Exhibit 10.1

 

 

 

Execution Version

REVOLVING CREDIT, TERM LOAN

AND

SECURITY AGREEMENT

PNC BANK, NATIONAL ASSOCIATION

(AS LENDER AND AS AGENT)

WITH

enservco corporation,

dillco fluid service, inc.

AND

heat waves hot oil services llc

(BORROWERS)

November 2, 2012

 

 

 
 

TABLE OF CONTENTS

      Page         I. DEFINITIONS 1   1.1 Accounting Terms 1   1.2 General Terms
1   1.3 Uniform Commercial Code Terms 21   1.4 Certain Matters of Construction
22  II. ADVANCES, PAYMENTS 22   2.1 Revolving Advances 22   2.2 Procedure for
Revolving Advances Borrowing 23   2.3 Disbursement of Advance Proceeds 25   2.4
Term Loan 25   2.5 Maximum Advances 26   2.6 Repayment of Advances 26   2.7
Repayment of Excess Advances 27   2.8 Statement of Account 27   2.9 Letters of
Credit 27   2.10 Issuance of Letters of Credit 27   2.11 Requirements For
Issuance of Letters of Credit 28   2.12 Disbursements, Reimbursement 28   2.13
Repayment of Participation Advances 30   2.14 Documentation 30   2.15
Determination to Honor Drawing Request 30   2.16 Nature of Participation and
Reimbursement Obligations 31   2.17 Indemnity 32   2.18 Liability for Acts and
Omissions 32   2.19 Additional Payments 34   2.20 Manner of Borrowing and
Payment 34   2.21 Mandatory Prepayments 35   2.22 Use of Proceeds 36   2.23
Defaulting Lender 36 III. INTEREST AND FEES 37   3.1 Interest 37   3.2 Letter of
Credit Fees 38   3.3 Facility Fee 38   3.4 Fee Letter 39   3.5 Computation of
Interest and Fees 39   3.6 Maximum Charges 39   3.7 Increased Costs 39   3.8
Basis For Determining Interest Rate Inadequate or Unfair 40   3.9 Capital
Adequacy 40   3.10 Gross Up for Taxes 41   3.11 Withholding Tax Exemption 41 IV.
COLLATERAL: GENERAL TERMS 42   4.1 Security Interest in the Collateral 42   4.2
Perfection of Security Interest 42   4.3 Disposition of Collateral 43   4.4
Preservation of Collateral 43   4.5 Ownership of Collateral 43   4.6 Defense of
Agent’s and Lenders’ Interests 44

 

 

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TABLE OF CONTENTS

(continued)

 

      Page           4.7 Books and Records 44   4.8 Financial Disclosure 45  
4.9 Compliance with Laws 45   4.10 Inspection of Premises 45   4.11 Insurance 45
  4.12 Failure to Pay Insurance 46   4.13 Payment of Taxes 46   4.14 Payment of
Leasehold Obligations 47   4.15 Receivables 47   4.16 Inventory 49   4.17
Maintenance of Equipment 49   4.18 Exculpation of Liability 50   4.19
Environmental Matters 50   4.20 Financing Statements 52   4.21 Appraisals 52  V.
REPRESENTATIONS AND WARRANTIES. 52   5.1 Authority 52   5.2 Formation and
Qualification 53   5.3 Survival of Representations and Warranties 53   5.4 Tax
Returns 53   5.5 Financial Statements 53   5.6 Entity Names 54   5.7 O.S.H.A.
and Environmental Compliance 54   5.8 Solvency; No Litigation, Violation,
Indebtedness or Default 54   5.9 Patents, Trademarks, Copyrights and Licenses 56
  5.10 Licenses and Permits 56   5.11 Default of Indebtedness 56   5.12 No
Default 56   5.13 No Burdensome Restrictions 56   5.14 No Labor Disputes 57  
5.15 Margin Regulations 57   5.16 Investment Company Act 57   5.17 Disclosure 57
  5.18 Swaps 57   5.19 Conflicting Agreements 57   5.20 Application of Certain
Laws and Regulations 57   5.21 Business and Property of Borrowers 58   5.22
Section 20 Subsidiaries 58   5.23 Anti-Terrorism Laws 58   5.24 Trading with the
Enemy 59   5.25 Federal Securities Laws 59  VI. AFFIRMATIVE COVENANTS. 59   6.1
Payment of Fees 59   6.2 Conduct of Business and Maintenance of Existence and
Assets 59   6.3 Violations 59   6.4 Government Receivables 59   6.5 Financial
Covenants 60   6.6 Execution of Supplemental Instruments 60   6.7 Payment of
Indebtedness 60

 

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TABLE OF CONTENTS

(continued)

 

 

      Page           6.8 Standards of Financial Statements 60   6.9 Federal
Securities Laws 61   6.10 Vehicle Titles 61   6.11 Termination Statements 61  
6.12 Interest Rate Protection Agreement 61   6.13 Affiliate Bankruptcy 61  VII.
NEGATIVE COVENANTS. 61   7.1 Merger, Consolidation, Acquisition and Sale of
Assets 61   7.2 Creation of Liens 62   7.3 Guarantees 62   7.4 Investments 62  
7.5 Loans 62   7.6 Capital Expenditures 62   7.7 Dividends 62   7.8 Indebtedness
62   7.9 Nature of Business 62   7.10 Transactions with Affiliates 63   7.11
Leases 63   7.12 Subsidiaries 63   7.13 Fiscal Year and Accounting Changes 63  
7.14 Pledge of Credit 63   7.15 Amendment of Articles or Certificate of
Incorporation, By-Laws Certificate of Formation, Operating Agreement 63   7.16
Compliance with ERISA 63   7.17 Prepayment of Indebtedness 64   7.18
Anti-Terrorism Laws 64   7.19 Membership/Partnership Interests 64   7.20 Trading
with the Enemy Act 64   7.21 Subordinated Debt 64  VIII. CONDITIONS PRECEDENT.
65   8.1 Conditions to Initial Advances 65   8.2 Conditions to Each Advance 68
IX. INFORMATION AS TO BORROWERS. 68   9.1 Disclosure of Material Matters 68  
9.2 Schedules 69   9.3 Environmental Reports 69   9.4 Litigation 69   9.5
Material Occurrences 69   9.6 Government Receivables 70   9.7 Annual Financial
Statements 70   9.8 Quarterly Financial Statements 70   9.9 Monthly Financial
Statements 70   9.10 Other Reports 70   9.11 Additional Information 70   9.12
Projected Operating Budget 71   9.13 Material Variances From Operating Budget,
Management Discussion and Analysis 71   9.14 Notice of Suits, Adverse Events 71

 

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TABLE OF CONTENTS

(continued)

 

      Page           9.15 ERISA Notices and Requests 71   9.16 Additional
Documents 72 X. EVENTS OF DEFAULT. 72   10.1 Nonpayment 72   10.2 Breach of
Representation 72   10.3 Financial Information 72   10.4 Judicial Actions 73  
10.5 Noncompliance 73   10.6 Judgments 73   10.7 Bankruptcy 73   10.8 Inability
to Pay 73   10.9 [Reserved] 73   10.10 Material Adverse Effect 73   10.11 Lien
Priority 73   10.12 [Reserved] 73   10.13 Cross Default 74   10.14 Breach of
Guaranty 74   10.15 Change of Ownership 74   10.16 Invalidity 74   10.17
Licenses 74   10.18 Seizures 74   10.19 Operations 74   10.20 Pension Plans 75
 XI. LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT. 75   11.1 Rights and Remedies
75   11.2 Agent’s Discretion 77   11.3 Setoff 77   11.4 Rights and Remedies not
Exclusive 77   11.5 Allocation of Payments After Event of Default 77  XII.
WAIVERS AND JUDICIAL PROCEEDINGS. 78   12.1 Waiver of Notice 78   12.2 Delay 78
  12.3 Jury Waiver 78 XIII. EFFECTIVE DATE AND TERMINATION. 78   13.1 Term 78  
13.2 Termination 79  XIV. REGARDING AGENT. 79   14.1 Appointment 79   14.2
Nature of Duties 80   14.3 Lack of Reliance on Agent and Resignation 80   14.4
Certain Rights of Agent 81   14.5 Reliance 81   14.6 Notice of Default 81   14.7
Indemnification 81   14.8 Agent in its Individual Capacity 82   14.9 Delivery of
Documents 82   14.10 Borrowers’ Undertaking to Agent 82

 

 

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TABLE OF CONTENTS

(continued)

 

  14.11 No Reliance on Agent’s Customer Identification Program 82   14.12 Other
Agreements 82 XV. BORROWING AGENCY. 83   15.1 Borrowing Agency Provisions 83  
15.2 Waiver of Subrogation 83 XVI. MISCELLANEOUS 83   16.1 Governing Law 83  
16.2 Entire Understanding 84   16.3 Successors and Assigns; Participations; New
Lenders 86   16.4 Application of Payments 88   16.5 Indemnity 88   16.6 Notice
89   16.7 Survival 91   16.8 Severability 91   16.9 Expenses 91   16.10
Injunctive Relief 91   16.11 Consequential Damages 91   16.12 Captions 92  
16.13 Counterparts; Facsimile Signatures 92   16.14 Construction 92   16.15
Confidentiality; Sharing Information 92   16.16 Publicity 93   16.17
Certifications From Banks and Participants; US PATRIOT Act 93

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LIST OF EXHIBITS AND SCHEDULES

Exhibits      

Exhibit 1.2(a)

Borrowing Base Certificate

Exhibit 1.2(b) Compliance Certificate Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note Exhibit 8.1(k) Financial Condition Certificate Exhibit
16.3 Commitment Transfer Supplement         Schedules       Schedule 1.2
Permitted Encumbrances Schedule 4.5 Equipment, Inventory and Real Property
Locations Schedule 4.15(h) Deposit and Investment Accounts Schedule 5.1 Consents
Schedule 5.2(a) States of Qualification and Good Standing Schedule 5.2(b)
Subsidiaries Schedule 5.4 Federal Tax Identification Number Schedule 5.6 Prior
Names Schedule 5.8(b) Litigation 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

 

 

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REVOLVING CREDIT, TERM LOAN
AND
SECURITY AGREEMENT

Revolving Credit, Term Loan and Security Agreement dated as of November 2, 2012
among ENSERVCO CORPORATION, a Delaware corporation (“Enservco”), DILLCO FLUID
SERVICE, INC., a Kansas corporation (“Dillco”), and HEAT WAVES HOT OIL SERVICES
LLC, a Colorado limited liability company (“Heat Waves”) (Enservco, Dillco and
Heat Waves, each, a “Borrower” and collectively, “Borrowers”), the financial
institutions which are now or which hereafter become a party hereto
(collectively, “Lenders” and individually, a “Lender”) and PNC BANK, NATIONAL
ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, “Agent”).

IN CONSIDERATION of the mutual covenants and undertakings herein contained,
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, 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 applied in
preparation of the audited financial statements of Borrowers for the fiscal year
ended December 31, 2011.

1.2              General Terms.

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

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

“Adjusted EBITDA” shall mean EBITDA for such period plus: (A) depletion, (B)
amortization of deferred financing costs, (C) impairment, (D) non-cash expenses
relating to share based payments recognized under ASC Topic 718 and ASC Subtopic
505-50, (E) pre-tax unrealized gains and losses on foreign currency, (F) pre-tax
unrealized gain and losses on any Interest Rate Hedge or other Hedge Liabilities
or commodity price risk management activities, (G) losses on derivatives for
such period, (H) losses on sale of damaged, obsolete or worn-out Equipment for
such period and (I) losses on sale of investments for such period; minus (X)
gains on derivatives for such period, (Y) gains on sale of damaged, obsolete or
worn-out Equipment for such period, and (Z) gains on sale of investments for
such period.

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

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

 

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“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, 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 5% 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 (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 Revolving Credit, Term Loan and Security Agreement,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.

“Alternate Base Rate” shall mean, for any day, a rate per annum equal to the
higher of (i) the Base Rate in effect on such day, (ii) the Federal Funds Open
Rate in effect on such day plus 1/2 of 1% and (iii) the Daily LIBOR Rate plus
1%. For purposes of this definition, “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 percentage prescribed by the Federal
Reserve for determining the maximum reserve requirements with respect to any
eurocurrency funding by banks on such day. For the purposes of this definition,
“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
eurodollar rate for a one month period as published in another publication
determined by Agent).

“Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism or
money laundering, including Executive Order No. 13224, the USA PATRIOT Act, the
Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).

“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.

“Authority” shall have the meaning set forth in Section 4.19(d).

“Availability Reserve” shall mean a reserve of $1,000,000 against borrowing
availability under the Revolving Advances facility, which Agent shall impose on
the Closing Date, but which shall be subject to reduction or elimination
following Agent’s receipt of the audited annual financial statements for
Borrowers fiscal year 2013, provided that: (i) such financial statements reflect
that Borrowers on a Consolidated Basis achieved net income of at least
$1,000,000 for such fiscal year and sustained profitability and other financial
benchmarks required by Agent in its Permitted Discretion; (ii) Borrowers have
Undrawn Availability of at least $1,250,000 prior to any such reduction or
elimination; and (iii) no Event of Default shall have occurred and be continuing
at the time of any such proposed reduction or elimination.

 

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“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.

“Blocked Accounts” shall have the meaning set forth in Section 4.15(h).

“Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).

“Blocked Person” shall have the meaning set forth in Section 5.23(b) 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 on a Consolidated Basis” shall mean the consolidation in accordance
with GAAP of the accounts or other items of Enservco and its Subsidiaries
whether or not the Subsidiaries are a Borrower, and which are included on a
consolidated basis in the financial statements filed by Enservco with the SEC.

“Borrowers’ Account” shall have the meaning set forth in Section 2.8.

“Borrowing Agent” shall mean Enservco.

“Borrowing Base Certificate” shall mean a certificate in substantially the form
of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of Borrowing Agent and delivered to Agent, appropriately completed,
by which such officer shall certify to Agent the Formula Amount and calculation
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 Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.

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

 

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

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

“Change of Ownership” shall mean any of the following events to the extent that
such event has (or can reasonably be expected to have) a Material Adverse Effect
on the Borrowers on a Consolidated Basis: (a) Enservco shall cease to own all of
the Equity Interests of Dillco, (b) Dillco shall cease to own all of the Equity
Interests of Heat Waves or (c) any merger, consolidation or sale of
substantially all of the property or assets of any Borrower.

“Closing Date” shall mean November 2, 2012 or such other date as may be agreed
to 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 thereunder, as from time to time in effect.

“Collateral” shall mean and include the following except for the exclusions set
forth in paragraph (i) below:

(a) all Receivables;

(b) all Equipment;

(c) all General Intangibles;

(d) all Inventory;

(e) all Investment Property;

(f) all of each Borrower’s right, title and interest in and to, whether now
owned or hereafter acquired and wherever located, (i) its respective goods and
other property including, but not limited to, all merchandise returned or
rejected by Customers, relating to or securing any of the Receivables; (ii) all
of each Borrower’s rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff,
detinue, replevin, reclamation and repurchase; (iii) all additional amounts due
to any Borrower from any Customer relating to the Receivables; (iv) other
property, including warranty claims, relating to any goods securing the
Obligations; (v) all of each Borrower’s contract rights, rights of payment which
have been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper), warehouse
receipts, deposit accounts, letters of credit and money; (vi) all commercial
tort claims (whether now existing or hereafter arising); (vii) if and when
obtained by any Borrower, all real and personal property of third parties in
which such Borrower has been granted a lien or security interest as security for
the payment or enforcement of Receivables; (viii) all letter of credit rights
(whether or not the respective letter of credit is evidenced by a writing);
(ix) all supporting obligations; and (x) any other goods, personal property or
real property now owned or hereafter acquired in which any Borrower has
expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;

 

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(g) all of each Borrower’s 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 relating to (a), (b), (c), (d), (e), (f), (g), (h) or (i) of this
Paragraph; and

(h) all proceeds and products of (a), (b), (c), (d), (e), (f) and (g) in
whatever form, including, but not limited to: cash, deposit accounts (whether or
not comprised solely of proceeds), certificates of deposit, insurance proceeds
(including hazard, flood and credit insurance), negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements,
documents, eminent domain proceeds, condemnation proceeds and tort claim
proceeds.

(i) When used herein, the term “Collateral” does not include any of the
foregoing which are collateral for Permitted Encumbrances.

“Commitment Percentage” of any Lender shall mean the percentage set forth below
such Lender’s name on the signature page hereof as same may be adjusted upon any
assignment by a Lender pursuant to Section 16.3(c) or (d) hereof.

“Commitment Transfer Supplement” shall mean a document 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.

“Compliance Certificate” shall mean a compliance certificate substantially in
the form of Exhibit 1.2(b) hereto to be signed by the Chief Financial Officer or
Controller of Borrowing Agent, which shall state that, based on an examination
sufficient to permit such officer to make an informed statement, no Default or
Event of Default exists, or if such is not the case, specifying such Default or
Event of Default, its nature, when it occurred, whether it is continuing and the
steps being taken by Borrowers with respect to such default and, such
certificate shall have appended thereto calculations which set forth Borrowers’
compliance with the requirements or restrictions imposed by Sections 6.5, 7.6
and 7.11.

“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, including any Consents required under all applicable federal, state
or other Applicable Law except to the extent that the failure to obtain such
Consent reasonably would not be expected to have a Material Adverse Effect.

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“Contract Rate” shall mean, as applicable, the Revolving Interest Rate or the
Term Loan Rate.

“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.

“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 2.11(b) hereof.

“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 have the meaning set forth in Section 2.23(a) hereof.

“Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.

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

“Documents” shall have the meaning set forth in Section 8.1(c) hereof.

“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 2.12(b) hereof.

“Early Termination Date” shall have the meaning set forth in Section 13.1
hereof.

“Earnings Before Interest and Taxes” shall mean for any period the sum of
(i) net income (or loss) of Borrowers on a Consolidated Basis for such period
(excluding extraordinary gains and losses), plus (ii) all interest expense of
Borrowers on a Consolidated Basis for such period, plus (iii) all charges
against income of Borrowers on a Consolidated Basis for such period for federal,
state and local taxes actually paid.

“EBITDA” shall mean for any period the sum of (i) Earnings Before Interest and
Taxes for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.

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“Eligible Receivables” shall mean and include with respect to each Borrower,
each Receivable of such Borrower arising in the Ordinary Course of Business and
which Agent, in its sole credit judgment, 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 or sixty (60) days after the due date, or if such Receivable is from an
Extended Term Customer, it is due or unpaid more than one hundred twenty (120)
days after the original invoice date or ninety (90) days after the due date;

(c) it constitutes a retainage receivable;

(d) fifty percent (50%) or more of the Receivables from such Customer are not
deemed Eligible Receivables hereunder if such Customer is not an Extended Term
Customer, or twenty-five percent (25%) or more of the Receivables from such
Customer are not deemed Eligible Receivables hereunder if such Customer is an
Extended Term Customer;

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

(f) the Customer shall (i) apply for, suffer, or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property or call a meeting of its
creditors, (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 laws (as now or hereafter
in effect), (v) be adjudicated a bankrupt or insolvent, (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, any petition which is 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;

(g) the sale is to a Customer outside the continental United States of America,
unless the sale is on letter of credit, guaranty or acceptance terms, in each
case acceptable to Agent in its Permitted Discretion;

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

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

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(j) 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 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;

(k) 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 performed by the applicable Borrower and accepted by the Customer or the
Receivable otherwise does not represent a final sale;

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

(m) the Receivable is subject to any offset, deduction, defense, dispute, 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;

(n) 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 for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice
related thereto;

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

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

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

“Environmental Complaint” shall have the meaning set forth in Section 4.19(d)
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 relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.

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

“Equity Interests” of any Person shall mean 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).

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

“Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current
Interest Period relating thereto the interest rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined by Agent by dividing
(i) 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
purpose of displaying rates at which US dollar deposits are offered by leading
banks in the London interbank deposit market (an “Alternative Source”), at
approximately 11:00 a.m., London time two (2) Business Days prior to the first
day of 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 Alternate
Source, a comparable replacement rate determined by the Agent at such time
(which determination shall be conclusive absent manifest error)) for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage.

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

“Eurodollar Rate Loan” shall mean an Advance at any time that bears interest
based on the Eurodollar Rate.

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

“Excess Cash Flow” for any fiscal period shall mean Adjusted EBITDA of Borrowers
on a Consolidated Basis for such fiscal period minus Unfinanced Capital
Expenditures made by Borrowers on a Consolidated Basis during such fiscal period
minus taxes actually paid by Borrowers on a Consolidated Basis during such
fiscal period plus decreases in working capital of Borrowers on a Consolidated
Basis for such fiscal period minus increases in working capital of Borrowers on
a Consolidated Basis for such fiscal period.

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

“Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.

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“Extended Term Customer” means Anadarko, Oxy USA, E.Q.T., Exxon Mobil, Antero
Resources, Chesapeake, or Brigham-Statoil Company.

“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, 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 Screen BTMM (or any substitute screen) or any Alternate
Source, a comparable replacement rate determined by the 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 the Borrowers, effective on the date of any such change.

“Fee Letter” shall mean the fee letter dated as of the date hereof between
Borrowers and Agent.

“Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) Adjusted EBITDA for such period minus (i) Unfinanced
Capital Expenditures made during such period and (ii) cash taxes paid during
such period to (b) all Senior Debt Payments during such period.

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

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

“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 year
from, 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 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 year at the option of the debtor, and also including, in
the case of Borrower, the Obligations and, without duplication, Indebtedness
consisting of guaranties of Funded Debt of other Persons.

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“GAAP” shall mean generally accepted accounting principles in the United States
of America in effect from time to time and as interpreted by the rules and
regulations of the SEC.

“General Intangibles” shall mean and include as to each Borrower all of such
Borrower’s general intangibles, whether now owned or hereafter acquired,
including all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer (other than
to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).

“Governmental Acts” shall have the meaning set forth in Section 2.17.

“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 legislative, judicial, regulatory or administrative
functions of or pertaining to a government.

“Guarantor” shall mean Michael D. Herman 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 Guaranty of such Guarantor, in form and
substance satisfactory to the Agent.

“Guarantor Subordination Agreement” shall mean a subordination agreement between
Agent and Michael D. Herman with respect to the indebtedness of Enservco to Mr.
Herman (not including, however, any salary, guarantee fee, or other reasonable
amount payable to Mr. Herman for services rendered to the Borrowers) in form and
substance satisfactory to Agent in its Permitted Discretion.

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

“Hazardous Discharge” shall have the meaning set forth in Section 4.19(d)
hereof.

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

“Hazardous Wastes” shall mean all waste materials subject to regulation under
CERCLA, RCRA or applicable state law, and any other applicable Federal and state
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.”

“Increased Tax Burden” shall mean the additional federal, state or local taxes
assumed to be payable by a member of any Borrower as a result of such Borrower’s
status as a limited liability company as evidenced and substantiated by the tax
returns filed by such Borrower as a limited liability company, with such taxes
being calculated for all members at the highest marginal rate applicable to any
member.

“Indebtedness” of a Person at a particular date shall mean all obligations of
such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.

“Ineligible Security” 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.

“Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trademark, service mark, trade
name, mask work, trade secret or license or other right to use any of the
foregoing.

“Intellectual Property Claim” shall mean the assertion by any Person of a claim
(whether asserted in writing, by action, suit or proceeding or otherwise) that
any Borrower’s ownership, use, marketing, sale or distribution of any Inventory,
Equipment, Intellectual Property or other property or asset that is material to
Borrowers on a Consoldated Basis is violative of any ownership of or right to
use any Intellectual Property of such Person.

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

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

“Inventory” shall mean and include as to each Borrower all of such Borrower’s
now owned or hereafter acquired 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 of title or other documents representing them.

“Investment Property” shall mean and include as to each Borrower, all of such
Borrower’s now owned or hereafter acquired securities (whether certificated or
uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.

“Issuer” shall mean any Person who issues a Letter of Credit and/or accepts a
draft pursuant to the terms hereof.

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

“Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge which is
provided by any Lender and with respect to which the Agent confirms meets the
following requirements: such Interest Rate Hedge (i) is documented in a standard
International Swap Dealer Association Agreement, (ii) provides for the method of
calculating the reimbursable amount of the provider’s credit exposure in a
reasonable and customary manner, and (iii) is entered into for hedging (rather
than speculative) purposes. The liabilities of any Borrower to the provider of
any Lender-Provided Interest Rate Hedge or currency hedge, future, option or
other similar agreement provided by any Lender (collectively, the “Hedge
Liabilities”) shall be “Obligations” hereunder, guaranteed obligations under the
Guaranty and secured obligations under the Guarantor Security Agreement 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.

“Letter of Credit Fees” shall have the meaning set forth in Section 3.2.

“Letter of Credit Borrowing” shall have the meaning set forth in
Section 2.12(d).

“Letter of Credit Sublimit” shall mean $250,000.

“Letters of Credit” shall have the meaning set forth in Section 2.9.

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“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, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the 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 from time to time and by which such Person shall waive any Lien that
such Person may ever have with respect to any of the Collateral and shall
authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.

“Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business,
properties or prospects of Borrowers on a Consolidated Basis, (b) the ability of
Borrowers on a Consolidated Basis 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.

“Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.

“Maximum Revolving Advance Amount” shall mean $5,000,000.

“Maximum Undrawn Amount” shall mean with respect to any outstanding Letter of
Credit, 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.

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

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

“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.

“Notes” shall mean, collectively, the Revolving Credit Note and the Term Note.

“Obligations” shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower to Lenders
or Agent or to any other direct or indirect subsidiary or affiliate of Agent or
any Lender of any kind or nature, present or future (including any interest or
other amounts accruing thereon 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 or other amounts is 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
and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit,
loan, equipment lease 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 the Agent’s
or any Lenders non-receipt of or inability to collect funds or otherwise not
being made whole in 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, any and all of any
Borrower’s Indebtedness and/or liabilities under this Agreement, the Other
Documents or under any other agreement between Agent or Lenders and any Borrower
and any amendments, extensions, renewals or increases and all costs and expenses
of 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 Agent or Lenders to perform acts or
refrain from taking any action.

“Ordinary Course of Business” shall mean with respect to any Borrower, the
ordinary course of such Borrower’s business as described in Section 5.21.

“Other Documents” shall mean the Notes, the Questionnaire, the Fee Letter, the
Guaranty, the Guarantor Security Agreement, the Guarantor Subordination
Agreement, any Lender-Provided Interest Rate Hedge and any and all other
agreements, instruments and documents, including guaranties, pledges, powers of
attorney, consents, interest or currency swap agreements, futures, options or
other similar agreements and all other writings heretofore, now or hereafter
executed by any Borrower or any Guarantor and/or delivered to Agent or any
Lender in respect of the transactions contemplated by this Agreement.

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

“Overadvance Threshold Amount” shall have the meaning set forth in Section
16.2(b) hereof.

“Parent” of any Person shall mean a corporation or other entity owning, directly
or indirectly at least 50% of the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the directors of the Person,
or other Persons performing similar functions for any such Person.

“Participant” shall mean each Person who 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 2.12(d).

“Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.

“Payee” shall have the meaning set forth in Section 3.10.

“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
(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 Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the Controlled Group for employees of
any entity which was at such time a member of the Controlled Group.

“Permitted Discretion” shall mean a determination made in good faith and in the
exercise of commercially reasonable (from the standpoint of an asset-based
lender) business judgment.

“Permitted Encumbrances” shall mean:

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(a) Liens in favor of Agent for the benefit of Agent and Lenders;

(b) Liens for taxes, assessments or other governmental charges not delinquent or
being Properly Contested;

(c) Liens disclosed in the financial statements referred to in Section 5.5 and
any Liens granted in substitution therefor or renewal, extension, refinancing or
replacement thereof without increasing any Borrower’s obligations thereunder;

(d) deposits or pledges to secure obligations under worker’s compensation,
social security or similar laws, or under unemployment insurance;

(e) 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;

(f) 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 for so long as each such Lien (x) is in
existence for less than 20 consecutive days after it first arises or is being
Properly Contested and (y) is at all times junior in priority to any Liens in
favor of Agent;

(g) 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;

(h) Liens placed upon fixed assets hereafter acquired to secure a portion of the
purchase price thereof, provided that (x) any such lien shall not encumber any
other property of any Borrower and (y) 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 provided for in Section 7.6;

(i) 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 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

(j) Liens disclosed on Schedule 1.2; provided that such Liens shall secure only
those obligations which they secure on the Closing Date (and extensions,
renewals and refinancings of such obligations permitted by Section 7.8) and
shall not subsequently apply to any other property or assets of any Borrower.

“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).

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

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

“Properly Contested” shall mean, in the case of any Indebtedness or Lien, as
applicable, of any Person (including any taxes) that is not paid as and when due
or payable by reason of such Person’s bona fide dispute concerning its liability
to pay same or concerning the amount thereof, (i) such Indebtedness or Lien, as
applicable, is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) such Person has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the
non-payment of such Indebtedness will not have a Material Adverse Effect and
will not result in the forfeiture of any assets of such Person; (iv) no Lien is
imposed upon any of such Person’s assets with respect to such Indebtedness
unless such Lien is at all times junior and subordinate in priority to the Liens
in favor of the Agent (except only with respect to property taxes that have
priority as a matter of applicable state law) and enforcement of such Lien is
stayed during the period prior to the final resolution or disposition of such
dispute; (v) 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; and
(vi) if such contest is abandoned, settled or determined adversely (in whole or
in part) to such Person, such Person forthwith pays such Indebtedness and all
penalties, interest and other amounts due in connection therewith.

“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.

“Questionnaire” shall mean the Documentation Information Questionnaire and the
responses thereto provided by Borrowers and delivered to Agent.

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

“Real Property” shall mean any real property or any improvements thereto owned
or leased by any Borrower.

“Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, 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,
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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“Register” shall have the meaning set forth in Section 16.3(e).

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

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

“Reportable Event” shall mean a reportable event described in Section 4043(c) of
ERISA or the regulations promulgated thereunder.

“Required Lenders” shall mean Lenders holding at least fifty-one percent (51%)
of the Advances and, if no Advances are outstanding, shall mean Lenders holding
at least fifty-one percent (51%) of the Commitment Percentages; provided,
however, if there are fewer than three (3) Lenders, Required Lenders shall mean
all Lenders.

“Reserve Percentage” shall mean as of any day the maximum 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 and
the Term Loan.

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

“Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the
sum of the Alternate Base Rate plus one and one-quarter percent (1.25%) with
respect to Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus three
and one-quarter percent (3.25%) with respect to Eurodollar Rate Loans.

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

“Section 20 Subsidiary” shall mean the Subsidiary of the bank holding company
controlling PNC, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

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

“Senior Debt Payments” shall mean and include all cash actually expended by any
Borrower to make (a) interest payments on any Advances hereunder, plus
(b) scheduled principal payments on the Term Loan, plus (c) payments for all
fees, commissions and charges set forth herein and with respect to any Advances,
plus (d) capitalized lease payments, plus (e) payments with respect to any other
Indebtedness for borrowed money.

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“Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.

“Subsidiary” of any Person shall mean a corporation or other entity of whose
Equity Interests 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 directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.

“Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests
of any Subsidiary owned by any Borrower (not to exceed 65% of the Equity
Interests of any Foreign Subsidiary).

“Tangible Net Worth” shall mean, at a particular date, (a) the aggregate amount
of all assets of Borrowers on a Consolidated Basis as may be properly classified
as such in accordance with GAAP consistently applied, excluding such other
assets as are properly classified as intangible assets under GAAP, less (b) the
aggregate amount of all liabilities of Borrowers on a Consolidated Basis
(excluding any liability that is subordinate in writing to the Obligations).

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

“Term Loan” shall mean the Advances made pursuant to Section 2.4 hereof.

“Term Loan Rate” shall mean an interest rate per annum equal to (a) the sum of
the Alternate Base Rate plus two and one-quarter percent (2.25%) with respect to
Domestic Rate Loans and (b) the sum of the Eurodollar Rate plus four and
one-quarter percent (4.25%) with respect to Eurodollar Rate Loans.

“Term Note” shall mean the promissory note described in Section 2.4 hereof.

“Termination Event” shall mean (i) a Reportable Event with respect to any Plan
or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of the
Controlled Group from a Plan or Multiemployer Plan during a plan year in which
such entity was a “substantial employer” as defined in Section 4001(a)(2) of
ERISA; (iii) the providing of notice of intent to terminate a Plan in a distress
termination described in Section 4041(c) of ERISA; (iv) the institution by the
PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) 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
Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any
Borrower or any member of the Controlled Group from a Multiemployer Plan.

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“Toxic Substance” shall mean and include any material present on the Real
Property or the Leasehold Interests which has been shown to have significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable state 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.

“Trading with the Enemy Act” shall mean the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) and any enabling legislation or executive order relating thereto.

“Transferee” shall have the meaning set forth in Section 16.3(d) 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 (b) the sum of (i) the outstanding amount of Advances (other than
the Term Loan) plus (ii) all amounts due and owing to any Borrower’s trade
creditors which are outstanding beyond normal trade terms.

“Unfinanced Capital Expenditures” shall mean all Capital Expenditures of
Borrower other than those made utilizing financing provided by the applicable
seller or third party lenders. For the avoidance of doubt, Capital Expenditures
made by a Borrower utilizing Revolving Advances shall be deemed Unfinanced
Capital Expenditures.

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

“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.

“Week” shall mean the time period commencing with the opening of business on a
Wednesday and ending on the end of business the following Tuesday.

1.3              Uniform Commercial Code Terms.

All terms used herein and defined in the Uniform Commercial Code as adopted in
the State of New York 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,” “commercial tort claims,”
“instruments,” “general intangibles,” “goods,” “payment intangibles,”
“proceeds,” “supporting obligations,” “securities,” “investment property,”
“documents,” “deposit accounts,” “software,” “letter of credit rights,”
“inventory,” “equipment” and “fixtures,” 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.

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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 or amendments thereto and any
and all extensions or renewals thereof. All references herein to the time of day
shall mean the time in New York, New York. Whenever the words “including” 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 are
used in this Agreement or Other Documents, such phrase shall mean and refer to
(i) the actual knowledge of a senior officer of any Borrower or (ii) the
knowledge that a senior officer would have obtained if he had engaged in good
faith and diligent performance of his 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 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 Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the
aggregate Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an
amount equal to:

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(i)                 up to 85%, subject to the provisions of Section 2.1(d)
hereof (the “Advance Rate”), of Eligible Receivables, minus

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

(iii)             the Availability Reserve, if then in effect, minus

(iv)             such other reserves as Agent may reasonably deem proper and
necessary from time to time.

The amount derived from (x) Section 2.1(a)(y)(i) minus
(y) Sections 2.1(a)(y)(ii), (iii) and (iv) at any time and from time to time
shall be referred to as the “Formula Amount.” The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the “Revolving
Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).

(b)               Discretionary Rights. The Advance Rate 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 Rate or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. Agent
shall give Borrowing Agent not less than five (5) Business Days prior written
notice of its intention to decrease the Advance Rate. The rights of Agent under
this subsection are subject to the provisions of Section 16.2(b).

2.2              Procedure for Revolving Advances Borrowing.

(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,
become due, 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 under this Agreement or
any other agreement with Agent or Lenders, and such request shall be
irrevocable.

(b)               Notwithstanding the provisions of subsection (a) above, in the
event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent
shall give Agent written notice by no later than 10:00 a.m. on the day which is
three (3) Business Days prior to the date such Eurodollar 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 on the date of such
Advance to be borrowed, which amount shall be in an aggregate principal amount
that is not less than $500,000 and integral multiples of $100,000 in excess
thereof, and (iii) the duration of the first Interest Period therefor. Interest
Periods for Eurodollar Rate Loans shall be for one, two or three months;
provided, 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 Eurodollar 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 Eurodollar Rate Loan, including those
which are converted from a Domestic Rate Loan under Section 2.2(d), there shall
not be outstanding more than five (5) Eurodollar Rate Loans, in the aggregate.

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(c)                Each Interest Period of a Eurodollar Rate Loan shall commence
on the date such Eurodollar 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.

Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar 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(d), 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
Eurodollar Rate Loan. If Agent does not receive timely notice of the Interest
Period elected by Borrowing Agent, Borrowing Agent shall be deemed to have
elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.

(d)               Provided that no 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 Eurodollar 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 Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar 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 Eurodollar Rate Loan, or
(ii) on the day which is one (1) Business Day prior to the date on which such
conversion is to occur with respect to a conversion from a Eurodollar 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 from a Domestic Rate Loan to
any other type of loan, the duration of the first Interest Period therefor.

(e)                At its option and upon written notice given prior to 10:00
a.m. (New York time) at least three (3) Business Days prior to the date of such
prepayment, any Borrower may prepay the Eurodollar 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 Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar 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(f) hereof.

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(f)                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 Eurodollar Rate Loan or failure by any Borrower to complete a
borrowing of, a prepayment of or conversion of or to a Eurodollar 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 Eurodollar 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.

(g)               Notwithstanding any other provision hereof, if any Applicable
Law, or any change therein or in the interpretation or application thereof,
shall make it unlawful for any Lender (for purposes of this subsection (g), the
term “Lender” shall include any Lender and the office or branch where any Lender
or any corporation or bank controlling such Lender makes or maintains any
Eurodollar Rate Loans) to make or maintain its Eurodollar Rate Loans, the
obligation of Lenders to make Eurodollar Rate Loans hereunder shall forthwith be
cancelled and Borrowers shall, if any affected Eurodollar Rate Loans are then
outstanding, promptly upon request from Agent, either pay all such affected
Eurodollar Rate Loans or convert such affected Eurodollar Rate Loans into loans
of another type. If any such payment or conversion of any Eurodollar Rate Loan
is made on a day that is not the last day of the Interest Period applicable to
such Eurodollar Rate Loan, Borrowers shall pay Agent, upon Agent’s request, such
amount or amounts as may be necessary to compensate Lenders for any loss or
expense sustained or incurred by Lenders in respect of such Eurodollar Rate Loan
as a result of such payment or conversion, including (but not limited to) any
interest or other amounts payable by Lenders to lenders of funds obtained by
Lenders in order to make or maintain such Eurodollar Rate Loan. 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              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. During the
Term, Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Section 2.2(a)
hereof shall, with respect to requested Revolving Advances to the extent Lenders
make such Revolving Advances, 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, with respect to Revolving Advances deemed to have been requested by
any Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.

2.4              Term Loan. Subject to the terms and conditions of this
Agreement, each Lender, severally and not jointly, will make a term loan to
Borrowers (collectively, the “Term Loan”) in the sum equal to such Lender’s
Commitment Percentage of $11,000,000. 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: thirty-five (35) equal monthly
principal installments of $130,952 each, beginning on November 30, 2012 and
continuing on the last day of each month thereafter through and including
September 30, 2015, with any remaining principal due on the last day of the
Term. 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 2.4. The Term Loan may consist of Domestic Rate Loans or Eurodollar Rate
Loans, or a combination thereof, as Borrowing Agent may request. In the event
that Borrowers desire to obtain or extend a Eurodollar Rate Loan or to convert a
Domestic Rate Loan to a Eurodollar Rate Loan, Borrowing Agent shall comply with
the notification requirements set forth in Sections 2.2(b) and (d) and the
provisions of Sections 2.2(b) through (g) shall apply.

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2.5              Maximum Advances. The aggregate balance of Revolving Advances
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.

2.6              Repayment of Advances.

(a)                The Revolving Advances 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 2.4 hereof and in the
Term Note, subject to mandatory prepayments as herein provided.

(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. In
consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the next Business Day following the Agent’s receipt of those items of
payment, each Borrower agrees that, in computing the charges under this
Agreement, all items of payment shall be deemed applied by Agent on account of
the Obligations one (1) Business Day after (i) the Business Day following the
Agent’s receipt of such payments via wire transfer or electronic depository
check or (ii) in the case of payments received by Agent in any other form, the
Business Day such payment constitutes good funds in Agent’s account. Agent is
not, however, required to credit Borrowers’ Account for the amount of any item
of payment which is unsatisfactory to Agent in Agent’s Permitted Discretion and
Agent may charge Borrowers’ Account for the amount of any item of payment which
is returned to Agent unpaid.

(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. (New York time) on the due date therefor
in lawful money of the United States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all Obligations due and owing hereunder by charging Borrowers’
Account or by making Advances as provided in Section 2.2 hereof.

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(d)               Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.

2.7              Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder 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.

2.8              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 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 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 the loan account shall be conclusive evidence absent manifest
error of the amounts of Advances and other charges thereto and of payments
applicable thereto.

2.9              Letters of Credit. Subject to the terms and conditions hereof,
Agent shall issue or cause the issuance of standby and/or trade letters of
credit (“Letters of Credit”) for the account of any Borrower; provided, however,
that Agent 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 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 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.

2.10          Issuance of Letters of Credit.

(a)                Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, prior to 10:00 a.m. (New York time), at least five (5) Business
Days prior to the proposed date of issuance, Agent’s form of Letter of Credit
Application (the “Letter of Credit Application”) completed to the satisfaction
of Agent; and, such other certificates, documents and other papers and
information as Agent may reasonably request. Borrowing Agent, on behalf of
Borrowers, also has the right to give instructions and make agreements with
respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement agreement and/or any
other applicable agreement, any letter of credit and the disposition of
documents, disposition of any unutilized funds, and to agree with Agent upon any
amendment, extension or renewal of any Letter of Credit.

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(b)               Each Letter of Credit shall, among other things, (i) provide
for the payment of sight 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 (ISP98
International Chamber of Commerce Publication Number 590) (the “ISP98 Rules”)),
and any subsequent revision thereof at the time a standby Letter of Credit is
issued, as determined by Agent, 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.

2.11          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 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 or the application therefor.

(b)               In connection with all Letters of Credit issued or caused to
be issued by Agent under this Agreement, each Borrower hereby appoints Agent, or
its designee, as its attorney, with full power and authority if an Event of
Default shall have occurred, (i) to sign and/or endorse such Borrower’s name
upon any warehouse or other receipts, letter of credit applications 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 Agent or Agent’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
Agent’s, or in the name of Agent’s designee, any order, sale or transaction,
obtain the necessary documents in connection therewith, and collect the proceeds
thereof. Neither Agent nor its 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 or its attorney’s willful misconduct. This power, being coupled with an
interest, is irrevocable as long as any Letters of Credit remain outstanding.

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2.12          Disbursements, Reimbursement.

(a)                Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from Agent a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Lender’s Commitment Percentage of the
Maximum Face Amount of such Letter of Credit 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, Agent will promptly notify
Borrowing Agent. Provided that Borrowing Agent shall have received such notice,
the Borrowers shall reimburse (such obligation to reimburse Agent shall
sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00
Noon, New York time on each date that an amount is paid by Agent under any
Letter of Credit (each such date, a “Drawing Date”) in an amount equal to the
amount so paid by Agent. In the event Borrowers fail to reimburse Agent for the
full amount of any drawing under any Letter of Credit by 12:00 Noon, New York
time, on the Drawing Date, Agent will promptly notify each Lender thereof, and
Borrowers shall be deemed to have requested that a Revolving Advance maintained
as a Domestic Rate Loan be made by the 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
and subject to Section 8.2 hereof. Any notice given by Agent pursuant to this
Section 2.12(b) may be oral if immediately confirmed in writing; provided that
the lack of such an immediate confirmation shall not affect the conclusiveness
or binding effect of such notice.

(c)                Each Lender shall upon any notice pursuant to Section 2.12(b)
make available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Revolving Advance maintained as a Domestic Rate Loan to Borrowers in that
amount. If any Lender so notified fails to make available to Agent the amount of
such Lender’s Commitment Percentage of such amount by no later than 2:00 p.m.,
New York time 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 will promptly give notice of the occurrence of the Drawing
Date, but failure of Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Lender to effect such payment on such date shall
not relieve such Lender from its obligation under this Section 2.12(c), provided
that such Lender shall not be obligated to pay interest as provided in Section
2.12(c) (i) and (ii) until and commencing from the date of receipt of notice
from Agent 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 2.12(b), because of Borrowers’
failure to satisfy the conditions set forth in Section 8.2 (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
Lender’s payment to Agent pursuant to Section 2.12(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 under this Section 2.12.

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(e)                Each Lender’s Participation Commitment shall continue until
the last to occur of any of the following events: (x) Agent 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 the Borrowers) have been fully reimbursed for
all payments made under or relating to Letters of Credit.

2.13          Repayment of Participation Advances.

(a)                Upon (and only upon) receipt by Agent for its account of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by the 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 Agent under such a Letter of Credit, Agent will pay to
each Lender, in the same funds as those received by Agent, the amount of such
Lender’s Commitment Percentage of such funds, except Agent shall retain the
amount of the Commitment Percentage of such funds of any Lender that did not
make a Participation Advance in respect of such payment by Agent.

(b)               If 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 Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.

2.14          Documentation. Each Borrower agrees to be bound by the terms of
the Letter of Credit Application and by Agent’s interpretations of any Letter of
Credit issued on behalf of such Borrower and by Agent’s written regulations and
customary practices relating to letters of credit, though Agent’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), Agent shall not be liable for
any error, negligence and/or mistakes, whether of omission or commission, in
following the Borrowing Agent’s or any Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments or
supplements thereto.

2.15          Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent 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.

 

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2.16          Nature of Participation and Reimbursement Obligations. Each
Lender’s obligation 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 Agent 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 2.16 under all
circumstances, including the following circumstances:

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

(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 the Lenders to make Participation Advances under Section
2.12;

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

(iv)             any claim of breach of warranty that might be made by Borrower
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 or any Lender may have at any time against a
beneficiary, any successor beneficiary or any transferee of any Letter of Credit
or the proceeds thereof (or any Persons for whom any such transferee may be
acting), 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
provisions of services relating to a Letter of Credit, in each case even if
Agent or any of Agent’s Affiliates has been notified thereof;

(vi)             payment by Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;

(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 the Agent or any of Agent’s Affiliates to issue
any Letter of Credit in the form requested by Borrowing Agent, unless the Agent
has received written notice from Borrowing Agent of such failure within three
(3) Business Days after the Agent shall have furnished 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;

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(ix)             any Material Adverse Effect;

(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 Borrower or any Guarantor;

(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 hereunder shall have been terminated; and

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

2.17          Indemnity. In addition to amounts payable as provided in Section
16.5, each Borrower hereby agrees to protect, indemnify, pay and save harmless
Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, taxes, penalties,
interest, judgments, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and allocated costs of internal
counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to
as a consequence, direct or indirect, of the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful misconduct of the
Agent as determined by a final and non-appealable judgment of a court of
competent jurisdiction or (B) the wrongful dishonor by the Agent or any of
Agent’s Affiliates of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto Governmental
Body (all such acts or omissions herein called “Governmental Acts”).

2.18          Liability for Acts and Omissions. As between Borrowers and 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. In furtherance and not in limitation of the respective foregoing,
Agent 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 Agent 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 Agent, including any governmental acts, and
none of the above shall affect or impair, or prevent the vesting of, any of
Agent’s rights or powers hereunder. Nothing in the preceding sentence shall
relieve Agent from liability for Agent’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 Agent or Agent’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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Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent 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 Agent 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 Agent 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 carrier or any similar document (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.

In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by Agent 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 (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Borrower or any Lender. 

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2.19          Additional Payments. 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 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’
Account as a Revolving Advance and added to the Obligations.

2.20          Manner of Borrowing and Payment

(a)                Each borrowing of Revolving Advances shall be advanced
according to the applicable Commitment Percentages of Lenders. The Term Loan
shall be advanced according to the Commitment Percentages of Lenders.

(b)               Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Each payment (including each prepayment) by
any Borrower on account of the principal of and interest on the Term Note, shall
be made from or to, or applied to that portion of the Term Loan evidenced by the
Term Note pro rata according to the Commitment Percentages of Lenders. Except as
expressly provided herein, all payments (including prepayments) to be made by
any Borrower on account of principal, interest and fees shall be made without
set off or counterclaim and shall be made to Agent on behalf of the Lenders to
the Payment Office, in each case on or prior to 1:00 P.M., New York time, in
Dollars and in immediately available funds.

(c)                (i) Notwithstanding anything to the contrary contained in
Sections 2.20(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M., New York time, on each Settlement Date commencing with
the first Settlement Date following the Closing Date, Agent and Lenders shall
make certain payments as follows: (I) if the aggregate amount of new Revolving
Advances made by Agent during the preceding Week (if any) exceeds the aggregate
amount of repayments applied to outstanding Revolving Advances during such
preceding Week, then each Lender shall provide Agent with funds in an amount
equal to its applicable Commitment Percentage of the difference between (w) such
Revolving Advances and (x) such repayments and (II) if the aggregate amount of
repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable
Commitment Percentage of the difference between (y) such repayments and (z) such
Revolving Advances.

(ii)               Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.

(iii)             Promptly following each Settlement Date, Agent shall submit to
each Lender a certificate with respect to payments received and Advances made
during the Week immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.

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(d)               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 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.

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

2.21          Mandatory Prepayments.

(a)                Subject to Section 4.3 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 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 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)               At the election of Agent and Lenders, Borrowers shall prepay
the outstanding amount of the Advances in an amount equal to 50% of Excess Cash
Flow for each fiscal year (not to exceed a prepayment of $500,000 for any fiscal
year), commencing with the fiscal year ending December 31, 2012 on a pro rata
basis from the Closing Date, 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 ninety (90) days after the end of each such fiscal
year. Any such prepayment amount 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 in such order as Agent may
determine, subject to Borrowers’ ability to reborrow Revolving Advances in
accordance with the terms hereof. In the event that the financial statement is
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 2.21(b), subject to adjustment when the financial statement is
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 statement.

2.22          Use of Proceeds.

(a)                Borrowers shall apply the proceeds of Advances to (i) repay
existing indebtedness owed to Great Western Bank, (ii) finance the ongoing
working capital and letter of credit needs of Borrowers, (iii) finance a portion
of the capital expenditures of Borrowers, and (iv) pay fees and transaction
expenses.

(b)               Without limiting the generality of Section 2.22(a) above,
neither Borrowers, Guarantors nor any other Person which may in the future
become party to this Agreement or the Other Documents as a Borrower or
Guarantor, intends to use nor shall they use any portion of the proceeds of the
Advances, directly or indirectly, for any purpose in violation of the Trading
with the Enemy Act.

2.23          Defaulting Lender.

(a)                Notwithstanding anything to the contrary contained herein, in
the event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (y) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a “Lender Default”), all rights and obligations hereunder of such Lender
(a “Defaulting Lender”) as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.23 while such Lender Default remains in effect.

(b)               Advances shall be incurred pro rata from Lenders (the
“Non-Defaulting Lenders”) which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender (other than any Defaulting Lender) pro rata based on the
aggregate of the outstanding Advances of that type of all Lenders at the time of
such application; 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 Permitted Discretion, re-lend to a Borrower the amount of such
payments received or retained by it for the account of such Defaulting Lender.

 

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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. 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 be deemed not to be a Lender
and not to have either Advances outstanding or a Commitment Percentage.

(d)               Other than as expressly set forth in this Section 2.23, 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 2.23 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 a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.

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 Eurodollar 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 the
Term Loan, the applicable Term Loan Rate (as applicable, the “Contract 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 Eurodollar Rate shall be adjusted with respect to Eurodollar 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, the Obligations shall
bear interest at the applicable Contract Rate plus two (2%) percent per annum
(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, 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 three and one-quarter percent (3.25%) 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, and (y) to the Issuer, a fronting fee of one quarter
of one percent (0.25%) per annum, together with any and all administrative,
issuance, amendment, payment and negotiation charges with respect to Letters of
Credit and all fees and expenses as agreed upon by the 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 and shall reimburse Agent for any and all fees and expenses,
if any, paid by Agent to the Issuer (all of the foregoing fees, the “Letter of
Credit Fees”). 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. All Letter of Credit Fees
payable hereunder 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. 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, 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.

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, and each Borrower hereby irrevocably authorizes Agent, in its Permitted
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 will invest such
cash collateral (less applicable reserves) in such short-term money-market items
as to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw 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.

3.3              Facility Fee. If, for any calendar quarter during the Term, the
average daily unpaid balance of the Revolving Advances and undrawn amount of any
outstanding Letters of Credit for each day of such calendar quarter does not
equal the Maximum Revolving Advance Amount, then Borrowers shall pay to Agent
for the ratable benefit of Lenders a fee at a rate equal to three-eighths of one
percent (.375%) 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 calendar quarter with respect to the
previous calendar quarter.

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3.4              Fee Letter. 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.

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
applicable Contract Rate during such extension.

3.6              Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrowers, and 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.

3.7              Increased Costs. In the event that any Applicable Law, or any
change therein or in the interpretation or application thereof, or compliance by
any Lender (for purposes of this Section 3.7, the term “Lender” shall include
Agent or any Lender and any corporation or bank controlling Agent or any Lender)
and the office or branch where Agent or any Lender (as so defined) makes or
maintains any Eurodollar 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 or any Lender to any tax of any kind whatsoever
with respect to this Agreement or any Other Document or change the basis of
taxation of payments to Agent or any Lender of principal, fees, interest or any
other amount payable hereunder or under any Other Documents (except for changes
in the rate of tax on the overall net income of Agent or any Lender by the
jurisdiction in which it maintains its principal office);

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

(c)                impose on Agent or any Lender or the London interbank
Eurodollar market any other condition with respect to this Agreement or any
Other Document;

and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender 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 or such Lender deems (in its Permitted
Discretion) to be material, then, in any case Borrowers shall promptly pay Agent
or such Lender, upon its demand, such additional amount as will compensate Agent
or such Lender 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 Eurodollar Rate, as the case may be. Agent or such Lender shall
certify the amount of such additional cost or reduced amount to Borrowing Agent,
and such certification shall be conclusive absent manifest error.

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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 Eurodollar
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 Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,

then Agent shall give Borrowing Agent prompt written or telephonic notice of
such determination. If such notice is given, (i) any such requested Eurodollar
Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing Agent shall
notify Agent no later than 10:00 a.m. (New York City time) 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 Eurodollar Rate
Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which was to have been
converted to an affected type of Eurodollar 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. (New York City time) two (2) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of Eurodollar
Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans shall be
converted into a Domestic Rate Loan, or, if Borrowing Agent shall notify Agent,
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
last Business Day of the then current Interest Period applicable to such
affected Eurodollar Rate Loan, shall be converted into an unaffected type of
Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been
withdrawn, Lenders shall have no obligation to make an affected type of
Eurodollar Rate Loan or maintain outstanding affected Eurodollar Rate Loans and
no Borrower shall have the right to convert a Domestic Rate Loan or an
unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate
Loan.

3.9              Capital Adequacy.

(a)                In the event that Agent or any Lender shall have determined
that any Applicable Law or guideline regarding capital adequacy, or any change
therein, 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 or any Lender
(for purposes of this Section 3.9, the term “Lender” shall include Agent or any
Lender and any corporation or bank controlling Agent or any Lender) and the
office or branch where Agent or any Lender (as so defined) makes or maintains
any Eurodollar 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 or any Lender’s capital as a consequence of its obligations
hereunder to a level below that which Agent or such Lender could have achieved
but for such adoption, change or compliance (taking into consideration Agent’s
and each Lender’s policies with respect to capital adequacy) by an amount deemed
by Agent or any Lender to be material, then, from time to time, Borrowers shall
pay upon demand to Agent or such Lender such additional amount or amounts as
will compensate Agent or such Lender for such reduction. In determining such
amount or amounts, Agent or such Lender may use any reasonable averaging or
attribution methods. The protection of this Section 3.9 shall be available to
Agent and each Lender regardless of any possible contention of invalidity or
inapplicability with respect to the Applicable Law or condition. 

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

3.10          Gross Up for Taxes. If any Borrower shall be required by
Applicable Law to withhold or deduct any taxes from or in respect of any sum
payable under this Agreement or any of the Other Documents to Agent, or any
Lender, assignee of any Lender, or Participant (each, individually, a “Payee”
and collectively, the “Payees,” except to the extent that a Lender is not
subject to taxation in the United States and payments to such Lender are
transmitted offshore unless such offshore Lender is subject to the withholding
requirements of Section 1441 of the Internal Revenue Code), (a) the sum payable
to such Payee or Payees, as the case may be, shall be increased as may be
necessary so that, after making all required withholding or deductions, the
applicable Payee or Payees receives an amount equal to the sum it would have
received had no such withholding or deductions been made (the “Gross-Up
Payment”), (b) such Borrower shall make such withholding or deductions, and
(c) such Borrower shall pay the full amount withheld or deducted to the relevant
taxation authority or other authority in accordance with Applicable Law.
Notwithstanding the foregoing, no Borrower shall be obligated to make any
portion of the Gross-Up Payment that is attributable to any withholding or
deductions that would not have been paid or claimed had the applicable Payee or
Payees properly claimed a complete exemption with respect thereto pursuant to
Section 3.11 hereof.

3.11          Withholding Tax Exemption.

(a)                Each Payee that is not incorporated under the Laws of the
United States of America or a state thereof (and, upon the written request of
Agent, each other Payee) agrees that it will deliver to Borrowing Agent and
Agent two (2) duly completed appropriate valid Withholding Certificates (as
defined under §1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”))
certifying its status (i.e., U.S. or foreign person) and, if appropriate, making
a claim of reduced, or exemption from, U.S. withholding tax on the basis of an
income tax treaty or an exemption provided by the Code. The term “Withholding
Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and
the related statements and certifications as required under §1.1441-1(e)(2)
and/or (3) of the Regulations; a statement described in §1.871-14(c)(2)(v) of
the Regulations; or any other certificates under the Code or Regulations that
certify or establish the status of a payee or beneficial owner as a U.S. or
foreign person.

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(b)               Each Payee required to deliver to Borrowing Agent and Agent a
valid Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver
such valid Withholding Certificate as follows: (A) each Payee which is a party
hereto on the Closing Date shall deliver such valid Withholding Certificate at
least five (5) Business Days prior to the first date on which any interest or
fees are payable by any Borrower hereunder for the account of such Payee;
(B) each Payee shall deliver such valid Withholding Certificate at least five
(5) Business Days before the effective date of such assignment or participation
(unless Agent in its Permitted Discretion shall permit such Payee to deliver
such Withholding Certificate less than five (5) Business Days before such date
in which case it shall be due on the date specified by Agent). Each Payee which
so delivers a valid Withholding Certificate further undertakes to deliver to
Borrowing Agent and Agent two (2) additional copies of such Withholding
Certificate (or a successor form) on or before the date that such Withholding
Certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent Withholding Certificate so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrowing Agent or Agent.

(c)                Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.11(b) hereof, Agent shall be entitled to withhold United States
federal income taxes at the full 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 Regulations. Further, Agent
is indemnified under §1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under §1441 of the Code.

IV.COLLATERAL: GENERAL TERMS

4.1              Security Interest in the Collateral. To secure the prompt
payment and performance to Agent and each Lender of the Obligations, each
Borrower hereby assigns, pledges and grants to Agent for its benefit and for the
ratable benefit of each Lender a continuing security interest in and to and Lien
on all of its Collateral, whether now owned or existing or hereafter acquired or
arising and wheresoever located. 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 promptly provide Agent with written
notice of all commercial tort claims, such notice to contain the case title
together with the applicable court and a brief description of the claim(s). Upon
delivery of each such notice, such Borrower shall be deemed to hereby grant to
Agent a security interest and lien in and to such commercial tort claims and all
proceeds thereof.

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 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 and other custodial arrangements satisfactory to Agent, and
(v) executing and delivering financing statements, control agreements,
instruments of pledge, mortgages, notices and assignments, 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
under the Uniform Commercial Code or other Applicable Law. 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). 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 to Agent for its benefit and
for the ratable benefit of Lenders immediately upon demand.

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4.3              Disposition of Collateral. Each Borrower will safeguard and
protect all Collateral for Agent’s general account and make no disposition
thereof whether by sale, lease or otherwise except the disposition or transfer
of damaged, obsolete or worn-out Equipment in the Ordinary Course of Business
during any fiscal year having an aggregate fair market value of not more than
$250,000 and only to the extent that (i) the proceeds of any such disposition
are used to acquire replacement Equipment which is subject to Agent’s first
priority security interest or (ii) the proceeds of which are remitted to Agent
to be applied pursuant to Section 2.21.

4.4              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, in its Permitted Discretion, deems necessary to protect Agent’s
interest in and to preserve the Collateral, including the hiring of such
security guards or the placing of other security protection measures as Agent
may deem appropriate; (b) may employ and maintain at any 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) 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 Borrower’s 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.

4.5              Ownership of Collateral.

(a)                With respect to the Collateral, at the time the Collateral
becomes subject to Agent’s security interest: (i) each Borrower shall be 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 and encumbrances whatsoever;
(ii) each document and agreement executed by each Borrower or delivered to Agent
or any Lender in connection with this 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 4.5 and shall not be removed from such
location(s) without the prior written consent of Agent except with respect to
the sale of Equipment to the extent permitted in Section 4.3 hereof or in the
Ordinary Course of Business.

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(b)               (i) There is no location at which any Borrower has any
Equipment or other goods (except for rolling stock or goods in transit) other
than those locations listed on Schedule 4.5; (ii) Schedule 4.5 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 4.5
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 officer of each
Borrower; and (iv) Schedule 4.5 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.

4.6              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, 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 Equipment to the extent permitted in Section 4.3
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.

4.7              Books and Records. Each Borrower shall (a) 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; (b) set
up on its books accruals with respect to all taxes, assessments, charges, levies
and claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set aside from
such earnings in connection with its business. All determinations pursuant to
this subsection shall be made in accordance with, or as required by, GAAP
consistently applied in the opinion of such independent public accountant as
shall then be regularly engaged by Borrowers.

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4.8              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. 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.

4.9              Compliance with Laws. Each Borrower shall 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. The
Collateral at all times shall be maintained in accordance with the requirements
of all insurance carriers which provide insurance with respect to the Collateral
so that such insurance shall remain in full force and effect.

4.10          Inspection of Premises. At all reasonable times 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, 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, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of such
Borrower’s business.

4.11          Insurance.The assets and properties of each Borrower at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets and properties of
such Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower’s own cost and expense in amounts
and with carriers acceptable to Agent, each Borrower shall (a) 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; (b) 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; (c) maintain public
and product liability insurance against claims for personal injury, death or
property damage suffered by others; (d) 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; (e) furnish Agent
with (i) 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
(ii) appropriate loss payable endorsements in form and substance satisfactory to
Agent, naming Agent as a co-insured and loss payee as its interests may appear
with respect to all insurance coverage referred to in clauses (a), and (c)
above, and providing (A) that all proceeds thereunder shall be payable to Agent,
(B) no such insurance shall be affected by any act or neglect of the insured or
owner of the property described in such policy, and (C) that such policy and
loss payable clauses may not be cancelled, amended or terminated unless at least
thirty (30) days’ prior written notice is given to Agent. 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. Agent is hereby authorized to adjust and
compromise claims under insurance coverage referred to in clauses (a), and (b)
above. All loss recoveries received by Agent upon any such insurance may be
applied to the Obligations, in such order as Agent in its Permitted 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.

 

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4.12          Failure to Pay Insurance. 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, and charge Borrowers’ Account therefor as a Revolving Advance of
a Domestic Rate Loan and such expenses so paid shall be part of the Obligations.

4.13          Payment of Taxes. Each Borrower will 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. 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 4.13 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.

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For the purposes of this Section 4.13, the term “Charges” when capitalized 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 the consolidated subsidiaries of any
Borrower.

4.14          Payment of Leasehold Obligations. Each Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at Agent’s
request will provide evidence of having done so.

4.15          Receivables.

(a)                Nature of Receivables. 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 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)               Solvency of Customers. 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 or 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)                Location of Borrowers. Each Borrower’s chief executive office
is located at 501 South Cherry Street, Suite 320, Denver, Colorado 80246. 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)               Collection of Receivables. Until any 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
Permitted 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)                Notification of Assignment of Receivables. At any time
following the occurrence of an Event of Default or a Default, 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)                Power of Agent to Act on Borrowers’ Behalf. 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) upon the occurrence and during the continuation of an Event of
Default, to sign such Borrower’s name on any invoice or bill of lading relating
to any of the Receivables, drafts against Customers, or assignments of
Receivables; (iii) to send verifications of Receivables to any Customer; (iv) to
sign such Borrower’s name on all documents or instruments deemed necessary or
appropriate by Agent to preserve, protect, or perfect Agent’s interest in the
Collateral and to file same; (v) upon the occurrence and during the continuation
of an Event of Default, to demand payment of the Receivables; (vi) upon the
occurrence and during the continuation of an Event of Default, to enforce
payment of the Receivables by legal proceedings or otherwise; (vii) upon the
occurrence and during the continuation of an Event of Default, to exercise all
of such Borrower’s rights and remedies with respect to the collection of the
Receivables and any other Collateral; (viii) upon the occurrence and during the
continuation of an Event of Default, to settle, adjust, compromise, extend or
renew the Receivables; (ix) upon the occurrence and during the continuation of
an Event of Default, to settle, adjust or compromise any legal proceedings
brought to collect Receivables; (x) upon the occurrence and during the
continuation of an Event of Default, to prepare, file and sign such Borrower’s
name on a proof of claim in bankruptcy or similar document against any Customer;
(xi) upon the occurrence and during the continuation of an Event of Default, 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; 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, 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)               No Liability. 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 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)               Establishment of a Lockbox Account, Dominion Account. 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 selected by
Borrowing Agent and be acceptable to Agent or (ii) depository accounts
(“Depository Accounts”) established at the 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 directing such Blocked Account Bank to transfer such funds
so deposited to Agent, either to any account maintained by Agent at said Blocked
Account Bank or by wire transfer to appropriate account(s) of Agent. All funds
deposited in such Blocked Accounts shall immediately become the property of
Agent and Borrowing Agent shall obtain the agreement by such Blocked Account
Bank to waive any offset rights against the funds so deposited. 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. All deposit accounts
and investment accounts of each Borrower and its Subsidiaries are set forth on
Schedule 4.15(h).

(i)                 Adjustments. No Borrower will, without Agent’s consent,
compromise or adjust any material amount of the Receivables (or extend the time
for payment thereof) or accept any material 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 business of such Borrower.

4.16          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.

4.17          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. Each Borrower shall have the right to sell
Equipment to the extent set forth in Section 4.3 hereof.

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4.18          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 shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof.
Neither Agent nor any Lender, whether by anything herein or in any assignment or
otherwise, 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.

4.19          Environmental Matters.

(a)                Borrowers shall ensure that the Real Property and all
operations and businesses conducted thereon remains in compliance with all
Environmental Laws and they shall not place or permit to be placed any Hazardous
Substances on any Real Property except as permitted by Applicable Law or
appropriate governmental authorities.

(b)               Borrowers shall establish and maintain a system to assure and
monitor continued compliance with all applicable Environmental Laws which system
shall include periodic reviews of such compliance.

(c)                Borrowers shall (i) employ in connection with the use of the
Real Property appropriate technology necessary to maintain compliance with any
applicable Environmental Laws and (ii) dispose of any and all Hazardous Waste
generated at the Real Property only at facilities and with carriers that
maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrowers shall use their best efforts to obtain certificates of disposal, such
as hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrowers in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.

(d)               In the event any Borrower obtains, gives or receives notice of
any Release or threat of Release of a reportable quantity of any Hazardous
Substances 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
Borrower’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower 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 Real
Property and the Collateral and is not intended to create nor shall it create
any obligation upon Agent or any Lender with respect thereto.

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(e)                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 Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority 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 at
the Real Property that any Borrower 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 Real Property and the Collateral.

(f)                Borrowers shall respond promptly to any Hazardous Discharge
or Environmental Complaint and take all necessary action in order to safeguard
the health of any Person and to avoid subjecting the Collateral or Real Property
to any Lien. 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: (A) give such notices or (B) 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 clean up, remove, mitigate or otherwise
deal 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 Domestic Rate Loans constituting 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.

(g)               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 audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of Agent, to assess with a
reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any
Hazardous Substances found on, under, at or within the Real Property. Any report
or investigation of such Hazardous Discharge proposed and acceptable to an
appropriate Authority that is charged to oversee the clean-up of such Hazardous
Discharge 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.

(h)               Borrowers shall defend and indemnify Agent and Lenders and
hold Agent, Lenders and their respective employees, agents, directors and
officers harmless from and against all loss, liability, damage and expense,
claims, costs, fines and penalties, including attorney’s fees, suffered or
incurred by Agent or Lenders under or on account of any Environmental Laws,
including the assertion of any Lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real Property,
whether or not the same originates or emerges from the Real Property or any
contiguous real estate, including 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 4.19
shall arise upon the discovery of the presence of any Hazardous Substances 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 Substances. Borrowers’ obligation and the indemnifications hereunder
shall survive the termination of this Agreement.

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(i)                 For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of each Borrower’s right, title and
interest in and to its owned and leased premises.

4.20          Financing Statements. Except as respects the financing statements
filed by Agent and the financing statements described on Schedule no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.

4.21          Appraisals. Borrowers shall cooperate with internal or outside
Equipment appraisers engaged by Agent for the purpose of conducting appraisals
of the Equipment of the Borrowers, in form and substance acceptable to Agent in
its Permitted Discretion, from an appraiser, acceptable to Agent in its
Permitted Discretion. Agent may commission such Equipment appraisals with such
frequency as Agent may elect in its Permitted Discretion; provided, however,
that prior to the occurrence and continuation of an Event of Default, Borrowers
shall be obligated to reimburse Agent for the cost of only one (1) full and one
(1) “desktop” Equipment appraisal in any year of the Term.

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 and to perform all
its respective Obligations hereunder and thereunder. This Agreement and the
Other Documents have been duly executed and delivered by each Borrower, and this
Agreement and the Other Documents 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 of this Agreement and of the Other Documents (a) are
within such Borrower’s corporate or limited liability company powers, have been
duly authorized by all necessary corporate or company action, are not in
contravention of law or the terms of such Borrower’s by-laws, certificate or
articles of incorporation, operating agreement, certificate of formation or
other applicable documents relating to such Borrower’s formation or to the
conduct of such Borrower’s business or of any material agreement or undertaking
to which such Borrower is a party or by which such Borrower is bound, (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 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 result in the creation of any Lien except
Permitted Encumbrances upon any asset of such Borrower under the provisions of
any agreement, charter document, instrument, by-law, operating agreement or
other instrument to which such Borrower is a party or by which it or its
property is a party or by which it may be bound.

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5.2              Formation and Qualification.

(a)                Each Borrower is duly incorporated formed 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. Each Borrower has delivered to Agent true and complete copies of
its certificate of incorporation and by-laws or certificate of formation and
operating agreement, as applicable, and will promptly notify Agent of any
amendment or changes thereto.

(b)               The only Subsidiaries of Borrowers are listed on Schedule
5.2(b).

5.3              Survival of Representations and Warranties. All representations
and warranties of such Borrower contained in this Agreement and the Other
Documents shall be true in all material respects at the time of such Borrower’s
execution of this Agreement and the Other Documents, and shall survive the
execution, delivery and acceptance thereof by the parties thereto and the
closing of the transactions described therein or related thereto.

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 and
local tax returns 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. Federal, state and local income tax returns of each Borrower have been
examined and reported upon by the appropriate taxing authority or closed by
applicable statute and satisfied for all fiscal years prior to and including the
fiscal year ending December 31, 2012. 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 any knowledge of any deficiency
or additional assessment in connection therewith not provided for on its books.

5.5              Financial Statements. The consolidated balance sheets of
Enservco as included in Enservco’s reports filed with the SEC for the year ended
December 31, 2011, 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 and are available at www.sec.gov, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which such accountants concur) and present fairly the financial position of
Borrowers at such date and the results of their operations for such period.
Since December 31, 2011, there has been no material adverse change in the
condition, financial or otherwise, of Borrowers on a Consolidated Basis as shown
on the consolidated balance sheet as of such date and no material adverse change
in the aggregate value of machinery, equipment and real property owned by
Borrowers on a Consolidated Basis, except changes in the Ordinary Course of
Business, none of which individually or in the aggregate has been materially
adverse which have been reflected on the financial statements subsequently filed
with the SEC.

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5.6              Entity Names. No Borrower has been known by any other corporate
name in the past five years and does not sell Inventory under any other name
except as set forth on Schedule 5.6, nor has any Borrower been the surviving
corporation or company of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years except that Enservco was known as Aspen Exploration Corporation until the
effectiveness of its name change to Enservco on December 30, 2010.

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

(a)                Each Borrower has duly complied with, and its facilities,
business, assets, property, leaseholds, Real Property and Equipment are in
compliance in all material respects with, the provisions of the Federal
Occupational Safety and Health Act, the Environmental Protection Act, RCRA and
all other Environmental Laws; there have been no outstanding citations, notices
or orders of non-compliance issued to any Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or
regulations.

(b)               Each Borrower has been issued all required federal, state and
local licenses, certificates or permits relating to all applicable Environmental
Laws.

(c)                (i) There are no visible signs of releases, spills,
discharges, leaks or disposal (collectively referred to as “Releases”) of
Hazardous Substances at, upon, under or within any Real Property or any premises
leased by any Borrower; (ii) there are no underground storage tanks or
polychlorinated biphenyls on any premises leased or owned by any Borrower;
(iii) no premises leased or owned by any Borrower has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on any premises leased or owned by any
Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer’s instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of any Borrower or of its tenants.

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

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

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(b)               Except as disclosed in Schedule 5.8(b), no Borrower has
(i) any pending or threatened litigation, arbitration, actions or proceedings
which involve the possibility of having a Material Adverse Effect, and (ii) any
liabilities or indebtedness for borrowed money other than the Obligations.

(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.

(d)               No Borrower nor any member of the Controlled Group maintains
or contributes to any Plan other than (i) as of the Closing Date, those listed
on Schedule 5.8(d) hereto and (ii) thereafter, as permitted under this
Agreement. (i) No Plan has incurred any “accumulated funding deficiency,” as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and each Borrower and each member of the Controlled Group has met
all applicable minimum funding requirements under Section 302 of ERISA in
respect of each Plan; (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; (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) at this time, 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 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) each Borrower and each member of the Controlled Group has made all
contributions due and payable with respect to each Plan; (x) there exists no
event described in Section 4043(b) 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 any fiduciary responsibility for investments with
respect to any plan existing for the benefit of persons other than employees or
former employees of any Borrower and any member of the Controlled Group;
(xii) neither any Borrower nor any member of the Controlled Group maintains or
contributes 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, 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.

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5.9              Patents, Trademarks, Copyrights and Licenses. All patents,
patent applications, trademarks, trademark applications, service marks, service
mark applications, copyrights, copyright applications, design rights,
tradenames, assumed names, trade secrets and licenses owned or utilized by any
Borrower that are material to the Business of any Borrower are set forth on
Schedule 5.9, are valid and have been duly registered or filed with all
appropriate Governmental Bodies and constitute all of the intellectual property
rights which are necessary for the operation of its business; there is no
objection to or pending challenge to the validity of any such patent, trademark,
copyright, design rights, tradename, trade secret or license and no Borrower is
aware of any grounds for any challenge, except as set forth in Schedule 5.9
hereto. Each patent, patent application, patent license, trademark, trademark
application, trademark license, service mark, service mark application, service
mark license, design rights, copyright, copyright application and copyright
license owned or held by any Borrower and all trade secrets used by any Borrower
consist 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. With respect to all software used
by any Borrower, such Borrower is in possession of all source and object codes
related to each piece of software or is the beneficiary of a source code escrow
agreement, each such source code escrow agreement being listed on Schedule 5.9
hereto.

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
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 the failure to procure such licenses or permits could 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, in either case
which default would have a Material Adverse Effect.

5.12          No Default. No Borrower is in default in the payment or
performance of any of its contractual obligations and no Default has occurred
which default would have a Material Adverse Effect.

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.

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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.

5.17          Disclosure. No representation or warranty made by any Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. 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 this Agreement which could reasonably be expected to have a
Material Adverse Effect.

5.18          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 except to the extent to be
negotiated with Agent as an Interest Rate Hedge or other Hedging Liability
hereunder.

5.19          Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.

5.20          Application of Certain Laws and Regulations. Neither any Borrower
nor any Affiliate of any Borrower is subject to any law, statute, rule or
regulation which regulates the incurrence of any Indebtedness, including laws,
statutes, rules or regulations relative to common or interstate carriers or to
the sale of electricity, gas, steam, water, telephone, telegraph or other public
utility services.

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5.21          Business and Property of Borrowers. Upon and after the Closing
Date, Borrowers do not propose to engage in any business other than the business
of providing oil field services to the domestic on-shore oil and gas industry
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          Section 20 Subsidiaries. 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 Section 20 Subsidiary.

5.23          Anti-Terrorism Laws.

(a)                General. Neither any Borrower nor any Affiliate of any
Borrower is in violation of any Anti-Terrorism Law or engages in or conspires to
engage in any transaction that evades or avoids, or has the purpose of evading
or avoiding, or attempts to violate, any of the prohibitions set forth in any
Anti-Terrorism Law.

(b)               Executive Order No. 13224. Neither any Borrower nor any
Affiliate of any Borrower or their respective agents acting or benefiting in any
capacity in connection with the Advances or other transactions hereunder, is any
of the following (each a “Blocked Person”):

(i)                 a Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order No. 13224;

(ii)               a Person owned or controlled by, or acting for or on behalf
of, any Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

(iii)             a Person or entity with which any Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv)             a Person or entity that commits, threatens or conspires to
commit or supports “terrorism” as defined in the Executive Order No. 13224;

(v)               a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or

(vi)             a Person or entity who is affiliated or associated with a
Person or entity listed above.

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Neither any Borrower nor to the knowledge of any Borrower, any of its agents
acting in any capacity in connection with the Advances or other transactions
hereunder (i) conducts any business or engages in making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, or (ii) deals in, or otherwise engages in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order
No. 13224.

5.24          Trading with the Enemy. No Borrower has engaged, nor does it
intend to engage, in any business or activity prohibited by the Trading with the
Enemy Act.

5.25          Federal Securities Laws. Enservco’s common stock is registered
under Section 12(g) of the Exchange Act, and Enservco files reports pursuant
thereto. No other Borrower nor any of its Subsidiaries (i) is required to file
periodic reports under the Exchange Act, (ii) has any securities registered
under the Exchange Act or (iii) has filed a registration statement that has not
yet become effective under the Securities Act.

VI.AFFIRMATIVE COVENANTS.

Each Borrower shall, until payment in full of the Obligations and termination of
this Agreement:

6.1              Payment of Fees. Pay to Agent on demand all usual and customary
fees and expenses which Agent incurs in connection with (a) the forwarding of
Advance proceeds and (b) the establishment and maintenance of any Blocked
Accounts or Depository Accounts as provided for in Section 4.15(h). Agent may,
without making demand, charge Borrowers’ Account for all such fees and expenses.

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 licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks 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 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.

6.3              Violations. Promptly notify Agent in writing of any violation
of any law, statute, regulation or ordinance of any Governmental Body, or of any
agency thereof, applicable to any Borrower which could reasonably be expected to
have a Material Adverse Effect.

6.4              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 contracts between any
Borrower and the United States, any state or any department, agency or
instrumentality of any of them.

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6.5              Financial Covenants.

(a)                Fixed Charge Coverage Ratio. Cause to be maintained as of the
last day of each fiscal quarter of Borrowers (the “compliance test date” as used
in this Section 6.5), commencing with the fiscal quarter of Borrowers ending
December 31, 2012, a Fixed Charge Coverage Ratio of not less than 1.1 to 1.0.
For the purpose of this covenant, the Fixed Charge Coverage Ratio shall be
determined on the basis of the trailing twelve-month period ended on the
applicable quarterly compliance test date, provided that for each quarterly
compliance test date prior to September 30, 2013, the Fixed Charge Coverage
Ratio will be tested for the shorter cumulative period commencing on October 1,
2012 and ending on such test date.

(b)               Tangible Net Worth. Cause to be maintained a Tangible Net
Worth of not less than $3,750,000 for any compliance test date in 2012. Minimum
Tangible Net Worth requirements for any compliance test dates in 2013, 2014 and
2015 will be agreed upon between Agent and Borrowing Agent within thirty (30)
days following submission of Borrowers’ financial projections for the applicable
year as set forth in Section 9.12 hereof. Borrowers’ compliance with this
covenant shall be tested as of the last day of each fiscal quarter of Borrowers,
commencing with the fiscal quarter of Borrowers ending December 31, 2012.

6.6              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.

6.7              Payment of Indebtedness. Pay, discharge or otherwise satisfy at
or before maturity (subject, where applicable, to specified grace periods and,
in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, 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 contested in good faith by
appropriate proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably deem proper and necessary, subject at all times to any
applicable subordination arrangement in favor of Lenders.

6.8              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 to be complete and correct in all material respects
(subject, in the case of interim quarterly financial statements, to normal
year-end audit adjustments, and in the case of interim monthly financial
statements, to the fact that the disclosures normally associated with GAAP
financial statements may not be included) and to be prepared in reasonable
detail and in accordance with GAAP applied consistently throughout the periods
reflected therein (except as concurred in by such reporting accountants or
officer, as the case may be, and disclosed therein).

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6.9              Federal Securities Laws. Promptly notify Agent in writing if
any Borrower (other than Enservco) or any of its Subsidiaries (i) is required to
file periodic reports under the Exchange Act, (ii) registers any securities
under the Exchange Act or (iii) files a registration statement under the
Securities Act.

6.10          Vehicle Titles. Cause Agent to be named as the sole registered
lien holder on each certificate of title to each material (as determined by
Agent in its Permitted Discretion) item of rolling stock of Borrowers, with such
process having been started in coordination with the release of such Liens by
Borrowers’ prior lender with the intention to have commenced such process within
sixty (60) days after the Closing Date and thereafter diligently pursued by
Agent and Borrowers.

6.11          Termination Statements. Cause each of the UCC-1 financing
statements filed by Compass Bank against the Borrowers to be terminated within
thirty (30) days after the Closing Date.

6.12          Interest Rate Protection Agreement. Use commercially reasonable
efforts to enter into an interest rate protection agreement for an amount not
less than $1,000,000 within thirty (30) days after the Closing Date.

6.13          Affiliate Bankruptcy. Promptly notify Agent if any Affiliate or
any Subsidiary of any Borrower, or any Guarantor, 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 himself or of
all or a substantial part of its or his property, (ii) admit in writing its or
his inability, or be generally unable, to pay its or his debts as they become
due or cease operations of its or his present business, (iii) make a general
assignment for the benefit of creditors, (iv) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (v) be
adjudicated a bankrupt or insolvent, (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 sixty (60) days, any petition filed
against it or him in any involuntary case under such bankruptcy laws, or
(viii) take any action for the purpose of effecting any of the foregoing.

VII.NEGATIVE COVENANTS.

No Borrower shall, until satisfaction in full of the Obligations and termination
of this Agreement:

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 in any manner that would have a Material
Adverse Effect.

(b)               Sell, lease, transfer or otherwise dispose of any material
portion of its properties or assets, except (i) dispositions of Equipment to the
extent expressly permitted by Section 4.3 and (ii) any other sales or
dispositions expressly permitted by this Agreement.

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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
acquired, except Permitted Encumbrances.

7.3              Guarantees. Become liable upon the obligations or liabilities
of any Person by assumption, endorsement or guaranty thereof or otherwise (other
than to Lenders) except the endorsement of checks in the Ordinary Course of
Business.

7.4              Investments. Purchase or acquire obligations or Equity
Interests of, or any other interest in, any Person (not including any Person who
becomes a borrower hereunder or a Guarantor hereof), except (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, and (d) U.S. money
market funds that invest solely in obligations issued or guaranteed by the
United States of America or an agency thereof.

7.5              Loans. Make advances, loans or extensions of credit to any
Person, including any Parent, Subsidiary or Affiliate, except advances, loans or
extensions of credit to another Borrower or to a Guarantor.

7.6              Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for Capital Expenditures in any fiscal year in an
aggregate amount for all Borrowers in excess of $2,500,000.

7.7              Dividends and Distributions. No Borrower shall declare, pay or
make any cash dividend or distribution on any of its Equity Interests or apply
any of its funds, property or assets to the purchase, redemption or other
retirement of any of its Equity Interests, or of any options to purchase or
acquire any of its Equity Interests except (i) dividends or distributions from a
Subsidiary of a Borrower to a Borrower and (ii) dividends or distributions to
Enservco (x) to enable Enservco to pay costs of overhead related to its status
as owner of Dillco and Heat Waves, (y) to enable Enservco to pay taxes related
to the income of its Subsidiaries, and (z) to enable Enservco to make payments
with respect to its Indebtedness to Michael D. Herman to the extent expressly
permitted by the Guarantor Subordination Agreement.

7.8              Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness (exclusive of trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) Indebtedness incurred for Capital Expenditures permitted under
Section 7.6 hereof; and (iii) Indebtedness due under the Subordinated Loan
Documentation.

7.9              Nature of Business. Substantially change the nature of the
business in which it is presently engaged, 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.

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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
transactions disclosed to the Agent or which have been disclosed in reports that
Enservco has filed or may in the future file with the SEC, 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          Leases. Enter as lessee into any lease arrangement for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect thereto, aggregate annual rental payments for all leased
property would exceed $250,000 in any one fiscal year in the aggregate for all
Borrowers except to the extent in effect on the date hereof or which are entered
into to replace or renew existing leases.

7.12          Subsidiaries.

(a)                Form any Subsidiary unless (i) such Subsidiary expressly
joins in this Agreement as a borrower hereunder or guarantor hereof and thereby
becomes jointly and severally liable for the obligations of Borrowers hereunder,
under the Notes, and under any other agreement between any Borrower and Lenders
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.

7.13          Fiscal Year and Accounting Changes. Change its fiscal year from
December 31st or make any significant 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 or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower’s business as conducted
on the date of this Agreement.

7.15          Amendment of Articles or Certificate of Incorporation, By-Laws
Certificate of Formation, Operating Agreement Amend, modify or waive any term or
material provision of its Articles of Incorporation, Certificate of
Incorporation, or By-Laws, or Certificate of Formation or Operating Agreement,
as applicable, 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) or any other Plan
for which Agent has provided its prior written consent, (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 and Section 4975
of the Code, (iii) incur, or permit any member of the Controlled Group to incur,
any “accumulated funding deficiency,” as that term is defined in Section 302 of
ERISA or Section 412 of the Code, (iv) 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, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) 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, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.

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7.17          Prepayment of Indebtedness. Except as permitted pursuant to
Section 7.21 hereof, at any time, directly or indirectly, prepay any
Indebtedness (other than to Lenders), or repurchase, redeem, retire or otherwise
acquire any Indebtedness of any Borrower.

7.18          Anti-Terrorism Laws. No Borrower shall, until satisfaction in full
of the Obligations and termination of this Agreement, nor shall it permit any
Affiliate or agent to:

(a)                Conduct any business or engage in any transaction or dealing
with any Blocked Person, including the making or receiving any contribution of
funds, goods or services to or for the benefit of any Blocked Person.

(b)               Deal in, or otherwise engage in any transaction relating to,
any property or interests in property blocked pursuant to the Executive Order
No. 13224.

(c)                Engage in or conspire to engage in any transaction that
evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in the Executive Order No. 13224, the
USA PATRIOT Act or any other Anti-Terrorism Law. Borrower shall deliver to
Lenders any certification or other evidence requested from time to time by any
Lender in its Permitted Discretion, confirming Borrower’s compliance with this
Section.

7.19          Membership/Partnership Interests. Elect to treat or permit any of
its Subsidiaries to (x) treat its 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 Uniform Commercial Code or (y) certificate its limited liability
company membership interests or partnership interests, as the case may be.

7.20          Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.

7.21          Subordinated Debt. Make any payment in cash or other assets of any
Borrower (not including common or preferred stock of Enservco) in respect to any
subordinated debt of Enservco except to the extent expressly permitted by the
terms of a written subordination agreement in form and substance satisfactory to
Agent in its Permitted Discretion between Agent and the holder of such
indebtedness.

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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)                Loan Documents. Agent shall have received this Agreement and
each of the other Documents, each duly executed and delivered by an authorized
officer of each Borrower or Guarantor party thereto;

(b)               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 the
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 except with
respect to vehicle titles which shall be dealt with as contemplated in Section
6.10;

(c)                Corporate or Company Proceedings of Borrowers. Agent shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors, Board of Managers or Managing
Member of each Borrower authorizing (i) the execution, delivery and performance
of this Agreement and any Other Documents to which such Borrower is a party and
(ii) the granting by each Borrower of the security interests in and liens upon
the Collateral in each case certified by the Secretary or an Assistant Secretary
of each Borrower as of the Closing Date; and, such certificate shall state that
the resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;

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

(e)                Certificates. Agent shall have received a copy of the
Articles or Certificate of Incorporation or Formation of each Borrower and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation or formation together with copies
of the By-Laws or Operating Agreement of each Borrower and all agreements of
each Borrower’s shareholders or members certified as accurate and complete by
the Secretary of each Borrower;

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

(g)               Legal Opinion. Agent shall have received the executed legal
opinion of Burns, Figa & Will, P.C. in form and substance satisfactory to Agent
which shall cover such matters incident to the transactions contemplated by this
Agreement and the Other Documents as Agent may reasonably require;

(h)               No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against any Borrower or against the officers or directors of any
Borrower (A) in connection with this Agreement, the Other Documents 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 Borrower or the
conduct of its business or inconsistent with the due consummation of the
Transactions shall have been issued by any Governmental Body;

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

(j)                 Collateral Examination. Agent shall have completed
Collateral examinations and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Equipment and
other assets of each Borrower and of all books and records in connection
therewith;

(k)               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;

(l)                 Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers’ casualty insurance
policies, together with loss payable endorsements on Agent’s standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers’ liability insurance policies, together with endorsements naming Agent
as an additional insured;

(m)             Securities Account Control Agreement. Agent shall have entered
into a securities account control agreement with TD Ameritrade with respect to
the shares of Pyramid Oil Company held by Michael D. Herman, which shall perfect
Agent’s security interest in one-half of such shares, provide for Agent to have
a first-priority perfected security interest in the other half of such shares
upon the full repayment of certain indebtedness to Great Western Bank guaranteed
by Mr. Herman, and otherwise be in form and substance satisfactory to Agent in
its Permitted Discretion.

(n)               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;

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(o)               Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral;

(p)               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;

(q)               No Adverse Material Change. (i) since October 8, 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;

(r)                 Additional Capital. Enservco shall have raised additional
equity capital of not less than $1,250,000 on such terms and conditions as may
be approved by the board of directors of Enservco;

(s)                Conversion of Herman Subordinated Debt. Michael D. Herman
shall have converted the indebtedness of Enservco owing to him into common stock
and warrants of Enservco on such terms and conditions as may be approved by the
board of directors of Enservco;

(t)                 Capital Structure. Agent, in its Permitted Discretion, shall
have been satisfied with its review of the capital structure of the Borrowers;

(u)               Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory, Equipment or books and records
are located, or Agent shall have established a reserve against availability
under the Revolving Advances facility in an amount equal to three (3) months’
rent for any such premises for which Agent did not receive such an agreement;

(v)               Contract Review. Agent shall have reviewed all material
contracts of Borrowers including MSAs, leases, union contracts, labor contracts,
vendor supply contracts, license agreements and distributorship agreements, and
all such material contracts and agreements shall be satisfactory in all respects
to Agent;

(w)             Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of each Borrower dated as of
the date hereof, stating that (i) all representations and warranties set forth
in this Agreement and the Other Documents are true and correct on and as of such
date, (ii) Borrowers are on such date in compliance with all the terms and
provisions set forth in this Agreement and the Other Documents and (iii) on such
date no Default or Event of Default has occurred or is continuing;

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

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(y)               Undrawn Availability. After giving effect to the initial
Advances hereunder, the sum of (i) Undrawn Availability and (ii) Borrowers’
aggregate unrestricted cash shall be at least $1,750,000;

(z)                Compliance with Laws. Agent shall be reasonably satisfied
that each Borrower 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 Trading with the Enemy Act; and

(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 any Borrower 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 material respects on and as of such date as if made on and as of
such 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; provided, however that Agent, in
its Permitted 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 BORROWERS.

Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf 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 collectibility 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.

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9.2              Schedules. Deliver to Agent 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, if any, and (d) a Borrowing Base Certificate in form and substance
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). In addition, each Borrower will deliver to Agent at such
intervals as Agent may require: (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 and do whatever 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. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Sections 9.7 and 9.8, with a
Compliance Certificate signed by the President of Borrowing Agent stating, to
the best of his knowledge, that each Borrower is in compliance in all material
respects with all federal, state and local Environmental Laws. To the extent any
Borrower 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.

9.4              Litigation. Promptly notify Agent in writing of any claim,
litigation, suit or administrative proceeding affecting any Borrower or any
Guarantor, 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. This obligation to notify Agent is in addition to the obligation to
provide written notice to Agent of all commercial tort claims as required by
Section 4.1

9.5              Material Occurrences. Promptly 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
Borrower or any Guarantor, 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.

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9.6              Government Receivables. Notify Agent immediately 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 at the same time
furnished to the SEC (but not later than the time limit set forth in SEC Form
10-K as may be extended by SEC Rule 12b-25), financial statements of Enservco in
the same form filed with the SEC and reported upon without qualification by an
independent certified public accounting firm selected by Borrowers and
satisfactory to Agent (the “Accountants”). In addition, the financial statements
shall be accompanied by a Compliance Certificate and the internal consolidating
financial statements (that support the consolidated financial statements)
prepared by Enservco in the Ordinary Course of Business.

9.8              Quarterly Financial Statements. Furnish Agent at the same time
furnished to the SEC (but not later than the time limit set forth in SEC Form
10-Q as may be extended by SEC Rule 12b-25), an unaudited balance sheet of
Enservco in the same form filed with the SEC pursuant to the SEC’s Rules and
Regulations, 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
Borrowers’ business. The financial statements shall be accompanied by a
Compliance Certificate and the internal consolidating financial statements (that
support the consolidated financial statements) prepared by Enservco in the
Ordinary Course of Business.

9.9              Monthly Financial Statements. For months other than those
referred to in Sections 9.7 and 9.8 above, furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Borrowers on a
Consolidated Basis in the same form as prepared in the Ordinary Course of
Business for management of Enservco and unaudited statements of income and
stockholders’ equity and cash flow of Borrowers on a Consolidated Basis
reflecting results of operations from the beginning of the fiscal year to the
end of such month and for such month in the same form as prepared in the
Ordinary Course of Business for management of Enservco, 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 Borrowers’ business. The financial
statements shall be accompanied by a Compliance Certificate and the internal
consolidating financial statements (that support the consolidated financial
statements) prepared by Enservco in the Ordinary Course of Business.

9.10          Other Reports. 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 Enservco shall send to its
stockholders.

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 Notes have been complied with by Borrowers 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
Borrower’s opening of any new office or place of business or any Borrower’s
closing of any existing office or place of business, and (c) promptly upon any
Borrower’s learning thereof, notice of any labor dispute to which any Borrower
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 Borrower
is a party or by which any Borrower is bound.

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9.12          Projected Operating Budget. Furnish Agent, no later than thirty
(30) days prior to the beginning of each fiscal year of Borrowers commencing
with fiscal year 2013, a quarter-by-quarter projected operating budget and cash
flow of Borrowers on a Consolidated Basis for such fiscal year (including an
income statement for each month and a balance sheet as at the end of the last
month in each fiscal quarter), such projections to be accompanied by a
certificate signed by the President or Chief Financial Officer of each Borrower
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          Material Variances From Operating Budget, Management Discussion
and Analysis. Furnish Agent, concurrently with the delivery of the financial
statements referred to in Section 9.7 and each quarterly financial statement
referred to in Section 9.8, a written report summarizing (both with figures and
appropriate narrative explanation) (a) material variances from the budget for
the applicable period submitted by Borrowers pursuant to Section 9.12,
(b) material variances from the financial statements for the similar period of
the preceding year delivered pursuant to Section 9.7 or 9.8, as applicable, and
(c) a discussion and analysis by management with respect to such material
variances reported under subsection (a) and (b) hereto.

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
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower’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 Borrower or any Guarantor with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of any Borrower or any Guarantor, 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 Borrower or any Guarantor.

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 Section 412 of
the Code 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, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.

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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.

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 unless such other liability, payment, fee or charge is paid
within five (5) Business Days after Agent or any Lender makes written demand
therefor;

10.2          Breach of Representation. Any representation or warranty made or
deemed made by any Borrower or any Guarantor 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 misleading in any material respect on the date when
made or deemed to have been made;

10.3          Financial Information. Failure by any Borrower to (i)(x) furnish
financial information when due or ten (10) Business Days after written demand
therefor is made, or (y) when requested which is unremedied for a period of
fifteen (15) days after such request, or (ii) permit the inspection of its books
or records in accordance with this Agreement;

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10.4          Judicial Actions. Issuance of a notice of Lien, levy, assessment,
injunction or attachment against any Borrower’s Inventory or Receivables or
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 Borrower or any Guarantor to
(in any respect that would have a Material Adverse Effect) 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 Borrower or any Guarantor, and Agent or any Lender, or
(ii) failure or neglect of any Borrower to perform, keep or observe any term,
provision, condition or covenant, contained in Sections 4.6, 4.7, 4.9, 6.1, 6.3,
6.4, 9.4 or 9.6 hereof which is not cured within ten (10) days from the
occurrence of such failure or neglect which failure would have a Material
Adverse Effect;

10.6          Judgments. Any judgment or judgments are rendered against any
Borrower or any Guarantor for an aggregate amount in excess of $250,000 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 Borrower or any Guarantor 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) make a general assignment for
the benefit of creditors, (iii) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a
bankrupt or insolvent, (v) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vi) 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 (vii) take any action for the
purpose of effecting any of the foregoing;

10.8          Inability to Pay. Any Borrower or any Guarantor shall admit in
writing its inability, or be generally unable, to pay its debts as they become
due or cease operations of its present business;

10.9          [Reserved].

10.10      Material Adverse Effect. Any change in any Borrower’s results of
operations or condition (financial or otherwise) which in Agent’s Permitted
Discretion has a Material Adverse Effect;

10.11      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 in any material respect except
to the extent the grantor of such Lien appropriately responds to Agent’s request
for curative measures with respect to such Lien;

10.12      [Reserved].

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10.13      Cross Default. A default of the obligations of any Borrower under any
other agreement to which it is a party shall occur which default has a Material
Adverse Effect upon Enservco’s condition, affairs or prospects (financial or
otherwise), which default is not cured within any applicable grace period;

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

10.15      Change of Ownership. Any Change of Ownership shall occur which Change
of Ownership is not cured or rectified within thirty (30) days after written
notice thereof to Borrowers from Agent;

10.16      Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on Borrower or any
Guarantor, or any Borrower or any Guarantor shall so claim in writing to Agent
or any Lender;

10.17      Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower, the continuation of which is material to the continuation of
any Borrower’s business, or (B) commence proceedings to suspend, revoke,
terminate or adversely modify any such license, permit, trademark, tradename 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 license,
permit, trademark, tradename or patent necessary in any material respect for the
continuation of any Borrower’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, tradename or
patent; (ii) any agreement which is necessary or material to the operation of
any Borrower’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;

10.18      Seizures. Any material portion of the Collateral shall be seized or
taken by a Governmental Body, or any Borrower or the title and rights of any
Borrower which is the owner of any material portion of the Collateral shall have
become the subject matter of claim, litigation, suit or other proceeding which
might, in the opinion of Agent, upon final determination, result in impairment
or loss of the security provided by this Agreement or the Other Documents unless
Borrowers have provided an adequate bond in the matter;

10.19      Operations. The operations of any Borrower are interrupted in any
material respect for more than seven (7) days during any period of twenty-one
(21) consecutive days, unless such Borrower 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 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 such Borrower
shall be receiving the proceeds of business interruption insurance for a period
of thirty (30) consecutive days; or

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10.20      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.

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 all Obligations shall be immediately due and payable and this
Agreement and the obligation of Lenders to make Advances shall be deemed
terminated; and, (ii) any of the other Events of Default and at any time
thereafter (such default not having previously been cured), at the option of
Required Lenders all Obligations shall be immediately due and payable and
Lenders shall have the right to terminate this Agreement and to terminate the
obligation of Lenders to make Advances and (iii) a filing of a petition against
any Borrower in any involuntary case under any state or federal bankruptcy laws,
all Obligations shall be immediately due and payable and the obligation of
Lenders to make Advances hereunder shall be terminated other than as may be
required by an appropriate order of the bankruptcy court having jurisdiction
over such Borrower. 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
Permitted 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 reasonable notification. At any public sale
Agent or any Lender may bid for and become the purchaser, and Agent, any Lender
or any other purchaser at any such sale thereafter shall hold the Collateral
sold absolutely free from any claim or right of whatsoever kind, including any
equity of redemption and all such claims, rights and equities are hereby
expressly waived and released by each Borrower. In connection with the exercise
of the foregoing remedies, 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) trademarks, trade styles, trade
names, patents, patent applications, copyrights, service marks, licenses,
franchises and other proprietary rights which are 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.

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(b)               To the extent that Applicable Law imposes duties on the Agent
to exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the Agent
(i) to fail to incur expenses reasonably deemed significant by the 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 the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the 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 the Agent would not
be commercially unreasonable in the Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the 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 Permitted
Discretion to determine which rights, Liens, security interests or remedies
Agent may at any time pursue, relinquish, subordinate, or modify or to take any
other action with respect thereto and such determination will not in any way
modify or affect any of Agent’s or Lenders’ rights hereunder.

11.3          Setoff. Subject to Section 14.12, 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 to reduce the Obligations.

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 the 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
Permitted 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 the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Agreement;

SECOND, to payment of any fees owed to the 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 fees and
interest, including the payment of all Hedge Liabilities;

FIFTH, to the payment of the outstanding principal amount of the Obligations
(including the payment or cash collateralization of any outstanding Letters of
Credit);

SIXTH, to all other Obligations and other obligations which shall have become
due and payable under the Other Documents or otherwise and not repaid pursuant
to clauses “FIRST” through “FIFTH” above; and

SEVENTH, to the payment of the surplus, if any, to whomever 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 the 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 Obligations owed to such Lender bears to
the aggregate then outstanding Obligations) of amounts available to be applied
pursuant to clauses “FOURTH,” “FIFTH” and “SIXTH” above; and (iii) to the extent
that any amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral account 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 “FIFTH” and
“SIXTH” above in the manner provided in this Section 11.5.

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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, 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, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT 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 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, 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 November 2, 2015 (the “Term”)
unless sooner terminated as herein provided. Borrowers may terminate this
Agreement at any time upon ninety (90) days’ prior written notice upon payment
in full of the Obligations. In the event the Obligations are prepaid in full
prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the “Early Termination Date”), Borrowers shall pay to Agent for
the benefit of Lenders an early termination fee in an amount equal to
(x) $480,000 if the Early Termination Date occurs on or after the Closing Date
to and including the date immediately preceding the first anniversary of the
Closing Date, (y) $320,000 if the Early Termination Date occurs on or after the
first anniversary of the Closing Date to and including the date immediately
preceding the second anniversary of the Closing Date, and (z) $160,000 if the
Early Termination Date occurs on or after the second anniversary of the Closing
Date to and including the date immediately preceding the third anniversary of
the Closing Date.

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13.2          Termination. The termination of the Agreement shall not affect any
Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or 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 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,
payments of principal and interest, fees (except the fees set forth in Sections
3.3 and the Fee Letter), charges and collections (without giving effect to any
collection days) 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 Note) 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 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.

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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. 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 except as expressly set forth herein.

14.3          Lack of Reliance on Agent and Resignation. 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 Borrower and each Guarantor 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 Borrower and each Guarantor. 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,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of any Borrower or any Guarantor, or be required to make any
inquiry concerning either the performance or observance of any of the terms,
provisions or conditions of this Agreement, the Note, the Other Documents or the
financial condition of any Borrower, or the existence of any Event of Default or
any Default.

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.

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

14.4          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.

14.5          Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or 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, 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.

14.6          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.

14.7          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 Advances (or, if no Advances are
outstanding, according to its Commitment Percentage), 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; 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).

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14.8          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.

14.9          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.

14.10      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.

14.11      No Reliance on Agent’s Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates,
participants or assignees, may rely on the 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 Borrower, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.

14.12      Other Agreements. Each of the 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 the 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.

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XV.BORROWING AGENCY.

 

15.1          Borrowing Agency Provisions.

(a)                Each Borrower hereby irrevocably designates Borrowing Agent
to be its attorney and agent and in such capacity to borrow, sign and endorse
notes, and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of 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.

(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, 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 to
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 other Person directly or contingently liable for the Obligations
hereunder, or against or with respect to the 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.

XVI.MISCELLANEOUS

16.1          Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applied to contracts to be
performed wholly within the State of New York. Any judicial proceeding brought
by or 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 New York, 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 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 the 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 New York. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right
of Agent or any Lender to bring proceedings against any 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 New York in the Borough of Manhattan, State of
New York.

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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 supersede 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, 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 all Lenders:

(i)                 increase the Commitment Percentage, the maximum dollar
commitment of any Lender or the Maximum Revolving Advance Amount.

(ii)               extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement.

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(iii)             alter the definition of the term Required Lenders or alter,
amend or modify this Section 16.2(b).

(iv)             release any Collateral during any calendar year (other than in
accordance with the provisions of this Agreement) having an aggregate value in
excess of $250,000.

(v)               change the rights and duties of Agent.

(vi)             increase the Advance Rate above the Advance Rate in effect on
the Closing Date.

(vii)           release any Guarantor.

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.

In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such consent is denied, then PNC may, at its option, require
such Lender to assign its interest in the Advances to PNC or to another Lender
or to any other Person designated by the 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 PNC elects to
require any Lender to assign its interest to PNC or to the Designated Lender,
PNC will so notify such Lender in writing within forty five (45) days following
such Lender’s denial, and such Lender will assign its interest to PNC 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, PNC or the
Designated Lender, as appropriate, and Agent.

Notwithstanding (a) the existence of a Default or an Event of Default, (b) that
any of the other applicable conditions precedent set forth in Section 8.2 hereof
have not been satisfied or (c) any other provision of this Agreement, Agent may
at its discretion and without the consent of the Required Lenders, voluntarily
permit the sum of the outstanding Revolving Advances and the Maximum Undrawn
Amount at any time to exceed the Formula Amount ( the “Overadvance Threshold
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 make such Out-of-Formula
Loans, 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 Lenders do make Out-of-Formula Loans, neither Agent nor
Lenders shall be deemed thereby to have changed the limits of Section 2.1(a).
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.

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In addition to (and not in substitution of) the discretionary Revolving Advances
permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, from time to time in the Agent’s sole discretion,
(A) after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrowers on behalf of the Lenders which the 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
Revolving Advances the outstanding Revolving Advances do not exceed one hundred
and ten percent (110%) of the Formula Amount.

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 permitted 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 financial
institutions (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 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 and 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, money 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 which shall not be
unreasonably withheld or delayed, may sell, assign or transfer all or any part
of its rights and obligations under or relating to Revolving Advances or the
Term Loan under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions 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. 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 Commitment Percentage 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 Commitment Percentages
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 Commitment Percentages
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 or the Term Loan 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 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.

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(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.

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.

16.5          Indemnity. Each Borrower shall indemnify Agent, each Lender and
each of their respective officers, directors, Affiliates, attorneys, employees
and agents from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including fees and disbursements of counsel)
which may be imposed on, incurred by, or asserted against Agent or any Lender in
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, except to the extent that any of the foregoing arises
out of the willful misconduct of the party being indemnified (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
indemnitees described above in this Section 16.5 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 Substances 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 indemnitees
described above in this Section 16.5 harmless from and against all liability in
connection therewith.

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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 Loan 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 site on
the World Wide Web (a “Website Posting”) if Notice of such Website 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;

(b)               If given by mail, four 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,
a Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon 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;

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

(f)                In the case of a Website 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 the Agent, and the Agent shall promptly notify the other
Lenders of its receipt of such Notice.

(A)If to Agent or PNC at:

PNC Bank, National Association
2 North Lake Avenue
Suite 440
Pasadena, California 91101
Attention: Mark Tito
Telephone: (626) 432-7542
Facsimile: (626) 432-4589
E-mail: mark.tito@pnc.com

with a copy to:

Buchalter Nemer, P.C.
1000 Wilshire Boulevard, Suite 1500
Los Angeles, California 90017
Attention: Anthony R. Callobre, Esq.
Telephone: (213) 891-5024
Facsimile: (213) 630-5773
E-mail: acallobre@buchalter.com

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

(C)If to Borrowing Agent or any Borrower:

Enservco Corporation
501 South Cherry Street, Suite 320
Denver, Colorado 80246
Attention: Rick D. Kasch
Telephone: (720) 974-3406
Facsimile: (720) 974-3416
E-mail: rkasch@enservco.com

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with a copy to:

Burns, Figa & Will, P.C.
6400 S. Fiddler’s Green Circle, Suite 100
Greenwood Village, Colorado 80111
Attention: Herrick K. Lidstone, Jr., Esq.
Telephone: (303) 796-2626
Facsimile: (303) 796-2777
E-mail: hklidstone@bfwlaw.com

16.7          Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7,
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. All costs and expenses including reasonable attorneys’
fees (including the allocated costs of in house counsel) and disbursements
incurred by Agent on its behalf or on behalf of Lenders (a) in all efforts made
to enforce payment of any Obligation or effect collection of any Collateral, or
(b) in connection with the entering into, modification, amendment,
administration and enforcement of this Agreement, any other Document or any
consents or waivers hereunder or thereunder and all related agreements,
documents and instruments, or (c) in instituting, maintaining, preserving,
enforcing and foreclosing on Agent’s security interest in or Lien on any of the
Collateral, or maintaining, preserving or enforcing any of Agent’s or any
Lender’s rights hereunder, under any other Document and under all related
agreements, documents and instruments, whether through judicial proceedings or
otherwise, or (d) in defending or prosecuting any actions or proceedings arising
out of or relating to Agent’s or any Lender’s transactions with any Borrower or
any Guarantor or (e) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement, any Other
Document and all related agreements, documents and instruments, may be charged
to Borrowers’ Account and shall be part of the Obligations.

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 Borrower or any Guarantor (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.

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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 transmission 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 recognize that Enservco is a company with a class of securities
registered under Section 12(g) of the Exchange Act, and that some of the
information to be furnished to Agent, each Lender and each Transferee pursuant
to this Agreement will be non-public information. In compliance with SEC
Regulation FD and any other confidentiality obligations established herein,
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 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 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.

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16.16      Publicity. Subject to the requirements of Enservco under the Exchange
Act and to the requirements of SEC Regulation FD, 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 Permitted Discretion deem
appropriate.

16.17      Certifications From Banks and Participants; US PATRIOT Act. 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 the 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 10 days after the Closing Date, and (2) as
such other times as are required under the USA PATRIOT Act.

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93

 

 
 

 

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

  BORROWERS:       ENSERVCO CORPORATION,   a Delaware corporation           By:
  Rick D. Kasch   President           DILLCO FLUID SERVICE, INC.   a Kansas
corporation           By:   Rick D. Kasch   Treasurer           HEAT WAVES HOT
OIL SERVICES LLC,   a Colordo limited liability company               By:   Rick
D. Kasch   Manager

 

 

Revolving Credit, Term Loan and Security Agreement

 

 

 
 

 

 

  PNC BANK, NATIONAL ASSOCIATION   as Lender and as Agent           By:   Name:
  Title:       Commitment Percentage: 100%

 

 

 

 

 

Revolving Credit, Term Loan and Security Agreement