2.6(b) or 2.14 hereof, and with respect to Swing Loans made upon
any request by Borrowing Agent for a Revolving Advance to the extent Swing Loan
Lender makes such Swing Loan in accordance with Section 2.4(b) hereof, be made
available to the applicable Borrower on the day so requested by way of credit to
such Borrower’s operating account at PNC, or such other bank as Borrowing Agent
may designate following notification to Agent, in immediately available federal
funds or other immediately available funds or, (ii) with respect to Revolving
Advances deemed to have been requested by any Borrower or Swing Loans made upon
any deemed request for a Revolving Advance by any Borrower, be disbursed to
Agent to be applied to the outstanding Obligations giving rise to such deemed
request. During the Term, Borrowers may use the Revolving Advances and Swing
Loans by borrowing, prepaying and reborrowing, all in accordance with the terms
and conditions hereof.

 

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2.6. Making and Settlement of Advances.

(a) Each borrowing of Revolving Advances shall be advanced according to the
applicable Revolving Commitment Percentages of Lenders holding the Revolving
Commitments (subject to any contrary terms of Section 2.22). The Term Loan shall
be advanced according to the applicable Term Loan Commitment Percentages of
Lenders holding the Term Loan Commitments. Each borrowing of Swing Loans shall
be advanced by the Swing Loan Lender alone.

(b) Promptly after receipt by Agent of a request or a deemed request for a
Revolving Advance pursuant to Section 2.2(a) and, with respect to Revolving
Advances, to the extent Agent elects not to provide a Swing Loan or the making
of a Swing Loan would result in the aggregate amount of all outstanding Swing
Loans exceeding the maximum amount permitted in Section 2.4(a), Agent shall
notify Lenders holding the Revolving Commitments of its receipt of such request
specifying the information provided by Borrowing Agent and the apportionment
among Lenders of the requested Revolving Advance as determined by Agent in
accordance with the terms hereof. Each Lender shall remit the principal amount
of each Revolving Advance to Agent such that Agent is able to, and Agent shall,
to the extent the applicable Lenders have made funds available to it for such
purpose and subject to Section 8.2, fund such Revolving Advance to Borrowers in
U.S. Dollars and immediately available funds at the Payment Office prior to the
close of business, on the applicable borrowing date; provided, that, if any
applicable Lender fails to remit such funds to Agent in a timely manner, Agent
may elect in its sole discretion to fund with its own funds the Revolving
Advance of such Lender on such borrowing date, and such Lender shall be subject
to the repayment obligation in Section 2.6(c) hereof.

(c) Unless Agent shall have been notified by telephone, confirmed in writing, by
any Lender holding a Revolving Commitment that such Lender will not make the
amount which would constitute its applicable Revolving Commitment Percentage of
the requested Revolving Advance available to Agent, Agent may (but shall not be
obligated to) assume that such Lender has made such amount available to Agent on
such date in accordance with Section 2.6(b) and may, in reliance upon such
assumption, make available to Borrowers a corresponding amount. In such event,
if a Lender has not in fact made its applicable Revolving Commitment Percentage
of the requested Revolving Advance available to Agent, then the applicable
Lender and Borrowers severally agree to pay to Agent on demand such
corresponding amount with interest thereon, for each day from and including the
date such amount is made available to Borrowers through but excluding the date
of payment to Agent, at (i) in the case of a payment to be made by such Lender,
the greater of (A) (x) the daily average Federal Funds Effective Rate (computed
on the basis of a year of 360 days) during such period as quoted by Agent, times
(y) such amount or (B) a rate determined by Agent in accordance with banking
industry rules on interbank compensation, and (ii) in the case of a payment to
be made by Borrowers, the Revolving Interest Rate for Revolving Advances that
are Domestic Rate Loans. If such Lender pays its share of the applicable
Revolving Advance to Agent, then the amount so paid shall constitute such
Lender’s Revolving Advance. Any payment by Borrowers shall be without prejudice
to any claim Borrowers may have against a Revolving Lender that shall have
failed to make such payment to Agent. A certificate of Agent submitted to any
Lender or Borrowers with respect to any amounts owing under this paragraph
(c) shall be conclusive, in the absence of manifest error.

 

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(d) Agent, on behalf of Swing Loan Lender, shall demand settlement (a
“Settlement”) of all or any Swing Loans with Lenders holding the Revolving
Commitments on at least a weekly basis, or on any more frequent date that Agent
elects or that Swing Loan Lender at its option exercisable for any reason
whatsoever may request, by notifying Lenders holding the Revolving Commitments
of such requested Settlement by facsimile, telephonic or electronic transmission
no later than 3:00 p.m. on the date of such requested Settlement (the
“Settlement Date”). Subject to any contrary provisions of Section 2.22, each
Lender holding a Revolving Commitment shall transfer the amount of such Lender’s
Revolving Commitment Percentage of the outstanding principal amount (plus
interest accrued thereon to the extent requested by Agent) of the applicable
Swing Loan with respect to which Settlement is requested by Agent, to such
account of Agent as Agent may designate not later than 5:00 p.m. on such
Settlement Date if requested by Agent by 3:00 p.m., otherwise not later than
5:00 p.m. on the next Business Day5. Settlements may occur at any time
notwithstanding that the conditions precedent to making Revolving Advances set
forth in Section 8.2 have not been satisfied or the Revolving Commitments shall
have otherwise been terminated at such time. All amounts so transferred to Agent
shall be applied against the amount of outstanding Swing Loans and, when so
applied shall constitute Revolving Advances of such Lenders accruing interest as
Domestic Rate Loans. If any such amount is not transferred to Agent by any
Lender holding a Revolving Commitment on such Settlement Date, Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon as specified in Section 2.6(c).

(e) If any Lender or Participant (a “Benefited Lender”) shall at any time
receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such Benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such Benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such Benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Borrower consents to the foregoing and
agrees, to the extent it may effectively do so under Applicable Law, that each
Lender so purchasing a portion of another Lender’s Advances may exercise all
rights of payment (including rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion, and the
obligations owing to each such purchasing Lender in respect of such
participation and such purchased portion of any other Lender’s Advances shall be
part of the Obligations secured by the Collateral, and the obligations owing to
each such purchasing Lender in respect of such participation and such purchased
portion of any other Lender’s Advances shall be part of the Obligations secured
by the Collateral.

2.7. Maximum Advances. The aggregate balance of Revolving Advances plus Swing
Loans outstanding at any time shall not exceed the lesser of (a) the Maximum
Revolving Advance Amount or (b) the Formula Amount less, in each case, the
aggregate Maximum Undrawn Amount of all issued and outstanding Letters of
Credit. The aggregate balance of Advances outstanding at any time shall not
exceed the Maximum Loan Amount.

 

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2.8. Manner and Repayment of Advances.

(a) The Revolving Advances and Swing Loans shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein provided. The
Term Loan shall be due and payable as provided in Section 2.3(a) hereof and
shall be due and payable in full on the last day of the Term, subject to
mandatory prepayments as herein provided. Notwithstanding the foregoing, all
Advances shall be subject to earlier repayment upon (x) acceleration upon the
occurrence of an Event of Default under this Agreement or (y) termination of
this Agreement. Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Advances (other than the Term
Loan) shall be applied first, to the outstanding Swing Loans and next, pro rata
according to the applicable Revolving Commitment Percentages of Lenders, to the
outstanding Revolving Advances (subject to any contrary provisions of
Section 2.22). Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Term Loan shall be applied to
the Term Loan pro rata according to the Term Loan Commitment Percentages of
Lenders in the inverse order of maturities thereof.

(b) Each Borrower recognizes that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may not
be collectible by Agent on the date received by Agent. Agent shall conditionally
credit Borrowers’ Account for each item of payment on the next Business Day
after the Business Day on which such item of payment is received by Agent (and
the Business Day on which each such item of payment is so credited shall be
referred to, with respect to such item, as the “Application Date”). Agent is
not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent and Agent may charge Borrowers’
Account for the amount of any item of payment which is returned, for any reason
whatsoever, to Agent unpaid. Subject to the foregoing, Borrowers agree that for
purposes of computing the interest charges under this Agreement, each item of
payment received by Agent shall be deemed applied by Agent on account of the
Obligations on its respective Application Date. Borrowers further agree that
there is a monthly float charge payable to Agent for Agent’s sole benefit, in an
amount equal to (y) the face amount of all items of payment received during the
prior month (including items of payment received by Agent as a wire transfer or
electronic depository check) multiplied by (z) the Revolving Interest Rate with
respect to Domestic Rate Loans for one (1) Business Day. All proceeds received
by Agent shall be applied to the Obligations in accordance with Section 4.8(h).

(c) All payments of principal, interest and other amounts payable hereunder, or
under any of the Other Documents shall be made to Agent at the Payment Office
not later than 1:00 p.m. on the due date therefor in Dollars in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment of any and all Obligations due and owing hereunder by
charging Borrowers’ Account or by making Advances as provided in Section 2.2
hereof.

(d) Except as expressly provided herein, all payments (including prepayments) to
be made by any Borrower on account of principal, interest, fees and other
amounts payable hereunder shall be made without deduction, setoff or
counterclaim and shall be made to Agent on behalf of Lenders to the Payment
Office, in each case on or prior to 1:00 p.m., in Dollars and in immediately
available funds.

 

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2.9. Repayment of Excess Advances. If at any time the aggregate balance of
outstanding Revolving Advances, Swing Loans, Term Loans and/or Advances taken as
a whole exceeds the maximum amount of such type of Advances and/or Advances
taken as a whole (as applicable) permitted hereunder, such excess Advances shall
be immediately due and payable without the necessity of any demand, at the
Payment Office, whether or not a Default or Event of Default has occurred.

2.10. Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent or Lenders and the date and amount of each payment in respect thereof;
provided, however, the failure by Agent to record the date and amount of any
Advance shall not adversely affect Agent or any Lender. Each month, Agent shall
send to Borrowing Agent a statement showing the accounting for the Advances
made, payments made or credited in respect thereof, and other transactions
between Agent, Lenders and Borrowers during such month. The monthly statements
shall be deemed correct and binding upon Borrowers in the absence of manifest
error and shall constitute an account stated between Lenders and Borrowers
unless Agent receives a written statement of Borrowers’ specific exceptions
thereto within thirty (30) days after such statement is received by Borrowing
Agent. The records of Agent with respect to Borrowers’ Account shall be
conclusive evidence absent manifest error of the amounts of Advances and other
charges thereto and of payments applicable thereto.

2.11. Letters of Credit. (a) Subject to the terms and conditions hereof, Issuer
shall issue or cause the issuance of standby and/or trade letters of credit
denominated in Dollars (“Letters of Credit”) for the account of any Borrower
except to the extent that the issuance thereof would then cause the sum of
(i) the outstanding Revolving Advances plus (ii) the outstanding Swing Loans to
such Borrower, plus (iii) the Maximum Undrawn Amount of all outstanding Letters
of Credit to exceed the lesser of (x) the Maximum Revolving Advance Amount or
(y) the Formula Amount; provided, further, however that, Issuer will not be
required to issue or cause to be issued any Letters of Credit to the extent that
the issuance thereof would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) the outstanding Swing Loans, plus (iii) the Maximum Undrawn
Amount of all outstanding Letters of Credit to exceed the lesser of (x) the
Maximum Revolving Advance Amount or (y) the Formula Amount. The Maximum Undrawn
Amount of all outstanding Letters of Credit shall not exceed in the aggregate at
any time the Letter of Credit Sublimit. All disbursements or payments related to
Letters of Credit shall be deemed to be Domestic Rate Loans consisting of
Revolving Advances and shall bear interest at the Revolving Interest Rate for
Domestic Rate Loans. Letters of Credit that have not been drawn upon shall not
bear interest (but fees shall accrue in respect of outstanding Letters of Credit
as provided in Section 3.2 hereof).

(b) Notwithstanding any provision of this Agreement, Issuer shall not be under
any obligation to issue any Letter of Credit if (i) any order, judgment or
decree of any Governmental Body or arbitrator shall by its terms purport to
enjoin or restrain Issuer from issuing any Letter of Credit, or any Law
applicable to the Issuer or any request or directive (whether or not having the
force of law) from any Governmental Body with jurisdiction over Issuer shall
prohibit, or request that the Issuer refrain from, the issuance of letters of
credit generally or the Letter of Credit in particular or shall impose upon
Issuer with respect to the Letter of Credit any restriction, reserve or capital
requirement (for which Issuer is not otherwise compensated hereunder) not in
effect on the date of this Agreement, or shall impose upon Issuer any
unreimbursed loss, cost or expense which was not applicable on the date of this
Agreement, and which Issuer in good faith deems material to it, or (ii) the
issuance of the Letter of Credit would violate one or more policies of the
Issuer applicable to letters of credit generally.

 

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2.12. Issuance of Letters of Credit.

(a) Borrowing Agent, on behalf of any Borrower, may request Issuer to issue or
cause the issuance of a Letter of Credit by delivering to Issuer, with a copy to
Agent at the Payment Office, prior to 10:00 a.m., at least five (5) Business
Days prior to the proposed date of issuance, such Issuer’s form of Letter of
Credit Application (the “Letter of Credit Application”) completed to the
satisfaction of Agent and Issuer; and, such other certificates, documents and
other papers and information as Agent or Issuer may reasonably request. Issuer
shall not issue any requested Letter of Credit if such Issuer has received
notice from Agent or any Lender that one or more of the applicable conditions
set forth in Section 8.2 of this Agreement have not been satisfied or the
commitments of Lenders to make Revolving Advances hereunder have been terminated
for any reason.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment
of sight drafts, or other written demands for payment, or acceptances of usance
drafts when presented for honor thereunder in accordance with the terms thereof
and when accompanied by the documents described therein and (ii) have an expiry
date not later than twelve (12) months after such Letter of Credit’s date of
issuance and in no event later than the last day of the Term. Each standby
Letter of Credit shall be subject either to the Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce at the time a Letter of Credit is issued (the “UCP”) or the
International Standby Practices (International Chamber of Commerce Publication
Number 590) (the “ISP98 Rules”), or any subsequent revision thereof at the time
a standby Letter of Credit is issued, as determined by Issuer, and each trade
Letter of Credit shall be subject to the UCP.

(c) Agent shall use its reasonable efforts to notify Lenders of the request by
Borrowing Agent for a Letter of Credit hereunder.

2.13. Requirements For Issuance of Letters of Credit.

(a) Borrowing Agent shall authorize and direct any Issuer to name the applicable
Borrower as the “Applicant” or “Account Party” of each Letter of Credit. If
Agent is not the Issuer of any Letter of Credit, Borrowing Agent shall authorize
and direct the Issuer to deliver to Agent all instruments, documents, and other
writings and property received by the

 

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Issuer pursuant to the Letter of Credit and to accept and rely upon Agent’s
instructions and agreements with respect to all matters arising in connection
with the Letter of Credit, the application therefor.

(b) In connection with all trade Letters of Credit issued or caused to be issued
by Issuer under this Agreement, each Borrower hereby appoints Issuer, or its
designee, as its attorney, with full power and authority if a Default or an
Event of Default shall have occurred: (i) to sign and/or endorse such Borrower’s
name upon any warehouse or other receipts, and acceptances; (ii) to sign such
Borrower’s name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department (“Customs”) in the name of such Borrower or
Issuer or Issuer’s designee, and to sign and deliver to Customs officials powers
of attorney in the name of such Borrower for such purpose; and (iv) to complete
in such Borrower’s name or Issuer’s, or in the name of Issuer’s designee, any
order, sale or transaction, obtain the necessary documents in connection
therewith, and collect the proceeds thereof. Neither Agent, Issuer nor their
attorneys will be liable for any acts or omissions nor for any error of judgment
or mistakes of fact or law, except for Agent’s, Issuer’s or their respective
attorney’s willful misconduct. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.

2.14. Disbursements, Reimbursement.

(a) Immediately upon the issuance of each Letter of Credit, each Lender holding
a Revolving Commitment shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from Issuer a participation in each Letter
of Credit and each drawing thereunder in an amount equal to such Lender’s
Revolving Commitment Percentage of the Maximum Undrawn Amount of such Letter of
Credit (as in effect from time to time) and the amount of such drawing,
respectively.

(b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Issuer will promptly notify Agent and
Borrowing Agent. Regardless of whether Borrowing Agent shall have received such
notice, Borrowers shall reimburse (such obligation to reimburse Issuer shall
sometimes be referred to as a “Reimbursement Obligation”) Issuer prior to 12:00
p.m., on each date that an amount is paid by Issuer under any Letter of Credit
(each such date, a “Drawing Date”) in an amount equal to the amount so paid by
Issuer. In the event Borrowers fail to reimburse Issuer for the full amount of
any drawing under any Letter of Credit by 12:00 p.m., on the Drawing Date,
Issuer will promptly notify Agent and each Lender holding a Revolving Commitment
thereof, and Borrowers shall be automatically deemed to have requested that a
Revolving Advance maintained as a Domestic Rate Loan be made by Lenders to be
disbursed on the Drawing Date under such Letter of Credit, subject to the amount
of the unutilized portion of the lesser of Maximum Revolving Advance Amount or
the Formula Amount, less, in each case, the Maximum Undrawn Amount of all
Letters of Credit and subject to Section 8.2 hereof. Any notice given by Issuer
pursuant to this Section 2.14(b) may be oral if promptly confirmed in writing;
provided, that, the lack of such a confirmation shall not affect the
conclusiveness or binding effect of such notice.

(c) Each Lender holding a Revolving Commitment shall upon any notice pursuant to
Section 2.14(b) make available to Issuer through Agent at the Payment Office an

 

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amount in immediately available funds equal to its Revolving Commitment
Percentage (subject to any contrary provisions of Section 2.22) of the amount of
the drawing, whereupon the participating Lenders shall (subject to
Section 2.14(d)) each be deemed to have made a Revolving Advance maintained as a
Domestic Rate Loan to Borrowers in that amount. If any Lender holding a
Revolving Commitment so notified fails to make available to Agent, for the
benefit of Issuer, the amount of such Lender’s Revolving Commitment Percentage
of such amount by 2:00 p.m. on the Drawing Date, then interest shall accrue on
such Lender’s obligation to make such payment, from the Drawing Date to the date
on which such Lender makes such payment (i) at a rate per annum equal to the
Federal Funds Effective Rate during the first three days following the Drawing
Date and (ii) at a rate per annum equal to the rate applicable to Revolving
Advances maintained as a Domestic Rate Loans on and after the fourth day
following the Drawing Date. Agent and Issuer will promptly give notice of the
occurrence of the Drawing Date, but failure of Agent or Issuer to give any such
notice on the Drawing Date or in sufficient time to enable any Lender holding a
Revolving Commitment to effect such payment on such date shall not relieve such
Lender from its obligations under this Section 2.14(c); provided, that, such
Lender shall not be obligated to pay interest as provided in Section 2.14(c)(i)
and (ii) until and commencing from the date of receipt of notice from Agent or
Issuer of a drawing.

(d) With respect to any unreimbursed drawing that is not converted into a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in whole or in
part as contemplated by Section 2.14(b), because of Borrowers’ failure to
satisfy the conditions set forth in Section 8.2 hereof (other than any notice
requirements) or for any other reason, Borrowers shall be deemed to have
incurred from Agent a borrowing (each a “Letter of Credit Borrowing”) in the
amount of such drawing. Such Letter of Credit Borrowing shall be due and payable
on demand (together with interest) and shall bear interest at the rate per annum
applicable to a Revolving Advance maintained as a Domestic Rate Loan. Each
applicable Lender’s payment to Agent pursuant to Section 2.14(c) shall be deemed
to be a payment in respect of its participation in such Letter of Credit
Borrowing and shall constitute a “Participation Advance” from such Lender in
satisfaction of its Participation Commitment in respect of the applicable Letter
of Credit under this Section 2.14.

(e) Each applicable Lender’s Participation Commitment in respect of the Letters
of Credit shall continue until the last to occur of any of the following events:
(x) Issuer ceases to be obligated to issue or cause to be issued Letters of
Credit hereunder; (y) no Letter of Credit issued or created hereunder remains
outstanding and uncancelled; and (z) all Persons (other than Borrowers) have
been fully reimbursed for all payments made under or relating to Letters of
Credit.

2.15. Repayment of Participation Advances.

(a) Upon (and only upon) receipt by Agent for the account of Issuer of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by Issuer or Agent under the Letter of Credit with respect to which any
Lender has made a Participation Advance to Agent, or (ii) in payment of interest
on such a payment made by Issuer or Agent under such a Letter of Credit, Agent
will pay to each Lender holding a Revolving Commitment, in the same funds as
those received by Agent, the amount of such Lender’s Revolving Commitment
Percentage of such funds, except Agent shall retain the amount of the

 

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Revolving Commitment Percentage of such funds of any Lender holding a Revolving
Commitment that did not make a Participation Advance in respect of such payment
by Agent (and, to the extent that any of the other Lender(s) holding the
Revolving Commitment have funded any portion such Defaulting Lender’s
Participation Advance in accordance with the provisions of Section 2.22, Agent
will pay over to such Non-Defaulting funding Lenders a pro rata portion of the
funds so withheld from such Defaulting Lender).

(b) If Issuer or Agent is required at any time to return to any Borrower, or to
a trustee, receiver, liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrowers to Issuer or Agent
pursuant to Section 2.15(a) in reimbursement of a payment made under the Letter
of Credit or interest or fee thereon, each applicable Lender shall, on demand of
Agent, forthwith return to Issuer or Agent the amount of its Revolving
Commitment Percentage of any amounts so returned by Issuer or Agent plus
interest at the Federal Funds Effective Rate.

2.16. Documentation. Each Borrower agrees to be bound by the terms of the Letter
of Credit Application and by Issuer’s interpretations of any Letter of Credit
issued for such Borrower’s account and by Issuer’s written regulations and
customary practices relating to letters of credit, though Issuer’s
interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern. It is understood and agreed that, except in the case of
gross negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment), Issuer shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission
(INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACT OR NEGLIGENCE OR STRICT
LIABILITY), in following Borrowing Agent’s or any Borrower’s instructions or
those contained in the Letters of Credit or any modifications, amendments or
supplements thereto.

2.17. Determination to Honor Drawing Request. In determining whether to honor
any request for drawing under any Letter of Credit by the beneficiary thereof,
Issuer shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.

2.18. Nature of Participation and Reimbursement Obligations. The obligation of
each Lender holding a Revolving Commitment in accordance with this Agreement to
make the Revolving Advances or Participation Advances as a result of a drawing
under a Letter of Credit, and the obligations of Borrowers to reimburse Issuer
upon a draw under a Letter of Credit, shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Section 2.18 under all circumstances, including the following
circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which such
Lender or any Borrower, as the case may be, may have against Issuer, Agent, any
Borrower or Lender, as the case may be, or any other Person for any reason
whatsoever;

 

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(ii) the failure of any Borrower or any other Person to comply, in connection
with a Letter of Credit Borrowing, with the conditions set forth in this
Agreement for the making of a Revolving Advance, it being acknowledged that such
conditions are not required for the making of a Letter of Credit Borrowing and
the obligation of Lenders to make Participation Advances under Section 2.14;

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) any claim of breach of warranty that might be made by any Borrower, Agent,
Issuer or any Lender against the beneficiary of a Letter of Credit, or the
existence of any claim, set-off, recoupment, counterclaim, cross-claim, defense
or other right which any Borrower, Agent, Issuer or any Lender may have at any
time against a beneficiary, any successor beneficiary or any transferee of any
Letter of Credit or assignee of the proceeds thereof (or any Persons for whom
any such transferee or assignee may be acting), Issuer, Agent or any Lender or
any other Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between any Borrower or any Subsidiaries of such Borrower and the
beneficiary for which any Letter of Credit was procured);

(v) the lack of power or authority of any signer of (or any defect in or forgery
of any signature or endorsement on) or the form of or lack of validity,
sufficiency, accuracy, enforceability or genuineness of any draft, demand,
instrument, certificate or other document presented under or in connection with
any Letter of Credit, or any fraud or alleged fraud in connection with any
Letter of Credit, or the transport of any property or provision of services
relating to a Letter of Credit, in each case even if Issuer or any of Issuer’s
Affiliates has been notified thereof;

(vi) payment by Issuer under any Letter of Credit against presentation of a
demand, draft or certificate or other document which is forged or does not fully
comply with the terms of such Letter of Credit (unless such payment is the
result of Agent’s gross negligence or willful misconduct); provided, that, the
foregoing shall not excuse Issuer from any obligation under the terms of any
applicable Letter of Credit to require the presentation of documents that on
their face appear to satisfy any applicable requirements for drawing under such
Letter of Credit prior to honoring or paying any such draw;

(vii) the solvency of, or any acts or omissions by, any beneficiary of any
Letter of Credit, or any other Person having a role in any transaction or
obligation relating to a Letter of Credit, or the existence, nature, quality,
quantity, condition, value or other characteristic of any property or services
relating to a Letter of Credit;

(viii) any failure by Issuer or any of Issuer’s Affiliates to issue any Letter
of Credit in the form requested by Borrowing Agent, unless Agent and Issuer have
each received written notice from Borrowing Agent of such failure within three
(3) Business Days after the Issuer shall have furnished Agent and Borrowing
Agent a copy of such Letter of Credit and such error is material and no drawing
has been made thereon prior to receipt of such notice;

(ix) the occurrence of any Material Adverse Effect;

 

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(x) any breach of this Agreement or any Other Document by any party thereto;

(xi) the occurrence or continuance of an insolvency proceeding with respect to
any Credit Party;

(xii) the fact that a Default or Event of Default shall have occurred and be
continuing;

(xiii) the fact that the Term shall have expired or this Agreement or the
obligations of Lenders to make Advances have been terminated; and

(xiv) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing.

2.19. Liability for Acts and Omissions.

(a) As between Borrowers and Issuer, Swing Loan Lender, Agent and Lenders, each
Borrower assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit
(INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACT OR INACTION ARISING FROM
AGENT’S NEGLIGENCE OR STRICT LIABILITY). In furtherance and not in limitation of
the foregoing, Issuer shall not be responsible for: (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for an issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if Issuer or any of its
Affiliates shall have been notified thereof); (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or assign
any such Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (iii) the failure of the beneficiary of any such Letter of Credit,
or any other party to which such Letter of Credit may be transferred, to comply
fully with any conditions required in order to draw upon such Letter of Credit
or any other claim of any Borrower against any beneficiary of such Letter of
Credit, or any such transferee, or any dispute between or among any Borrower and
any beneficiary of any Letter of Credit or any such transferee; (iv) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, facsimile, telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms; (vi) any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; (vii) the
misapplication by the beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit; or (viii) any consequences arising
from causes beyond the control of Issuer, including any Governmental Acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Issuer’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Issuer from liability for Issuer’s gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final
non-appealable judgment) in connection with actions or omissions described in
such clauses (i) through (viii) of such sentence. In no event shall Issuer or
Issuer’s Affiliates be liable to any Borrower for any indirect, consequential,
incidental, punitive, exemplary or special damages or expenses (including
without limitation attorneys’ fees), or for any damages resulting from any
change in the value of any property relating to a Letter of Credit.

 

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(b) Without limiting the generality of the foregoing, Issuer and each of its
Affiliates: (i) may rely on any oral or other communication believed in good
faith by Issuer or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit; (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Issuer or its Affiliates; (iv) may honor any drawing that
is payable upon presentation of a statement advising negotiation or payment,
upon receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Issuer or its Affiliate in any way related to any order issued at the
applicant’s request to an air carrier, a letter of guarantee or of indemnity
issued to a steamship agent or carrier or any document or instrument of like
import (each an “Order”) and honor any drawing in connection with any Letter of
Credit that is the subject of such Order, notwithstanding that any drafts or
other documents presented in connection with such Letter of Credit fail to
conform in any way with such Letter of Credit.

(c) In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Issuer under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence or intentional misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment), shall not put Issuer
under any resulting liability to any Borrower, Agent or any Lender.

2.20. Mandatory Prepayments.

(a) Subject to Section 7.1 hereof, when any Borrower sells or otherwise disposes
of any Collateral other than Inventory in the Ordinary Course of Business,
Borrowers shall repay the Advances in an amount equal to the net proceeds of
such sale (i.e., gross proceeds less the reasonable direct costs of such sales
or other dispositions), such repayments to be made promptly but in no event more
than one (1) Business Day following receipt of such net proceeds, and until the
date of payment, such proceeds shall be held in trust for Agent. The foregoing
shall not be deemed to be implied consent to any such sale otherwise prohibited
by the terms and conditions hereof. Such repayments shall be applied first, to
the outstanding principal installments of the Term Loan in the inverse order of
the maturities thereof and second, to the remaining Advances (including cash
collateralization of all Obligations relating to any outstanding Letters of
Credit in accordance with the provisions of Section 3.2(b); provided, however
that, if no Default or Event of Default has occurred and is continuing, such
repayments shall be applied to cash collateralize any Obligations related to
outstanding Letters of Credit last) in such order as Agent may determine,
subject to Borrowers’ ability to reborrow Revolving Advances in accordance with
the terms hereof.

 

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(b) Borrowers shall prepay the outstanding amount of the Advances in an amount
equal to twenty-five percent (25%) of Excess Cash Flow for each fiscal year
commencing with the fiscal year ending December 31, 2013, payable upon delivery
of the financial statements to Agent referred to in and required by Section 9.7
for such fiscal year but in any event not later than one hundred and twenty
(120) days after the end of each such fiscal year, which amount shall be applied
in the same manner as set forth in Section 2.20(a) hereof; provided, however, if
no Default or Event of Default shall have occurred and be continuing, the amount
required to be prepaid pursuant to this clause (b) shall not exceed $3,000,000
for any fiscal year. In the event that the financial statements are not so
delivered, then a calculation based upon estimated amounts shall be made by
Agent upon which calculation Borrowers shall make the prepayment required by
this Section 2.20(b), subject to adjustment when the financial statements are
delivered to Agent as required hereby. The calculation made by Agent shall not
be deemed a waiver of any rights Agent or Lenders may have as a result of the
failure by Borrowers to deliver such financial statements.

(c) In the event of any issuance or other incurrence of Indebtedness by
Borrowers or the issuance of any Equity Interests by any Borrower, Borrowers
shall, no later than one (1) Business Day after the receipt by Borrowers of
(i) the cash proceeds from any such issuance or incurrence of Indebtedness or
(ii) the net cash proceeds of any issuance of Equity Interests, as applicable,
repay the Advances in an amount equal to such cash proceeds, as applicable. Such
repayments will be applied in the same manner as set forth in Section 2.20(a)
hereof. The foregoing shall not be deemed to be implied consent to any such
issuance or incurrence of Indebtedness or Equity Interest prohibited by the
terms and conditions hereof.

(d) In the event that Borrowers, Holdings or any of their respective Affiliates
receives or is entitled to any refund, return or other repayment of the purchase
consideration paid under the Merger Agreement or any Acquisition Agreement (or
any portion thereof), Borrowers shall cause all such amounts to be remitted
directly to Agent (or, if such amounts are nonetheless received by Borrowers,
Holdings or any such Affiliate, Borrowers shall, no later than one (1) Business
Day after such receipt, cause all such amounts to be remitted to Agent) for
repayment of the Obligations, until all Obligations have been indefeasibly paid
in full. Such repayments shall be applied, (x) first, to the outstanding
principal installments of the Term Loan in the inverse order of the maturities
thereof and (y) second, to the outstanding Advances in such order as Agent may
determine, subject to Borrowers’ ability to reborrow Revolving Advances in
accordance with the terms hereof. Notwithstanding the foregoing, payments
received by Borrowers pursuant to any escrow agreement executed in connection
with Merger Agreement or any Acquisition Agreement in respect of a breach by the
sellers thereunder of any representation, warranty, covenant or agreement set
forth in or made by such sellers pursuant to such Merger Agreement or any
Acquisition Agreement, shall be remitted to Agent and applied by Agent to the
Revolving Advances, subject to Borrowers’ ability to reborrow Revolving Advances
in accordance with the terms hereof.

 

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2.21. Use of Proceeds.

(a) Borrowers shall apply the proceeds of Advances to (i) pay fees and expenses
relating to the Transactions, (ii) finance the transactions contemplated by the
Merger Agreement and the Permitted Acquisitions, (iii) finance Capital
Expenditures permitted pursuant to the terms hereof, and (iv) provide for its
working capital needs and reimburse drawings under Letters of Credit.

(b) Without limiting the generality of Section 2.21(a) above, none of the Credit
Parties nor any other Person which may in the future become party to this
Agreement or the Other Documents as a Credit Party, intends to use nor shall
they use any portion of the proceeds of the Advances, directly or indirectly,
for any purpose in violation of Applicable Law.

2.22. Defaulting Lender.

(a) Notwithstanding anything to the contrary contained herein, in the event any
Lender is a Defaulting Lender, all rights and obligations hereunder of such
Defaulting Lender and of the other parties hereto shall be modified to the
extent of the express provisions of this Section 2.22 so long as such Lender is
a Defaulting Lender.

(b) (i) except as otherwise expressly provided for in this Section 2.22,
Revolving Advances shall be made pro rata from Lenders holding Revolving
Commitments which are not Defaulting Lenders based on their respective Revolving
Commitment Percentages, and no Revolving Commitment Percentage of any Lender or
any pro rata share of any Revolving Advances required to be advanced by any
Lender shall be increased as a result of any Lender being a Defaulting Lender.
Amounts received in respect of principal of any type of Revolving Advances shall
be applied to reduce such type of Revolving Advances of each Lender (other than
any Defaulting Lender) holding a Revolving Commitment in accordance with their
Revolving Commitment Percentages; provided, that, Agent shall not be obligated
to transfer to a Defaulting Lender any payments received by Agent for the
Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder (including any principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to a Borrower the amount
of such payments received or retained by it for the account of such Defaulting
Lender.

(ii) fees payable hereunder shall cease to accrue in favor of such Defaulting
Lender.

(iii) if any Swing Loans are outstanding or any Letter of Credit Obligations (or
drawings under any Letter of Credit for which the Issuer has not been
reimbursed) are outstanding or exist at the time any such Lender holding a
Revolving Commitment becomes a Defaulting Lender, then:

(A) the Defaulting Lender’s Participation Commitment in the outstanding Swing
Loans and of the Maximum Undrawn Amount of all outstanding Letters of Credit
shall be reallocated among the Non-Defaulting Lenders holding Revolving
Commitments in proportion to the respective Revolving Commitment Percentages of
such Non-Defaulting Lenders to the extent (but only to the extent) that (x) such
reallocation does not cause the aggregate sum of outstanding Revolving Advances
made by any such Non-Defaulting Lender

 

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holding a Revolving Commitment plus such Lender’s reallocated Participation
Commitment in the outstanding Swing Loans plus such Lender’s reallocated
Participation Commitment in the aggregate Maximum Undrawn Amount of all
outstanding Letters of Credit to exceed the the Revolving Commitment Amount of
any such Non-Defaulting Lender, and (y) no Default or Event of Default has
occurred and is continuing at such time;

(B) if the reallocation described in clause (A) above cannot, or can only
partially, be effected, Borrowers shall within one (1) Business Day following
notice by Agent (x) first, prepay any outstanding Swing Loans that cannot be
reallocated, and (y) second, cash collateralize for the benefit of the Issuer,
Borrowers’ obligations corresponding to such Defaulting Lender’s Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit (after giving
effect to any partial reallocation pursuant to clause (A) above) in accordance
with Section 3.2(b) for so long as such Obligations are outstanding;

(C) if Borrowers cash collateralize any portion of such Defaulting Lender’s
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
pursuant to clause (B) above, Borrowers shall not be required to pay any fees to
such Defaulting Lender pursuant to Section 3.2(a) with respect to such
Defaulting Lender’s Revolving Commitment Percentage of Maximum Undrawn Amount of
all Letters of Credit during the period such Defaulting Lender’s Participation
Commitment in the Maximum Undrawn Amount of all Letters of Credit are cash
collateralized;

(D) if the Defaulting Lender’s Participation Commitment in the Maximum Undrawn
Amount of all Letters of Credit is reallocated pursuant to clause (A) above,
then the fees payable to Lenders holding Revolving Commitments pursuant to
Section 3.2(a) shall be adjusted and reallocated to the Non-Defaulting Lenders
holding Revolving Commitments in accordance with such reallocation; and

(E) if all or any portion of such Defaulting Lender’s Participation Commitment
in the Maximum Undrawn Amount of all Letters of Credit is neither reallocated
nor cash collateralized pursuant to clause (A) or (B) above, then, without
prejudice to any rights or remedies of the Issuer or any other Lender hereunder,
all Letter of Credit Fees payable under Section 3.2(a) with respect to such
Defaulting Lender’s Revolving Commitment Percentage of the Maximum Undrawn
Amount of all Letters of Credit shall be payable to the Issuer (and not to such
Defaulting Lender) until (and then only to the extent that) such Revolving
Participation Commitment in the Maximum Undrawn Amount of all Letters of Credit
is reallocated and/or cash collateralized; and

(iv) so long as any Lender holding a Revolving Commitment is a Defaulting
Lender, Swing Loan Lender shall not be required to fund any Swing Loans and the
Issuer shall not be required to issue, amend or increase any Letter of Credit,
unless such Issuer is satisfied that the related exposure and the Defaulting
Lender’s Participation Commitment in the Maximum Undrawn Amount of all Letters
of Credit and all Swing Loans (after giving effect to any such issuance,
amendment, increase or funding) will be fully allocated to the Non-Defaulting
Lenders holding Revolving Commitments and/or cash collateral for such Letters of
Credit will be provided by Borrowers in accordance with clause (A) and
(B) above, and participating interests in any newly made Swing Loan or any newly
issued or increased Letter of Credit shall be allocated among the Non-Defaulting
Lenders in a manner consistent with Section 2.22(b)(ii)(A) above (and such
Defaulting Lender shall not participate therein).

 

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(c) A Defaulting Lender shall not be entitled to give instructions to Agent or
to approve, disapprove, consent to or vote on any matters relating to this
Agreement and the Other Documents, and all amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall not be deemed to be a Lender, to have any
outstanding Advance, a Revolving Commitment Percentage or a Term Loan Commitment
Percentage; provided, that, this clause (c) shall not apply to the vote of a
Defaulting Lender in the case of an amendment, waiver or other modification
described in clauses (i) or (ii) of Section 16.2(b).

(d) Other than as expressly set forth in this Section 2.22, the rights and
obligations of a Defaulting Lender (including the obligation to indemnify Agent)
and the other parties hereto shall remain unchanged. Nothing in this
Section 2.22 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.

(e) In the event that Agent, Borrowers, Swing Loan Lender and the Issuer agree
in writing that a Defaulting Lender has adequately remedied all matters that
caused such Lender to be a Defaulting Lender, then Agent will so notify the
parties hereto, and, if such cured Defaulting Lender is a Lender holding a
Revolver Commitment, then Participation Commitments of Lenders holding Revolving
Commitments (including such cured Defaulting Lender) of the Swing Loans and
Maximum Undrawn Amount of all outstanding Letters of Credit shall be reallocated
to reflect the inclusion of such Lender’s Revolving Commitment, and on such date
such Lender shall purchase at par such of the Revolving Advances of the other
Lenders as Agent shall determine may be necessary in order for such Lender to
hold such Revolving Advances in accordance with its Revolving Commitment
Percentage.

(f) If Swing Loan Lender or Issuer has a good faith belief that any Lender
holding a Revolver Commitment has defaulted in fulfilling its obligations under
one or more other agreements in which such Lender commits to extend credit,
Swing Loan Lender shall not be required to fund any Swing Loans and Issuer shall
not be required to issue, amend or increase any Letter of Credit, unless Swing
Loan Lender or Issuer, as the case may be, shall have entered into arrangements
with Borrowers or such Lender, satisfactory to Swing Loan Lender or Issuer, as
the case may be, to defease any risk to it in respect of such Lender hereunder.

2.23. Payment of Obligations. Agent may charge to Borrowers’ Account as a
Revolving Advance or, at the discretion of Swing Loan Lender, as a Swing Loan
(i) all payments with respect to any of the Obligations required hereunder
(including without limitation principal payments, payments of interest, payments
of Letter of Credit Fees and all other fees provided for hereunder and payments
under Sections 16.5 and 16.9) as and when each such payment shall become due and
payable (whether as regularly scheduled, upon or after acceleration, upon
maturity or otherwise), (ii) without limiting the generality of the foregoing
clause (i), (a) all

 

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amounts expended by Agent or any Lender pursuant to Sections 4.2 or 4.3 hereof
and (b) all expenses which Agent incurs in connection with the forwarding of
Advance proceeds and the establishment and maintenance of any Blocked Accounts
or Depository Accounts as provided for in Section 4.8(h), and (iii) any sums
expended by Agent or any Lender due to any Borrower’s failure to perform or
comply with its obligations under this Agreement or any Other Document including
any Borrower’s obligations under Sections 3.4, 4.4, 4.7, 6.4, 6.6, 6.7 and 6.8
hereof, and all amounts so charged shall be added to the Obligations and shall
be secured by the Collateral. To the extent Revolving Advances are not actually
funded by the other Lenders in respect of any such amounts so charged, all such
amounts so charged shall be deemed to be Revolving Advances or Swing Loans made
by and owing to Agent and Agent shall be entitled to all rights (including
accrual of interest) and remedies of a Lender under this Agreement and the Other
Documents with respect to such Revolving Advances.

2.24. Increase in Maximum Revolving Advance Amount.

(a) Borrowers may request that the Maximum Revolving Advance Amount be increased
by (1) one or more of the current Lenders increasing their Revolving Commitment
Amount (any current Lender which elects to increase its Revolving Commitment
Amount shall be referred to as an “Increasing Lender”) or (2) one or more new
lenders (each a “New Lender”) joining this Agreement and providing a Revolving
Commitment Amount hereunder, subject to the following terms and conditions:

(i) No current Lender shall be obligated to increase its Revolving Commitment
Amount and any increase in the Revolving Commitment Amount by any current Lender
shall be in the sole discretion of such current Lender;

(ii) Borrowers may not request the addition of a New Lender unless (and then
only to the extent that) there is insufficient participation on behalf of the
existing Lenders in the increased Revolving Commitments being requested by
Borrowers;

(iii) There shall exist no Event of Default or Default on the effective date of
such increase after giving effect to such increase;

(iv) After giving effect to such increase, the Maximum Revolving Advance Amount
shall not exceed $100,000,000;

(v) No single increase in the Maximum Revolving Advance Amount shall be for an
amount less than $10,000,000;

(vi) Borrowers shall deliver to Agent on or before the effective date of such
increase the following documents in form and substance satisfactory to Agent:
(1) certifications of their corporate secretaries with attached resolutions
certifying that the increase in the Revolving Commitment Amounts has been
approved by such Borrowers, (2) certificate dated as of the effective date of
such increase certifying that no Default or Event of Default shall have occurred
and be continuing and certifying that the representations and warranties made by
each Borrower herein and in the Other Documents are true and complete in all
respects with the same force and effect as if made on and as of such date
(except to the extent any such representation or warranty expressly relates only
to any earlier and/or specified date), (3) such

 

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other agreements, instruments and information (including supplements or
modifications to this Agreement and/or the Other Documents executed by Borrowers
as Agent reasonably deems necessary in order to document the increase to the
Maximum Revolving Advance Amount and to protect, preserve and continue the
perfection and priority of the liens, security interests, rights and remedies of
Agent and Lenders hereunder and under the Other Documents in light of such
increase, and (4) an opinion of counsel in form and substance satisfactory to
Agent which shall cover such matters related to such increase as Agent may
reasonably require and each Borrower hereby authorizes and directs such counsel
to deliver such opinions to Agent and Lenders;

(vii) Borrowers shall execute and deliver (1) to each Increasing Lender a
replacement Note reflecting the new amount of such Increasing Lender’s Revolving
Commitment Amount after giving effect to the increase (and the prior Note issued
to such Increasing Lender shall be deemed to be cancelled) and (2) to each New
Lender a Note reflecting the amount of such New Lender’s Revolving Commitment
Amount;

(viii) Any New Lender shall be subject to the approval of Agent and Issuer;

(ix) Each Increasing Lender shall confirm its agreement to increase its
Revolving Commitment Amount pursuant to an acknowledgement in a form acceptable
to Agent, signed by it and each Borrower and delivered to Agent at least five
(5) days before the effective date of such increase; and

(x) Each New Lender shall execute a lender joinder in form and substance
satisfactory to Agent to which such New Lender shall join and become a party to
this Agreement and the Other Documents with a Revolving Commitment Amount as set
forth in such lender joinder.

(b) On the effective date of such increase, (i) Borrowers shall repay all
Revolving Advances then outstanding, subject to Borrowers’ obligations under
Sections 3.7, 3.9, or 3.10; provided, that, subject to the other conditions of
this Agreement, the Borrowing Agent may request new Revolving Advances on such
date and (ii) the Revolving Commitment Percentages of all of Lenders holding a
Revolving Commitment (including each Increasing Lender and/or New Lender) shall
be recalculated such that each such Lender’s Revolving Commitment Percentage is
equal to (x) the Revolving Commitment Amount of such Lender divided by (y) the
aggregate of the Revolving Commitment Amounts of all Lenders. Each of Lenders
shall participate in any new Revolving Advances made on or after such date in
accordance with their respective Revolving Commitment Percentages after giving
effect to the increase in the Maximum Revolving Advance Amount and recalculation
of the Revolving Commitment Percentages contemplated by this Section 2.24.

(c) On the effective date of such increase, each Increasing Lender shall be
deemed to have purchased an additional/increased participation in, and each New
Lender will be deemed to have purchased a new participation in, each then
outstanding Letter of Credit and each drawing thereunder and each then
outstanding Swing Loan in an amount equal to such Lender’s Revolving Commitment
Percentage (as calculated pursuant to Section 2.24(b) above) of the Maximum
Undrawn Amount of each such Letter of Credit (as in effect from time to time)
and

 

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the amount of each drawing and of each such Swing Loan, respectively. As
necessary to effectuate the foregoing, each existing Lender holding a Revolving
Commitment Percentage that is not an Increasing Lender shall be deemed to have
sold to each applicable Increasing Lender and/or New Lender, as necessary, a
portion of such existing Lender’s participations in such outstanding Letters of
Credit and drawings and such outstanding Swing Loans such that, after giving
effect to all such purchases and sales, each Lender holding a Revolving
Commitment (including each Increasing Lender and/or New Lender) shall hold a
participation in all Letters of Credit (and drawings thereunder) and all Swing
Lines in accordance with their respective Revolving Commitment Percentages (as
calculated pursuant to Section 2.24(b) above).

(d) On the effective date of such increase, Borrowers shall pay all cost and
expenses incurred by Agent and by each Increasing Lender and New Lender in
connection with the negotiations regarding, and the preparation, negotiation,
execution and delivery of all agreements and instruments executed and delivered
by any of Agent, Borrowers and/or the Increasing Lenders and New Lenders in
connection with, such increase (including all fees for any supplemental or
additional public filings of any Other Documents necessary to protect, preserve
and continue the perfection and priority of the liens, security interests,
rights and remedies of Agent and Lenders hereunder and under the Other Documents
in light of such increase).

 

III. INTEREST AND FEES.

3.1. Interest. Interest on Advances shall be payable in arrears on the first day
of each month with respect to Domestic Rate Loans and, with respect to LIBOR
Rate Loans, at the end of each Interest Period. Interest charges shall be
computed on the actual principal amount of Advances outstanding during the month
at a rate per annum equal to (i) with respect to Revolving Advances, the
applicable Revolving Interest Rate and (ii) with respect to Swing Loans, the
Revolving Interest Rate for Domestic Rate Loans and (iii) with respect to the
Term Loan, the applicable Term Loan Rate (as applicable, the “Contract Rate”).
Except as expressly provided otherwise in this Agreement, any Obligations other
than the Advances that are not paid when due shall accrue interest at the
Revolving Interest Rate for Domestic Rate Loans, subject to the provision of the
final sentence of this Section 3.1 regarding the Default Rate. Whenever,
subsequent to the date of this Agreement, the Alternate Base Rate is increased
or decreased, the applicable Contract Rate shall be similarly changed without
notice or demand of any kind by an amount equal to the amount of such change in
the Alternate Base Rate during the time such change or changes remain in effect.
The LIBOR Rate shall be adjusted with respect to LIBOR Rate Loans without notice
or demand of any kind on the effective date of any change in the Reserve
Percentage as of such effective date. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, at the option of Agent or at
the direction of Required Lenders (or, in the case of any Event of Default under
Section 10.7, immediately and automatically upon the occurrence of any such
Event of Default without the requirement of any affirmative action by any
party), (i) the Obligations other than LIBOR Rate Loans shall bear interest at
the Revolving Interest Rate for Domestic Rate Loans plus two percent (2%) per
annum and (ii) LIBOR Rate Loans shall bear interest at the Revolving Interest
Rate for LIBOR Rate Loans plus two percent (2%) per annum (as applicable, the
“Default Rate”).

 

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3.2. Letter of Credit Fees.

(a) Borrowers shall pay (x) to Agent, for the ratable benefit of Lenders holding
Revolving Commitments, fees for each Letter of Credit for the period from and
excluding the date of issuance of same to and including the date of expiration
or termination, equal to the average daily face amount of each outstanding
Letter of Credit multiplied by the Applicable Margin for Revolving Advances
consisting of LIBOR Rate Loans, such fees to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable quarterly
in arrears on the first day of each calendar quarter and on the last day of the
Term, and (y) to the Issuer, a fronting fee of one quarter of one percent
(0.25%) per annum (such fees to be calculated on the basis of a 360-day year for
the actual number of days elapsed and to be payable quarterly in arrears on the
first day of each quarter and on the last day of the Term) times the average
daily face amount of each outstanding Letter of Credit for the period from and
excluding the date of issuance of same to and including the date of expiration
or termination, to be payable quarterly in arrears on the first day of each
calendar quarter and on the last day of the Term (all of the foregoing fees, the
“Letter of Credit Fees”). In addition, Borrowers shall pay to Agent any and all
customary administrative, issuance, amendment, payment and negotiation charges
with respect to Letters of Credit and all reasonable and documented
out-of-pocket fees and expenses as agreed upon by Issuer and the Borrowing Agent
in connection with any Letter of Credit, including in connection with the
opening, amendment or renewal of any such Letter of Credit and any acceptances
created thereunder, all such charges, fees and expenses, if any, to be payable
on demand. All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
pro-ration upon the termination of this Agreement for any reason. Any such
charge in effect at the time of a particular transaction shall be the charge for
that transaction, notwithstanding any subsequent change in the Issuer’s
prevailing charges for that type of transaction. Upon and after the occurrence
of an Event of Default, and during the continuation thereof, at the option of
Agent or at the direction of Required Lenders (or, in the case of any Event of
Default under Section 10.7, immediately and automatically upon the occurrence of
any such Event of Default without the requirement of any affirmative action by
any party), the Letter of Credit Fees described in clause (x) of this
Section 3.2(a) shall be increased by an additional two percent (2%) per annum.

(b) On demand Borrowers will cause cash to be deposited and maintained in an
account with Agent, as cash collateral, in an amount equal to one hundred and
five percent (105%) of the Maximum Undrawn Amount of all outstanding Letters of
Credit for which Agent has not fully implemented the deduction from the Formula
Amount contemplated by Section 2.1(a)(y)(iii) hereof, and each Borrower hereby
irrevocably authorizes Agent, in its discretion, on such Borrower’s behalf and
in such Borrower’s name, to open such an account and to make and maintain
deposits therein, or in an account opened by such Borrower, in the amounts
required to be made by such Borrower, out of the proceeds of Receivables or
other Collateral or out of any other funds of such Borrower coming into any
Lender’s possession at any time. Agent may, in its discretion, invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which Agent and such Borrower mutually agree (or, in the absence of such
agreement, as Agent may reasonably select) and the net return on such
investments shall be credited to such account and constitute additional cash
collateral, or Agent may (notwithstanding the foregoing) establish the account
provided for under this Section 3.2(b) as a non-interest bearing account and in
such case Agent shall have no obligation (and Borrowers hereby waive any claim)
under Article 9 of the Uniform Commercial Code or under any other Applicable Law
to pay interest on such cash collateral being held by Agent. No Borrower may
withdraw

 

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amounts credited to any such account except upon the occurrence of all of the
following: (x) payment and performance in full of all Obligations;
(y) expiration of all Letters of Credit; and (z) termination of this Agreement.
Borrowers hereby assign, pledge and grant to Agent, for its benefit and the
ratable benefit of Issuer, Lenders and each other Secured Party, a continuing
security interest in and to and Lien on any such cash collateral and any right,
title and interest of Borrowers in any deposit account, securities account or
investment account into which such cash collateral may be deposited from time to
time to secure the Obligations, specifically including all Obligations with
respect to any Letters of Credit. Borrowers agree that upon the coming due of
any Reimbursement Obligations (or any other Obligations, including Obligations
for Letter of Credit Fees) with respect to the Letters of Credit, Agent may use
such cash collateral to pay and satisfy such Obligations.

3.3. Facility Fee. If, for any month during the Term, the average daily unpaid
balance of the sum of Revolving Advances (for purposes of this computation,
Swing Loans shall be deemed to be Revolving Advances made by PNC as a Lender)
plus Swing Loans plus the Maximum Undrawn Amount of all outstanding Letters of
Credit for each day of such month does not equal the Maximum Revolving Advance
Amount, then Borrowers shall pay to Agent, for the ratable benefit of Lenders
holding the Revolving Commitments based on their Revolving Commitment
Percentages, a fee at a rate equal to one-quarter of one percent (0.25%) per
annum on the amount by which the Maximum Revolving Advance Amount exceeds such
average daily unpaid balance. Such fee shall be payable to Agent in arrears on
the first day of each month with respect to the previous month.

3.4. Fee Letter and Other Fees.

(a) Borrowers shall pay the amounts required to be paid in the Fee Letter in the
manner and at the times required by the Fee Letter.

(b) All of the fees and out-of-pocket costs and expenses of any appraisals
conducted pursuant to Section 4.7 hereof shall be paid for when due, in full and
without deduction, off-set or counterclaim by Borrowers.

3.5. Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.

3.6. Maximum Charges. In no event whatsoever shall interest and other charges
charged hereunder exceed the highest rate permissible under Applicable Law. In
the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under Applicable Law: (i) the interest rates
hereunder will be reduced to the maximum rate permitted under Applicable Law;
(ii) such excess amount shall be first applied to any unpaid principal balance
owed by Borrowers; and (iii) if the then remaining excess amount is greater than
the previously unpaid principal balance, Lenders shall promptly refund such
excess amount to Borrowers and the provisions hereof shall be deemed amended to
provide for such permissible rate. Notwithstanding anything to the contrary
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Document, all agreements which either now are or which shall become agreements
among Credit Parties, Agent and Lenders are hereby limited so that in no
contingency or event whatsoever shall the total liability for payments in the
nature of interest, additional interest and other charges exceed the applicable
limits imposed by any applicable usury laws. If any payments in the nature of
interest, additional interest and other charges made under this Agreement or any
Other Document are held to be in excess of the limits imposed by any applicable
usury laws, it is agreed that any such amount held to be in excess shall be
considered payment of principal hereunder, and the indebtedness evidenced hereby
shall be reduced by such amount so that the total liability for payments in the
nature of interest, additional interest and other charges shall not exceed the
applicable limits imposed by any applicable usury laws, in compliance with the
desires of Credit Parties and Agent. In addition, unless preempted by federal
law, the Revolving Interest Rate, Term Loan Rate or Default Rate, as applicable,
from time to time in effect hereunder may not exceed the “weekly ceiling” from
time to time in effect under Chapter 303 of the Texas Finance Code, as amended
from time to time. The foregoing provisions shall never be superseded or waived
and shall control every other provision of this Agreement or any Other Document
and all agreements among Borrowers and Agent and Lenders, or their respective
successors and assigns. If the applicable state or federal law is amended in the
future to allow a greater rate of interest to be charged under this Agreement
than is presently allowed by applicable state or federal law, then the
limitation of interest hereunder shall be increased to the maximum rate of
interest allowed by applicable state or federal law as amended, which increase
shall be effective hereunder on the effective date of such amendment, and all
interest charges owing to Lender by reason thereof shall be payable in
accordance with Section 3.1 of this Agreement. If by operation of this
provision, Borrowers would be entitled to a refund of interest paid pursuant to
this Agreement, each Lender agrees that it shall pay to Borrowers upon Agent’s
request such Lender’s Revolving Commitment Percentage or Term Loan Commitment
Percentage, as applicable, of such interest to be refunded, as determined by
Agent.

3.7. Increased Costs. In the event that any Applicable Law or any Change in Law
or compliance by any Lender (for purposes of this Section 3.7, the term “Lender”
shall include Agent, Swing Loan Lender, any Issuer or Lender and any corporation
or bank controlling Agent, Swing Loan Lender, any Lender or Issuer and the
office or branch where Agent, Swing Loan Lender, any Lender or Issuer (as so
defined) makes or maintains any LIBOR Rate Loans) with any request or directive
(whether or not having the force of law) from any central bank or other
financial, monetary or other authority, shall:

(a) subject Agent, Swing Loan Lender, any Lender or Issuer to any tax of any
kind whatsoever with respect to this Agreement, any Letter of Credit, any
participation in a Letter of Credit or any LIBOR Rate Loan, or change the basis
of taxation of payments to Agent, Swing Loan Lender, such Lender or Issuer in
respect thereof (except for Indemnified Taxes or Other Taxes covered by
Section 3.10 and the imposition of, or any change in the rate of, any Excluded
Tax payable by Agent, Swing Loan Lender, such Lender or the Issuing Lender);

(b) impose, modify or deem applicable any reserve, special deposit, assessment,
special deposit, compulsory loan, insurance charge or similar requirement
against assets held by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of Agent, Swing Loan Lender, Issuer
or any Lender, including pursuant to Regulation D of the Board of Governors of
the Federal Reserve System; or

 

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(c) impose on Agent, Swing Loan Lender, any Lender or Issuer or the London
interbank LIBOR market any other condition, loss or expense (other than Taxes)
affecting this Agreement or any Other Document or any Advance made by any
Lender, or any Letter of Credit or participation therein;

and the result of any of the foregoing is to increase the cost to Agent, Swing
Loan Lender, any Lender or Issuer of making, converting to, continuing, renewing
or maintaining its Advances hereunder by an amount that Agent, Swing Loan Lender
or such Lender or Issuer deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent, Swing Loan Lender or such Lender or Issuer
deems to be material, then, in any case Borrowers shall promptly pay Agent,
Swing Loan Lender or such Lender or Issuer, upon its demand, such additional
amount as will compensate Agent, Swing Loan Lender or such Lender or Issuer for
such additional cost or such reduction, as the case may be; provided, that, the
foregoing shall not apply to increased costs which are reflected in the LIBOR
Rate, as the case may be. Agent, Swing Loan Lender or such Lender or Issuer
shall certify the amount of such additional cost or reduced amount to Borrowing
Agent, and such certification shall be conclusive absent manifest error.

3.8. Basis For Determining Interest Rate Inadequate or Unfair. In the event that
Agent or any Lender shall have determined that:

(a) reasonable means do not exist for ascertaining the LIBOR Rate applicable
pursuant to Section 2.2 hereof for any Interest Period; or

(b) Dollar deposits in the relevant amount and for the relevant maturity are not
available in the London interbank LIBOR market, with respect to an outstanding
LIBOR Rate Loan, a proposed LIBOR Rate Loan, or a proposed conversion of a
Domestic Rate Loan into a LIBOR Rate Loan; or

(c) the making, maintenance or funding of any LIBOR Rate Loan has been made
impracticable or unlawful by compliance by Agent or such Lender in good faith
with any Applicable Law or any interpretation or application thereof by any
Governmental Body or with any request or directive of any such Governmental Body
(whether or not having the force of law),

then Agent shall give Borrowing Agent prompt written or telephonic notice of
such determination. If such notice is given, (i) any such requested LIBOR Rate
Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall notify
Agent no later than 10:00 a.m. two (2) Business Days prior to the date of such
proposed borrowing, that its request for such borrowing shall be cancelled or
made as an unaffected type of LIBOR Rate Loan, (ii) any Domestic Rate Loan or
LIBOR Rate Loan which was to have been converted to an affected type of LIBOR
Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. two (2) Business
Days prior to the proposed conversion, shall be maintained as an unaffected type
of LIBOR Rate Loan, and (iii) any outstanding affected LIBOR Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 a.m. two (2) Business Days prior to the last Business Day of
the then current Interest Period applicable to such affected LIBOR Rate

 

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Loan, shall be converted into an unaffected type of LIBOR Rate Loan, on the last
Business Day of the then current Interest Period for such affected LIBOR Rate
Loans (or sooner, if any Lender cannot continue to lawfully maintain such
affected LIBOR Rate Loan). Until such notice has been withdrawn, Lenders shall
have no obligation to make an affected type of LIBOR Rate Loan or maintain
outstanding affected LIBOR Rate Loans and no Borrower shall have the right to
convert a Domestic Rate Loan or an unaffected type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.

3.9. Capital Adequacy.

(a) In the event that Agent, Swing Loan Lender or any Lender shall have
determined that any Applicable Law or guideline regarding capital adequacy, or
any Change in Law or any change in the interpretation or administration thereof
by any Governmental Body, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Agent, Swing Loan
Lender, Issuer or any Lender (for purposes of this Section 3.9, the term
“Lender” shall include Agent, Swing Loan Lender, Issuer or any Lender and any
corporation or bank controlling Agent, Swing Loan Lender or any Lender and the
office or branch where Agent, Swing Loan Lender or any Lender (as so defined)
makes or maintains any LIBOR Rate Loans) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on Agent, Swing Loan Lender or any Lender’s capital as a
consequence of its obligations hereunder (including the making of any Swing
Loans) to a level below that which Agent, Swing Loan Lender or such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration Agent’s, Swing Loan Lender’s and each Lender’s policies with
respect to capital adequacy) by an amount deemed by Agent, Swing Loan Lender or
any Lender to be material, then, from time to time, Borrowers shall pay upon
demand to Agent, Swing Loan Lender or such Lender such additional amount or
amounts as will compensate Agent, Swing Loan Lender or such Lender for such
reduction. In determining such amount or amounts, Agent, Swing Loan Lender or
such Lender may use any reasonable averaging or attribution methods. The
protection of this Section 3.9 shall be available to Agent, Swing Loan Lender
and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law, rule, regulation, guideline
or condition.

(b) A certificate of Agent, Swing Loan Lender or such Lender setting forth such
amount or amounts as shall be necessary to compensate Agent, Swing Loan Lender
or such Lender with respect to Section 3.9(a) hereof when delivered to Borrowing
Agent shall be conclusive absent manifest error.

3.10. Taxes.

(a) Any and all payments by or on account of any Obligations hereunder or under
any Other Document shall be made free and clear of and without reduction or
withholding for any Indemnified Taxes or Other Taxes; provided, that, if
Borrowers shall be required by Applicable Law to deduct any Indemnified Taxes
(including any Other Taxes) from such payments, then (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this

 

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Section) Agent, Lender, Swing Loan Lender, Issuer or Participant, as the case
may be, receives an amount equal to the sum it would have received had no such
deductions been made, (ii) Borrowers shall make such deductions and
(iii) Borrowers shall timely pay the full amount deducted to the relevant
Governmental Body in accordance with Applicable Law.

(b) Without limiting the provisions of Section 3.10(a) above, Borrowers shall
timely pay any Other Taxes to the relevant Governmental Body in accordance with
Applicable Law.

(c) Each Borrower shall indemnify Agent, Swing Loan Lender, each Lender, Issuer
and any Participant, within ten (10) days after demand therefor, for the full
amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or
Other Taxes imposed or asserted on or attributable to amounts payable under this
Section) paid by Agent, Swing Loan Lender, such Lender, Issuer, or such
Participant, as the case may be, and any penalties, interest and reasonable
expenses arising therefrom or with respect thereto, whether or not such
Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted
by the relevant Governmental Body. A certificate as to the amount of such
payment or liability delivered to Borrowers by any Lender, Swing Loan Lender,
Participant, or the Issuer (with a copy to Agent), or by Agent on its own behalf
or on behalf of Swing Loan Lender, a Lender or the Issuer, shall be conclusive
absent manifest error.

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

(e) Any Foreign Lender that is entitled to an exemption from or reduction of
withholding tax under the law of the jurisdiction in which any Borrower is
resident for tax purposes, or under any treaty to which such jurisdiction is a
party, with respect to payments hereunder or under any Other Document shall
deliver to Borrowers (with a copy to Agent), at the time or times prescribed by
Applicable Law or reasonably requested by Borrowers or 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. Notwithstanding the submission of such documentation claiming a
reduced rate of or exemption from U.S. withholding tax, Agent shall be entitled
to withhold United States federal income taxes at the full thirty percent
(30%) withholding rate if in its reasonable judgment it is required to do so
under the due diligence requirements imposed upon a withholding agent under §
1.1441-7(b) of the United States Income Tax Regulations or other Applicable Law.
Further, Agent is indemnified under § 1.1461-1(e) of the United States Income
Tax Regulations against any claims and demands of any Lender, Issuer or assignee
or participant of a Lender or Issuer for the amount of any Tax it deducts and
withholds in accordance with regulations under § 1441 of the Code. In addition,
any Lender, if requested by Borrowers or Agent, shall deliver such other
documentation prescribed by Applicable Law or reasonably requested by Borrowers
or Agent as will enable Borrowers or Agent to determine whether or not such
Lender is subject to backup withholding or information reporting requirements.
Without limiting the generality of the foregoing, in the event that any Borrower
is resident for tax purposes in the United States of

 

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America, any Foreign Lender (or other Lender) shall deliver to Borrowers and
Agent (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender (or other Lender) becomes a
Lender under this Agreement (and from time to time thereafter upon the request
of Borrowers or Agent, but only if such Foreign Lender (or other Lender) is
legally entitled to do so), whichever of the following is applicable:

(i) two (2) duly completed valid originals of IRS Form W-8BEN claiming
eligibility for benefits of an income tax treaty to which the United States of
America is a party,

(ii) two (2) duly completed valid originals of IRS 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 Borrowers
within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled
foreign corporation” described in section 881(c)(3)(C) of the Code and (y) two
(2) duly completed valid originals of IRS Form W-8BEN,

(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 Borrowers to determine the withholding or deduction
required to be made, or

(v) to the extent that any Lender is not a Foreign Lender, such Lender shall
submit to Agent two (2) originals of an IRS Form W-9 or any other form
prescribed by Applicable Law demonstrating that such Lender is not a Foreign
Lender.

(f) If a payment made to a Lender, Swing Loan Lender, Participant, Issuer, or
Agent under any Document would be subject to U.S. Federal withholding Tax
imposed by FATCA if such Person fails to comply with the applicable reporting
requirements of FATCA (including those contained in Section 1471(b) or 1472(b)
of the Code, as applicable), such Lender, Swing Loan Lender, Participant,
Issuer, or Agent shall deliver to Agent (in the case of Swing Loan Lender, a
Lender, Participant or Issuer) and Borrowers (A) a certification signed by the
chief financial officer, principal accounting officer, treasurer or controller
of such Person, and (B) other documentation reasonably requested by Agent or any
Borrower sufficient for Agent and Borrowers to comply with their obligations
under FATCA and to determine that Swing Loan Lender, such Lender, Participant,
Issuer, or Agent has complied with such applicable reporting requirements.

(g) If Agent, Swing Loan Lender, a Lender, a Participant or the Issuer
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
Borrowers or with respect to which Borrowers have paid additional amounts
pursuant to this Section, it shall pay to Borrowers an amount equal to such
refund (but only to the extent of indemnity payments made, or additional amounts
paid, by Borrowers under this Section with respect to the Indemnified Taxes or
Other Taxes giving

 

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rise to such refund); net of all out-of-pocket expenses of Agent, Swing Loan
Lender, such Lender, Participant, or the Issuer, as the case may be, and without
interest (other than any interest paid by the relevant Governmental Body with
respect to such refund); provided, that, Borrowers, upon the request of Agent,
Swing Loan Lender, such Lender, Participant, or the Issuer, agrees to repay the
amount paid over to Borrowers (plus any penalties, interest or other charges
imposed by the relevant Governmental Body) to Agent, Swing Loan Lender, such
Lender, Participant or the Issuer in the event Agent, Swing Loan Lender, such
Lender, Participant or the Issuer is required to repay such refund to such
Governmental Body. This Section shall not be construed to require Agent, Swing
Loan Lender, any Lender, Participant, or the Issuer to make available its tax
returns (or any other information relating to its taxes that it deems
confidential) to Borrowers or any other Person.

3.11. Replacement of Lenders. If any Lender (an “Affected Lender”) (a) makes
demand upon Borrowers for (or if Borrowers are otherwise required to pay)
amounts pursuant to Section 3.7 or 3.9 hereof, (b) is unable to make or maintain
LIBOR Rate Loans as a result of a condition described in Section 2.2(h) hereof,
(c) is a Defaulting Lender, or (d) denies any consent requested by Agent
pursuant to Section 16.2(b) hereof, Borrowers may, within ninety (90) days of
receipt of such demand, notice (or the occurrence of such other event causing
Borrowers to be required to pay such compensation or causing Section 2.2(h)
hereof to be applicable), or such Lender becoming a Defaulting Lender or denial
of a request by Agent pursuant to Section 16.2(b) hereof, as the case may be, by
notice (a “Replacement Notice”) in writing to Agent and such Affected Lender
(i) request the Affected Lender to cooperate with Borrowers in obtaining a
replacement Lender satisfactory to Agent and Borrowers (the “Replacement
Lender”); (ii) request the non-Affected Lenders to acquire and assume all of the
Affected Lender’s Advances and its Revolving Commitment Percentage and/or Term
Loan Commitment Percentages, as applicable, as provided herein, but none of such
Lenders shall be under any obligation to do so; or (iii) propose a Replacement
Lender subject to approval by Agent in its good faith business judgment. If any
satisfactory Replacement Lender shall be obtained, and/or if any one or more of
the non-Affected Lenders shall agree to acquire and assume all of the Affected
Lender’s Advances and its Revolving Commitment Percentage and/or Term Loan
Commitment Percentages, as applicable, then such Affected Lender shall assign,
in accordance with Section 16.3 hereof, all of its Advances and its Revolving
Commitment Percentage and/or Term Loan Commitment Percentages, as applicable,
and other rights and obligations under this Loan Agreement and the Other
Documents to such Replacement Lender or non-Affected Lenders, as the case may
be, in exchange for payment of the principal amount so assigned and all interest
and fees accrued on the amount so assigned, plus all other Obligations then due
and payable to the Affected Lender.

 

IV. COLLATERAL: GENERAL TERMS

4.1. Security Interest in the Collateral.

(a) To secure the prompt payment and performance to Agent, Issuer and each
Lender (and each other holder of any Obligations) of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for its benefit and for the
ratable benefit of each Lender, Issuer and each other Secured Party, a
continuing security interest in and to and Lien on all of its Collateral,
whether now owned or existing or hereafter created, acquired or arising and

 

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wheresoever located; provided, however, that such assignment, pledge and grant
of a security interest and Lien in and to the Equity Interests of a Foreign
Subsidiary of Borrowers shall be subject to Section 4.1(b). Each Borrower shall
mark its books and records as may be necessary or appropriate to evidence,
protect and perfect Agent’s security interest and shall cause its financial
statements to reflect such security interest. Each Borrower shall provide Agent
with written notice of all commercial tort claims promptly upon the occurrence
of any events giving rise to any such claim(s) (regardless of whether legal
proceedings have yet been commenced), such notice to contain a brief description
of the claim(s), the events out of which such claim(s) arose and the parties
against which such claims may be asserted and, if applicable in any case where
legal proceedings regarding such claim(s) have been commenced, the case title
together with the applicable court and docket number. Upon delivery of each such
notice, such Borrower shall be deemed to thereby grant to Agent a security
interest and lien in and to such commercial tort claims described therein and
all proceeds thereof. Each Borrower shall provide Agent with written notice
promptly upon becoming the beneficiary under any letter of credit or otherwise
obtaining any right, title or interest in any letter of credit rights, and at
Agent’s request shall take such actions as Agent may reasonably request for the
perfection of Agent’s security interest therein.

(b) Without limiting the generality of Section 4.1(a) above, to secure the
prompt payment and performance to Agent and each Lender of the Obligations,
Borrowers hereby assign, pledge and grant to Agent for its benefit and for the
ratable benefit of each Lender a continuing security interest in and to (i) 100%
of the issued and outstanding Equity Interests of each Domestic Subsidiary and
(ii) 66% (or such greater percentage that, due to a change in an Applicable Law
after the date hereof, (A) could not reasonably be expected to cause the
undistributed earnings of such Foreign Subsidiary as determined for U.S. federal
income tax purposes to be treated as a deemed dividend to such Foreign
Subsidiary’s U.S. parent and (B) could not reasonably be expected to cause any
material adverse tax consequences) of the issued and outstanding Equity
Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956
2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to
vote (within the meaning of Treas. Reg. Section 1.956 2(c)(2)) in each Foreign
Subsidiary directly owned by Borrowers or any Domestic Subsidiary. Promptly
after any request therefor made by Agent to Borrowers after the Closing Date,
each Borrower which owns any Equity Interests of any Foreign Subsidiary shall
cause to be executed and delivered to Agent (1) a Pledge Agreement in form and
substance satisfactory to Agent which is in form and substance appropriate for
use in, and valid and enforceable under the laws of, the foreign jurisdiction in
which such Foreign Subsidiary is organized and (2) all such further agreements,
documents, instruments and legal opinions as Agent may request in connection
therewith to perfect such security interest and Lien or to ensure or confirm the
validity and enforceability thereof, in each case under the laws of such foreign
jurisdiction.

4.2. Perfection of Security Interest. Each Borrower shall take all action that
may be necessary or desirable, or that Agent may request, so as at all times to
maintain the validity, perfection, enforceability and priority of Agent’s
security interest in and Lien on the Collateral or to enable Agent to protect,
exercise or enforce its rights hereunder and in the Collateral, including, but
not limited to, (i) immediately discharging all Liens other than Permitted
Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering to Agent,
endorsed or accompanied by such instruments of assignment as Agent may specify,
and stamping or

 

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marking, in such manner as Agent may specify, any and all chattel paper,
instruments, letters of credits and advices thereof and documents evidencing or
forming a part of the Collateral, (iv) entering into warehousing, lockbox,
customs and freight agreements and other custodial arrangements satisfactory to
Agent, and (v) executing and delivering financing statements, control
agreements, security agreements, instruments of pledge, mortgages, notices and
assignments and amendments and/or modifications of any of the foregoing, this
Agreement and each Other Document, in each case in form and substance
satisfactory to Agent, relating to the creation, validity, perfection,
maintenance or continuation of Agent’s security interest and Lien in the
Collateral (including in respect of all Collateral acquired by any Borrower
after the Closing Date) under the Uniform Commercial Code or other Applicable
Law. Agent is hereby authorized to file financing statements without signature
in accordance with the Uniform Commercial Code as in effect in the State of
Texas or any other jurisdiction from time to time. By its signature hereto, each
Borrower hereby authorizes Agent to file against such Borrower, one or more
financing, continuation or amendment statements pursuant to the Uniform
Commercial Code in form and substance satisfactory to Agent (which statements
may have a description of collateral which is broader than that set forth
herein, including without limitation a description of Collateral as “all assets”
and/or “all personal property” of any Borrower). All charges, expenses and fees
Agent may incur in doing any of the foregoing, and any local taxes relating
thereto, shall be charged to Borrowers’ Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be
paid by Borrowers to Agent for its benefit and for the ratable benefit of
Lenders immediately upon demand.

4.3. Preservation of Collateral. In addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) may at any time take such steps as
Agent deems necessary to protect Agent’s interest in and to preserve the
Collateral, including the hiring of security guards or the placing of other
security protection measures as Agent may deem appropriate; (b) may employ and
maintain at any of any Borrower’s premises a custodian who shall have full
authority to do all acts necessary to protect Agent’s interests in the
Collateral; (c) after the occurrence and during the continuation of a Default or
an Event of Default, may lease warehouse facilities to which Agent may move all
or part of the Collateral; (d) may use any Borrower’s owned or leased lifts,
hoists, trucks and other facilities or equipment for handling or removing the
Collateral; and (e) shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrowers’ owned or leased property. Each Borrower shall
cooperate fully with all of Agent’s efforts to preserve the Collateral and will
take such actions to preserve the Collateral as Agent may direct. All of Agent’s
expenses of preserving the Collateral, including any expenses relating to the
bonding of a custodian, shall be charged to Borrowers’ Account as a Revolving
Advance maintained as a Domestic Rate Loan and added to the Obligations.

4.4. Ownership and Location of Collateral.

(a) With respect to the Collateral, at the time the Collateral becomes subject
to Agent’s security interest: (i) each Borrower is and shall remain the sole
owner of and fully authorized and able to sell, transfer, pledge and/or grant a
first priority security interest in each and every item of its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens whatsoever; (ii) each document and agreement
executed by each Borrower or delivered to Agent or any Lender in connection with
this

 

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Agreement shall be true and correct in all respects; (iii) all signatures and
endorsements of each Borrower that appear on such documents and agreements shall
be genuine and each Borrower shall have full capacity to execute same; and
(iv) each Borrower’s equipment and Inventory shall be located as set forth on
Schedule 4.4(a)(iv) and shall not be removed from such location(s) without the
prior written consent of Agent except (i) with respect to the sale of Inventory
in the Ordinary Course of Business and (ii) equipment to the extent permitted in
Section 7.1(b) hereof.

(b) (i) There is no location at which any Borrower has any Inventory (except for
Inventory in transit) other than those locations listed on Schedule 4.4(a)(iv);
(ii) Schedule 4.4(b)(ii) hereto contains a correct and complete list, as of the
Closing Date, of the legal names and addresses of each warehouse at which
Inventory of any Borrower is stored; none of the receipts received by any
Borrower from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person’s assigns; (iii) Schedule 4.4(b)(iii) hereto sets forth a
correct and complete list as of the Closing Date of (A) each place of business
of each Borrower and (B) the chief executive office of each Borrower; and
(iv) Schedule 4.4(b)(iv) hereto sets forth a correct and complete list as of the
Closing Date of the location, by state and street address, of all Real Property
owned or leased by each Borrower, together with the names and addresses of any
landlords.

4.5. Defense of Agent’s and Lenders’ Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement and the Other Documents, Agent’s interests in the Collateral shall
continue in full force and effect. During such period no Borrower shall, without
Agent’s prior written consent, pledge, sell (except for sales or other
dispositions otherwise permitted in Section 7.1(b) hereof), assign, transfer,
create or suffer to exist a Lien upon or encumber or allow or suffer to be
encumbered in any way except for Permitted Encumbrances, any part of the
Collateral. Each Borrower shall defend Agent’s interests in the Collateral
against any and all Persons whatsoever. At any time following demand by Agent
for payment of all Obligations, Agent shall have the right to take possession of
the indicia of the Collateral and the Collateral in whatever physical form
contained, including: labels, stationery, documents, instruments and advertising
materials. If Agent exercises this right to take possession of the Collateral,
Borrowers shall, upon demand, assemble it in the best manner possible and make
it available to Agent at a place reasonably convenient to Agent. In addition,
with respect to all Collateral, Agent and Lenders shall be entitled to all of
the rights and remedies set forth herein and further provided by the Uniform
Commercial Code or other Applicable Law. Each Borrower shall, and Agent may, at
its option, instruct all suppliers, carriers, forwarders, warehousers or others
receiving or holding cash, checks, Inventory, documents or instruments in which
Agent holds a security interest to deliver same to Agent and/or subject to
Agent’s order and if they shall come into any Borrower’s possession, they, and
each of them, shall be held by such Borrower in trust as Agent’s trustee, and
such Borrower will immediately deliver them to Agent in their original form
together with any necessary endorsement.

4.6. Inspection of Premises. At all reasonable times and upon advance notice
(except that no notice shall be required upon the occurrence and continuance of
a Default or Event of Default), Agent and each Lender shall have full access to
and the right to audit, check, inspect and make abstracts and copies from each
Borrower’s books, records, audits, correspondence and all other papers relating
to the Collateral and the operation of each Borrower’s business. Agent,

 

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any Lender and their agents may enter upon any premises of any Borrower at any
time during business hours and at any other reasonable time, and from time to
time as often as Agent shall elect in its sole discretion, for the purpose of
inspecting the Collateral and any and all records pertaining thereto and the
operation of such Borrower’s business.

4.7. Appraisals. Agent may, in its sole discretion, exercised in a commercially
reasonable manner, at any time after the Closing Date and from time to time,
engage the services of an independent appraisal firm or firms of reputable
standing, satisfactory to Agent, for the purpose of appraising the then current
values of Borrowers’ assets. Absent the occurrence and continuance of an Event
of Default at such time, Agent shall consult with Borrowers as to the identity
of any such firm. In the event the value of Borrowers’ Inventory, as so
determined pursuant to such appraisal, is less than anticipated by Agent or
Lenders, such that the Revolving Advances are in excess of such Advances
permitted hereunder, then, promptly upon Agent’s demand for same, Borrowers
shall make mandatory prepayments of the then outstanding Revolving Advances so
as to eliminate the excess Advances.

4.8. Receivables; Deposit Accounts and Securities Accounts.

(a) Each of the Receivables shall be a bona fide and valid account representing
a bona fide indebtedness incurred by the Customer therein named, for a fixed sum
as set forth in the invoice relating thereto (provided that, immaterial or
unintentional invoice errors shall not be deemed to be a breach hereof) with
respect to an absolute sale or lease and delivery of goods upon stated terms of
a Borrower, or work, labor or services theretofore rendered by a Borrower as of
the date each Receivable is created. Same shall be due and owing in accordance
with the applicable Borrower’s standard terms of sale without dispute, setoff or
counterclaim except as may be stated on the accounts receivable schedules
delivered by Borrowers to Agent.

(b) Each Customer, to the best of each Borrower’s knowledge, as of the date each
Receivable is created, is and will be solvent and able to pay all Receivables on
which the Customer is obligated in full when due. With respect to such Customers
of any Borrower who are not solvent, such Borrower has set up on its books and
in its financial records bad debt reserves adequate to cover such Receivables.

(c) Each Borrower’s chief executive office is located as set forth on Schedule
4.4(b)(iii). Until written notice is given to Agent by Borrowing Agent of any
other office at which any Borrower keeps its records pertaining to Receivables,
all such records shall be kept at such executive office.

(d) Until Borrower’s authority to do so is terminated by Agent (which notice
Agent may give at any time following the occurrence of an Event of Default or a
Default or when Agent in its sole discretion deems it to be in Lenders’ best
interest to do so), each Borrower will, at such Borrower’s sole cost and
expense, but on Agent’s behalf and for Agent’s account, collect as Agent’s
property and in trust for Agent all amounts received on Receivables and shall
not commingle such collections with any Borrower’s funds or use the same except
to pay Obligations Each Borrower shall deposit in the Blocked Account or, upon
request by Agent, deliver to Agent, in original form and on the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness.

 

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(e) At any time following the occurrence of an Event of Default or a Default, or
at such other times as Agent determines is necessary or appropriate, Agent shall
have the right to send notice of the assignment of, and Agent’s security
interest in and Lien on, the Receivables to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral. Thereafter,
Agent shall have the sole right to collect the Receivables, take possession of
the Collateral, or both. Agent’s actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers’ Account and added to the Obligations.

(f) Agent shall have the right to receive, endorse, assign, and/or deliver in
the name of Agent or any Borrower any and all checks, drafts and other
instruments for the payment of money relating to the Receivables, and each
Borrower hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed. Each Borrower hereby constitutes Agent or Agent’s
designee as such Borrower’s attorney with power (i) to endorse such Borrower’s
name upon any notes, acceptances, checks, drafts, money orders or other
evidences of payment or Collateral; (ii) to sign such Borrower’s name on any
invoice or bill of lading relating to any of the Receivables, drafts against
Customers, assignments and verifications of Receivables, in each case, upon and
during the continuance of a Default or an Event of Default; (iii) to send
verifications of Receivables to any Customer; (iv) to authorize the filing of
financing statements and to sign such Borrower’s name on any documents or
instruments deemed necessary or appropriate by Agent to preserve, protect, or
perfect Agent’s interest in the Collateral and to file same; (v) to demand
payment of the Receivables; (vi) to enforce payment of the Receivables by legal
proceedings or otherwise upon and during the continuance of a Default or an
Event of Default; (vii) to exercise all of such Borrower’s rights and remedies
with respect to the collection of the Receivables and any other Collateral upon
and during the continuance of a Default or an Event of Default; (viii) to
settle, adjust, compromise, extend or renew the Receivables upon and during the
continuance of a Default or an Event of Default; (ix) to settle, adjust or
compromise any legal proceedings brought to collect Receivables upon and during
the continuance of a Default or an Event of Default; (x) to prepare, file and
sign such Borrower’s name on a proof of claim in bankruptcy or similar document
against any Customer upon and during the continuance of a Default or an Event of
Default; (xi) to prepare, file and sign such Borrower’s name on any notice of
Lien, assignment or satisfaction of Lien or similar document in connection with
the Receivables upon and during the continuance of a Default or an Event of
Default; and (xii) to do all other acts and things necessary to carry out this
Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designee shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or of
law (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACT OR INACTION ARISING
FROM AGENT’S OR LENDER’S NEGLIGENCE OR STRICT LIABILITY), unless done
maliciously or with gross (not mere) negligence (as determined by a court of
competent jurisdiction in a final non-appealable judgment); this power being
coupled with an interest is irrevocable while any of the Obligations remain
unpaid. Agent shall have the right at any time following the occurrence of an
Event of Default or Default, to change the address for delivery of mail
addressed to any Borrower to such address as Agent may designate and to receive,
open and dispose of all mail addressed to any Borrower.

 

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(g) Neither Agent nor any Lender shall, under any circumstances or in any event
whatsoever, have any liability for any error or omission or delay of any kind
(INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACT OR INACTION ARISING FROM
AGENT’S OR ANY LENDER’S NEGLIGENCE OR STRICT LIABILITY) occurring in the
settlement, collection or payment of any of the Receivables or any instrument
received in payment thereof, or for any damage resulting therefrom. Following
the occurrence of an Event of Default or Default Agent may, without notice or
consent from any Borrower, sue upon or otherwise collect, extend the time of
payment of, compromise or settle for cash, credit or upon any terms any of the
Receivables or any other securities, instruments or insurance applicable thereto
and/or release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence of an Event of Default or Default the return of the
goods represented by any of the Receivables, without notice to or consent by any
Borrower, all without discharging or in any way affecting any Borrower’s
liability hereunder.

(h) All proceeds of Collateral shall be deposited by Borrowers into either (i) a
lockbox account, dominion account or such other “blocked account” (“Blocked
Accounts”) established at a bank or banks (each such bank, a “Blocked Account
Bank”) pursuant to an arrangement with such Blocked Account Bank as may be
acceptable to Agent in its sole discretion or (ii) depository accounts
(“Depository Accounts”) established at Agent for the deposit of such proceeds.
Each applicable Borrower, Agent and each Blocked Account Bank shall enter into a
deposit account control agreement in form and substance satisfactory to Agent
that is sufficient to give Agent “control” (for purposes of Articles 8 and 9 of
the Uniform Commercial Code) over such account and which directs such Blocked
Account Bank to transfer such funds so deposited on a daily basis or at other
times acceptable to Agent to Agent, either to any account maintained by Agent at
said Blocked Account Bank or by wire transfer to appropriate account(s) at
Agent; provided, however, that no such deposit account control agreement shall
be required with respect to (i) deposit accounts maintained solely for the
payment of payroll, payroll taxes and benefits and (ii) the deposit accounts
listed on Schedule 4.8 so long as the aggregate balance of the accounts listed
on such schedule does not exceed $125,000 at any time, which balance shall be
promptly reported to Agent upon Agent’s request and immediately reported to
Agent in the event any such balance exceeds $125,000 for more than one
(1) Business Day. All funds deposited in such Blocked Accounts or Depository
Accounts shall immediately become subject to the security interest of Agent for
its own benefit and the ratable benefit of Issuer, Lenders and all other holders
of the Obligations, and Borrowing Agent shall obtain the agreement by such
Blocked Account Bank to waive any offset rights against the funds so deposited.
For the avoidance of doubt, to the extent any funds so deposited in a Blocked
Account or a Depository Account remain after application to the outstanding
Advances in accordance with this Agreement, Borrowing Agent may deliver a
written request to Agent to transfer such excess funds to Borrowers’ operating
account and, upon such transfer, such funds shall not be deemed property of
Agent. Neither Agent nor any Lender assumes any responsibility for such blocked
account arrangement, including any claim of accord and satisfaction or release
with respect to deposits accepted by any Blocked Account Bank thereunder.
Borrowing Agent shall notify each Customer of any Borrower to send all future

 

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payments owed to a Borrower by such Customer, including, but not limited to,
payments on any Receivable, to a Blocked Account or Depository Account, (i) with
respect to any Person that is a Customer of any Borrower on the Closing Date,
within thirty (30) days of the Closing Date and (ii) with respect to any Person
that is not a Customer on the Closing Date, promptly upon such Person becoming a
Customer of a Borrower. If any Borrower shall receive any collections or other
proceeds of the Collateral, such Borrower shall hold such collections or
proceeds in trust for the benefit of Agent and deposit such collections or
proceeds into a Blocked Account or Depository Account within one (1) Business
Day following such Borrower’s receipt thereof. All Deposit Accounts, investment
accounts and other bank accounts of any Credit Party, including, without
limitation, all Blocked Accounts and Depository Accounts are described and set
forth on Schedule 4.8 hereto. Agent shall apply all funds received by it from
the Blocked Accounts and/or Depository Accounts to the satisfaction of the
Obligations (including the cash collateralization of the Letters of Credit) in
such order as Agent shall determine in its sole discretion; provided, that, in
the absence of any Event of Default, Agent shall apply all such funds
representing collection of Receivables first, to the prepayment of the principal
amount of the Swing Loans, if any, and then, to the Revolving Advances.

(i) No Borrower will, without Agent’s consent, compromise or adjust any
Receivables (or extend the time for payment thereof) or accept any returns of
merchandise or grant any additional discounts, allowances or credits thereon
except for those compromises, adjustments, returns, discounts, credits and
allowances as have been heretofore customary in the Ordinary Course of Business
of such Borrower.

(j) All deposit accounts (including all Blocked Accounts and Depository
Accounts), securities accounts and investment accounts of each Borrower and its
Subsidiaries as of the Closing Date are set forth on Schedule 4.8. No Borrower
shall open any new deposit account, securities account or investment account
unless (i) Borrowers shall have given at least thirty (30) days prior written
notice to Agent and (ii) if such account is to be maintained with a bank,
depository institution or securities intermediary that is not Agent, such bank,
depository institution or securities intermediary, each applicable Borrower and
Agent shall first have entered into an account control agreement in form and
substance satisfactory to Agent sufficient to give Agent “control” (for purposes
of Articles 8 and 9 of the Uniform Commercial Code) over such account.

4.9. Inventory. To the extent Inventory held for sale or lease has been produced
by any Borrower, it has been and will be produced by such Borrower in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations and orders thereunder.

4.10. Maintenance of Equipment. The equipment shall be maintained in good
operating condition and repair (reasonable wear and tear excepted) and all
necessary replacements of and repairs thereto shall be made so that the value
and operating efficiency of the equipment shall be maintained and preserved. No
Borrower shall use or operate the equipment in violation of any law, statute,
ordinance, code, rule or regulation.

4.11. Exculpation of Liability. Nothing herein contained shall be construed to
constitute Agent or any Lender as any Borrower’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
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destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO
ANY ACT OR INACTION ARISING FROM AGENT’S OR ANY LENDER’S NEGLIGENCE OR STRICT
LIABILITY). Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of any Borrower’s obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by any Borrower
of any of the terms and conditions thereof.

4.12. Financing Statements. Except with respect to the financing statements
filed by Agent, financing statements described on Schedule 1.2, and financing
statements filed in connection with Permitted Encumbrances, no financing
statement covering any of the Collateral or any proceeds thereof is or will be
on file in any public office.

4.13. Vehicle Titles. With respect to each vehicle, trailer or other item of
Collateral subject to a certificate of title statute (each a “Vehicle Title”)
acquired after the Closing Date, Borrowers shall deliver to Agent, in form and
substance satisfactory to Agent: (i) all necessary fully-executed, notarized
powers of attorney authorizing Automotive Resources International to perfect
Liens on behalf of Agent; (ii) an original title properly endorsed to such
Borrower for each such item of Collateral; (iii) all other necessary
documentation or information required by Applicable Law, including without
limitation, vehicle descriptions, odometer statements and owner and lienholder
identification information; and (iv) evidence that Agent’s Lien has been duly
noted thereon. For the avoidance of doubt, Agent shall retain possession of all
original Vehicle Titles reflecting Agent as the lienholder thereunder.

 

V. REPRESENTATIONS AND WARRANTIES.

Each Borrower represents and warrants as follows:

5.1. Authority. Each Borrower has full power, authority and legal right to enter
into this Agreement and the Other Documents to which it is a party and to
perform all its respective Obligations hereunder and thereunder. This Agreement
and the Other Documents to which it is a party have been duly executed and
delivered by each Borrower, and this Agreement and the Other Documents to which
it is a party constitute the legal, valid and binding obligation of such
Borrower enforceable in accordance with their terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance by each Borrower of this Agreement and of the Other
Documents to which it is a party (a) are within such Borrower’s corporate or
company powers, as applicable, have been duly authorized by all necessary
corporate or company action, as applicable, are not in contravention of law or
the terms of such Borrower’s Organizational Documents or to the conduct of such
Borrower’s business or of any Material Contract or undertaking to which such
Borrower is a party or by which such Borrower is bound, including the Merger
Agreement, (b) will not conflict with or violate any law or regulation, or any
judgment, order or decree of any Governmental Body, (c) will not require the
Consent of any Governmental Body, any party to a Material Contract or any other
Person, except those Consents set forth on Schedule 5.1 hereto, all of which
will have been duly obtained, made or compiled prior to the Closing Date and
which are in full force and effect and (d) will not conflict with, nor result in
any breach in any of the provisions of or constitute a default under or

 

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result in the creation of any Lien except Permitted Encumbrances upon any asset
of such Borrower under the provisions of any agreement, instrument, or other
document to which such Borrower is a party or by which it or its property is a
party or by which it may be bound, including the Merger Agreement.

5.2. Formation and Qualification.

(a) Each Borrower is duly incorporated or formed, as applicable, and in good
standing under the laws of the state listed on Schedule 5.2(a) and is qualified
to do business and is in good standing in the states listed on Schedule 5.2(a)
which constitute all states in which qualification and good standing are
necessary for such Borrower to conduct its business and own its property and
where the failure to so qualify could reasonably be expected to have a Material
Adverse Effect on such Borrower. Each Borrower has delivered to Agent true and
complete copies of its Organizational Documents and will promptly notify Agent
of any amendment or changes thereto.

(b) The only Subsidiaries of Holdings and each Borrower are listed on Schedule
5.2(b). The Equity Interests of each Borrower are presently held by the Persons
identified on Schedule 5.2(b), in the numbers of interests set forth thereon.

(c) All accrued but unpaid dividends owing on account of the Equity Interests of
each Borrower as of the Closing Date are set forth on Schedule 5.2(c).

5.3. Survival of Representations and Warranties. All representations and
warranties of such Credit Party contained in this Agreement and the Other
Documents to which it is a party shall be true at the time of such Borrower’s
execution of this Agreement and the Other Documents to which it is a party, and
shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.

5.4. Tax Returns. Each Borrower’s federal tax identification number is set forth
on Schedule 5.4. Each Borrower has filed all federal, state, local and foreign
tax returns (if applicable) and other reports each is required by law to file
and has paid all taxes, assessments, fees and other governmental charges that
are due and payable. To the best knowledge of Borrowers, the provision for taxes
on the books of each Borrower is adequate for all years not closed by applicable
statutes, and for its current fiscal year, and no Borrower has knowledge of any
deficiency or additional assessment in connection therewith not provided for on
its books and the charges, accruals and reserves on the books of Holdings and
its Subsidiaries in respect of federal, state and local and/or foreign taxes for
all such years and for the current fiscal year.

5.5. Financial Statements.

(a) The pro forma balance sheet of Holdings and its Subsidiaries on a
consolidated basis (the “Pro Forma Balance Sheet”) furnished to Agent on the
Closing Date reflects the consummation of the transactions contemplated by the
Merger Agreement and under this Agreement (collectively, the “Transactions”) and
fairly reflects the financial condition, results of operations and cash flows of
Holdings and its Subsidiaries on a consolidated basis as of the Closing Date
after giving effect to the Transactions, and has been prepared in accordance

 

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with GAAP, consistently applied. The Pro Forma Balance Sheet has been certified
by an Authorized Officer of Holdings as being based on the information available
to Borrowers as of the date of delivered thereof, and presents fairly in all
material respects on a pro forma basis the estimated financial position, results
of operations and cash flows of Holdings and its Subsidiaries on a consolidated
basis. All financial statements referred to in this subsection 5.5(a), including
the related schedules and notes thereto, have been prepared in accordance with
GAAP, except as may be disclosed in such financial statements.

(b) The twelve-month cash flow and balance sheet projections of Holdings and its
Subsidiaries on a consolidated basis, copies of which are annexed hereto as
Exhibit 5.5(b) (the “Projections”) were prepared by an Authorized Officer of
Holdings, are based on underlying assumptions which provide a reasonable basis
for the projections contained therein and reflect Holdings’ judgment based on
present circumstances of the most likely set of conditions and course of action
for the projected period. The cash flow Projections together with the Pro Forma
Balance Sheet are referred to as the “Pro Forma Financial Statements”.

(c) The consolidated balance sheets of Holdings and its Subsidiaries, and such
other Persons described therein, as of December 31, 2012, and the related
statements of income, changes in stockholder’s equity, and changes in cash flow
for the period ended on such date, all accompanied by reports thereon containing
opinions without qualification by independent certified public accountants,
copies of which have been delivered to Agent, have been prepared in accordance
with GAAP, consistently applied (except for changes in application to which such
accountants concur and present fairly the financial position of the respective
Borrowers and their respective Subsidiaries at such date and the results of
their operations for such period. Since December 31, 2012 there has been no
change in the condition, financial or otherwise, of Holdings or its Subsidiaries
as shown on the consolidated balance sheet as of such date and no change in the
aggregate value of machinery, equipment and Real Property owned by Holdings and
its Subsidiaries, except changes which could not reasonably be expected to cause
a Material Adverse Effect or changes in the Ordinary Course of Business, none of
which individually or in the aggregate could reasonably be expected to cause a
Material Adverse Effect.

5.6. Entity Names. No Borrower has been known by any other company or corporate
name, as applicable, in the past five (5) years and no Borrower sells Inventory
or provides services under any other name except as set forth on Schedule 5.6,
nor has any Borrower been the surviving Person of a merger or consolidation or
acquired all or substantially all of the assets of any Person during the
preceding five (5) years.

5.7. O.S.H.A. Environmental Compliance and Flood Insurance.

(a) Except as set forth on Schedule 5.7 hereto, each Borrower is in compliance
with, and its facilities, business, assets, property, leaseholds, Real Property
and equipment are in compliance with the Federal Occupational Safety and Health
Act, Environmental Laws and there are no outstanding citations, written notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or equipment under any such Laws.

 

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(b) Except as set forth on Schedule 5.7 hereto, each Borrower has been issued
all required federal, state and local licenses, certificates or permits
(collectively, “Approvals”) relating to all applicable Environmental Laws and
all such Approvals are current and in full force and effect.

(c) Except as set forth on Schedule 5.7 hereto: (i) there have been no releases,
spills, discharges, leaks or disposal (collectively referred to as “Releases”)
of Hazardous Materials at, upon, under or migrating from or onto any Real
Property owned, leased or occupied by any Borrower, except for those Releases
which are in full compliance with Environmental Laws; (ii) there are no
underground storage tanks or polychlorinated biphenyls on any Real Property,
except for such underground storage tanks or polychlorinated biphenyls that are
present in compliance with Environmental Laws; (iii) the Real Property has never
been used by any Borrower to dispose of Hazardous Materials, except as
authorized by Environmental Laws; and (iv) to the best of Borrower’s knowledge,
no Hazardous Materials are managed by Borrowers on any Real Property, excepting
such quantities as are managed in accordance with all applicable manufacturer’s
instructions and compliance with Environmental Laws and as are necessary for the
operation of the commercial business of any Borrower or of its tenants.

(d) All Real Property owned by Borrowers is insured pursuant to policies and
other bonds which are valid and in full force and effect and which provide
adequate coverage from reputable and financially sound insurers in amounts
sufficient to insure the assets and risks of each such Borrower in accordance
with prudent business practice in the industry of such Borrower. Each Borrower
has taken all actions required under the Flood Laws and/or requested by Agent to
assist in ensuring that each Lender is in compliance with the Flood Laws
applicable to the Collateral, including, but not limited to, to the extent
required, obtaining flood insurance for such property, structures and contents
prior to such property, structures and contents becoming Collateral.

5.8. Solvency; No Litigation, Violation, Indebtedness or Default; ERISA
Compliance.

(a) (i) Each Borrower is, and after giving effect to the Transactions, will be
solvent, able to pay its debts as they mature, and has capital sufficient to
carry on its business and all businesses in which it is about to engage, (ii) as
of the Closing Date, the fair present saleable value of its assets, calculated
on a going concern basis, is in excess of the amount of its liabilities, and
(iii) subsequent to the Closing Date, the fair saleable value of its assets
(calculated on a going concern basis) will be in excess of the amount of its
liabilities.

(b) Except as disclosed in Schedule 5.8(b)(i), no Borrower has any pending or
threatened litigation, arbitration, actions or proceedings. No Borrower has any
outstanding Indebtedness other than the Obligations, except for (i) Indebtedness
disclosed in Schedule 5.8(b)(ii) and (ii) Indebtedness otherwise permitted under
Section 7.8 hereof.

(c) No Borrower is in violation of any applicable statute, law, rule, regulation
or ordinance in any respect which could reasonably be expected to have a
Material Adverse Effect, nor is any Borrower in violation of any order of any
court, Governmental Body or arbitration board or tribunal. Each Plan is in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state laws.

 

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(d) No Borrower or any member of the Controlled Group maintains or is required
to contribute to any Plan other than those listed on Schedule 5.8(d) hereto.
(i) Each Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA and Section 412 of the
Code in respect of each Plan, and each Plan is in compliance with Sections 412,
430 and 436 of the Code and Sections 206(g), 302 and 303 of ERISA, without
regard to waivers and variances; (ii) each Plan which is intended to be a
qualified plan under Section 401(a) of the Code as currently in effect has been
determined by the Internal Revenue Service to be qualified under Section 401(a)
of the Code and the trust related thereto is exempt from federal income tax
under Section 501(a) of the Code or an application for such a determination is
currently being processed by the Internal Revenue Code; (iii) neither any
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid; (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan; (v) the current value of the assets of each Plan
exceeds the present value of the accrued benefits and other liabilities of such
Plan and neither any Borrower nor any member of the Controlled Group knows of
any facts or circumstances which would materially change the value of such
assets and accrued benefits and other liabilities; (vi) neither any Borrower nor
any member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan;
(vii) neither any Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4971, 4972 or 4980B of the
Code, and no fact exists which could give rise to any such liability;
(viii) neither any Borrower nor any member of the Controlled Group nor any
fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited
transaction” described in Section 406 of the ERISA or Section 4975 of the Code
nor taken any action which would constitute or result in a Termination Event
with respect to any such Plan which is subject to ERISA; (ix) no Termination
Event has occurred or is reasonably expected to occur; (x) there exists no event
described in Section 4043 of ERISA, for which the thirty (30) day notice period
has not been waived; (xi) neither any Borrower nor any member of the Controlled
Group has engaged in a transaction that could be subject to Section 4069 or
4212(c) of ERISA; (xii) neither any Borrower nor any member of the Controlled
Group maintains or is required to contribute to any Plan which provides health,
accident or life insurance benefits to former employees, their spouses or
dependents, other than in accordance with Section 4980B of the Code;
(xiii) neither any Borrower nor any member of the Controlled Group has
withdrawn, completely or partially, within the meaning of Section 4203 or 4205
of ERISA, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which
would reasonably be expected to result in any such liability; and (xiv) no Plan
fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of
fiduciary duty or for any failure in connection with the administration or
investment of the assets of a Plan.

5.9. Patents, Trademarks, Copyrights and Licenses. All Intellectual Property
owned or utilized by any Borrower: (i) is set forth on Schedule 5.9; (ii) is
valid and has been duly registered or filed with all appropriate Governmental
Bodies; (iii) constitutes all of the intellectual property rights which are
necessary for the operation of its business. To the best of Borrowers’
knowledge, there is no objection to or pending challenge to the validity of, or
proceedings by any Governmental Body to suspend, revoke, terminate or adversely
modify, any

 

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such Intellectual Property and no Borrower is aware of any grounds for any
challenge or proceedings, except as set forth in Schedule 5.9 hereto. To the
best of Borrowers’ knowledge, all Intellectual Property owned or held by any
Borrower consists of original material or property developed by such Borrower or
was lawfully acquired by such Borrower from the proper and lawful owner thereof.
Each of such items has been maintained so as to preserve the value thereof from
the date of creation or acquisition thereof.

5.10. Licenses and Permits. Except as set forth in Schedule 5.10, each Borrower
(a) is in compliance with and (b) has procured and is now in possession of, all
material licenses or permits required by any applicable federal, state,
provincial or local law, rule or regulation for the operation of its business in
each jurisdiction wherein it is now conducting or proposes to conduct business
and where such noncompliance or failure to procure such licenses or permits
could reasonably be expected to have a Material Adverse Effect.

5.11. Default of Indebtedness. No Borrower is in default in the payment of the
principal of or interest on any Indebtedness or under any instrument or
agreement under or subject to which any Indebtedness has been issued and no
event has occurred under the provisions of any such instrument or agreement
which with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default thereunder.

5.12. No Default. No Borrower is in default in the payment or performance of any
of its contractual obligations.

5.13. No Burdensome Restrictions. No Borrower is party to any contract or
agreement the performance of which could have a Material Adverse Effect. Each
Borrower has heretofore delivered to Agent true and complete copies of all
Material Contracts to which it is a party or to which it or any of its
properties is subject. No Borrower has agreed or consented to cause or permit in
the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien which
is not a Permitted Encumbrance.

5.14. No Labor Disputes. No Borrower is involved in any labor dispute; there are
no strikes or walkouts or union organization of any Borrower’s employees
threatened or in existence and no labor contract is scheduled to expire during
the Term other than as set forth on Schedule 5.14 hereto.

5.15. Margin Regulations. No Borrower is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” within
the respective meanings of each of the quoted terms under Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. No part of the proceeds of any Advance will be used for
“purchasing” or “carrying” “margin stock” as defined in Regulation U of such
Board of Governors.

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

 

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5.17. Disclosure. No representation or warranty made by any Borrower in this
Agreement or in the Merger Agreement, or in any financial statement, report,
certificate or any other document furnished in connection herewith or therewith
contains any untrue statement of fact or omits to state any fact necessary to
make the statements herein or therein not misleading. There is no fact known to
any Borrower or which reasonably should be known to such Borrower which such
Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by the Merger Agreement or this Agreement which could reasonably be
expected to have a Material Adverse Effect.

5.18. [Reserved].

5.19. Delivery of Merger Agreement. Agent has received complete copies of the
Merger Agreement and related documents (including all exhibits, schedules and
disclosure letters referred to therein or delivered pursuant thereto, if any)
and all amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents and agreements
has been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore been delivered to Agent. Each of the representations made by each
Credit Party party thereto is true and correct in all respects.

5.20. Swaps. No Borrower is a party to, nor will it be a party to, any swap
agreement whereby such Borrower has agreed or will agree to swap interest rates
or currencies unless same provides that damages upon termination following an
event of default thereunder are payable on an unlimited “two-way basis” without
regard to fault on the part of either party.

5.21. Business and Property of Borrowers. Upon and after the Closing Date,
Borrowers do not propose to engage in any business other than those described on
Schedule 5.21 and activities necessary to conduct the foregoing. On the Closing
Date, each Borrower will own all the property and possess all of the rights and
Consents necessary for the conduct of the business of such Borrower.

5.22. Ineligible Securities. Borrowers do not intend to use and shall not use
any portion of the proceeds of the Advances, directly or indirectly, to purchase
during the underwriting period, or for 30 days thereafter, Ineligible Securities
being underwritten by a securities Affiliate of Agent or any Lender.

5.23. [Reserved].

5.24. Equity Interests. The authorized and outstanding Equity Interests of each
Borrower, and each legal and beneficial holder thereof as of the Closing Date,
are as set forth on Schedule 5.24 hereto. All of the Equity Interests of each
Borrower have been duly and validly authorized and issued and are fully paid and
non-assessable and have been sold and delivered to the holders hereof in
compliance with, or under valid exemption from, all federal and state laws and
the rules and regulations of each Governmental Body governing the sale and
delivery of securities. Except for the rights and obligations set forth on
Schedule 5.24, there are no subscriptions, warrants, options, calls,
commitments, rights or agreement by which any Borrower or any of the
shareholders of any Borrower is bound relating to the issuance, transfer, voting
or

 

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redemption of shares of its Equity Interests or any pre-emptive rights held by
any Person with respect to the Equity Interests of Borrowers. Except as set
forth on Schedule 5.24, Borrowers have not issued any securities convertible
into or exchangeable for shares of its Equity Interests or any options, warrants
or other rights to acquire such shares or securities convertible into or
exchangeable for such shares.

5.25. Commercial Tort Claims. No Borrower has any commercial tort claims, except
as set forth on Schedule 5.25 hereto.

5.26. Letter of Credit Rights. As of the Closing Date, no Borrower has any
letter of credit rights, except as set forth on Schedule 5.26 hereto.

5.27. Material Contracts. Schedule 5.27 sets forth all Material Contracts of
Borrowers. All Material Contracts are in full force and effect and no material
defaults currently exist thereunder.

5.28. Inactive Subsidiaries. No Inactive Subsidiary (i) owns or hold any assets
(other than, with respect to Flotek Ecuador Investments, LLC and Flotek Ecuador
Management, LLC, the Equity Interests in FlotekChemical Ecuador CIA, LTDA),
(ii) has any liabilities, and (iii) conducts any business operations, and the
Inactive Subsidiaries will not do any of the foregoing after the Closing Date
without the prior written consent of Lender.

 

VI. AFFIRMATIVE COVENANTS.

Each Borrower hereby covenants and agrees that on the Closing Date and
thereafter, until all of the Obligations (other than indemnification and other
contingent Obligations, in each case, not yet due and payable or in respect of
which no assertion of liability and no claim or demand for payment has been
made) incurred hereunder, are indefeasibly paid in full, termination of this
Agreement and all Letters of Credit issued hereunder have expired, terminated or
been fully collateralized in cash in an amount and manner satisfactory to Agent
in its sole discretion (and as applicable shall cause its Subsidiaries) to:

6.1. Compliance with Laws. Comply in all material respects with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
such Borrower’s business the non-compliance with which could reasonably be
expected to have a Material Adverse Effect (except to the extent any separate
provision of this Agreement shall expressly require compliance with any
particular Applicable Law(s) pursuant to another standard). Each Borrower may,
however, contest or dispute any Applicable Laws in any reasonable manner;
provided, that, any related Lien is inchoate or stayed and sufficient reserves
are established to the reasonable satisfaction of Agent to protect Agent’s Lien
on or security interest in the Collateral.

6.2. Conduct of Business and Maintenance of Existence and Assets. (a) Conduct
continuously and operate actively its business according to good business
practices and maintain all of its properties useful or necessary in its business
in good working order and condition (reasonable wear and tear excepted and
except as may be disposed of in accordance with the terms of this Agreement),
including all Intellectual Property and take all actions necessary to enforce
and protect the validity of any intellectual property right or other right
included in the Collateral; (b) keep in full force and effect its existence and
comply in all material respects with

 

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the laws and regulations governing the conduct of its business where the failure
to do so could reasonably be expected to have a Material Adverse Effect; and
(c) make all such reports and pay all such franchise and other taxes and license
fees and do all such other acts and things as may be lawfully required to
maintain its rights, licenses, leases, powers and franchises under the laws of
the United States or any political subdivision thereof where the failure to do
so could reasonably be expected to have a Material Adverse Effect.

6.3. Books and Records. Keep proper books of record and account in which full,
true and correct entries will be made of all dealings or transactions of or in
relation to its business and affairs (including without limitation accruals for
taxes, assessments, Charges, levies and claims, allowances against doubtful
Receivables and accruals for depreciation, obsolescence or amortization of
assets), all in accordance with, or as required by, GAAP consistently applied in
the opinion of such independent public accountant as shall then be regularly
engaged by Borrowers.

6.4. Payment of Taxes. Pay, when due, all taxes, assessments and other Charges
lawfully levied or assessed upon such Borrower or any of the Collateral,
including real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding, and sales
taxes (unless such taxes, assessments and other Charges are being Properly
Contested). If any tax by any Governmental Body is or may be imposed on or as a
result of any transaction between any Borrower and Agent or any Lender which
Agent or any Lender may be required to withhold or pay or if any taxes,
assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby indemnifies and holds Agent and each Lender harmless in respect
thereof. Agent will not pay any taxes, assessments or Charges to the extent that
any applicable Borrower has Properly Contested those taxes, assessments or
Charges. The amount of any payment by Agent under this Section 6.4 shall be
charged to Borrowers’ Account as a Revolving Advance maintained as a Domestic
Rate Loan and added to the Obligations and, until Borrowers shall furnish Agent
with an indemnity therefor (or supply Agent with evidence satisfactory to Agent
that due provision for the payment thereof has been made), Agent may hold
without interest any balance standing to Borrowers’ credit and Agent shall
retain its security interest in and Lien on any and all Collateral held by
Agent.

6.5. Financial Covenants.

(a) Fixed Charge Coverage Ratio. Cause to be maintained, a Fixed Charge Coverage
Ratio of not less than 1.10 to 1.00 as of the last day of each fiscal quarter
for the twelve (12) month period then ending.

(b) Leverage Ratio. Maintain as of the end of each fiscal quarter a ratio of
Funded Debt to Adjusted EBITDA of not greater than 4.00 to 1.00.

 

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6.6. Insurance.

(a) (i) Keep all its insurable properties and properties in which such Borrower
has an interest insured against the hazards of fire, flood, sprinkler leakage,
those hazards covered by extended coverage insurance and such other hazards, and
for such amounts, as is customary in the case of companies engaged in businesses
similar to such Borrower’s including business interruption insurance;
(ii) maintain a bond in such amounts as is customary in the case of companies
engaged in businesses similar to such Borrower insuring against larceny,
embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of such Borrower either directly or through authority to
draw upon such funds or to direct generally the disposition of such assets;
(iii) maintain public and product liability insurance against claims for
personal injury, death or property damage suffered by others; (iv) maintain all
such worker’s compensation or similar insurance as may be required under the
laws of any state or jurisdiction in which such Borrower is engaged in business;
(v) furnish Agent with (A) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (B) appropriate lender loss payable endorsements
in form and substance satisfactory to Agent, naming Agent as an additional
insured and mortgagee and/or lender loss payee (as applicable) as its interests
may appear with respect to all insurance coverage referred to in clauses (i) and
(iii) above, and providing (I) that all proceeds thereunder shall be payable to
Agent, (II) no such insurance shall be affected by any act or neglect of the
insured or owner of the property described in such policy, and (III) that such
policy and lender loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days prior written notice is given to
Agent (or in the case of non-payment, at least ten (10) days prior written
notice). In the event of any loss thereunder, the carriers named therein hereby
are directed by Agent and the applicable Borrower to make payment for such loss
to Agent and not to such Borrower and Agent jointly. If any insurance losses are
paid by check, draft or other instrument payable to any Borrower and Agent
jointly, Agent may endorse such Borrower’s name thereon and do such other things
as Agent may deem advisable to reduce the same to cash.

(b) Each Borrower shall take all actions required under the Flood Laws and/or
requested by Agent to assist in ensuring that each Lender is in compliance with
the Flood Laws applicable to the Collateral, including, but not limited to,
providing Agent with the address and/or GPS coordinates of each structure on any
real property that will be subject to a mortgage in favor of Agent, for the
benefit of Lenders, and, to the extent required, obtaining flood insurance for
such property, structures and contents prior to such property, structures and
contents becoming Collateral, and thereafter maintaining such flood insurance in
full force and effect for so long as required by the Flood Laws.

(c) Agent is hereby authorized to adjust and compromise claims under insurance
coverage referred to in Sections 6.6(a)(i) and (iii) and 6.6(b) above. All loss
recoveries received by Agent under any such insurance may be applied to the
Obligations, in such order as Agent in its sole discretion shall determine. Any
surplus shall be paid by Agent to Borrowers or applied as may be otherwise
required by law. Any deficiency thereon shall be paid by Borrowers to Agent, on
demand. If any Borrower fails to obtain insurance as hereinabove provided, or to
keep the same in force, Agent, if Agent so elects, may obtain such insurance and
pay the premium therefor on behalf of such Borrower, which payments shall be
charged to Borrowers’ Account and constitute part of the obligations.

 

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6.7. Payment of Indebtedness and Leasehold Obligations. Pay, discharge or
otherwise satisfy (i) at or before maturity (subject, where applicable, to
specified grace periods) all its Indebtedness, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being Properly Contested, subject at all
times to any applicable subordination arrangement in favor of Lenders and
(ii) when due its rental obligations under all leases under which it is a
tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect.

6.8. Environmental Matters.

(a) Ensure that the Real Property and all operations and businesses conducted
thereon are in compliance and remain in material compliance with all
Environmental Laws and it shall manage any and all Hazardous Materials on any
Real Property in compliance with Environmental Laws.

(b) Establish and maintain an environmental management and compliance system to
assure and monitor continued compliance with all applicable Environmental Laws
which system shall include periodic environmental compliance audits to be
conducted by knowledgeable environmental professionals. All potential violations
and violations of Environmental Laws shall be reviewed with legal counsel to
determine any required reporting to applicable Governmental Bodies and any
required corrective actions to address such potential violations or violations.

(c) As required by Environmental Law, respond promptly to any Hazardous
Discharge or Environmental Complaint and take all necessary action in order to
comply with Environmental Laws. If any Borrower shall fail to respond promptly
to any Hazardous Discharge or Environmental Complaint or any Borrower shall fail
to comply with any of the requirements of any Environmental Laws, Agent on
behalf of Lenders may, but without the obligation to do so, for the sole purpose
of protecting Agent’s interest in the Collateral: (i) give such notices or
(ii) enter onto the Real Property (or authorize third parties to enter onto the
Real Property) and take such actions as Agent (or such third parties as directed
by Agent) deem reasonably necessary or advisable, to remediate, remove, mitigate
or otherwise manage with any such Hazardous Discharge or Environmental
Complaint. All reasonable costs and expenses incurred by Agent and Lenders (or
such third parties) in the exercise of any such rights, including any sums paid
in connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Revolving Advances shall be paid upon demand by Borrowers,
and until paid shall be added to and become a part of the Obligations secured by
the Liens created by the terms of this Agreement or any other agreement between
Agent, any Lender and any Borrower.

(d) Promptly upon the written request of Agent from time to time, Borrowers
shall provide Agent, at Borrowers’ expense, with an environmental site
assessment or environmental compliance audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, remediation and removal of any
Hazardous Materials found on, under, at or within the Real

 

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Property. Any report or investigation of such Hazardous Discharge proposed and
acceptable to the responsible Governmental Body shall be acceptable to Agent. If
such estimates, individually or in the aggregate, exceed $100,000, Agent shall
have the right to require Borrowers to post a bond, letter of credit or other
security reasonably satisfactory to Agent to secure payment of these costs and
expenses.

6.9. Standards of Financial Statements. Cause all financial statements referred
to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, and 9.13 as to which GAAP is
applicable fairly reflect the financial condition, results of operations and
cash flows of Holdings and its Subsidiaries (subject, in the case of interim
financial statements, to normal year-end audit adjustments) prepared in
reasonable detail and in accordance with GAAP applied consistently throughout
the periods reflected therein (except as disclosed therein and agreed to by such
reporting accountants or officer, as applicable).

6.10. [Reserved].

6.11. Execution of Supplemental Instruments. Execute and deliver to Agent from
time to time, upon demand, such supplemental agreements, statements, assignments
and transfers, or instructions or documents relating to the Collateral, and such
other instruments as Agent may request, in order that the full intent of this
Agreement may be carried into effect.

6.12. Exercise of Rights. Enforce all of its rights under the Merger Agreement
and any Acquisition Agreement including, but not limited to, all indemnification
rights and pursue all remedies available to it with diligence and in good faith
in connection with the enforcement of any such rights.

6.13. Government Receivables. Take all steps necessary to protect Agent’s
interest in the Collateral under the Federal Assignment of Claims Act, the
Uniform Commercial Code and all other applicable state or local statutes or
ordinances and deliver to Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of any contract between
any Borrower and the United States, any state or any department, agency or
instrumentality of any of them.

6.14. Membership / Partnership Interests. Designate and shall cause all of their
Subsidiaries to designate (a) their limited liability company membership
interests or partnership interests as the case may be, as securities as
contemplated by the definition of “security” in Section 8-102(15) and
Section 8-103 of Article 8 of the Uniform Commercial Code, and (b) certificate
such limited liability company membership interests and partnership interests,
as applicable.

6.15. Post-Closing Obligations. Borrowers shall cause the conditions set forth
on Schedule 6.15 hereto to be satisfied in full, on or before the date specified
for each such condition, time being of the essence, in a manner satisfactory, in
form and substance as applicable, to Agent in its Permitted Discretion.

 

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VII. NEGATIVE COVENANTS.

Each Borrower hereby covenants and agrees that on the Closing Date and
thereafter, until all of the Obligations (other than indemnification and other
contingent Obligations, in each case, not yet due and payable or in respect of
which no assertion of liability and no claim or demand for payment has been
made) incurred hereunder, are indefeasibly paid in full, termination of this
Agreement and all Letters of Credit issued hereunder have expired, terminated or
been fully collateralized in cash in an amount and manner satisfactory to Agent
in its sole discretion, it shall not (and as applicable shall not permit any
Subsidiary to):

7.1. Merger, Consolidation, Acquisition and Sale of Assets.

(a) Enter into any merger, consolidation or other reorganization with or into
any other Person or acquire all or a substantial portion of the assets or Equity
Interests of any Person or permit any other Person to consolidate with or merge
with it, except (i) any Borrower may merge, consolidate or reorganize with
another Borrower or acquire the assets or Equity Interest of another Borrower so
long as such Borrower provides Agent with ten (10) days prior written notice of
such merger, consolidation or reorganization and delivers all of the relevant
documents evidencing such merger, consolidation or reorganization and
(ii) Permitted Acquisitions. Notwithstanding the foregoing, and in each case
(a) any Borrower may merge or be consolidated into any other Borrower, (b) any
Guarantor may merge or be consolidated into any other Guarantor or any Borrower
(provided in the case of a Guarantor merging or consolidating into any Borrower,
such Borrower shall be the continuing or surviving person).

(b) Sell, lease, transfer or otherwise dispose of any of its properties or
assets, except (i) (a) the sale of Inventory in the Ordinary Course of Business
and (b) the disposition or transfer of obsolete and worn-out equipment in the
Ordinary Course of Business during any fiscal year having an aggregate fair
market value of not more than $1,000,000 and only to the extent that (x) the
proceeds of any such disposition are used to acquire replacement equipment which
is subject to Agent’s first priority security interest or (y) the proceeds of
which are remitted to Agent to be applied pursuant to Section 2.20,
(ii) transfers among Guarantors and any transfer from a Guarantor to a Borrower,
(iii) transfers among Borrowers, (iv) the sale of all assets of or all Equity
Interests in the Inactive Subsidiaries, and (v) any other sales or dispositions
expressly permitted by this Agreement.

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

7.3. Guarantees. Become liable or permit any of their respective Subsidiaries to
become liable upon the obligations or liabilities of any Person by assumption,
endorsement or guaranty thereof or otherwise (other than to Lenders) except
(a) as disclosed on Schedule 7.3, (b) the endorsement of checks in the Ordinary
Course of Business and (c) guarantees of the obligations or liabilities of any
other Borrower or any Subsidiary of any Borrower with respect to any real
property lease incurred in the Ordinary Course of Business, provided, that any
such guaranty must be disclosed in writing to Agent no later than five
(5) Business Days prior to the execution or effective date of such guaranty and
otherwise be in form and substance satisfactory to Agent in its sole discretion.

 

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7.4. Investments. Purchase or acquire obligations or Equity Interests of, or any
other interest in, any Person, other than Permitted Investments.

7.5. Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate other than Permitted Loans.

7.6. Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount
in excess of $32,000,000. For purposes of this Section 7.6, the amount of “lost
in hole” revenue of Borrowers shall be subtracted from the amounts deemed or
paid for Capital Expenditures.

7.7. Dividends. Declare, pay or make any dividend or distribution on any Equity
Interests of any Borrower that is a corporation (other than dividends or
distributions payable in its stock, or split-ups or reclassifications of its
stock) or apply any of its funds, property or assets to the purchase, redemption
or other retirement of any Equity Interest, or of any options to purchase or
acquire any Equity Interest of any Borrower.

7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
other than Permitted Indebtedness.

7.9. Nature of Business. Substantially change the nature of the business in
which it is presently engaged as set forth in Section 5.21, nor except as
specifically permitted hereby purchase or invest, directly or indirectly, in any
assets or property other than in the Ordinary Course of Business for assets or
property which are useful in, necessary for and are to be used in its business
as presently conducted.

7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or
lease any property from, or sell, transfer or lease any property to, or
otherwise enter into any transaction or deal with, any Affiliate, except for
(i) transactions among Borrowers which are not expressly prohibited by the terms
of this Agreement and which are in the Ordinary Course of Business and
(ii) transactions disclosed to Agent, which are in the Ordinary Course of
Business, on an arm’s-length basis on terms and conditions no less favorable
than terms and conditions which would have been obtainable from a Person other
than an Affiliate.

7.11. [Reserved].

7.12. Subsidiaries.

(a) Form any Subsidiary unless such Subsidiary (i) is not a Foreign Subsidiary,
(ii) at Agent’s discretion, expressly joins in this Agreement as a “Borrower”
and becomes jointly and severally liable for the obligations of Borrowers
hereunder, under the Notes, and under any other agreement among Borrowers and
Lenders, or (B) becomes a “Guarantor” by executing a Guaranty and Guarantor
Security Agreement (to be determined by Agent in its sole discretion), and
(ii) Agent shall have received all documents, including legal opinions, it may
reasonably require to establish compliance with each of the foregoing
conditions.

(b) Enter into any partnership, joint venture or similar arrangement.

 

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7.13. Fiscal Year and Accounting Changes. Change its fiscal year from
December 31 or make any change (i) in accounting treatment and reporting
practices except as required by GAAP or (ii) in tax reporting treatment except
as required by law.

7.14. Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s credit
on any purchases, commitments or contracts or for any purpose whatsoever or use
any portion of any Advance in or for any business other than such Borrower’s
business operations as conducted on the Closing Date.

7.15. Amendment of Organizational Documents. Amend, modify or waive any term or
material provision of its Organizational Documents in any manner that adversely
affects Agent or any Lender, unless required by law.

7.16. Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in Section 406 of ERISA or
Section 4975 of the Code, (iii) terminate, or permit any member of the
Controlled Group to terminate, any Plan where such event could result in any
liability of any Borrower or any member of the Controlled Group or the
imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (iv) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (v) fail promptly to notify Agent of the occurrence of any
Termination Event, (vi) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, (vii) fail to meet, permit any member of
the Controlled Group to fail to meet, or permit any Plan to fail to meet all
minimum funding requirements under ERISA and the Code, without regard to any
waivers or variances, or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan, or
(viii) cause, or permit any member of the Controlled Group to cause, a
representation or warranty in Section 5.8(d) to cease to be true and correct.

7.17. Prepayment of Indebtedness. At any time, directly or indirectly, prepay
any Indebtedness (other than to Lenders), or repurchase, redeem, retire or
otherwise acquire any Indebtedness of any Credit Party.

7.18. Other Agreements. Enter into any material amendment, waiver or
modification of the Merger Agreement or any Acquisition Agreement or any related
agreements.

7.19. Membership / Partnership Interests. Designate or permit any of their
Subsidiaries to (a) treat their limited liability company membership interests
or partnership interests, as the case may be, as securities as contemplated by
the definition of “security” in Section 8-102(15) and by Section 8-103 of
Article 8 of the Uniform Commercial Code or (b) certificate their limited
liability membership interests or partnership interests, as applicable.

 

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7.20. Inactive Subsidiaries. Cause the Inactive Subsidiaries at any time to
(a) own any assets (other than, with respect to Flotek Ecuador Investments, LLC
and Flotek Ecuador Management, LLC, the Equity Interests of FlotekChemical
Ecuador CIA, LTDA, (b) incur or suffer to exist any liabilities, or (c) engage
in any business activity.

 

VIII. CONDITIONS PRECEDENT.

8.1. Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:

(a) Notes. Agent shall have received the Notes duly executed and delivered by an
authorized officer of each Borrower;

(b) Other Documents. Agent shall have received each of the executed Other
Documents, duly executed by the parties named therein and in form and substance
satisfactory to Agent in is sole discretion;

(c) Negative Pledge Agreements. Agent shall have received the Negative Pledge
Agreements, in each case, duly executed by the parties named therein and in
recordable form;

(d) Financial Condition Certificates. Agent shall have received an executed
Financial Condition Certificate in the form of Exhibit 8.1(c).

(e) Closing Certificate. Agent shall have received a closing certificate signed
by an Authorized Officer of each Credit Party dated as of the date hereof,
stating that (i) all representations and warranties set forth in this Agreement
and the Other Documents to which it is a party are true and correct on and as of
such date, and (ii) on such date no Default or Event of Default has occurred or
is continuing and no default under any document or agreement pursuant to which a
Credit Party has been extended credit or other financial accommodation or is a
guarantor of same has occurred or is continuing;

(f) Borrowing Base. Agent shall have received evidence from Borrowers that the
aggregate amount of Eligible Receivables and Eligible Inventory is sufficient in
value and amount to support Advances in the amount requested by Borrowers on the
Closing Date;

(g) Undrawn Availability. After giving effect to the initial Advances hereunder,
Borrowers shall have Undrawn Availability of at least $ 15,000,000, as evidenced
by a Borrowing Base Certificate satisfactory to Agent in is sole discretion;

(h) Blocked Accounts. Borrowers shall have opened the Depository Accounts with
Agent or Agent shall have received duly executed agreements establishing the
Blocked Accounts with financial institutions acceptable to Agent for the
collection or servicing of the Receivables and proceeds of the Collateral and
Agent shall have entered into control agreements with the applicable financial
institutions in form and substance satisfactory to Agent with respect to such
Blocked Accounts;

 

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(i) Merger Agreement. Agent shall have received final executed copies of the
Merger Agreement, and all related agreements, documents and instruments as in
effect on the Closing Date all of which shall be satisfactory in form and
substance to Agent and the transactions contemplated by such documentation shall
be consummated prior to or simultaneously with the making of the initial Advance
including;

(j) Filings, Registrations and Recordings. Each document (including any Uniform
Commercial Code financing statement) required by this Agreement, any related
agreement or under law or reasonably requested by Agent to be filed, registered
or recorded in order to create, in favor of Agent, a perfected security interest
in or lien upon the Collateral shall have been properly filed, registered or
recorded in each jurisdiction in which the filing, registration or recordation
thereof is so required or requested, and Agent shall have received an
acknowledgment copy, or other evidence satisfactory to it, of each such filing,
registration or recordation and satisfactory evidence of the payment of any
necessary fee, tax or expense relating thereto;

(k) Lien Waiver Agreements. Agent shall have received Lien Waiver Agreements
with respect to all locations or places at which Inventory and/or books and
records are located;

(l) Secretary’s Certificates, Authorizing Resolutions and Good Standings of
Borrowers. Agent shall have received a certificate of the Secretary or Assistant
Secretary (or other equivalent officer, partner or manager) of each Borrower in
form and substance satisfactory to Agent dated as of the Closing Date which
shall certify (i) copies of resolutions in form and substance reasonably
satisfactory to Agent, of the board of directors (or other equivalent governing
body, member or partner) of such Borrower authorizing (x) the execution,
delivery and performance of this Agreement, the Notes and each Other Document to
which such Borrower is a party (including authorization of the incurrence of
indebtedness, borrowing of Revolving Advances, Swing Loans and Term Loan and
requesting of Letters of Credit on a joint and several basis with all Borrowers
as provided for herein), and (y) the granting by such Borrower of the security
interests in and liens upon the Collateral to secure all of the joint and
several Obligations of Borrowers (and such certificate shall state that such
resolutions have not been amended, modified, revoked or rescinded as of the date
of such certificate), (ii) the incumbency and signature of the officers of such
Borrower authorized to execute this Agreement and the Other Documents,
(iii) copies of the Organizational Documents of such Borrower as in effect on
such date, complete with all amendments thereto, and (iv) the good standing (or
equivalent status) of such Borrower in its jurisdiction of organization and each
applicable jurisdiction where the conduct of such Borrower’s business activities
or the ownership of its properties necessitates qualification, as evidenced by
good standing certificate(s) (or the equivalent thereof issued by any applicable
jurisdiction) dated not more than ten (10) days prior to the Closing Date,
issued by the Secretary of State or other appropriate official of each such
jurisdiction;

(m) Secretary’s Certificates, Authorizing Resolutions and Good Standings of
Guarantors. Agent shall have received a certificate of the Secretary or
Assistant Secretary (or other equivalent officer, partner or manager) of each
Guarantor in form and substance satisfactory to Agent dated as of the Closing
Date which shall certify (i) copies of resolutions in

 

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form and substance reasonably satisfactory to Agent, of the board of directors
(or other equivalent governing body, member or partner) of each Guarantor
authorizing (x) the execution, delivery and performance of such Guarantor’s
Guaranty and each Other Document to which such Guarantor is a party and (y) the
granting by such Guarantor of the security interests in and liens upon the
Collateral to secure its obligations under its Guaranty (and such certificate
shall state that such resolutions have not been amended, modified, revoked or
rescinded as of the date of such certificate), (ii) the incumbency and signature
of the officers of such Guarantor authorized to execute this Agreement and the
Other Documents, (iii) copies of the Organizational Documents of such Guarantor
as in effect on such date, complete with all amendments thereto, and (iv) the
good standing (or equivalent status) of such Guarantor in its jurisdiction of
organization and each applicable jurisdiction where the conduct of such
Guarantor’s business activities or the ownership of its properties necessitates
qualification, as evidenced by good standing certificate(s) (or the equivalent
thereof issued by any applicable jurisdiction) dated not more than ten (10) days
prior to the Closing Date, issued by the Secretary of State or other appropriate
official of each such jurisdiction;

(n) Legal Opinion. Agent shall have received the executed legal opinion of
(i) Doherty & Doherty LLP, (ii) Crowe & Dunlevy PC and (iii) Lowndes, Drosdick,
Doster, Kantor & Reed, P.A., in each case, in form and substance satisfactory to
Agent, which opinions shall cover such matters incident to the transactions
contemplated by this Agreement, the Notes, the Other Documents, and related
agreements as Agent may reasonably require and each Borrower hereby authorizes
and directs such counsel to deliver such opinions to Agent and Lenders;

(o) No Litigation. No litigation, investigation or proceeding before or by any
arbitrator or Governmental Body shall be continuing or threatened against any
Credit Party or against the officers or directors of any Credit Party (A) in
connection with this Agreement, the Other Documents, the Merger Agreement or any
of the transactions contemplated thereby and which, in the reasonable opinion of
Agent, is deemed material or (B) which could, in the reasonable opinion of
Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining
order or other order of any nature materially adverse to any Credit Party or the
conduct of its business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;

(p) Collateral Examination. Agent shall have completed Collateral examinations
and received appraisals, the results of which shall be satisfactory in form and
substance to Agent, of the Receivables, Inventory, general intangibles, and
equipment of each Borrower and all books and records in connection therewith;

(q) Fees. Agent shall have received all fees payable to Agent and Lenders on or
prior to the Closing Date hereunder, including pursuant to Article III hereof
and the Fee Letter;

(r) Pro Forma Financial Statements. Agent shall have received a copy of the Pro
Forma Financial Statements which shall be satisfactory in all respects to Agent;

(s) Insurance. Agent shall have received in form and substance satisfactory to
Agent, (i) evidence that adequate insurance, including without limitation,
casualty and liability

 

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insurance, required to be maintained under this Agreement is in full force and
effect, (ii) insurance certificates issued by Borrowers’ insurance broker
containing such information regarding Borrowers’ casualty and liability
insurance policies as Agent shall request and naming Agent as an additional
insured, lenders loss payee and/or mortgagee, as applicable, and (iii) lender
loss payable endorsements issued by Borrowers’ insurer naming Agent as lenders
loss payee and mortgagee, as applicable;

(t) Payment Instructions. Agent shall have received written instructions from
Borrowing Agent directing the application of proceeds of the initial Advances
made pursuant to this Agreement;

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

(v) No Adverse Material Change. (i) Since December 31, 2012, there shall not
have occurred any event, condition or state of facts which could reasonably be
expected to have a Material Adverse Effect and (ii) no representations made or
information supplied to Agent or Lenders shall have been proven to be inaccurate
or misleading in any material respect;

(w) Contract and Diligence Review. Agent shall have (i) received and reviewed
all Material Contracts of the Credit Parties including, without limitation,
books and records, Organizational Documents, third party financing agreements,
leases, union contracts, labor contracts, vendor supply contracts,
representation/agency agreements, license agreements and distributorship
agreements, (ii) performed background checks on members of each Credit Party’s
management team, (iii) received and reviewed all OFAC due diligence, and
(iv) reviewed each Credit Party’s corporate and legal structure, and such
contracts, agreements, background checks and review shall be satisfactory in all
respects to Agent;

(x) Prefund Examination. Agent shall have completed a prefunding examination of
the Collateral, which examination shall be satisfactory to Agent in its sole
discretion;

(y) Compliance with Laws. Agent shall be reasonably satisfied that each Credit
Party is in compliance with all pertinent federal, state, local or territorial
regulations, including those with respect to the Federal Occupational Safety and
Health Act, the Environmental Protection Act, ERISA and the Anti-Terrorism Laws;

(z) Vehicle Title Liens. With respect to Vehicle Title, Borrowers shall have
delivered to Agent, in form and substance satisfactory to Agent: (i) all
necessary fully-executed, notarized powers of attorney authorizing Automotive
Resources International to perfect liens on behalf of Agent; (ii) an original
title properly endorsed to such Borrower for each such item of Collateral;
(iii) all other necessary documentation or information required by applicable
state law, including without limitation, vehicle descriptions, odometer
statements and owner and lienholder identification information; and
(iv) evidence that Agent’s Lien has been duly noted thereon; and

 

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(aa) Other. All corporate and other proceedings, and all documents, instruments
and other legal matters in connection with the Transactions shall be
satisfactory in form and substance to Agent and its counsel.

8.2. Conditions to Each Advance. The agreement of Lenders to make any Advance
requested to be made on any date (including the initial Advance), is subject to
the satisfaction of the following conditions precedent as of the date such
Advance is made:

(a) Representations and Warranties. Each of the representations and warranties
made by the Credit Parties in or pursuant to this Agreement, the Other Documents
and any related agreements to which it is a party, and each of the
representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement, the Other Documents or any related agreement shall be true and
correct in all respects on and as of such date as if made on and as of such date
(except to the extent any such representation or warranty expressly relates only
to any earlier and/or specified date);

(b) No Default. No Event of Default or Default shall have occurred and be
continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date and, in the case of the initial Advance,
after giving effect to the consummation of the transactions contemplated by the
Merger Agreement; provided, however that, Agent, in its sole discretion, may
continue to make Advances notwithstanding the existence of an Event of Default
or Default and that any Advances so made shall not be deemed a waiver of any
such Event of Default or Default; and

(c) Maximum Advances. In the case of any type of Advance requested to be made,
after giving effect thereto, the aggregate amount of such type of Advance shall
not exceed the maximum amount of such type of Advance permitted under this
Agreement.

Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

 

IX. INFORMATION AS TO CREDIT PARTIES.

Each Borrower shall and shall cause their respective Subsidiaries to, until
satisfaction in full of the Obligations and the termination of this Agreement:

9.1. Disclosure of Material Matters. Immediately upon learning thereof, report
to Agent all matters materially affecting the value, enforceability or
collectability of any portion of the Collateral, including any Borrower’s
reclamation or repossession of, or the return to any Borrower of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.

9.2. Schedules. Deliver to Agent (i) on or before the twenty fifth (25th) day of
each month as and for the prior month (a) accounts receivable agings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of reconciliations to the general ledger, (c) Inventory reports and
(d) a Borrowing Base Certificate in form and substance

 

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satisfactory to Agent (which shall be calculated as of the last day of the prior
month and which shall not be binding upon Agent or restrictive of Agent’s rights
under this Agreement); provided however, during any Trigger Period, Borrowing
Agent shall deliver to Agent a Borrowing Base Certificate, in form and substance
satisfactory to Agent, on or before each Wednesday of each week as and for the
previous week, or at such other intervals as Agent may require in its sole
discretion. In addition, Borrowing Agent will deliver to Agent upon the written
request of Agent: (i) confirmatory assignment schedules; (ii) copies of
Customer’s invoices; (iii) evidence of shipment or delivery; and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including trial balances and test verifications. Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable as it may deem reasonably necessary to protect
its interests hereunder. The items to be provided under this Section are to be
in form satisfactory to Agent and executed by each Borrower and delivered to
Agent from time to time solely for Agent’s convenience in maintaining records of
the Collateral, and any Borrower’s failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent’s Lien with respect
to the Collateral.

9.3. Environmental Reports.

(a) Furnish Agent, concurrently with the delivery of the financial statements
referred to in Sections 9.7 and 9.8, with a certificate signed by an Authorized
Officer of Borrowing Agent stating, to the best of his knowledge, that each
Credit Party is in compliance in all material respects with all applicable
Environmental Laws. To the extent any Credit Party is not in compliance with the
foregoing laws, the certificate shall set forth with specificity all areas of
non-compliance and the proposed action such Borrower will implement in order to
achieve full compliance.

(b) In the event any Credit Party obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous Materials
at the Real Property (any such event being hereinafter referred to as a
“Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Credit Party’s interest therein or the operations or the business (any of the
foregoing is referred to herein as an “Environmental Complaint”) from any
Person, including any Governmental Body, then Borrowing Agent shall, within five
(5) Business Days, give written notice of same to Agent detailing facts and
circumstances of which any Credit Party is aware giving rise to the Hazardous
Discharge or Environmental Complaint. Such information is to be provided to
allow Agent to protect its security interest in and Lien on the Collateral and
is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.

(c) Borrowing Agent shall promptly forward to Agent copies of any request for
information, notification of potential liability, demand letter relating to
potential responsibility with respect to the investigation or cleanup of
Hazardous Materials at any other site owned, operated or used by any Credit
Party to manage of Hazardous Materials and shall continue to forward copies of
correspondence between any Credit Party and the Authority

 

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regarding such claims to Agent until the claim is settled. Borrowing Agent shall
promptly forward to Agent copies of all documents and reports concerning a
Hazardous Discharge or Environmental Complaint at the Real Property, operations
or business that any Credit Party is required to file under any Environmental
Laws. Such information is to be provided solely to allow Agent to protect
Agent’s security interest in and Lien on the Collateral.

9.4. Litigation. Promptly notify Agent in writing of any claim, litigation, suit
or administrative proceeding affecting any Credit Party, whether or not the
claim is covered by insurance, and of any litigation, suit or administrative
proceeding, which in any such case affects the Collateral or which could
reasonably be expected to have a Material Adverse Effect.

9.5. Material Occurrences. Immediately notify Agent in writing upon the
occurrence of: (a) any Event of Default or Default; (b) any event, development
or circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP
consistently applied, the financial condition or operating results of any
Borrower as of the date of such statements; (c) any accumulated retirement plan
funding deficiency which, if such deficiency continued for two plan years and
was not corrected as provided in Section 4971 of the Code, could subject any
Borrower to a tax imposed by Section 4971 of the Code; (d) each and every
default by any Borrower which might result in the acceleration of the maturity
of any Indebtedness, including the names and addresses of the holders of such
Indebtedness with respect to which there is a default existing or with respect
to which the maturity has been or could be accelerated, and the amount of such
Indebtedness; and (e) any other development in the business or affairs of any
Credit Party, which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action Borrowers
propose to take with respect thereto.

9.6. Government Receivables. Notify Agent promptly if any of its Receivables
arise out of contracts between any Borrower and the United States, any state, or
any department, agency or instrumentality of any of them.

9.7. Annual Financial Statements. Furnish Agent, as soon as available and in any
event no later than the earlier of (i) the date Holdings is required to file its
Form 10-K with the SEC for any fiscal year and (ii) one hundred and twenty
(120) days after the end of each fiscal year of Holdings, financial statements
of Holdings and its Subsidiaries on a consolidated basis in each case,
including, but not limited to, statements of income and stockholders’ equity and
cash flow from the immediately prior fiscal year to the end of such prior fiscal
year and the balance sheet as at the end of such fiscal year, all prepared in
accordance with GAAP applied on a basis consistent with prior practices, and in
reasonable detail and reported upon without qualification by an independent
certified public accounting firm selected by Holdings and satisfactory to Agent
(the “Accountants”). The financial statements required to be delivered above
shall be accompanied by a Compliance Certificate.

9.8. Quarterly Financial Statements. Furnish Agent, as soon as available and in
any event no later than the earlier of (i) forty-five (45) days after the end of
each fiscal quarter and (ii) the date Holdings is required to file its Form 10-Q
with the SEC for any fiscal quarter (other than the fiscal quarter ending
December 31), an unaudited balance sheet of Holdings and its Subsidiaries on a
consolidated basis and unaudited (or, in the case of the fourth fiscal quarter,

 

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audited) statements of income and stockholders’ equity and cash flow of Holdings
and its Subsidiaries on a consolidated basis, in each case reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared on a basis consistent with prior practices and in
accordance with GAAP, subject to normal and recurring year-end adjustments that
individually and in the aggregate are not material to the business operations of
Holdings or its Subsidiaries. The reports shall be accompanied by a Compliance
Certificate.

9.9. Monthly Financial Statements. Furnish Agent for distribution to the Lenders
within thirty (30) days after the end of each fiscal month which shall be
delivered in accordance with Sections 9.7 and 9.8 as applicable), an unaudited
balance sheet of Holdings and its Subsidiaries on a consolidated basis and
unaudited statements of income and stockholders’ equity and cash flow of
Holdings and its Subsidiaries on a consolidated basis reflecting results of
operations from the beginning of the fiscal year to the end of such calendar
month and for such month, prepared on a basis consistent with prior practices
and complete and correct in all material respects, subject to normal and
recurring year-end adjustments that individually and in the aggregate are not
material to the business operations of Holdings or its Subsidiaries.

9.10. Other Reports. At Agent’s request, furnish Agent as soon as available, but
in any event within ten (10) days after the issuance thereof with copies of such
financial statements, reports and returns as each Borrower shall send to its
stockholders or members, as applicable.

9.11. Additional Information. Furnish Agent with such additional information as
Agent shall reasonably request in order to enable Agent to determine whether the
terms, covenants, provisions and conditions of this Agreement and the Other
Documents have been complied with by the applicable Credit Party including,
without the necessity of any request by Agent, (a) copies of all environmental
audits and reviews, (b) at least thirty (30) days prior thereto, notice of any
Credit Party’s opening of any new office or place of business or any Credit
Party’s closing of any existing office or place of business, and (c) promptly
upon any Credit Party’s learning thereof, notice of any labor dispute to which
any Credit Party may become a party, any strikes or walkouts relating to any of
its plants or other facilities, and the expiration of any labor contract to
which any Credit Party is a party or by which any Credit Party is bound.

9.12. Projected Operating Budget. Furnish Agent, no later the last day of
February of each of Holdings’ fiscal years commencing with fiscal year 2013, a
month by month projected operating budget and cash flow of Holdings and its
Subsidiaries on a consolidated basis for such fiscal year (including an income
statement and a balance sheet as at the end of the last month in each fiscal
quarter), such projections to be accompanied by a certificate signed by an
Authorized Officer of Holdings to the effect that such projections have been
prepared on the basis of sound financial planning practice consistent with past
budgets and financial statements and that such officer has no reason to question
the reasonableness of any material assumptions on which such projections were
prepared.

9.13. Variances From Operating Budget. At Agent’s request, furnish Agent,
concurrently with the delivery of the financial statements referred to in
Sections 9.7, a written report summarizing all material variances from budgets
submitted by Holdings pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.

 

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9.14. Notice of Suits, Adverse Events. Furnish Agent with prompt written notice
of (i) any lapse or other termination of any Consent issued to any Credit Party
by any Governmental Body or any other Person that is material to the operation
of any Credit Party’s business, (ii) any refusal by any Governmental Body or any
other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Credit Party with any Governmental Body
or Person, if such reports indicate any material change in the business,
operations, affairs or condition of any Credit Party, or if copies thereof are
requested by Lender, and (iv) copies of any material notices and other
communications from any Governmental Body or Person which specifically relate to
any Credit Party.

9.15. ERISA Notices and Requests. Furnish Agent with immediate written notice in
the event that (i) any Borrower or any member of the Controlled Group knows or
has reason to know that a Termination Event has occurred, together with a
written statement describing such Termination Event and the action, if any,
which such Borrower or any member of the Controlled Group has taken, is taking,
or proposes to take with respect thereto and, when known, any action taken or
threatened by the Internal Revenue Service, Department of Labor or PBGC with
respect thereto, (ii) any Borrower or any member of the Controlled Group knows
or has reason to know that a prohibited transaction (as defined in Sections 406
of ERISA and 4975 of the Code) has occurred together with a written statement
describing such transaction and the action which such Borrower or any member of
the Controlled Group has taken, is taking or proposes to take with respect
thereto, (iii) a funding waiver request has been filed with respect to any Plan
together with all communications received by any Borrower or any member of the
Controlled Group with respect to such request, (iv) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions to any Plan to which any Borrower or any member of the Controlled
Group was not previously contributing shall occur, (v) any Borrower or any
member of the Controlled Group shall receive from the PBGC a notice of intention
to terminate a Plan or to have a trustee appointed to administer a Plan,
together with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under the Code or
ERISA on or before the due date for such installment or payment; or (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, (c) the PBGC has
instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan or (d) a Multiemployer Plan is subject to
Section 432 of the Code or Section 305 of ERISA.

9.16. Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement.

9.17. Updates to Certain Schedules. Deliver to Agent promptly as shall be
required to maintain the related representations and warranties as true and
correct, updates to Schedules 4.4(a)(iv) (Locations of equipment and Inventory),
5.24 (Equity Interests), 5.25 (Commercial

 

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Tort Claims), and 5.26 (Letter-of-Credit Rights); provided, that, absent the
occurrence and continuance of any Event of Default, Borrowers shall only be
required to provide such updates on a monthly basis in connection with delivery
of a Compliance Certificate with respect to the applicable month. Any such
updated Schedules delivered by Borrowers to Agent in accordance with this
Section 9.17 shall automatically and immediately be deemed to amend and restate
the prior version of such Schedule previously delivered to Agent and attached to
and made part of this Agreement. The updated Schedules to be provided under this
Section are to be in form satisfactory to Agent.

9.18. Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower’s financial statements, trial balances or other accounting records
of any sort in the accountant’s or auditor’s possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower’s financial status and business operations, provided that Agent and
Lenders shall provide Borrowers with prior notice of communications with such
accountants or auditors so long as no Default or Event of Default shall have
occurred. Each Borrower hereby authorizes all Governmental Bodies to furnish to
Agent and each Lender copies of reports or examinations relating to such
Borrower, whether made by such Borrower or otherwise; however, Agent and each
Lender will attempt to obtain such information or materials directly from such
Borrower prior to obtaining such information or materials from such accountants
or Governmental Bodies.

9.19. Appraisals and Field Examinations. Permit Agent or Agent’s representatives
to (a) perform full Collateral appraisals in form and substance satisfactory to
Agent at Borrowers’ cost and expense as Agent deems appropriate in Agent’s sole
discretion, and (in the case of Inventory appraisals) in no event more
frequently than annually prior to the occurrence of an Event of Default, and
during the existence of an Event of Default, on an unlimited basis, and, to
determine, among other things, the net orderly liquidation value of the
Collateral (each appraisal contemplated in this Section 9.17 or performed by
Agent prior to the Closing Date shall each be an “NOLV Appraisal”), (b) after
the occurrence of an Event of Default, at Agent’s option, obtain Real Property
appraisals at Borrowers’ cost and expense and (c) conduct field examinations at
Credit Parties’ cost and expense as Agent deems appropriate in Agent’s sole
discretion.

 

X. EVENTS OF DEFAULT.

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

10.1. Nonpayment. Failure by any Borrower to pay any principal or interest on
the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document.

10.2. Breach of Representation. Any representation or warranty made or deemed
made by any Credit Party in this Agreement, any Other Document or any related
agreement or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall prove to have
been incorrect or misleading in any material respect on the date when made or
deemed to have been made;

 

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10.3. Financial Information. Failure by any Borrower to (i) furnish financial
information when due or when requested, or (ii) permit the inspection of its
books or records or access to its premises for audits and appraisals in
accordance with the terms hereof;

10.4. Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment (a) against any Borrower’s Inventory or Receivables or
(b) against a material portion of any Borrower’s other property which is not
stayed or lifted within thirty (30) days;

10.5. Noncompliance. Except as otherwise provided for in Sections 10.1, 10.3 and
10.5(ii), (i) failure or neglect of any Credit Party or any Person to perform,
keep or observe any term, provision, condition, covenant herein contained, or
contained in any Other Document or any other agreement or arrangement, now or
hereafter entered into between any Credit Party and Agent or any Lender, or
(ii) failure or neglect of any Credit Party to perform, keep or observe any
term, provision, condition or covenant, contained in Sections 4.5(b), 4.6, 4.7,
4.14, 4.9, 4.13, 4.17, 6.1, 6.2, 6.3, 6.4, 6.6, 6.12, 7.2 (for purposes of the
cure period contemplated by this clause (ii) only, with respect to Liens
incurred without any Borrowers’ consent so long as such Liens do not exceed
$5,000 in the aggregate and are being Properly Contested), 9.4 or 9.6 hereof
which is not cured within ten (10) days from the occurrence of such failure or
neglect;

10.6. Judgments. Any judgment or judgments are rendered against any Credit Party
for an aggregate amount in excess of $500,000 and (i) enforcement proceedings
shall have been commenced by a creditor upon such judgment, (ii) there shall be
any period of thirty (30) consecutive days during which a stay of enforcement of
such judgment, by reason of a pending appeal or otherwise, shall not be in
effect, or (iii) any such judgment results in the creation of a Lien upon any of
the Collateral (other than a Permitted Encumbrance);

10.7. Bankruptcy. Any Credit Party or any Subsidiary of any Credit Party shall
(i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy or receivership laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent (including by entry of any order for relief
in any involuntary bankruptcy or insolvency proceeding commenced against it),
(vi) file a petition seeking to take advantage of any other law providing for
the relief of debtors, (vii) acquiesce to, or fail to have dismissed, within
thirty (30) days, any petition filed against it in any involuntary case under
such bankruptcy laws, or (viii) take any action for the purpose of effecting any
of the foregoing;

10.8. Material Adverse Effect. Any change in any Credit Party’s results of
operations or financial condition which Agent has determined in the exercise of
its Permitted Discretion has a Material Adverse Effect;

 

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10.9. Lien Priority. Any Lien created hereunder or provided for hereby or under
any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;

10.10. Cross Default. A default of the obligations of any Credit Party under any
other agreement to which it is a party shall occur which adversely affects its
condition, affairs or prospects (financial or otherwise) which default is not
cured within any applicable grace period;

10.11. Breach of Guaranty or Pledge Agreement. Termination or breach of any
Guaranty, Guaranty Security Agreement, Pledge Agreement or similar agreement
executed and delivered to Agent in connection with the Obligations of any
Borrower, or if any Guarantor or pledgor attempts to terminate, challenges the
validity of, or its liability under, any such Guaranty, Guaranty Security
Agreement, Pledge Agreement or similar agreement;

10.12. Change of Control. Any Change of Control shall occur;

10.13. Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on any Credit
Party, or any Credit Party shall so claim in writing to Agent or any Lender or
any Borrower challenges the validity of or its liability under this Agreement or
any Other Document;

10.14. Seizures. Any (a) portion of the Collateral shall be seized, subject to
garnishment or taken by a Governmental Body, or any Credit Party, or (b) the
title and rights of any Credit Party shall have become the subject matter of
claim, litigation, suit, garnishment or other proceeding which might, in the
opinion of Agent, upon final determination, result in a material impairment or
loss of the security provided by this Agreement or the Other Documents;

10.15. Operations. The operations of any Credit Party’s business or facilities
(as a whole) are interrupted at any time for more than a period of ten
(10) consecutive days, unless such Credit Party shall (i) be entitled to receive
for such period of interruption, proceeds of business interruption insurance
sufficient to assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive three (3) month
period immediately preceding the initial date of interruption and (ii) receive
such proceeds in the amount described in clause (i) preceding not later than
thirty (30) days following the initial date of any such interruption; provided,
however that, notwithstanding the provisions of clauses (i) and (ii) of this
section, an Event of Default shall be deemed to have occurred if any Credit
Party shall not remit such insurance proceeds to Agent pursuant to Section 4.11
hereof within ten (10) days following such Credit Party’s receipt thereof;

10.16. Pension Plans. An event or condition specified in Sections 7.16 or 9.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group shall incur, or in the opinion of
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Agent, would have a Material Adverse
Effect; or.

 

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10.17. Reportable Compliance Event. The occurrence of any Reportable Compliance
Event, or any Borrower’s failure to immediately report a Reportable Compliance
Event in accordance with Section 9.14 hereof.

10.18. Licenses. (i) Any Governmental Body shall (A) revoke, terminate, suspend
or adversely modify any material license, permit, patent trademark or trade name
of any Credit Party, or (B) commence proceedings to suspend, revoke, terminate
or adversely modify any such material license, permit, trademark, trade name or
patent and such proceedings shall not be dismissed or discharged within sixty
(60) days, or (c) schedule or conduct a hearing on the renewal of any material
license, permit, trademark, trade name or patent necessary for the continuation
of any Credit Party’s business and the staff of such Governmental Body issues a
report recommending the termination, revocation, suspension or material, adverse
modification of such license, permit, trademark, trade name or patent; (ii) any
agreement which is necessary or material to the operation of any Credit Party’s
business shall be revoked or terminated and not replaced by a substitute
acceptable to Agent within thirty (30) days after the date of such revocation or
termination, and such revocation or termination and non-replacement would
reasonably be expected to have a Material Adverse Effect.

 

XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.

11.1. Rights and Remedies.

(a) Upon the occurrence of: (i) an Event of Default pursuant to Section 10.7
(other than Section 10.7(vii)), all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated, (ii) any of the other Events of Default and at any time
thereafter, at the option of Agent or at the direction of Required Lenders all
Obligations shall be immediately due and payable and Agent or Required Lenders
shall have the right to terminate this Agreement and to terminate the obligation
of Lenders to make Advances; and (iii) without limiting Section 8.2 hereof, any
Default under Sections 10.7(vii) hereof, the obligation of Lenders to make
Advances hereunder shall be suspended until such time as such involuntary
petition shall be dismissed. Upon the occurrence of any Event of Default, Agent
shall have the right to exercise any and all rights and remedies provided for
herein, under the Other Documents, under the Uniform Commercial Code and at law
or equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial
procedure and/or to take possession of and sell any or all of the Collateral
with or without judicial process. Agent may enter any of any Borrower’s premises
or other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to
such place as Agent may deem advisable and Agent may require Borrowers to make
the Collateral available to Agent at a convenient place. With or without having
the Collateral at the time or place of sale, Agent may sell the Collateral, or
any part thereof, at public or private sale, at any time or place, in one or
more sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as Agent may elect. Except as to that part of the
Collateral which is perishable or threatens to decline speedily in value or is
of a type customarily sold on a recognized market, Agent shall give Borrowers
reasonable notification of such sale or sales, it being agreed that in all
events written notice mailed to Borrowing Agent at least ten (10) days prior to
such sale or sales is

 

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reasonable notification. At any public sale Agent or any Lender may bid
(including credit bid) for and become the purchaser, and Agent, any Lender or
any other purchaser at any such sale thereafter shall hold the Collateral sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and all such claims, rights and equities are hereby expressly
waived and released by each Borrower. For the purposes of enabling Agent to
exercise the rights and remedies hereunder and under each of the Other
Documents, including the sale of Inventory, Agent is granted a perpetual
nonrevocable, royalty free, nonexclusive license and Agent is granted permission
to use all of each Borrower’s (a) Intellectual Property which is used or useful
in connection with Inventory for the purpose of marketing, advertising for sale
and selling or otherwise disposing of such Inventory and (b) equipment for the
purpose of completing the manufacture of unfinished goods. The cash proceeds
realized from the sale of any Collateral shall be applied to the Obligations in
the order set forth in Section 11.5 hereof. Noncash proceeds will only be
applied to the Obligations as they are converted into cash. If any deficiency
shall arise, Borrowers shall remain liable to Agent and Lenders therefor.

(b) To the extent that Applicable Law imposes duties on Agent to exercise
remedies in a commercially reasonable manner, each Borrower acknowledges and
agrees that it is not commercially unreasonable for Agent: (i) to fail to incur
expenses reasonably deemed significant by Agent to prepare Collateral for
disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition; (ii) to fail to
obtain third party consents for access to Collateral to be disposed of, or to
obtain or, if not required by other law, to fail to obtain governmental or third
party consents for the collection or disposition of Collateral to be collected
or disposed of; (iii) to fail to exercise collection remedies against Customers
or other Persons obligated on Collateral or to remove Liens on or any adverse
claims against Collateral; (iv) to exercise collection remedies against
Customers and other Persons obligated on Collateral directly or through the use
of collection agencies and other collection specialists; (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature; (vi) to contact other
Persons, whether or not in the same business as any Borrower, for expressions of
interest in acquiring all or any portion of such Collateral; (vii) to hire one
or more professional auctioneers to assist in the disposition of Collateral,
whether or not the Collateral is of a specialized nature; (viii) to dispose of
Collateral by utilizing internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capacity of
doing so, or that match buyers and sellers of assets; (ix) to dispose of assets
in wholesale rather than retail markets; (x) to disclaim disposition warranties,
such as title, possession or quiet enjoyment, (xi) to purchase insurance or
credit enhancements to insure Agent against risks of loss, collection or
disposition of Collateral or to provide to Agent a guaranteed return from the
collection or disposition of Collateral; or (xii) to the extent deemed
appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral. Each Borrower acknowledges that the
purpose of this Section 11.1(b) is to provide non-exhaustive indications of what
actions or omissions by Agent would not be commercially unreasonable in Agent’s
exercise of remedies against the Collateral and that other actions or omissions
by Agent shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section 11.1(b). Without limitation upon the foregoing,
nothing contained in this Section 11.1(b) shall be construed to grant any rights
to any Borrower or to impose any duties on Agent that would not have been
granted or imposed by this Agreement or by Applicable Law in the absence of this
Section 11.1(b).

 

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11.2. Agent’s Discretion. Agent shall have the right in its sole discretion to
determine which rights, Liens, security interests or remedies Agent may at any
time pursue, relinquish, subordinate, or modify, which procedures, timing and
methodologies to employ, and what any other action to take with respect to any
or all of the collateral and in what order, thereto and such determination will
not in any way modify or affect any of Agent’s or Lenders’ rights hereunder as
against Borrowers or each other.

11.3. Setoff. Subject to Section 14.13, in addition to any other rights which
Agent or any Lender may have under Applicable Law, upon the occurrence of an
Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any kind, to apply any Borrower’s property
held by Agent and such Lender or any of their affiliates to reduce the
Obligations and to exercise any and all rights of setoff which may be available
to Agent and such Lender with respect to any deposits held by Agent or such
Lender.

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

11.5. Allocation of Payments After Event of Default. Notwithstanding any other
provisions of this Agreement to the contrary, after the occurrence and during
the continuance of an Event of Default, all amounts collected or received by
Agent on account of the Obligations or any other amounts outstanding under any
of the Other Documents or in respect of the Collateral may, at Agent’s
discretion, be paid over or delivered as follows:

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of Agent in connection with enforcing its
rights and the rights of Lenders under this Agreement and the Other Documents,
and any Out-of-Formula Loans and Protective Advances funded by Agent with
respect to the Collateral under or pursuant to the terms of this Agreement;

SECOND, to payment of any fees owed to Agent;

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders to the extent
owing to such Lender pursuant to the terms of this Agreement;

FOURTH, to the payment of all of the Obligations consisting of accrued interest
on account of the Swing Loans;

FIFTH, to the payment of the outstanding principal amount of the Obligations
consisting of Swing Loans;

SIXTH, to the payment of all Obligations arising under this Agreement and the
Other Documents consisting of accrued fees and interest (other than interest in
respect of Swing Loans paid pursuant to clause FOURTH above);

 

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SEVENTH, to the payment of the outstanding principal amount of the Obligations
(other than principal in respect of Swing Loans paid pursuant to clause FIFTH
above) arising under this Agreement.

EIGHTH, to all other Obligations arising under this Agreement which shall have
become due and payable (hereunder, under the Other Documents or otherwise) and
not repaid pursuant to clauses “FIRST” through “SEVENTH” above;

NINTH, to all other Obligations which shall have become due and payable and not
repaid pursuant to clauses “FIRST” through “EIGHT”; and

TENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.

In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of Lenders shall receive (so long as it is not a
Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “SIXTH”, “SEVENTH”, “EIGHTH” and “NINTH” above; and (iii) to the
extent that any amounts available for distribution pursuant to clause “SEVENTH”
above are attributable to the issued but undrawn amount of outstanding Letters
of Credit, such amounts shall be held by Agent as cash collateral for the
Letters of Credit pursuant to Section 3.2(b) hereof and applied (A) first, to
reimburse the Issuer from time to time for any drawings under such Letters of
Credit and (B) then, following the expiration of all Letters of Credit, to all
other obligations of the types described in clauses “SEVENTH,” “EIGHTH” and
“NINTH” above in the manner provided in this Section 11.5.

 

XII. WAIVERS AND JUDICIAL PROCEEDINGS.

12.1. Waiver of Notice. Each Borrower hereby waives notice of non-payment of any
of the Receivables, demand, presentment, notice of intent to accelerate and
notice of acceleration, protest and notice thereof with respect to any and all
instruments, notice of acceptance hereof, notice of loans or advances made,
credit extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.

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

12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT, ANY OTHER DOCUMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH,
OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT,

 

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ANY OTHER DOCUMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH
CLAIM, COUNTERCLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

XIII. EFFECTIVE DATE AND TERMINATION.

13.1. Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until May 10, 2018 (the “Term”) unless sooner
terminated as herein provided.

13.2. Termination. The termination of the Agreement shall not affect Agent’s or
any Lender’s rights, or any of the Obligations having their inception prior to
the effective date of such termination or any Obligations which pursuant to the
terms hereof continue to accrue after such date, and the provisions hereof shall
continue to be fully operative until all transactions entered into, rights or
interests created and Obligations have been fully and indefeasibly paid,
disposed of, concluded or liquidated. The security interests, Liens and rights
granted to Agent and Lenders hereunder and the financing statements filed
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the fact that Borrowers’ Account may from time
to time be temporarily in a zero or credit position, until all of the
Obligations of each Borrower have been indefeasibly paid and performed in full
after the termination of this Agreement or each Borrower has furnished Agent and
Lenders with an indemnification satisfactory to Agent and Lenders (in their sole
discretion) with respect thereto. Accordingly, each Borrower waives any rights
which it may have under the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.

 

XIV. REGARDING AGENT.

14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such
Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and thereunder as are specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,

 

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payments of principal and interest, fees (except the fees set forth in Sections
2.8(b) and 3.4 and the Fee Letter), charges and collections received pursuant to
this Agreement, for the ratable benefit of Lenders. Agent may perform any of its
duties hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including collection of the Notes)
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however that, Agent
shall not be required to take any action which, in Agent’s discretion, exposes
Agent to liability or which is contrary to this Agreement or the Other Documents
or Applicable Law unless Agent is furnished with an indemnification reasonably
satisfactory to Agent with respect thereto.

14.2. Nature of Duties. Agent shall have no duties or responsibilities except
those expressly set forth in this Agreement and the Other Documents. Neither
Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder or under any Other Document. Agent shall not be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any of
the Other Documents, or to inspect the properties, books or records of any
Borrower. The duties of Agent as respects the Advances to Borrowers shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon Agent any obligations in respect of this Agreement or the
transactions described herein except as expressly set forth herein.

14.3. Lack of Reliance on Agent. Independently and without reliance upon Agent
or any other Lender, each Lender has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of each Credit
Party in connection with the making and the continuance of the Advances
hereunder and the taking or not taking of any action in connection herewith, and
(ii) its own appraisal of the creditworthiness of each Credit Party. Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before making of the Advances or at any time
or times thereafter except as shall be provided by any Borrower pursuant to the
terms hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness, genuineness, validity, enforceability,
collectability or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Credit Party, or be required to make any inquiry
concerning either the performance or observance of any of the

 

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terms, provisions or conditions of this Agreement, the Notes, the Other
Documents or the financial condition or prospects of any Credit Party, or the
existence of any Event of Default or any Default.

14.4. Resignation of Agent; Successor Agent. Agent may resign on sixty (60) days
written notice to each of Lenders and Borrowing Agent and upon such resignation,
the Required Lenders will promptly designate a successor Agent reasonably
satisfactory to Borrowers (provided, that, no such approval by Borrowers shall
be required (i) in any case where the successor Agent is one of Lenders or
(ii) after the occurrence and during the continuance of any Event of Default).
Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and shall in particular succeed to all of Agent’s right, title and
interest in and to all of the Liens in the Collateral securing the Obligations
created hereunder or any Other Document (including the Pledge Agreement and all
account control agreements), and the term “Agent” shall mean such successor
agent effective upon its appointment, and the former Agent’s rights, powers and
duties as Agent shall be terminated, without any other or further act or deed on
the part of such former Agent. However, notwithstanding the foregoing, if at the
time of the effectiveness of the new Agent’s appointment, any further actions
need to be taken in order to provide for the legally binding and valid transfer
of any Liens in the Collateral from former Agent to new Agent and/or for the
perfection of any Liens in the Collateral as held by new Agent or it is
otherwise not then possible for new Agent to become the holder of a fully valid,
enforceable and perfected Lien as to any of the Collateral, former Agent shall
continue to hold such Liens solely as agent for perfection of such Liens on
behalf of new Agent until such time as new Agent can obtain a fully valid,
enforceable and perfected Lien on all Collateral; provided, that, Agent shall
not be required to or have any liability or responsibility to take any further
actions after such date as such agent for perfection to continue the perfection
of any such Liens (other than to forego from taking any affirmative action to
release any such Liens). After any Agent’s resignation as Agent, the provisions
of this Article XIV, and any indemnification rights under this Agreement,
including without limitation, rights arising under Section 16.5 hereof, shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement (and in the event resigning Agent continues to
hold any Liens pursuant to the provisions of the immediately preceding sentence,
the provisions of this Article XIV and any indemnification rights under this
Agreement, including without limitation, rights arising under Section 16.5
hereof, shall inure to its benefit as to any actions taken or omitted to be
taken by it in connection with such Liens).

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

14.6. Reliance. Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
email, facsimile, telex, teletype or telecopier message, cablegram, order or
other document or telephone message believed by it to be genuine and correct and
to have been signed, sent or made by the proper person or entity,

 

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and, with respect to all legal matters pertaining to this Agreement and the
Other Documents and its duties hereunder, upon advice of counsel selected by it.
Agent may employ agents and attorneys-in-fact and shall not be liable for the
default or misconduct of any such agents or attorneys-in-fact selected by Agent
with reasonable care.

14.7. Notice of Default. Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default hereunder or under the
Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.

14.8. Indemnification. To the extent Agent is not reimbursed and indemnified by
Borrowers, each Lender will reimburse and indemnify Agent in proportion to its
respective portion of the outstanding Advances and its respective Participation
Commitments in the outstanding Letters of Credit and outstanding Swing Loans
(or, if no Advances are outstanding, pro rata according to the percentage that
its Revolving Commitment Amount constitutes of the total aggregate Revolving
Commitment Amounts), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Other Document (INCLUDING
WITHOUT LIMITATION, WITH RESPECT TO ANY OTHERWISE INDEMNIFIED MATTER ARISING
FROM AGENTS NEGLIGENCE OR STRICT LIABILITY); provided, that, Lenders shall not
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent’s gross (not mere) negligence or willful misconduct (as determined by
a court of competent jurisdiction in a final non-appealable judgment).

14.9. Agent in its Individual Capacity. With respect to the obligation of Agent
to lend under this Agreement, the Advances made by it shall have the same rights
and powers hereunder as any other Lender and as if it were not performing the
duties as Agent specified herein; and the term “Lender” or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

14.10. Delivery of Documents. To the extent Agent receives financial statements
required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing Base
Certificates from any Borrower pursuant to the terms of this Agreement which any
Borrower is not obligated to deliver to each Lender, Agent will promptly furnish
such documents and information to Lenders.

 

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14.11. Borrowers’ Undertaking to Agent. Without prejudice to their respective
obligations to Lenders under the other provisions of this Agreement, each
Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower’s obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.

14.12. No Reliance on Agent’s Customer Identification Program. To the extent the
Advances or this Agreement is, or becomes, syndicated in cooperation with other
Lenders, each Lender acknowledges and agrees that neither such Lender, nor any
of its Affiliates, participants or assignees, may rely on Agent to carry out
such Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to the USA
PATRIOT Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of Borrowers, their
Affiliates or their agents, the Other Documents or the transactions hereunder or
contemplated hereby: (i) any identity verification procedures, (ii) any
recordkeeping, (iii) comparisons with government lists, (iv) customer notices or
(v) other procedures required under the CIP Regulations or such Anti-Terrorism
Laws.

14.13. Other Agreements. Each of Lenders agrees that it shall not, without the
express consent of Agent, and that it shall, to the extent it is lawfully
entitled to do so, upon the request of Agent, set off against the Obligations,
any amounts owing by such Lender to any Borrower or any deposit accounts of any
Borrower now or hereafter maintained with such Lender. Anything in this
Agreement to the contrary notwithstanding, each of Lenders further agrees that
it shall not, unless specifically requested to do so by Agent, take any action
to protect or enforce its rights arising out of this Agreement or the Other
Documents, it being the intent of Lenders that any such action to protect or
enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.

 

XV. BORROWING AGENCY PROVISION AND COMMON ENTERPRISE.

15.1. Borrowing Agency Provisions.

(a) Each Borrower hereby irrevocably designates Borrowing Agent to be its
attorney and agent and in such capacity to (i) borrow, (ii) request advances,
(iii) request the issuance of Letters of Credit, (iv) sign and endorse notes,
(v) execute and deliver all instruments, documents, applications, security
agreements, reimbursement agreements and letter of credit agreements for Letters
of Credit and all other certificates, notice, writings and further assurances
now or hereafter required hereunder, (vi) make elections regarding interest
rates, (vii) give instructions regarding Letters of Credit and agree with Issuer
upon any amendment, extension or renewal of any Letter of Credit and
(viii) otherwise take action under and in connection with this Agreement and the
Other Documents, all on behalf of and in the name such Borrower or Borrowers,
and hereby authorizes Agent to pay over or credit all loan proceeds hereunder in
accordance with the request of Borrowing Agent.

 

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(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. TO INDUCE AGENT AND
LENDERS TO DO SO AND IN CONSIDERATION THEREOF, EACH BORROWER HEREBY INDEMNIFIES
AGENT AND EACH LENDER AND HOLDS AGENT AND EACH LENDER HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY ACT
OR INACTION ARISING FROM AGENT’S NEGLIGENCE OR STRICT LIABILITY), EXPENSES,
LOSSES, DAMAGES AND CLAIMS OF DAMAGE OR INJURY ASSERTED AGAINST AGENT OR ANY
LENDER BY ANY PERSON ARISING FROM OR INCURRED BY REASON OF THE HANDLING OF THE
FINANCING ARRANGEMENTS OF BORROWERS AS PROVIDED HEREIN, RELIANCE BY AGENT OR ANY
LENDER ON ANY REQUEST OR INSTRUCTION FROM BORROWING AGENT OR ANY OTHER ACTION
TAKEN BY AGENT OR ANY LENDER WITH RESPECT TO THIS SECTION 15.1 EXCEPT DUE TO
WILLFUL MISCONDUCT OR GROSS (NOT MERE) NEGLIGENCE BY THE INDEMNIFIED PARTY (AS
DETERMINED BY A COURT OF COMPETENT JURISDICTION IN A FINAL AND NON-APPEALABLE
JUDGMENT).

(c) All Obligations shall be joint and several, and each Borrower shall make
payment upon the maturity of the Obligations by acceleration or otherwise, and
such obligation and liability on the part of each Borrower shall in no way be
affected by any extensions, renewals and forbearance granted by Agent or any
Lender to any Borrower, failure of Agent or any Lender to give any Borrower
notice of borrowing or any other notice, any failure of Agent or any Lender to
pursue or preserve its rights against any Borrower, the release by Agent or any
Lender of any Collateral now or thereafter acquired from any Borrower, and such
agreement by each Borrower to pay upon any notice issued pursuant thereto is
unconditional and unaffected by prior recourse by Agent or any Lender to the
other Borrowers or any Collateral for such Borrower’s Obligations or the lack
thereof. Each Borrower waives all suretyship defenses.

15.2. Waiver of Subrogation. EACH BORROWER EXPRESSLY WAIVES ANY AND ALL RIGHTS
OF SUBROGATION, REIMBURSEMENT, INDEMNITY, EXONERATION, CONTRIBUTION OF ANY OTHER
CLAIM WHICH SUCH BORROWER MAY NOW OR HEREAFTER HAVE AGAINST THE OTHER BORROWERS
OR ANY OTHER PERSON DIRECTLY OR CONTINGENTLY LIABLE FOR THE OBLIGATIONS
HEREUNDER, OR AGAINST OR WITH RESPECT TO ANY OTHER BORROWERS’ PROPERTY
(INCLUDING, WITHOUT LIMITATION, ANY PROPERTY WHICH IS COLLATERAL FOR THE
OBLIGATIONS), ARISING FROM THE EXISTENCE OR PERFORMANCE OF THIS AGREEMENT, UNTIL
TERMINATION OF THIS AGREEMENT AND REPAYMENT IN FULL OF THE OBLIGATIONS.

15.3. Common Enterprise. The successful operation and condition of each of
Borrowers is dependent on the continued successful performance of the functions
of the group of Borrowers as a whole and the successful operation of each
Borrower is dependent on the successful performance and operation of each other
Borrower. Each of Borrowers expects to derive benefit (and its board of
directors or other governing body has determined that it may reasonably be
expected to derive benefit), directly and indirectly, from successful operations
of Holdings and each of the other Borrowers. Each Borrower expects to derive
benefit (and the

 

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boards of directors or other governing body of each such Borrower have
determined that it may reasonably be expected to derive benefit), directly and
indirectly, from the credit extended by Lenders to Borrowers hereunder, both in
their separate capacities and as members of the group of companies. Each
Borrower has determined that execution, delivery, and performance of this
Agreement and any Other Documents to be executed by such Borrower is within its
corporate purpose, will be of direct and indirect benefit to such Borrower, and
is in its best interest.

 

XVI. MISCELLANEOUS.

16.1. Governing Law. This Agreement and each Other Document (unless and except
to the extent expressly provided otherwise in any such Other Document), and all
matters relating hereto or thereto or arising herefrom or therefrom (whether
arising under contract law, tort law or otherwise) shall be governed by and
construed in accordance with the laws of the State of Texas applied to contracts
to be performed wholly within the State of Texas. Any judicial proceeding
brought against any Borrower with respect to any of the Obligations, this
Agreement, the Other Documents or any related agreement may be brought in any
court of competent jurisdiction in the State of Texas, United States of America,
and, by execution and delivery of this Agreement, each Borrower accepts for
itself and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by certified or registered
mail (return receipt requested) directed to Borrowing Agent at its address set
forth in Section 16.6 and service so made shall be deemed completed five
(5) days after the same shall have been so deposited in the mails of the United
States of America, or, at Agent’s option, by service upon Borrowing Agent which
each Borrower irrevocably appoints as such Borrower’s Agent for the purpose of
accepting service within the State of Texas. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right
of Agent or any Lender to bring proceedings against any Borrower in the courts
of any other jurisdiction. Each Borrower waives any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. Each
Borrower waives the right to remove any judicial proceeding brought against such
Borrower in any state court to any federal court. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of Dallas, State of Texas.

16.2. Entire Understanding.

(a) This Agreement and the documents executed concurrently herewith contain the
entire understanding between each Borrower, Agent and each Lender and supersedes
all prior agreements and understandings, if any, relating to the subject matter
hereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing,
signed by each Borrower’s, Agent’s and each Lender’s respective officers.
Neither this Agreement nor any portion or provisions hereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing,

 

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signed by the party to be charged. Each Borrower acknowledges that it has been
advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.

(b) The Required Lenders, Agent with the consent in writing of the Required
Lenders, and Borrowers may, subject to the provisions of this Section 16.2(b),
from time to time enter into written supplemental agreements to this Agreement
or the Other Documents executed by Borrowers, for the purpose of adding or
deleting any provisions or otherwise changing, varying or waiving in any manner
the rights of Lenders, Agent or Borrowers thereunder or the conditions,
provisions or terms thereof or waiving any Event of Default thereunder, but only
to the extent specified in such written agreements; provided, however that, no
such supplemental agreement shall, without the consent of (1) Supermajority
Lenders, (A) make any modifications, amendments or waivers to (i) the definition
of the Formula Amount (and the defined terms used in such definition) or
increase the Advance Rates applicable to the Formula Amount if the effect of
such amendment is to make more credit available or to add new types of
Collateral thereunder or (B) add or delete any provisions or otherwise change,
vary or waive in any manner the rights of Lenders, Agent or Borrowers with
respect to Section 6.5 or the conditions, provisions or terms thereof or waive
any Event of Default thereunder and (2) all Lenders:

(i) increase the Revolving Commitment Percentage or Term Loan Commitment
Percentage, as applicable, or the maximum dollar amount of the Revolving
Commitment Amount or Term Loan Commitment Amount, as applicable, of any Lender
without the consent of such Lender directly affected thereby;

(ii) whether or not any Advances are outstanding, extend the Term or the time
for payment of principal or interest of any Advance (excluding the due date of
any mandatory prepayment of an Advance), or any fee payable to any Lender, or
reduce the principal amount of or the rate of interest borne by any Advances or
reduce any fee payable to any Lender, without the consent of each Lender
directly affected thereby (except that Required Lenders may elect to waive or
rescind any imposition of the Default Rate under Section 3.1 or of default rates
of Letter of Credit fees under Section 3.2 (unless imposed by Agent));

(iii) except in connection with any increase pursuant to Section 2.24 hereof,
increase the Maximum Revolving Advance Amount;

(iv) alter the definition of the term Required Lenders or alter, amend or modify
this Section 16.2(b) without the consent of all Lenders;

(v) alter, amend or modify the provisions of Section 11.5 without the consent of
all Lenders;

(vi) release any Collateral during any calendar year (other than in accordance
with the provisions of this Agreement) having an aggregate value in excess of
$1,000,000 without the consent of all Lenders;

(vii) change the rights and duties of Agent without the consent of all Lenders;

 

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(viii) subject to clause (e) below, permit any Revolving Advance to be made if
after giving effect thereto the total of Revolving Advances outstanding
hereunder would exceed the Formula Amount for more than sixty (60) consecutive
Business Days or exceed one hundred and ten percent (110%) of the Formula Amount
without the consent of each Lender directly affected thereby;

(ix) increase the Advance Rates above the Advance Rates in effect on the Closing
Date without the consent of each Lender directly affected thereby; or

(x) release any Guarantor or any Borrower without the consent of all Lenders.

(c) Any such supplemental agreement shall apply equally to each Lender and shall
be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.

(d) In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such consent is denied (each, a “Non-Consenting Lender”), then
Agent may, at its option, require such Non-Consenting Lender to assign its
interest in the Advances to Agent or to another Lender or to any other Person
designated by Agent (the “Designated Lender”), for a price equal to (i) the then
outstanding principal amount thereof plus (ii) accrued and unpaid interest and
fees due such Lender, which interest and fees shall be paid when collected from
Borrowers. In the event Agent elects to require any Lender to assign its
interest to Agent or to the Designated Lender, Agent will so notify such Lender
in writing within forty five (45) days following such Non-Consenting Lender’s
denial, and such Non-Consenting Lender will assign its interest to Agent or the
Designated Lender no later than five (5) days following receipt of such notice
pursuant to a Commitment Transfer Supplement executed by such Lender, Agent or
the Designated Lender, as appropriate, and Agent. Additionally, in the event any
Lender (other than PNC) (i) requests compensation under Sections 3.7 or 3.9, or
requires the Borrowers to pay any additional amount due to any Lender’s status
pursuant to Section 3.11 to any Lender or any Governmental Body for the account
of any Lender, (iii) is a Defaulting Lender or (iv) is a Non-Consenting Lender
referred to in this Section 16.2(c), then in any such event Borrowers may, at
their sole expense, upon notice to such Lender and Agent, require such Lender to
assign and delegate, without recourse (in accordance with and subject to the
restrictions contained in, and consents required by, this Section 16.3), all of
its interests, rights and obligations under this Agreement and the Other
Documents to an assignee acceptable to Agent in its sole discretion that shall
assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment), provided that:

(i) Borrowers shall have paid to Agent the assignment fee specified in
Section 16.3(e) hereof;

 

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(ii) such Lender shall have received payment of an amount equal to the
outstanding principal of its outstanding Advances, accrued interest thereon,
accrued fees and all other amounts payable to it hereunder and under the other
Loan Documents (including any amounts under Section 2.17) from the assignee (to
the extent of such outstanding principal and accrued interest and fees) or
Borrowers (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a claim for compensation
under Sections 3.7 or 3.9, such assignment will result in a reduction in such
compensation or payments thereafter; and

(iv) such assignment does not conflict with Applicable Law.

A Lender shall not be required to make any such assignment or delegation if,
prior thereto, as a result of a waiver by such Lender or otherwise, the
circumstances entitling Borrowers to require such assignment and delegation
cease to apply.

(e) Notwithstanding (i) the existence of a Default or an Event of Default,
(ii) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or the commitments of Lenders to make
Revolving Advances hereunder have been terminated for any reason, or (iii) any
other contrary provision of this Agreement, Agent may at its discretion and
without the consent of any Lender, voluntarily permit the sum of the outstanding
Revolving Advances and the Maximum Undrawn Amount at any time to exceed the
Formula Amount by up to ten percent (10%) of the Formula Amount for up to sixty
(60) consecutive Business Days (the “Out-of-Formula Loans”); provided, that,
such outstanding Advances do not exceed the Maximum Revolving Advance Amount. If
Agent is willing in its sole and absolute discretion to permit such
Out-of-Formula Loans, Lenders holding the Revolving Commitments shall be
obligated to fund such Out-of-Formula Loans in accordance with their respective
Revolving Commitment Percentages, and such Out-of-Formula Loans shall be payable
on demand and shall bear interest at the Default Rate for Revolving Advances
consisting of Domestic Rate Loans; provided, that, if Agent does permit
Out-of-Formula Loans, neither Agent nor Lenders shall be deemed thereby to have
changed the limits of Section 2.1(a) nor shall any Lender be obligated to fund
Revolving Advances in excess of its Revolving Commitment Amount. For purposes of
this paragraph, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Formula Amount was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be either “Eligible Receivables”
or “Eligible Inventory”, as applicable, becomes ineligible, collections of
Receivables applied to reduce outstanding Revolving Advances are thereafter
returned for insufficient funds or overadvances are made to protect or preserve
the Collateral. In the event Agent involuntarily permits the outstanding
Revolving Advances to exceed the Formula Amount by more than ten percent (10%),
Agent shall use its efforts to have Borrowers decrease such excess in as
expeditious a manner as is practicable under the circumstances and not
inconsistent with the reason for such excess. Revolving Advances made after
Agent has determined the existence of involuntary overadvances shall be deemed
to be involuntary overadvances and shall be decreased in accordance with the
preceding sentence. To the extent any Out-of-Formula Loans are not actually
funded by the other Lenders as provided for in this Section 16.2(e), Agent may
elect in its discretion to fund such Out-of-Formula Loans and any such
Out-of-Formula Loans so funded by Agent shall be

 

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deemed to be Revolving Advances made by and owing to Agent, and Agent shall be
entitled to all rights (including accrual of interest) and remedies of a Lender
holding a Revolving Commitment under this Agreement and the Other Documents with
respect to such Revolving Advances.

(f) In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, Agent is hereby authorized by
Borrowers and Lenders, at any time in Agent’s sole discretion, regardless of
(i) the existence of a Default or an Event of Default, (ii) whether any of the
other applicable conditions precedent set forth in Section 8.2 hereof have not
been satisfied or the commitments of Lenders to make Revolving Advances
hereunder have been terminated for any reason, or (iii) any other contrary
provision of this Agreement, to make Revolving Advances (“Protective Advances”)
to Borrowers on behalf of Lenders which Agent, in its reasonable business
judgment, deems necessary or desirable (a) to preserve or protect the
Collateral, or any portion thereof, (b) to enhance the likelihood of, or
maximize the amount of, repayment of the Advances and other Obligations, or
(c) to pay any other amount chargeable to Borrowers pursuant to the terms of
this Agreement; provided, that, at any time after giving effect to any such
Protective Advances the outstanding Revolving Advances and Swing Loans do not
exceed one hundred and ten percent (110%) of the Formula Amount. To the extent
any Protective Advances are not actually funded by the other Lenders as provided
for in this Section 16.2(f), any such Protective Advances funded by Agent shall
be deemed to be Revolving Advances made by and owing to Agent, and Agent shall
be entitled to all rights (including accrual of interest) and remedies of a
Lender holding a Revolving Commitment under this Agreement and the Other
Documents with respect to such Revolving Advances.

16.3. Successors and Assigns; Participations; New Lenders.

(a) This Agreement shall be binding upon and inure to the benefit of Borrowers,
Agent, each Lender, all future holders of the Obligations and their respective
successors and assigns, except that no Borrower may assign or transfer any of
its rights or obligations under this Agreement without the prior written consent
of Agent and each Lender.

(b) Each Borrower acknowledges that in the regular course of commercial banking
business one or more Lenders may at any time and from time to time sell
participating interests in the Advances to other Persons (each such transferee
or purchaser of a participating interest, a “Participant”). Each Participant may
exercise all rights of payment (including rights of set-off) with respect to the
portion of such Advances held by it or other Obligations payable hereunder as
fully as if such Participant were the direct holder thereof; provided, that,
(i) Borrowers shall not be required to pay to any Participant more than the
amount which it would have been required to pay to Lender which granted an
interest in its Advances or other Obligations payable hereunder to such
Participant had such Lender retained such interest in the Advances hereunder or
other Obligations payable hereunder unless the sale of the participation to such
Participant is made with Borrowers’ prior written consent, and (ii) in no event
shall Borrowers be required to pay any such amount arising from the same
circumstances and with respect to the same Advances or other Obligations payable
hereunder to both such Lender and such Participant. Each Borrower hereby grants
to any Participant a continuing security interest in any deposits, moneys or
other property actually or constructively held by such Participant as security
for the Participant’s interest in the Advances.

 

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(c) Any Lender, with the consent of Agent and Borrowers (unless an Event of
Default or Default has occurred and is continuing, in which case no consent of
the Borrowers is required), may sell, assign or transfer all or any part of its
rights and obligations under or relating to Revolving Advances and/or Term Loans
under this Agreement and the Other Documents to one or more additional Persons
and one or more additional Persons may commit to make Advances hereunder (each a
“Purchasing Lender”), in minimum amounts of not less than $1,000,000, pursuant
to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and Agent and delivered to Agent for recording; provided,
however that, each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement with respect to each of the Revolving Advances and/or Term Loans
under this Agreement in which such Lender has an interest. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Revolving Commitment Percentage and/or Term Loan Commitment
Percentage, as applicable, as set forth therein, and (ii) the transferor Lender
thereunder shall, to the extent provided in such Commitment Transfer Supplement,
be released from its obligations under this Agreement, the Commitment Transfer
Supplement creating a novation for that purpose. Such Commitment Transfer
Supplement shall be deemed to amend this Agreement to the extent, and only to
the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting adjustment of the Revolving Commitment Percentages and/or Term Loan
Commitment Percentages, as applicable, arising from the purchase by such
Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Each Borrower
hereby consents to the addition of such Purchasing Lender and the resulting
adjustment of the Revolving Commitment Percentages or Term Loan Commitment
Percentages, as applicable, arising from the purchase by such Purchasing Lender
of all or a portion of the rights and obligations of such transferor Lender
under this Agreement and the Other Documents. Borrowers shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing.

(d) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may directly or indirectly sell, assign or transfer all or
any portion of its rights and obligations under or relating to Revolving
Advances and/or Term Loans under this Agreement and the Other Documents to an
entity, whether a corporation, partnership, trust, limited liability company or
other entity that (i) is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course
of its business and (ii) is administered, serviced or managed by the assigning
Lender or an Affiliate of such Lender (a “Purchasing CLO” and together with each
Participant and Purchasing Lender, each a “Transferee” and collectively the
“Transferees”), pursuant to a Commitment Transfer Supplement modified as
appropriate to reflect the interest being assigned (“Modified Commitment
Transfer Supplement”), executed by any intermediate purchaser, the Purchasing
CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for
recording. Upon such execution and delivery, from and after the transfer
effective date determined pursuant

 

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to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder
shall be a party hereto and, to the extent provided in such Modified Commitment
Transfer Supplement, have the rights and obligations of a Lender thereunder and
(ii) the transferor Lender thereunder shall, to the extent provided in such
Modified Commitment Transfer Supplement, be released from its obligations under
this Agreement, the Modified Commitment Transfer Supplement creating a novation
for that purpose. Such Modified Commitment Transfer Supplement shall be deemed
to amend this Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing CLO. Each Borrower hereby consents to
the addition of such Purchasing CLO. Borrowers shall execute and deliver such
further documents and do such further acts and things in order to effectuate the
foregoing.

(e) Agent shall maintain at its address a copy of each Commitment Transfer
Supplement and Modified Commitment Transfer Supplement delivered to it and a
register (the “Register”) for the recordation of the names and addresses of each
Lender and the outstanding principal, accrued and unpaid interest and other fees
due hereunder. The entries in the Register shall be conclusive, in the absence
of manifest error, and each Borrower, Agent and Lenders may treat each Person
whose name is recorded in the Register as the owner of the Advance recorded
therein for the purposes of this Agreement. The Register shall be available for
inspection by Borrowing Agent or any Lender at any reasonable time and from time
to time upon reasonable prior notice. Agent shall receive a fee in the amount of
$3,500 payable by the applicable Purchasing Lender and/or Purchasing CLO upon
the effective date of each transfer or assignment (other than to an intermediate
purchaser) to such Purchasing Lender and/or Purchasing CLO.

(f) Each Borrower authorizes each Lender to disclose to any Transferee and any
prospective Transferee any and all financial information in such Lender’s
possession concerning such Borrower which has been delivered to such Lender by
or on behalf of such Borrower pursuant to this Agreement or in connection with
such Lender’s credit evaluation of such Borrower.

(g) Notwithstanding anything to the contrary contained in this Agreement, any
Lender may at any time and from time to time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided, that, no such pledge or
assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.

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

 

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16.5. Indemnity. EACH BORROWER SHALL DEFEND, PROTECT, INDEMNIFY, PAY AND SAVE
HARMLESS AGENT, ISSUER, EACH LENDER AND EACH OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, AFFILIATES, ATTORNEYS, EMPLOYEES AND AGENTS (EACH AN “INDEMNIFIED
PARTY”) FOR AND FROM AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, FINES, ACTIONS, JUDGMENTS, SUITS,
COSTS, CHARGES, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER
(INCLUDING FEES AND DISBURSEMENTS OF COUNSEL (INCLUDING ALLOCATED COSTS OF
INTERNAL COUNSEL)) (COLLECTIVELY, “CLAIMS”) WHICH MAY BE IMPOSED ON, INCURRED
BY, OR ASSERTED AGAINST ANY INDEMNIFIED PARTY IN ARISING OUT OF OR IN ANY WAY
RELATING TO OR AS A CONSEQUENCE, DIRECT OR INDIRECT, OF: (I) THIS AGREEMENT, THE
OTHER DOCUMENTS, THE ADVANCES AND OTHER OBLIGATIONS AND/OR THE TRANSACTIONS
CONTEMPLATED HEREBY INCLUDING THE TRANSACTIONS, (II) ANY ACTION OR FAILURE TO
ACT OR ACTION TAKEN ONLY AFTER DELAY OR THE SATISFACTION OF ANY CONDITIONS BY
ANY INDEMNIFIED PARTY IN CONNECTION WITH AND/OR RELATING TO THE NEGOTIATION,
EXECUTION, DELIVERY OR ADMINISTRATION OF THE AGREEMENT AND THE OTHER DOCUMENTS,
THE CREDIT FACILITIES ESTABLISHED HEREUNDER AND THEREUNDER AND/OR THE
TRANSACTIONS CONTEMPLATED HEREBY INCLUDING THE TRANSACTIONS, (III) ANY CREDIT
PARTY’S FAILURE TO OBSERVE, PERFORM OR DISCHARGE ANY OF ITS COVENANTS,
OBLIGATIONS, AGREEMENTS OR DUTIES UNDER OR BREACH OF ANY OF THE REPRESENTATIONS
OR WARRANTIES MADE IN THIS AGREEMENT AND THE OTHER DOCUMENTS, (IV) THE
ENFORCEMENT OF ANY OF THE RIGHTS AND REMEDIES OF AGENT, ISSUER OR ANY LENDER
UNDER THE AGREEMENT AND THE OTHER DOCUMENTS, (V) ANY THREATENED OR ACTUAL
IMPOSITION OF FINES OR PENALTIES, OR DISGORGEMENT OF BENEFITS, FOR VIOLATION OF
ANY ANTI-TERRORISM LAW BY ANY BORROWER, ANY AFFILIATE OR SUBSIDIARY OF ANY
CREDIT PARTY, AND (VI) ANY CLAIM, LITIGATION, PROCEEDING OR INVESTIGATION
INSTITUTED OR CONDUCTED BY ANY GOVERNMENTAL BODY OR INSTRUMENTALITY OR ANY OTHER
PERSON WITH RESPECT TO ANY ASPECT OF, OR ANY TRANSACTION CONTEMPLATED BY, OR
REFERRED TO IN, OR ANY MATTER RELATED TO, THIS AGREEMENT OR THE OTHER DOCUMENTS,
WHETHER OR NOT AGENT OR ANY LENDER IS A PARTY THERETO. WITHOUT LIMITING THE
GENERALITY OF ANY OF THE FOREGOING, EACH BORROWER SHALL DEFEND, PROTECT,
INDEMNIFY, PAY AND SAVE HARMLESS EACH INDEMNIFIED PARTY FROM (X) ANY CLAIMS
WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY INDEMNIFIED PARTY
ARISING OUT OF OR IN ANY WAY RELATING TO OR AS A CONSEQUENCE, DIRECT OR
INDIRECT, OF THE ISSUANCE OF ANY LETTER OF CREDIT HEREUNDER AND (Y) ANY CLAIMS
WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST ANY INDEMNIFIED PARTY
UNDER ANY ENVIRONMENTAL LAWS WITH RESPECT TO OR IN CONNECTION WITH THE REAL
PROPERTY, ANY HAZARDOUS DISCHARGE, THE PRESENCE OF ANY HAZARDOUS MATERIALS
AFFECTING THE REAL PROPERTY (WHETHER OR NOT THE SAME ORIGINATES OR EMERGES FROM
THE REAL PROPERTY OR ANY CONTIGUOUS REAL ESTATE), INCLUDING ANY

 

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CLAIMS CONSISTING OF OR RELATING TO THE IMPOSITION OR ASSERTION OF ANY LIEN ON
ANY OF THE REAL PROPERTY UNDER ANY ENVIRONMENTAL LAWS AND ANY LOSS OF VALUE OF
THE REAL PROPERTY AS A RESULT OF THE FOREGOING EXCEPT TO THE EXTENT SUCH LOSS,
LIABILITY, DAMAGE AND EXPENSE IS ATTRIBUTABLE TO ANY HAZARDOUS DISCHARGE
RESULTING FROM ACTIONS ON THE PART OF AGENT OR ANY LENDER. BORROWERS’
OBLIGATIONS UNDER THIS SECTION 16.5 SHALL ARISE UPON THE DISCOVERY OF THE
PRESENCE OF ANY HAZARDOUS MATERIALS AT THE REAL PROPERTY, WHETHER OR NOT ANY
FEDERAL, STATE, OR LOCAL ENVIRONMENTAL AGENCY HAS TAKEN OR THREATENED ANY ACTION
IN CONNECTION WITH THE PRESENCE OF ANY HAZARDOUS MATERIALS, IN EACH SUCH CASE
EXCEPT TO THE EXTENT THAT ANY OF THE FOREGOING ARISES OUT OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF THE INDEMNIFIED PARTY (AS DETERMINED BY A
COURT OF COMPETENT JURISDICTION IN A FINAL AND NON-APPEALABLE JUDGMENT). WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, THIS INDEMNITY SHALL EXTEND TO ANY
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER (INCLUDING
FEES AND DISBURSEMENTS OF COUNSEL) ASSERTED AGAINST OR INCURRED BY ANY OF THE
INDEMNIFIED PARTIES BY ANY PERSON UNDER ANY ENVIRONMENTAL LAWS OR SIMILAR LAWS
BY REASON OF ANY BORROWER’S OR ANY OTHER PERSON’S FAILURE TO COMPLY WITH LAWS
APPLICABLE TO SOLID OR HAZARDOUS WASTE MATERIALS, INCLUDING HAZARDOUS MATERIALS
AND HAZARDOUS WASTE, OR OTHER TOXIC SUBSTANCES. Additionally, if any taxes
(excluding taxes imposed upon or measured solely by the net income of Agent and
Lenders, but including any intangibles taxes, stamp tax, recording tax or
franchise tax) shall be payable by Agent, Lenders or Borrowers on account of the
execution or delivery of this Agreement, or the execution, delivery, issuance or
recording of any of the Other Documents, or the creation or repayment of any of
the Obligations hereunder, by reason of any Applicable Law now or hereafter in
effect, Borrowers will pay (or will promptly reimburse Agent and Lenders for
payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the Indemnified Parties harmless from and against all
liability in connection therewith.

16.6. Notice. Any notice or request hereunder may be given to Borrowing Agent or
any Borrower or to Agent or any Lender at their respective addresses set forth
below or at such other address as may hereafter be specified in a notice
designated as a notice of change of address under this Section. Any notice,
request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Agreement shall be given or made by telephone or in
writing (which includes by means of electronic transmission (i.e., “e-mail”) or
facsimile transmission or by setting forth such Notice on a website to which
Borrowers are directed (an “Internet Posting”) if Notice of such Internet
Posting (including the information necessary to access such site) has previously
been delivered to the applicable parties hereto by another means set forth in
this Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:

(a) In the case of hand-delivery, when delivered;

 

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(b) If given by mail, four (4) days after such Notice is deposited with the
United States Postal Service, with first-class postage prepaid, return receipt
requested;

(c) In the case of a telephonic Notice, when a party is contacted by telephone,
if delivery of such telephonic Notice is confirmed no later than the next
Business Day by hand delivery, a facsimile or electronic transmission, an
Internet Posting or an overnight courier delivery of a confirmatory Notice
(received at or before 12:00 p.m. on such next Business Day);

(d) In the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number, if the party sending such Notice receives
confirmation of the delivery thereof from its own facsimile machine;

(e) In the case of electronic transmission, when actually received;

(f) In the case of an Internet Posting, upon delivery of a Notice of such
posting (including the information necessary to access such site) by another
means set forth in this Section 16.6; and

(g) If given by any other means (including by overnight courier), when actually
received.

Any Lender giving a Notice to Borrowing Agent or any Borrower shall concurrently
send a copy thereof to Agent, and Agent shall promptly notify the other Lenders
of its receipt of such Notice.

 

  (A) If to Agent or PNC at:

PNC Bank, National Association

2100 Ross Avenue, Suite 1850

Dallas, Texas 75201

Attention:    Relationship Manager (Flotek) Telephone:    (214) 871-1256
Facsimile:    (214) 871-2015

with a copy to:

PNC Bank, National Association

Two Tower Center Boulevard

East Brunswick, New Jersey 08816

Attention: Josephine Griffin

Telephone: (732) 220-4388

Facsimile: (732) 220-4538

 

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with an additional copy to:

Patton Boggs LLP

2000 McKinney Avenue, Suite 1700

Dallas, Texas 75201

Attention: Anthony J. Herrera

Telephone: (214) 758-1500

Facsimile: (214) 758-1550

 

  (B) If to a Lender other than Agent, as specified on the signature pages
hereof

 

  (C) If to Borrowing Agent or any Borrower:

Flotek Industries, Inc

10603 W. Sam Houston Parkway North, Suite 300

Houston, Texas 77064

Attention: H. Richard Walton

Telephone: 713-849-9911

Facsimile: 713-896-4511

with a copy to:

Doherty & Doherty LLP

1717 St. James Place, Suite 520

Houston, TX 77056

Attention: Casey W. Doherty, Sr.

Telephone: 713) 572-1165

Facsimile: (713) 572-1001

16.7. Survival. The obligations of Borrowers under Sections 2.2(f), 2.2(g),
2.2(h), 3.7, 3.8, 3.9, 3.10, 16.5 and 16.9 and the obligations of Lenders under
Sections 2.2, 2.15(b), 2.16, 2.18, 2.19, 14.8 and 16.5, shall survive
termination of this Agreement and the Other Documents and payment in full of the
Obligations.

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

16.9. Expenses. Borrowers shall pay (i) all out-of-pocket expenses incurred by
Agent, PNC Capital Markets and any of their Affiliates (including the reasonable
fees, charges and disbursements of counsel for Agent), and shall pay all fees
and time charges and disbursements for attorneys who may be employees of Agent,
in connection with the syndication of the credit facilities provided for herein,
the preparation, negotiation, execution, delivery and administration of this
Agreement and the Other Documents or any amendments, modifications or waivers of
the provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the Issuer in connection with the issuance, amendment, renewal or
extension of any Letter of Credit or any demand for payment thereunder,
(iii) all out-of-pocket expenses incurred by Agent, any Lender or the Issuer

 

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(including the fees, charges and disbursements of any counsel for Agent, any
Lender or the Issuer), and shall pay all fees and time charges for attorneys who
may be employees of Agent, any Lender or the Issuer, in connection with the
enforcement or protection of its rights (A) in connection with this Agreement
and the Other Documents, including its rights under this Section, or (B) in
connection with the Advances made or Letters of Credit issued hereunder,
including all such out-of-pocket expenses incurred during any workout,
restructuring or negotiations in respect of such Loans or Letters of Credit, and
(iv) all reasonable out-of-pocket expenses of Agent’s regular employees and
agents engaged periodically to perform audits of the Credit Parties’ books,
records and business properties.

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

16.11. Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Credit Party (or any Affiliate
of any such Person) for indirect, punitive, exemplary or consequential damages
arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations or as a result of
any transaction contemplated under this Agreement or any Other Document.

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

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

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

16.15. Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in confidence
and accordance with Agent’s, such Lender’s and such Transferee’s customary
procedures for handling confidential information of this nature; provided,
however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, Affiliates, outside auditors, counsel and
other professional advisors, (b) to Agent, any Lender or to any prospective
Transferees, and (c) as required or requested by any Governmental Body or
representative thereof or pursuant to legal process; provided, further that,
(i) unless specifically prohibited by Applicable Law, Agent, each Lender and
each Transferee shall use its reasonable best efforts prior to disclosure
thereof, to

 

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notify the applicable Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall Agent, any Lender or any Transferee
be obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the
provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement. Notwithstanding any non-disclosure agreement or
similar document executed by Agent in favor of any Borrower or any of any
Borrower’s affiliates, the provisions of this Agreement shall supersede such
agreements.

16.16. Publicity. Each Borrower and each Lender hereby authorizes Agent to make
appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including announcements which are commonly known
as tombstones, in such publications and to such selected parties as Agent shall
in its sole and absolute discretion deem appropriate.

16.17. Certifications From Banks and Participants; USA PATRIOT Act.

(a) Each Lender or assignee or participant of a Lender that is not incorporated
under the Laws of the United States of America or a state thereof (and is not
excepted from the certification requirement contained in Section 313 of the USA
PATRIOT Act and the applicable regulations because it is both (i) an affiliate
of a depository institution or foreign bank that maintains a physical presence
in the United States or foreign country, and (ii) subject to supervision by a
banking authority regulating such affiliated depository institution or foreign
bank) shall deliver to Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a “shell” and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within ten (10) days after the Closing Date, and
(2) as such other times as are required under the USA PATRIOT Act.

(b) The USA PATRIOT Act requires all financial institutions to obtain, verify
and record certain information that identifies individuals or business entities
which open an “account” with such financial institution. Consequently, Lender
may from time to time request, and each Borrower shall provide to Lender, such
Borrower’s name, address, tax identification number and/or such other
identifying information as shall be necessary for Lender to comply with the USA
PATRIOT Act and any other Anti-Terrorism Law.

 

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16.18. Anti-Money Laundering/International Trade Law Compliance. Each Borrower
represents and warrants to Agent, as of the date of this Agreement, the date of
each Advance, the date of any renewal, extension or modification of this
Agreement, and at all times until this Agreement has been terminated and all
Obligations have been indefeasibly paid in full, that: (a) no Covered Entity
(i) is a Sanctioned Person; (ii) has any of its assets in a Sanctioned Country
or in the possession, custody or control of a Sanctioned Person; or (iii) does
business in or with, or derives any of its operating income from investments in
or transactions with, any Sanctioned Country or Sanctioned Person in violation
of any law, regulation, order or directive enforced by any Compliance Authority;
(b) the Advances will not be used to fund any operations in, finance any
investments or activities in, or, make any payments to, a Sanctioned Country or
Sanctioned Person in violation of any law, regulation, order or directive
enforced by any Compliance Authority; (c) the funds used to repay the
Obligations are not derived from any unlawful activity; and (d) each Covered
Entity is in compliance with, and no Covered Entity engages in any dealings or
transactions prohibited by, any laws of the United States, including but not
limited to any Anti-Terrorism Laws. Borrowers covenant and agree that they shall
immediately notify Agent in writing upon the occurrence of a Reportable
Compliance Event.

16.19. Concerning Joint and Several Liability of Borrowers.

(a) Each of Borrowers is accepting joint and several liability hereunder in
consideration of the financial accommodations to be provided by Lenders under
this Agreement, for the mutual benefit, directly and indirectly, of each of
Borrowers and in consideration of the undertakings of each of Borrowers to
accept joint and several liability for the obligations of each of them.

(b) Each of Borrowers jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers with respect to the payment and
performance of all of the Obligations, it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
each of Borrowers without preferences or distinction among them.

(c) If and to the extent that any of the Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such
event, the other Borrowers will make such payment with respect to, or perform,
such Obligation.

(d) The obligations of each Borrower under the provisions of this Section 16.19
constitute full recourse obligations of such Borrower, enforceable against it to
the full extent of its properties and assets, irrespective of the validity,
regularity or enforceability of this Agreement or any other circumstances
whatsoever.

(e) Except as otherwise expressly provided herein, each Borrower hereby waives
notice of acceptance of its joint and several liability, notice of any Advance
made under this Agreement, notice of occurrence of any Event of Default, or of
any demand for any payment under this Agreement (except as otherwise provided
herein), notice of any action at any time taken or omitted by any Lender under
or in respect of any of the Obligations, any requirement of diligence and,
generally, all demands, notices and other formalities of every kind in
connection

 

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with this Agreement. Each Borrower hereby assents to, and waives notice of, any
extension or postponement of the time for the payment of any of the Obligations,
the acceptance of any partial payment thereon, any waiver, consent or other
action or acquiescence by any Lender at any time or times in respect of any
default by any Borrower in the performance or satisfaction of any term,
covenant, condition or provision of this Agreement, any and all other
indulgences whatsoever by any Lender in respect of any of the Obligations, and
the taking, addition, substitution or release, in whole or in part, at any time
or times, of any security for any of the Obligations or in part, at any time or
times, of any security for any of the Obligations or the addition, substitution
or release, in whole or in part, of any Borrower. Without limiting the
generality of the foregoing, each Borrower assents to any other action or delay
in acting or failure to act on the part of any Lender, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with the applicable laws or regulations thereunder
which might, but for the provisions of this Section 16.19, afford grounds for
terminating, discharging or relieving such Borrower, in whole or in part, from
any of its obligations under this Section 16.19, it being the intention of each
Borrower that, so long as any of the Obligations remain unsatisfied, the
obligations of such Borrower under this Section 16.19 shall not be discharged
except by performance and then only to the extent of such performance or except
as otherwise agreed in writing in accordance with Section 16.2. The Obligations
of each Borrower under this Section 16.19 shall not be diminished or rendered
unenforceable by any winding up, reorganization, arrangement, liquidation,
reconstruction or similar proceeding with respect to any Borrower or any Lender.
The joint and several liability of Borrowers hereunder shall continue in full
force and effect notwithstanding any absorption, merger, amalgamation or any
other change whatsoever in the name, membership, constitution or place of
formation of any Borrower or any Lender.

(f) The provisions of this Section 16.19 are made for the benefit of the Lenders
and their respective successors and assigns, and may be enforced by any such
Person from time to time against any of the Borrowers as often as occasion
therefor may arise and without requirement on the part of any Lender first to
marshal any of its claims or to exercise any of its rights against any of the
other Borrowers or to exhaust any remedies available to it against any of the
other Borrowers or to resort to any other source or means of obtaining payment
of any of the Obligations or to elect any other remedy. The provisions of this
Section 16.19 shall remain in effect until all the Obligations shall have been
paid in full or otherwise fully satisfied. If at any time, any payment, or any
part thereof, made in respect of any of the Obligations, is rescinded or must
otherwise be restored or returned by any Lender upon the insolvency, bankruptcy
or reorganization of any of the Borrowers, or otherwise, the provisions of this
Section 16.19 will forthwith be reinstated in effect, as though such payment had
not been made.

(g) Notwithstanding any provision to the contrary contained herein or in any
other of the Other Documents, to the extent the joint obligations of a Borrower
shall be adjudicated to be invalid or unenforceable for any reason (including,
without limitation, because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of each Borrower
hereunder shall be limited to the maximum amount that is permissible under
Applicable Law (whether federal or state and including, without limitation, any
federal or state bankruptcy laws).

 

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(h) Borrowers hereby agree, as among themselves, that if any Borrower shall
become an Excess Funding Borrower (as defined below), each other Borrower shall,
on demand of such Excess Funding Borrower (but subject to the next sentence
hereof and to subsection (B) below), pay to such Excess Funding Borrower an
amount equal to such Borrower’s Pro Rata Share (as defined below and determined,
for this purpose, without reference to the properties, assets, liabilities and
debts of such Excess Funding Borrower) of such Excess Payment (as defined
below). The payment obligation of any Borrower to any Excess Funding Borrower
under this Section 16.19(h) shall be subordinate and subject in right of payment
to the prior payment in full of the Obligations of such Borrower under the other
provisions of this Agreement, and such Excess Funding Borrower shall not
exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all of such Obligations. For purposes hereof,
(i) “Excess Funding Borrower” shall mean, in respect of any Obligations arising
under the other provisions of this Agreement (hereafter, the “Joint
Obligations”), a Borrower that has paid an amount in excess of its Pro Rata
Share of the Joint Obligations; (ii) “Excess Payment” shall mean, in respect of
any Joint Obligations, the amount paid by an Excess Funding Borrower in excess
of its Pro Rata Share of such Joint Obligations; and (iii) “Pro Rata Share”, for
the purposes of this Section 16.19(h), shall mean, for any Borrower, the ratio
(expressed as a percentage) of (A) the amount by which the aggregate present
fair salable value of all of its assets and properties exceeds the amount of all
debts and liabilities of such Borrower (including contingent, subordinated,
unmatured, and unliquidated liabilities, but excluding the obligations of such
Borrower hereunder) to (B) the amount by which the aggregate present fair
salable value of all assets and other properties of such Borrower and all of the
other Borrowers exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of such Borrower and the other Borrowers
hereunder) of such Borrower and all of the other Borrowers, all as of the
Closing Date (if any Borrower becomes a party hereto subsequent to the Closing
Date, then for the purposes of this Section 16.19(h) such subsequent Borrower
shall be deemed to have been a Borrower as of the Closing Date and the
information pertaining to, and only pertaining to, such Borrower as of the date
such Borrower became a Borrower shall be deemed true as of the Closing Date)
notwithstanding the payment obligations imposed on Borrowers in this Section,
the failure of a Borrower to make any payment to an Excess Funding Borrower as
required under this Section shall not constitute an Event of Default.

16.20. No Advisory or Fiduciary Relationship. In connection with all aspects of
each transaction contemplated hereby (including in connection with any
amendment, waiver or other modification hereof or of any Other Document), each
Borrower acknowledges and agrees that: (a)(i) the arranging and other services
regarding this Agreement provided by Agent are arm’s-length commercial
transactions between Borrowers, on the one hand, and Agent on the other hand,
(ii) each Borrower has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate, and (iii) each Borrower is
capable of evaluating, and understands and accepts, the terms, risks and
conditions of the transactions contemplated hereby and by the Other Documents;
(b)(i) each of Agent and Lenders is and has been acting solely as a principal
and, except as expressly agreed in writing by the relevant parties, has not
been, is not, and will not be acting as an advisor, agent or fiduciary for any
Credit Party, or any other Person and (ii) none of Agent or any Lender has any
obligation to any Credit Party, or any of their respective Affiliates with
respect to the transactions contemplated hereby except those obligations
expressly set forth herein and in the Other Documents; and (c) Agent and Lenders

 

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may be engaged in a broad range of transactions that involve interests that
differ from those of any Credit Party, and their respective Affiliates, and
neither Agent nor any Lender has any obligation to disclose any of such
interests to any Credit Party, or any of their respective Affiliates. To the
fullest extent permitted by law, each Borrower hereby waives and releases any
claims that it may have against each of Agent and Lenders with respect to any
breach or alleged breach of agency or fiduciary duty in connection with any
aspect of any transaction contemplated hereby.

16.21. Non-Applicability of Chapter 346. Borrowers, Agent and the Lenders hereby
agree that, except for the opt-out provisions of Section 346.004 thereof, the
provisions of Chapter 346 of the Texas Finance Code, as amended from time to
time (regulating certain revolving credit loans and revolving tri-party
accounts) shall not apply to this Agreement or any of the Other Documents, and
the extensions of credit made hereunder are not for personal, family or
household use.

16.22. BORROWERS’ WAIVER OF RIGHTS UNDER TEXAS DECEPTIVE TRADE PRACTICES ACT.
EACH BORROWER HEREBY WAIVES ANY RIGHTS UNDER THE DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, SECTION § 17.41 ET SEQ. TEXAS BUSINESS &
COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER
CONSULTATION WITH AN ATTORNEY OF THE OBLIGORS’ OWN SELECTION, EACH OBLIGOR
VOLUNTARILY CONSENTS TO THIS WAIVER. EACH BORROWER EXPRESSLY WARRANTS AND
REPRESENTS THAT EACH PERSON (A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING
POSITION RELATIVE TO LENDER, AND (B) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

16.23. Amendment and Restatement.

(a) The parties hereto acknowledge and agree that (i) this Agreement and the
Other Documents, whether executed and delivered in connection herewith or
otherwise, do not constitute a novation or repayment and re-borrowing of the
Advances and the other Obligations under the Original Credit Agreement or the
Other Documents (as defined in the Original Credit Agreement) as in effect prior
to the Closing Date and which remain outstanding as of the Closing Date,
(ii) the Obligations under the Original Credit Agreement and the Other Documents
(as defined in the Original Credit Agreement) are in all respects continuing (as
amended and restated and converted hereby and which are in all respects
hereinafter subject to the terms herein) and (iii) the Liens and security
interests as granted under the Credit Agreement and the applicable Other
Documents (as defined in the Original Credit Agreement) securing payment of such
Obligations (as defined in the Original Credit Agreement) are in all respects
continuing and in full force and effect and are reaffirmed hereby.

(b) The parties hereto acknowledge and agree that on and after the Closing Date,
(i) all references to the Credit Agreement or the Other Documents shall be
deemed to refer to the Original Credit Agreement, as amended and restated
hereby, (ii) all references to any section (or subsection) of the Original
Credit Agreement or the Other Documents shall be amended to become, mutatis
mutandis, references to the corresponding provisions of this

 

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Agreement and (iii) except as the context otherwise provides, on or after the
Closing Date, all references to this Agreement herein (including for purposes of
indemnification and reimbursement of fees) shall be deemed to be references to
the Original Credit Agreement as amended and restated hereby.

(c) The parties hereto acknowledge and agree that this amendment and restatement
is limited as written and is not a consent to any other amendment, restatement
or waiver or other modification, whether or not similar and, except as expressly
provided herein or in any Other Document, all terms and conditions of this
Agreement and the Other Documents remain in full force and effect unless
otherwise specifically amended hereby or by any Other Documents.

[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

 

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

 

FLOTEK INDUSTRIES, INC., a Delaware corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President CESI CHEMICAL, INC., an
Oklahoma corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO CESI MANUFACTURING, LLC, an Oklahoma limited
liability company By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO MATERIAL TRANSLOGISTICS, INC., a Texas
corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President TELEDRIFT COMPANY, a Delaware
corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President TURBECO, INC., a Texas
corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

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

USA PETROVALVE, INC., a Texas corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President FLOTEK ACQUISITION INC., a
Delaware corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President And upon consummation of the
transactions contemplated by the Merger Agreement: FLORIDA CHEMICAL COMPANY,
INC., a Delaware corporation By:  

/s/ John Chisholm

Name:   John Chisholm Title:   CEO and President

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

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

PNC BANK, NATIONAL ASSOCIATION, as Lender and as Agent By:  

/s/ Anita Inkollu

Name:   Anita Inkollu Title:   Vice President

PNC Bank, National Association 2100 Ross Avenue, Suite 1850 Dallas, Texas 75201
Attention:   Relationship Manager (Flotek) Telephone:   (214) 871-1256
Facsimile:   (214) 871-2015 Revolving Commitment Percentage: 100% Revolving
Commitment Amount $75,000,000 Term Loan Commitment Percentage: 100% Term Loan
Commitment Amount $50,000,000

 

[SIGNATURE PAGE TO CREDIT AGREEMENT]

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Schedule 6.15

Post-Closing Obligations

1. No later than five (5) days after the Closing Date, Agent shall have
received, in form and substance satisfactory to Agent, evidence of the release
of the federal tax lien filed against Flotek Paymaster, Inc. by the United
States Department of Treasury in Harris County, Texas.

2. No later than ten (10) days after the Closing Date, Agent shall have received
good standing certificates (or the equivalent thereof issued by any applicable
jurisdiction) from each of the following states indicated opposite the
applicable Credit Party name:

Florida Chemical: Florida, Minnesota, New Jersey, Texas and West Virginia

Turbeco, Inc.: North Dakota

USA Petrovalve, Inc.: New Mexico

3. No later than ten (10) days after the Closing Date, Agent shall have received
appropriate additional insured endorsements in form and substance satisfactory
to Agent, naming Agent as an additional insured as its interests may appear with
respect to all insurance coverage referred to in Section 6.6 hereof.

4. No later than fifteen (15) days after the Closing Date, Agent shall have
received the executed legal opinion of Lowndes, Drosdick, Doster, Kantor & Reed,
P.A. in form and substance satisfactory to Agent which shall cover such matters
incident to the transactions contemplated by this Agreement, the Other
Documents, and related agreements as Agent may reasonably require and Borrower
hereby authorizes and directs such counsel to deliver such opinions to Agent.

5. No later than thirty (30) days after the Closing Date, (i) Borrowers shall
cause the Credit Parties’ deposit accounts established with JPMorgan Chase Bank,
N.A. and Bank of America, N.A. to each be subject to a deposit account control
agreement in form and substance satisfactory to Agent or (ii) Borrower shall
have delivered to Agent, in form and substance satisfactory to Agent, evidence
that such accounts have been closed.

6. No later than ninety (90) days after the Closing Date, Agent shall have
received appraisals with respect to Borrowers’ equipment and Inventory, the
results of which are satisfactory in form and substance to Agent.