Exhibit 10.1

 

 

 

CREDIT AGREEMENT

dated as of October 25, 2018

among

NINE ENERGY SERVICE, INC.

as U.S. Borrower

and

NINE ENERGY CANADA INC.,

as Canadian Borrower

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and an Issuing Lender

WELLS FARGO BANK, NATIONAL ASSOCIATION, and

ZIONS BANCORPORATION, N.A. dba AMEGY BANK,

as Issuing Lenders

and

THE LENDERS PARTY HERETO FROM TIME TO TIME

as Lenders

 

 

JPMORGAN CHASE BANK, N.A.,

and

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Joint Lead Arrangers and Joint Bookrunners

 

 

 

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TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

     1  

Section 1.1

 

Certain Defined Terms

     1  

Section 1.2

 

Computation of Time Periods

     42  

Section 1.3

 

Accounting Terms; Changes in GAAP

     42  

Section 1.4

 

Classes and Types of Loans

     43  

Section 1.5

 

Other Interpretive Provisions; UCC, PPSA Terms

     43  

Section 1.6

 

Exchange Rates; Currency Equivalents

     44  

Section 1.7

 

Currency Matters; Currency Indemnity

     44  

ARTICLE II CREDIT FACILITIES

     44  

Section 2.1

 

Commitments

     44  

Section 2.2

 

Loans and Borrowings

     45  

Section 2.3

 

Requests for Borrowing; Notice of Borrowing

     46  

Section 2.4

 

Protective Advances

     47  

Section 2.5

 

Cash Dominion

     47  

Section 2.6

 

Letters of Credit

     48  

Section 2.7

 

Funding of Borrowings

     53  

Section 2.8

 

Interest Elections

     53  

Section 2.9

 

Increase, Reduction and Termination of Commitments

     54  

Section 2.10

 

Repayment of Loans. Evidence of Debt.

     56  

Section 2.11

 

Prepayment of Loans

     57  

Section 2.12

 

Fees

     59  

Section 2.13

 

Interest

     60  

Section 2.14

 

Alternate Rate of Interest

     61  

Section 2.15

 

Increased Costs; Illegality

     62  

Section 2.16

 

Breakage Costs

     63  

Section 2.17

 

Withholding of Taxes; Gross-Up

     64  

Section 2.18

 

Payments Generally; Allocation of Proceeds; Sharing of Set-Offs

     67  

Section 2.19

 

Mitigation Obligations; Replacement of Lenders

     70  

Section 2.20

 

Defaulting Lender Provisions

     71  

Section 2.21

 

Returned Payments

     72  

Section 2.22

 

Banking Services and Swap Agreements

     72  

Section 2.23

 

Excess Resulting From Exchange Rate Change

     73  

Section 2.24

 

Canadian Loans

     73  

ARTICLE III CONDITIONS PRECEDENT

     74  

Section 3.1

 

Conditions Precedent to the Closing Date

     74  

Section 3.2

 

Conditions Precedent to Each Credit Extension After Closing Date

     77  

Section 3.3

 

Determinations Under Section 3.1 and Section 3.2

     78  

ARTICLE IV REPRESENTATIONS AND WARRANTIES

     78  

Section 4.1

 

Organization

     78  

Section 4.2

 

Authorization

     78  

 

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Section 4.3

 

Enforceability

     78  

Section 4.4

 

Financial Condition

     79  

Section 4.5

 

Ownership and Liens; Real Property

     79  

Section 4.6

 

True and Complete Disclosure

     79  

Section 4.7

 

Litigation

     79  

Section 4.8

 

Compliance with Agreements

     80  

Section 4.9

 

Pension Plans

     80  

Section 4.10

 

Environmental Condition

     81  

Section 4.11

 

Subsidiaries

     81  

Section 4.12

 

Investment Company Act

     81  

Section 4.13

 

Taxes

     81  

Section 4.14

 

Permits, Licenses, etc.

     82  

Section 4.15

 

Use of Proceeds

     82  

Section 4.16

 

Condition of Property; Casualties

     82  

Section 4.17

 

Insurance

     82  

Section 4.18

 

Security Interest

     82  

Section 4.19

 

OFAC; Anti-Terrorism; Anti-Corruption Laws; Sanctions

     83  

Section 4.20

 

Solvency

     83  

Section 4.21

 

EEA Financial Institution

     83  

Section 4.22

 

Qualified ECP Counterparty

     83  

ARTICLE V AFFIRMATIVE COVENANTS

     83  

Section 5.1

 

Organization

     83  

Section 5.2

 

Reporting

     83  

Section 5.3

 

Insurance

     88  

Section 5.4

 

Compliance with Laws

     89  

Section 5.5

 

Taxes

     89  

Section 5.6

 

Security

     89  

Section 5.7

 

Designations with Respect to Subsidiaries

     90  

Section 5.8

 

Books and Records; Inspection; Field Examinations

     91  

Section 5.9

 

Maintenance of Property

     91  

Section 5.10

 

Controlled Accounts

     91  

Section 5.11

 

Appraisals

     92  

Section 5.12

 

Post-Closing; Further Assurances

     92  

ARTICLE VI NEGATIVE COVENANTS

     93  

Section 6.1

 

Debt

     93  

Section 6.2

 

Liens

     95  

Section 6.3

 

Investments

     97  

Section 6.4

 

Acquisitions

     98  

Section 6.5

 

Agreements Restricting Liens

     99  

Section 6.6

 

Use of Proceeds; Use of Letters of Credit

     99  

Section 6.7

 

Corporate Actions; Accounting Changes

     100  

Section 6.8

 

Disposition of Assets

     101  

Section 6.9

 

Restricted Payments

     102  

Section 6.10

 

Certain Payments, Prepayments and Redemptions of Debt

     103  

Section 6.11

 

Affiliate Transactions

     103  

Section 6.12

 

Line of Business

     103  

Section 6.13

 

Hazardous Materials

     104  

 

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Section 6.14

 

Compliance with ERISA

     104  

Section 6.15

 

Sale and Leaseback Transactions

     104  

Section 6.16

 

Limitation on Hedging

     105  

Section 6.17

 

No Material Amendments

     105  

Section 6.18

 

Fixed Charge Coverage Ratio

     105  

Section 6.19

 

Establishment of Canadian Defined Benefit Plan

     105  

ARTICLE VII DEFAULT AND REMEDIES

     105  

Section 7.1

 

Events of Default

     105  

Section 7.2

 

Optional Acceleration of Maturity

     107  

Section 7.3

 

Automatic Acceleration of Maturity

     108  

Section 7.4

 

Set-off

     108  

Section 7.5

 

Remedies Cumulative, No Waiver

     109  

Section 7.6

 

Application of Payments

     109  

ARTICLE VIII THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER

     109  

Section 8.1

 

Appointment, Powers, and Immunities

     109  

Section 8.2

 

Reliance by Administrative Agent and Issuing Lenders

     111  

Section 8.3

 

Delegation of Duties

     111  

Section 8.4

 

Indemnification

     111  

Section 8.5

 

Non-Reliance on Administrative Agent and Other Lenders

     112  

Section 8.6

 

Resignation of Administrative Agent or an Issuing Lender

     113  

Section 8.7

 

Collateral Matters

     114  

Section 8.8

 

No Other Duties, etc.

     116  

ARTICLE IX MISCELLANEOUS

     116  

Section 9.1

 

Expenses; Indemnity; Damage Waiver

     116  

Section 9.2

 

Waivers and Amendments

     118  

Section 9.3

 

Severability

     119  

Section 9.4

 

Survival of Representations and Obligations

     119  

Section 9.5

 

Binding Effect

     120  

Section 9.6

 

Successors and Assigns Generally

     120  

Section 9.7

 

Lender Assignments and Participations

     120  

Section 9.8

 

Confidentiality

     122  

Section 9.9

 

Notices, etc.

     123  

Section 9.10

 

Usury Not Intended

     124  

Section 9.11

 

Usury Recapture

     125  

Section 9.12

 

Judgment Currency

     125  

Section 9.13

 

Payments Set Aside

     126  

Section 9.14

 

Governing Law

     126  

Section 9.15

 

Submission to Jurisdiction

     126  

Section 9.16

 

Waiver of Venue

     127  

Section 9.17

 

Service of Process

     127  

Section 9.18

 

Execution in Counterparts

     127  

Section 9.19

 

Electronic Execution of Assignments

     127  

Section 9.20

 

Waiver of Jury

     127  

Section 9.21

 

USA Patriot Act

     128  

Section 9.22

 

Canadian AML

     128  

 

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Section 9.23

 

Acknowledgement and Consent to Bail-In of EEA Financial Institutions

     128  

Section 9.24

 

Integration

     129  

Section 9.25

 

No Fiduciary Duty, etc.

     129  

ARTICLE X The Borrower Representative

     129  

Section 10.1

 

Appointment; Nature of Relationship

     129  

Section 10.2

 

Powers

     130  

Section 10.3

 

Employment of Agents

     130  

Section 10.4

 

Notices

     130  

Section 10.5

 

Successor Borrower Representative

     130  

Section 10.6

 

Execution of Credit Documents; Borrowing Base Certificate

     130  

Exhibits and Schedules

 

Exhibit A    Form of Assignment and Assumption Exhibit B    Form of Borrowing
Base Certificate Exhibit C    Form of Guaranty Exhibit D    Pledge and Security
Agreement Exhibit E    Form of Compliance Certificate Exhibit F    Form of
Notice of Borrowing Exhibit G    Form of U.S. Tax Compliance Certificate
Schedule I    Commitments, Contact Information Schedule II    Existing Letters
of Credit Schedule 4.1    Organizational Information Schedule 4.10   
Environmental Conditions Schedule 4.11    Subsidiaries Schedule 5.7   
Requirements for New Subsidiaries Schedule 6.1    Permitted Debt Schedule 6.2   
Permitted Liens Schedule 6.3    Permitted Investments Schedule 6.11    Permitted
Affiliate Transactions

 

 

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CREDIT AGREEMENT

This Credit Agreement dated as of October 25, 2018 (this “Agreement”) is among
Nine Energy Service, Inc., a Delaware corporation (the “U.S. Borrower”, and the
“Company”), Nine Energy Canada Inc., a corporation organized under the laws of
Alberta, Canada (the “Canadian Borrower” and, together with the U.S. Borrower,
the “Borrowers”), the Lenders, JPMorgan Chase Bank, N.A. (“JPMCB U.S.”), as
Administrative Agent and as an Issuing Lender (each as defined below) and Wells
Fargo Bank, National Association (“Wells Fargo”), as an Issuing Lender and Zions
Bancorporation, N.A. dba Amegy Bank (“Amegy”), as an Issuing Lender.

PRELIMINARY STATEMENT:

WHEREAS, the Borrowers have requested that the Lenders and the Issuing Lenders
provide certain loans to and extensions of credit on behalf of the Borrowers on
and after the Closing Date; and

WHEREAS, the Lenders and the Issuing Lenders have agreed to make such loans and
extensions of credit subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and of the loans, extensions of credit and commitments
hereinafter referred to, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1 Certain Defined Terms. As used in this Agreement, the defined terms
set forth in the recitals above shall have the meanings set forth above and the
following terms shall have the following meanings (unless otherwise indicated,
such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

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

“Acceptable Security Interest” means a security interest which (a) exists in
favor of the Administrative Agent for its benefit and the ratable benefit of the
applicable Secured Parties, (b) is superior to all other security interests
(other than the Permitted Liens and other than as to Excluded Perfection
Collateral), (c) secures the Secured Obligations, (d) is enforceable against the
Credit Party which created such security interest and (e) except as to Excluded
Perfection Collateral, is perfected.

“Account” has the meaning assigned to such term in the U.S. Security Agreement
or the Canadian Security Agreement, as applicable.

“Account Control Agreement” means an account control agreement (or similar
agreement), in form and substance satisfactory to the Administrative Agent,
executed by the applicable Credit Party, the Administrative Agent and the
relevant depository institution or securities intermediary, as applicable, party
thereto. Such agreement shall provide a first priority perfected Lien in favor
of the Administrative Agent, for the benefit of the Secured Parties, in the
applicable Credit Party’s Deposit Account, Securities Account or Commodity
Account, as applicable.

“Account Debtor” means any Person obligated on an Account.

 

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“Acquisition” means any transaction, or any series of related transactions,
consummated on or after the Closing Date, by which any Credit Party (a) acquires
any going business or all or substantially all of the assets of any Person,
whether through purchase of assets, merger, amalgamation or otherwise or
(b) directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the Equity Interests of a Person which has ordinary voting power for
the election of directors or other similar management personnel of a Person
(other than Equity Interests having such power only by reason of the happening
of a contingency) or a majority of the outstanding Equity Interests of a Person.

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

“Administrative Agent” means JPMorgan Chase Bank, N.A., acting through one or
more of its branches or affiliates, including, with respect to any Canadian
Loan, JPMCB Canada, in its capacity as Canadian Administrative Agent under this
Agreement.

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

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

“Aggregate Borrowing Base” means, at any time, the Dollar Equivalent Amount of
the sum of the U.S. Borrowing Base plus the Canadian Borrowing Base.

“Aggregate Canadian Exposure” means, at any time, the aggregate Canadian
Exposure of all Lenders at such time.

“Aggregate Commitments” means at any time, the aggregate amount of the
Commitments. As of the Closing Date, the Aggregate Commitments are
$200.0 million.

“Aggregate Credit Exposure” means, at any time, the Dollar Equivalent Amount of
the aggregate Credit Exposure at such time, as increased or reduced from time to
time pursuant to the terms and conditions hereof.

“Aggregate U.S. Exposure” means, at any time, the aggregate U.S. Exposure of all
Lenders at such time.

“Agreement” has the meaning assigned to such term in the preamble.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on
such day plus  1⁄2 of 1% and (c) the Adjusted LIBO Rate for a one month Interest
Period on such day (or if such day is not a Business Day, the immediately
preceding Business Day) plus one percent (1%), provided that, for the purpose of
this definition, the Adjusted LIBO Rate for any day shall be based on the LIBO
Screen Rate (or if the LIBO Screen Rate is not available for such one month
Interest Period, the Interpolated Rate) at approximately 11:00 a.m. London time
on such day. Any change in the Alternate Base Rate due to a change in the Prime
Rate, the NYFRB Rate or the Adjusted LIBO Rate shall be effective from and
including the effective date of such change in the Prime Rate, the NYFRB Rate or
the Adjusted LIBO Rate, respectively. If the Alternate

 

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Base Rate is being used as an alternate rate of interest pursuant to
Section 2.14 hereof, then the Alternate Base Rate shall be the greater of
clauses (a) and (b) above and shall be determined without reference to clause
(c) above. For the avoidance of doubt, if the Alternate Base Rate as so
determined pursuant to the foregoing would be less than zero, such rate shall be
deemed to be zero for purposes of this Agreement.

“AML Legislation” means, collectively, the Proceeds of Crime (Money Laundering)
and Terrorist Financing Act (Canada), the Criminal Code (Canada) and the United
Nations Act (Canada), including the Regulations Implementing the United Nations
Resolutions on the Suppression of Terrorism (Canada) and the United Nations
Al-Qaida and Taliban Regulations (Canada) promulgated under the United Nations
Act (Canada), and other applicable anti-money laundering, anti-terrorist
financing, government sanction and “know your client” laws, in each case,
applicable to Secured Parties operating in Canada or any of its provinces or
territories, including any rules, regulations, directives, guidelines or orders
thereunder.

“Anti-Corruption Laws” means all laws, rules, ordinances and regulations of any
jurisdiction applicable to the Company or any of its Subsidiaries from time to
time concerning or relating to bribery, money laundering or corruption,
including the United States Foreign Corrupt Practice Act of 1997 and the U.K.
Bribery Act 2010.

“Applicable Borrower” means the U.S. Borrower or the Canadian Borrower, as
applicable.

“Applicable Margin” means, at any time with respect to each Type of Loan and the
Letters of Credit, the percentage rate per annum which is applicable at such
time with respect to such Loan or Letter of Credit as set forth in the grid
below based on the Leverage Ratio for the most recently ended four fiscal
quarter period of the Company for which financial statements have been
delivered, as set forth in the most recent Compliance Certificate received by
the Administrative Agent pursuant to Section 5.2(c), and subject to further
adjustments as set forth below:

 

Level

          Applicable Margin        Leverage Ratio      Eurocurrency and
CDOR Margin     ABR, CBR and
CPR Margin  

Level I

   £ 1.00:1.00        1.75 %      0.75 % 

Level II

    

> 1.00:1.0 and

< 2.00:1.00

 

 

     2.00 %      1.00 % 

Level III

   ³ 2.00:1.00        2.25 %      1.25 % 

Any increase or decrease in the Applicable Margin resulting from a change in the
Leverage Ratio shall become effective as of the date a Compliance Certificate is
delivered pursuant to Section 5.2(c). Notwithstanding the foregoing: (a) if the
Company fails to deliver a Compliance Certificate as required by Section 5.2(c),
then from the date of such failure until the delivery of such Compliance
Certificate in accordance with the requirements of Section 5.2(c), the
Applicable Margin shall be set at Level III and (b) during the Fixed Applicable
Margin Period, the Applicable Margin shall be set at Level II.

Without limitation of any other provision of this Agreement or any other remedy
available to the Lender Parties hereunder, to the extent that any financial
statements or any information contained in any Compliance Certificate delivered
hereunder shall be incorrect in any material respect and the Company shall
deliver to the Lender Parties corrected financial statements or other corrected
information in a Compliance Certificate (or otherwise), the Administrative Agent
may recalculate the Applicable Margin based upon such corrected financial
statements or such other corrected information and, upon written notice thereof
to the Company, the Loans shall bear interest based upon such recalculated
Applicable Margin

 

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retroactively from the date of delivery of the erroneous financial statements or
other erroneous information in question; it being understood that the Company
shall promptly pay any additional interest that would have been due but for such
incorrect information, and no Default shall be deemed to have occurred as a
result of a failure to pay such additional interest when originally due.

“Applicable Percentage” means, with respect to the Facility and any Lender, the
ratio (expressed as a percentage) of (a) such Lender’s Commitment at such time
to the Aggregate Commitments at such time or (b) if the Commitments have been
terminated or expired, the ratio (expressed as a percentage) of such Lender’s
aggregate outstanding Loans at such time to the total outstanding Loans at such
time; provided that, (i) in accordance with Section 2.20, so long as any Lender
shall be a Defaulting Lender, such Defaulting Lender’s Commitment shall be
disregarded in the calculations under clause (a) or (ii) if no Loans or
Commitments are then outstanding, then “Applicable Percentage” means the
“Applicable Percentage” most recently in effect, after giving pro forma effect
to any Assignment and Assumptions.

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

“Assignment and Assumption” means an Assignment and Assumption executed by a
Lender and an Eligible Assignee and accepted by the Administrative Agent in
substantially the form set forth in Exhibit A.

“Availability” means, at any time, the Dollar Equivalent Amount of the sum of
U.S. Availability plus Canadian Availability.

“Availability Period” means the period from and including the Closing Date to
but excluding the earlier of (a) the Maturity Date and (b) the date of
termination of the Commitments.

“Available Commitment” means, for each Lender, at any time, its Commitment minus
its Revolving Exposure.

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

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

“Banking Services” means each and any of the following bank services provided to
any Credit Party by any Banking Services Provider: (a) credit cards for
commercial customers (including, without limitation, “commercial credit cards”
and purchasing cards), (b) stored value cards, (c) merchant processing services,
and (d) treasury management services (including, without limitation, controlled
disbursement, automated clearinghouse transactions, return items, cash pooling
services, overdrafts and interstate depository network services).

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

 

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“Banking Services Provider” means any Lender or Affiliate of a Lender that
provides Banking Services to any Credit Party.

“Bankruptcy Code” means the Bankruptcy Code of the United States.

“Bankruptcy Event” means, with respect to any Person, when such Person becomes
the subject of a bankruptcy or insolvency proceeding, or proposal proceeding
under the Bankruptcy and Insolvency Act (Canada), the Companies Creditors
Arrangement Act (Canada) or the Winding Up and Restructuring Act (Canada) as now
or hereafter in effect, or any successor legislation thereto, or has had a
receiver, interim receiver, receiver manager, monitor, sequestrator,
conservator, trustee, administrator, custodian, assignee for the benefit of
creditors or similar Person charged with the reorganization or liquidation of
its business, appointed for it, or, in the good faith determination of the
Administrative Agent, has taken any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any such proceeding or appointment,
provided that, a Bankruptcy Event shall not result solely by virtue of any
ownership interest, or the acquisition of any ownership interest, in such Person
by a Governmental Authority or instrumentality thereof, unless such ownership
interest results in or provides such Person with immunity from the jurisdiction
of courts within the United States or Canada or from the enforcement of
judgments or writs of attachment on its assets or permits such Person (or such
Governmental Authority or instrumentality), to reject, repudiate, disavow or
disaffirm any contracts or agreements made by such Person.

“Base Rate Borrowing” means a Borrowing of the Type calculated at ABR, CBR or
CPR, as the context requires.

“Base Rate Loan” means (a) a U.S. Dollar denominated Loan which bears interest
based upon the Alternate Base Rate or the Canadian Base Rate and (b) a Canadian
Dollar denominated Loan which bears interest based upon the Canadian Prime Rate.

“Beneficial Owner” means, with respect to any U.S. federal withholding tax, the
beneficial owner, for U.S. federal income tax purposes, to whom such tax
relates.

“Beneficial Ownership Certification” means a certificate regarding beneficial
ownership or control as required by the Beneficial Ownership Regulation.

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

“Borrower Representative” has the meaning assigned to such term in Section 10.1.

“Borrowers” has the meaning set forth in the preamble.

“Borrowing” means (a) a borrowing consisting of Loans of the same Type made by
the Lenders pursuant to Section 2.1(a) or converted by each Lender to Loans of a
different Type pursuant to Section 2.8 and, in the case of Non-Base Rate Loans,
as to which a single Interest Period is in effect, and (b) a Protective Advance.

“Borrowing Base” means the U.S. Borrowing Base and/or the Canadian Borrowing
Base as the context requires.

“Borrowing Base Certificate” means a certificate, signed and certified as
accurate and complete by a Financial Officer of the Borrower Representative, in
substantially the form of Exhibit B or another form which is reasonably
acceptable to the Administrative Agent.

 

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“Business Day” means (a) any day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close under the Legal Requirements of,
or are in fact closed in, New York, New York, Houston, Texas, or Calgary,
Alberta, Canada; and

(b) (i) if such day relates to any interest rate settings as to a Eurodollar
Loan denominated in Dollars, any fundings, disbursements, settlements and
payments in Dollars in respect of any such Eurodollar Loan, or any other
dealings in Dollars to be carried out pursuant to this Agreement in respect of
any such Eurodollar Loan, means any such day on which dealings in deposits in
Dollars are conducted by and between banks in the London interbank Eurodollar
market and (ii) if such day relates to a Loan denominated in Canadian Dollars,
any such day shall also exclude any day on which commercial banks are not open
for dealings in Canadian Dollar deposits in the interbank market in Toronto,
Ontario.

“Business Optimization Costs and Savings” means (a) those certain costs and
expenses paid or payable by the Credit Parties in connection with the
transition, restructuring, integration and business optimization of the assets
of the Credit Parties and other costs related to replacing services to be
performed for the Credit Parties’ business, including in the case of each of the
foregoing all one-time costs and charges in connection with the following:
(i) restructuring, business optimization, set-up, recertification and
integration, (ii) retention and severance, (iii) systems and information
technology procurement, establishment and optimization, (iv) rebranding, (v)
contract termination, (vi) the start-up, closure, relocation or reconfiguration,
consolidation, or opening of facilities and future lease commitments,
(vii) recruiting, retention, relocation, signing bonuses, severance and salary
for interim employees, (viii) consulting fees and expenses not payable to any
Affiliate of the Credit Parties, (ix) interim salary and bonus, and (x) and any
other costs incurred in connection with any of the foregoing, (b) unrealized pro
forma cost synergies and expenses comprised of headcount reductions, facility
consolidations, and administrative expenses, such as insurance, audit & tax
filings, information technology investments and facility costs and (c) run rate
costs and savings in connection with any Acquisition.

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

“Canadian Applicable Percentage” means, with respect to the Canadian Sublimit
and each Canadian Lender, the ratio (expressed as a percentage) of such Canadian
Lender’s Canadian Sublimit at such time to the aggregate Canadian Sublimit at
such time.

“Canadian Availability” means, at any time, an amount equal to (a) the Canadian
Loan Limit, minus (b) the Aggregate Canadian Exposure (calculated, with respect
to any Defaulting Lender, as if such Defaulting Lender had funded its Applicable
Percentage of all outstanding Canadian Loans).

“Canadian Base Rate” means, for any period, the rate per annum determined by the
Administrative Agent to be the greater of (a) the rate of interest per annum
most recently announced by JPMCB Canada as its reference rate in effect on such
day for determining interest rates for U.S. Dollar denominated commercial loans
in Canada and commonly known as “base rate” (or its equivalent or analogous such
rate), such rate not being intended to be the lowest rate of interest charged by
JPMCB Canada, (b) the NYFRB Rate in effect on such day plus  1⁄2 of 1% and
(c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if
such day is not a Business Day, the immediately preceding Business Day) plus 1%,
provided that, for the purpose of this definition, the Adjusted LIBO Rate for
any day shall be based on the LIBO Screen Rate (or if the LIBO Screen Rate is
not available for such one month Interest Period, the Interpolated Rate) at
approximately 11:00 a.m. London time on such day, subject to the interest rate
floors set forth therein. Any change in the Canadian Base Rate due to a change
in the rate described in clause (i), the NYFRB Rate or the Adjusted LIBO Rate
shall be effective from and including the effective date of such change in the
rate described in clause (i), the NYFRB Rate or the Adjusted LIBO Rate,
respectively. If the Canadian Base Rate is being used as an alternate rate of
interest pursuant to Section 2.19 hereof, then the Canadian Base Rate shall be
the greater of clause (a) and (b) above and shall be determined without
reference to clause (c) above.

 

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“Canadian Borrower” means Nine Energy Canada Inc., a corporation organized under
the laws of Alberta, Canada.

“Canadian Borrowing” means a Borrowing of Canadian Loans.

“Canadian Borrowing Base” means the Dollar Equivalent Amount of the sum of (a)
85% of the Canadian Credit Parties’ Eligible Accounts at such time, plus (b) 80%
of the Canadian Credit Parties’ Eligible Unbilled Accounts at such time, in an
aggregate amount, when combined with clause (b) of the definition of U.S.
Borrowing Base, not to exceed $10.0 million, plus (c) the product of 85%
multiplied by the Net Orderly Liquidation Value percentage identified in the
most recent Inventory appraisal ordered by the Administrative Agent multiplied
by the Canadian Credit Parties’ Eligible Inventory (valued at the lower of cost
(FIFO) or market), minus (d) Reserves applicable to the Canadian Credit Parties
established by the Administrative Agent in its Permitted Discretion; provided
that, until both an acceptable appraisal and field exam with respect to the
assets of the Magnum Targets are received by the Administrative Agent, the
assets of the Magnum Targets included in the Canadian Borrowing Base shall be
limited to 50% of the book value of the Accounts of the Magnum Targets that are
Canadian Credit Parties; provided, further, that if such field exam and
appraisal are not received on or prior to the date that is sixty (60) days after
the Closing Date, no assets of the Magnum Targets shall be included in the
Canadian Borrowing Base until such field examination and appraisal have been
received by the Administrative Agent.

“Canadian Concentration Account” has the meaning assigned to such term in
Section 5.10(c).

“Canadian Credit Parties” means (a) the Canadian Borrower and (b) each
Subsidiary thereof that has guaranteed the Canadian Secured Obligations pursuant
to Section 5.12(b), and their respective successors and assigns.

“Canadian Defined Benefit Plan” has the meaning assigned to such term in
Section 4.09(c).

“Canadian Excluded Lender” means Amegy.

“Canadian Exposure” means, (a) solely for purposes of calculating the Available
Commitment of any Canadian Lender, the principal amount of such Lender’s
Canadian Loans, and (b) otherwise, for each Lender, at any time, such Lender’s
Applicable Percentage of all Canadian Loans as if such Lender had funded its
participations in all Canadian Loans outstanding at such time.

“Canadian Lender” means each Lender or its applicable Affiliate that is not a
Canadian Excluded Lender.

“Canadian Loan Limit” means the least of (x) the aggregate Canadian Sublimit,
(y) the Canadian Borrowing Base and (z) the Aggregate Commitments less the U.S.
Exposure.

“Canadian Loan” means a Loan made pursuant to Section 2.24.

“Canadian Obligations” means all unpaid principal of and accrued and unpaid
interest on the Canadian Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations and indebtedness (including
interest and fees accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), obligations and liabilities of any of the
Canadian Credit Parties to any of the Lenders, the

 

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Administrative Agent or any indemnified party, individually or collectively,
existing on the Closing Date or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, in each case, arising or incurred under this Agreement or any of the
other Credit Documents in respect of any of the Canadian Loans or other
instruments at any time evidencing any thereof.

“Canadian Pension Event” means (a) the wind-up or termination, in whole or in
part, of a Canadian Defined Benefit Plan; or (b) the filing of an amendment with
a Governmental Authority to wind-up or terminate, in whole or in part, a
Canadian Defined Benefit Plan; (c) the institution of proceedings by any
Governmental Authority to wind-up or terminate, in whole or in part, or to have
a trustee appointed to administer a Canadian Defined Benefit Plan; or (d) any
other event or condition which would reasonably be expected to result in the
termination of, winding up of, or partial termination or winding up of, or the
appointment of a trustee to administer, any Canadian Defined Benefit Plan.

“Canadian Pension Plan” means each pension plan required to be registered under
Canadian federal, provincial or territorial law that is maintained or
contributed to by a Credit Party for its Canadian employees or former Canadian
employees, but does not include the Canada Pension Plan or the Quebec Pension
Plan as maintained by the Government of Canada or the Province of Quebec,
respectively.

“Canadian Prime Rate” means, on any day, the rate determined by the
Administrative Agent to be the higher of (i) the rate equal to the PRIMCAN Index
rate that appears on the Bloomberg screen at 10:15 a.m. Toronto time on such day
(or, in the event that the PRIMCAN Index is not published by Bloomberg, any
other information service that publishes such index from time to time, as
selected by the Administrative Agent in its reasonable discretion) and (ii) the
average rate for 30 day Canadian Dollar-denominated bankers’ acceptances
displayed and identified as such on the “Reuters Screen CDOR Page” as defined in
the International Swaps and Derivatives Association, Inc. definitions, as
modified and amended from time to time (or, in the event such rate does not
appear on such page or screen, on any successor or substitute page or screen
that displays such rate, or on the appropriate page of such other information
service that publishes such rate from time to time, as selected by the
Administrative Agent in its reasonable discretion) as of 10:15 a.m. Toronto
local time on such day and, if such day is not a Business Day, then on the
immediately preceding Business Day (as adjusted by the Administrative Agent
after 10:15 a.m. Toronto local time to reflect any error in the posted rate of
interest or in the posted average annual rate of interest), plus 1% per annum;
provided, that if any the above rates shall be less than zero, such rate shall
be deemed to be zero for purposes of this Agreement. Any change in the Canadian
Prime Rate due to a change in the PRIMCAN Index or in the average rate for 30
day Canadian Dollar-denominated bankers’ acceptances displayed and identified as
such on the “Reuters Screen CDOR Page” shall be effective from and including the
effective date of such change in the PRIMCAN Index or in the 30 day Canadian
Dollar-denominated bankers’ acceptances displayed and identified as such on the
“Reuters Screen CDOR Page”, respectively.

“Canadian Secured Obligations” means all Canadian Obligations, together with all
(i) Banking Services Obligations owing by Canadian Credit Parties to one or more
Lenders or their respective Affiliates and (ii) Swap Agreement Obligations owing
by Canadian Credit Parties to one or more Lenders or their respective Affiliates
(including a Person that is a party to a Swap Agreement with the Canadian Credit
Parties that entered into such Swap Agreement before or while such Person was a
Lender or an Affiliate of a Lender, whether or not such Person at any time
ceases to be a Lender or an Affiliate of a Lender, as the case may be);
provided, however, that the definition of “Canadian Secured Obligations” shall
not create any guarantee by any Guarantor of (or grant of security interest by
any Guarantor to support, as applicable) any Excluded Swap Obligations of such
Guarantor for purposes of determining any obligations of any Guarantor.

 

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“Canadian Security Agreement” means that certain Pledge and Security Agreement
(including any and all supplements or joinders thereto), substantially in the
form in Exhibit D-2, dated as of the date hereof, between the Canadian Credit
Parties and the Administrative Agent, for the benefit of the Administrative
Agent and the other Secured Parties, as the same may be amended, restated,
supplemented or otherwise modified from time to time.

“Canadian Sublimit” means, as to any Canadian Lender, (i) as of the Closing
Date, the amount set forth on Schedule I or (ii) if such Canadian Lender has
entered into an Assignment and Assumption or has otherwise assumed a portion of
the Canadian Sublimit after the Effective Date, the amount set forth for such
Lender as its portion of the Canadian Sublimit in the Register; provided that
the aggregate amount of the Canadian Sublimit shall not exceed $25.0 million as
such amount may be reduced pursuant to Section 2.9.

“Capital Expenditures” means, for any Person and period of its determination,
without duplication, the aggregate of all expenditures and costs (whether paid
in cash or accrued as liabilities during that period and including that portion
of payments under Capital Leases that are capitalized on the balance sheet of
such Person) of such Person during such period that, in conformity with GAAP,
are required to be included in or reflected as property, plant, equipment or
other similar fixed asset accounts on the balance sheet of such Person, but
excluding any such expenditure made to restore, replace or rebuild Property to
the condition of such Property immediately prior to any damage, loss,
destruction or condemnation of such Property, to the extent such expenditure is
made with insurance proceeds, condemnation awards or damage recovery proceeds
relating to any such damage, loss, destruction or condemnation.

“Capital Leases” means, for any Person, any lease of any Property by such Person
as lessee which would, in accordance with GAAP, be required to be classified and
accounted for as a capital lease on the balance sheet of such Person.

“Cash Collateral Account” means a cash collateral account pledged to the
Administrative Agent containing cash deposited pursuant to the terms hereof to
be maintained with the Administrative Agent in accordance with the terms hereof.

“Cash Collateralize” means, to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the applicable Issuing Lender or the
Lenders, as collateral for Secured Obligations, or the obligations of Lenders to
fund participations in respect of Letter of Credit Obligations, cash or deposit
account balances or, if the Administrative Agent and the applicable Issuing
Lender shall agree in their sole discretion, other credit support, in each case
pursuant to documentation in form and substance reasonably satisfactory to the
Administrative Agent and the applicable Issuing Lender. “Cash Collateral” shall
have a meaning correlative to the foregoing and shall include the proceeds of
such cash collateral and other credit support.

“Cash Dominion Event” shall occur at any time (a) Availability is less than the
greater of (x) $18.75 million and (y) 12.5% of the lesser of the Borrowing Base
and the Aggregate Commitment or (b) an Event of Default has occurred and is
continuing and the Administrative Agent or the Required Lenders have elected to
declare a Cash Dominion Event. Once commenced, a Cash Dominion Event shall be
deemed to be continuing until such time as (x) no Event of Default is continuing
and (y) Availability equals or exceeds for thirty (30) consecutive days the
greater of (1) $18.75 million and (2) 12.5% of the lesser of the Borrowing Base
and the Aggregate Commitment (such period, the “Cash Dominion Period”).

“Cash Dominion Period” has the meaning assigned to such term within the
definition of Cash Dominion Event.

 

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“CBR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the loans comprising such Borrowing, bear interest at a rate determined
by reference to the Canadian Base Rate.

“CDOR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the loans comprising such Borrowing, bear interest at a rate determined
by reference to the CDOR Rate.

“CDOR Rate” means, for an Interest Period equal to one, two, three or six months
(as selected by the Canadian Borrower), the Canadian dollar offered rate which,
in turn means on any day the sum of (a) the annual rate of interest determined
with reference to the arithmetic average of the discount rate quotations of all
institutions listed in respect of the relevant Interest Period for Canadian
Dollar-denominated bankers’ acceptances displayed and identified as such on the
“Reuters Screen CDOR Page” as defined in the International Swaps and Derivatives
Association, Inc. definitions, as modified and amended from time to time (the
“CDOR Screen Rate”), as of 10:15 a.m. Toronto local time on the first day of the
applicable Interest Period and, if such day is not a Business Day, then on the
immediately preceding Business Day (as adjusted by the Administrative Agent
after 10:15 a.m. Toronto local time to reflect any error in the posted rate of
interest or in the posted average annual rate of interest) plus (b) 0.10% per
annum; provided, that (x) if the CDOR Screen Rate shall be less than zero, such
rate shall be deemed to be zero and (y) if the CDOR Screen Rate is not available
on the Reuters Screen CDOR Page on any particular day, then the Canadian dollar
offered rate component of such rate on that day shall be calculated as the
applicable Interpolated Rate as of such time on such day; or if such day is not
a Business Day, then as so determined on the immediately preceding Business Day.

“CDOR Screen Rate” has the meaning assigned to such term in the definition of
“CDOR Rate”.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, analogous state and local laws, and all rules
and regulations and legally enforceable requirements promulgated thereunder, in
each case as now or hereafter in effect.

“Change in Control” means the occurrence of any of the following events: (a) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, but excluding any employee benefit plan of such
person or its Subsidiaries, and any person or entity acting in its capacity as
trustee, agent or other fiduciary or administrator of any such plan) other than
SCF becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under
the Securities Exchange Act of 1934, except that a person or group shall be
deemed to have “beneficial ownership” of all securities that such person or
group has the right to acquire (such right, an “option right”), whether such
right is exercisable immediately or only after the passage of time), directly or
indirectly, of 33% or more of the equity securities of the Company entitled to
vote for members of the board of directors of the Company on a fully-diluted
basis (and taking into account all such securities that such person or group has
the right to acquire pursuant to any option right), or (b) occupation at any
time of a majority of the seats (other than vacant seats) on the board of
directors of the Company by Persons who were not (i) directors of the Company on
the date of this Agreement, (ii) nominated or appointed by the board of
directors of the Company (iii) approved by the board of directors of the Company
as director candidates prior to their election; provided that, the foregoing
clause (b) shall not include any change to the board of directors of the Company
solely to the extent required for the board of directors of the Company to
comply with Section 303A.01 of the New York Stock Exchange listed company manual
within one year after the Closing Date.

“Change in Law” means the occurrence, after the date of this Agreement (or with
respect to any Lender, if later, the date on which such Lender becomes a
Lender), of any of the following: (a) the adoption or taking effect of any law,
rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation, implementation or application
thereof by any Governmental

 

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Authority or (c) compliance by any Lender or Issuing Lender (or, for purposes of
Section 2.15(b), by any Lending Office of such Lender or by such Lender’s or
Issuing Lender’s holding company, if any) with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement; provided that, notwithstanding
anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, guidelines or directives
thereunder or issued in connection therewith and (y) all requests, rules,
guidelines or directives promulgated by the Bank for International Settlements,
the Basel Committee on Banking Supervision (or any successor or similar
authority) or the United States or foreign regulatory authorities, in each case
pursuant to Basel III, shall be deemed to be a “Change in Law,” regardless of
the date enacted, adopted or issued.

“Class” when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the Loans comprising such Borrowing, are U.S. Loans, Canadian Loans or
Protective Advances.

“Closing Date” means the date on which all of the conditions set forth in
Section 3.1 have been satisfied or waived in accordance therewith.

“Code” means the Internal Revenue Code of 1986, as amended, and Treasury
regulations thereunder.

“Collateral” means all Property of the Credit Parties, now owned or hereafter
acquired, upon which a Lien is created, or purported to be created, by any
Security Document. The Collateral shall not include any Excluded Collateral. In
no event is any Building (as defined in the applicable Flood Insurance
Regulation) or Manufactured (Mobile) Home (as defined in the applicable Flood
Insurance Regulation) included in the definition of “Collateral” and no Building
or Manufactured (Mobile) Home is hereby encumbered by this Agreement or any
other Credit Document.

“Collateral Access Agreement” has the meaning assigned to such term in the U.S.
Security Agreement or the Canadian Security Agreement, as applicable.

“Collateral Deposit Account” has the meaning assigned to such term in
Section 5.10(b).

“Commitment Fee” means the fees required under Section 2.12(a).

“Commitment” means, with respect to each Lender, the commitment, if any, of such
Lender to make Loans and to acquire participations in Letters of Credit or
Canadian Loans hereunder, expressed as an amount representing the maximum
possible aggregate amount of such Lender’s Credit Exposure hereunder, as such
commitment may be reduced or increased from time to time pursuant to
(a) Section 2.9 and (b) assignments by or to such Lender pursuant to
Section 9.7. The initial amount of each Lender’s Commitment is set forth on
Schedule I, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Commitment, as applicable, provided that, after the
Maturity Date, the Commitment for each Lender shall be zero.

“Commodity Account” has the meaning assigned to such term in the UCC.

“Communications” has the meaning assigned to such term in Section 9.9(b)(i).

“Company” has the meaning assigned to such term in the preamble.

 

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“Compliance Certificate” means a compliance certificate executed by a
Responsible Officer of the Borrower Representative or such other Person as
required by this Agreement in substantially the same form as Exhibit E.

“Concentration Account” has the meaning assigned to such term in
Section 5.10(c).

“Condemnation Event” means any event that gives rise to the receipt by any
Restricted Entity of any condemnation awards in respect of any Property.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise taxes or
branch profits taxes.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through ownership, by contract, or otherwise, and the terms “Controlled by” or
“under common Control with” shall have the correlative meanings.

“Controlled Account” means a Deposit Account, Securities Account or Commodity
Account and the Concentration Account that is subject to an Account Control
Agreement.

“Controlled Group” means all members of a controlled group of corporations and
all businesses (whether or not incorporated) under common Control which,
together with the Company or any Subsidiary (as applicable), are treated as a
single employer under Section 414 of the Code.

“CPR”, when used in reference to any Loan or Borrowing, refers to whether such
Loan, or the loans comprising such Borrowing, bear interest at a rate determined
by reference to the Canadian Prime Rate.

“Credit Documents” means this Agreement, the Notes, the Letter of Credit
Documents, the Guaranty, the Notices of Borrowing, the Notices of Continuation
or Conversion, the Security Documents, the Fee Letter, and each other agreement,
instrument, or document executed at any time in connection with this Agreement.

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

“Credit Extension” means a Loan or a Letter of Credit Extension.

“Credit Parties” means the Borrowers and the Guarantors.

“Debt” means, for any Person, without duplication: (a) indebtedness of such
Person for borrowed money; (b) to the extent not covered under clause (a) above,
obligations under letters of credit and agreements relating to the issuance of
letters of credit, bankers’ acceptances, bank guaranties, surety bonds and
similar instruments; (c) obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments; (d) obligations of such Person
under conditional sale or other title retention agreements relating to any
Properties purchased by such Person (other than customary reservations or
retentions of title under agreements with suppliers entered into in the ordinary
course of business); (e) obligations of such Person to pay in cash the deferred
purchase price of Property or services (such obligations including, without
limitation, any earn-out obligations, contingent obligations, or other similar
obligations associated with such purchase) but excluding trade accounts payable
in the ordinary course of business and, in each case, either not past due for
more than ninety (90) days after the date on which such trade account payable
was created or being contested in good faith and for which adequate reserves
have been made in accordance with GAAP; (f) obligations of such Person as lessee
under Capital Leases and obligations of such Person

 

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in respect of synthetic leases; (g) obligations of such Person under any Swap
Agreement; (h) all obligations of such Person to mandatorily purchase, redeem,
retire, defease or otherwise make any payment in respect of any Equity Interest
in such Person or any other Person on a date certain or upon the occurrence of
certain events or conditions, valued, in the case of a redeemable preferred
interest, at the greater of its voluntary or involuntary liquidation preference
plus accrued and unpaid dividends (which obligations, for the avoidance of
doubt, do not include any obligations to issue Equity Interests in respect of
warrants); (i) the Debt of any partnership or unincorporated joint venture in
which such Person is a general partner or a joint venturer, but only to the
extent to which there is recourse to such Person for the payment of such Debt;
(j) Disqualified Equity Interests; (k) obligations of such Person under direct
or indirect guaranties in respect of, and obligations (contingent or otherwise)
of such Person to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clauses (a) through (j) above; and (l) indebtedness or
obligations of others of the kinds referred to in clauses (a) through (j)
secured by any Lien on or in respect of any Property of such Person, but if
recourse is only to such Property, then only to the extent of the lesser of the
amount of the Debt secured thereby and the fair market value of the Property
subject to such Lien.

“Debtor Relief Laws” means (a) the Bankruptcy Code, (b) the Bankruptcy and
Insolvency Act (Canada), the Companies’ Creditors Arrangement Act (Canada), and
the Winding-Up and Restructuring Act (Canada) and any other applicable
insolvency or other similar law of any jurisdiction, including any corporate law
or other law of any jurisdiction permitting a debtor to obtain a stay or a
compromise of the claims of its creditors against it, and (c) all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
corporate or similar other debtor relief laws of the United States, Canada or
other applicable jurisdictions from time to time in effect and affecting the
rights of creditors generally.

“Default” means (a) an Event of Default or (b) any event or condition which with
notice or lapse of time or both would, unless cured or waived, become an Event
of Default.

“Defaulting Lender” means, subject to Section 2.20, any Lender that (a) has
failed to (i) fund all or any portion of its Loans within two (2) Business Days
of the date such Loans were required to be funded hereunder unless such Lender
notifies the Administrative Agent and the Applicable Borrower in writing that
such failure is the result of such Lender’s good faith determination that one or
more conditions precedent to funding (each of which conditions precedent,
together with any applicable Default, shall be specifically identified in such
writing) has not been satisfied or waived, or (ii) pay to the Administrative
Agent, the Canadian Administrative Agent, the applicable Issuing Lender or any
other Lender any other amount required to be paid by it hereunder (including in
respect of its participation in Letters of Credit) within two (2) Business Days
of the date when due, (b) has notified the Applicable Borrower, the
Administrative Agent or the applicable Issuing Lender in writing that it does
not intend to comply with its funding obligations hereunder, or has made a
public statement to that effect (unless such writing or public statement relates
to such Lender’s obligation to fund a Loan hereunder and states that such
position is based on such Lender’s good faith determination that a condition
precedent to funding (which condition precedent, together with any applicable
Default, shall be specifically identified in such writing or public statement)
cannot be satisfied), (c) has failed, within three (3) Business Days after
written request by the Administrative Agent or the Applicable Borrower, to
confirm in writing to the Administrative Agent and such Borrower that it will
comply with its prospective funding obligations hereunder (provided that, such
Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon
receipt of such written confirmation by the Administrative Agent and the
Applicable Borrower), or (d) has, or has a direct or indirect parent company
that has, (i) become the subject of a proceeding under any Debtor Relief Law or
Bail-In Action, or (ii) had appointed for it a receiver, interim receiver,
receiver manager, custodian, conservator, trustee, administrator, assignee for
the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance
Corporation

 

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or any other state or federal regulatory authority acting in such a capacity;
provided that, a Lender shall not be a Defaulting Lender solely by virtue of the
ownership or acquisition of any Equity Interest in that Lender or any direct or
indirect parent company thereof by a Governmental Authority so long as such
ownership interest does not result in or provide such Lender with immunity from
the jurisdiction of courts within the United States or from the enforcement of
judgments or writs of attachment on its assets or permit such Lender (or such
Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts
or agreements made with such Lender. Any determination by the Administrative
Agent that a Lender is a Defaulting Lender under clauses (a) through (d) above
shall be conclusive and binding absent manifest error, and such Lender shall be
deemed to be a Defaulting Lender (subject to Section 2.20) upon delivery of
written notice of such determination to the Applicable Borrower, the applicable
Issuing Lender and each Lender under the Facility.

“Deposit Account” has the meaning assigned to such term in the applicable
Security Agreement.

“Disposition” means any sale, lease, transfer, assignment, conveyance, or other
disposition of any Property and “Dispose” or similar terms shall have
correlative meanings.

“Disqualified Equity Interest” means any Equity Interest that, by its terms (or
by the terms of any security into which it is convertible or for which it is
exchangeable) or upon the happening of any event, matures or is mandatorily
redeemable for any consideration other than another Equity Interest (which would
not constitute a Disqualified Equity Interest), pursuant to a sinking fund
obligation or otherwise (except as a result of a Change in Control or asset sale
so long as any rights of the holders thereof upon the occurrence of such Change
in Control or asset sale event shall be subject to prior Payment in Full), or is
convertible or exchangeable for Debt or redeemable for any consideration other
than any Equity Interest (which would not constitute a Disqualified Equity
Interest) at the option of the holder thereof, in whole or in part, on or prior
to the date that is one hundred eighty (180) days after the earlier of (a) the
Maturity Date and (b) Payment in Full; provided that, if such Equity Interest is
issued pursuant to a Plan for the benefit of the Company or its Subsidiaries or
their officers or employees, such Equity Interest shall not constitute a
Disqualified Equity Interest solely because it may be required to be repurchased
by the Company or its Subsidiaries in order to satisfy applicable statutory or
regulatory obligations.

“Dividing Person” has the meaning assigned to it in the definition of
“Division”.

“Division” means the division of the assets, liabilities and/or obligations of a
Person (the “Dividing Person”) among two or more Persons (whether pursuant to a
“plan of division” or similar arrangement) pursuant to Section 18-217 of the
Delaware Limited Liability Company Act, which may or may not include the
Dividing Person and pursuant to which the Dividing Person may or may not
survive.

“Division Successor” means any Person that, upon the consummation of a Division
of a Dividing Person, holds all or any portion of the assets, liabilities and/or
obligations previously held by such Dividing Person immediately prior to the
consummation of such Division. A Dividing Person which retains any of its
assets, liabilities and/or obligations after a Division shall be deemed a
Division Successor upon the occurrence of such Division.

“Dollar Equivalent Amount” means, for any amount, at the time of determination
thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such
amount is expressed in Canadian Dollars, the equivalent of such amount in
Dollars determined by using the rate of exchange for the purchase of Dollars
with Canadian Dollars last provided (either by publication or otherwise provided
to the Administrative Agent) by the applicable Thomson Reuters Corporation
(“Reuters”) source on the Business Day (New York City time) immediately
preceding the date of determination or if such service ceases to be available or
ceases to provide a rate of exchange for the purchase of Dollars with Canadian
Dollars, as provided by such

 

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other publicly available information service which provides that rate of
exchange at such time in place of Reuters chosen by the Administrative Agent in
its sole discretion (or if such service ceases to be available or ceases to
provide such rate of exchange, the equivalent of such amount in Dollars as
determined by the Administrative Agent using any method of determination it
deems appropriate in its sole discretion) and (c) if such amount is denominated
in any other currency, the equivalent of such amount in Dollars as determined by
the Administrative Agent using any method of determination it deems appropriate
in its sole discretion.

“Dollars” and “$” means U.S. Dollars unless otherwise specified herein.

“Domestic Restricted Subsidiary” means any Restricted Subsidiary that is a
Domestic Subsidiary; provided that, neither an Excluded Domestic Holdco nor a
Subsidiary of a Foreign Subsidiary shall be a Domestic Restricted Subsidiary.

“Domestic Subsidiary” means any Subsidiary that is either (a) incorporated or
organized under the laws of the United States, any State thereof or the District
of Columbia or (b) disregarded for U.S. federal income tax purposes and the
parent is either the Company or any other Domestic Subsidiary.

“EBITDA” means, for any period, Net Income of the Company and its consolidated
Restricted Subsidiaries for such period (it being understood that no amounts of
the Unrestricted Subsidiaries’ Net Income shall be taken into account in
calculating EBITDA other than to the extent provided in clause (v) below) plus
(a) without duplication and to the extent deducted in determining Net Income for
such period, the sum of (i) Interest Expense for such period, (ii) provisions
for taxes based on income, profits or capital (including federal, state,
provincial, franchise, excise and similar taxes) net of tax refunds associated
with such taxes, (iii) all amounts attributable to depreciation and amortization
expense for such period, (iv) any extraordinary or non-recurring non-cash
charges for such period, and any other non-cash charges or expenses for such
period (but excluding any non-cash charge or expense in respect of an item that
was included in Net Income in a prior period and any non-cash charge or expense
that relates to the write-down or write-off of inventory), (v) cash dividends
received by the Restricted Entities from the net income of Unrestricted
Subsidiaries during such period, (vi) cash and non-cash charges associated with
the Transactions, (vii) expenses reimbursed by a third party that is not a
Credit Party, but only to the extent the Credit Parties actually receive payment
in respect of such reimbursed expenses, (viii) (A) fees, costs and expenses
relating to the Magnum Acquisition or any Permitted Acquisition (including
cash-stay bonuses paid to employees, severance and reorganization costs and
expenses in connection with any Permitted Acquisition), (B) fees, costs and
expenses relating to any permitted issuance of Equity Interests, investment,
debt incurrence (including a refinancing thereof, whether or not successful) or
repayment, amortization or write-off (including discounts) of Debt,
recapitalization, or any sale, transfer or other disposition of assets,
(C) fees, costs and expenses relating to other Acquisitions which would have (if
consummated) satisfied the requirements of the defined term “Permitted
Acquisitions” and fees, costs and expenses relating to investments which would
have (if consummated) satisfied the requirements of Section 6.3, and
(D) purchase accounting adjustments in connection with Permitted Acquisitions,
investments permitted by Section 6.3 and the Magnum Acquisition, (ix) non-cash
costs or expenses relating to any equity-based compensation or equity-based
incentive plan or any other management or employee benefit plan or agreement or
any stock subscription or shareholder agreement, in each case of the Company or
any Subsidiary for such period and funded with equity, (x) the amount of any
fees, costs, expenses or charges incurred in connection with (A) Business
Optimization Costs and Savings and (B) the closure, transfer or consolidation of
facilities or other operations, (xi) any proceeds from business interruption
insurance received by the Credit Parties during such period, to the extent the
associated losses arising out of the event that resulted in the payment of such
business interruption insurance proceeds were included in computing Net Income,
and (xii) one-time litigation costs and expenses; provided, that the aggregate
amount of additions to EBITDA pursuant to clauses (viii)(B), (viii)(C), (x) and
(xii) shall not, in an aggregate amount

 

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exceed fifteen percent (15%) of EBITDA for such period; minus (b) without
duplication and to the extent included in Net Income, (y) any cash payments made
during such period in respect of non-cash charges described in clause (a)(v)
taken in a prior period and (z) any extraordinary gains and any non-cash items
of income for such period, all calculated for the Company and its Restricted
Subsidiaries on a consolidated basis in accordance with GAAP. Further, EBITDA
shall be subject to pro forma adjustments for Material Acquisitions (including
annualization of EBITDA if the target of such Material Acquisition has less than
four full quarters of operating results at the time of such acquisition) and
Material Dispositions assuming that such transactions had occurred on the first
day of the applicable determination period, which adjustments shall be made in
accordance with the guidelines for pro forma presentations set forth by the SEC
or in a manner otherwise reasonably acceptable to the Administrative Agent. As
used in this definition, “Material Acquisition” means any Permitted Acquisition
with consideration of $5.0 million or more and “Material Disposition” means any
disposition with consideration of $5.0 million or more.

“ECP” means an “eligible contract participant” as defined in Section 1(a)(18) of
the Commodity Exchange Act or any regulations promulgated thereunder and the
applicable rules issued by the Commodity Futures Trading Commission and/or the
SEC.

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

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

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

“Electronic System” means any electronic system, including e-mail, e-fax, web
portal access for such Borrower, Intralinks®, ClearPar®, Debt Domain, Syndtrak
and any other Internet or extranet-based site, whether such electronic system is
owned, operated or hosted by the Administrative Agent or any Issuing Lender and
any of its respective Related Parties or any other Person, providing for access
to data protected by passcodes or other security system.

“Eligible Accounts” means at any time, the Accounts of a Credit Party which the
Administrative Agent determines in its Permitted Discretion are eligible as the
basis for the extension of U.S. Revolving Loans, Canadian Loans and the issuance
of Letters of Credit provided that Eligible Accounts shall not include any
Account of a Credit Party:

(a) which is not subject to a first priority perfected security interest in
favor of the Administrative Agent;

(b) which is subject to any Lien other than (i) a Lien in favor of the
Administrative Agent and (ii) a Permitted Lien permitted by paragraph (d) or (h)
of Section 6.2;

(c) (i) with respect to which the scheduled due date is more than sixty
(60) days after the original invoice date, (ii) which is unpaid more than ninety
(90) days after the date of the original invoice therefor or more than sixty
(60) days after the original due date therefor, or (iii) which has been written
off the books of the applicable Credit Party;

 

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(d) which is owing by an Account Debtor for which more than 50% of the Accounts
owing by such Account Debtor and its Affiliates are ineligible pursuant to
paragraph (c) above;

(e) which (i) is owing by an Account Debtor (other than an Account Debtor
described in clause (ii) below) to the extent the aggregate amount of Accounts
owing from such Account Debtor and its Affiliates to such Credit Party exceeds
20% of the aggregate amount of Eligible Accounts of all Credit Parties or
(ii) is owing by an Account Debtor whose securities (or such Account Debtor’s
parent company’s securities) are rated BBB or better by S&P or Baa3 or better by
Moody’s to the extent the aggregate amount of Accounts owing from such Account
Debtor and its Affiliates to such Credit Party exceeds 25% of the aggregate
amount of Eligible Accounts of all Credit Parties, solely to the extent of such
excess;

(f) with respect to which any covenant, representation or warranty contained in
this Agreement or in the Security Agreements has been breached in any material
respect;

(g) which (i) does not arise from the sale of goods or performance of services
in the ordinary course of business, (ii) is not evidenced by an invoice or other
documentation reasonably satisfactory to the Administrative Agent which has been
sent to the Account Debtor, (iii) represents a progress billing, (iv) is
contingent upon such Credit Party’s completion of any further performance,
(v) represents a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale
on approval, consignment, cash-on-delivery or any other repurchase or return
basis or (vi) relates to the payment of interest;

(h) for which the goods giving rise to such Account have not been shipped to the
Account Debtor or for which the services giving rise to such Account have not
been performed by the Credit Party or if such Account was invoiced more than
once (unless such additional invoices were provided for a purpose other than the
failure of the Account Debtor to timely make payment, provided that, in no event
shall any such accounts be double-counted);

(i) with respect to which any check or other instrument of payment has been
returned uncollected for any reason;

(j) which is owed by an Account Debtor which has (i) applied for, suffered, or
consented to the appointment of any receiver, interim receiver, receiver
manager, custodian, trustee, monitor, administrator, sequestrator or liquidator
of its assets, (ii) had possession of all or a material part of its Property
taken by any receiver, interim receiver, receiver manager, custodian, trustee or
liquidator, (iii) filed, or had filed against it, any request or petition for
liquidation, reorganization, arrangement, adjustment of debts, adjudication as
bankrupt, winding-up, or voluntary or involuntary case under any state,
provincial, territorial or federal bankruptcy laws (iv) admitted in writing its
inability, or is generally unable to, pay its debts as they become due,
(v) become insolvent, or (vi) ceased operation of its business;

(k) which is owed by any Account Debtor which has sold all or substantially all
of its assets;

(l) which is owed by an Account Debtor that fails to satisfy at least one of the
following requirements: (i) it maintains its chief executive office or principal
place of business in the U.S. or Canada or (ii) it is organized under applicable
law of the U.S., any state of the U.S., or the District of Columbia, Canada or
any province or territory of Canada, unless in any such case, such Account is
backed by a Letter of Credit acceptable to the Administrative Agent which is in
the possession of, and is directly drawable by, the Administrative Agent;

(m) which is owed in any currency other than CAD or U.S. Dollars;

 

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(n) which is owed by (i) any Governmental Authority of any country other than
the U.S. or Canada unless such Account is backed by a letter of credit
reasonably acceptable to the Administrative Agent which is in the possession of,
and is directly drawable by, the Administrative Agent, or (ii) any Governmental
Authority of Canada or the U.S., or any department, agency, public corporation,
or instrumentality thereof, unless the Financial Administration Act (Canada), as
amended, or the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C.
§ 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to
perfect the Lien of the Administrative Agent in such Account have been complied
with;

(o) which is owed by any Credit Party or any Affiliate of any Credit Party or
any employee, officer, director, agent or stockholder of any Credit Party or any
of its Affiliates;

(p) which is owed by an Account Debtor or any Affiliate of such Account Debtor
to which a Credit Party is indebted, but only to the extent of such
indebtedness, or is subject to any security, deposit, progress payment,
retainage or other similar advance made by or for the benefit of an Account
Debtor, in each case to the extent thereof;

(q) which is subject to any counterclaim, deduction, defense, setoff or dispute,
but only to the extent of the amount of any such counterclaim, deduction,
defense, setoff or dispute;

(r) which is evidenced by any promissory note, Chattel Paper or Instrument
unless all steps necessary to perfect the Lien of the Administrative Agent in
such promissory note, Chattel Paper or Instrument have been complied with in a
manner reasonably satisfactory to the Administrative Agent;

(s) which is owed by an Account Debtor (i) located in any jurisdiction which
requires filing of a “Notice of Business Activities Report” or other similar
report in order to permit the Credit Party to seek judicial enforcement in such
jurisdiction of payment of such Account, unless the Company has filed such
report or qualified to do business in such jurisdiction, or (ii) which is a
Sanctioned Person;

(t) with respect to which a Credit Party has made any agreement with the Account
Debtor for any reduction thereof, other than discounts and adjustments given in
the ordinary course of business but only to the extent of any such reduction, or
any Account which was partially paid and the Credit Party created a new
receivable for the unpaid portion of such Account;

(u) which does not comply in all material respects with the requirements of all
applicable laws and regulations, whether federal, state, provincial, territorial
or local, including, without limitation, the Federal Consumer Credit Protection
Act, the Federal Truth in Lending Act and Regulation Z of the Federal Reserve
Board;

(v) which is for goods that have been sold under a purchase order or pursuant to
the terms of a contract or other agreement or understanding (written or oral)
that indicates or purports that any Person (other than a Credit Party) has or
has had an ownership interest in such goods, or which indicates any party (other
than a Credit Party or the Administrative Agent) as payee or remittance party;

(w) which was created on cash on delivery terms;

(x) as to which the contract or agreement underlying such Account is governed by
the laws of any jurisdictions other than (or, if no governing law is expressed
therein, as to which, under applicable choice of law principles, such Account
would not be governed by the laws of any of) (i) the United States, any state
thereof or the District of Columbia or (ii) Canada or any province thereof; or

 

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(y) which the Administrative Agent otherwise determines is unacceptable in its
Permitted Discretion.

In the event that an Account of a Credit Party which was previously an Eligible
Account ceases to be an Eligible Account hereunder, such Credit Party or the
Borrower Representative shall notify the Administrative Agent thereof on and at
the time of submission to the Administrative Agent of the next Borrowing Base
Certificate. In determining the amount of an Eligible Account of a Credit Party,
the face amount of an Account may, in the Administrative Agent’s Permitted
Discretion, be reduced by, without duplication, to the extent not reflected in
such face amount, (i) the amount of all accrued and actual discounts, claims,
credits or credits pending, promotional program allowances, price adjustments,
finance charges or other allowances (including any amount that such Credit Party
may be obligated to rebate to an Account Debtor pursuant to the terms of any
agreement or understanding (written or oral)) and (ii) the aggregate amount of
all cash received in respect of such Account but not yet applied by such Credit
Party to reduce the amount of such Account.

“Eligible Assignee” means (a) a Lender (other than a Defaulting Lender); (b) an
Affiliate of a Lender (other than a Defaulting Lender); (c) an Approved Fund;
and (d) any other Person approved by (i) the Administrative Agent, (ii) unless
an Event of Default has occurred and is continuing at the time any assignment is
effected, the Borrower Representative; provided that, if the Borrower
Representative shall fail to promptly (and in any event within ten (10) Business
Days) approve or reject such Person as an Eligible Assignee, the Borrower
Representative shall be deemed to have approved such Person as an Eligible
Assignee and (iii) in the case of any assignment under the Facility, each
Issuing Lender, in each case, such approval not to be unreasonably withheld or
delayed; provided, however, that neither the Company nor an Affiliate of the
Company nor any natural person shall qualify as an Eligible Assignee.

“Eligible Inventory” means at any time, the Inventory of a Credit Party which
the Administrative Agent determines in its Permitted Discretion is eligible as
the basis for the extension of U.S. Revolving Loans, Canadian Loans and the
issuance of Letters of Credit provided that Eligible Inventory shall not include
any Inventory:

(a) which is not subject to a first priority perfected Lien in favor of the
Administrative Agent;

(b) which is subject to any Lien other than (i) a Lien in favor of the
Administrative Agent and (ii) a Permitted Lien which does not have priority over
the Lien in favor of the Administrative Agent, and (iii) a Permitted Lien
permitted by paragraph (d) or (h) of Section 6.2;

(c) which is, in such Credit Party’s good faith judgment, slow moving, obsolete,
unmerchantable, defective, unfit for sale or not salable at prices approximating
at least the cost of such Inventory in the ordinary course of business;

(d) with respect to which any covenant, representation or warranty contained in
this Agreement or in the Security Agreements has been breached or is not true
and which does not conform to all applicable standards imposed by any
Governmental Authority;

(e) in which any Person other than such Borrower shall (i) have any direct or
indirect ownership, interest or title or (ii) be indicated on any purchase order
or invoice with respect to such Inventory as having or purporting to have an
interest therein;

(f) which is not finished goods or which constitutes spare or replacement parts,
subassemblies, packaging and shipping material, manufacturing supplies, samples,
prototypes, displays or display items, bill-and-hold or ship-in-place goods,
goods that are returned or marked for return, repossessed goods, defective or
damaged goods, goods held on consignment, or goods which are not of a type held
for sale in the ordinary course of business;

 

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(g) which is not located in the U.S. or Canada or is in transit with a common
carrier from vendors and suppliers;

(h) which is located in any location leased by such Borrower unless (i) the
lessor has delivered to the Administrative Agent a Collateral Access Agreement
or (ii) a Reserve for rent, charges and other amounts due or to become due with
respect to such facility has been established by the Administrative Agent in its
Permitted Discretion; provided that, such Reserve shall be for a rental period
of no more than ninety (90) days;

(i) which is located in any third party warehouse or is in the possession of a
bailee (other than a third party processor) and is not evidenced by a Document,
unless (i) such warehouseman or bailee has delivered to the Administrative Agent
a Collateral Access Agreement and such other documentation as the Administrative
Agent may require or (ii) an appropriate Reserve has been established by the
Administrative Agent in its Permitted Discretion; provided that, such Reserve
shall be for a rental period of no more than ninety (90) days;

(j) which is being processed offsite at a third party location or outside
processor, or is in-transit to or from such third party location or outside
processor, it being understood that Inventory being used by a customer in the
ordinary course of business is not being “processed”;

(k) which is a discontinued product or component thereof;

(l) which is the subject of a consignment by such Borrower as consignor;

(m) which is perishable;

(n) which contains or bears any intellectual property rights licensed to such
Borrower unless the Administrative Agent is satisfied that it may sell or
otherwise Dispose of such Inventory without (i) infringing the rights of such
licensor, (ii) violating any contract with such licensor, or (iii) incurring any
liability with respect to payment of royalties other than royalties incurred
pursuant to sale of such Inventory under the current licensing agreement;

(o) for which reclamation rights have been asserted by the seller;

(p) which has been acquired from a Sanctioned Person; or

(q) which the Administrative Agent otherwise determines is unacceptable in its
Permitted Discretion.

In the event that Inventory of a Borrower which was previously Eligible
Inventory ceases to be Eligible Inventory hereunder, such Borrower or the
Borrower Representative shall notify the Administrative Agent thereof on and at
the time of submission to the Administrative Agent of the next Borrowing Base
Certificate.

“Eligible Unbilled Accounts” means, with respect to each Credit Party, each
Account of a Credit Party that would be an Eligible Account but for the fact
that such Account has not been invoiced, in each case arising in the ordinary
course of business; provided that, no more than thirty (30) days have elapsed
from the date on which the Credit Party recognizes such Account on its books and
records until its issuance of an invoice with respect thereto.

 

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“Enhanced Reporting Period” means the period (a) commencing on (i) the day that
an Event of Default occurs or (ii) the third consecutive day that
(A) Availability falls below the greater of (x) $18.75 million and (y) 12.5% of
the lesser of the Aggregate Commitments and the then effective Borrowing Base,
and (b) continuing until, (i) with respect to the foregoing clause (a)(i), no
Event of Default exists and (ii) with respect to the foregoing clause (a)(ii),
Availability has been greater than or equal to the greater of (i) $18.75 million
and (ii) 12.5% of the lesser of the Aggregate Commitments and the then effective
Aggregate Borrowing Base during each of the preceding thirty (30) consecutive
days.

“Environment” or “Environmental” shall have the meanings set forth in 42 U.S.C.
§ 9601(8).

“Environmental Claim” means any third party (including any Governmental
Authority) action, lawsuit, claim, demand, regulatory action or proceeding,
order, decree, consent agreement or written notice of potential or actual
responsibility or violation which seeks to impose liability under any
Environmental Law.

“Environmental Law” means all federal, provincial, territorial, state, foreign,
and local or municipal laws, rules, regulations, ordinances, orders, decisions,
enforceable agreements, and other Legal Requirements, including duties imposed
under common law, now or hereafter in effect and relating to, or in connection
with the Environment, including without limitation CERCLA, relating to
(a) pollution, contamination, injury, destruction, loss, protection, cleanup,
reclamation or restoration of the air, surface water, groundwater, land surface
or subsurface strata, or other natural resources; (b) solid, gaseous or liquid
waste generation, treatment, processing, recycling, reclamation, cleanup,
storage, disposal or transportation; (c) exposure to pollutants, contaminants,
hazardous or toxic substances, materials or wastes; or (d) the manufacture,
processing, handling, transportation, distribution in commerce, use, storage or
disposal of hazardous or toxic substances, materials or wastes.

“Environmental Permit” means any permit, license, order, approval, registration
or other authorization required or issued under Environmental Law.

“Equipment” has the meaning assigned to such term in the U.S. Security Agreement
or the Canadian Security Agreement, as applicable.

“Equity Interests” means with respect to any Person, any shares, interests,
participation, or other equivalents (however designated) of corporate stock,
capital stock, membership interests or partnership interests, beneficial
interests in a trust (or any other ownership interests) of such Person and any
warrants, options or other rights entitling the holder thereof to purchase or
acquire any of the foregoing.

“Equity Issuance” means any issuance of equity securities or any other Equity
Interests (including any preferred equity securities) by the Company, including
any such issuance upon the exercise of warrants to purchase equity by the
holders thereof.

“Equity Issuance Proceeds” means, with respect to any Equity Issuance, all cash
and cash equivalent proceeds or cash equivalent investments received by the
Company from such Equity Issuance (other than from any other Credit Party) after
payment of, or provision for, all underwriter fees and expenses, SEC and blue
sky fees, printing costs, fees and expenses of accountants, lawyers and other
professional advisors, brokerage commissions and other out-of-pocket fees and
expenses actually incurred in connection with such Equity Issuance.

 

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

“ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with any Borrower, is treated as a single employer under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer under
Section 414(b), (c), (m), (n) or (o) of the Code or Section 4001(a)(14) of
ERISA.

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

“Event of Default” has the meaning assigned to such term in Section 7.1.

“Exchange Rate” means, on any Business Day, with respect to any calculation of
the Dollar Equivalent Amount on such date, the rate at which a currency may be
exchanged into Dollars, as set forth on such date on the relevant FWDS Series
Reuters currency page at or about 11:00 a.m. New York City time on such date. In
the event that such rate does not appear on any such Reuters page, the “Exchange
Rate” shall be determined by reference to such other publicly available service
for displaying exchange rates as may be agreed upon by the Administrative Agent
and the Company or, in the absence of such agreement, such “Exchange Rate” shall
instead be the Administrative Agent’s spot rate of exchange in the interbank
market where its currency exchange operations in respect of such currency are
then being conducted, at or about 10:00 A.M. local time at such date for the
purchase of such currency with Dollars or the purchase of Dollars with such
currency, as the case may be, for delivery two (2) Business Days later; provided
that, if at the time of any such determination no such spot rate can reasonably
be quoted, the Administrative Agent may use any reasonable method (including
obtaining quotes from three or more market makers for such currency) as it deems
appropriate to determine such rate and such determination shall be presumed
correct absent manifest error.

“Excluded Account” means accounts that are (a) solely used for the purposes of
making payments in respect of payroll, taxes and employees’ wages and benefits
for the benefit of any Credit Party or any of its Subsidiaries, (b) zero balance
accounts, (c) trust accounts and (d) other accounts with funds on deposit with
an average weekly balance for two weeks of any four week period less than
$500,000, with respect to accounts located in the United States and Cdn$500,000
with respect to accounts located in Canada, individually for any single account
and $1.0 million, with respect to accounts located in the United States and
Cdn$1.0 million with respect to accounts located in Canada in the aggregate for
all such other accounts, or, in each case, the Dollar Equivalent Amount.

“Excluded Collateral” has the meaning given to such term in the applicable
Security Agreement.

“Excluded Domestic Holdco” means any direct or indirect Domestic Subsidiary
(including any Domestic Subsidiary that is a disregarded entity under the Code)
of any Credit Party that has no material assets (held directly or indirectly)
other than Equity Interests or indebtedness of one or more Foreign Subsidiaries
that are “controlled foreign corporations” within the meaning of Section 957 of
the Code.

“Excluded Perfection Collateral” means Property with respect to which the
Administrative Agent has determined, in its reasonable discretion that the cost
of perfecting a security interest in such Property are excessive in relation to
the value of the Lien to be afforded thereby.

“Excluded Subsidiary” means any Domestic Subsidiary of any Credit Party (i) that
is owned directly or indirectly by a Foreign Subsidiary or (ii) that is a FSHCO.

 

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“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap
Obligation if, and to the extent that, all or a portion of the Guarantee of such
Guarantor of, or the grant by such Guarantor of a security interest to secure,
such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the
Commodity Exchange Act or any rule, regulation or order of the Commodity Futures
Trading Commission (or the application or official interpretation of any
thereof) by virtue of such Guarantor’s failure for any reason to constitute an
ECP at the time the Guarantee of such Guarantor or the grant of such security
interest becomes or would become effective with respect to such Swap Obligation.
If a Swap Obligation arises under a master agreement governing more than one
swap, such exclusion shall apply only to the portion of such Swap Obligation
that is attributable to swaps for which such Guarantee or security interest is
or becomes illegal.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
a Recipient or required to be withheld or deducted from a payment to a
Recipient, (a) Taxes imposed on or measured by net income (however denominated),
franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result
of such Recipient being organized under the laws of, or having its principal
office or, in the case of any Lender, its applicable lending office located in,
the jurisdiction imposing such Tax (or any political subdivision thereof) or
(ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal
or withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Loan, Letter of Credit or
Commitment pursuant to a law in effect on the date on which (i) such Lender
acquires such interest in the Loan, Letter of Credit or Commitment (other than
pursuant to an assignment request by the Borrowers under Section 2.19(b)) or
(ii) such Lender changes its lending office, except in each case to the extent
that, pursuant to Section 2.17, amounts with respect to such Taxes were payable
either to such Lender’s assignor immediately before such Lender acquired the
applicable interest in a Loan, Letter of Credit or Commitment or to such Lender
immediately before it changed its lending office, (c) any Canadian federal
withholding Taxes imposed on amounts payable to or for the account of such
Lender or Issuing Lender with respect to an applicable interest in a Loan,
Letter of Credit or Commitment as a result of having been made to such Recipient
that, at the time of making such payment, (x) is a person with which a Credit
Party does not deal at arm’s length (for the purposes of the ITA or (y) is a
“specified non-resident shareholder” (as defined in subsection 18(5) of the ITA)
of a Credit Party or does not deal at arm’s length (for the purposes of the ITA)
with a “specified shareholder” (as defined in subsection 18(5) of the ITA) of a
Credit Party, except, in each case, where such relationship or circumstance
results from such Recipient having executed, delivered, become a party to,
performed its obligations under, received payments under, received or perfected
a security interest under, engaged in any other transaction pursuant to or
enforced any Loan Document, (d) Taxes attributable to such Recipient’s failure
to comply with Section 2.17(f) and (e) any withholding Taxes imposed under
FATCA.

“Executive Officer” means any Responsible Officer of a Restricted Subsidiary who
is, as part of his/her employment with such Restricted Subsidiary, in contact
with any Responsible Officer of the Company regarding the business and
operations of such Restricted Subsidiary on a regular basis.

“Existing Credit Agreement” means that certain Credit Agreement, dated as of
September 14, 2017, as amended, among the Company, JPMorgan Chase Bank, N.A., as
Administrative Agent and the other financial institutions party thereto.

“Existing Letters of Credit” means each letter of credit listed on Schedule II
issued under the Existing Credit Agreement that is outstanding on the Closing
Date.

“Existing Nine Debt” means all Debt and other obligations of the Company and its
Subsidiaries under the Existing Credit Agreement.

“Facility” means the revolving credit facility described in Section 2.1(a).

 

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“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement, (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof, any agreement entered into
pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement
entered into in connection with the implementation of such Sections of the Code
and any fiscal or regulatory legislation or rules adopted pursuant to such
intergovernmental agreement.

“Federal Funds Effective Rate” means, for any day, the rate calculated by the
NYFRB based on such day’s federal funds transactions by depositary institutions
(as determined in such manner as the NYFRB shall set forth on its public website
from time to time) and published on the next succeeding Business Day by the
NYFRB as the federal funds effective rate, provided that, if the Federal Funds
Effective Rate shall be less than zero, such rate shall be deemed to be zero for
the purposes of this Agreement.

“Federal Reserve Board” means the Board of Governors of the Federal Reserve
System or any of its successors.

“Fee Letter” means collectively (a) that certain agency fee letter, dated as of
October 15, 2018, between the U.S. Borrower and JPMorgan Chase Bank, N.A. and
(b) that certain upfront fee letter dated as of October 15, 2018, between the
U.S. Borrower, JPMorgan Chase Bank, N.A. and the other parties thereto.

“Financial Covenant Trigger Period” means the period (a) commencing on the first
day on which (i) the Borrowers’ Availability is less than the greater of (A)
$18.75 million, and (B) 12.5% of the Loan Limit or (ii) a Default has occurred
and (b) ending on the day immediately succeeding the 30th consecutive day on
which (i) the Borrowers’ Availability is not less than the greater of (A)
$18.75 million, and (B) 12.5% of the Loan Limit and (ii) no Default has been
continuing.

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

“First Tier Foreign Subsidiary” means any Foreign Subsidiary the Equity
Interests of which are held directly by the Company or a U.S. Credit Party.

“Fixed Applicable Margin Period” means the period commencing on the Closing Date
and ending on the date on which a Compliance Certificate is delivered in
accordance with Section 5.2(c) and the accompanying financial statements
required under Sections 5.2(a) or 5.2(b), as the case may be.

“Fixed Charge Coverage Ratio” means, at any date, the ratio of (a) EBITDA for
the four consecutive fiscal quarters of the Company ended on such date (or, if
such date is the not the last day of the fiscal quarter, the last day of the
most recently ended fiscal quarter for which financial statements have been
delivered pursuant to Section 5.2(a) or 5.2(b)) (or, prior to the first delivery
of any such financial statements, with respect to the most recently available
financial statements) for such period minus Unfinanced Capital Expenditures to
(b) the sum of Fixed Charges for such period.

“Fixed Charges” means, for any period, without duplication, (a) cash Interest
Expense, plus (b) scheduled principal payments on Funded Debt due in cash,
whether or not paid, plus (c) expenses for taxes paid in cash, plus
(d) Restricted Payments paid in cash (other than Restricted Payments permitted
pursuant to Section 6.9(a), (c) or (d)), plus (e) cash payments of obligations
under Capital Leases, all calculated for the Company and its Restricted
Subsidiaries on a consolidated basis in accordance with GAAP.

 

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“Flood Insurance Regulations” means (a) the National Flood Insurance Act of 1968
as now or hereafter in effect or any successor statute thereto, (b) the Flood
Disaster Protection Act of 1973 as now or hereafter in effect or any successor
statue thereto, (c) the National Flood Insurance Reform Act of 1994 (amending 42
USC 4001, et seq.), as the same may be amended or recodified from time to time,
(d) the Flood Insurance Reform Act of 2004 and (e) the Biggert-Waters Flood
Reform Act of 2012, and any regulations promulgated thereunder

“Foreign Lender” means, with respect to the Company, any Lender that is
organized under the laws of a jurisdiction other than that in which the Company
is resident for tax purposes. For purposes of this definition (i) the United
States, each State thereof and the District of Columbia shall be deemed to
constitute a single jurisdiction, and (ii) Canada and each province and
territory thereof shall be deemed to constitute a single jurisdiction.

“Foreign Restricted Subsidiary” means any Restricted Subsidiary of the Company
that is a Foreign Subsidiary.

“Foreign Subsidiary” means any Subsidiary of the Company that is not a Domestic
Subsidiary.

“FSHCO” means any Domestic Subsidiary with no material assets or business
activities other than the ownership of Equity Interests in one or more
“controlled foreign corporations” as defined in Section 957 of the Code.

“Funded Debt” means, on a consolidated basis for the Borrowers and their
consolidated Restricted Subsidiaries, without duplication:

(a) all Debt of such Restricted Entity of the type described in clauses (a),
(b), (c), (d), (f) and (j) of the definition of “Debt” but excluding any Debt
permitted under Section 6.1(l);

(b) all Debt of such Restricted Entity of the type described in clause (e) of
the definition of “Debt” other than (i) trade accounts payable incurred in the
ordinary course of business, and (ii) contingent obligations of such Restricted
Entity to pay in cash the deferred purchase price of Property to the extent, and
only to the extent, (A) such obligations are contingent and (B) with respect to
earn-out obligations, the amount of such earn-out obligations is not known and
payable;

(c) all Debt of such Restricted Entity of the type described in clause (h) of
the definition of “Debt”;

(d) all Debt of such Restricted Entity of the type described in clause (i) of
the definition of “Debt”, but only to the extent such Debt is of the type that
would be included in clause (a)-(c) above; and

(e) all Debt of others of the type included in clauses (a)-(d) above secured by
any Lien on or in respect of any Property of such Restricted Entity, but if
recourse is only to such Property, then only to the extent of the lesser of the
amount of the Debt secured thereby and the fair market value of the Property
subject to such Lien.

“Funding Account” means any Deposit Account of the U.S. Borrower or the Canadian
Borrower to which the Administrative Agent is authorized by the Borrowers to
transfer the proceeds of any Borrowings requested or authorized pursuant to this
Agreement.

“GAAP” means United States generally accepted accounting principles as in effect
from time to time, applied on a basis consistent with the requirements of
Section 1.3.

 

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“Governmental Authority” means the government of the United States, Canada or
any other nation, or of any political subdivision thereof, whether state,
provincial, territorial or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions
of or pertaining to government (including any supra-national bodies such as the
European Union or the European Central Bank).

“Guarantor” means any Person that now or hereafter executes a Guaranty,
including (a) the Company, (b) each of the Wholly-Owned Domestic Restricted
Subsidiaries of the U.S. Borrower or Wholly-Owned Restricted Subsidiaries of the
Canadian Borrower listed on Schedule 4.11; and (c) each of the Wholly-Owned
Domestic Restricted Subsidiaries of the U.S. Borrower or Wholly-Owned Restricted
Subsidiaries of the Canadian Borrower that becomes a guarantor of all or a
portion of the Secured Obligations and which has entered into either a Joinder
Agreement or a new Guaranty.

“Guaranty” means the Guaranty Agreements, dated as of the Closing Date, among
the Guarantors and the Administrative Agent for the benefit of the Secured
Parties and each Guaranty Agreement executed and delivered after the Closing
Date in substantially the same form as Exhibit C.

“Hazardous Substance” means any substance or material identified as hazardous or
extremely hazardous pursuant to CERCLA and those regulated as hazardous or toxic
under any other Environmental Law, including without limitation pollutants,
contaminants, petroleum, petroleum products, radionuclides, and radioactive
materials.

“Hazardous Waste” means any substance or material regulated or designated as a
hazardous waste pursuant to any Environmental Law.

“Impacted Interest Period” has the meaning assigned to such term in the
definition of “LIBO Rate”.

“Indemnified Taxes” means (a) taxes other than Excluded Taxes and (b) to the
extent not otherwise described in (a), Other Taxes.

“Indemnitee” has the meaning assigned to such term in Section 9.1(b).

“Interest Election Request” means a request by the Borrower Representative to
convert or continue a Borrowing in accordance with Section 2.8.

“Interest Expense” means, for any period and with respect to any Person, total
cash interest expense of the Company and its Restricted Subsidiaries, Letter of
Credit fees and other fees and expenses incurred by such Person in connection
with any Debt for such period whether paid or accrued (including that
attributable to obligations which have been or should be, in accordance with
GAAP, recorded as Capital Leases; provided that, notwithstanding any changes in
GAAP resulting from the implementation of lease accounting rules after the
Closing Date, no lease payments shall be treated as “Interest Expense” to the
extent that such lease payments would not have been treated as “Interest
Expense” prior to such change in GAAP), including, without limitation, all
commissions, discounts, and other fees and charges owed with respect to Letters
of Credit and bankers’ acceptance financing, fees owed with respect to the
Secured Obligations, and net costs under Swap Agreements entered into addressing
interest rates, all as determined in conformity with GAAP; provided that, no
amounts of the Unrestricted Subsidiaries’ Interest Expense (which, for the
avoidance of doubt, the Company or any Restricted Subsidiary does not have
liability to pay) shall be taken into account in calculating the Company’s
consolidated Interest Expense.

 

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“Interest Payment Date” means (a) with respect to any Base Rate Loan, the first
day of each calendar quarter and the Maturity Date and (b) with respect to any
Non-Base Rate Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part (and, in the case of a Non-Base Rate Loan
with an Interest Period of more than three (3) months’ duration, each day prior
to the last day of such Interest Period that occurs at intervals of three
(3) months’ duration after the first day of such Interest Period) and the
Maturity Date.

“Interest Period” means for each Non-Base Rate Loan comprising part of the same
Borrowing, the period commencing on the date such Non-Base Rate Loan is made or
deemed made and ending on the last day of the period selected by the Borrower
Representative pursuant to the provisions below and Section 2.8, and thereafter,
each subsequent period commencing on the last day of the immediately preceding
Interest Period and ending on the last day of the period selected by the
Borrower Representative pursuant to the provisions below and Section 2.8. The
duration of each such Interest Period shall be one (1), three (3), or six
(6) months (or such longer or shorter period if agreed to by all the Lenders),
in each case as the Borrower Representative may select, provided that:

(a) whenever the last day of any Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, provided that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day;

(b) any Interest Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month in which it would have ended if there were a
numerically corresponding day in such calendar month; and

(c) the Borrower Representative may not select any Interest Period for any Loan
which ends after the Maturity Date.

“Interpolated Rate” shall mean, at any time, for any Interest Period, the rate
per annum (rounded to the same number of decimal places as the LIBO Screen Rate
or to the next 1/100th of 1% with respect to any CDOR Rate Loan, as applicable)
determined by the Administrative Agent (which determination shall be conclusive
and binding absent manifest error) to be equal to the rate that results from
interpolating on a linear basis between: (a) with respect to the Adjusted LIBO
Rate (i) the LIBO Screen Rate for the longest period (for which the LIBO Screen
Rate is available) that is shorter than the Impacted Interest Period, and
(ii) the LIBO Screen Rate for the shortest period (for which the LIBO Screen
Rate is available) that exceeds the Impacted Interest Period, in each case, at
such time, and (b) with respect to any CDOR Rate Loan, (i) the applicable CDOR
Screen Rate for the longest period (for which the CDOR Screen Rate is available)
that is shorter than the Interest Period for such CDOR Rate Loan, and (ii) the
applicable CDOR Screen Rate for the shortest period (for which the CDOR Screen
Rate is available) that is longer than the Interest Period for such CDOR Rate
Loan, in each case, at such time.

“Inventory” has the meaning assigned to such term in the U.S. Security Agreement
or the Canadian Security Agreement, as applicable.

“Investment” means, as to any Person, any direct or indirect acquisition or
investment by such Person, whether by means of (a) the purchase or other
acquisition of capital stock or other securities of another Person, (b) a loan,
advance or capital contribution to, or a purchase or other acquisition of any
Debt or equity participation or interest in, another Person, including any
partnership or joint venture interest in such other Person, or (c) the purchase
or other acquisition (in one transaction or a series of transactions) of assets
of another Person that constitute a business unit. For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.

 

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“ISP” means, with respect to any Letter of Credit, the “International Standby
Practices 1998” published by the Institute of International Banking Law &
Practice (or such later version thereof as may be in effect at the time of
issuance).

“Issuing Lender” means each of (i) JPMorgan, (ii) Amegy, (iii) Wells Fargo, and
(iv) with the consent of the Administrative Agent, any other Lender that agrees
to act as an Issuing Lender, each in its capacity as the issuer of Letters of
Credit pursuant to the terms of this Agreement. Each Issuing Lender may, in its
discretion, arrange for one or more Letters of Credit to be issued by Affiliates
of the Issuing Lender, in which case the term “Issuing Lender” shall include any
such Affiliate with respect to Letters of Credit issued by such Affiliate.
References herein and in the other Credit Documents to the Issuing Lender shall
be deemed to refer to the Issuing Lender in respect of the applicable Letter of
Credit or to each Issuing Lender, as the context requires.

“ITA” means the Income Tax Act (Canada), as amended.

“Joinder Agreement” means a joinder agreement substantially in the form attached
to the Guaranty.

“JPMCB Canada” means JPMorgan Chase Bank, N.A., Toronto Branch.

“JPMCB U.S.” means JPMorgan Chase Bank, N.A.

“JPMorgan” means, collectively, JPMCB U.S. and/or JPMCB Canada, as the context
requires.

“LC Collateral Account” has the meaning assigned to such term in Section 2.6(j).

“LC Disbursement” means any payment made by an Issuing Lender pursuant to a
Letter of Credit.

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

“LC Fronting Limit” means, with respect to each Issuing Lender, initially, the
amount set forth on Schedule I as its LC Fronting Limit and thereafter, amounts
as may be agreed between each Issuing Lender and the Borrower Representative.

“Lead Arranger” means each of JPMCB U.S. and Wells Fargo Bank, National
Association in its capacity as a lead arranger and bookrunner hereunder.

“Legal Requirement” means any law, statute, ordinance, decree, requirement,
order, judgment, rule, regulation (or official interpretation of any of the
foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, including, but not limited to, Regulations T, U, and X.

“Lender” means a Lender having a Commitment or if the Aggregate Commitments have
been terminated, a lender that is owed Loans.

“Lender Parties” means the Lenders, the Issuing Lenders, and the Administrative
Agent.

 

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“Lending Office” means, as to any Lender, the office or offices of such Lender
described as such in such Lender’s Administrative Questionnaire, or such other
office or offices as a Lender may from time to time notify the Borrowers and the
Administrative Agent.

“Letter of Credit Application” means the applicable Issuing Lender’s standard
form letter of credit application for standby or commercial letters of credit
which has been executed by a Borrower, the applicable Guarantor and accepted by
the applicable Issuing Lender in connection with the issuance of a Letter of
Credit.

“Letter of Credit Documents” means all Letters of Credit, Letter of Credit
Applications and amendments thereof, and agreements, documents, and instruments
entered into in connection therewith or relating thereto.

“Letter of Credit Extension” means, with respect to any Letter of Credit, the
issuance thereof or extension of the expiry date thereof, or the increase of the
amount thereof.

“Letter of Credit Maximum Amount” means $50.0 million; provided that, on and
after the Maturity Date, the Letter of Credit Maximum Amount shall be zero.

“Letter of Credit Obligations” means any obligations of the U.S. Borrower under
this Agreement in connection with the Letters of Credit.

“Letters of Credit” means the letters of credit issued pursuant to this
Agreement for the account of the U.S. Borrower, and the term “Letter of Credit”
means any one of them or each of them singularly, as the context may require, in
such form as may be agreed by the U.S. Borrower and the applicable Issuing
Lender.

“Leverage Ratio” means, at any date, the ratio of (a) total Funded Debt on such
date to (b) EBITDA for the period of four consecutive fiscal quarters ended on
such date (or, if such date is not the last day of a fiscal quarter, ended on
the last day of the fiscal quarter most recently ended prior to such date).

“LIBO Rate” means, with respect to any Borrowing of Eurodollar Loans for any
Interest Period, the LIBO Screen Rate at approximately 11:00 a.m., London time,
two (2) Business Days prior to the commencement of such Interest Period;
provided that, if the LIBO Screen Rate shall not be available at such time for
such Interest Period (an “Impacted Interest Period”), then the LIBO Rate shall
be the Interpolated Rate.

“LIBO Screen Rate” means, for any day and time, with respect to any Borrowing of
Eurodollar Loans for any Interest Period, the London interbank offered rate as
administered by ICE Benchmark Administration (or any other Person that takes
over the administration of such rate for U.S. Dollars for a period equal in
length to such Interest Period as displayed on such day and time on pages
LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the
event such rate does not appear on a Reuters page or screen, on any successor or
substitute page on such screen that displays such rate, or on the appropriate
page of such other information service that publishes such rate from time to
time as selected by the Administrative Agent in its reasonable discretion);
provided that, if the LIBO Screen Rate shall be less than zero, such rate shall
be deemed to be zero for the purposes of this Agreement.

“Lien” means any mortgage, lien, pledge, hypothecation, charge, deed of trust,
security interest, or encumbrance to secure or provide for the payment of any
obligation of any Person, whether arising by contract, operation of law, or
otherwise (including the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease, or other title retention agreement).

 

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“Liquid Investments” means (a) readily marketable direct full faith and credit
obligations of the United States of America or obligations unconditionally
guaranteed by the full faith and credit of the United States of America;
(b) commercial paper issued by (i) any Lender or any Affiliate of any Lender or
(ii) any commercial banking institutions or corporations rated at least P-1 by
Moody’s or A-1 by S&P; (c) certificates of deposit, time deposits, and bankers’
acceptances issued by (i) any of the Lenders or (ii) any other commercial
banking institution which is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$250.0 million and rated Aa by Moody’s or AA by S&P; (d) repurchase agreements
which are entered into with any of the Lenders or any major money center banks
included in the commercial banking institutions described in clause (c) and
which are secured by readily marketable direct full faith and credit obligations
of the government of the United States of America or any agency thereof;
(e) investments in any money market fund which holds investments substantially
of the type described in the foregoing clauses (a) through (d); and (f) other
investments made through the Administrative Agent or its Affiliates. All the
Liquid Investments described in clauses (a) through (d) above shall have
maturities of not more than 365 days from the date of issue.

“Liquidity” means, as of a date of determination, the sum of (a) Availability
plus (b) readily available unrestricted cash held in Deposit Accounts of any
Credit Party in the United States (other than the Cash Collateral Accounts);
provided that, such Deposit Accounts and the funds therein shall be unencumbered
and free and clear of all Liens and other third party rights other than a Lien
in favor of the Administrative Agent pursuant to Security Documents and the
Liens described in Section 6.2(i).

“LLC” means any Person that is a limited liability company under the laws of its
jurisdiction of formation.

“Loan” means each of the Loans (including Canadian Loans) made by the Lenders to
either of the Borrowers pursuant to this Agreement.

“Loan Limit” means, at any time, the lesser of (a) the Aggregate Commitments and
(b) the Aggregate Borrowing Base then in effect.

“Magnum Acquisition” means the direct or indirect acquisition by the U.S.
Borrower of the total Equity Interests in Magnum Oil Tools International, Ltd
and Magnum Oil Tools Canada Ltd (collectively the “Magnum Targets”) pursuant to
the Magnum Purchase Agreement.

“Magnum Canada” has the meaning assigned to such term in Section 5.12(d).

“Magnum Purchase Agreement” means the securities purchase agreement dated as of
October 15, 2018 among MOTI Holdco, LLC, the Borrowers and Warren Lynn Frazier,
Garrett Lynn Frazier 2018 DG Trust, Derrick Chase Frazier 2018 DG Trust, Lynn
Frazier Charitable Trust and Frazier Family Foundation, Inc.

“Magnum Targets” has the meaning assigned to such term in the definition of
“Magnum Acquisition”.

“Material Adverse Change” means any event, development or circumstance that has
had or would reasonably be expected to have a material adverse effect on (a) the
business, operations, Property or financial condition of the Company and its
Restricted Subsidiaries, taken as a whole; (b) the validity or enforceability of
any Credit Document or any right or remedy of any Secured Party under any Credit
Document, (c) the ability of the Company and the other Credit Parties, taken as
a whole, to perform their obligations under the Credit Documents or (d) the
Collateral, or the Administrative Agent’s Liens (on behalf of itself and the
Secured Parties) on the Collateral and the priority of such Liens.

 

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“Material Debt” means Debt (other than the Loans and Letters of Credit), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Company and its Restricted Subsidiaries in an aggregate principal amount
exceeding $15.0 million. For purposes of determining Material Debt, the
“principal amount” of the obligations of any Borrower or any Restricted
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that such Borrower or
such Restricted Subsidiary would be required to pay if such Swap Agreement were
terminated at such time.

“Maturity Date” means the earliest of (a) five (5) years after the Closing Date
(the “Scheduled Maturity Date”), (b) the earlier termination in whole of the
Commitments pursuant to Section 2.9 or Article VII or (c) April 28, 2023 to the
extent that, on or before such date, the Senior Notes are not repurchased,
redeemed or refinanced to have a maturity date at least one hundred eighty
(180) days after the Scheduled Maturity Date.

“Maximum Rate” means the maximum nonusurious interest rate under applicable
Legal Requirements.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto which
is a nationally recognized statistical rating organization.

“Multiemployer Plan” means a “multiemployer plan” as defined in
Section 4001(a)(3) of ERISA to which the Company or any member of the Controlled
Group is making or accruing an obligation to make contributions.

“Net Income” means, for any period and with respect to any Person, the net
income for such period for such Person after taxes as determined in accordance
with GAAP, excluding, however, (a) extraordinary items, including (i) any net
non-cash gain or loss during such period arising from the sale, exchange,
retirement or other Disposition of capital assets (such term to include all
fixed assets and all securities) other than in the ordinary course of business,
and (ii) any write-up or write-down of assets and (b) the cumulative effect of
any change in GAAP.

“Net Orderly Liquidation Value” means, with respect to Inventory of any Person,
the orderly liquidation value thereof as determined in a manner reasonably
acceptable to the Administrative Agent by an appraiser reasonably acceptable to
the Administrative Agent, net of all costs of liquidation thereof.

“Net Proceeds” means, in connection with any Disposition or any casualty loss of
Collateral pursuant to Section 5.3(c), by any Restricted Entity, the proceeds
thereof in the form of cash and Liquid Investments (including any such proceeds
received by way of deferred payment of principal pursuant to a note or
installment receivable or purchase price adjustment receivable or otherwise, and
including casualty insurance settlements and condemnation awards, but in each
case only as and when received), net of attorneys’ fees, accountants’ fees,
investment banking fees, amounts required to be applied to the repayment of the
Debt secured by a Lien expressly permitted hereunder on any asset that is the
subject of such Disposition or such casualty loss of Collateral and other
customary fees and expenses actually incurred in connection therewith and net of
taxes paid or reasonably estimated to be payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements).

“Non-Base Rate Borrowing” means a Borrowing of the Type calculated at the
Adjusted LIBO Rate or CDOR, as the context requires.

“Non-Base Rate Loan” means (a) with respect to U.S. Loans (and calculations of
interest with respect to LC Exposure), Eurodollar Loans, (b) with respect to
Canadian Loans, to the extent denominated in U.S. Dollars, Eurodollar Loans, and
(c) with respect to Canadian Loans, to the extent denominated in Canadian
Dollars, CDOR Loans.

 

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“Non-Consenting Lender” means any Lender who does not agree to a consent, waiver
or amendment which (a) requires the agreement of all Lenders or all affected
Lenders in accordance with the terms of Section 9.2 and (b) has been agreed by
the Required Lenders.

“Non-Defaulting Lender” means any Lender that is not then a Defaulting Lender or
a Potential Defaulting Lender.

“Note” means a promissory note of a Borrower payable to a Lender in the amount
of such Lender’s Commitment, in the form provided by the Administrative Agent
and reasonably acceptable to such Borrower.

“Notice” shall has the meaning assigned to such term in Section 9.9(b)(ii).

“Notice of Borrowing” means a notice of borrowing signed by the Borrower
Representative in substantially the same form as Exhibit F or such other form as
shall be reasonably approved by the Administrative Agent setting forth:

(i) the name of the Applicable Borrower;

(ii) the aggregate amount of the requested Borrowing;

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

(iv) whether such Borrowing is to be an ABR Borrowing, Eurodollar Borrowing, CBR
Borrowing, CPR Borrowing or a CDOR Borrowing; and

(v) in the case of a Non-Base Rate Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period.”

“NYFRB” means the Federal Reserve Bank of New York.

“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective
Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on
such day (or for any day that is not a Business Day, for the immediately
preceding Business Day); provided that, if none of such rates are published for
any day that is a Business Day, the term “NYFRB Rate” means the rate for a
federal funds transaction quoted at 11:00 a.m. on such day received to the
Administrative Agent from a federal funds broker of recognized standing selected
by it; provided, further, that if any of the aforesaid rates shall be less than
zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Obligations” means all principal, interest (including post-petition interest),
fees, reimbursements, indemnifications, and other amounts now or hereafter owed
by any of the Credit Parties to the Lenders, the Issuing Lenders, or the
Administrative Agent under this Agreement and the Credit Documents, including
the Letter of Credit Obligations and any increases, extensions, and
rearrangements of those obligations under any amendments, supplements, and other
modifications of the documents and agreements creating those obligations.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.

 

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

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing taxes or any other similar taxes, charges or
levies imposed by any Governmental Authority arising from any payment made
hereunder or under any other Credit Document or from the execution, delivery or
enforcement of, or otherwise with respect to, this Agreement or any other Credit
Document, except any such taxes that are Other Connection Taxes imposed with
respect to an assignment (other than an assignment made pursuant to
Section 2.14).

“Overnight Bank Funding Rate” means, for any day, the rate comprised of both
overnight federal funds and overnight Eurodollar borrowings by U.S.-managed
banking offices of depository institutions (as such composite rate shall be
determined by the NYFRB as set forth on its public website from time to time)
and published on the next succeeding Business Day by the NYFRB as an overnight
bank funding rate (from and after such date as the NYFRB shall commence to
publish such composite rate).

“Participant” has the meaning assigned to such term in Section 9.7(c).

“Participant Register” has the meaning assigned to such term in Section 9.7(c).

“Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed
into law October 26, 2001)).

“Payment Conditions” shall be deemed to be satisfied with respect to an action
or proposed action if:

 

  (A)

no Default or Event of Default has occurred and is continuing or would result
immediately after giving effect to such action or proposed action;

 

  (B)

immediately after giving effect to and at all times during the thirty (30) day
period (or if less, the number of days that have elapsed since the Closing Date)
immediately prior to such action or proposed action, the Borrowers shall have
(1) (x) Availability calculated on a pro forma basis after giving effect to such
action or proposed action of not less than the greater of (A) 15% of the Loan
Limit and (B) $22.5 million, and (y) a Fixed Charge Coverage Ratio calculated on
a pro forma basis after giving effect to such action or proposed action of not
less than 1.00 to 1.00 or (2) Availability calculated on a pro forma basis after
giving effect to such action or proposed action of not less than the greater of
(A) 20% of the lesser of the Aggregate Commitments and the Aggregate Borrowing
Base or (B) $30.0 million; and

 

  (C)

the Borrower Representative shall have delivered to the Administrative Agent a
certificate in form and substance reasonably satisfactory to the Administrative
Agent certifying as to the items described in (A) and (B) above and attaching
calculations for item (B).

 

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“Payment in Full” means (a) the Commitments have expired or been terminated and
the payment in full in cash of all outstanding Loans and LC Disbursements,
together with accrued and unpaid interest thereon, (b) the termination,
expiration, or cancellation of all outstanding Letters of Credit (or
alternatively, with respect to each such Letter of Credit, such Letters of
Credit are Cash Collateralized or otherwise secured to the satisfaction of the
applicable Issuing Lender), (c) the payment in full in cash of the accrued and
unpaid fees, (d) the payment in full in cash of all reimbursable expenses and
other Secured Obligations (other than unliquidated Obligations for which no
claim has been made and other obligations expressly stated to survive such
payment and termination of this Agreement), together with accrued and unpaid
interest thereon, and (e) the termination of the Swap Agreement Obligations and
the Banking Services Obligations or entering into other arrangements
satisfactory to the Secured Parties that are counterparties thereto.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

“Permitted Acquisition” means an Acquisition that is permitted under
Section 6.4.

“Permitted Debt” has the meaning assigned to such term in Section 6.1.

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

“Permitted Investments” has the meaning assigned to such term in Section 6.3.

“Permitted Liens” has the meaning assigned to such term in Section 6.2.

“Person” means any natural person, partnership, corporation (including a
business trust), joint stock company, trust, limited liability company,
unlimited liability company, limited liability partnership, unincorporated
association, joint venture, or other entity, or Governmental Authority, or any
trustee, receiver, interim receiver, receiver manager, custodian, or similar
official.

“Plan” means an employee benefit plan (other than a Multiemployer Plan)
maintained for employees of the Company or any member of the Controlled Group
and covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code.

“Platform” has the meaning assigned to such term in Section 9.9(b)(i).

“Potential Defaulting Lender” means, at any time, a Lender (a) as to which the
Administrative Agent has notified the Company that an event of the kind referred
to in clause (d) of the definition of “Defaulting Lender” has occurred in
respect of any financial institution affiliate of such Lender, or (b) as to
which the Administrative Agent or an Issuing Lender has in good faith determined
and notified the Company and, in the case of any good faith determination and
notification made by an Issuing Lender, the Administrative Agent, that such
Lender or its direct or indirect parent company or a financial institution
affiliate thereof has notified the Administrative Agent or the applicable
Issuing Lender, or has stated publicly, that it will not comply with its funding
obligations under any other loan agreement or credit agreement or other similar
financing agreement. Any determination that a Lender is a Potential Defaulting
Lender under any of clauses (a) or (b) above will be made by the Administrative
Agent or, in the case of clause (b), an Issuing Lender, in its sole discretion
acting in good faith.

“PPSA” means the Personal Property Security Act (Alberta), including the
regulations thereto, as amended from time to time, and any other similar
legislation of any Canadian province or territory; provided that, if perfection
or the effect of perfection or non-perfection or the priority of any security
interest or other Lien on any Collateral is governed by the personal property
security legislation or other applicable

 

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legislation with respect to personal property security in effect in a
jurisdiction in Canada other than the Province of Alberta, “PPSA” shall refer
instead to the Personal Property Security Act or such other applicable federal,
provincial or territorial legislation (including the Civil Code of Québec)
pertaining to the granting, perfecting, opposability, priority, ranking or
enforcement of security interests, liens, hypothecs on personal or moveable
property, and any successor statutes, together with any regulations thereunder,
in each case as in effect from time to time.

“Prepayment Event” means:

(a) any sale, transfer or other Disposition (including pursuant to a sale and
leaseback transaction) of any Property or asset of any Credit Party, other than
Dispositions described in Section 6.05(a) and Dispositions between or among
Credit Parties, resulting in Net Proceeds in excess of $2.5 million;

(b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any Property or
asset of any Credit Party resulting in Net Proceeds in excess of $2.5 million.

“Prime Rate” means the per annum rate of interest established from time to time
by JPMorgan as its prime rate for Dollar loans, which rate may not be the lowest
rate of interest charged by such Lender to its customers.

“Prior Claims” shall mean all Liens created by applicable law (in contrast with
Liens voluntarily granted), or interests similar thereto under applicable law,
which rank or are capable of ranking prior or pari passu with the Liens created
by the Canadian Security Agreement including for amounts owing for, or in
respect of, employee source deductions, wages, vacation pay, goods and services
taxes, sales taxes, harmonized sales taxes, municipal taxes, workers’
compensation, Quebec corporate taxes, pension fund obligations and overdue
rents.

“Property” of any Person means any property or assets (whether real, personal,
or mixed, tangible or intangible) of such Person.

“Protective Advance” has the meaning assigned to such term in Section 2.4.

“Qualified ECP Counterparty” means, in respect of any Swap Agreement, a
Guarantor that (a) has total assets exceeding $10.0 million at the time any
guaranty of obligations of any Credit Party owing to Swap Counterparties under
any Swap Agreement or grant of the relevant security interest becomes effective
or (b) otherwise constitutes an “eligible contract participant” under the
Commodity Exchange Act.

“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Lender
and (c) any Issuing Lender, or any combination thereof (as the context
requires).

“Register” has the meaning assigned to such term in Section 9.7(b).

“Regulations T, U, and X” means Regulations T, U, and X of the Federal Reserve
Board, as each is from time to time in effect, and all official rulings and
interpretations thereunder or thereof.

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

 

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“Release” shall have the meaning set forth in CERCLA or under any other
applicable Environmental Law.

“Removal Effective Date” has the meaning set forth in Section 8.6(b).

“Report” means reports prepared by the Administrative Agent or another Person
showing the results of appraisals, field examinations or audits pertaining to
the assets of the Credit Parties from information furnished by or on behalf of
the Borrowers, which Reports may be distributed to the Lenders by the
Administrative Agent.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA
(other than any such event not subject to the provision for 30-day notice to the
PBGC under the regulations issued under such section).

“Required Lenders” means, (a) at any time when there are two (2) or more
unaffiliated Lenders, two (2) or more unaffiliated Lenders holding more than 50%
of (i) prior to the termination or expiration of the Commitments, the Aggregate
Commitments and (ii) following the termination or expiration of the Commitments,
the Aggregate Credit Exposure (with the aggregate amount of each Lender’s risk
participation and funded participation in the Letter of Credit Obligations and
Canadian Loans being deemed “held” by such Lender for purposes of this
definition) and (b) at any time when there is one Lender, such Lender; provided
that the Commitments and Aggregate Credit Exposure of any Defaulting Lender
shall be excluded for purposes of determining the Required Lenders.

“Requirement of Law” means, with respect to any Person, (a) the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person and (b) any statute, law
(including common law), treaty, rule, regulation, code, ordinance, order,
decree, writ, judgment, injunction or determination of any arbitrator or court
or other Governmental Authority (including Environmental Laws), in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.

“Reserves” means any and all reserves which the Administrative Agent deems
necessary, in its Permitted Discretion, to maintain (including, without
limitation, reserves for accrued and unpaid interest on the Secured Obligations,
reserves applicable to Banking Services, volatility reserves, reserves for rent
at locations leased by any Credit Party and for consignee’s, warehousemen’s and
bailee’s charges, reserves for dilution of Accounts, reserves for Inventory
shrinkage, reserves for customs charges and shipping charges related to any
Inventory in transit, reserves for obligations of any of the Credit Parties
owing to Swap Counterparties under any Swap Agreement, reserves for contingent
liabilities of any Credit Party, reserves for uninsured losses of any Credit
Party, reserves for uninsured, underinsured, un-indemnified or under-indemnified
liabilities or potential liabilities with respect to any litigation and reserves
for taxes, fees, assessments, and other governmental charges and, with respect
to the Canadian Credit Parties, reserves for Prior Claims established in the
Administrative Agent’s Permitted Discretion) with respect to the Collateral or
any Credit Party.

“Resignation Effective Date” has the meaning assigned to such term in
Section 8.6(a).

“Response” shall have the meaning set forth in CERCLA, and includes any
equivalent action, howsoever defined, under any other applicable Environmental
Law.

 

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“Responsible Officer” means (a) with respect to any Person that is a
corporation, such Person’s chief executive officer, president, chief financial
officer, chief operating officer, general counsel, director of finance,
treasurer, controller, or vice president, (b) with respect to any Person that is
a limited liability company, if such Person has officers, then such Person’s
chief executive officer, president, chief financial officer, chief operating
officer, general counsel, treasurer, or vice president, and if such Person is
managed by members, then a chief executive officer, president, chief financial
officer, chief operating officer, general counsel, treasurer or vice president
of such Person’s managing member, and if such Person is managed by managers,
then a manager (if such manager is an individual) or a chief executive officer,
president, chief financial officer, chief operating officer, general counsel,
treasurer or vice president of such manager (if such manager is an entity), and
(c) with respect to any Person that is a general partnership, limited
partnership or a limited liability partnership, the chief executive officer,
president, chief financial officer, chief operating officer, general counsel,
treasurer or vice president of such Person’s general partner or partners.

“Restricted Entity” means (a) the Borrowers and (b) each Restricted Subsidiary.

“Restricted Payment” means, with respect to any Person, any direct or indirect
dividend or distribution (whether in cash, securities or other Property) or any
direct or indirect payment of any kind or character (whether in cash, securities
or other Property) in consideration for or otherwise in connection with any
retirement, purchase, redemption or other acquisition of any Equity Interest of
such Person, or any options, warrants or rights to purchase or acquire any such
Equity Interest of such Person; provided that, the term “Restricted Payment”
shall not include any dividend or distribution payable solely in Equity
Interests of such Person or warrants, options or other rights to purchase such
Equity Interests.

“Restricted Subsidiary” means (a) each Subsidiary of a Borrower on the Closing
Date and (b) each other Subsidiary of a Borrower that is not an Unrestricted
Subsidiary.

“Revaluation Date” shall mean (a) with respect to any Loan denominated in
Canadian Dollars, each of the following: (i) the date of the Borrowing of such
Loan and (ii) each date of a conversion into or continuation of such Loan
pursuant to the terms of this Agreement; (b) with respect to any Letter of
Credit denominated in Canadian Dollars, each of the following: (i) the date on
which such Letter of Credit is issued, (ii) the first Business Day of each
calendar month and (iii) the date of any amendment of such Letter of Credit that
has the effect of increasing the face amount thereof; and (c) any additional
date as the Administrative Agent may determine at any time when an Event of
Default exists.

“Revolving Exposure” means, at any time, with respect to any Lender, the sum of
such Lender’s U.S. Exposure and the Canadian Exposure.

“S&P” means Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc., or any successor thereof which is a nationally recognized
statistical rating organization.

“Same Day Funds” means with respect to disbursements and payments in Dollars,
immediately available funds.

“Sanctioned Entity” means (a) a country or a government of a country, region or
territory, (b) an agency of the government of a country, region or territory,
(c) an organization directly or indirectly controlled by a country, region or
territory or its government, (d) a Person resident in a country, region or
territory, in each case, that is subject to a country, region or territory
sanctions program administered and enforced by OFAC or other applicable
Sanctions authority, including, without limitation, currently, the Crimea Region
of Ukraine, Cuba, Iran, North Korea and Syria.

 

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“Sanctioned Person” means, at any time, (a) a Person named on any
Sanctions-related list of designated Persons maintained by OFAC or other
applicable Sanctions authority, (b) any Person operating, organized or resident
in a Sanctioned Entity or (c) any Person owned or Controlled by any such Person
or Persons described in the foregoing clauses (a) or (b).

“Sanctions” means all economic or financial sanctions or trade embargoes
imposed, administered or enforced from time to time by (a) the U.S. government,
including those administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury or the U.S. Department of State, (b) the United
Nations Security Council, the European Union, any European Union member state,
Her Majesty’s Treasury of the United Kingdom, or (c) the Government of Canada.

“SCF” means, collectively, SCF-VII, L.P., a Delaware limited partnership, and
its Affiliates (other than any portfolio company thereof).

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

“Secured Obligations” means (a) the Obligations, (b) the Banking Services
Obligations owing by Credit Parties, and (c) obligations of any Credit Party
owing to Swap Counterparties under any Swap Agreement, provided, that solely
with respect to any Credit Party that is not an “eligible contract participant”
under the Commodity Exchange Act, Excluded Swap Obligations of such Credit Party
shall in any event be excluded from “Secured Obligations” owing by such Credit
Party.

“Secured Parties” means the Lender Parties, the Banking Services Providers who
are owed Banking Services Obligations and Swap Counterparties who are owed any
Obligations.

“Securities Account” has the meaning assigned to such term in the UCC.

“Security Agreements” means, collectively, the U.S. Security Agreement and the
Canadian Security Agreement.

“Security Documents” means the Security Agreements, including any supplements
thereto and any and all other instruments, documents or agreements, now or
hereafter executed by any Credit Party or any other Person to secure the
Obligations.

“Senior Notes” means the 8.750% senior unsecured notes due 2023 issued by the
Company.

“Solvent” means on the date of any determination (a) as to any U.S. Credit Party
(i) the fair value of the assets of the Company is not less than the amount that
will be required to pay the total liability on existing debts as they become
absolute and matured, (ii) the present fair saleable value of the assets of the
Company is not less than the amount that will be required to pay the probable
liability on existing debts of the Company as they become absolute and matured
and (iii) the Company is able to pay its debts or other obligations as they
generally become absolute and matured and (b) as to any Canadian Credit Party,
such Person shall not be an “insolvent person” as such term is defined in the
Bankruptcy and Insolvency Act (Canada). The term “debts” as used in this
paragraph includes any legal liability, whether matured or unmatured, liquidated
or unliquidated, absolute, fixed or contingent and “values of assets” means the
amount at which the assets (both tangible and intangible) in their entirety
would change hands between a willing buyer and a willing seller, with a
commercially reasonable period of time, each having reasonable knowledge of the
relevant facts, with neither being under compulsion to act.

“Statements” has the meaning assigned to such term in Section 2.18(g).

 

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

“Subsidiary” means, with respect to any Person (the “holder”) at any date, any
corporation, limited liability company, partnership, association or other entity
the accounts of which would be consolidated with those of the holder in the
holder’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other
entity, a majority of whose outstanding Voting Securities shall at any time be
owned by the holder or one more Subsidiaries of the holder. Unless expressly
provided otherwise, all references herein and in any other Credit Document to
any “Subsidiary” or “Subsidiaries” means a Subsidiary or Subsidiaries of the
Company.

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

“Swap Agreement Obligations” means any and all obligations of the Credit
Parties, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Swap
Agreements permitted hereunder with a Lender or an Affiliate of a Lender
(including a Person that is a party to a Swap Agreement with the Borrowers or
any of their Restricted Subsidiaries that entered into such Swap Agreement
before or while such Person was a Lender or an Affiliate of a Lender, whether or
not such Person at any time ceases to be a Lender or an Affiliate of a Lender,
as the case may be), and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any such Swap Agreement transaction.

“Swap Counterparty” means Person that is a Lender or an Affiliate of a Lender or
was a Lender or an Affiliate of a Lender at the time such Person entered into a
Swap Agreement with a Credit Party.

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

“Tangible Net Assets” means (a) the consolidated net book value of all assets of
the Company and its consolidated Restricted Subsidiaries minus (b) the
consolidated net book value of all intangible assets of the Company and its
consolidated Restricted Subsidiaries, calculated in each case based on the
Company’s consolidated balance sheet for the most recently ended fiscal quarter
as to which its financial statements are available. Tangible Net Assets shall be
subject to pro forma adjustments for Material Acquisitions and Material
Dispositions.

 

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“Tax Group” has the meaning assigned to such term in Section 4.13.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Termination Event” means (a) a Reportable Event with respect to a Plan, (b) the
withdrawal of the Company or any member of the Controlled Group from a Plan
during a plan year in which it was a “substantial employer” as defined in
Section 4001(a)(2) of ERISA, (c) the filing of a notice of intent to terminate a
Plan or the treatment of a Plan amendment as a termination under Section 4041(c)
of ERISA, (d) the institution of proceedings to terminate a Plan by the PBGC, or
(e) any other event or condition which constitutes grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.

“Transactions” means, collectively, (a) the initial borrowings and other
extensions of credit under this Agreement, (b) the Magnum Acquisition, (c) the
refinancing of the Existing Nine Debt, (d) the issuance of the Senior Notes and
(e) the payment of fees, commissions and expenses in connection with each of the
foregoing.

“Type” has the meaning assigned to such term in Section 1.4.

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

“Unfinanced Capital Expenditures” means, for any period, Capital Expenditures
made during such period which are not financed (a) from the proceeds of any Debt
(other than the Loans), (b) with the proceeds of the sale of an asset, (c) with
capital contributions to the Credit Parties or the proceeds from the issuance of
Equity Interests by the Credit Parties, in each case, other than capital
contributions from or Equity Interest issuances to another Credit Party,
(d) with casualty insurance proceeds or condemnation awards, (e) through a
trade-in of existing assets, (f) as a part of an Investment permitted by
Section 6.3 or a Permitted Acquisition, or (g) with any combination of the
foregoing.

“United States” and “U.S.” means the United States of America.

“Unrestricted Subsidiaries” means any Subsidiary of the Company that has been
designated as an Unrestricted Subsidiary in compliance with Section 5.7.

“U.S. Availability” means, at any time, an amount equal to (a) the U.S. Loan
Limit, minus (b) the Aggregate U.S. Exposure (calculated, with respect to any
Defaulting Lender, as if such Defaulting Lender had funded its Applicable
Percentage of all outstanding U.S. Loans).

“U.S. Borrower” has the meaning assigned to such term in the preamble.

“U.S. Borrowing Base” means the sum of (a) 85% of the U.S. Credit Parties’
Eligible Accounts at such time, plus (b) 80% of the U.S. Credit Parties’
Eligible Unbilled Accounts at such time, in an aggregate amount, when combined
with clause (b) of the definition of Canadian Borrowing Base, not to exceed
$10.0 million, plus (c) the product of 85% multiplied by the Net Orderly
Liquidation Value percentage identified in the most recent Inventory appraisal
ordered by the Administrative Agent multiplied by the

 

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U.S. Credit Parties’ Eligible Inventory (valued at the lower of cost (FIFO) or
market), minus (d) Reserves applicable to the U.S. Credit Parties established by
the Administrative Agent in its Permitted Discretion; provided that, until both
an acceptable appraisal and field exam with respect to the assets of the Magnum
Targets are received by the Administrative Agent, the assets of the Magnum
Targets included in the U.S. Borrowing Base shall be limited to 50% of the book
value of the Accounts of the Magnum Targets that are U.S. Credit Parties;
provided, further, that if such field exam and appraisal is not received on or
prior to the date that is sixty (60) days after the Closing Date, no assets of
the Magnum Targets shall be included in the U.S. Borrowing Base until such field
examination and appraisal have been received by the Administrative Agent.

“U.S. Collateral Deposit Account” has the meaning assigned to such term in
Section 5.13.

“U.S. Concentration Account” has the meaning assigned to such term in
Section 5.10(c).

“U.S. Credit Parties” means (a) the U.S. Borrower and (b) each U.S. Domestic
Subsidiary that has guaranteed the U.S. Secured Obligations pursuant to
Section 5.12(b), and their successors and assigns. Notwithstanding anything to
the contrary in this Agreement or in any other Credit Document, neither an
Excluded Subsidiary nor a Foreign Subsidiary will be deemed a U.S. Credit Party.

“U.S. Dollars” and “$” means lawful money of the United States.

“U.S. Domestic Subsidiary” means a Subsidiary organized under the laws of a
jurisdiction located in the U.S.

“U.S. Exposure” means, with respect to any Lender at any time, the sum of
(a) the outstanding principal amount of such Lender’s U.S. Revolving Loans and
LC Exposure as such time plus (b) an amount equal to such Lender’s Applicable
Percentage, if any, of the aggregate principal amount of all Protective Advances
at such time.

“U.S. Loan Limit” means, at any time, the lesser of (a) the Aggregate
Commitments (less the Aggregate Canadian Exposure) and (b) the U.S. Borrowing
Base then in effect.

“U.S. Loans” means the U.S. Revolving Loans and the Protective Advances.

“U.S. Obligations” means all unpaid principal of and accrued and unpaid interest
on the U.S. Loans, all LC Exposure, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations and indebtedness
(including interest and fees accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding), obligations and liabilities of any of
the U.S. Credit Parties to any of the Lenders, the Administrative Agent, any
Issuing Lender or any indemnified party, individually or collectively, existing
on the Closing Date or arising thereafter, direct or indirect, joint or several,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
secured or unsecured, in each case, arising by contract, operation of law or
otherwise, arising or incurred under this Agreement or any of the other Credit
Documents or in respect of any of the U.S. Loans or any of the Letters of Credit
or other instruments at any time evidencing any thereof.

“U.S. Person” means a “United States person” within the meaning of
Section 7701(a) (30) of the Code.

“U.S. Revolving Loan” means a Loan made to the U.S. Borrower pursuant to
Section 2.1(a).

 

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“U.S. Secured Obligations” means all U.S. Obligations, together with all
(a) Banking Services Obligations owing by U.S. Credit Parties to one or more
Lenders or their respective Affiliates and (b) Swap Agreement Obligations owing
by U.S. Credit Parties owing to one or more Lenders or their respective
Affiliates (including a Person that is a party to a Swap Agreement with the U.S.
Credit Parties that entered into such Swap Agreement before or while such Person
was a Lender or an Affiliate of a Lender, whether or not such Person at any time
ceases to be a Lender or an Affiliate of a Lender, as the case may be);
provided, however, that the definition of “U.S. Secured Obligations” shall not
create any guarantee by any Guarantor of (or grant of security interest by any
Guarantor to support, as applicable) any Excluded Swap Obligations of such
Guarantor for purposes of determining any obligations of any Guarantor.

“U.S. Security Agreement” means that certain Pledge and Security Agreement
(including any and all supplements or joinders thereto), substantially in the
form in Exhibit D-1, dated as of the date hereof, among the U.S. Credit Parties
and the Administrative Agent, for the benefit of the Administrative Agent and
the other Secured Parties, as the same may be amended, restated, supplemented or
otherwise modified from time to time.

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
Section 2.17(f) (ii) (B) (3).

“Voting Securities” means (a) with respect to any corporation (including any
unlimited liability company), capital stock of such corporation having general
voting power under ordinary circumstances to elect directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have special voting power or rights by reason of the happening of
any contingency), (b) with respect to any partnership, any partnership interest
or other ownership interest having general voting power to elect the general
partner or other management of the partnership or other Person, and (c) with
respect to any limited liability company, membership certificates or interests
having general voting power under ordinary circumstances to elect managers of
such limited liability company.

“Wells Fargo” has the meaning given to such term in the preamble.

“Wholly-Owned” means, as used in reference to a Restricted Subsidiary, any
Restricted Subsidiary whose Equity Interest is owned 100%, either directly or
indirectly, by the Borrowers.

“Withholding Agent” means a Borrower, any Guarantor and the Administrative
Agent.

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

Section 1.2 Computation of Time Periods. In this Agreement in the computation of
periods of time from a specified date to a later specified date, the word “from”
means “from and including” and the words “to” and “until” each means “to but
excluding”.

Section 1.3 Accounting Terms; Changes in GAAP.

(a) All accounting terms not specifically defined in this Agreement shall be
construed in accordance with GAAP applied on a consistent basis with those
applied in the preparation of the audited financial statements delivered to the
Administrative Agent for the fiscal year ended December 31, 2017 pursuant to
Section 3.1(k), except as provided in Section 6.6.

 

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(b) Unless otherwise indicated, all financial statements of the Company, all
calculations for compliance with covenants in this Agreement, all determinations
of the Applicable Margin, and all calculations of any amounts to be calculated
under the definitions in Section 1.1 shall be based upon the consolidated
accounts of the Company and its Restricted Subsidiaries in accordance with GAAP
and consistent with the principles of consolidation applied in preparing the
Company financial statements referred to in Section 4.4. For the avoidance of
doubt, references in this Agreement or in any other Credit Document to a
Person’s consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated Subsidiaries (or subset thereof if expressly provided
herein) which eliminate offsetting intercompany transactions.

(c) If at any time any change in, or the application of, GAAP would affect the
computation of any financial ratio or requirement set forth in any Credit
Document, and either the Company or the Required Lenders shall so request, the
Administrative Agent, the Lenders and the Company shall negotiate in good faith
to amend such ratio or requirement to preserve the original intent thereof in
light of such change in, or application of, GAAP (subject to the approval of the
Company and the Required Lenders); provided that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP (or
its prior application) prior to such change in, or application of, GAAP and
(ii) the Company shall provide to the Administrative Agent and the Lenders
financial statements and other documents required under this Agreement or as
reasonably requested hereunder setting forth a reconciliation between
calculations of such ratio or requirement made before and after giving effect to
such change in, or application of, GAAP; provided further that, the accounting
for operating leases and Capital Leases under GAAP as in effect on the Closing
Date (including, without limitation, Accounting Standards Codification 480)
shall apply for the purposes of determining compliance with the provisions of
this Agreement with respect to operating leases and Capital Leases (it being
understood, for the avoidance of doubt, that no operating leases, or obligations
in respect of operating leases, shall be treated as Capital Leases hereunder).

Section 1.4 Classes and Types of Loans. Loans are distinguished by Classes and
Type. The “Type” of a Loan refers to the Rate (as defined below) by reference to
which interest on such Loan is determined. For purposes hereof, the term “Rate”
shall include ABR, CBR, CPR, the Adjusted LIBO Rate and CDOR.

Section 1.5 Other Interpretive Provisions; UCC, PPSA Terms.

(a) Article, Section, Schedule, and Exhibit references are to this Agreement,
unless otherwise specified. All references to instruments, documents, contracts,
and agreements (including this Agreement) are references to such instruments,
documents, contracts, and agreements as the same may be amended, supplemented,
and otherwise modified from time to time, unless otherwise specified and shall
include all schedules and exhibits thereto unless otherwise specified. Any
reference herein to any law shall be construed as referring to such law as
amended, modified, codified or reenacted, in whole or in part, and in effect
from time to time. Any reference herein to any Person shall be construed to
include such Person’s successors and assigns (subject to the restrictions
contained herein). The words “hereof”, “herein”, and “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The term
“including” means “including, without limitation,”. Paragraph headings have been
inserted in this Agreement as a matter of convenience for reference only and it
is agreed that such paragraph headings are not a part of this Agreement and
shall not be used in the interpretation of any provision of this Agreement.

 

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(b) Unless otherwise defined herein, the following terms, as well as all
uncapitalized terms which are defined in the UCC (whether or not capitalized or
uncapitalized in the same manner therein) on the date hereof are used herein as
so defined: Accounts, Certificated Security, Chattel Paper, Commercial Tort
Claims, Commodity Accounts, Deposit Accounts, Documents, Electronic Chattel
Paper, Equipment, Fixtures, General Intangibles, Goods, Instruments, Inventory,
Letter of Credit Rights, Payment Intangibles, Proceeds, Securities Accounts,
Supporting Obligations and Tangible Chattel Paper; provided that, if such terms
are defined both in the UCC and the PPSA, in respect of the Canadian Credit
Parties, such terms shall have the meaning herein ascribed to them in the PPSA.
Other terms defined in the UCC or terms defined in the PPSA which are not
otherwise defined in this Agreement or in any other Credit Document, as
applicable, are used herein and/or therein as defined in the UCC or the PPSA, as
the context requires.

Section 1.6 Exchange Rates; Currency Equivalents. Except for purposes of
financial statements delivered by Credit Parties hereunder or calculating
compliance with any covenants hereunder or except as otherwise provided herein,
the applicable amount of any currency (other than Dollars) for purposes of the
Credit Documents shall be such Dollar Equivalent Amount as so determined by the
Administrative Agent or the applicable Issuing Lender.

Section 1.7 Currency Matters; Currency Indemnity. The U.S. Borrower shall, and
shall cause the other Credit Parties to, make payment relative to any Obligation
with respect to Letters of Credit in the currency in which such Obligation was
effected (the “Agreed Currency”). If any payment is received on account of any
Obligation in any currency other than the Agreed Currency (the “Other Currency”)
(whether voluntarily or pursuant to an order or judgment or the enforcement
thereof or the realization of any Collateral under the Security Documents or the
liquidation of a Credit Party or otherwise), such payment shall constitute a
discharge of the liability of the Credit Parties hereunder and under the other
Credit Documents in respect of such obligation only to the extent of the amount
of the Agreed Currency which the relevant Issuing Lender is able to purchase
with the amount of the Other Currency received by it on the Business Day next
following such receipt in accordance with its normal banking procedures in the
relevant jurisdiction and applicable law after deducting any costs of exchange.
To the fullest extent permitted by applicable law, if the amount of the Other
Currency received is insufficient to satisfy the obligation in the Agreed
Currency in full, then the U.S. Borrower shall on demand indemnify the Issuing
Lenders from and against any loss or cost arising out of or in connection with
such deficiency; provided that, if the amount of the Agreed Currency so
purchased is greater than the amount of the Agreed Currency due in respect of
such liability immediately prior to such judgment or order, voluntary
prepayment, realization of Collateral, liquidation of a Credit Party or
otherwise, then the Administrative Agent or the Lenders, as the case may be,
agree to return the amount of any excess to the U.S. Borrower (or to any other
Person who may be entitled thereto under applicable law). To the fullest extent
permitted by applicable law, the foregoing indemnity and agreement by each party
shall constitute an obligation separate and independent from all other
obligations contained in this Agreement and shall give rise to a separate and
independent cause of action.

ARTICLE II

CREDIT FACILITIES

Section 2.1 Commitments.

(a) Generally. Subject to the terms and conditions set forth in this Agreement,
each Lender severally (and not jointly) agrees to make U.S. Revolving Loans in
Dollars to the U.S. Borrower in Dollars from time to time during the
Availability Period; provided that, after giving effect to such Loans, (A) the
sum of the aggregate outstanding amount of all Loans plus the LC Exposure shall
not exceed the Aggregate Commitments, (B) no Lender’s Revolving Exposure shall
exceed such Lender’s Commitment, (C) no Lender’s U.S. Exposure shall exceed its
Applicable Percentage of the U.S. Loan Limit, (D) the Aggregate U.S. Exposure
shall not exceed the U.S. Loan Limit, (E) the Aggregate Canadian Exposure shall
not exceed the Canadian Loan Limit, or (F) none of the U.S. Availability or the
Availability may be less

 

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than zero, in each case, subject to the Administrative Agent’s authority, in its
sole discretion, to make Protective Advances. Subject to the terms of this
Agreement, the Borrowers may from time to time borrow, prepay, and reborrow
Loans. No Lender (including the Administrative Agent) shall make any U.S. Loan
to the Canadian Borrower.

(b) Change in Commitments.

(i) Defaulting Lender. At any time when a Lender is then a Defaulting Lender,
the Borrowers, at their election, may elect to terminate such Defaulting
Lender’s Commitment hereunder; provided that, (A) such termination must be of
all of the Defaulting Lender’s Commitments, (B) the Borrowers shall pay all
amounts owed by the Borrowers to such Defaulting Lender in such Lender’s
capacity as a Lender under this Agreement and under the other Credit Documents
(including principal of and interest on the Loans owed to such Defaulting
Lender, accrued Commitment Fees (subject to Section 2.15(a)(iii)), and Letter of
Credit fees (subject to Section 2.15(a)(iii) but specifically excluding any
amounts owing under Section 2.10 as result of such payment of such Loans) and
shall deposit with the Administrative Agent into the Cash Collateral Account
Cash Collateral in the amount equal to such Defaulting Lender’s ratable share of
the LC Exposure (including any such portion thereof that has been reallocated
pursuant to Section 2.15), (C) a Defaulting Lender’s Commitments may be
terminated by the Borrowers under this Section 2.1(c)(iii) if and only if at
such time, the Borrowers have elected, or are then electing, to terminate the
Commitments of all then existing Defaulting Lenders, and (D) no Default has
occurred and is continuing at the time of such election and termination. Upon
written notice to the Defaulting Lender and Administrative Agent of the
Borrowers’ election to terminate a Defaulting Lender’s Commitments pursuant to
this clause (i) and the payment and deposit of amounts required to be made by
the Borrowers under clause (B) and (C) above, (1) such Defaulting Lender shall
cease to be a “Lender” hereunder for all purposes except that such Lender’s
rights and obligations as a Lender under Section 2.9, Section 2.11,
Section 2.13, Section 8.3 and Section 9.1 shall continue with respect to events
and occurrences occurring before or concurrently with its ceasing to be a
“Lender” hereunder, (2) such Defaulting Lender’s Commitments shall be deemed
terminated, and (3) such Defaulting Lender shall be relieved of its obligations
hereunder as a “Lender” except as to its obligations under Section 8.3 and
Section 9.1 and any other obligations that expressly survive, which obligations
shall continue with respect to events and occurrences occurring before or
concurrently with its ceasing to be a “Lender” hereunder, provided that, any
such termination will not be deemed to be a waiver or release of any claim the
Borrowers, the Administrative Agent, the Issuing Lender or any Lender may have
against such Defaulting Lender.

(ii) All notices for a complete termination under clause (i) above delivered by
the Borrowers may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Borrowers (by notice to the Administrative Agent on or prior to the specified
effective date) if such condition is not satisfied.

Section 2.2 Loans and Borrowings.

(a) Each Loan (other than a Canadian Loan) shall be made as part of a Borrowing
consisting of Loans of the same Class and Type made by the Lenders ratably in
accordance with their respective Commitments of the applicable Class. The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that, the
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender’s failure to make Loans as required. Any Protective Advance
shall be made in accordance with the procedures set forth in Sections 2.4 and
2.5. Any Canadian Loan shall be made in accordance with Section 2.24

 

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(b) Subject to Section 2.19, each Borrowing shall be comprised entirely of Base
Rate Loans or Non-Base Rate Loans as the Borrower Representative may request in
accordance herewith, provided that all Borrowings made on the Closing Date must
be made as Base Rate Borrowings but may be converted into Non-Base Rate
Borrowings in accordance with Section 2.4.

(c) At the commencement of each Interest Period for any Non-Base Rate Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$500,000 (or Cdn$100,000 in the case of CDOR Rate Loans) and not less than
$1.0 million (or Cdn$1.0 million in the case of CDOR Rate Loans). Base Rate
Borrowings may be in any amount. Borrowings of more than one Type and Class may
be outstanding at the same time; provided that, there shall not at any time be
more than a total of ten (10) Non-Base Rate Borrowings outstanding.

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

Section 2.3 Requests for Borrowing; Notice of Borrowing.

(a) Notice of Borrowing. To request a Borrowing, the Borrower Representative
shall notify the Administrative Agent in writing (delivered by hand or
facsimile) in a form approved by the Administrative Agent and signed by the
Borrower Representative or by telephone or through Electronic System if
arrangements for doing so have been approved by the Administrative Agent, a
Notice of Borrowing not later than: (i) in the case of a Non-Base Rate
Borrowing, 10:00 a.m., Chicago time, three (3) Business Days before the date of
the proposed Borrowing; or (ii) in the case of a Base Rate Borrowing, (A) of a
U.S. Loan, noon, Chicago time, on the date of the proposed Borrowing and (B) of
a Canadian Loan, 10:00 a.m., Chicago time, on the date of the proposed
Borrowing; provided that, any such notice of a Base Rate Borrowing to finance
the reimbursement of an LC Disbursement as contemplated by Section 2.6(e) may be
given not later than 9:00 a.m., Chicago time, on the date of such proposed
Borrowing. Each such Notice of Borrowing shall be irrevocable.

(b) The Administrative Agent shall give each Lender prompt notice on the day of
receipt of a timely Notice of Borrowing in writing (delivered by hand or
facsimile) in a form approved by the Administrative Agent and signed by the
Borrower Representative or by telephone or through Electronic System if
arrangements for doing so have been approved by the Administrative Agent. Each
Notice of Borrowing shall be by telephone or facsimile, and if by telephone,
confirmed promptly in writing, specifying (i) the requested date of such
Borrowing (which shall be a Business Day), (ii) the requested Type of Loans
comprising such Borrowing, (iii) the aggregate amount of such Borrowing and
(iv) if such Borrowing is to be comprised of Non-Base Rate Loans, the Interest
Period to be applicable to each such Loan, which shall be a period contemplated
by the definition of the term “Interest Period”. Each Lender shall before 2:00
p.m. (Chicago time) on the date of the proposed Borrowing, make available for
the account of its Lending Office to the Administrative Agent at its address
referred to in Section 9.9, or such other location as the Administrative Agent
may specify by notice to the Lenders, in Same Day Funds, such Lender’s
Applicable Percentage of such Borrowing. Promptly upon the Administrative
Agent’s receipt of such funds (but in any event not later than 4:00 p.m.
(Chicago time) on the date of the proposed Borrowing) and provided that, the
applicable conditions set forth in Article III have been satisfied, the
Administrative Agent will make such funds available to the Applicable Borrower
at its account with the Administrative Agent (specified in the Notice of
Borrowing).

(c) Election of Type of Borrowing. If no election as to the Type of Borrowing is
specified, then the requested Borrowing shall be a Base Rate Borrowing. If no
Interest Period is specified with respect to any requested Non-Base Rate
Borrowing, then the Applicable Borrower shall be deemed to have selected an
Interest Period of one month’s duration.

 

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Section 2.4 Protective Advances.

(a) Subject to the limitations set forth below, the Administrative Agent is
authorized by the Borrowers and the Lenders, from time to time in the
Administrative Agent’s sole discretion (but shall have absolutely no
obligation), to make Loans to the U.S. Borrower in Dollars, on behalf of all
Lenders, which the Administrative Agent, in its Permitted Discretion, deems
necessary or desirable (i) to preserve or protect the Collateral, or any portion
thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (iii) to pay any other amount chargeable
to or required to be paid by the Borrowers pursuant to the terms of this
Agreement, including payments of reimbursable expenses (including costs, fees,
and expenses as described in Section 9.1) and other sums payable under the
Credit Documents (any of such Loans are herein referred to as “Protective
Advances”); provided that, the aggregate amount of Protective Advances
outstanding at any time shall not at any time exceed $10.0 million; and provided
further that, upon making such Protective Advance (A) the Aggregate Credit
Exposure after giving effect to the Protective Advances being made shall not
exceed the Aggregate Commitment, (B) the Aggregate U.S. Exposure after giving
effect to the Protective Advances shall not exceed the Aggregate Commitments
less any Aggregate Canadian Exposure. Protective Advances may be made even if
the conditions precedent set forth in Section 3.2 have not been satisfied. The
Protective Advances shall be secured by the Liens in favor of the Administrative
Agent in and to the Collateral and shall constitute Secured Obligations. All
Protective Advances shall be Base Rate Borrowings. The making of a Protective
Advance on any one occasion shall not obligate the Administrative Agent to make
any Protective Advance on any other occasion. Any such revocation must be in
writing and shall become effective prospectively upon the Administrative Agent’s
receipt thereof. At any time that there is sufficient Availability and U.S.
Availability and the conditions precedent set forth in Section 3.2 have been
satisfied, the Administrative Agent may request the Lenders to make a U.S.
Revolving Loan to repay a Protective Advance. At any other time the
Administrative Agent may require the Lenders to fund their risk participations
described in Section 2.4(b).

(b) Upon the making of a Protective Advance by the Administrative Agent (whether
before or after the occurrence of a Default), each Lender shall be deemed,
without further action by any party hereto, to have unconditionally and
irrevocably purchased from the Administrative Agent, without recourse or
warranty, an undivided interest and participation in such Protective Advance in
proportion to its Applicable Percentage. From and after the date, if any, on
which any Lender is required to fund its participation in any Protective Advance
purchased hereunder, the Administrative Agent shall promptly distribute to such
Lender, such Lender’s Applicable Percentage of all payments of principal and
interest and all proceeds of Collateral received by the Administrative Agent in
respect of such Protective Advance.

Section 2.5 Cash Dominion.

(a) Subsequent to the Credit Parties’ compliance with Section 2.5(b), all
Deposit Accounts, Securities Accounts and Commodities Accounts (other than any
Excluded Account for so long as such account is an Excluded Account) of the
Credit Parties shall be Controlled Accounts.

(b) The Credit Parties will, in connection with any Deposit Account, Securities
Account or Commodity Account (other than any Excluded Account for so long as
such account is an Excluded Account) established on or before the date that is
thirty (30) days after the Closing Date (or such later date as the
Administrative Agent may agree in its sole discretion), enter into and deliver
to the Administrative Agent an Account Control Agreement and/or lockbox
agreement, in each case in form and substance acceptable to the Administrative
Agent, on or before the following dates (or, in each case, such later date as
the Administrative Agent may agree in its sole discretion): (i) the date that is
sixty (60) days after the Closing Date or (ii) with respect to any Deposit
Account, Securities Account or Commodity Account (other than any Excluded
Account for so long as such account is an Excluded Account) established on or
after the date that is thirty (30) days after the Closing Date, promptly but in
any event within thirty (30) days of the date such account is established.

 

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(c) Each Credit Party shall be subject to cash dominion at all times during a
Cash Dominion Period. At any time that a Cash Dominion Event has occurred and is
continuing, cash on hand and collections which are received into any Controlled
Account, and to the extent necessary any securities (other than any Equity
Interests of a Credit Party) held in any Securities Account shall be liquidated
and the cash proceeds thereof, shall be swept on a daily basis into a blocked
Concentration Account in the name of the U.S. Borrower or Canadian Borrower, as
applicable, and held with and maintained by the Administrative Agent and subject
to an Account Control Agreement and used to prepay Loans outstanding under this
Agreement in accordance with Section 2.9. At any time during a Cash Dominion
Period, all proceeds of the Funding Accounts shall be swept into the
Concentration Account and any Loan shall be deposited into the Concentration
Account that is maintained with the Administrative Agent.

Section 2.6 Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the U.S.
Borrower may request the issuance of Letters of Credit for its own account or
the account of any Restricted Subsidiary denominated in Dollars or CAD as the
applicant thereof for the support of its or the other Credit Parties’
obligations, in a form reasonably acceptable to the Administrative Agent and the
applicable Issuing Lender, at any time and from time to time during the
Availability Period; provided, that Wells Fargo shall not be obligated to issue
Letters of Credit in any currency other than Dollars. In the event of any
inconsistency between the terms and conditions of this Agreement and the terms
and conditions of any form of Letter of Credit Application or other agreement
submitted by the U.S. Borrower to, or entered into by the U.S. Borrower with,
the applicable Issuing Lender relating to any Letter of Credit, the terms and
conditions of this Agreement shall control. The U.S. Borrower unconditionally
and irrevocably agrees that, in connection with any Letter of Credit issued for
the support of any Credit Party’s obligations as provided in the first sentence
of this paragraph, it will be fully responsible for the reimbursement of LC
Disbursements in accordance with the terms hereof, the payment of interest
thereon and the payment of fees due under Section 2.12(b) to the same extent as
if it were the sole account party in respect of such Letter of Credit (hereby
irrevocably waiving any defenses that might otherwise be available to it as a
guarantor or surety of the obligations of such Restricted Subsidiary that is an
account party in respect of any such Letter of Credit). Notwithstanding anything
herein to the contrary, no Issuing Lender shall have any obligation hereunder to
issue, and shall not issue, any Letter of Credit (i) the proceeds of which would
be made available to any Person (A) to fund any activity or business of or with
any Sanctioned Person, or in any country or territory that, at the time of such
funding, is the subject of any Sanctions or (B) in any manner that would result
in a violation of any Sanctions by any party to this Agreement, (ii) if any
order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain the applicable Issuing Lender from
issuing such Letter of Credit, or any Requirement of Law relating to the
applicable Issuing Lender or any request or directive (whether or not having the
force of law) from any Governmental Authority with jurisdiction over the
applicable Issuing Lender shall prohibit, or request that the applicable Issuing
Lender refrain from, the issuance of Letters of Credit generally or such Letter
of Credit in particular or shall impose upon the applicable Issuing Lender with
respect to such Letter of Credit any restriction, reserve or capital requirement
(for which the applicable Issuing Lender is not otherwise compensated hereunder)
not in effect on the Closing Date, or shall impose upon the applicable Issuing
Lender any unreimbursed loss, cost or expense which was not applicable on the
Closing Date and which the applicable Issuing Lender in good faith deems
material to it, or (iii) if the issuance of such Letter of Credit would violate
one or more policies of the applicable Issuing Lender applicable to Letters of
Credit generally; provided that, notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, guidelines, requirements or directives thereunder or issued
in connection therewith or in the implementation thereof, and (y) all requests,
rules, guidelines,

 

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requirements or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities, in
each case pursuant to Basel III, shall in each case be deemed not to be in
effect on the Closing Date for purposes of clause (ii) above, regardless of the
date enacted, adopted, issued or implemented.

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions. To
request the issuance of a Letter of Credit (or the amendment, renewal or
extension of an outstanding Letter of Credit), the U.S. Borrower shall deliver
by hand or facsimile (or transmit through Electronic Systems, if arrangements
for doing so have been approved by the applicable Issuing Lender) to the
applicable Issuing Lender and the Administrative Agent prior to 9:00 am, Chicago
time, at least three (3) Business Days prior to the requested date of issuance,
amendment, renewal or extension, a notice requesting the issuance of a Letter of
Credit, or identifying the Letter of Credit to be amended, renewed or extended,
and specifying the date of issuance, amendment, renewal or extension (which
shall be a Business Day), the date on which such Letter of Credit is to expire
(which shall comply with paragraph (c) of this Section), the amount of such
Letter of Credit, the currency of such Letter of Credit, the name and address of
the beneficiary thereof and such other information as shall be necessary to
prepare, amend, renew or extend such Letter of Credit. If requested by the
applicable Issuing Lender, the U.S. Borrower also shall submit a Letter of
Credit Application on the applicable Issuing Lender’s standard form in
connection with any request for a Letter of Credit. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit, the U.S. Borrower shall be deemed
to represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the aggregate LC Exposure shall not exceed
$50.0 million, (ii) the Revolving Exposure shall exceed the lesser of the
Aggregate Commitment and the Aggregate Borrowing Base, (iii) the Aggregate U.S.
Exposure shall not exceed the U.S. Loan Limit, (iv) the Aggregate Canadian
Exposure shall not exceed the Canadian Loan Limit and (v) the aggregate face
amount of drawn and undrawn Letters of Credit (that have not been Cash
Collateralized) of the applicable Issuing Lender shall not exceed such Issuing
Lender’s LC Fronting Limit unless such Issuing Lender shall agree in its sole
discretion.

(c) Expiration Date. Each Letter of Credit shall expire (or be subject to
termination or non-renewal by notice from the applicable Issuing Lender to the
beneficiary thereof) at or prior to the close of business on the earlier of
(i) the date one year after the date of the issuance of such Letter of Credit
(or, in the case of any renewal or extension thereof, including, without
limitation, any automatic renewal provision, one year after such renewal or
extension) and (ii) the date that is five (5) Business Days prior to the
Maturity Date; provided, that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (ii) above) and provided,
further, that the applicable Issuing Lender may consent to an expiration date of
a Letter of Credit which is on or after the date that is five (5) Business Days
prior to the Maturity Date if such Letter of Credit has been Cash Collateralized
on terms acceptable to such Issuing Lender at least five (5) Business Days prior
to the Maturity Date. If any such Letter of Credit has not been Cash
Collateralized on terms acceptable to such Issuing Lender at least five
(5) Business Days prior to the Maturity Date, then the U.S. Borrower shall, on
the date that is five (5) Business Days prior to the Maturity Date,
notwithstanding any conditions to Borrowing set forth herein, be deemed to have
requested, and the U.S. Borrower does hereby request under such circumstances,
an ABR Borrowing in an amount equal to the LC Exposure of such Letter of Credit
and such ABR Loans shall be provided to replace such LC Exposure.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a
Letter of Credit increasing the amount thereof) and without any further action
on the part of the applicable Issuing Lender or the Lenders, the applicable
Issuing Lender hereby grants to each Lender, and each Lender hereby acquires
from the applicable Issuing Lender, a participation in such Letter of Credit
equal to such Lender’s Applicable Percentage of the aggregate amount available
to be drawn under such Letter of Credit. In consideration and in furtherance of
the foregoing, the U.S. Borrower hereby absolutely and unconditionally

 

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agrees to pay in the currency of the LC Disbursement to the Administrative
Agent, for the account of the applicable Issuing Lender, such Lender’s
Applicable Percentage of each LC Disbursement made by the applicable Issuing
Lender and not reimbursed by the U.S. Borrower on the date due as provided in
paragraph (e) of this Section, or of any reimbursement payment required to be
refunded to the U.S. Borrower for any reason. Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If any Issuing Lender shall make any LC Disbursement in
respect of a Letter of Credit, the U.S. Borrower shall reimburse such LC
Disbursement by paying in the currency of such LC Disbursement to the
Administrative Agent an amount equal to such LC Disbursement (i) not later than
11:00 a.m., Chicago time, on the date that such LC Disbursement is made, if the
Borrower Representative shall have received notice of such LC Disbursement prior
to 9:00 a.m., Chicago time, on such date, or, (ii) if such notice has not been
received by the Borrower Representative prior to such time on such date, then
not later than 11:00 a.m., Chicago time, on (A) the Business Day that the
Borrower Representative receives such notice, if such notice is received prior
to 9:00 a.m., Chicago time, on the day of receipt, or (B) the Business Day
immediately following the day that the Borrower Representative receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that, the U.S. Borrower may, subject to the conditions to borrowing set
forth herein, request in accordance with Section 2.3 or 2.5 that such payment be
financed with a Base Rate Borrowing in U.S. Dollars equal to the Dollar
Equivalent Amount of such LC Disbursement) and, to the extent so financed, the
U.S. Borrower’s obligation to make such payment shall be discharged and replaced
by the resulting Base Rate Borrowing. If the U.S. Borrower fails to make such
payment when due, the Administrative Agent shall notify each Lender of the
applicable LC Disbursement, the payment then due from the U.S. Borrower in
respect thereof and such Lender’s Applicable Percentage thereof. Promptly
following receipt of such notice, each Lender shall pay to the Administrative
Agent its Applicable Percentage of the payment then due from the U.S. Borrower
in U.S. Dollars, in the same manner as provided in Section 2.7 with respect to
Loans made by such Lender (and Section 2.7 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the applicable Issuing Lender the amounts so received by it from the
Lenders. Promptly following receipt by the Administrative Agent of any payment
from the U.S. Borrower pursuant to this paragraph, the Administrative Agent
shall distribute such payment to the applicable Issuing Lender or, to the extent
that Lenders have made payments pursuant to this paragraph to reimburse the
applicable Issuing Lender, then to such Lenders and the Issuing Lenders as their
interests may appear. Any payment made by a Lender pursuant to this paragraph to
reimburse an Issuing Lender for any LC Disbursement (other than the funding of
Base Rate Loans as contemplated above) shall not constitute a Loan and shall not
relieve the U.S. Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute. The U.S. Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of any Letter of
Credit or this Agreement, or any term or provision therein or herein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) any payment by an Issuing Lender under a Letter
of Credit against presentation of a draft or other document that does not comply
with the terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the U.S. Borrower’s obligations hereunder.
None of the Administrative Agent, the

 

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Lenders, any Issuing Lender or any of their Related Parties, shall have any
liability or responsibility by reason of or in connection with the issuance or
transfer of any Letter of Credit or any payment or failure to make any payment
thereunder (irrespective of any of the circumstances referred to in the
preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of an Issuing Lender;
provided that the foregoing shall not be construed to excuse the Issuing Lenders
from liability to the U.S. Borrower to the extent of any direct damages (as
opposed to special, indirect, consequential or punitive damages, claims in
respect of which are hereby waived by the Borrowers to the extent permitted by
applicable law) suffered by any Borrower that are caused by an Issuing Lender’s
failure to exercise care when determining whether drafts and other documents
presented under a Letter of Credit comply with the terms thereof. The parties
hereto expressly agree that, in the absence of gross negligence or willful
misconduct on the part of an Issuing Lender (as finally determined by a court of
competent jurisdiction), the applicable Issuing Lender shall be deemed to have
exercised care in each such determination. In furtherance of the foregoing and
without limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the applicable Issuing Lender may, in its
sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

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

(h) Interim Interest. If an Issuing Lender shall make any LC Disbursement, then,
unless the U.S. Borrower shall reimburse such LC Disbursement in full on the
date such LC Disbursement is made, the unpaid amount thereof shall bear
interest, for each day from and including the date such LC Disbursement is made
to but excluding the date that the U.S. Borrower reimburses such LC
Disbursement, at the rate per annum then applicable to Base Rate Loans and such
interest shall be payable on the date when such reimbursement is due; provided
that, if the U.S. Borrower fails to reimburse such LC Disbursement when due
pursuant to paragraph (e) of this Section, then Section 2.13(d) shall apply.
Interest accrued pursuant to this paragraph shall be for the account of the
applicable Issuing Lender, except that interest accrued on and after the date of
payment by any Lender pursuant to paragraph (e) of this Section to reimburse the
applicable Issuing Lender shall be for the account of such Lender to the extent
of such payment.

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

 

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(j) Cash Collateralization. If any Event of Default shall occur and be
continuing, on the Business Day that the Borrower Representative receives notice
from the Administrative Agent or the Required Lenders (or, if the maturity of
the Loans has been accelerated, Lenders with LC Exposure representing greater
than 50% of the aggregate LC Exposure) demanding the deposit of Cash Collateral
pursuant to this paragraph, the U.S. Borrower shall deposit in an account with
the Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders (the “LC Collateral Account”), an amount in cash equal to
one hundred three percent (103%) of the amount of the LC Exposure as of such
date plus accrued and unpaid interest thereon; provided that, the obligation to
deposit such Cash Collateral shall become effective immediately, and such
deposit shall become immediately due and payable, without demand or other notice
of any kind, upon the occurrence of any Event of Default with respect to any
Borrower described in clause (g) of Article VII. Such deposit shall be held by
the Administrative Agent as Collateral for the payment and performance of the
U.S. Secured Obligations. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over the LC Collateral
Account and the U.S. Borrower hereby grants the Administrative Agent a security
interest in the LC Collateral Account and all money or other assets on deposit
therein or credited thereto. Other than any interest earned on the investment of
such deposits, which investments shall be made at the option and sole discretion
of the Administrative Agent and at the U.S. Borrower’s risk and expense, such
deposits shall not bear interest. Interest or profits, if any, on such
investments shall accumulate in the LC Collateral Account. Moneys in the LC
Collateral Account shall be applied by the Administrative Agent to reimburse
each Issuing Lender for LC Disbursements for which it has not been reimbursed
and, to the extent not so applied, shall be held for the satisfaction of the
reimbursement obligations of the U.S. Borrower for the LC Exposure at such time
or, if the maturity of the Loans has been accelerated (but subject to the
consent of Lenders with LC Exposure representing greater than 50% of the
aggregate LC Exposure), be applied to satisfy other Secured Obligations. If the
U.S. Borrower is required to provide an amount of Cash Collateral hereunder as a
result of the occurrence of such an Event of Default, such amount (to the extent
not applied as aforesaid) shall be returned to the U.S. Borrower within three
(3) Business Days after all such Events of Default have been cured or waived as
confirmed in writing by the Administrative Agent.

(k) LC Exposure Determination. For all purposes of this Agreement, the amount of
a Letter of Credit that, by its terms or the terms of any document related
thereto, provides for one or more automatic increases in the stated amount
thereof shall be deemed to be the maximum stated amount of such Letter of Credit
after giving effect to all such increases, whether or not such maximum stated
amount is in effect at the time of determination.

(l) Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of
Credit issued or outstanding hereunder is in support of any obligations of, or
is for the account of, any Restricted Subsidiary, the U.S. Borrower shall be
obligated to reimburse each Issuing Lender hereunder for any and all drawings
under any Letter of Credit issued under the Facility by such Issuing Lender. The
U.S. Borrower hereby acknowledges that the issuance of Letters of Credit for the
account of its Restricted Subsidiaries inures to the benefit of the U.S.
Borrower, and that the U.S. Borrower’s business derives substantial benefits
from the businesses of such Restricted Subsidiaries.

(m) Reports from Issuing Lenders. Each Issuing Lender (other than the
Administrative Agent or any of its Affiliates) shall, upon any issuance of a
Letter of Credit or any drawing under a Letter of Credit by such Issuing Lender,
provide the Administrative Agent and each other Issuing Lender with a list of
all Letters of Credit issued by such Issuing Lender that are outstanding at such
time; provided that, upon written request from the Administrative Agent, the
applicable Issuing Lender shall thereafter notify the Administrative Agent in
writing on each Business Day of all Letters of Credit issued on the prior
Business Day by such Issuing Lender.

 

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(n) Existing Letters of Credit. The Existing Letters of Credit will
automatically, without any further action on the part of any Person, be deemed
to be Letters of Credit issued hereunder. Without limiting the foregoing
(i) each such Existing Letter of Credit shall be included in the calculation of
the LC Exposure, (ii) all liabilities of the Credit Parties with respect to such
Existing Letters of Credit shall constitute Obligations and (iii) each Lender
shall have reimbursement obligations with respect to such Existing Letters of
Credit as provided in Section 2.6(e).

Section 2.7 Funding of Borrowings.

(a) Each Lender shall make each Loan to be made by such Lender hereunder on the
proposed date thereof solely by wire transfer of immediately available funds by
2:00 p.m., Chicago time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders in an amount
equal to such Lender’s Applicable Percentage; provided, that Canadian Loans
shall be made as provided in Section 2.24. The Administrative Agent will make
such Loans available to the Applicable Borrower by promptly crediting the funds
so received in the aforesaid account of the Administrative Agent to the Funding
Account; provided that, Base Rate Loans made to finance the reimbursement of
(i) an LC Disbursement as provided in Section 2.6(e) shall be remitted by the
Administrative Agent to the applicable Issuing Lender and (ii) a Protective
Advance shall be retained by the Administrative Agent.

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

Section 2.8 Interest Elections.

(a) Each Borrowing initially shall be of the Type specified in the applicable
Notice of Borrowing and, in the case of a Non-Base Rate Borrowing, shall have an
initial Interest Period as specified in such Notice of Borrowing. Thereafter,
the Borrower Representative may elect to convert such Borrowing to a different
Type or to continue such Borrowing and, in the case of a Non-Base Rate
Borrowing, may elect Interest Periods therefor, all as provided in this Section.
The Borrower Representative may elect different options with respect to
different portions of the affected Borrowing, in which case each such portion
shall be allocated ratably among the Lenders holding the Loans comprising such
Borrowing, and the Loans comprising each such portion shall be considered a
separate Borrowing, provided that, a Borrowing in one currency may only be
converted to another type of Borrowing denominated in the same currency as the
Borrowing to be so converted. This Section shall not apply to Protective
Advances, which may not be converted or continued.

 

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(b) To make an election pursuant to this Section, the Borrower Representative
shall notify the Administrative Agent of such election by telephone or through
Electronic System, if arrangements for doing so have been approved by the
Administrative Agent, by the time that a Notice of Borrowing would be required
under Section 2.3 if the Borrower Representative were requesting a Borrowing of
the Type resulting from such election to be made on the effective date of such
election. Each such telephonic Interest Election Request shall be irrevocable
and shall be confirmed promptly by hand delivery, Electronic System or facsimile
to the Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower Representative.

(c) Each telephonic and written Interest Election Request (including requests
submitted through Electronic System) shall specify the following information in
compliance with Section 2.2:

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

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

(iii) whether the resulting Borrowing is to be a Base Rate Borrowing or a
Non-Base Rate Borrowing; and

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

If any such Interest Election Request requests a Non-Base Rate Borrowing but
does not specify an Interest Period, then the Borrowers shall be deemed to have
selected an Interest Period of one month’s duration.

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

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

Section 2.9 Increase, Reduction and Termination of Commitments.

(a) Unless previously terminated, the Commitments shall terminate on the
Maturity Date.

 

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(b) The Borrowers may at any time terminate the Commitments upon Payment in Full
of the Secured Obligations.

(c) The Borrowers may from time to time reduce the Commitment; provided that,
(i) each reduction of the Commitment shall be in an amount that is an integral
multiple of $1.0 million and not less than $5.0 million and (ii) the Borrowers
shall not terminate or reduce such Commitments if, after giving effect to any
concurrent prepayment of the Loans in accordance with Section 2.11, (A) the
Revolving Exposure would exceed the lesser of the Aggregate Commitments and the
Aggregate Borrowing Base, (B) the Aggregate U.S. Exposure would exceed the U.S.
Loan Limit or (C) the Aggregate Canadian Exposure would exceed the Canadian Loan
Limit.

(d) The Canadian Borrower may from time to time reduce the Canadian Sublimit;
provided that, (i) each reduction shall be in an amount that is an integral
multiple of $1.0 million and not less than $1.0 million and (ii) the Canadian
Borrower shall not terminate or reduce the Canadian Sublimit if, after giving
effect to any concurrent prepayment of the Canadian Loans in accordance with
Section 2.11, the Aggregate Canadian Exposure would exceed the Canadian Loan
Limit.

(e) The Borrower Representative shall notify the Administrative Agent of any
election to terminate or reduce the Commitments under paragraph (b), (c) or
(d) of this Section at least three (3) Business Days prior to the effective date
of such termination or reduction, specifying such election and the effective
date thereof. Promptly following receipt of any notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower Representative pursuant to this Section shall be irrevocable; provided
that, a notice of termination of the Commitments delivered by the Borrower
Representative may state that such notice is conditioned upon the effectiveness
of other credit facilities, in which case such notice may be revoked by the
Borrower Representative (by notice to the Administrative Agent on or prior to
the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Commitments shall be permanent. Each reduction
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.

(f) The Borrowers shall have the right to increase the Commitment by obtaining
additional Commitments, either from one or more of the Lenders or another
lending institution provided that, (i) any such request for an increase shall be
in a minimum amount of $5.0 million, (ii) after giving effect thereto, the sum
of the total of the additional Commitments does not exceed $50.0 million,
(iii) the Administrative Agent and the Issuing Lenders have approved the
identity of any such new Lender, such approvals not to be unreasonably withheld,
(iv) any such new Lender assumes all of the rights and obligations of a “Lender”
hereunder, and (v) the procedure described in Section 2.9(g) has been satisfied.
Nothing contained in this Section 2.9 shall constitute, or otherwise be deemed
to be, a commitment on the part of any Lender to increase its Commitment
hereunder at any time.

(g) Any amendment hereto for such an increase or addition shall be in form and
substance satisfactory to the Administrative Agent and shall only require the
written signatures of the Administrative Agent, the Borrower Representative and
each Lender being added or increasing its Commitment, subject only to the
approval of the Required Lenders if any such increase or addition would cause
the Commitments to exceed $250.0 million. As a condition precedent to such an
increase or addition, the Borrowers shall deliver to the Administrative Agent
(i) a certificate of each Credit Party signed by an authorized officer of such
Credit Party (A) certifying and attaching the resolutions adopted by such Credit
Party approving or consenting to such increase, and (B) in the case of the
Borrowers, certifying that, before and after giving effect to such increase or
addition, (1) the representations and warranties contained in Article III and
the other Credit Documents are true and correct in all material respects with
the same effect as though made on and as of the date of such increase or
addition (it being understood and agreed that any representation or warranty
which by its terms is made as of a specified date shall be required to be true
and

 

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correct in all material respects only as of such specified date, and that any
representation or warranty which is subject to any materiality qualifier shall
be required to be true and correct in all respects), (2) no Default exists and
(3) the Borrowers are in compliance (on a pro forma basis after giving effect to
any additional Borrowings to be made on the effective date of such increase or
addition) with any then operative covenant contained in Section 6.1(i) or 6.18
and (ii) legal opinions and documents consistent with those delivered on the
Closing Date, to the extent reasonably requested by the Administrative Agent.

(h) On the effective date of any such increase or addition, (i) any Lender
increasing (or, in the case of any newly added Lender, extending) its Commitment
shall make available to the Administrative Agent such amounts in immediately
available funds as the Administrative Agent shall determine, for the benefit of
the other Lenders, as being required in order to cause, after giving effect to
such increase or addition and the use of such amounts to make payments to such
other Lenders, each Lender’s portion of the outstanding Loans of all the Lenders
to equal its revised Applicable Percentage of such outstanding Loans, and the
Administrative Agent shall make such other adjustments among the Lenders with
respect to the Loans then outstanding and amounts of principal, interest,
Commitment Fees and other amounts paid or payable with respect thereto as shall
be necessary, in the opinion of the Administrative Agent, in order to effect
such reallocation and (ii) to the extent necessary to implement the matters set
forth in clause (i) above, the Borrowers shall be deemed to have repaid and
reborrowed all outstanding Loans as of the date of any increase (or addition) in
the Commitments (with such reborrowing to consist of the Types of Loans, with
related Interest Periods if applicable, specified in a notice delivered by the
Borrower Representative, in accordance with the requirements of Section 2.3).
The deemed payments made pursuant to clause (ii) of the immediately preceding
sentence shall be accompanied by payment of all accrued interest on the amount
prepaid and, in respect of each Non- Base Rate Loan, shall be subject to
indemnification by the Borrowers pursuant to the provisions of Section 2.16 if
the deemed payment occurs other than on the last day of the related Interest
Periods. Within a reasonable time after the effective date of any increase or
addition, the Administrative Agent shall, and is hereby authorized and directed
to, revise Schedule I to reflect such increase or addition and shall distribute
such revised Schedule I to each of the Lenders and the Borrower Representative,
whereupon such revised Schedule I shall replace the old Schedule I and become
part of this Agreement.

Section 2.10 Repayment of Loans. Evidence of Debt.

(a) The Applicable Borrower hereby unconditionally promises to pay (i) to the
Administrative Agent for the account of each applicable Lender the then unpaid
principal amount of each Canadian Loan or U.S. Loan, as applicable, on the
Maturity Date and (ii) to the Administrative Agent the then unpaid amount of
each Protective Advance on the earlier of the Maturity Date and demand by the
Administrative Agent.

(b) At all times during a Cash Dominion Period, on each Business Day, the
Administrative Agent shall apply all funds credited to the U.S. Concentration
Account on such Business Day or the immediately preceding Business Day (at the
discretion of the Administrative Agent, whether or not immediately available)
first to prepay any Protective Advances that may be outstanding and any other
U.S. Obligations that are then due and payable, pro rata, second to prepay the
U.S. Loans, third if an Event of Default exists and is continuing, to Cash
Collateralize outstanding LC Exposure, fourth to prepay any Canadian Obligations
that are then due and payable, and fifth to prepay the Canadian Loans. At all
times during a Cash Dominion Period, on each Business Day, the Administrative
Agent shall apply all funds credited to the Canadian Concentration Account on
such Business Day or the immediately preceding Business Day (at the discretion
of the Administrative Agent, whether or not immediately available) first to any
Canadian Obligations that are then due and payable, pro rata, and second to
prepay the Canadian Loans. Notwithstanding the foregoing, to the extent that any
funds credited to a Concentration Account constitute Net Proceeds, the
application of such Net Proceeds shall be subject to Section 2.11(c).

 

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

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

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

(f) Any Lender may request that Loans made by it be evidenced by a promissory
note. In such event, the Applicable Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to such Lender (or, if requested by
such Lender, to such Lender and its registered assigns) and in a form approved
by the Administrative Agent. Thereafter, the Loans evidenced by such promissory
note and interest thereon shall at all times (including after assignment
pursuant to Section 9.7) be represented by one or more promissory notes in such
form.

Section 2.11 Prepayment of Loans.

(a) The Borrowers shall have the right at any time and from time to time to
prepay any Borrowing in whole or in part, subject to prior notice in accordance
with paragraph (e) of this Section and, if applicable, payment of any break
funding expenses under Section 2.16.

(b) In the event and on such occasion that (i) the Aggregate Credit Exposure
exceeds the lesser of (A) the Aggregate Commitment and (B) the Aggregate
Borrowing Base, (ii) the Aggregate U.S. Exposure exceeds the U.S. Loan Limit, or
(iii) the Aggregate Canadian Exposure exceeds the Canadian Loan Limit, the
Applicable Borrower shall prepay the applicable Loans and LC Exposure or Cash
Collateralize LC Exposure in an account with the Administrative Agent pursuant
to Section 2.6(j), as applicable, in an aggregate amount equal to such excess.

(c) In the event and on each occasion that any Net Proceeds are received by or
on behalf of any Credit Party in respect of any Prepayment Event, the Applicable
Borrower shall, promptly after such Net Proceeds are received by any Credit
Party, prepay the applicable Obligations and, if any Event of Default exists and
is continuing, Cash Collateralize the LC Exposure as set forth in
Section 2.11(d) below, in an aggregate amount equal to 100% of the Net Proceeds
of such Prepayment Event; provided that, if no Cash Dominion Period is in
effect, if the Borrower Representative shall deliver to the Administrative Agent
a certificate of a Financial Officer to the effect that the Credit Parties
intend to apply the Net Proceeds from such event (or a portion thereof specified
in such certificate), within one hundred eighty (180) days after receipt of such
Net Proceeds, to acquire (or replace or rebuild) real property, Equipment or
other tangible assets (excluding Inventory) to be used in the business of the
applicable Credit Parties, and certifying that no Default has occurred and is
continuing, then either (i) so long as no Cash Dominion Period is in effect, no
prepayment shall be required pursuant to this paragraph in respect of the Net
Proceeds specified in such certificate or (ii) if a Cash Dominion Period is in
effect, then, if the Net Proceeds specified in such certificate are to be
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U.S. Borrower, such Net Proceeds of a U.S. Borrower shall be applied by the
Administrative Agent (1) first to reduce the outstanding principal balance of
the U.S. Loans until paid in full and second to reduce the outstanding principal
balance of the Canadian Loans if the applicable Property or asset is owned by a
U.S. Credit Party or (2) to reduce the outstanding principal balance of the
Canadian Loans (in each case without a permanent reduction of the Commitments)
and upon such application, the Administrative Agent may in its Permitted
Discretion, establish a Reserve against the Aggregate Borrowing Base, the U.S.
Borrowing Base, and/or the Canadian Borrowing Base, as applicable, in an amount
not to exceed the amount of such proceeds so applied, (B) the Canadian Borrower,
such Net Proceeds of the Canadian Borrower shall be applied by the
Administrative Agent to reduce the outstanding balance of the Canadian Loans,
and (C) any Credit Party that is not a Borrower, such Net Proceeds shall be
deposited in a Cash Collateral Account for the U.S. Credit Parties or the
Canadian Credit Parties, and in the case of either (A) or (B), thereafter, such
funds shall be made available to the applicable Credit Parties as follows:

(1) the Borrower Representative shall request a Borrowing (specifying that the
request is to use Net Proceeds pursuant to this Section) or the applicable
Credit Party shall request a release from the Cash Collateral Account be made in
the amount needed;

(2) so long as the conditions set forth in Section 4.2 have been met, the
applicable Lenders shall make such Borrowing or the Administrative Agent shall
release funds from the Cash Collateral Account; and

(3) in the case of Net Proceeds applied against any Borrowing, the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Borrowing;

provided that to the extent of any such Net Proceeds therefrom that have not
been so applied by the end of such 180 day period, a prepayment shall be
required at such time in an amount equal to such Net Proceeds that have not been
so applied. Notwithstanding the foregoing, in no event will U.S. Obligations be
repaid pursuant to this Section 2.11(c) if such Net Proceeds are received by any
Restricted Subsidiary that is an Excluded Subsidiary or a Foreign Subsidiary.

(d) All such amounts pursuant to Section 2.11(c) shall be applied, first to
prepay any Protective Advances that may be outstanding, pro rata, and second to
prepay the Loans without a corresponding reduction in the Commitments and, if an
Event of Default exists and is continuing to Cash Collateralize outstanding LC
Exposure.

(e) The Borrower Representative shall notify the Administrative Agent by
telephone (confirmed by facsimile) or through Electronic System, if arrangements
for doing so have been approved by the Administrative Agent, of any prepayment
hereunder not later than (i) 10:00 a.m., Chicago time, (A) in the case of
prepayment of a Non-Base Rate Borrowing, three (3) Business Days before the date
of prepayment, or (B) in the case of prepayment of a Base Rate Borrowing, one
(1) Business Day before the date of prepayment. Each such notice shall be
irrevocable and shall specify the prepayment date and the principal amount of
each Borrowing or portion thereof to be prepaid; provided that, if a notice of
prepayment is given in connection with a conditional notice of termination of
the Commitments as contemplated by Section 2.9, then such notice of prepayment
may be revoked if such notice of termination is revoked in accordance with
Section 2.9. Promptly following receipt of any such notice relating to a
Borrowing, the Administrative Agent shall advise the Lenders of the contents
thereof. Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.2. Each prepayment of a Borrowing shall be applied first
to Base Rate Borrowings and second to Non-Base Rate Borrowings and otherwise
ratably to the Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by (i) accrued interest to the extent required by Section 2.13 and
(ii) break funding payments, if any, pursuant to Section 2.16.

 

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Section 2.12 Fees.

(a) Commitment Fee. The Borrowers agree to pay to the Administrative Agent for
the account of each Lender a Commitment Fee, which shall accrue at 0.50% per
annum, with a reduction to 0.375% per annum for so long as greater than 50% of
the Commitments are drawn, of the average daily amount of such Lender’s
Available Commitment during the period from and including the Closing Date to
but excluding the date on which the Commitments terminate. Accrued Commitment
Fees shall be payable quarterly in arrears on the first day of each calendar
quarter and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof. All Commitment Fees shall be
computed on the basis of a year of 360 days and shall be payable for the actual
number of days elapsed, (including the first day but excluding the last day).

(b) Fees for Letters of Credit. The U.S. Borrower agrees to pay:

(i) to the Administrative Agent for the pro rata benefit of and for the account
of each Lender, a participation fee with respect to its participations in
Letters of Credit, which shall accrue at the same Applicable Margin used to
determine the interest rate applicable to Eurodollar Loans on the average daily
amount of such Lender’s applicable LC Exposure (excluding any portion thereof
attributable to unreimbursed LC Disbursements) during the period from and
including the Closing Date to but excluding the later of the date on which such
Lender’s Commitment terminates and the date on which such Lender ceases to have
any applicable LC Exposure; and

(ii) to each Issuing Lender, a fronting fee in an amount to be agreed between
such Issuing Lender and the Borrower Representative for each Letter of Credit
issued by such Issuing Lender, which fee shall be due and payable in advance on
the date of the issuance of the Letter of Credit, and, in the case of an
increase or extension only, on the date of such increase or such extension.

Participation fees accrued through and including the last day of each calendar
quarter shall be payable on the first day of each calendar quarter following
such last day, commencing on the first such date to occur after the Closing
Date; provided that, all such fees shall be payable on the date on which the
Commitments terminate and any such fees accruing after the date on which the
Commitments terminate shall be payable on demand. All other fees payable to the
Issuing Lenders pursuant to this paragraph shall be payable within ten (10) days
after demand. All participation fees and fronting fees shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

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

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

 

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Section 2.13 Interest.

(a) The Loans comprising (i) each ABR Borrowing shall bear interest at the
Alternate Base Rate plus the Applicable Margin, (ii) each CBR Borrowing shall
bear interest at the Canadian Base Rate plus the Applicable Margin and
(iii) each CPR Borrowing shall bear interest at the Canadian Prime Rate plus the
Applicable Margin.

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

(c) Each Protective Advance shall bear interest at the Alternate Base Rate plus
the Applicable Margin for U.S. Revolving Loans plus, at the option of the
Required Lenders, 2% per annum.

(d) Notwithstanding the foregoing, during the occurrence and continuance of an
Event of Default, the Administrative Agent or the Required Lenders may, at their
option, by notice to the Borrower Representative (which notice may be revoked at
the option of the Required Lenders notwithstanding any provision of Section 9.2
requiring the consent of “each Lender directly and adversely affected thereby”
for reductions in interest rates), declare that (i) all Loans (other than
Protective Advances) shall bear interest at 2% plus the rate otherwise
applicable to such Loans as provided in the preceding paragraphs of this Section
or (ii) in the case of any other amount outstanding hereunder (other than
Protective Advances), such amount shall accrue at 2% plus the rate applicable to
such fee or other obligation as provided hereunder.

(e) Accrued interest on each Loan (for Base Rate Loans, accrued through the last
day of the prior calendar quarter) shall be payable in arrears on each Interest
Payment Date for such Loan and upon termination of the Commitments; provided
that, (i) interest accrued pursuant to paragraph (d) of this Section shall be
payable on demand, (ii) in the event of any repayment or prepayment of any Loan
(other than a prepayment of a Base Rate Loan prior to the end of the
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in the
event of any conversion of any Non-Base Rate Loan prior to the end of the
current Interest Period therefor, accrued interest on such Loan shall be payable
on the effective date of such conversion.

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

(g) For purposes of disclosure pursuant to the Interest Act (Canada), the annual
rates of interest or fees to which the rates of interest or fees provided in
this Agreement and the other Credit Documents (and stated herein or therein, as
applicable, to be computed on the basis of 360 days or any other period of time
less than a calendar year) are equivalent are the rates so determined multiplied
by the actual number of days in the applicable calendar year and divided by 360
or such other period of time, respectively. The principle of deemed reinvestment
of interest does not apply to any interest calculation under this Agreement and
the rates of interest stipulated in this Agreement are intended to be nominal
rates and not effective rates or yields. The Administrative Agent agrees that if
requested in writing by the Borrower Representative it shall calculate the
nominal and effective per annum rate of interest on any outstanding Borrowing at
any time and provide such information to the Borrower Representative, provided

 

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that any error in any such calculation, or any failure to provide such
information on request, shall not relieve the Borrowers or any of the other
Credit Parties of any of its obligations under this Agreement or any other
Credit Documents, nor result in any liability to the Administrative Agent or the
Lenders. Each Borrower hereby irrevocably agrees not to plead or assert, whether
by way of defence or otherwise, in any proceeding relating to the Credit
Documents, that the interest payable under the Credit Documents and the
calculation thereof has not been adequately disclosed to any Borrower or Credit
Party, whether pursuant to Section 4 of the Interest Act (Canada) or any other
applicable law or legal principle.

(h) If any provision of this Agreement or of any of the other Credit Documents
would obligate any Credit Party to make any payment of interest or other amount
payable to the Lenders in an amount or calculated at a rate which would be
prohibited by law or would result in a receipt by the Lenders of interest at a
criminal rate (as such terms are construed under the Criminal Code (Canada))
then, notwithstanding such provisions, such amount or rate shall be deemed to
have been adjusted with retroactive effect to the maximum amount or rate of
interest, as the case may be, as would not be so prohibited by law or so result
in a receipt by the Lenders of interest at a criminal rate, such adjustment to
be effected, to the extent necessary, as follows: (1) firstly, by reducing the
amount or rate of interest required to be paid to the Lenders under this
Section 2.13 and (2) thereafter, by reducing any fees, commissions, premiums and
other amounts required to be paid to the Lenders which would constitute
“interest” for purposes of Section 347 of the Criminal Code (Canada).
Notwithstanding the foregoing, and after giving effect to all adjustments
contemplated thereby, if the Lenders shall have received an amount in excess of
the maximum permitted by that section of the Criminal Code (Canada), the Credit
Parties shall be entitled, by notice in writing to the Administrative Agent, to
obtain reimbursement from the Lenders in an amount equal to such excess and,
pending such reimbursement, such amount shall be deemed to be an amount payable
by the Lenders to the Borrowers. Any amount or rate of interest referred to in
this Section 2.13 shall be determined in accordance with generally accepted
actuarial practices and principles as an effective annual rate of interest over
the term that the applicable Loan remains outstanding on the assumption that any
charges, fees or expenses that fall within the meaning of “interest” (as defined
in the Criminal Code (Canada)) shall, if they relate to a specific period of
time, be pro-rated over that period of time and otherwise be pro-rated over the
period from the Closing Date to the Maturity Date and, in the event of a
dispute, a certificate of a Fellow of the Canadian Institute of Actuaries
appointed by the Administrative Agent shall be conclusive for the purposes of
such determination.

Section 2.14 Alternate Rate of Interest.

(a) If prior to the commencement of any Interest Period for a Eurodollar
Borrowing, or CDOR Rate Borrowing, as applicable:

(i) the Administrative Agent determines (which determination shall be conclusive
absent manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate, the LIBO Rate or the CDOR Rate, as
applicable (including, without limitation, because the LIBO Screen Rate is not
available or published on a current basis) for such Interest Period; or

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

then the Administrative Agent shall give notice thereof to the Borrower
Representative and the Lenders via telephone or Electronic System as provided in
Section 9.1 as promptly as practicable thereafter and, until the Administrative
Agent notifies the Borrower Representative and the Lenders that the
circumstances giving rise to such notice no longer exist, (A) any Interest
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any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing or
CDOR Rate Borrowing, as applicable, shall be ineffective and any such Eurodollar
Borrowing or CDOR Rate Borrowing, as applicable, shall be repaid or converted
into an ABR Borrowing or CPR Borrowing, as applicable, on the last day of the
then current Interest Period applicable thereto, and (B) if any Notice of
Borrowing requests a Eurodollar Borrowing, such Borrowing shall be made as an
ABR Borrowing or CPR Borrowing, as applicable.

(b) If at any time the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that (i) the circumstances set forth
in clause (a)(i) have arisen and such circumstances are unlikely to be temporary
or (ii) the circumstances set forth in clause (a)(i) have not arisen but the
supervisor for the administrator of the LIBO Screen Rate or a Governmental
Authority having jurisdiction over the Administrative Agent has made a public
statement identifying a specific date after which the LIBO Screen Rate shall no
longer be used for determining interest rates for loans, then the Administrative
Agent and the Borrower Representative shall endeavor to establish an alternate
rate of interest to the LIBO Rate that gives due consideration to the then
prevailing market convention for determining a rate of interest for syndicated
loans in the United States at such time, and shall enter into an amendment to
this Agreement to reflect such alternate rate of interest and such other related
changes to this Agreement as may be applicable (but for the avoidance of doubt,
such related changes shall not include a reduction of the Applicable Margin).
Notwithstanding anything to the contrary in Section 9.2, such amendment shall
become effective without any further action or consent of any other party to
this Agreement so long as the Administrative Agent shall not have received,
within five (5) Business Days of the date notice of such alternate rate of
interest and other related changes (including, to the extent necessary,
corresponding changes to the definition of “Applicable Margin” and other
definitions referenced therein) is provided to the Lenders, a written notice
from the Required Lenders stating that such Required Lenders object to such
amendment. Until an alternate rate of interest shall be determined in accordance
with this clause (b) (but, in the case of the circumstances described in clause
(ii) of the first sentence of this Section 2.14(b), only to the extent the LIBO
Screen Rate for such Interest Period is not available or published at such time
on a current basis), (x) any Interest Election Request that requests the
conversion of any Borrowing to, or continuation of any Borrowing as, a
Eurodollar Borrowing shall be ineffective, and (y) if any Notice of Borrowing
requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR
Borrowing; provided that, if such alternate rate of interest shall be less than
zero, such rate shall be deemed to be zero for the purposes of this Agreement.

Section 2.15 Increased Costs; Illegality.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, liquidity or
similar requirement (including any compulsory loan requirement, insurance charge
or other assessment) against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate) or an Issuing Lender;

(ii) impose on any Lender or Issuing Lender or the London interbank market any
other condition, cost or expense (in each case, other than taxes) affecting this
Agreement or Loans made by such Lender or any Letter of Credit or participation
therein; or

(iii) subject any Recipient to any taxes (other than (A) Indemnified Taxes,
(B) taxes described in clauses (b) through (d) of the definition of Excluded
Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of
credit, commitments, or other obligations, or its deposits, reserves, other
liabilities or capital attributable thereto;

 

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

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

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

(d) If any Lender shall notify the Borrower Representative that the introduction
of or any change in or in the interpretation of any law or regulation makes it
unlawful, or that any central bank or other Governmental Authority asserts that
it is unlawful, for such Lender or its Lending Office to perform its obligations
under this Agreement to make, maintain, or fund any Eurodollar Loans of such
Lender then outstanding hereunder, (a) the Applicable Borrower shall, no later
than 11:00 a.m. (New York City time) (i) if not prohibited by law, on the last
day of the Interest Period for each outstanding Eurodollar Loan, or (ii) if
required by such notice, on the second Business Day following its receipt of
such notice, prepay all of the Eurodollar Loans of such Lender then outstanding,
together with accrued interest on the principal amount prepaid or defeased to
the date of such prepayment and amounts, if any, required to be paid pursuant to
Section 2.10 as a result of such prepayment or defeasance being made on such
date, (b) such Lender shall simultaneously make a Base Rate Loan to the
Applicable Borrower on such date in an amount equal to the aggregate principal
amount of the Eurodollar Loans prepaid to such Lender, and (c) the right of the
Applicable Borrower to select Eurodollar Loans from such Lender for any
subsequent Borrowing shall be suspended until such Lender shall notify the
Borrower Representative that the circumstances causing such suspension no longer
exist. Each Lender agrees to use commercially reasonable efforts (consistent
with its internal policies and legal and regulatory restrictions) to designate a
different Lending Office if the making of such designation would avoid the
effect of this paragraph and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.

Section 2.16 Breakage Costs. In the event of (a) the payment of any principal of
any Non-Base Rate Loan other than on the last day of an Interest Period
applicable thereto (including as a result of an Event of Default or as a result
of any prepayment pursuant to Section 2.11), (b) the conversion of any Non-Base
Rate Loan other than on the last day of the Interest Period applicable thereto,
(c) the failure to borrow,

 

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convert, continue or prepay any Non-Base Rate Loan on the date specified in any
notice delivered pursuant hereto (regardless of whether such notice may be
revoked under Section 2.9(e) and is revoked in accordance therewith), or (d) the
assignment of any Non-Base Rate Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower
Representative pursuant to Section 2.19 or 9.2(d), then, in any such event, the
Applicable Borrower shall compensate each Lender for the loss, cost and expense
attributable to such event. In the case of a Non-Base Rate Loan, such loss, cost
or expense to any Lender shall be deemed to include an amount determined by such
Lender to be the excess, if any, of (i) the amount of interest which would have
accrued on the principal amount of such Non-Base Rate Loan had such event not
occurred, at the Adjusted LIBO Rate or the CDOR Rate that would have been
applicable to such Non-Base Rate Loan, for the period from the date of such
event to the last day of the then current Interest Period therefor (or, in the
case of a failure to borrow, convert or continue, for the period that would have
been the Interest Period for such Non-Base Rate Loan), over (ii) the amount of
interest which would accrue on such principal amount for such period at the
interest rate which such Lender would bid were it to bid, at the commencement of
such period, for Dollar deposits of a comparable amount and period from other
banks in the Eurodollar market, or for the CAD deposits of a comparable amount
and period to such CDOR Rate Loan from other banks in the Canadian bankers
acceptance market. A certificate of any Lender setting forth any amount or
amounts that such Lender is entitled to receive pursuant to this Section shall
be delivered to the Borrower Representative and shall be conclusive absent
manifest error. The Applicable Borrower shall pay such Lender the amount shown
as due on any such certificate within ten (10) days after receipt thereof.

Section 2.17 Withholding of Taxes; Gross-Up.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of any Credit Party under any Credit Document shall be made without
deduction or withholding for any taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of an applicable
Withholding Agent) requires the deduction or withholding of any tax from any
such payment by a Withholding Agent, then the applicable Withholding Agent shall
be entitled to make such deduction or withholding and shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with applicable law and, if such tax is an Indemnified Tax, then the sum payable
by the applicable Credit Party shall be increased as necessary so that after
such deduction or withholding of Indemnified Taxes has been made (including such
deductions and withholdings applicable to additional sums payable under this
Section 2.17) the applicable Recipient receives an amount equal to the sum it
would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Borrowers. The applicable Credit Party shall
timely pay to the relevant Governmental Authority in accordance with applicable
law, or at the option of the Administrative Agent timely reimburse it for, Other
Taxes.

(c) Evidence of Payment. As soon as practicable after any payment of taxes by
any Credit Party to a Governmental Authority pursuant to this Section 2.17, such
Credit Party shall deliver to the Administrative Agent the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

(d) Indemnification by the Credit Parties. The Credit Parties shall jointly and
severally indemnify each Recipient, within ten (10) days after demand therefor,
for the full amount of any Indemnified Taxes (including Indemnified Taxes
imposed or asserted on or attributable to amounts payable under this Section)
payable or paid by such Recipient on any payment by or on account of any Credit
Party under any Credit Document or required to be withheld or deducted from such
payment to such Recipient and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Indemnified

 

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Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of such payment or liability delivered
to any Credit Party by a Lender (with a copy to the Administrative Agent), or by
the Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.

(e) Indemnification by the Lenders. Each Lender shall severally indemnify the
Administrative Agent, within ten (10) days after demand therefor, for (i) any
Indemnified Taxes attributable to such Lender (but only to the extent that any
Credit Party has not already indemnified the Administrative Agent for such
Indemnified Taxes and without limiting the obligation of the Credit Parties to
do so), (ii) any taxes attributable to such Lender’s failure to comply with the
provisions of Section 9.7(c) relating to the maintenance of a Participant
Register and (iii) any Excluded Taxes attributable to such Lender, in each case,
that are payable or paid by the Administrative Agent in connection with any
Credit Document, and any reasonable expenses arising therefrom or with respect
thereto, whether or not such taxes were correctly or legally imposed or asserted
by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to any Lender by the Administrative Agent shall
be conclusive absent manifest error. Each Lender hereby authorizes the
Administrative Agent to set off and apply any and all amounts at any time owing
to such Lender under any Credit Document or otherwise payable by the
Administrative Agent to such Lender from any other source against any amount due
to the Administrative Agent under this paragraph (e).

(f) Status of Lenders.

(i) Any Lender that is entitled to an exemption from or reduction of withholding
tax with respect to payments made under any Credit Document shall deliver to the
Borrower Representative and the Administrative Agent, at the time or times
reasonably requested by the Borrower Representative or the Administrative Agent,
such properly completed and executed documentation reasonably requested by the
Borrower Representative or the Administrative Agent as will permit such payments
to be made without withholding or at a reduced rate of withholding. In addition,
any Lender, if reasonably requested by the Borrower Representative or the
Administrative Agent, shall deliver such other documentation prescribed by
applicable law or reasonably requested by the Borrower Representative or the
Administrative Agent as will enable the Borrowers or the Administrative Agent to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in
Section 2.17(f)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in
the Lender’s reasonable judgment such completion, execution or submission would
subject such Lender to any material unreimbursed cost or expense or would
materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that any
Borrower is a U.S. Person,

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

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

 

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

(2) in the case of a Foreign Lender claiming that its extension of credit will
generate U.S. effectively connected income, an executed IRS Form W-8ECI;

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

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

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

(D) if a payment made to a Lender under any Credit Document would be subject to
U.S. federal withholding tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower Representative and the Administrative Agent at the
time or times prescribed by law and at such time or times reasonably requested
by the Borrower Representative or the Administrative Agent such documentation
prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the Code) and such additional documentation
reasonably requested by the Borrower Representative or the Administrative Agent
as may be necessary for the Borrowers and

 

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the Administrative Agent to comply with their obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA or to determine the amount to deduct and withhold from such payment.
Solely for purposes of this clause (D), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

(iii) On or before the date on which JPMorgan Chase Bank, N.A. (and any
successor or replacement Administrative Agent) becomes the Administrative Agent
hereunder, it shall deliver to the Borrower Representative executed copies of
either (i) IRS Form W-9, or (ii) IRS Form W-8ECI (with respect to any payments
to be received on its own behalf) and IRS Form W-8IMY (for all other payments),
establishing that each Borrower can make payments to the Administrative Agent
without deduction or withholding of any taxes imposed by the United States,
including taxes imposed under FATCA.

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

(g) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any taxes
as to which it has been indemnified pursuant to this Section 2.17 (including by
the payment of additional amounts pursuant to this Section 2.17), it shall pay
to the indemnifying party an amount equal to such refund (but only to the extent
of indemnity payments made under this Section 2.17 with respect to the taxes
giving rise to such refund), net of all out-of-pocket expenses (including taxes)
of such indemnified party and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund). Such
indemnifying party, upon the request of such indemnified party, shall repay to
such indemnified party the amount paid over pursuant to this paragraph (g) (plus
any penalties, interest or other charges imposed by the relevant Governmental
Authority) in the event that such indemnified party is required to repay such
refund to such Governmental Authority. Notwithstanding anything to the contrary
in this paragraph (g), in no event will the indemnified party be required to pay
any amount to an indemnifying party pursuant to this paragraph (g) the payment
of which would place the indemnified party in a less favorable net after-tax
position than the indemnified party would have been in if the tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts
giving rise to such refund had never been paid. This paragraph (g) shall not be
construed to require any indemnified party to make available its tax returns (or
any other information relating to its taxes that it deems confidential) to the
indemnifying party or any other Person.

(h) Survival. Each party’s obligations under this Section 2.17 shall survive the
resignation or replacement of the Administrative Agent or any assignment of
rights by, or the replacement of, a Lender, the termination of the Commitments
and the repayment, satisfaction or discharge of all obligations under any Credit
Document.

(i) Defined Terms. For purposes of this Section 2.17, the term “Lender” includes
any Issuing Lender and the term “applicable law” includes FATCA.

Section 2.18 Payments Generally; Allocation of Proceeds; Sharing of Set-Offs.

(a) The Applicable Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or of amounts payable under Section 2.15, 2.16 or 2.17, or
otherwise) prior to 2:00 p.m., Chicago time, on the date when due, in
immediately available funds, without set-off or counterclaim. Any amounts
received after such time on any date may, in the discretion of the
Administrative Agent, be deemed to have been received on the

 

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next succeeding Business Day for purposes of calculating interest thereon. All
such payments shall be made to the Administrative Agent at its offices at 10
South Dearborn Street, Floor L2, Chicago, Illinois, except payments to be made
directly to the applicable Issuing Lender or Canadian Lender as expressly
provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17,
and 9.1 shall be made directly to the Persons entitled thereto. The
Administrative Agent shall distribute any such payments received by it for the
account of any other Person to the appropriate recipient promptly following
receipt thereof. If any payment hereunder shall be due on a day that is not a
Business Day, the date for payment shall be extended to the next succeeding
Business Day, and, in the case of any payment accruing interest, interest
thereon shall be payable for the period of such extension. All payments
hereunder shall be made in the currency in which the applicable Obligations are
denominated, and, if not otherwise specified, in Dollars.

(b) Any proceeds of Collateral received by the Administrative Agent (i) not
constituting either (A) a specific payment of principal, interest, fees or other
sum payable under the Credit Documents (which shall be applied as specified by
the Borrower Representative), (B) a mandatory prepayment (which shall be applied
in accordance with Section 2.11) or (C) amounts to be applied from a
Concentration Account when full cash dominion is in effect (which shall be
applied in accordance with Section 2.10(b)) or (ii) after an Event of Default
has occurred and is continuing and the Administrative Agent so elects or the
Required Lenders so direct, shall:

(i) with respect to Collateral of U.S. Credit Parties (“U.S. Payments”), be
applied ratably first, to pay any fees, indemnities, or expense reimbursements
owing by the Credit Parties including amounts then due to the Administrative
Agent and the Issuing Lenders from the Borrowers (other than in connection with
Banking Services Obligations or Swap Agreement Obligations), second, to pay any
fees, indemnities or expense reimbursements then due to the Lenders from the
Credit Parties (other than in connection with Banking Services Obligations or
Swap Agreement Obligations), third, to pay interest due in respect of the
Protective Advances, fourth, to pay the principal of the Protective Advances,
fifth, to pay interest then due and payable on the Loans (other than the
Protective Advances) ratably, sixth, to prepay principal on the Loans (other
than the Protective Advances) and unreimbursed LC Disbursements owing by the
Credit Parties, seventh, to pay an amount to the Administrative Agent equal to
one hundred three percent (103%) of the aggregate LC Exposure, to be held as
cash Collateral for such Obligations, eighth, to pay any amounts owing from
Credit Parties with respect to Banking Services Obligations and Swap Agreement
Obligations up to and including the amount most recently provided to the
Administrative Agent pursuant to Section 2.22, and ninth, to the payment of any
other Secured Obligation due to the Administrative Agent or any Secured Party by
the Credit Parties. Notwithstanding the foregoing amounts received from any
Credit Party shall not be applied to any Excluded Swap Obligation of such Credit
Party. Notwithstanding anything to the contrary contained in this Agreement,
unless so directed by the Borrower Representative, or unless a Default is in
existence, neither the Administrative Agent nor any Lender shall apply any
payment which it receives to any Non-Base Rate Loan of a Class, except (a) on
the expiration date of the Interest Period applicable thereto or (b) in the
event, and only to the extent, that there are no outstanding Base Rate Loans of
the same Class and, in any such event, the Borrowers shall pay the break funding
payment required in accordance with Section 2.16. The Administrative Agent and
the Lenders shall have the continuing and exclusive right to apply and reverse
and reapply any and all such proceeds and payments to any portion of the Secured
Obligations.

(ii) with respect to Collateral of Canadian Credit Parties (“Canadian
Payments”), be applied ratably: first, to pay any fees, indemnities, or expense
reimbursements owing by the Canadian Credit Parties including amounts then due
to the Administrative Agent and the Issuing Lenders from the Canadian Borrower
(other than in connection with Banking Services Obligations or Swap Agreement
Obligations), second, to pay any fees, indemnification or expense reimbursements
then due to the Lenders from the Canadian Credit Parties (other than in
connection with Banking Services Obligations or Swap Agreement Obligations),
third, to pay interest then due and payable on the Canadian Loans ratably,

 

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fourth, to prepay principal on the Canadian Loans, fifth, to pay any amounts
owing with respect to Banking Services Obligations and Swap Agreement
Obligations of the Canadian Credit Parties up to and including the amount most
recently provided to the Administrative Agent pursuant to Section 2.22, and
sixth, to the payment of any other Secured Obligation due to the Administrative
Agent or any Lender by the Canadian Credit Parties.

(iii) Notwithstanding anything else in this Section 2.18(b)(i) to the contrary,
any portion of the U.S. Payments otherwise payable on behalf of Secured
Obligations of the Canadian Credit Parties pursuant to Section 2.18(b)(i) may be
temporarily held in reserve pending the receipt of Canadian Payments and, upon
receipt of any Canadian Payments, 100% of such Canadian Payments shall be
applied in accordance with Section 2.18(b)(ii) and thereby reduce by an
equivalent amount the application of U.S. Payments to the Secured Obligations of
the Canadian Credit Parties pursuant to Section 2.18(b)(i).

(c) At the election of the Administrative Agent, all payments of principal,
interest, LC Disbursements, fees, premiums, reimbursable expenses (including,
without limitation, all reimbursement for fees, costs and expenses pursuant to
Section 9.1), and other sums payable under the Credit Documents, may be paid
from the proceeds of Borrowings made hereunder whether made following a request
by the Borrower Representative pursuant to Section 2.3 or a deemed request as
provided in this Section or may be deducted from any Deposit Account of the
Applicable Borrower maintained with the Administrative Agent. The Applicable
Borrower hereby irrevocably authorizes (i) the Administrative Agent to make a
Borrowing for the purpose of paying each payment of principal, interest and fees
as it becomes due hereunder or any other amount due under the Credit Documents
and agrees that all such amounts charged shall constitute Loans and that all
such Borrowings shall be deemed to have been requested pursuant to Section 2.3,
2.4 or 2.5, as applicable, and (ii) the Administrative Agent to charge any
Deposit Account of any Applicable Borrower maintained with the Administrative
Agent for each payment of principal, interest and fees as it becomes due from
the Applicable Borrower hereunder or any other amount due under the Credit
Documents.

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

 

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

(f) If any Lender shall fail to make any payment required to be made by it
hereunder, then the Administrative Agent may, in its discretion (notwithstanding
any contrary provision hereof), (i) apply any amounts thereafter received by the
Administrative Agent for the account of such Lender to satisfy such Lender’s
obligations hereunder until all such unsatisfied obligations are fully paid
and/or (ii) hold any such amounts in a segregated account as Cash Collateral
for, and application to, any future funding obligations of such Lender
hereunder. Application of amounts pursuant to (i) and (ii) above shall be made
in any order determined by the Administrative Agent in its discretion.

(g) The Administrative Agent may from time to time provide the Borrowers with
account statements or invoices with respect to any of the Secured Obligations
(the “Statements”). The Administrative Agent is under no duty or obligation to
provide Statements, which, if provided, will be solely for the Borrowers’
convenience. Statements may contain estimates of the amounts owed during the
relevant billing period, whether of principal, interest, fees or other Secured
Obligations. If the Applicable Borrower pays the full amount indicated on a
Statement on or before the due date indicated on such Statement, the Applicable
Borrower shall not be in default of payment with respect to the billing period
indicated on such Statement; provided, that acceptance by the Administrative
Agent, on behalf of the Lenders, of any payment that is less than the total
amount actually due at that time (including but not limited to any past due
amounts) shall not constitute a waiver of the Administrative Agent’s or the
Lenders’ right to receive Payment in Full at another time.

Section 2.19 Mitigation Obligations; Replacement of Lenders.

(a) If (i) any Lender requests compensation under Section 2.15 or (ii) the
Applicable Borrower is required to pay any Indemnified Taxes or additional
amounts to any Lender or any Governmental Authority for the account of any
Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts
to designate a different Lending Office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Lender, such
designation or assignment (1) would eliminate or reduce amounts payable pursuant
to Section 2.15 or 2.17, as the case may be, in the future and (2) would not
subject such Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to such Lender. The Applicable Borrower hereby agrees to pay
all reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

(b) If (i) any Lender requests compensation under Section 2.15, (ii) any of the
Borrowers are required to pay any Indemnified Taxes or additional amounts to any
Lender or any Governmental Authority for the account of any Lender pursuant to
Section 2.17, or (iii) any Lender becomes a Defaulting Lender, then the
Borrowers may, at their sole expense and effort, upon notice to such Lender and
the Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance

 

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with and subject to the restrictions contained in Section 9.7), all its
interests, rights (other than its existing rights to payments pursuant to
Section 2.15 or 2.17) and obligations under this Agreement and other Credit
Documents to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that, (1) the
Borrowers shall have received the prior written consent of the Administrative
Agent (and in circumstances where its consent would be required under
Section 9.7, each Issuing Lender), which consent shall not unreasonably be
withheld, (2) such Lender shall have received payment of an amount equal to the
outstanding principal of its Loans and participations in LC Disbursements and
Canadian Loans, if any, accrued interest thereon, accrued fees and all other
amounts payable to it hereunder, from the assignee (to the extent of such
outstanding principal and accrued interest and fees) or the Borrowers (in the
case of all other amounts) and (3) in the case of any such assignment resulting
from a claim for compensation under Section 2.15 or payments required to be made
pursuant to Section 2.17, such assignment will result in a reduction in such
compensation or payments. A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrowers to require such
assignment and delegation cease to apply.

Section 2.20 Defaulting Lender Provisions. Notwithstanding any provision of this
Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the
following provisions shall apply for so long as such Lender is a Defaulting
Lender:

(a) fees shall cease to accrue on the unfunded portion of the Commitment of such
Defaulting Lender pursuant to Section 2.12(a);

(b) such Defaulting Lender shall not have the right to vote on any issue on
which voting is required (other than to the extent expressly provided in
Section 9.2(b)) and the Commitment and Revolving Exposure of such Defaulting
Lender shall not be included in determining whether the Required Lenders have
taken or may take any action hereunder (including any consent to any amendment,
waiver or other modification pursuant to Section 9.2) or under any other Credit
Document; provided, that, except as otherwise provided in Section 9.2, this
clause (b) shall not apply to the vote of a Defaulting Lender in the case of an
amendment, waiver or other modification requiring the consent of such Lender or
each Lender directly and adversely affected thereby;

(c) if any LC Exposure or Canadian Exposure exists at the time a Lender becomes
a Defaulting Lender then:

(i) all or any part of the LC Exposure or Canadian Exposure of such Defaulting
Lender shall be reallocated among the Non-Defaulting Lenders in accordance with
their respective Applicable Percentages but only to the extent that (x) the
conditions set forth in Section 4.2 are satisfied at the time of such
reallocation (and, unless the Borrower Representative shall have otherwise
notified the Administrative Agent at such time, the Company shall be deemed to
have represented and warranted that such conditions are satisfied at such time)
and (y) the sum of all Non-Defaulting Lenders’ Revolving Exposures plus such
Defaulting Lender’s LC Exposure does not exceed the total of all Non-Defaulting
Lenders’ Commitments;

(ii) if the reallocation described in clause (i) above cannot, or can only
partially, be effected, the Company shall within one (1) Business Day following
notice by the Administrative Agent (x) first, Cash Collateralize, for the
benefit of the applicable Issuing Lender, the Company’s obligations
corresponding to such Defaulting Lender’s applicable LC Exposure or Canadian
Exposure (after giving effect to any partial reallocation pursuant to clause
(i) above) in accordance with the procedures set forth in Section 2.6(j) for so
long as such LC Exposure or Canadian Exposure is outstanding;

 

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(iii) if the Company Cash Collateralizes any portion of such Defaulting Lender’s
LC Exposure pursuant to clause (ii) above, the Borrowers shall not be required
to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with
respect to such Defaulting Lender’s applicable LC Exposure during the period
such Defaulting Lender’s applicable LC Exposure is Cash Collateralized;

(iv) if the LC Exposure of the Non-Defaulting Lenders is reallocated pursuant to
clause (i) above, then the fees payable to the Lenders pursuant to Sections
2.12(a) and 2.12(b) shall be adjusted in accordance with such Non-Defaulting
Lenders’ Applicable Percentages; and

(v) if all or any portion of such Defaulting Lender’s LC Exposure or Canadian
Exposure is neither reallocated nor Cash Collateralized pursuant to clause
(i) or (ii) above, then, without prejudice to any rights or remedies of any
Issuing Lender or any other Lender hereunder, all letter of credit fees payable
under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure or
Canadian Exposure shall be payable to the applicable Issuing Lender or Canadian
Lender until and to the extent that such LC Exposure or Canadian Exposure is
reallocated and/or Cash Collateralized; and

(d) If (i) a Bankruptcy Event or a Bail-In Action with respect to the parent of
any Lender shall occur following the date hereof and for so long as such event
shall continue or (ii) an Issuing Lender or Canadian Lender has a good faith
belief that any Lender has defaulted in fulfilling its obligations under one or
more other agreements in which such Lender commits to extend credit, such
Issuing Lender or Canadian Lender shall not be required to issue, amend or
increase any Letter of Credit or make any Canadian Loan, unless such Issuing
Lender or Canadian Lender, as the case may be, shall have entered into
arrangements with the Borrowers or such Lender, satisfactory to such Issuing
Lender or Canadian Lender, as the case may be, to defease any risk to it in
respect of such Lender hereunder.

(e) In the event that the Administrative Agent, the Borrower Representative, the
Canadian Lenders and the Issuing Lenders agree that a Defaulting Lender has
adequately remedied all matters that caused such Lender to be a Defaulting
Lender, then the LC Exposure and Canadian Exposure of the Lenders shall be
readjusted to reflect the inclusion of such Lender’s Commitment and on the date
of such readjustment such Lender shall purchase at par such of the Loans of the
other Lenders as the Administrative Agent shall determine may be necessary in
order for such Lender to hold such Loans in accordance with its Applicable
Percentage.

Section 2.21 Returned Payments. If after receipt of any payment which is applied
to the payment of all or any part of the Obligations (including a payment
effected through exercise of a right of setoff), the Administrative Agent or any
Lender is for any reason compelled to surrender such payment or proceeds to any
Person because such payment or application of proceeds is invalidated, declared
fraudulent, set aside, determined to be void or voidable as a preference,
impermissible setoff, or a diversion of trust funds, or for any other reason
(including pursuant to any settlement entered into by the Administrative Agent
or such Lender in its discretion), then the Obligations or part thereof intended
to be satisfied shall be revived and continued and this Agreement shall continue
in full force as if such payment or proceeds had not been received by the
Administrative Agent or such Lender. The provisions of this Section 2.21 shall
be and remain effective notwithstanding any contrary action which may have been
taken by the Administrative Agent or any Lender in reliance upon such payment or
application of proceeds. The provisions of this Section 2.21 shall survive the
termination of this Agreement.

Section 2.22 Banking Services and Swap Agreements. Each Lender or Affiliate
thereof providing Banking Services for, or having Swap Agreements with, any
Credit Party or any Subsidiary or Affiliate of a Credit Party shall deliver to
the Administrative Agent, promptly after entering into such Banking Services or
Swap Agreements, written notice setting forth the aggregate amount of all
Banking Services Obligations and Swap Agreement Obligations of such Credit Party
or Subsidiary or Affiliate

 

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thereof to such Lender or Affiliate (whether matured or unmatured, absolute or
contingent). In addition, each such Lender or Affiliate thereof shall deliver to
the Administrative Agent, from time to time after a significant change therein
or upon a request therefor, a summary of the amounts due or to become due in
respect of such Banking Services Obligations and Swap Agreement Obligations. The
most recent information provided to the Administrative Agent shall be used in
determining the amounts to be applied in respect of such Banking Services
Obligations and/or Swap Agreement Obligations pursuant to Section 2.18(b) and
which tier of the waterfall, contained in Section 2.18(b), such Banking Services
Obligations and/or Swap Agreement Obligations will be placed.

Section 2.23 Excess Resulting From Exchange Rate Change. With respect to the
Commitments, if on any Revaluation Date following one or more fluctuations in
the Exchange Rate of the CAD against the Dollar, (i) Aggregate Credit Exposure
exceeds the lesser of the Aggregate Commitment and the Aggregate Borrowing Base
or (ii) the Aggregate Canadian Exposure exceeds the Canadian Loan Limit, the
Applicable Borrower shall, within two (2) Business Days of notice from the
Administrative Agent (x) make the necessary payments or repayments to reduce
such Revolving Exposure to an amount necessary to eliminate such excess or
(y) maintain or cause to be maintained with the Administrative Agent (for the
benefit of the Secured Parties) deposits as continuing collateral security for
the Obligations in an amount equal to or greater than the amount of such excess,
such deposits to be maintained in such form and upon such terms as are
acceptable to the Administrative Agent. Without limiting the foregoing
provisions, the Administrative Agent shall, on the first Business Day of each
month or more frequently in the sole discretion of the Administrative Agent,
make the necessary exchange rate calculations to determine whether any such
excess exists on such date and advise the Borrower Representative such excess
exists.

Section 2.24 Canadian Loans.

(a) Subject to the terms and conditions set forth herein, each Canadian Lender
agrees to make Canadian Loans to the Canadian Borrower in Dollars and CAD an
aggregate principal amount at any time outstanding that will not result in
(i) the aggregate principal amount of outstanding Canadian Loans exceeding the
aggregate Canadian Sublimit, (ii) the sum of the aggregate outstanding amount of
all Loans plus the LC Exposure exceeding the Aggregate Commitments, (iii) any
Lender’s Revolving Exposure exceeding such Lender’s Commitment, (iv) the
Aggregate Canadian Exposure exceeding the Canadian Loan Limit, or (v) the U.S.
Availability or the Availability being less than zero. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Canadian
Borrower may borrow, prepay and reborrow Canadian Loans. The Canadian Lenders
shall make each Canadian Loan available to the Borrowers by means of a credit to
the Funding Account, and each Canadian Lender shall make its ratable portion of
the requested Canadian Loan (such ratable portion to be calculated based upon
such Canadian Lender’s Canadian Applicable Percentage).

(b) Any Canadian Lender may by written notice given to the Canadian
Administrative Agent require the Lenders to acquire participations on such
Business Day in all or a portion of the Canadian Loans outstanding. Such notice
shall specify the aggregate amount of Canadian Loans in which the Lenders will
participate. Promptly upon receipt of such notice, the Canadian Administrative
Agent will give notice thereof to each Lender, specifying in such notice such
Lender’s Applicable Percentage of such Canadian Loan or Loans. Each Lender
hereby absolutely and unconditionally agrees, promptly upon receipt of such
notice from the Canadian Administrative Agent (and in any event, if such notice
is received by 11:00 a.m., Chicago time, on a Business Day no later than 4:00
p.m., Chicago time on such Business Day and if received after 11:00 a.m.,
Chicago time, “on a Business Day” means no later than 9:00 a.m. Chicago time on
the immediately succeeding Business Day), to pay to the Canadian Administrative
Agent, for the account of the applicable Canadian Lender, the Dollar Equivalent
of such Lender’s Applicable Percentage of such Canadian Loan or Loans. Each
Lender acknowledges and agrees that its obligation to acquire participations in
Canadian Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any

 

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circumstance whatsoever, including the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever. Each
Lender shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.7 with
respect to Loans made by such Lender (and Section 2.7 shall apply, mutatis
mutandis, to the payment obligations of the Lenders), and the Canadian
Administrative Agent shall promptly pay to the Canadian Lender the amounts so
received by it from the Lenders. The Canadian Administrative Agent shall notify
the Borrower Representative of any participations in any Canadian Loan acquired
pursuant to this paragraph, and thereafter payments in respect of such Canadian
Loan shall be made to the Canadian Administrative Agent and not to the Canadian
Lender. Any amounts received by the Canadian Lender from the Canadian Borrower
(or other party on behalf of the Canadian Borrower) in respect of a Canadian
Loan after receipt by the Canadian Lender of the proceeds of a sale of
participations therein shall be promptly remitted to the Canadian Administrative
Agent; any such amounts received by the Canadian Administrative Agent shall be
promptly remitted by the Canadian Administrative Agent to the Lenders that shall
have made their payments pursuant to this paragraph and to the Canadian Lender,
as their interests may appear; provided that any such payment so remitted shall
be repaid to the Canadian Lender or to the Canadian Administrative Agent, as
applicable, if and to the extent such payment is required to be refunded to the
Canadian Borrower for any reason. The purchase of participations in a Canadian
Loan pursuant to this paragraph shall not relieve the Canadian Borrower of any
default in the payment thereof.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.1 Conditions Precedent to the Closing Date. The obligations of each
Lender to make Loans on the Closing Date and for the Issuing Lenders to issue or
confirm any initial Letters of Credit shall be subject to the satisfaction or
waiver (in accordance with Section 9.2 of this Agreement) of the following
conditions:

(a) Documentation. The Administrative Agent shall have received this Agreement
and all attached Exhibits and Schedules, in form and substance reasonably
satisfactory to the Administrative Agent and the Lenders, and fully executed by
all parties hereto.

(b) Acquisition. The Administrative Agent shall have received a copy of the
Magnum Purchase Agreement certified as being true and correct by a duly
authorized officer of the Borrower Representative. The Magnum Acquisition shall
have been, or shall substantially concurrently be, consummated in accordance
with the terms of the Magnum Purchase Agreement without giving effect to any
amendment, change or supplement or waiver of any provision thereof, in each
case, in any manner that is materially adverse to the interests of the Lenders
or the Administrative Agent (in each case in their capacities as such) without
the prior written consent (not to be unreasonably withheld, delayed or
conditioned) of the Administrative Agent.

(c) Representations. The representations and warranties (i) made by the Credit
Parties under Sections 4.1, 4.2, 4.3, 4.15, 4.19 and 4.20 of this Agreement and
(ii) made by the Magnum Targets and their affiliates in the Magnum Purchase
Agreement as are material to the interests of the Lenders, but only to the
extent that the breach of any such representations results in the Company or any
of its affiliates having the right to terminate its obligations under the Magnum
Purchase Agreement (after giving effect to any applicable notice and cure
period) or otherwise decline to consummate the Magnum Acquisition, shall be true
and correct in all material respects on the Closing Date.

 

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(d) Solvency Certificate. The Administrative Agent shall have received a
certificate in form and substance reasonably satisfactory to the Administrative
Agent from a Responsible Officer of the Company certifying that, (i) before
giving effect to the initial Borrowings made hereunder on the Closing Date, the
Credit Parties, taken as a whole, are Solvent and (ii) after giving effect to
the initial Borrowings made hereunder on the Closing Date and the other
Transactions, the Credit Parties, taken as a whole, are Solvent.

(e) No Material Adverse Change. Since October 15, 2018, no “Material Adverse
Effect” (as defined in the Magnum Purchase Agreement) has occurred.

(f) USA Patriot Act; Beneficial Ownership Certification. The Administrative
Agent shall have received (i) all documentation and other information that is
required by regulatory authorities under applicable “know your customer” and
anti-money-laundering rules and regulations, including, without limitation, the
Patriot Act and (ii) to the extent the Company qualifies as a “legal entity
customer” under the Beneficial Ownership Regulation, at least five (5) Business
Days prior to the Closing Date, any Lender that has requested, in a written
notice to the Company at least ten (10) Business Days prior to the Closing Date,
a Beneficial Ownership Certification in relation to the Company shall have
received such Beneficial Ownership Certification (provided that, upon the
execution and delivery by such Lender of its signature page to this Agreement,
the condition set forth in this clause (ii) shall be deemed to be satisfied).

(g) Payment of Fees. The Company shall have paid the fees and expenses required
to be paid as of the Closing Date by Section 2.12(d), Section 2.12(e) and
Section 9.1(a) (other than legal fees) or any other provision of a Credit
Document (including, for the avoidance of doubt, the Fee Letter). The Company
shall have paid the legal fees for the Administrative Agent’s counsel as
required under Section 9.1 to the extent such fees have been invoiced at least
three (3) Business Days prior to the Closing Date.

(h) Borrowing Base Certificate. The Administrative Agent shall have received a
Borrowing Base Certificate which calculates the Canadian Borrowing Base and the
U.S. Borrowing Base as of September 30, 2018.

(i) Documentation. The Administrative Agent shall have received the following,
duly executed by all the parties thereto, in form and substance reasonably
satisfactory to the Administrative Agent and the Lenders, and, where applicable,
fully executed by all parties thereto:

(i) a Note payable to each Lender requesting a Note;

(ii) the Guaranty and the Security Agreements, together with such other
documents, agreements, or instruments necessary to create an Acceptable Security
Interest in the Collateral;

(iii) certificates of insurance naming the Administrative Agent as loss payee or
lender’s loss payable with respect to property insurance, or additional insured
with respect to liability insurance, and covering the Credit Parties’ Properties
with such insurance carriers, for such amounts and covering such risks as
required by Section 5.3;

(iv) a secretary’s certificate from each Credit Party certifying and appending
such Credit Party’s (A) officers’ incumbency, (B) authorizing resolutions,
(C) organizational documents, and (D) governmental approvals, if any, with
respect to the Credit Documents to which such Person is a party;

(v) a certificate from an authorized officer of the Company dated as of the
Closing Date stating that as of such date all conditions precedent set forth in
this Section 3.1 have been met or waived;

 

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(vi) certificates of status or good standing for each Credit Party in the state
in which each such Person is organized, which certificates shall be (A) dated as
of a recent date or (B) otherwise effective on the Closing Date;

(vii) a legal opinion of (A) Vinson & Elkins LLP as outside counsel to the
Credit Parties and (B) local counsel in each relevant jurisdiction, in form and
substance reasonably acceptable to the Administrative Agent; and

(j) Field Examinations. The Administrative Agent or its designee shall have
conducted a field examination of the Accounts and Inventory of the Credit
Parties (other than the Magnum Targets) and such other information or materials
as the Administrative Agent shall include within the scope of such field
examination and audit, all of which shall be in form and substance reasonably
satisfactory to the Administrative Agent. The Administrative Agent acknowledges
and agrees that this condition (k) has been satisfied.

(k) Delivery of Financial Statements; Projections. With respect to the Company
and its Subsidiaries, the Administrative Agent shall have received (i) the
audited consolidated balance sheets of the Company and its Subsidiaries and the
Magnum Targets as of the end of the fiscal years ended December 31, 2017 and
December 31, 2016 and related audited and consolidated statements of operations,
changes in shareholders’ equity or partners’ capital and cash flows of each of
the Company and its Subsidiaries and the Magnum Targets for such fiscal years;
(ii) the unaudited consolidated balance sheets and related statements of
operations, changes in shareholders’ equity or partners’ capital and cash flows
of each of the Company and its Subsidiaries and the Magnum Targets for each
fiscal quarter of Nine Energy and the Magnum Targets that started after
December 31, 2017 and ended at least forty-five (45) days prior to the Closing
Date; and (iii) (A) a pro forma statement of operations of the Company and its
Subsidiaries (including the Magnum Targets) for the fiscal year ended
December 31, 2017, (B) a pro forma statement of operations of the Company and
its Subsidiaries (including the Magnum Targets) for the latest interim period
(and the comparative period of the prior year) of the Company covered by the
financial statements specified in clause (i), and (C) a pro forma balance sheet
as of the last day of the latest quarterly period of the Company and its
Subsidiaries (including the Magnum Targets).

(l) Refinancing; Payment in Full of Funded Debt. Prior to, or concurrently with,
the making of the initial Loans hereunder, all outstanding obligations owing
with respect to the Existing Nine Debt (subject to Section 2.6(n)) shall have
been paid in full and the Administrative Agent shall have received evidence that
on the Closing Date, after giving effect to the Transactions, neither the
Borrowers nor any of their Subsidiaries shall have Funded Debt except for
(i) Funded Debt under this Facility and the Senior Notes and (ii) any Funded
Debt of the Borrowers or the Magnum Targets and their respective Subsidiaries
incurred in respect of short term debt for working capital, capital leases,
purchase money debt or equipment financings or deferred purchase price
obligations (excluding earn out obligations under the Magnum Purchase Agreement)
up to an aggregate amount not exceeding $3.0 million. Such evidence may include
(without limitation) one or more “pay-off” letters (or such other evidence) in
form and substance reasonably satisfactory to the Administrative Agent with
respect to any such Funded Debt being refinanced with the initial Loans to be
made hereunder; and arrangements reasonably satisfactory to the Administrative
Agent shall have been made with any Person holding any Lien securing any such
Funded Debt, for the release and delivery of such UCC (or equivalent)
termination statements, mortgage releases, releases of assignments of leases and
rents, and other instruments, in each case in proper form for recording or
filing, as the Administrative Agent shall have requested to release and
terminate of record the Liens securing such Funded Debt.

 

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(m) Availability. The Administrative Agent shall have received evidence
satisfactory to it that, immediately after giving effect to the Transactions,
(a) Availability on the Closing Date shall not be less than $60.0 million and
(b) Liquidity shall not be less than $80.0 million.

(n) Appraisals. The Administrative Agent shall have received an appraisal of
certain Credit Parties’ Inventory from one or more firms reasonably satisfactory
to the Administrative Agent, which appraisal shall be satisfactory to the
Administrative Agent. The Administrative Agent acknowledges and agrees that this
condition (o) has been satisfied.

(o) Closing Date. The Closing Date shall have occurred on or prior to
December 31, 2018.

Section 3.2 Conditions Precedent to Each Credit Extension After Closing Date.
The obligation of each Lender to make any Credit Extension on the occasion of
each Borrowing (excluding the initial Borrowing), the obligation of each Issuing
Lender to make any Credit Extension after the Closing Date and any reallocation
provided in Section 2.20, in each case, shall be subject to the satisfaction or
waiver (in accordance with Section 9.2 of this Agreement) of the following
conditions as of the date of such Borrowing, such Credit Extension or such
reallocation:

(a) Representations and Warranties. As of the date of the making of such Credit
Extension, Borrowing or reallocation, the representations and warranties made by
any Credit Party or any officer of any Credit Party contained in the Credit
Documents shall be true and correct in all material respects (except that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof) on such date, except that any representation and warranty which by its
terms is made as of a specified date shall be required to be true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof) only as of such specified date and
each request for the making of any Borrowing, Credit Extension or reallocation,
and the making of such Borrowing, Credit Extension or reallocation shall be
deemed to be a reaffirmation of such representations and warranties. Each of the
giving of the applicable Notice of Borrowing or Letter of Credit Application,
the acceptance by the Applicable Borrower of the proceeds of such Borrowing,
Credit Extension or reallocation, shall constitute a representation and warranty
by the Applicable Borrower that on the date of such Borrowing, Credit Extension
or reallocation, as applicable, the foregoing condition has been met.

(b) Event of Default. As of the date of each Borrowing, Credit Extension or
reallocation, no Default or Event of Default shall exist, and the making of such
Borrowing, Credit Extension or reallocation would not cause a Default or Event
of Default. Each of the giving of the applicable Notice of Borrowing or Letter
of Credit Application, the acceptance by the Applicable Borrower of the proceeds
of such Borrowing, Credit Extension or reallocation, shall constitute a
representation and warranty by the Applicable Borrower that on the date of such
Borrowing, Credit Extension or reallocation, as applicable, the foregoing
condition has been met.

(c) Availability. After giving effect to any Borrowing or the issuance,
amendment, renewal or extension of any Letter of Credit, (i) Availability and
(ii) as applicable, Canadian Availability or U.S. Availability shall not be less
than zero.

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

 

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Section 3.3 Determinations Under Section 3.1 and Section 3.2. For purposes of
determining compliance with any of the conditions specified in Section 3.1 and
Section 3.2, each Lender shall be deemed to have consented to, approved or
accepted or to be satisfied with each document or other matter required
thereunder to be consented to or approved by or acceptable or satisfactory to
the Lenders unless an officer of the Administrative Agent responsible for the
transactions contemplated by the Credit Documents shall have received written
notice from such Lender prior to the Credit Extensions hereunder specifying its
objection thereto and such Lender shall not have made available to the
Administrative Agent such Lender’s Credit Extensions.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

From and after the Closing Date, each Borrower represents and warrants as
follows:

Section 4.1 Organization. Each Borrower and each of its Restricted Subsidiaries
is duly and validly organized and existing and in good standing under the laws
of its jurisdiction of incorporation, formation or organization and is
authorized to do business and is in good standing in all jurisdictions in which
such qualifications or authorizations are necessary except where the failure to
be so qualified or authorized could not reasonably be expected to result in a
Material Adverse Change. As of the Closing Date, each Credit Party’s type of
organization and jurisdiction of incorporation, formation or organization are
set forth on Schedule 4.1.

Section 4.2 Authorization. The execution, delivery, and performance by each
Credit Party of each Credit Document to which such Credit Party is a party and
the consummation of the Transactions and any related transactions contemplated
thereby (a) are within such Credit Party’s organizational powers, (b) have been
duly authorized by all necessary corporate, limited liability company or
partnership action, as applicable, of such Credit Party, (c) do not contravene
any articles or certificate of incorporation or formation, bylaws, partnership
or limited liability company agreement or other equivalent organization
documents, as applicable, binding on or affecting such Credit Party, (d) do not
contravene any law or any contractual restriction binding on or affecting such
Credit Party except for immaterial laws or contractual restrictions the
noncompliance with which would not reasonably be expected to be adverse to any
Secured Party, (e) do not result in or require the creation or imposition of any
Lien prohibited by this Agreement, and (f) do not require any authorization or
approval or other action by, or any notice or filing with, any Governmental
Authority except for immaterial authorizations, approvals, other actions,
notices or filings the failure to obtain of which would not reasonably be
expected to be adverse to any Secured Party. At the time of each Credit
Extension, such Credit Extension and the use of the proceeds of such Credit
Extension are within the Applicable Borrower’s corporate powers, have been duly
authorized by all necessary action, do not contravene (i) the Applicable
Borrower’s certificate or articles of incorporation, bylaws or other
organizational documents, or (ii) any Legal Requirement or any contractual
restriction binding on or affecting the Applicable Borrower, will not result in
or require the creation or imposition of any Lien prohibited by this Agreement,
and do not require any authorization or approval or other action by, or any
notice or filing with, any Governmental Authority.

Section 4.3 Enforceability. The Credit Documents have each been duly executed
and delivered by each Credit Party that is a party thereto and each Credit
Document constitutes the legal, valid, and binding obligation of each Credit
Party that is a party thereto enforceable against such Credit Party in
accordance with its terms, except as limited by applicable Debtor Relief Laws or
similar laws at the time in effect affecting the rights of creditors generally
and to the effect of general principles of equity whether applied by a court of
law or equity.

 

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Section 4.4 Financial Condition.

(a) The Borrower Representative has delivered to the Lenders the financial
statements identified in Section 3.1(k) and such financial statements were
prepared in accordance with GAAP and fairly present, in all material respects,
the consolidated financial condition and results of operations and cash flows of
the Persons covered thereby as of the respective dates thereof for the periods
covered therein, subject, in the case of unaudited financial statements, to
normal year-end adjustments and the absence of footnotes. As of the date of the
aforementioned financial statements, there were no material contingent
obligations, liabilities for taxes, unusual forward or long-term commitments, or
unrealized or anticipated losses of the applicable Persons, except as disclosed
therein and adequate reserves for such items have been made in accordance with
GAAP.

(b) Since October 15, 2018, after giving pro forma effect to the Transactions,
no event or condition has occurred that could reasonably be expected to result
in a Material Adverse Change.

Section 4.5 Ownership and Liens; Real Property. Each Restricted Entity (i) has
good and marketable fee simple title to, or a valid leasehold interest or
easement in, all material real property, and good title to all material personal
Property, used in its business, and (ii) none of the Property owned by the
Borrowers or a Restricted Subsidiary is subject to any Lien except Permitted
Liens.

Section 4.6 True and Complete Disclosure. All written factual information
(whether delivered before or after the date of this Agreement) prepared by or on
behalf of the Borrowers and their Restricted Subsidiaries and furnished to any
Lender Party for purposes of or in connection with this Agreement or any other
Credit Document, taken as a whole, does not contain any material misstatement of
fact or omit to state any material fact necessary to make the statements therein
not misleading as of the date such information is dated or certified. There is
no fact known to any Responsible Officer of any Credit Party on the date of this
Agreement that has not been disclosed to the Administrative Agent that could
reasonably be expected to result in a Material Adverse Change. All projections,
estimates, budgets, and pro forma financial information furnished by the Company
or any of its Restricted Subsidiaries (or on behalf of the Company or any such
Restricted Subsidiary), were prepared on the basis of assumptions, data,
information, tests, or conditions (including current and reasonably foreseeable
business conditions) believed to be reasonable at the time such projections,
estimates, and pro forma financial information were furnished (it being
recognized by the Lender Parties, however, that projections as to future events
are not to be viewed as facts and that results during the period(s) covered by
such projections may differ from the projected results and that such differences
may be material and that the Credit Parties make no representation that such
projections will be realized).

Section 4.7 Litigation. There are no actions, suits, or proceedings pending or,
to any Restricted Entity’s knowledge, threatened against the Company or any
Restricted Subsidiary, at law, in equity, or in admiralty, or by or before any
Governmental Authority, which could reasonably be expected to result in a
Material Adverse Change. Additionally, except as disclosed in writing to the
Administrative Agent, there is no pending or, to the knowledge of any Restricted
Entity, threatened action or proceeding instituted against the Company or any
Restricted Subsidiary which seeks to adjudicate the Company or any Restricted
Subsidiary as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any Debtor Relief Law, or seeking the entry of an order
for relief or the appointment of a receiver, interim receiver, receiver manager,
custodian, trustee or other similar official for it or for any substantial part
of its Property.

 

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Section 4.8 Compliance with Agreements.

(a) No Restricted Entity is a party to any indenture, loan or credit agreement
or any lease or any other types of agreement or instrument or subject to any
charter or corporate restriction or provision of applicable law or governmental
regulation the performance of or compliance with which could reasonably be
expected to cause a Material Adverse Change. No Restricted Entity is in default
under or with respect to any contract, agreement, lease or any other types of
agreement or instrument to which any Restricted Entity is a party and which
could reasonably be expected to cause a Material Adverse Change. To the
knowledge of the Credit Parties, no Restricted Entity is in default under, or
has received a notice of default under, any contract, agreement, lease or any
other document or instrument to which any Restricted Entity is a party which is
continuing and which, if not cured, could reasonably be expected to cause a
Material Adverse Change.

(b) No Default has occurred and is continuing.

Section 4.9 Pension Plans.

(a) Except for matters that could not reasonably be expected to result in a
Material Adverse Change, all Plans are in compliance with all applicable
provisions of ERISA, (b) no Termination Event has occurred with respect to any
Plan that would result in an Event of Default under Section 7.1(j), and, except
for matters that could not reasonably be expected to result in a Material
Adverse Change, each Plan has complied with and been administered in accordance
with applicable provisions of ERISA and the Code, (c) no “accumulated funding
deficiency” (as defined in Section 302 of ERISA) has occurred with respect to
any Plan, and for plan years after December 31, 2007, no unpaid minimum required
contribution exists with respect to any Plan, and there has been no excise tax
imposed under Section 4971 of the Code with respect to any Plan, (d) the present
value of all benefits vested under each Plan (based on the assumptions used to
fund such Plan) did not, as of the last annual valuation date applicable
thereto, exceed the value of the assets of such Plan allocable to such vested
benefits in an amount that could reasonably be expected to result in a Material
Adverse Change, (e) neither the Company nor any member of the Controlled Group
has had a complete or partial withdrawal from any Multiemployer Plan for which
there is any unsatisfied withdrawal liability that could reasonably be expected
to result in a Material Adverse Change or an Event of Default under
Section 7.1(i), and (f) neither the Company nor any member of the Controlled
Group has incurred any liability as a result of a Multiemployer Plan being in
reorganization or insolvent that could reasonably be expected to result in a
Material Adverse Change. Based upon GAAP existing as of the date of this
Agreement and current factual circumstances, no Restricted Entity has any reason
to believe that the annual cost during the term of this Agreement to the Company
or any Subsidiary for post-retirement benefits to be provided to the current and
former employees of the Company or any Subsidiary under Plans that are welfare
benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate,
reasonably be expected to cause a Material Adverse Change.

(b) Each Canadian Credit Party is in compliance with the requirements of all
federal or provincial or territorial laws applicable to any Canadian Pension
Plan, except where the failure to so comply would not reasonably be expected to
result in a Material Adverse Change. No fact or situation that may reasonably be
expected to result in a Material Adverse Change exists in connection with any
Canadian Pension Plan. No Canadian Credit Party has any material withdrawal
liability in connection with a Canadian Pension Plan that is a “multi-employer
pension plan” under applicable federal or provincial pension standards
legislation in Canada. No Canadian Pension Event has occurred that would
reasonably be expected to have a Material Adverse Change. No Lien has arisen,
choate or inchoate, in respect of any Canadian Credit Party or their Property in
connection with any Canadian Pension Plan (save for contribution amounts not yet
due).

 

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(c) As of the Closing Date, no Credit Party contributes to, sponsors or
maintains a Canadian Pension Plan which contains a “defined benefit provision”
as defined in subsection 147.1(i) of the ITA (“a Canadian Defined Benefit
Plan”).

Section 4.10 Environmental Condition. Except as set forth on Schedule 4.10:

(a) Permits, Etc. Each Restricted Entity (i) has obtained all material
Environmental Permits necessary for the ownership and operation of its
Properties and the conduct of its businesses; (ii) is and, during the relevant
time periods specified under applicable statutes of limitation, has been in
material compliance with all terms and conditions of such Environmental Permits
and with all other material requirements of applicable Environmental Laws;
(iii) has not received written notice of any material violation or alleged
material violation of any Environmental Law or Environmental Permit; and (iv) is
not subject to any actual or contingent Environmental Claim which could
reasonably be expected to cause a Material Adverse Change.

(b) Certain Liabilities. To each Restricted Entity’s knowledge, none of the
present or previously owned or operated Property of any Restricted Entity or of
any Subsidiary thereof, wherever located, (i) has been placed on or proposed to
be placed on the National Priorities List, the Comprehensive Environmental
Response Compensation Liability Information System list, or their state or local
analogs, or have been otherwise investigated, designated, listed, or identified
by a Governmental Authority as a potential site for removal, remediation,
cleanup, closure, restoration, reclamation, or other response activity under any
Environmental Laws; (ii) is subject to a Lien, arising under or in connection
with any Environmental Laws, that attaches to any revenues or to any Property
owned or operated by any Restricted Entity, wherever located, which could
reasonably be expected to cause a Material Adverse Change; or (iii) has been the
site of any Release of Hazardous Substances or Hazardous Wastes from present or
past operations which has caused at the site or at any third-party site any
condition that has resulted in or could reasonably be expected to result in the
need for Response that could cause a Material Adverse Change.

(c) Certain Actions. Without limiting the foregoing, (i) all necessary material
notices have been properly filed, and no further material action is required
under current applicable Environmental Law as to each Response or other
restoration or remedial project required to be undertaken by a Borrowers, any of
its Subsidiaries or any of a Borrowers’ or such Subsidiary’s former Subsidiaries
pursuant to any Environmental Law, on any of their presently or formerly owned
or operated Property and (ii) the present and, to the Credit Parties’ knowledge,
future liability, if any, of the Company or of any of its Subsidiaries which
could reasonably be expected to arise in connection with requirements under
Environmental Laws is not expected to result in a Material Adverse Change.

Section 4.11 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those listed on Schedule 4.11, each of which is a
Restricted Subsidiary hereunder. Each Restricted Subsidiary (including any such
Restricted Subsidiary formed or acquired subsequent to the Closing Date) has
complied with the requirements of Section 5.6.

Section 4.12 Investment Company Act. No Restricted Entity is an “investment
company” or a company “controlled” by an “investment company” within the meaning
of the Investment Company Act of 1940, as amended.

Section 4.13 Taxes. Proper and accurate (in all material respects), federal and
all material state, provincial, territorial local and foreign tax returns,
reports and statements required to be filed (after giving effect to any
extension granted in the time for filing) by each Restricted Entity or any
member of an affiliated group of such Restricted Entities as determined under
Section 1504 of the Code (hereafter collectively called the “Tax Group”) have
been filed with the appropriate Governmental Authorities, and

 

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all material taxes and other impositions due and payable with respect to such
tax returns have been timely paid prior to the date on which any fine, penalty,
interest, late charge or loss may be added thereto for non-payment thereof
except where contested in good faith and by appropriate proceeding and for which
adequate reserves have been established in compliance with GAAP. No Restricted
Entity nor any member of the Tax Group has given, or been requested to give, a
waiver of the statute of limitations relating to the payment of any federal,
state, provincial, territorial, local or foreign taxes. Proper and accurate
amounts have been withheld by the Restricted Entities and all other members of
the Tax Group from their employees and in respect of payments to any other
Persons for all periods to comply in all material respects with the tax, social
security and unemployment withholding provisions of applicable federal, state,
provincial, territorial, local and foreign law.

Section 4.14 Permits, Licenses, etc. Each Restricted Entity possesses all
permits, licenses, patents, patent rights or licenses, trademarks, trademark
rights, trade names rights, and copyrights which are material to the conduct of
its business. Each Restricted Entity manages and operates its business in
accordance with all applicable Legal Requirements except where the failure to so
manage or operate could not reasonably be expected to result in a Material
Adverse Change; provided that, this Section 4.14 does not apply with respect to
Environmental Permits.

Section 4.15 Use of Proceeds. The proceeds of the Loans will be used by the
Company for the purposes described in Section 6.6. No Credit Party is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U). No proceeds of any Loan will
be used to purchase or carry any margin stock in violation of Regulation T, U,
or X.

Section 4.16 Condition of Property; Casualties. The material Properties used or
to be used in the continuing operations of the Restricted Entities, taken as a
whole, are in good working order and condition, normal wear and tear excepted.
Neither the business nor the material Properties of any Restricted Entity has
been affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of Property or cancellation of contracts, permits or concessions by a
Governmental Authority, riot, activities of armed forces or acts of God or of
any public enemy, which effect could reasonably be expected to cause a Material
Adverse Change.

Section 4.17 Insurance. Each Borrower and each Restricted Subsidiary carries
insurance (which may be carried by the U.S. Borrower on a consolidated basis)
with reputable insurers in respect of such of their respective Properties, in
such amounts and against such risks as is customarily maintained by other
Persons of similar size engaged in similar businesses or, self-insure to the
extent that is customary for Persons of similar size engaged in similar
businesses.

Section 4.18 Security Interest. The provisions of the Security Documents create
legal and valid Liens on all of the Collateral in favor of the Administrative
Agent, for the benefit of the Secured Parties and each Credit Party has
authorized the filing of financing statements sufficient when filed to perfect
the Lien created by the Security Documents to the extent such Lien can be
perfected by filing financing statements. When such financing statements
(including, to the extent required to perfect in Equity Interests of Canadian
Restricted Subsidiaries not constituting Excluded Collateral, PPSA financing
statements in Canada) are filed in the offices noted therein, the Administrative
Agent will have a valid and perfected security interest in all Collateral that
is capable of being perfected by filing financing statements (excluding, for
perfection purposes, the Excluded Perfection Collateral).

 

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Section 4.19 OFAC; Anti-Terrorism; Anti-Corruption Laws; Sanctions(a) .

(a) Neither the Company nor any Subsidiary of the Company is in violation of any
Sanctions. Neither the Company nor any Subsidiary of the Company, nor any of
their respective officers, directors, nor to the knowledge of the Company, any
of their respective employees or agents (i) is a Sanctioned Person or a
Sanctioned Entity, (ii) has assets located in Sanctioned Entities, or
(iii) derives revenues from Investments in, or transactions with Sanctioned
Persons or Sanctioned Entities. No proceeds of any Loan will be used to fund any
operations in, finance any Investments or activities in, or make any payments
to, a Sanctioned Person or a Sanctioned Entity.

(b) Neither the Company nor any Subsidiary, nor any of their directors or
officers, nor to the knowledge of the Company, any agent, employee or other
person acting on behalf of the Company or any of its Subsidiaries is aware of or
has taken any action, directly or indirectly, that would result in a violation
by such persons of any Anti-Corruption Laws. Furthermore, each Borrower and its
Affiliates, and to the knowledge of the Borrowers, each Credit Party and each of
their Restricted Subsidiaries has conducted their businesses in compliance with
Anti-Corruption Laws and have instituted and maintain policies and procedures
designed to ensure, and which are reasonably expected to continue to ensure,
continued compliance therewith.

Section 4.20 Solvency. Before and after giving effect to the making of each
Credit Extension after the Closing Date, the Company and its Restricted
Subsidiaries are, when taken as a whole, Solvent.

Section 4.21 EEA Financial Institution. No Credit Party is an EEA Financial
Institution.

Section 4.22 Qualified ECP Counterparty. Each Borrower is a Qualified ECP
Counterparty.

ARTICLE V

AFFIRMATIVE COVENANTS

Commencing on the Closing Date and until Payment in Full, each Borrower
covenants and agrees with the Lenders that it shall and shall cause the
Restricted Subsidiaries to comply with the following covenants:

Section 5.1 Organization. Each Credit Party shall, and shall cause each of its
respective Restricted Subsidiaries to, preserve and maintain its partnership,
limited liability company or corporate existence, rights, franchises and
privileges in the jurisdiction of its organization. Each Credit Party shall, and
shall cause each of its respective Restricted Subsidiaries to qualify and remain
qualified as a foreign business entity in each jurisdiction in which
qualification is necessary or desirable in view of its business and operations
or the ownership of its Properties, except where failure to so qualify could not
reasonably be expected to cause a Material Adverse Change. Nothing contained in
this Section 5.1 shall prevent any transaction permitted by Section 6.6 or
Section 6.7.

Section 5.2 Reporting.

(a) Annual Financial Reports. (i) The Borrower Representative shall provide, or
shall cause to be provided, to the Administrative Agent, as soon as available,
but in any event within ninety (90) days after the end of each fiscal year of
the Company (commencing with the fiscal year ended December 31, 2018), the
audited consolidated balance sheet of the Company and its Subsidiaries (and, to
the extent that any Unrestricted Subsidiaries existed during the applicable
period, consolidating balance sheets of the Company and its Subsidiaries,
including Unrestricted Subsidiaries) as at the end of such fiscal year, and the
related consolidated statements of income or operations, shareholders’ equity
and cash flows of the Company and its Subsidiaries (and, to the extent that any
Unrestricted Subsidiaries existed during the applicable period, consolidating
statements of income or operations, shareholders’ equity and cash flows of the
Company and its Subsidiaries, including Unrestricted Subsidiaries) for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and

 

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prepared in accordance with GAAP. Such consolidated statements shall be audited
and accompanied by a report and opinion of PriceWaterhouseCoopers LLC or other
independent certified public accountant of recognized standing reasonably
acceptable to the Administrative Agent, which report and opinion shall be
prepared in accordance with GAAP and shall not be subject to any “going concern”
or like qualification or exception or any qualification or exception as to the
scope of such audit, and such consolidated and, if applicable, consolidating
statements to be certified by the chief executive officer, chief financial
officer, director of finance, treasurer or controller of the Borrower
Representative to the effect that such statements fairly present the financial
condition, results of operations, shareholders’ equity and cash flows of the
Company and its Subsidiaries in all material respects in accordance with GAAP.

(b) Quarterly Financial Reports. (i) The Borrower Representative shall provide,
or shall cause to be provided, to the Administrative Agent, as soon as
available, but in any event within forty-five (45) days after the end of the
first three fiscal quarters of each fiscal year of the Company, the consolidated
balance sheets of the Company and its Subsidiaries (and, to the extent that any
Unrestricted Subsidiaries existed during the applicable period, consolidating
balance sheets of the Company and its Subsidiaries, including Unrestricted
Subsidiaries) as at the end of such fiscal quarter, and the related consolidated
statements of income or operations, shareholders’ equity and cash flows of the
Company and its Subsidiaries (and, to the extent that any Unrestricted
Subsidiaries existed during the applicable period, consolidating statements of
income or operations, shareholders’ equity and cash flows of the Company and its
Subsidiaries, including Unrestricted Subsidiaries) for such fiscal quarter and
for the portion of the Company’s fiscal year then ended, setting forth in each
case in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal year,
all in reasonable detail, such consolidated statements and, if applicable
consolidating statements to be certified by the chief executive officer, chief
financial officer, director of finance, treasurer or controller of the Company
as fairly presenting the financial condition, results of operations,
shareholders’ equity and cash flows of the Company and its Subsidiaries, in all
material respects, in accordance with GAAP, subject only to normal year-end
audit adjustments and the absence of footnotes.

(c) Compliance Certificate. Concurrently with the delivery of the financial
statements referred to in Section 5.2(a) and Section 5.2(b) and upon any
calculation of the Fixed Charge Coverage Ratio pursuant to Section 6.18, the
Borrower Representative shall provide to the Administrative Agent a duly
completed Compliance Certificate signed by a Responsible Officer of the Borrower
Representative and attaching thereto detailed supporting information for the
calculations made thereunder.

(d) Annual Budget. As soon as available and in any event within sixty (60) days
after the end of each fiscal year of the Company, the Company shall provide to
the Administrative Agent an annual budget consisting of projected balance
sheets, income statements and cash flow statements for the immediately following
fiscal year and reasonably detailed on a quarterly basis.

(e) Defaults. The Credit Parties shall provide to the Administrative Agent
promptly, but in any event within five (5) Business Days after a Responsible
Officer of any Credit Party obtains knowledge thereof, a notice of any Default,
together with a statement of a Responsible Officer of the Company setting forth
the details of such Default and the actions which the Credit Parties have taken
and propose to take with respect thereto.

(f) Other Creditors. The Credit Parties shall provide to the Administrative
Agent promptly after the giving or receipt thereof, copies of any material
default notices given or received by the Company or by any of its Restricted
Subsidiaries pursuant to the terms of any indenture, loan agreement, credit
agreement, or similar agreement evidencing Debt in an amount in excess of
$3.0 million.

 

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(g) Litigation. The Credit Parties shall provide to the Administrative Agent
promptly after the commencement thereof, notice of all actions, suits, and
proceedings before any Governmental Authority, affecting any Restricted Entity
that could reasonably be expected to result in a Material Adverse Change.

(h) Environmental Notices. Promptly upon, and in any event no later than fifteen
(15) days after, the receipt thereof, or the acquisition of knowledge thereof,
by any Executive Officer of any Restricted Entity, the Credit Parties shall
provide the Administrative Agent with a copy of any form of request, claim,
complaint, order, notice, summons or citation received from any Governmental
Authority or any other Person, (i) concerning violations or alleged violations
of Environmental Laws, which seeks to impose liability therefore in excess of
$3.0 million, (ii) concerning any action or omission on the part of any of the
Credit Parties or any of their former Subsidiaries in connection with Hazardous
Waste or Hazardous Substances which could reasonably result in the imposition of
liability in excess of $3.0 million or requiring that action be taken to respond
to or clean up a Release of Hazardous Substances or Hazardous Waste into the
Environment and such action or clean-up could reasonably be expected to exceed
$3.0 million, including without limitation any information request related to,
or notice of, potential responsibility under CERCLA which could reasonably
result in the imposition of liability in excess of $3.0 million, or
(iii) concerning the filing of a Lien (other than a Permitted Lien) upon,
against or in connection with any Credit Party, any Subsidiary, or any of their
respective former Subsidiaries, or any of their leased or owned Property,
wherever located pursuant to any Environmental Law.

(i) Material Changes. The Credit Parties shall provide to the Administrative
Agent prompt written notice of any condition or event of which any Responsible
Officer of any Credit Party obtains knowledge and which could reasonably be
expected to result in a Material Adverse Change.

(j) Termination Events. As soon as possible and in any event (i) within thirty
(30) days after the Company or any member of the Controlled Group knows that any
Termination Event described in clause (a) of the definition of Termination Event
with respect to any Plan has occurred, and (ii) within ten (10) days after the
Company or any member of the Controlled Group knows that any other Termination
Event with respect to any Plan has occurred, the Credit Parties shall provide to
the Administrative Agent a statement of an authorized officer of the Company
describing such Termination Event and the action, if any, which the Company or
any Affiliate of the Company proposes to take with respect thereto;

(k) Termination of Plans. Promptly and in any event within five (5) Business
Days after receipt thereof by the Company or any member of the Controlled Group
from the PBGC, the Credit Parties shall provide to the Administrative Agent
copies of each notice received by the Company or any such member of the
Controlled Group of the PBGC’s intention to terminate any Plan or to have a
trustee appointed to administer any Plan;

(l) Other ERISA Notices. Promptly and in any event within five (5) Business Days
after receipt thereof by the Company or any member of the Controlled Group from
a Multiemployer Plan sponsor, the Credit Parties shall provide to the
Administrative Agent a copy of each notice received by the Company or any member
of the Controlled Group concerning the imposition or amount of withdrawal
liability imposed on the Company or any member of the Controlled Group pursuant
to Section 4202 of ERISA;

(m) Termination of Canadian Plans. Promptly and in any event within five
Business Days after a Canadian Credit Party knows that a Canadian Pension Event
has occurred, the Credit Parties shall provide the Administrative Agent with a
statement of an authorized officer of the Credit Party describing such Canadian
Pension Event and the action, if any, which the Credit Party proposes to take
thereto;

 

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(n) Other Governmental Notices. Promptly and in any event within five
(5) Business Days after receipt thereof by the Company or any Restricted
Subsidiary, the Credit Parties shall provide to the Administrative Agent a copy
of any notice, summons, citation, or proceeding seeking to modify, revoke, or
suspend any contract, license, permit, or agreement with any Governmental
Authority the modification, revocation or suspension of which could reasonably
be expected to result in a Material Adverse Change;

(o) Disputes; etc. The Credit Parties shall provide to the Administrative Agent
prompt written notice of (i) any claims, legal or arbitration proceedings,
proceedings before any Governmental Authority, or disputes, or to the knowledge
of any Credit Party, any such actions threatened, or affecting the Company or
any Restricted Subsidiary, in any event, which could reasonably be expected to
cause a Material Adverse Change, or any material labor controversy of which any
Credit Party has knowledge resulting in or reasonably considered to be likely to
result in a strike against the Company or any Restricted Subsidiary, and
(ii) any claim, judgment, Lien or other encumbrance (other than a Permitted
Lien) affecting any Property of the Company or any Restricted Subsidiary, if the
value of the claim, judgment, Lien, or other encumbrance affecting such Property
shall exceed $3.0 million;

(p) Management Letters; Other Accounting Reports. Promptly upon receipt thereof
(to the extent permitted by the Company’s auditors), a copy of each “management
letter” submitted to the Company or any Restricted Subsidiary by independent
accountants in connection with any annual, interim or special audit made by them
of the books of the Company and its Restricted Subsidiaries, and a copy of any
response by the Company or any Restricted Subsidiary of the Company, or the
board of directors or managers (or other applicable governing body) of the
Company or any Restricted Subsidiary of the Company, to such letter;

(q) Borrowing Base Certificates. As soon as available but in any event within
twenty-five (25) days of the end of each calendar month, and at such other times
as may be necessary to re-determine Availability or as may be requested by the
Administrative Agent, as of the period then ended, a Borrowing Base Certificate
and supporting information in connection therewith including, without
limitation, together with any additional reports with respect to the U.S.
Borrowing Base and the Canadian Borrowing Base as the Administrative Agent may
reasonably request; provided that, during an Enhanced Reporting Period, in
addition to the foregoing, on the third (3) Business Day of each week, Borrower
Representative shall deliver a Borrowing Base Certificate, with respect to the
prior week.

(r) Collateral Reporting; Borrowing Base.

(i) As soon as available but in any event within twenty-five (25) days of the
end of each calendar month (and weekly during an Enhanced Reporting Period, on
the third (3rd) Business Day of each week) and at such other times as may be
requested by the Administrative Agent, as of the period then ended, all
delivered electronically in a text formatted file acceptable to the
Administrative Agent;

(A) a detailed aging of the Credit Parties’ Accounts, including all invoices
aged by invoice date and due date (with an explanation of the terms offered),
prepared in a manner reasonably acceptable to the Administrative Agent, together
with a summary specifying the name, address, and balance due for each Account
Debtor;

 

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(B) a schedule detailing the Credit Parties’ Inventory, in form satisfactory to
the Administrative Agent, by location (showing Inventory in transit, any
Inventory located with a third party under any consignment, bailee arrangement,
or warehouse agreement), by product type, and by volume on hand, which Inventory
shall be valued at the lower of cost (determined on a first-in, first-out basis)
or market and adjusted for Reserves as the Administrative Agent has previously
indicated to the Borrower Representative are deemed by the Administrative Agent
to be appropriate;

(C) a worksheet of calculations prepared by the Credit Parties to determine
Eligible Accounts and Eligible Inventory, such worksheets detailing the Accounts
and Inventory excluded from Eligible Accounts and Eligible Inventory and the
reason for such exclusion; and

(D) as soon as available but in any event within twenty (20) days of the end of
each calendar month and at such other times as may be requested by the
Administrative Agent, as of the month then ended, a schedule and aging of the
Borrowers’ accounts payable, delivered electronically in a text formatted file
acceptable to the Administrative Agent;

(ii) Promptly upon the Administrative Agent’s request:

(A) copies of invoices issued by the Borrowers in connection with any Accounts,
credit memos, shipping and delivery documents, and other information related
thereto;

(B) copies of purchase orders, invoices, and shipping and delivery documents in
connection with any Inventory purchased by any Credit Party; and

(C) a schedule detailing the balance of all intercompany accounts of the Credit
Parties.

(s) Customer List. Concurrently with the annual field examination and at any
time promptly upon the Administrative Agent’s request, an updated customer list
for each Credit Party, which list shall state the customer’s name, mailing
address and phone number, delivered electronically in a text formatted file
acceptable to the Administrative Agent and certified as true and correct by a
Financial Officer of the Borrower Representative;

(t) Other Documentation.

(i) Promptly upon the Administrative Agent’s request, as of the period then
ended, the Borrowers’ sales journal, cash receipts journal (identifying trade
and non-trade cash receipts) and debit memo/credit memo journal.

(ii) Concurrently with the annual field examination and at any time promptly
upon the Administrative Agent’s request, a certificate of good standing or the
substantive equivalent available in the jurisdiction of incorporation, formation
or organization for each Credit Party from the appropriate governmental officer
in such jurisdiction.

(u) Intellectual Property. If, subsequent to the Closing Date, a Credit Party
shall acquire or obtain any Inventory that contains or bears intellectual
property rights licensed to any Credit Party that may be sold or otherwise
disposed of without (i) infringing the rights of such licensor, (ii) violating
any contract with such licensor, or (iii) incurring any liability with respect
to payment of royalties other than royalties incurred pursuant to the sale of
such Inventory under the current licensing agreement, then the Company shall
provide an annex with each Borrowing Base Certificate delivered to the
Administrative Agent pursuant to Section 8.2(f) immediately following the date
that such Inventory is

 

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acquired or obtained, notifying the Administrative Agent of such acquisition,
which annex shall specify all reasonable details (including the location, title,
patent number(s) and issue date) as to the Inventory so acquired or obtained and
the intellectual property rights licensed to the Credit Party in connection
therewith.

(v) Other Information. Subject to the confidentiality provisions of Section 9.8,
the Credit Parties shall provide to the Administrative Agent such other
information respecting the business, operations, or Property of the Company or
any Restricted Subsidiary, financial or otherwise, as any Lender through the
Administrative Agent may reasonably request.

Documents required to be delivered pursuant to Section 5.2(a) or Section 5.2(b)
(to the extent such documents are included in materials otherwise filed with the
SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the earliest of such date (i) on which such documents are
delivered by e-mail to the Administrative Agent, (ii) on which the Company posts
such documents, or provides a link thereto on the Company’s website on the
Internet or (iii) on which such documents are posted on the Company’s behalf on
an Internet or intranet website, if any, to which each Lender and the
Administrative Agent have access (whether a commercial, third-party website or
whether sponsored by the Administrative Agent); provided that: (A) the Company
shall deliver paper copies of such documents to the Administrative Agent upon
its reasonable request to the Company to deliver such paper copies and (B) the
Company shall arrange for the prompt notification of the Administrative Agent
(by facsimile or electronic mail) of the posting of any such documents pursuant
to clause (ii) or (iii) (unless posted by the Administrative Agent). The
Administrative Agent shall have no obligation to request the delivery or to
maintain copies of the documents referred to above, and in any event shall have
no responsibility to monitor compliance by the Company with any such request for
delivery, and each Lender shall be solely responsible for requesting delivery to
it or maintaining its copies of such documents.

Section 5.3 Insurance.

(a) Each Credit Party shall, and shall cause each of its Restricted Subsidiaries
to, carry and maintain all such insurance in such amounts and against such risks
as is customarily maintained by other Persons of similar size engaged in similar
businesses and with reputable insurers.

(b) Copies of all certificates of insurance for policies covering the Property
or business of the Credit Parties, and endorsements and renewals thereof, shall
be delivered by the Company to and retained by the Administrative Agent. At the
request of the Administrative Agent, copies of such policies of insurance,
certified as true and correct copies of such documents by a Responsible Officer
of the Company shall be delivered by the Company to and retained by the
Administrative Agent. All policies of property insurance with respect to the
Collateral either shall have attached thereto a lender’s loss payable
endorsement in favor of the Administrative Agent for its benefit and the ratable
benefit of the Secured Parties or name the Administrative Agent as loss payee
for its benefit and the ratable benefit of the Secured Parties, in either case,
in form reasonably satisfactory to the Administrative Agent, and all policies of
liability insurance shall name the Administrative Agent for its benefit and the
ratable benefit of the Secured Parties as an additional insured. All policies or
certificates of insurance shall set forth the coverage, the limits of liability,
the name of the carrier, the policy number and the period of coverage. All such
policies shall contain a provision that notwithstanding any contrary agreements
between the Company, its Restricted Subsidiaries, and the applicable insurance
company, such policies will not be canceled or allowed to lapse without renewal
without at least thirty (30) days’ (or such shorter period as such insurance
company may require and which is acceptable to the Administrative Agent) prior
written notice to the Administrative Agent.

 

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(c) Prior to the occurrence and continuance of an Event of Default or Cash
Dominion Period, (i) all Net Proceeds of property insurance received by a Credit
Party for the casualty loss of Property which constitutes Collateral not in
excess of $2.5 million shall be paid directly to the applicable Credit Party to
repair or replace the damaged or destroyed Property covered by such policy;
provided that, such Credit Party shall make such repair or replace such Property
within one hundred eighty (180) days from the receipt of such proceeds and
(ii) the remaining amount of such proceeds and any amount of proceeds that were
paid to such Credit Party as permitted under clause (i) above and not used
toward the repair or replacement of such Property within the one hundred eighty
(180) days required under such clause (i), shall be paid directly to the
Administrative Agent and if necessary, assigned to the Administrative Agent to
be, at the election of the Administrative Agent, (A) applied in accordance with
Section 7.6(b) of this Agreement, whether or not the Secured Obligations are
then due and payable, or (B) returned to such Credit Party to repair or replace
the damaged or destroyed Property covered by such policy or to make such other
Investments permitted under Section 6.2 of this Agreement.

(d) After the occurrence and during the continuance of an Event of Default, if
requested by the Administrative Agent, all proceeds of insurance of any Credit
Party, including any casualty insurance proceeds, property insurance proceeds,
proceeds from actions, and any other proceeds, shall be paid directly to the
Administrative Agent and if necessary, assigned to the Administrative Agent, to
be applied in accordance with Section 7.6(b) of this Agreement, whether or not
the Secured Obligations are then due and payable.

(e) In the event that any insurance proceeds are paid to any Credit Party in
violation of clause (d) or clause (e), such Credit Party shall hold the proceeds
in trust for the Administrative Agent, segregate the proceeds from the other
funds of such Credit Party, and promptly pay the proceeds to the Administrative
Agent with any necessary endorsement. Upon the request of the Administrative
Agent, each Credit Party shall execute and deliver to the Administrative Agent
any additional assignments and other documents as may be necessary to enable the
Administrative Agent to directly collect the proceeds as set forth herein.

Section 5.4 Compliance with Laws. Each Credit Party shall, and shall cause each
of its Restricted Subsidiaries to, comply with Legal Requirements (including
Environmental Laws) which are applicable to such Restricted Entity, including
the operations, business or Property of such Restricted Entity and maintain all
related permits necessary for the ownership and operation of such Restricted
Entity’s Property and business, except in any case where the failure to so
comply could not reasonably be expected to result in a Material Adverse Change.

Section 5.5 Taxes. Each Credit Party shall, and shall cause each of its
Restricted Subsidiaries to pay and discharge all material taxes, assessments,
and other charges and claims related thereto imposed on the Company or any of
its Restricted Subsidiaries prior to the date on which penalties attach other
than any tax, assessment, charge, or claims which is being contested in good
faith and for which adequate reserves have been established in compliance with
GAAP.

Section 5.6 Security. The Company agrees that at all times, the Administrative
Agent shall have an Acceptable Security Interest in the applicable Collateral as
required below, subject to any permitted releases pursuant to the terms of this
Agreement or the Security Documents, to secure the performance and payment of
the Secured Obligations as set forth in the Security Documents. The Company
shall, and shall cause each Restricted Subsidiary to take such actions,
including execution and delivery of any Security Documents necessary to create,
perfect and maintain an Acceptable Security Interest in favor of the
Administrative Agent in the following Property, whether now owned or hereafter
acquired: (i) all Equity Interests issued by any Subsidiary (other than a
Foreign Subsidiary) and held by a Wholly-Owned Domestic Restricted Subsidiary or
the Company; (ii) (x) 100% of Equity Interests issued by First Tier Foreign
Subsidiaries which are owned by the Company or any Wholly-Owned Domestic
Restricted Subsidiary and are not Voting Securities and (y) 65% of the
outstanding Voting Securities issued by any such First Tier Foreign Subsidiary;
and (iii) all other Properties of the Credit Parties and their respective
Domestic Restricted Subsidiaries, in each case, other than Excluded Collateral.

 

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For the avoidance of doubt, notwithstanding the preceding provisions of this
Section 5.6 or any other provisions of the Credit Documents, none of the
Property of any Foreign Subsidiary shall ever serve as Collateral or other
security for the U.S. Obligations and no actions outside of the United States
shall be required with respect to any Collateral granted by the U.S. Credit
Parties other than the filing of a PPSA or similar financing statement with
respect to Equity Interests in First Tier Foreign Subsidiaries which are owned
by the Company or any Wholly-Owned Domestic Restricted Subsidiary.

Section 5.7 Designations with Respect to Subsidiaries.

(a) Any Subsidiary formed or acquired after the Closing Date shall be deemed a
Restricted Subsidiary unless initially designated by the Company as an
Unrestricted Subsidiary in accordance with the terms of this Section 5.7(a) or
subsequently designated by the Company as an Unrestricted Subsidiary in
accordance with Section 5.7(b). No Borrower may acquire or form any new
Subsidiary or initially designate such new Subsidiary as an Unrestricted
Subsidiary unless each of the following conditions are satisfied in connection
with such acquisition, formation or designation:

(i) immediately before and after giving effect to such acquisition, formation,
or designation, no Default shall exist and be continuing;

(ii) the Company shall deliver to the Administrative Agent each of the items set
forth in Schedule 5.7 attached hereto with respect to each Subsidiary created
after the Closing Date (and not initially designated as an Unrestricted
Subsidiary) to the extent required in Schedule 5.7;

(iii) the Company shall otherwise be in compliance with Section 5.6 and
Section 6.3; and

(iv) such designation shall occur either (A) concurrently with the acquisition
or formation of such new Subsidiary or (B) prior to such new Subsidiary becoming
a Credit Party.

(b) The Company may designate any Restricted Subsidiary that was created or
acquired after the Closing Date as an Unrestricted Subsidiary and may designate
any Unrestricted Subsidiary as a Restricted Subsidiary; provided that,
(i) before and after giving effect to such designation, no Default shall exist,
(ii) if such designation is to make a Restricted Subsidiary an Unrestricted
Subsidiary, the Company can demonstrate compliance with Section 6.1 -
Section 6.3, Section 6.7, Section 6.8, Section 6.14, Section 6.16 - Section 6.18
as of the date of such designation, both before and after giving effect to such
designation, in such detail as is reasonably acceptable to the Administrative
Agent, (iii) if such designation is to make a Credit Party an Unrestricted
Subsidiary, no such designation may be made if such Credit Party has received
from any Restricted Entity a Disposition that would not have been permitted
under Section 6.7 had such Credit Party been an Unrestricted Subsidiary at the
time of such Disposition, (iv) if such designation is to make an Unrestricted
Subsidiary a Restricted Subsidiary, such Restricted Subsidiary shall deliver to
the Administrative Agent each of the items set forth in Schedule 5.7 to the
extent required therein, (v) only two such designations may be made as to any
particular Subsidiary, (vi) such designation shall be made effective as of a
quarter end, and (vii) at the time of any such designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, Restricted Subsidiaries shall account
for at least eighty-five percent (85%) of the Tangible Net Assets and the Net
Income of the Company, each on a consolidated basis.

 

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(c) The Company shall deliver to the Administrative Agent (i) with respect to
any designation of an Unrestricted Subsidiary, prior to or concurrently with
such designation and (ii) otherwise, within twenty (20) Business Days of any
such designation, a certificate of a Responsible Officer of the Company stating
the effective date of such designation and stating that the applicable foregoing
conditions have been satisfied.

Section 5.8 Books and Records; Inspection; Field Examinations. Each Credit Party
shall and shall cause each Restricted Subsidiary to maintain, in all material
respects, proper, complete and consistent books of record with respect to such
Person’s operations, affairs, and financial condition. Each Credit Party will
permit any representatives designated by the Administrative Agent or any Lender
(including employees of the Administrative Agent, any Lender or any consultants,
accountants, lawyers, agents and appraisers retained by the Administrative
Agent), upon reasonable prior notice, (a) once during any 12-month period and
(b) one additional time (for a total of two (2) such times during any 12-month
period) at any time when Availability falls below the greater of (i)
$26.25 million and (ii) 17.5% of the lesser of the Aggregate Commitment and
Aggregate Borrowing Base, to conduct at such Credit Party’s premises field
examinations of such Credit Party’s assets, liabilities, books and records,
including examining and making extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants. Each Credit Party acknowledges that the Administrative Agent, after
exercising its rights of inspection, may prepare and distribute to the Lenders
certain Reports pertaining to such Credit Party’s assets for internal use by the
Administrative Agent and the Lenders. The Applicable Borrower shall be
responsible for the costs and expenses of (a) one (1) field examination during
any 12-month period and (b) one (1) additional field examination (for a total of
two (2) such field examinations during any 12-month period) conducted at any
time when Availability falls below the greater of (i) $26.25 million and (ii)
17.5% of the lesser of the Aggregate Commitment and Aggregate Borrowing Base.
Additionally, there shall be no limitation on the number or frequency of field
examinations if an Event of Default has occurred and is continuing, and the
Applicable Borrower shall be responsible for the costs and expenses of any field
examinations conducted while an Event of Default has occurred and is continuing.

Section 5.9 Maintenance of Property. Each Credit Party shall, and shall cause
each of its Restricted Subsidiaries to, maintain their owned, leased, or
operated material Property, taken as a whole, in good condition and repair,
except for normal wear and tear; and shall abstain from, and cause each of its
Restricted Subsidiaries to abstain from, knowingly or willfully permitting the
commission of waste or other injury, destruction, or loss of natural resources,
or the occurrence of pollution, contamination, or any other condition in, on or
about the owned or operated Property involving the Environment that could
reasonably be expected to result in Response activities and that could
reasonably be expected to cause a Material Adverse Change.

Section 5.10 Controlled Accounts

(a) Within the time periods set forth in Section 2.5(b), each U.S. Credit Party
shall execute and deliver to the Administrative Agent Account Control Agreements
for each Deposit Account (other than Excluded Accounts) maintained by such U.S.
Credit Party (each, a “U.S. Collateral Deposit Account”).

(b) Within the time periods set forth in Section 2.5(b), each Canadian Credit
Party shall execute and deliver to JPMCB Canada as the Administrative Agent, an
Account Control Agreement for each Deposit Account (other than Excluded
Accounts) maintained by such Canadian Credit Party (each, a “Canadian Collateral
Deposit Account” and collectively with each U.S. Collateral Deposit Account, the
“Collateral Deposit Accounts”).

 

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(c) Subject to the time periods referenced above, each Credit Party shall direct
all of its Account Debtors to forward payments directly to Collateral Deposit
Accounts subject to Account Control Agreements. During a Cash Dominion Period
the Administrative Agent shall have sole access to the Collateral Deposit
Accounts and each Credit Party shall take all actions necessary to grant the
Administrative Agent such access. At no time during a Cash Dominion Period shall
any Credit Party remove any item from a Collateral Deposit Account without the
Administrative Agent’s prior written consent. If any Credit Party should refuse
or neglect to notify any Account Debtor to forward payments directly to a
Collateral Deposit Account subject to an Account Control Agreement after notice
from the Administrative Agent, the Administrative Agent shall be entitled to
make such notification directly to such Account Debtor. If notwithstanding the
foregoing instructions, any Credit Party receives any proceeds of any
Collateral, such Credit Party shall receive such payments as the Administrative
Agent’s trustee, and shall promptly deposit all cash, checks or other similar
payments related to or constituting payments made in respect of Collateral
received by it to a Collateral Deposit Account. During a Cash Dominion Period,
all funds deposited into any Collateral Deposit Account subject to a Collateral
Deposit Account, as applicable, will be swept on a daily basis into a U.S.
collection account maintained by such Credit Party with the Administrative Agent
(the “U.S. Concentration Account”) or a Canadian collection account maintained
by such Credit Party with the Administrative Agent (the “Canadian Concentration
Account” and collectively with the U.S. Concentration Account, the
“Concentration Accounts” and each a “Concentration Account”). The Administrative
Agent shall hold and apply funds received into the Concentration Account as
provided by the terms of Section 2.10(b).

Section 5.11 Appraisals. At any time that the Administrative Agent requests,
each Borrower will, and will cause each Restricted Subsidiary to, provide the
Administrative Agent with appraisals or updates thereof of its Inventory
prepared on a basis satisfactory to the Administrative Agent, such appraisals
and updates to include, without limitation, information required by any
applicable Requirement of Law. The Applicable Borrower shall be responsible for
the costs and expenses of (a) one Inventory appraisal during any period of
twelve (12) consecutive calendar months and (b) one additional Inventory
appraisal in the event that Availability falls below the greater of (i)
$26.25 million and (ii) 17.5% of the lesser of the Aggregate Commitment and
Aggregate Borrowing Base. Additionally, there shall be no limitation on the
number or frequency of appraisals if an Event of Default has occurred and is
continuing, and the Applicable Borrower shall be responsible for the costs and
expenses of any such appraisals conducted while an Event of Default has occurred
and is continuing.

Section 5.12 Post-Closing; Further Assurances.

(a) For a period of sixty (60) days after the Closing Date (or such later date
as the Administrative Agent may agree), the Applicable Borrower shall exert
commercially reasonable efforts to obtain each Collateral Access Agreement to be
provided pursuant to Section 4.12 of the Security Agreement.

(b) Subject to any applicable Requirement of Law, each U.S. Credit Party will
cause each of its U.S. Domestic Subsidiaries that is a Restricted Subsidiary,
other than an Excluded Subsidiary, formed or acquired after the date of this
Agreement to become a U.S. Credit Party by executing a Guaranty Agreement. Upon
execution and delivery thereof, each such U.S. Domestic Subsidiary (i) shall
automatically become a Guarantor hereunder and thereupon shall have all of the
rights, benefits, duties and obligations in such capacity under the Credit
Documents and (ii) will grant Liens to the Administrative Agent, for the benefit
of the Administrative Agent and the other Secured Parties, in any Property of
such Credit Party which constitutes Collateral. Subject to any applicable
Requirement of Law, the Canadian Borrower will cause each of its Subsidiaries,
other than an Excluded Subsidiary, formed or acquired after the date of this
Agreement to become a Canadian Credit Party by executing a guaranty of the
Canadian Obligations.

 

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(c) If any material assets (other than material assets of a type that would
constitute Excluded Collateral) are acquired by any Credit Party after the
Closing Date (other than assets constituting Collateral under the U.S. Security
Agreement or the Canadian Security Agreement that become subject to the Lien
thereunder upon acquisition thereof), the Borrower Representative will
(i) notify the Administrative Agent thereof and, if requested by the
Administrative Agent or the Required Lenders, cause such assets to be subjected
to a Lien securing the Secured Obligations or Canadian Secured Obligations, as
the case may be, and (ii) take, and cause each applicable Credit Party to take,
such actions as shall be necessary or reasonably requested by the Administrative
Agent to grant and perfect such Liens, all at the expense of the Applicable
Borrower.

(d) Within sixty (60) days after the Closing Date (subject to extension as may
be agreed by the Administrative Agent in its sole discretion), (i) the Canadian
Borrower will cause Magnum Oil Tools Canada Ltd. ( “Magnum Canada”) to deliver
to the Administrative Agent stock certificates and stock powers executed in
blank, and any other documents, agreements or instruments necessary to perfect
an Acceptable Security Interest in the Collateral and (ii) the Administrative
Agent shall have received a customary perfection opinion from local counsel to
the Canadian Borrower, in form and substance reasonably acceptable to the
Administrative Agent, related to the pledged Equity Interests in Magnum Canada.

ARTICLE VI

NEGATIVE COVENANTS

Commencing on the Closing Date and until Payment in Full, each Borrower
covenants and agrees with the Lenders that it shall and shall cause the
Restricted Subsidiaries to comply with the following covenants:

Section 6.1 Debt. No Credit Party shall, nor shall it permit any of its
Restricted Subsidiaries to, create, assume, incur, suffer to exist, or in any
manner become liable, directly, indirectly, or contingently in respect of, any
Debt other than the following (collectively, the “Permitted Debt”):

(a) (i) the Obligations, and (ii) the Banking Services Obligations;

(b) Debt existing on the date hereof, including Debt relating to the Senior
Notes, and set forth in Schedule 6.1 and extensions, refinancings, refundings,
replacements and renewals of any such Debt subject to the last sentence of this
Section 6.1.

(c) intercompany Debt incurred by any Credit Party owing to any other Credit
Party; so long as such Debt is also permitted as an Investment under
Section 6.3(e)(i); provided that, (i) to the extent such Debt is evidenced by an
unsecured intercompany note, the Administrative Agent shall have a first
priority Lien in such intercompany note and the receivable evidenced thereby and
(ii) such Debt shall be subordinated to the Obligations on terms reasonably
acceptable to the Administrative Agent;

(d) intercompany Debt incurred by any Foreign Restricted Subsidiary that is not
a Credit Party and owing to any Credit Party or Restricted Subsidiary; provided
that, (i) such Debt is evidenced by an unsecured intercompany note, (ii) to the
extent owed to a Credit Party, the Administrative Agent shall have a first
priority Lien in such intercompany note and the receivable evidenced thereby,
and (iii) the aggregate outstanding amount of all Debt pursuant to this clause
(d) does not exceed (x) $5.0 million and (y) an additional $5.0 million to the
extent that the Payment Conditions are met at the time of such incurrence;

 

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(e) purchase money debt or Capital Leases (including extensions, refinancings,
refundings, replacements and renewals of thereof subject to the last paragraph
of this Section 6.1, and including those set forth on Schedule 6.1) in an
aggregate outstanding principal amount not to exceed $40.0 million at any time;

(f) Swap Agreements permitted under Section 6.16;

(g) Debt arising from the endorsement of instruments for collection in the
ordinary course of business;

(h) Debt incurred by any Foreign Restricted Subsidiary under overdraft lines of
credit made available for the purpose of supporting the operations of any
Foreign Restricted Subsidiary in any jurisdiction that is not a Sanctioned
Entity (and including extensions, refinancings, refundings, replacements and
renewals thereof subject to the last paragraph of this Section 6.1); provided,
that the aggregate outstanding principal amount of such Debt permitted under
this clause (h) shall not exceed $5.0 million at any time;

(i) unsecured Debt of the Company evidenced by bonds, debentures, notes or other
similar instruments (including extensions, refinancings, refundings,
replacements and renewals of thereof subject to the last sentence of this
Section 6.1); provided that, (i) the scheduled maturity date of such Debt shall
not be earlier than one year after the Maturity Date, (ii) such Debt shall not
have any amortization or other requirement to purchase, redeem, retire, defease
or otherwise make any payment in respect thereof, other than at scheduled
maturity thereof and mandatory prepayments which are customary with respect to
such type of Debt and that are triggered upon change in control and sale of all
or substantially all assets, (iii) the aggregate amount of such Debt shall not
exceed $200.0 million, (iv) the Company’s pro forma Leverage Ratio after giving
effect to the incurrence or issuance of such Debt for the four most recent
fiscal quarters for which financial statements are available shall be less than
2.50:1:00 and (v) the agreements and instruments governing such Debt shall not
contain (A) (x) any financial maintenance covenants that are more restrictive
than those in this Agreement, or (y) any other affirmative or negative covenants
that are, taken as a whole, materially more restrictive than those set forth in
this Agreement; provided that, the inclusion of any covenant that is customary
with respect to such type of Debt and that is not found in this Agreement shall
not be deemed to be more restrictive for purposes of this clause (A), (B) any
restriction on the ability of the Company or any of its Restricted Subsidiaries
to amend, modify, restate or otherwise supplement this Agreement or the other
Credit Documents, (C) any restrictions on the ability of any Subsidiary of the
Company to guarantee the Secured Obligations (as such Secured Obligations may be
amended, supplemented, modified, or amended and restated), provided that, a
requirement that any such Subsidiary also guarantee such Debt shall not be
deemed to be a violation of this clause (C), (D) any restrictions on the ability
of any Restricted Subsidiary or the Company to pledge assets as collateral
security for the Secured Obligations (as such Secured Obligations may be
amended, supplemented, modified, or amended and restated), or (E) any
restrictions on the ability of any Restricted Subsidiary or the Company to incur
Debt under this Agreement or any other Credit Document;

(j) any guaranty of Debt so long as such underlying Debt is otherwise permitted
hereunder;

(k) Debt of any Restricted Entity that is non-recourse to any other Restricted
Entity and that is assumed by such Restricted Entity in connection with any
Permitted Acquisition (or, if such Restricted Subsidiary is acquired as part of
such Permitted Acquisition, existing prior thereto) and the refinancing and
renewal thereof; provided, however, that (i) such Debt exists at the time of
such Permitted Acquisition at least in the amounts assumed in connection
therewith and is not drawn down, created or increased in contemplation of or in
connection with such Permitted Acquisition, (ii) that such Debt is not recourse
to any other Restricted Entity or any Property thereof prior to the date of such
Permitted Acquisition, and (iii) the aggregate principal amount of Debt
outstanding pursuant to this clause (k) shall not exceed $10.0 million at any
time;

 

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(l) Debt arising from the financing of insurance premium of any Restricted
Entity, so long as (i) such Debt shall not be in excess of the amount of the
unpaid cost of, and shall be incurred only to defer the cost of, such insurance
for the underlying term of such insurance policy, (ii) any unpaid amount of such
Debt is fully cancelled upon termination of the underlying insurance policy, and
(iii) the aggregate principal amount of Debt outstanding pursuant to this clause
(l) shall not exceed $10.0 million at any time;

(m) secured Debt not otherwise permitted under the preceding provisions of this
Section 6.1 (including extensions, refinancings, refundings, replacements and
renewals of thereof subject to the last sentence of this Section 6.1); provided
that, (i) the aggregate principal amount of such Debt shall not exceed
$10.0 million at any time and (ii) the Properties encumbered by any Lien
securing such Debt shall not be Collateral or any Property that is required to
be Collateral under Section 5.6;

(n) unsecured Debt not otherwise permitted under the preceding provisions of
this Section 6.1 (including extensions, refinancings, refundings, replacements
and renewals of thereof subject to the last sentence of this Section 6.1);
provided that, the aggregate outstanding principal amount of Debt permitted
under this clause (n) shall not exceed, at the time such Debt is incurred (after
giving effect to the incurrence thereof), $30.0 million;

(o) unsecured Debt constituting earn-out obligations, contingent obligations or
similar obligations of any Restricted Entity arising from or relating to the
Magnum Acquisition or any Permitted Acquisition; and

(p) Debt in respect of performance bonds, bid bonds, appeal bonds, surety bonds
and similar obligations, in each case provided in the ordinary course of
business.

Any extensions, refinancings, refundings, replacements and renewals of Debt as
permitted above in this Section 6.1 shall be subject to the following
conditions: (A) any such refinancing Debt is in an aggregate principal amount
not greater than the aggregate principal amount of the Debt being renewed or
refinanced, plus the amount of any premiums required to be paid thereon and
reasonable fees and expenses associated therewith and an amount equal to any
unutilized active commitment under the Debt being renewed or refinanced and
(B) the covenants, events of default, subordination and other provisions thereof
(including any guarantees thereof) shall be, in the aggregate, no less favorable
to the Company and its Subsidiaries than those contained in the Debt being
renewed or refinanced; provided that, the foregoing conditions are not, and
shall not be construed as, an increase in any dollar limit already provided in
Section 6.1 above nor an amendment of any specific requirement set forth in
Section 6.1 above, including the specific requirements under clause (i) above.

Section 6.2 Liens. No Credit Party shall, nor shall it permit any of its
Restricted Subsidiaries to, create, assume, incur, or suffer to exist any Lien
on the Property of any Credit Party or any Restricted Subsidiary, whether now
owned or hereafter acquired, or assign any right to receive any income, other
than the following (collectively, the “Permitted Liens”):

(a) Liens securing the Secured Obligations pursuant to the Security Documents;

(b) Liens imposed by law, such as materialmen’s, mechanics’, carriers’,
workmen’s and repairmen’s liens, landlord’s liens and other similar liens, and
such Liens granted under contract with such materialmen, mechanic, carrier,
workmen, repairmen and landlord, in any case, arising in the ordinary course of
business securing obligations which are not overdue for a period of more than
thirty (30) days or are being contested in good faith by appropriate procedures
or proceedings and for which adequate reserves have been established;

 

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(c) Liens arising in the ordinary course of business out of pledges or deposits
under workers compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar legislation to secure
public or statutory obligations;

(d) Liens for taxes, assessments, or other governmental charges which are not
yet due and payable or which are being actively contested in good faith by
appropriate proceedings and for which adequate reserves have been established in
compliance with GAAP;

(e) undetermined or inchoate Liens, rights of distress and charges incidental to
current operations that have not at such time been filed or exercised, or of
which written notice has not been duly given in accordance with applicable law
or which although filed or registered, relate to obligations not due or
delinquent or, if due, the validity of such Lien is being contested in good
faith by appropriate actions diligently conducted;

(f) Liens securing purchase money debt or Capital Lease obligations permitted
under Section 6.1(e); provided that, each such Lien encumbers only the Property
purchased in connection with the creation of any such purchase money debt or the
subject of any such Capital Lease, and all proceeds thereof (including insurance
proceeds);

(g) Liens arising from PPSA or precautionary UCC financing statements regarding
operating leases;

(h) encumbrances consisting of easements, zoning restrictions, servitudes or
other restrictions on the use of real property that do not (individually or in
the aggregate) materially affect the value of the assets encumbered thereby or
materially impair the ability of any Credit Party to use such assets in its
business;

(i) Liens arising solely by virtue of any statutory or common law provision
relating to banker’s liens, rights of set-off or similar rights and remedies and
burdening only Deposit Accounts or other funds maintained with a depository
institution;

(j) Liens on cash or securities with an aggregate value not to exceed
$3.0 million pledged to secure performance of tenders, surety and appeal bonds,
government contracts, performance and return of money bonds, bids, trade
contracts, leases, statutory obligations, regulatory obligations and other
obligations of a like nature incurred in the ordinary course of business;

(k) judgment and attachment Liens not giving rise to an Event of Default,
provided that, (i) any appropriate legal proceedings which may have been duly
initiated for the review of such judgment shall not have been finally terminated
or the period within which such proceeding may be initiated shall not have
expired and (ii) no action to enforce such Lien has been commenced;

(l) Liens arising out of conditional sale, title retention, consignment or
similar arrangements for sale of goods entered into in the ordinary course of
business or Liens arising by operation of law under Article 2 of the UCC or by
contract in favor of a reclaiming seller of goods or buyer of goods (including
purchase money security interests in favor of vendors in the ordinary course of
business);

 

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(m) Liens solely on cash earnest money deposits made in connection with any
letter of intent or purchase agreement permitted hereunder;

(n) Lien arising by reason of deposits with or giving of any form of security to
any Governmental Authority for any purpose at any time as required by applicable
law as a condition to the transaction of any business or the exercise of any
privilege or license;

(o) Liens created pursuant to joint venture agreements and related documents (to
the extent requiring a Lien on the Equity Interest owned by the Company or
Restricted Entity in the applicable joint venture is required thereunder) having
ordinary and customary terms (including with respect to Liens) and entered into
in the ordinary course of business and securing obligations other than Debt;

(p) Liens encumbering Property of the Restricted Entities which is not
Collateral (as defined in the Security Agreements) or Property required to be
Collateral under Section 5.6 and securing Debt permitted under Section 6.1(m);

(q) Liens encumbering Properties not constituting Collateral (as defined in the
Security Agreements) of Foreign Subsidiaries securing Debt permitted under
Section 6.1(h);

(r) Liens on Property of a Person which becomes a Restricted Subsidiary after
the date hereof, to the extent that (i) such Liens are in existence at the time
such Person becomes a Restricted Subsidiary and were not created in anticipation
thereof and (ii) the Debt secured by such Liens does not thereafter increase in
amount; and

(s) Liens existing as of the date hereof and set forth on Schedule 6.2.

The permitted existence of any Permitted Liens or any other Liens shall not be
interpreted to expressly or impliedly subordinate any Liens granted in favor of
the collateral agent and the other Secured Parties as there is no intention to
subordinate the Liens granted in favor of the collateral agent and the other
Secured Parties.

Section 6.3 Investments. No Credit Party shall, nor shall it permit any of its
Restricted Subsidiaries to, make or hold (including pursuant to any merger with,
or as a Division Successor pursuant to the Division of, any Person that was not
a Wholly-Owned Subsidiary prior to such merger or Division) any Investment other
than the following (collectively, the “Permitted Investments”):

(a) Investments in the form of trade credit to customers of a Restricted Entity
arising in the ordinary course of business and represented by accounts from such
customers;

(b) Liquid Investments;

(c) Investments made prior to the Closing Date as specified in the attached
Schedule 6.3(c);

(d) Investments in any Unrestricted Subsidiary by any Credit Party (including
the creation of any Unrestricted Subsidiary in compliance with Section 5.7);
provided that, (i) the aggregate amount of all such Investments permitted under
this clause (d), does not exceed $5.0 million (other than as a result of
appreciation), (ii) if any Restricted Payments made by Unrestricted Subsidiaries
are included in the calculation of EBITDA of any period for any purpose under
this Agreement, then no Investments may be made by any Restricted Entity in such
applicable Unrestricted Subsidiary during such period (under this clause (d) or
otherwise) unless the Credit Party would otherwise be in compliance with the
applicable covenant without taking into account such Restricted Payments from
the Unrestricted Subsidiaries, and (iii) any such Investment that constitutes an
Equity Interest or intercompany Debt shall become Collateral to the extent
required by Section 5.6;

 

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(e) (i) Investments by any Credit Party in any other Credit Party,
(ii) Investments by any Domestic Restricted Subsidiary that is not Credit Party
in any other Domestic Restricted Subsidiary that is not Credit Party,
(iii) Investments by any Foreign Restricted Subsidiary in any other Foreign
Restricted Subsidiary and (iv) Investments by any Credit Party in a Foreign
Restricted Subsidiary to the extent permitted under Section 6.1(d);

(f) Investments in the form of Permitted Acquisitions; provided that, if such
Permitted Acquisition involves a Subsidiary, such Acquisition otherwise complies
with this Agreement, including Section 5.7 as to Wholly-Owned Restricted
Subsidiaries and clause (d) above with respect to Investments in any
Unrestricted Subsidiary;

(g) Investments consisting of the creation and de minimis (on both an individual
basis and on an aggregate basis with any other entities capitalized pursuant to
this clause (e)) initial capitalization of any additional Restricted
Subsidiaries in compliance with Section 5.6 and Section 5.7;

(h) loans or advances to (x) directors, officers and employees of any Restricted
Entity for expenses or other payments incident to such Person’s employment or
association with any Restricted Entity and (y) former owners of Equity Interests
in any Restricted Entity in connection with or relating to their acquisition of
Equity Interests in such Restricted Entity; provided that, the aggregate amount
of such loans and advances pursuant to this Section 6.3(h) shall not exceed
$5.0 million;

(i) Investments (including debt obligations and Equity Interests) and other
assets received in connection with the bankruptcy or reorganization of suppliers
and customers or in settlement or delinquent obligations of, or other disputes
with, customers and suppliers arising in the ordinary course of business or
received upon the foreclosure with respect to any secured Investment or other
transfer of title with respect to any secured Investment;

(j) Investments in the form of mergers, amalgamations and consolidations of
Restricted Entities in compliance with Section 6.7(a); provided that, if such
Investment involves a Subsidiary, such Investment otherwise complies with this
Agreement, including Section 5.7 as to Restricted Subsidiaries and clause (d)
above with respect to any Subsidiary that is not a Credit Party;

(k) Capital Expenditures and Investments to the extent funded exclusively with
Equity Issuance Proceeds (of Equity Interests not constituting Disqualified
Equity Interests);

(l) Investments with respect to which the Payment Conditions are satisfied on a
pro forma basis for such Investment; and

(m) other Investments in an aggregate amount not to exceed $7.5 million (other
than as a result of appreciation), during the term hereof.

Section 6.4 Acquisitions. No Credit Party shall, nor shall it permit any of its
Restricted Subsidiaries to, make an Acquisition in a single transaction or
related series of transactions other than:

(a) mergers, amalgamations and consolidations permitted by Section 6.7(a);

(b) any Acquisition approved by the Required Lenders; or

 

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(c) any Acquisition with respect to which the Payment Conditions are satisfied
on a pro forma basis.

Section 6.5 Agreements Restricting Liens. No Credit Party shall, nor shall it
permit any of its Restricted Subsidiaries to, create, incur, assume or permit to
exist any contract, agreement or understanding which in any way prohibits or
restricts the granting, conveying, creation or imposition of any Lien on any of
its Property, whether now owned or hereafter acquired, to secure the Secured
Obligations or restricts any Restricted Subsidiary from paying Restricted
Payments to any Borrower, or which requires the consent of or notice to other
Persons in connection therewith other than:

(a) this Agreement and the Security Documents;

(b) agreements governing Debt permitted by Section 6.1(e) to the extent such
restrictions govern only the assets financed pursuant to such Debt and the
proceeds thereof;

(c) agreements governing Debt permitted by Section 6.1 (k), and (m) to the
extent such restrictions do not apply to Collateral or Properties which are
required to be Collateral under Section 5.6 and such agreements do not require
the direct or indirect granting of any Lien securing such Debt or other
obligation by virtue of the granting of Liens on or pledge of Collateral to
secure the Secured Obligations;

(d) any prohibition or limitation that (i) exists pursuant to applicable
requirements of a Governmental Authority, (ii) restricts subletting or
assignment of leasehold interests contained in any lease governing a leasehold
interest of the Company or a Restricted Subsidiary and customary provisions in
other contracts restricting assignment thereof, or (iii) exists in any agreement
in effect at the time a Subsidiary becomes a Restricted Subsidiary of the
Company, so long as such agreement was not entered into in contemplation of such
Person becoming a Restricted Subsidiary; and

(e) any prohibition or limitation that exists in any contract to which a Credit
Party is a party on the date hereof so long as (i) such prohibition or
limitation is generally applicable and does not specifically address any of the
Secured Obligations or the Liens granted under the Credit Documents, and
(ii) the noncompliance of such prohibition or limitation would not reasonably be
expected to be adverse to any Secured Party.

Section 6.6 Use of Proceeds; Use of Letters of Credit. No Credit Party shall,
nor shall it permit any of its Subsidiaries to (a) use the proceeds of the Loans
for any purpose other than (i) to repay the Existing Nine Debt, (ii) to pay a
portion of the consideration for the Magnum Acquisition, (iii) for the payment
of fees and expenses related to the Transactions, (iv) for working capital
purposes of the Company and the Restricted Subsidiaries and (v) for other
general corporate purposes of the Company and the Restricted Subsidiaries,
including Permitted Acquisitions, Permitted Investments and permitted Restricted
Payments; (b) use the proceeds of the Letters of Credit for any purposes other
than (i) working capital purposes of the Company and the Restricted Subsidiaries
and (ii) other general corporate purposes of the Company and the Restricted
Subsidiaries. No Credit Party shall, nor shall it permit any of its Subsidiaries
to, directly or indirectly, use any part of the proceeds of the Loans or the
Letters of Credit for any purpose which violates, or is inconsistent with,
Regulations T, U, or X. Neither Borrower will request any Borrowing or Letter of
Credit, and each Borrower shall not use, and shall ensure that their
Subsidiaries and its or their respective directors, officers, employees and
agents shall not use, the proceeds of any Borrowing or Letter of Credit (A) in
furtherance of an offer, payment, promise to pay, or authorization of the
payment or giving of money, or anything else of value, to any Person in
violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing
or facilitating any activities, business or transaction of or with any
Sanctioned Person, or in any Sanctioned Entity, or (C) in any manner that would
result in the violation of any Sanctions applicable to any party hereto.

 

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Section 6.7 Corporate Actions; Accounting Changes.

(a) No Credit Party shall, nor shall it permit any of its Restricted
Subsidiaries to, merge, amalgamate or consolidate with or into, any other Person
or consummate a Division as the Dividing Person after the Closing Date, except:

(i) that the Company may merge or amalgamate with any of its Wholly-Owned
Restricted Subsidiaries and any Credit Party may merge, amalgamate or be
consolidated with or into any other Credit Party; provided that, immediately
after giving effect to any such proposed transaction no Default would exist and,
in the case of any such merger or amalgamation to which the Company is a party,
the Company is the surviving entity;

(ii) that any Foreign Restricted Subsidiary may merge, amalgamate or be
consolidated with or into any other Foreign Restricted Subsidiary; provided
that, immediately after giving effect to any such proposed transaction no
Default would exist;

(iii) that any Restricted Entity that is not a Credit Party may merge,
amalgamate or consolidate with any other Restricted Entity that is not a Credit
Party;

(iv) any other merger, amalgamation or consolidation to effect a Permitted
Acquisition under Section 6.4(c), subject to the conditions set forth therein;

(v) any Restricted Subsidiary may dissolve, liquidate or wind up its affairs at
any time; provided, that (A) the assets of any such dissolving Restricted
Subsidiary that is a Domestic Subsidiary become owned by the Company or another
Domestic Restricted Subsidiary and (B) to the extent that the dissolving
Restricted Subsidiary is a Credit Party, the assets of any such dissolving
Restricted Subsidiary that is a Credit Party become owned by the Company or
another Credit Party and provided further that such dissolution, liquidation or
winding up, as applicable, could not reasonably be expected to have a Material
Adverse Change. Any such Subsidiary may effect the same by merger, amalgamation
or consolidation; and

(vi) any Restricted Subsidiary that is an LLC may consummate a Division as the
Dividing Person if, immediately upon the consummation of the Division, the
assets of the applicable Dividing Person are held by one or more Restricted
Subsidiaries at such time, or, with respect to assets not so held by one or more
Restricted Subsidiaries, such Division in the aggregate would otherwise result
in a Disposition permitted by Section 6.8.

(b) No Credit Party shall, nor shall it permit any of its Restricted
Subsidiaries to, (i) without at least fifteen (15) days (or such shorter period
as agreed to by the Administrative Agent) prior written notice to the
Administrative Agent, change its name, change its jurisdiction of incorporation,
formation or organization, change its organizational identification number or
reorganize in another jurisdiction, (ii) amend, supplement, modify or restate
its articles or certificate of incorporation or formation, limited partnership
agreement, bylaws, limited liability company agreements, or other equivalent
organizational documents, in any manner that could reasonably be expected to be
materially adverse to the Lenders, (iii) change the method of accounting
employed in the preparation of the financial statements referred to in
Section 4.4 unless such changes are required to conform to GAAP or such changes
are to conform the accounting practices of the Company and its Restricted
Subsidiaries and notice of such changes have been delivered to the
Administrative Agent prior to effecting such changes or (iv) change the fiscal
year end of a Borrower.

 

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(c) The Company shall not reorganize in any jurisdiction other than the United
States, any State thereof or the District of Columbia. The Canadian Borrower
shall not reorganize in any jurisdiction other than Canada or any province or
territory thereof.

Section 6.8 Disposition of Assets. No Credit Party shall, nor shall it permit
any of its Restricted Subsidiaries to, make a Disposition other than:

(a) Disposition by any Restricted Entity (other than a Credit Party) of any of
its Properties to any Credit Party; provided that, at the reasonable request of
the Administrative Agent, the receiving Credit Party shall ratify, grant and
confirm the Liens on such assets (and any other related Collateral) pursuant to
documentation reasonably satisfactory to the Administrative Agent;

(b) Disposition by any Credit Party of any of its Properties to any other Credit
Party; provided that (i) any Disposition by a U.S. Credit Party to a Canadian
Credit Party must be made in the ordinary course of business and (ii) at the
reasonable request of the Administrative Agent, the receiving Credit Party shall
ratify, grant and confirm the Liens on such assets (and any other related
Collateral) pursuant to documentation reasonably satisfactory to the
Administrative Agent;

(c) Disposition by any Restricted Entity that is not a Credit Party of any of
its Properties to any Domestic Restricted Subsidiary that is not a Credit Party;
provided that, if such Property is an Equity Interest that is Collateral or
otherwise required to be Collateral under Section 5.6, then at the reasonable
request of the Administrative Agent, the receiving Restricted Entity (other than
a Foreign Subsidiary) shall ratify, grant and confirm the Liens on such Equity
Interest (and any other related Collateral) pursuant to documentation reasonably
satisfactory to the Administrative Agent;

(d) Sale of Inventory in the ordinary course of business and Disposition of cash
or Liquid Investments in the ordinary course of business;

(e) Disposition of worn out, obsolete or surplus Property in the ordinary course
of business and the abandonment or other Disposition of patents, trademarks and
copyrights that, in the reasonable judgment of the Company and its Restricted
Subsidiaries, should be replaced or is no longer economically practicable to
maintain or useful in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole;

(f) mergers, amalgamations and consolidations in compliance with Section 6.7(a);

(g) Dispositions of Permitted Investments;

(h) assignments and licenses of patents, trademarks or copyrights of any
Restricted Entity in the ordinary course of business;

(i) Disposition of any assets required under Legal Requirements;

(j) Dispositions of Equipment by any Credit Party in the ordinary course of
business the proceeds of which are reinvested in the acquisition of Equipment of
comparable value and type within ninety (90) days and on which the
Administrative Agent has an Acceptable Security Interest;

 

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(k) Dispositions of Equipment by any Foreign Restricted Subsidiary in the
ordinary course of business;

(l) Dispositions of Equity Interests in a joint venture or Unrestricted
Subsidiary;

(m) leases of real or personal property in the ordinary course of business;

(n) Dispositions of Property permitted by Section 6.15; and

(o) Disposition of Properties not otherwise permitted under the preceding
clauses of this Section 6.8; provided that, such Disposition, taken together
with all such other Dispositions completed since the Closing Date, does not
exceed ten percent (10%) of the Tangible Net Assets in the aggregate and
calculated at the time of such subject Disposition; provided, that, at least
seventy-five percent (75%) of the consideration for each Disposition effected
pursuant to this Section 6.8(n) shall be cash or Liquid Investments.

Section 6.9 Restricted Payments. No Credit Party shall, nor shall it permit any
of its Restricted Subsidiaries to make any Restricted Payments except that:

(a) (i) the Restricted Subsidiaries of a Borrower may make Restricted Payments
to another Borrower or any other Credit Party, and (ii) the Foreign Restricted
Subsidiaries may make Restricted Payments to any Credit Party;

(b) so long as no Default exists or would result from the making of such
Restricted Payment, a Borrower or any Restricted Subsidiary may (i) make cash
Restricted Payments to existing and former officers, directors, and employees of
the Company or such Restricted Subsidiary; provided, that such Restricted
Payments are in consideration for the retirement, purchase, or redemption of any
of the Equity Interests of such Restricted Entity, or any option, warrant or
other right to purchase or acquire such Equity Interest, in any event, held by
such Person and (ii) make repurchases, redemptions or exchanges of Equity
Interests of the Company deemed to occur upon exercise of stock options or
exchange of exchangeable shares if such Equity Interests represent a portion of
the exercise price of such options and may make repurchases, redemptions or
other acquisitions or retirements for value of Equity Interests of the Company
made in lieu of withholding taxes in connection with any exercise or exchange of
stock options, warrants or other similar rights, in an aggregate amount with
respect to this clause (b) not to exceed $5.0 million in the aggregate per
fiscal year; provided that any amounts permitted but not used pursuant to this
clause (b) may be carried over to next fiscal year but not thereafter.

(c) a Borrower may declare and pay dividends with respect to its common stock
payable solely in additional shares of its common stock, and, with respect to
its preferred stock, payable solely in additional shares of such preferred stock
(not constituting Disqualified Equity Interests) or in shares of its common
stock;

(d) the Company may make Restricted Payments to purchase, redeem, retire, or
otherwise acquire its Equity Interests, to the extent such Restricted Payments
are made from the substantially concurrent receipt by the Company of Net
Proceeds from capital contributions or the substantially concurrent issuance of
new Equity Interests of the Company (not constituting Disqualified Equity
Interests); and

(e) the Company may make Restricted Payments so long as the Payment Conditions
are satisfied.

 

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Section 6.10 Certain Payments, Prepayments and Redemptions of Debt. No Credit
Party will, nor will it permit any Restricted Subsidiary to, make, directly or
indirectly, any payment or other distribution (whether in cash, securities or
other property) of or in respect of principal of or interest on any Debt, or any
payment or other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any Debt,
except:

(a) payment of Debt created under the Loan Documents;

(b) payment of scheduled payments, required payments and redemptions as and when
due in respect of any Debt permitted under Section 6.1;

(c) refinancings of Debt to the extent permitted by Section 6.1;

(d) payment of secured Debt that becomes due as a result of the voluntary sale
or transfer of the property or assets securing such Debt to the extent such sale
or transfer is permitted by the terms of Section 6.5; and

(e) the Credit Parties may made payments in respect of Debt not otherwise
permitted by this Section 6.10 so long as the Payment Conditions are satisfied.

Section 6.11 Affiliate Transactions. No Credit Party shall, nor shall it permit
any of its Restricted Subsidiaries to, directly or indirectly, enter into or
permit to exist any transaction or series of transactions (including, but not
limited to, the purchase, sale, lease or exchange of Property, the making of any
Investment, the giving of any guaranty, the assumption of any obligation or the
rendering of any service) with any of their Affiliates that are not Restricted
Entities other than:

(a) such transaction or series of transactions are arm’s length transactions
entered into on terms that are not materially less favorable to the Borrowers or
any Restricted Subsidiary, as applicable, than those that could be obtained in a
comparable arm’s length transaction with a Person that is not such an Affiliate;

(b) the agreements described on Schedule 6.11; provided that, the terms thereof
may not be amended, supplemented or otherwise modified unless such amended,
supplemented or otherwise modified terms complies with clause (a) above;

(c) the Restricted Payments permitted under Section 6.8;

(d) Permitted Investments in the form of Equity Interests of Subsidiaries,
including the purchase or acquisition thereof and capital contributions in
connection therewith; and

(e) reasonable and customary director, officer and employee compensation
(including bonuses) and other benefits (including retirement, health, stock
option and other benefit plans).

Section 6.12 Line of Business. No Credit Party shall, and shall not permit any
of its Restricted Subsidiaries to, change the character of the Company’s and its
Restricted Subsidiaries collective business as conducted on the date of this
Agreement, or engage in any type of business not reasonably related to, or a
normal extension of, the Company’s and its Restricted Subsidiaries collective
business as presently conducted.

 

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Section 6.13 Hazardous Materials. No Credit Party (a) shall, nor shall it permit
any of its Subsidiaries to, create, handle, transport, use, or dispose of any
Hazardous Substance or Hazardous Waste, except in the ordinary course of its
business and except in compliance with Environmental Law other than to the
extent that such non-compliance could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change or in any
liability on the Lenders or the Administrative Agent, and (b) shall, nor shall
it permit any of its Subsidiaries to, Release any Hazardous Substance or
Hazardous Waste into the Environment and shall not permit any Credit Party’s or
any Subsidiary’s Property to be subjected to any Release of Hazardous Substance
or Hazardous Waste, except in compliance with Environmental Law other than to
the extent that such non-compliance could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change or in any material
liability on the Lenders or the Administrative Agent.

Section 6.14 Compliance with ERISA. Except for matters that could not reasonably
be expected to cause a Material Adverse Change, no Credit Party shall, nor shall
it permit any of its Subsidiaries to, directly or indirectly: (a) engage in any
transaction in connection with which the Company or any Subsidiary could be
subjected to either a civil penalty assessed pursuant to Section 502(c), (i) or
(l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code;
(b) terminate, or permit any member of the Controlled Group to terminate, any
Plan in a manner, or take any other action with respect to any Plan, which could
result in any liability to the Borrowers, any Subsidiary or any member of the
Controlled Group to the PBGC; (c) fail to make, or permit any member of the
Controlled Group to fail to make, full payment when due of all amounts which,
under the provisions of any Plan, agreement relating thereto or applicable law,
the Borrowers, a Subsidiary or member of the Controlled Group is required to pay
as contributions thereto; (d) permit to exist, or allow any Subsidiary or any
member of the Controlled Group to permit to exist, any accumulated funding
deficiency (or unpaid minimum required contribution for plan years after
December 31, 2007) within the meaning of Section 302 of ERISA or Section 412 of
the Code, whether or not waived, with respect to any Plan; (e) permit, or allow
any member of the Controlled Group to permit, the actuarial present value of the
benefit liabilities (as “actuarial present value of the benefit liabilities”
shall have the meaning specified in Section 4041 of ERISA) under any Plan that
is regulated under Title IV of ERISA to exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities; (f) contribute to or assume an
obligation to contribute to, or permit any member of the Controlled Group to
contribute to or assume an obligation to contribute to, any Multiemployer Plan;
(g) acquire, or permit any member of the Controlled Group to acquire, an
interest in any Person that causes such Person to become a member of the
Controlled Group if such Person sponsors, maintains or contributes to, or at any
time in the six-year period preceding such acquisition has sponsored,
maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan
that is subject to Title IV of ERISA under which the actuarial present value of
the benefit liabilities under such Plan exceeds the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities; (h) incur, or permit any member
of the Controlled Group to incur, a liability to or on account of a Plan under
Sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; or (i) contribute to or
assume an obligation to contribute to any employee welfare benefit plan, as
defined in Section 3(1) of ERISA, including, without limitation, any such plan
maintained to provide benefits to former employees of such entities, that may
not be terminated by such entities in their sole discretion at any time without
any liability.

Section 6.15 Sale and Leaseback Transactions. No Credit Party shall, nor shall
it permit any of its Restricted Subsidiaries to, sell or transfer to a Person
any Property, whether now owned or hereafter acquired, if at the time or
thereafter the Company or a Restricted Subsidiary shall lease as lessee such
Property or any part thereof or other Property which the Company or a Restricted
Subsidiary intends to use for substantially the same purpose as the Property
sold or transferred; provided that, the Restricted Entities may effect such
transactions with Property that is not Collateral so long as such transactions
do not exceed $10.0 million in the aggregate during the term hereof and if such
Restricted Entity is a Foreign Restricted Subsidiary, the cash proceeds of such
transaction are distributed or otherwise transferred to a Credit Party for
repayment of Loans pursuant to Section 2.5.

 

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Section 6.16 Limitation on Hedging. No Credit Party shall, nor shall it permit
any of its Restricted Subsidiaries to, (a) purchase, assume, or hold a
speculative position in any commodities market or futures market or enter into
any Swap Agreement for speculative purposes; or (b) be party to or otherwise
enter into any Swap Agreement which is entered into for reasons other than as a
part of its normal business operations as a risk management strategy and/or
hedge against changes resulting from market conditions related to the Borrowers’
or their Restricted Subsidiaries’ operations; provided that, for the avoidance
of doubt, any Restricted Entity may enter into Swap Agreement (A) to mitigate
risk to which such Restricted Entity has actual exposure, (B) to effectively
cap, collar or exchange interest rates (from floating to fixed rates, from fixed
to floating rates, from one floating rate to another floating rate or otherwise)
with respect to any interest-bearing liability or Investment of any Restricted
Entities and (C) consisting of spot and forward delivery foreign exchange
contracts entered into in the ordinary course of business and not for
speculative purposes.

Section 6.17 No Material Amendments. No Credit Party will, nor will they permit
any of their respective Restricted Subsidiaries to, amend, modify or waive any
of its rights under any agreement relating to any Material Debt if the effect of
such amendment, modification or waiver would be materially adverse to the
Lenders.

Section 6.18 Fixed Charge Coverage Ratio. At any time during a Financial
Covenant Trigger Period, the Fixed Charge Coverage Ratio of the Company, as of
the last day of the most recent fiscal quarter for which financial statements
are available shall not be less than 1.00 to 1.00.

Section 6.19 Establishment of Canadian Defined Benefit Plan. No Credit Party
shall, without the prior written consent of the Administrative Agent,
(a) establish or contribute to any Canadian Defined Benefit Plan, or (b) acquire
an interest in any Person if such Person sponsors, administers, maintains or
contributes to, or has any liability in respect of any Canadian Defined Benefit
Plan, unless such acquisition would not result in a Credit Party assuming any
liability or obligation in respect of any such Canadian Defined Benefit Plan.

ARTICLE VII

DEFAULT AND REMEDIES

Section 7.1 Events of Default. The occurrence of any of the following events
shall constitute an “Event of Default” under this Agreement and any other Credit
Document:

(a) Payment Failure. Any Credit Party (i) fails to pay any principal when due
under this Agreement or (ii) fails to pay, within three (3) Business Days of
when due, any other amount due under this Agreement or any other Credit
Document, including payments of interest fees, reimbursements, and
indemnifications;

(b) False Representation or Warranties. Any representation or warranty made or
deemed to be made by any Credit Party or any officer thereof in this Agreement,
in any other Credit Document or in any certificate delivered in connection with
this Agreement or any other Credit Document is incorrect, false or otherwise
misleading in any material respect (except that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof) at the time it was
made or deemed made;

 

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(c) Breach of Covenant. (i) Any breach by any Credit Party of any of the
covenants in Section 5.2(a), Section 5.2(e) or Article VI of this Agreement or
the corresponding covenants in any Guaranty; or (ii) any breach by any Credit
Party of any other covenant or agreement contained in this Agreement or any
other Credit Document and such breach shall remain unremedied for a period of
thirty (30) days after the earliest of (A) the date any Responsible Officer of
the Company has actual knowledge of such breach, (B) the date any Executive
Officer of any Restricted Subsidiary has actual knowledge of such breach, and
(C) the date written notice thereof shall have been given to the Company by any
Lender Party;

(d) Guaranties. (i) Any material provision in the Guaranties shall at any time
(before the Guaranties expire in accordance with their terms) and for any reason
be determined by a court of competent jurisdiction to cease to be in full force
and effect and valid and binding on the Guarantors party thereto or shall be
contested by any Guarantor party thereto or by a Borrower; (ii) the Company or
any Guarantor shall deny in writing that it has any liability or obligation
under the Guaranties; or (iii) any Guarantor shall cease to exist other than as
expressly permitted by the terms of this Agreement;

(e) Security Documents. Any Security Document shall at any time and for any
reason cease to create an Acceptable Security Interest with respect to any
Collateral having a fair market value, individually or in the aggregate, in
excess of $2.5 million (unless released or terminated pursuant to the terms of
such Security Document) or any material provisions thereof shall cease to be in
full force and effect and valid and binding on the Credit Party that is a party
thereto or any such Person shall so state in writing (unless released or
terminated pursuant to the terms of such Security Document);

(f) Cross-Default. (i) Any Restricted Entity shall fail to pay any principal of
or premium or interest on its Debt which is outstanding in a principal amount of
at least $15.0 million, individually or when aggregated with all such Debt of
the Restricted Entities so in default (but excluding Debt owing to the Lenders
hereunder) when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument relating to such Debt; (ii) any other event shall occur or
condition shall exist under any agreement or instrument relating to Debt of the
Restricted Entities which is outstanding in a principal amount of at least
$15.0 million individually or when aggregated with all such Debt of the
Restricted Entities so in default (but excluding Debt owing to the Lenders
hereunder), and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of,
or to permit the redemption of such Debt by the holder of, such Debt prior to
the stated maturity thereof; or (iii) any such Debt shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment); provided that, for purposes of this paragraph (f), the
“principal amount” of the obligations in respect of Swap Agreements at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that would be required to be paid if such Swap Agreements were terminated at
such time;

(g) Bankruptcy and Insolvency. (i) Except as otherwise permitted under this
Agreement, any Restricted Entity shall terminate its existence or dissolve or
(ii) any Restricted Entity (A) admits in writing its inability to pay its Debts
generally as they become due; makes an assignment for the benefit of its
creditors; consents to or acquiesces in the appointment of a receiver, interim
receiver, receiver manager, custodian, liquidator, fiscal agent, or trustee (or
similar official) of itself or any of its Property; files a petition,
application, case or proceeding under any Debtor Relief Law; or consents to any
reorganization, arrangement, workout, liquidation, dissolution, or similar
relief or (B) shall have had, without its consent: any court enter an order
appointing a receiver, interim receiver, receiver manager, custodian,
liquidator, fiscal agent, or trustee (or similar official) of itself or any of
its Property; any petition, application, case or proceeding filed against it
seeking reorganization, arrangement, workout, liquidation, dissolution or
similar relief under any Debtor Relief Law and such petition, application, case
or proceeding shall not be dismissed, stayed, or set aside for an aggregate of
60 days, whether or not consecutive;

 

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(h) Adverse Judgment. Any Restricted Entity suffers final non-appealable
judgments against any of them since the date of this Agreement that results in
an aggregate amount, less any insurance proceeds covering such judgments which
are received or as to which the insurance carriers have not denied, greater than
$15.0 million and either (i) enforcement proceedings shall have been commenced
by any creditor upon such judgments or (ii) there shall be any period of thirty
(30) consecutive days during which a stay of enforcement of such judgments, by
reason of a pending appeal or otherwise, shall not be in effect;

(i) Termination Events. Any Termination Event with respect to a Plan shall have
occurred, and, thirty (30) days after notice thereof shall have been given to
the Company by the Administrative Agent, such Termination Event shall not have
been corrected and shall have created and caused to be continuing a material
risk of Plan termination or liability for withdrawal from the Plan as a
“substantial employer” (as defined in Section 4001(a)(2) of ERISA), which
termination could reasonably be expect to result in a liability of, or liability
for withdrawal could reasonably be expected to be, greater than $15.0 million;

(j) Multiemployer Plan Withdrawals. The Company or any member of the Controlled
Group as employer under a Multiemployer Plan shall have made a complete or
partial withdrawal from such Multiemployer Plan and such withdrawing employer
shall have incurred a withdrawal liability in an annual amount exceeding
$15.0 million;

(k) Canadian Pension Events. Any Canadian Pension Event shall have occurred, and
such Canadian Pension Event could reasonably be expected to result in a
liability of greater than $10.0 million;

(l) Invalidity of Credit Agreement. Any material provision of this Agreement
shall cease to be in full force and effect and valid and binding on the Company
or the Company shall so state in writing (except as permitted by the terms of
this Agreement or as waived in accordance with Section 9.2); or

(m) Change in Control. The occurrence of a Change in Control.

Section 7.2 Optional Acceleration of Maturity. If any Event of Default (other
than an Event of Default under Section 7.1(g)) shall have occurred and be
continuing, then, and in any such event,

(a) the Administrative Agent (i) shall at the request, or may with the consent,
of the Required Lenders, by notice to the Borrower Representative, declare that
the obligation of each Lender and each Issuing Lender to make Credit Extensions
shall be terminated, whereupon the same shall forthwith terminate, and
(ii) shall at the request, or may with the consent, of the Required Lenders, by
notice to the Borrower Representative, declare all outstanding Loans, all
interest thereon, and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon such Loans, all such interest, and all such
amounts shall become and be forthwith due and payable in full, without
presentment, demand, protest or further notice of any kind (including, without
limitation, any notice of intent to accelerate or notice of acceleration), all
of which are hereby expressly waived by the Borrower Representative,

 

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(b) the Company shall, on demand of the Administrative Agent at the request or
with the consent of the Required Lenders, deposit with the Administrative Agent
into the Cash Collateral Account an amount of cash equal to 103% of the
outstanding LC Exposure as security for the Secured Obligations to the extent
the Letter of Credit Obligations are not otherwise paid or Cash Collateralized
at such time, and

(c) the Administrative Agent shall at the request of, or may with the consent
of, the Required Lenders proceed to enforce its rights and remedies under the
Security Documents, the Guaranties, or any other Credit Document by appropriate
proceedings.

Section 7.3 Automatic Acceleration of Maturity. If any Event of Default pursuant
to Section 7.1(g) shall occur,

(a) the obligation of each Lender and each Issuing Lender to make Credit
Extensions shall immediately and automatically be terminated and all Loans, all
interest on the Loans, and all other amounts payable under this Agreement shall
immediately and automatically become and be due and payable in full, without
presentment, demand, protest or any notice of any kind (including, without
limitation, any notice of intent to accelerate or notice of acceleration), all
of which are hereby expressly waived by the Borrower Representative,

(b) the Company shall, on demand of the Administrative Agent at the request or
with the consent of the Required Lenders, deposit with the Administrative Agent
into the Cash Collateral Account an amount of cash equal to 103% of the
outstanding LC Exposure as security for the Secured Obligations to the extent
the Letter of Credit Obligations are not otherwise paid or Cash Collateralized
at such time, and

(c) the Administrative Agent shall at the request of, or may with the consent
of, the Required Lenders proceed to enforce its rights and remedies under the
Security Documents, the Guaranties, or any other Credit Document by appropriate
proceedings.

Section 7.4 Set-off. If an Event of Default shall have occurred and be
continuing, each Lender Party, and each of its Affiliates is hereby authorized
at any time and from time to time, to the fullest extent permitted by applicable
Legal Requirement, to set off and apply any and all deposits (general or
special, time or demand, provisional or final, in whatever currency) at any time
held and other obligations (in whatever currency) at any time owing by such
Lender Party or any such Affiliate to or for the credit or the account of a
Borrower against any and all of the obligations of a Borrower now or hereafter
existing under this Agreement or any other Credit Document to such Lender Party
or Affiliate, irrespective of whether or not such Lender Party or Affiliate
shall have made any demand under this Agreement or any other Credit Document and
although such obligations of a Borrower may be contingent or unmatured or are
owed to a branch or office of such Lender Party or Affiliate different from the
branch or office holding such deposit or obligated on such indebtedness;
provided that, in the event that any Defaulting Lender shall exercise any such
right of setoff, (x) all amounts so set off shall be paid over immediately to
the Administrative Agent for further application in accordance with the
provisions of Section 2.15 and, pending such payment, shall be segregated by
such Defaulting Lender from its other funds and deemed held in trust for the
benefit of the Administrative Agent, the Issuing Lenders and the Lenders, and
(y) the Defaulting Lender shall provide promptly to the Administrative Agent a
statement describing in reasonable detail the Secured Obligations owing to such
Defaulting Lender as to which it exercised such right of setoff. The rights of
the Administrative Agent, each Lender, each Issuing Lender and their respective
Affiliates under this Section are in addition to other rights and remedies
(including other rights of setoff) that the Administrative Agent, such Lender,
such Issuing Lender or their respective Affiliates may have. Each Lender and
Issuing Lender agrees to notify the Borrower Representative and the
Administrative Agent promptly after any such setoff and application, provided
that, the failure to give such notice shall not affect the validity of such
setoff and application.

 

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Section 7.5 Remedies Cumulative, No Waiver. No right, power, or remedy conferred
to any Lender, Administrative Agent, or any Issuing Lender in this Agreement or
the Credit Documents, or now or hereafter existing at law, in equity, by
statute, or otherwise shall be exclusive, and each such right, power, or remedy
shall to the full extent permitted by law be cumulative and in addition to every
other such right, power or remedy. No course of dealing and no delay in
exercising any right, power, or remedy conferred to any Lender, Administrative
Agent, or Issuing Lender in this Agreement and the Credit Documents or now or
hereafter existing at law, in equity, by statute, or otherwise shall operate as
a waiver of or otherwise prejudice any such right, power, or remedy. Any Lender,
the Administrative Agent, or any Issuing Lender may take action to eliminate the
circumstances giving rise to any Event of Default (it being understood that
taking such action shall not waive such Event of Default). No notice to or
demand upon the Company shall entitle the Company to similar notices or demands
in the future.

Section 7.6 Application of Payments.

(a) Prior to Event of Default. Prior to an Event of Default, all payments made
hereunder shall be applied as directed by the Applicable Borrower, but such
payments are subject to the terms of this Agreement, including the application
of prepayments according to Section 2.11.

(b) After Event of Default. If an Event of Default has occurred and is
continuing, any amounts received or collected from, or on account of assets held
by, any Credit Party shall be applied to the Secured Obligations by the
Administrative Agent in the order and manner set forth in Section 2.18(b) but
subject to the marshaling rights of the Administrative Agent and Lenders.

Notwithstanding the foregoing, amounts received from the Company or any
Guarantor that is not an “eligible contract participant” under the Commodity
Exchange Act shall not be applied to any Excluded Swap Obligations.

ARTICLE VIII

THE ADMINISTRATIVE AGENT AND THE ISSUING LENDER

Section 8.1 Appointment, Powers, and Immunities.

(a) Appointment and Authority. Each Lender and Issuing Lender hereby
(a) irrevocably appoints JPMorgan to act on its behalf as the Administrative
Agent hereunder and under the other Credit Documents, and (b) authorizes the
Administrative Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Administrative Agent by the terms hereof or
thereof, together with such actions and powers as are reasonably incidental
thereto. The provisions of this Article VIII are solely for the benefit of the
Lender Parties, and neither the Company nor any other Credit Party shall have
rights as a third party beneficiary of any of such provisions. It is understood
and agreed that the use of the term “agent” herein or in any other Credit
Documents (or any other similar term) with reference to the Administrative Agent
is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Legal Requirement.
Instead such term is used as a matter of market custom, and is intended to
create or reflect only an administrative relationship between contracting
parties.

(b) Rights as a Lender. The Person serving as the Administrative Agent hereunder
shall have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not the Administrative Agent
and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated
or unless the context otherwise requires, include the Person serving as the
Administrative Agent hereunder in its individual capacity. Such Person and its
Affiliates may accept deposits from, lend money to, own securities, act as the
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for and generally engage in any kind of business with the Company or any
Subsidiary or other Affiliate thereof as if such Person were not the
Administrative Agent hereunder and without any duty to account therefor to the
Lenders. JPMorgan (and any successor acting as Administrative Agent) and their
respective Affiliates may accept fees and other consideration from the Company
or any Subsidiary or Affiliate of a Subsidiary for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders or the Issuing Lenders.

(c) Exculpatory Provisions. The Administrative Agent (which term as used in this
Section 8.1(c) shall include its Related Parties) shall not have any duties or
obligations except those expressly set forth herein and in the other Credit
Documents, and its duties hereunder shall be administrative in nature. Without
limiting the generality of the foregoing, the Administrative Agent:

(i) shall not be subject to any fiduciary or other implied duties, regardless of
whether a Default has occurred and is continuing;

(ii) shall not have any duty to take any discretionary action or exercise any
discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Credit Documents that the Administrative
Agent is required to exercise as directed in writing by the Required Lenders (or
such other number or percentage of the Lenders as shall be expressly provided
for herein or in the other Credit Documents), provided that, the Administrative
Agent shall not be required to take any action that, in its opinion or the
opinion of its counsel, may expose the Administrative Agent to liability or that
is contrary to any Credit Document or Legal Requirement, including for the
avoidance of doubt any action that may be in violation of the automatic stay
under any Debtor Relief Law or that may effect a forfeiture, modification or
termination of Property of a Defaulting Lender in violation of any Debtor Relief
Law; and

(iii) shall not, except as expressly set forth herein and in the other Credit
Documents, have any duty to disclose, nor shall it be liable for the failure to
disclose, any information relating to any Credit Party or any of their
respective Affiliates that is communicated to or obtained by the Person serving
as the Administrative Agent or any of their respective Affiliates in any
capacity.

The Administrative Agent shall not be liable for any action taken or not taken
by it (i) with the consent or at the request of the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary, or as the
Administrative Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 7.1 and Section 1.1) or (ii) in the absence
of its own gross negligence or willful misconduct as determined by a court of
competent jurisdiction by final and nonappealable judgment. The Administrative
Agent shall be deemed not to have knowledge of any Default unless and until
notice describing such Default is given to the Administrative Agent in writing
by the Borrower Representative, a Lender or an Issuing Lender. In the event that
the Administrative Agent receives such a notice of the occurrence of a Default,
the Administrative Agent shall (subject to Section 9.2) take such action with
respect to such Default or Event of Default as shall reasonably be directed by
the Required Lenders, provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interest of the
Secured Parties.

The Administrative Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any recital, statement, warranty or representation
(whether written or oral) made in or in connection with this Agreement or any
other Credit Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or
therewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein or therein or the
occurrence of any Default, (iv) the value, validity, enforceability,
effectiveness, enforceability,

 

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sufficiency or genuineness of this Agreement, any other Credit Document or any
other agreement, instrument or document, (v) the inspection of, or to inspect,
the Property (including the books and records) of any Credit Party or any
Subsidiary or Affiliate thereof, (vi) the satisfaction of any condition set
forth in Article III or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Administrative Agent, or (vii) any
litigation or collection proceedings (or to initiate or conduct any such
litigation or proceedings) under any Credit Document unless requested by the
Required Lenders in writing and it receives indemnification satisfactory to it
from the Lenders.

Section 8.2 Reliance by Administrative Agent and Issuing Lenders. The
Administrative Agent and each Issuing Lender shall be entitled to rely upon, and
shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document, writing or other
communication (including any electronic message, Internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to have been made by the proper Person, and shall not incur any
liability for relying thereon. In determining compliance with any condition
hereunder to the making of a Credit Extension or any conversion or continuance
of a Loan that by its terms must be fulfilled to the satisfaction of a Lender or
an Issuing Lender, the Administrative Agent may presume that such condition is
satisfactory to such Lender or Issuing Lender unless the Administrative Agent
shall have received notice to the contrary from such Lender or Issuing Lender
prior to the making of such Credit Extension or conversion or continuance of a
Loan. The Administrative Agent may consult with legal counsel (who may be
counsel for the Company), independent accountants and other experts selected by
it, and shall not be liable for any action taken or not taken by it in
accordance with the advice of any such counsel, accountants or experts.

Section 8.3 Delegation of Duties. The Administrative Agent may perform any and
all of its duties and exercise its rights and powers hereunder or under any
other Credit Document by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all of its duties and exercise its rights and powers by or
through their respective Related Parties. The exculpatory provisions of this
Article shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the Facilities provided for
herein as well as activities as Administrative Agent. The Administrative Agent
shall not be responsible for the negligence or misconduct of any sub-agents
except to the extent that a court of competent jurisdiction determines in a
final and non-appealable judgment that the Administrative Agent acted with gross
negligence or willful misconduct in the selection of such sub agents.

Section 8.4 Indemnification.

(a) INDEMNITY OF ADMINISTRATIVE AGENT. THE LENDERS SEVERALLY AGREE TO INDEMNIFY
THE ADMINISTRATIVE AGENT AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE RELATED
PARTIES (TO THE EXTENT NOT REIMBURSED BY THE APPLICABLE BORROWER), RATABLY
ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE LOANS THEN HELD BY EACH OF
THEM (OR IF NO PRINCIPAL OF THE LOANS IS AT THE TIME OUTSTANDING, RATABLY
ACCORDING TO THE RESPECTIVE COMMITMENTS HELD BY EACH OF THEM IMMEDIATELY PRIOR
TO THE TERMINATION, EXPIRATION OR FULL REDUCTION OF EACH SUCH COMMITMENT), 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 THE
ADMINISTRATIVE AGENT OR ANY OF ITS RELATED PARTIES IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT, ANY CREDIT DOCUMENT OR ANY ACTION TAKEN

 

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OR OMITTED BY SUCH ADMINISTRATIVE AGENT UNDER THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT (INCLUDING SUCH INDEMNITEE’S OWN NEGLIGENCE REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR
TECHNICAL), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES,
PROVIDED THAT, NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES, OR DISBURSEMENTS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT
OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH
LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS
RATABLE SHARE (DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF (i) ANY
OUT-OF-POCKET EXPENSES (INCLUDING REASONABLE COUNSEL FEES) INCURRED BY THE
ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION, MODIFICATION, OR AMENDMENT, AND (ii) ANY OUT-OF-POCKET EXPENSES
(INCLUDING COUNSEL FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH
ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, IN ANY EVENT,
INCLUDING LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND TO THE EXTENT THAT THE ADMINISTRATIVE
AGENT IS NOT REIMBURSED FOR SUCH BY THE APPLICABLE BORROWER.

(b) INDEMNITY OF ISSUING LENDER. THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE
ISSUING LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE RELATED PARTIES
(TO THE EXTENT NOT REIMBURSED BY THE APPLICABLE BORROWER), RATABLY ACCORDING TO
THE RESPECTIVE PRINCIPAL AMOUNTS OF THE LOANS THEN HELD BY EACH OF THEM (OR IF
NO PRINCIPAL OF THE LOANS IS AT THE TIME OUTSTANDING, RATABLY ACCORDING TO THE
RESPECTIVE COMMITMENTS HELD BY EACH OF THEM IMMEDIATELY PRIOR TO THE
TERMINATION, EXPIRATION OR FULL REDUCTION OF EACH SUCH COMMITMENT), 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 THE
ISSUING LENDER OR ANY OF ITS RELATED PARTIES IN ANY WAY RELATING TO OR ARISING
OUT OF THIS AGREEMENT, ANY CREDIT DOCUMENT OR ANY ACTION TAKEN OR OMITTED BY THE
ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (INCLUDING SUCH
INDEMNITEE’S OWN NEGLIGENCE REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR
CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL), AND INCLUDING,
WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT, NO LENDER SHALL BE
LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS FOUND IN
A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

Section 8.5 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
Party acknowledges and agrees that it has, independently and without reliance
upon the Administrative Agent or any other Lender Party or any of their Related
Parties, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender Party also acknowledges and agrees that it will,
independently and without reliance upon the Administrative Agent or any other
Lender Party or any of their Related Parties, and based on such

 

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documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Credit Document or any related agreement or any
document furnished hereunder or thereunder. Except for notices, reports, and
other documents and information expressly required to be furnished to the
Lenders or an Issuing Lender by the Administrative Agent hereunder and for other
information in the Administrative Agent’s possession which has been requested by
a Lender and for which such Lender pays the Administrative Agent’s expenses in
connection therewith, the Administrative Agent shall not have any duty or
responsibility to provide any Lender or Issuing Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or Affiliates that may come into the
possession of the Administrative Agent or any of its Affiliates.

Section 8.6 Resignation of Administrative Agent or an Issuing Lender.

(a) The Administrative Agent or an Issuing Lender may at any time give notice of
its resignation to the other Lender Parties and the Borrower Representative.
Upon receipt of any such notice of resignation, (i) with respect to the
Administrative Agent, the Required Lenders shall have the right, with the prior
written consent of the Borrower Representative (which consent is not required if
a Default or Event of Default has occurred and is continuing and which consent
shall not be unreasonably withheld or delayed), to appoint a successor
Administrative Agent and (ii) with respect to an Issuing Lender, the Required
Lenders shall have the right, with the prior written consent of the Borrower
Representative (which consent is not required if a Default or Event of Default
has occurred and is continuing and which consent shall not be unreasonably
withheld or delayed) to appoint a successor Issuing Lender, which shall be a
Lender. If no such successor Administrative Agent or Issuing Lender shall have
been so appointed (and, if with respect to an Issuing Lender, there is no
remaining Issuing Lender) and shall have accepted such appointment within thirty
(30) days after the retiring Administrative Agent or Issuing Lender gives notice
of its resignation (or such earlier day as shall be agreed by the Required
Lenders) (the “Resignation Effective Date”), then the retiring Administrative
Agent or Issuing Lender, as applicable, may on behalf of the Lenders and the
applicable Issuing Lender, appoint a successor agent or Issuing Lender meeting
the qualifications set forth above. Whether or not a successor has been
appointed, such resignation by the Administrative Agent or an Issuing Lender
shall become effective in accordance with such notice on the Resignation
Effective Date.

(b) If the Person serving as Administrative Agent is a Defaulting Lender
pursuant to clause (d) of the definition thereof, the Required Lenders may, to
the extent permitted by applicable Legal Requirement, by notice in writing to
the Borrower Representative and such Person remove such Person as Administrative
Agent and, in consultation with the Borrower Representative, appoint a
successor. If no such successor shall have been so appointed by Required Lenders
and shall have accepted such appointment within thirty (30) days (or such
earlier day as shall be agreed by the Required Lenders) (the “Removal Effective
Date”), then such removal shall nonetheless become effective in accordance with
such notice on the Removal Effective Date.

(c) With effect from the Resignation Effective Date or the Removal Effective
Date (as applicable), (i) the retiring or removed Administrative Agent or
Issuing Lender, as applicable, shall be discharged from its duties and
obligations hereunder and under the other Credit Documents (except that (y) in
the case of any collateral security held by the Administrative Agent on behalf
of the Lenders or the Issuing Lenders under any of the Credit Documents, the
retiring Administrative Agent shall continue to hold such collateral security
until such time as a successor Administrative Agent is appointed and (z) the
retiring Issuing Lender shall remain the Issuing Lender with respect to any
Letters of Credit outstanding on the effective date of its resignation and the
provisions affecting the applicable Issuing Lender with respect to such Letters
of Credit shall inure to the benefit of the retiring Issuing Lender until the
termination of all such Letters of Credit); provided, that promptly after
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Borrower Representative shall request from the successor Issuing Lender
replacement Letters of Credit to replace Letters of Credit issued by the
retiring Issuing Lender and (ii) all payments, communications and determinations
provided to be made by, to or through the retiring or removed Administrative
Agent or Issuing Lender, as applicable, shall instead be made by or to each
applicable class of Lenders, until such time as the Required Lenders, appoint a
successor Administrative Agent or Issuing Lender as provided for above in this
paragraph. Upon the acceptance of a successor’s appointment as Administrative
Agent or Issuing Lender hereunder, such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring or
removed Administrative Agent or Issuing Lender, as applicable, and the retiring
or removed Administrative Agent or Issuing Lender, as applicable, shall be
discharged from all of its duties and obligations hereunder or under the other
Credit Documents. The fees payable by the Borrower Representative to a successor
Administrative Agent or Issuing Lender, as applicable shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower
Representative and such successor. After the retiring or removed Administrative
Agent’s or Issuing Lender’s resignation or removal hereunder and under the other
Credit Documents, the provisions of this Article and Section 9.1 and
Section 2.6(j) shall continue in effect for the benefit of such retiring or
removed Administrative Agent and the Issuing Lender, its sub-agents and their
respective Related Parties in respect of any actions taken or omitted to be
taken by any of them while the retiring or removed Administrative Agent or
Issuing Lender, as applicable, was acting as Administrative Agent or Issuing
Lender.

Section 8.7 Collateral Matters.

(a) The Administrative Agent is authorized on behalf of the Secured Parties,
without the necessity of any notice to or further consent from the Secured
Parties, from time to time, to take any actions with respect to any Collateral
or Security Documents which may be necessary to perfect and maintain Acceptable
Security Interests in and Liens upon the Collateral granted pursuant to the
Security Documents. The Administrative Agent is further authorized (but not
obligated) on behalf of the Secured Parties, without the necessity of any notice
to or further consent from the Secured Parties, from time to time, to take any
action (other than enforcement actions requiring the consent of, or request by,
the Required Lenders as set forth in Section 7.2 or Section 7.3 above) in
exigent circumstances as may be reasonably necessary to preserve any rights or
privileges of the Lenders under the Credit Documents or applicable Legal
Requirement.

(b) The Lenders hereby, and any other Secured Party by accepting the benefit of
the Liens granted pursuant to the Security Documents, irrevocably authorize the
Administrative Agent to (i) release any Lien granted to or held by the
Administrative Agent upon any Collateral (a) upon Payment in Full;
(b) constituting Property sold or to be sold or Disposed of as part of or in
connection with any Disposition permitted under this Agreement or any other
Credit Document; (c) constituting Property in which no Credit Party owned an
interest at the time the Lien was granted or at any time thereafter; or
(d) constituting Property leased to any Credit Party under a lease which has
expired or has been terminated in a transaction permitted under this Agreement
or is about to expire and which has not been, and is not intended by such Credit
Party to be, renewed or extended; and (ii) release a Guarantor from its
obligations under the Guaranty and any other applicable Credit Document if such
Person ceases to be a Restricted Subsidiary as a result of a transaction
permitted under this Agreement.

(c) Upon request by the Administrative Agent at any time, the Secured Parties
will confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of Property, or to release
any Guarantor from its obligations under its Guaranty pursuant to this
Section 8.7. The Administrative Agent shall not be responsible for or have a
duty to ascertain or inquire into any representation or warranty regarding the
existence, value or collectability of the Collateral, the existence, priority or
perfection of the Administrative Agent’s Lien thereon, or any certificate
prepared by any Credit Party in connection therewith, nor shall the
Administrative Agent be responsible or liable to the Secured Parties or any
other Lender Party for any failure to monitor or maintain any portion of the
Collateral.

 

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(d) Notwithstanding anything contained in any of the Credit Documents to the
contrary, the Credit Parties, the Administrative Agent, and each Secured Party
hereby agree that no Secured Party shall have any right individually to realize
upon any of the Collateral or to enforce the Guaranties, it being understood and
agreed that all powers, rights and remedies under the Guaranties and under the
Security Documents may be exercised solely by Administrative Agent on behalf of
the Secured Parties in accordance with the terms hereof and the other Credit
Documents.

(e) By accepting the benefit of the Liens granted pursuant to the Security
Documents, each Secured Party hereby agrees to the terms of this Section 8.7.

(f) The Secured Parties hereby irrevocably authorize the Administrative Agent,
at the direction of the Required Lenders, to credit bid all or any portion of
the Obligations (including by accepting some or all of the Collateral in
satisfaction of some or all of the Obligations pursuant to a deed in lieu of
foreclosure or otherwise) and in such manner purchase (either directly or
through one or more acquisition vehicles) all or any portion of the Collateral
(i) at any sale thereof conducted under the provisions of the Bankruptcy Code,
including under Sections 363, 1123 or 1129 of the Bankruptcy Code, or any
similar laws in any other jurisdictions, or (ii) at any other sale, foreclosure
or acceptance of Collateral in lieu of Debt conducted by (or with the consent or
at the direction of) the Administrative Agent (whether by judicial action or
otherwise) in accordance with any applicable law. In connection with any such
credit bid and purchase, the Obligations owed to the Secured Parties shall be
entitled to be, and shall be, credit bid by the Administrative Agent at the
direction of the Required Lenders on a ratable basis (with Obligations with
respect to contingent or unliquidated claims receiving contingent interests in
the acquired assets on a ratable basis that shall vest upon the liquidation of
such claims in an amount proportional to the liquidated portion of the
contingent claim amount used in allocating the contingent interests) for the
asset or assets so purchased (or for the Equity Interests or debt instruments of
the acquisition vehicle or vehicles that are issued in connection with such
purchase). In connection with any such bid (A) the Administrative Agent shall be
authorized to form one or more acquisition vehicles and to assign any successful
credit bid to such acquisition vehicle or vehicles (B) each of the Secured
Parties’ ratable interests in the Obligations which were credit bid shall be
deemed without any further action under this Agreement to be assigned to such
vehicle or vehicles for the purpose of closing such sale, (C) the Administrative
Agent shall be authorized to adopt documents providing for the governance of the
acquisition vehicle or vehicles (provided that, any actions by the
Administrative Agent with respect to such acquisition vehicle or vehicles,
including any Disposition of the assets or Equity Interests thereof, shall be
governed, directly or indirectly, by, and the governing documents shall provide
for, control by the vote of the Required Lenders or their permitted assignees
under the terms of this Agreement or the governing documents of the applicable
acquisition vehicle or vehicles, as the case may be, irrespective of the
termination of this Agreement and without giving effect to the limitations on
actions by the Required Lenders contained in Section 9.2), (D) the
Administrative Agent on behalf of such acquisition vehicle or vehicles shall be
authorized to issue to each of the Secured Parties, ratably on account of the
relevant Obligations which were credit bid, interests, whether as equity,
partnership, limited partnership interests or membership interests, in any such
acquisition vehicle and/or debt instruments issued by such acquisition vehicle,
all without the need for any Secured Party or acquisition vehicle to take any
further action, and (E) to the extent that Obligations that are assigned to an
acquisition vehicle are not used to acquire Collateral for any reason (including
as a result of another bid being higher or better, because the amount of
Obligations assigned to the acquisition vehicle exceeds the amount of
Obligations credit bid by the acquisition vehicle or otherwise), such
Obligations shall automatically be reassigned to the Secured Parties pro rata
and the Equity Interests and/or debt instruments issued by any acquisition
vehicle on account of such Obligations shall automatically be cancelled, without
the need for any Secured Party or any acquisition vehicle to take any further
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the ratable portion of the Obligations of each Secured Party are deemed assigned
to the acquisition vehicle or vehicles as set forth in clause (B) above, each
Secured Party shall execute such documents and provide such information
regarding the Secured Party (and/or any designee of the Secured Party which will
receive interests in or debt instruments issued by such acquisition vehicle) as
the Administrative Agent may reasonably request in connection with the formation
of any acquisition vehicle, the formulation or submission of any credit bid or
the consummation of the transactions contemplated by such credit bid.

Section 8.8 No Other Duties, etc. Anything herein to the contrary
notwithstanding, none of the Bookrunners, Arrangers, and Documentation Agent
listed on the cover page hereof shall have any powers, duties or
responsibilities under this Agreement or any of the other Credit Documents,
except in its capacity, as applicable, as the Administrative Agent, Lender or
Issuing Lender hereunder.

ARTICLE IX

MISCELLANEOUS

Section 9.1 Expenses; Indemnity; Damage Waiver.

(a) Costs and Expenses. The Company shall pay, within thirty (30) days of
invoice, (i) all reasonable out-of-pocket expenses incurred by the
Administrative Agent and its Affiliates (including the reasonable out-of-pocket
fees, charges and disbursements of counsel for the Administrative Agent;
provided that, counsel shall be limited to (x) one counsel to such Persons,
taken as a whole and one local counsel in each relevant jurisdiction, taken as a
whole and (y) solely in the event of a conflict of interest, one additional
counsel (and, if necessary, one local counsel in each relevant jurisdiction or
for each matter) to each group of similarly situated affected Persons), in
connection with the syndication of the credit facilities provided for herein,
the preparation, negotiation, execution, delivery and administration of this
Agreement and the other Credit Documents or any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the Transactions
contemplated hereby or thereby shall be consummated), (ii) all reasonable
out-of-pocket expenses incurred by the applicable Issuing Lender in connection
with the issuance, amendment, renewal or extension of any Letter of Credit or
any demand for payment thereunder and (iii) all out-of-pocket expenses incurred
by any Lender Party (including the fees, charges and disbursements of any
counsel for any Lender Party), in connection with the enforcement or protection
of its rights, (A) in connection with this Agreement and the other Credit
Documents, including its rights under this Section, or (B) in connection with
the Loans made or Letters of Credit issued hereunder, including all such
out-of-pocket expenses incurred during any workout, restructuring, negotiations
or legal proceedings in respect of such Loans or Letters of Credit.

(b) Indemnification by the Company. The Company shall, and does hereby
indemnify, the Administrative Agent (and any sub-agent thereof), each Lender and
each Issuing Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”) against, and hold each
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses (including the reasonable fees, charges and disbursements of
any counsel for any Indemnitee; provided that, counsel shall be limited to
(x) one counsel to such Persons, taken as a whole and one local counsel in each
relevant jurisdiction, taken as a whole and (y) solely in the event of a
conflict of interest, one additional counsel (and, if necessary, one local
counsel in each relevant jurisdiction or for each matter) to each group of
similarly situated affected indemnified Persons), incurred by any Indemnitee or
asserted against any Indemnitee by any third party or by the Company or any
other Credit Party arising out of, in connection with, or as a result of (i) the
execution or delivery of this Agreement, any other Credit Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties hereto of their respective obligations hereunder or thereunder, the
consummation of the transactions contemplated hereby or thereby, or, in the case
of the Administrative Agent (and any sub-agent thereof) and its Related Parties
only, the administration of this Agreement and the other Credit Documents,
(ii) any Loan or Letter

 

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of Credit or the use or proposed use of the proceeds therefrom (including any
refusal by an Issuing Lender to honor a demand for payment under a Letter of
Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Letter of Credit), (iii) any actual or alleged
Release of Hazardous Substance on or from any Property owned or operated by the
Company or any of its Subsidiaries, or any Environmental Claim related in any
way to the Company or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory, whether brought by a third
party or by the Company or any other Credit Party, and regardless of whether any
Indemnitee is a party thereto, IN ALL CASES, WHETHER OR NOT CAUSED BY OR
ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE
NEGLIGENCE OF THE INDEMNITEE; provided that, such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment in favor on the Company or such
other Credit Party to have resulted (x) from the bad faith, gross negligence or
willful misconduct of such Indemnitee, (y) from a claim brought by the Company
or any other Credit Party against an Indemnitee for breach in bad faith of such
Indemnitee’s material obligations hereunder or under any other Credit Document
or (z) a dispute among or between Indemnitees (except to the extent that such
indemnified loss was incurred by or asserted against the Administrative Agent,
any arranger or Issuing Lender in its capacity as such) and not involving any
act or omission of the Credit Parties or any of their Affiliates. THIS
SECTION 9.1(b) SHALL NOT APPLY WITH RESPECT TO TAXES OTHER THAN TAXES THAT
REPRESENT LOSSES, CLAIMS, DAMAGES, ETC. ARISING FROM ANY NON-TAX CLAIM.

(c) Waiver of Consequential Damages, Etc. To the fullest extent permitted by
applicable Legal Requirement, no Credit Party shall assert, agrees not to assert
and hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, consequential or punitive damages (as opposed to direct
or actual damages) arising out of, in connection with, or as a result of, this
Agreement, any other Credit Document or any agreement or instrument contemplated
hereby, the transactions contemplated hereby or thereby, any Loan or Letter of
Credit or the use of the proceeds thereof. To the fullest extent permitted by
applicable Legal Requirement, no Indemnitee shall assert, agrees not to assert,
and hereby waives, any claim against any Credit Party or any Affiliate thereof,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any other Credit Document or any
agreement or instrument contemplated hereby, the transactions contemplated
hereby or thereby. For the avoidance of doubt, the parties hereto acknowledge
and agree that a claim for indemnity under Section 9.1(b) above, to the extent
covered thereby, is a claim of direct or actual damages. No Indemnitee referred
to in subsection (b) above shall be liable for any damages arising from the use
by unintended recipients of any information or other materials distributed to
such unintended recipients by such Indemnitee through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Credit Documents or the transactions contemplated hereby
or thereby other than for direct or actual damages resulting from the gross
negligence or willful misconduct of such Indemnitee as determined by a final and
nonappealable judgment of a court of competent jurisdiction.

(d) Survival. Without prejudice to the survival of any other agreement
hereunder, the agreements in this Section shall survive the resignation of the
Administrative Agent and any Issuing Lender, the replacement of any Lender, the
termination of the Aggregate Commitments, termination or expiration of all
Letters of Credit, and the repayment, satisfaction or discharge of all the other
Obligations.

(e) Payments. All amounts due under this Section 9.1 shall, unless otherwise set
forth above, be payable not later than ten (10) days after demand therefor.

 

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(f) Reimbursement by Lenders. To the extent that the Company for any reason fail
to indefeasibly pay any amount required under subsection (a) or (b) of this
Section to be paid by it to the Administrative Agent (or any sub-agent thereof,
including the Canadian Administrative Agent), an Issuing Lender or any Related
Party of any of the foregoing, each Lender severally agrees to pay to the
Administrative Agent (or any such sub-agent), the applicable Issuing Lender, or
such Related Party, as the case may be, such Lender’s pro rata share (determined
as of the time that the applicable unreimbursed expense or indemnity payment is
sought based on each Lender’s share of the Aggregate Credit Exposure at such
time) of such unpaid amount (including any such unpaid amount in respect of a
claim asserted by such Lender); provided that, with respect to such unpaid
amounts owed to the Administrative Agent or the applicable Issuing Lender solely
in its capacity as such, only the Lenders under the Facility shall be required
to pay such unpaid amounts, such payment to be made severally among them based
on such Lenders’ Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought), provided
further that the unreimbursed expense or indemnified loss, claim, damage,
liability or related expense, as the case may be, was incurred by or asserted
against the Administrative Agent (or any such sub-agent, including the Canadian
Administrative Agent), or Issuing Lender in its capacity as such, or against any
Related Party of any of the foregoing acting for the Administrative Agent (or
any such sub-agent), the applicable Issuing Lender in connection with such
capacity. The obligations of the Lenders under this subsection (f) are subject
to the provisions of Section 2.1(c)(i).

Section 9.2 Waivers and Amendments. Subject to Section 2.14(b) and
Section 9.2(c) below, no amendment or waiver of any provision of this Agreement
or any other Credit Document (other than the Fee Letter), nor consent to any
departure by any Credit Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Required Lenders and the Borrower
Representative, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that:

(a) no amendment, waiver, or consent shall, unless in writing and signed by all
the Lenders and the Borrower Representative (in addition to such other parties
that may be required under this Section 9.2), to change the number of Lenders
which shall be required for the Lenders to take any action hereunder or under
any other Credit Document (including the definition of “Required Lenders”);

(b) no amendment, waiver, or consent shall, unless in writing and signed by all
the Lenders and the Borrower Representative, do any of the following: (i) waive
any of the conditions specified in Section 3.1 or Section 3.2, (ii) reduce the
principal or interest amounts payable hereunder or under any other Credit
Document (provided that, the consent of the Required Lenders shall be sufficient
to waive or reduce the increased portion of interest resulting from
Section 2.13(a)), (iii) release all or substantially all of the Guarantors from
their respective obligations under any Guaranty except as specifically provided
in the Credit Documents or release the Company from its obligations under the
Guaranty, or (iv) release all or substantially all of the Collateral except as
permitted under Section 8.7(b) or subordinate the Administrative Agent’s Lien on
any material portion of the Collateral;

(c) no amendment, waiver, or consent shall, unless in writing and signed by each
Lender directly and adversely affected thereby, do any of the following:
(i) postpone any date fixed for any interest, fees or other amounts payable
hereunder, extend the Maturity Date with respect to Loans or extend the
expiration of any Letter of Credit to a date after the Maturity Date with
respect to Loans, (ii) reduce any fees or other amounts payable hereunder or
under any other Credit Document (other than the principal or interest) with
respect to Loans or (iii) amend Section 2.18(d), Section 2.20, Section 7.6, or
this Section 9.2;

(d) no amendment, waiver, or consent shall, unless in writing and signed by all
the Lenders and the Borrower Representative increase the advance rates set forth
in the definition of Canadian Borrowing Base or U.S. Borrowing Base, add new
categories of eligible assets, or modify the categories of eligible assets or
components of the Canadian Borrowing Base or U.S. Borrowing Base if the result
thereof is to increase the amounts available to be borrowed, without the written
consent of each Lender;

 

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(e) no Commitment of a Lender, no Canadian Sublimit of any Canadian Lender or
any obligations of a Lender may be increased without such Lender’s written
consent;

(f) no amendment, waiver, or consent shall, unless in writing and signed by the
Administrative Agent in addition to the Lenders required above to take such
action, affect the rights or duties of the Administrative Agent under this
Agreement or any other Credit Document; and

(g) no amendment, waiver or consent shall, unless in writing and signed by the
applicable Issuing Lender in addition to the Lenders required above to take such
action, affect the rights or duties of the applicable Issuing Lender under this
Agreement or any other Credit Document.

Notwithstanding the foregoing, (a) the Borrower Representative and
Administrative Agent may amend this Agreement and the other Credit Documents
without the consent of any Lender (i) to cure any ambiguity, omission, mistake,
error, defect or inconsistency, (ii) to add a Guarantor with respect to the
Loans or Collateral to secure the Loans, (iii) to make administrative changes
that do not adversely affect the rights of any Lender or (iv) make changes that
enhance the rights of the Lenders. For the avoidance of doubt, no Lender or any
Affiliate of a Lender shall have any voting rights under this Agreement or any
Credit Document as a result of the existence of obligations owed to it under
Swap Agreements or Banking Services Obligations.

If, in connection with any proposed amendment, waiver or consent requiring the
consent of “all of the Lenders” or “each Lender directly and adversely affected
thereby,” the consent of the Required Lenders is obtained, but the consent of
other necessary Lenders is not obtained (any such Lender whose consent is
necessary but has not been obtained being referred to herein as a
“Non-Consenting Lender”), then the Borrower Representative may elect to replace
a Non-Consenting Lender as a Lender party to this Agreement, provided that,
concurrently with such replacement, (i) another bank or other entity which is
reasonably satisfactory to the Borrower Representative, the Administrative Agent
and the Issuing Lenders shall agree, as of such date, to purchase for cash the
Loans and other Obligations due to the Non-Consenting Lender pursuant to an
Assignment and Assumption and to become a Lender for all purposes under this
Agreement and to assume all obligations of the Non-Consenting Lender to be
terminated as of such date and to comply with the requirements of Section 9.7,
and (ii) the Borrowers shall pay to such Non-Consenting Lender in Same Day Funds
on the day of such replacement (1) all interest, fees and other amounts then
accrued but unpaid to such Non-Consenting Lender by the Borrowers hereunder to
and including the date of termination, including without limitation payments due
to such Non-Consenting Lender under Sections 2.15 and 2.17, and (2) an amount,
if any, equal to the payment which would have been due to such Lender on the day
of such replacement under Section 2.16 had the Loans of such Non-Consenting
Lender been prepaid on such date rather than sold to the replacement Lender.

Section 9.3 Severability. In case one or more provisions of this Agreement or
the other Credit Documents shall be invalid, illegal or unenforceable in any
respect under any applicable Legal Requirement, the validity, legality, and
enforceability of the remaining provisions contained herein or therein shall not
be affected or impaired thereby.

Section 9.4 Survival of Representations and Obligations. All representations and
warranties contained in this Agreement or made in writing by or on behalf of the
Credit Parties in connection herewith shall survive the execution and delivery
of this Agreement and the other Credit Documents, the making of Credit
Extensions and any investigation made by or on behalf of the Lenders, none of
which investigations shall diminish any Lender’s right to rely on such
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provisions hereof which expressly provide for the survival of obligations, all
obligations of the Company or any other Credit Party provided for in
Section 2.8(c), Section 2.10, Section 2.11, Section 2.13(c), and Section 9.1(a),
Section 9.1(b), Section 9.1(c) and Section 9.1(e) and all of the obligations of
the Lenders in Section 8.3, Section 9.1(c) and Section 9.1(f) shall survive any
termination of this Agreement, Payment in Full, and termination or expiration of
all Letters of Credit.

Section 9.5 Binding Effect. This Agreement shall become effective when it shall
have been executed by the Credit Parties, and the Administrative Agent, and when
the Administrative Agent shall have, as to each Lender, either received a
counterpart hereof executed by such Lender or been notified by such Lender that
such Lender has executed it.

Section 9.6 Successors and Assigns Generally. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns permitted hereby, except that neither Borrower
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender Party or pursuant to a
transaction permitted under Section 6.7(a) and no Lender may assign or otherwise
transfer any of its rights or obligations hereunder except (a) to an Eligible
Assignee in accordance with the provisions of Section 9.7, (b) by way of
participation in accordance with the provisions of Section 9.7(c), or (c) by way
of pledge or assignment of a security interest subject to the restrictions of
Section 9.7(e) (and any other attempted assignment or transfer by any party
hereto shall be null and void). Nothing in this Agreement, expressed or implied,
shall be construed to confer upon any Person (other than the parties hereto,
their respective successors and assigns permitted hereby, Participants to the
extent provided in Section 9.7(e) and, to the extent expressly contemplated
hereby, the Related Parties of the Administrative Agent and each Lender) any
legal or equitable right, remedy or claim under or by reason of this Agreement.

Section 9.7 Lender Assignments and Participations.

(a) Assignments by Lenders. Any Lender may at any time assign to one or more
Eligible Assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it); provided, that:

(i) except in the case of an assignment of the entire remaining amount of the
assigning Lender’s applicable Commitment and the Loans under such Commitment at
the time owing to it or in the case of an assignment to a Lender or an Affiliate
of a Lender, the aggregate amount of the applicable Commitment (which for this
purpose includes Loans outstanding thereunder) or, if the applicable Commitment
is not then in effect, the principal outstanding balance of the Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption with respect to such assignment is delivered to the
Administrative Agent or, if “Trade Date” is specified in the Assignment and
Assumption, as of the Trade Date) shall not be less than $5.0 million unless the
Administrative Agent and, so long as no Event of Default has occurred and is
continuing, the Borrower Representative otherwise consent (each such consent not
to be unreasonably withheld or delayed);

(ii) each partial assignment shall be made as an assignment of a proportionate
part of all the assigning Lender’s rights and obligations under this Agreement
with respect to the applicable Class of Loans or the applicable Commitment
assigned, except that this clause (ii) shall not prohibit any Lender from
assigning all or a portion of its rights and obligations among separate
Facilities on a non-pro rata basis;

(iii) any assignment of a Commitment or a Loan must be approved by the Issuing
Lenders, unless the Person that is the proposed assignee is itself a Lender with
a Commitment or an outstanding Loan (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and

 

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(iv) the parties to each assignment shall execute and deliver to the
Administrative Agent an Assignment and Assumption, together with a processing
and recordation fee of $3,500; provided that, the Administrative Agent may, in
its sole discretion, elect to waive such processing and recordation fee in the
case of any assignment, and the Eligible Assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.

Subject to acceptance and recording thereof by the Administrative Agent pursuant
to paragraph (b) of this Section, from and after the effective date specified in
each Assignment and Assumption, the assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Assignment and
Assumption, have the rights and obligations of a Lender under this Agreement,
and the assigning Lender thereunder shall, to the extent of the interest
assigned by such Assignment and Assumption, be released from its obligations
under this Agreement (and, in the case of an Assignment and Assumption covering
all of the assigning Lender’s rights and obligations under this Agreement, such
Lender shall cease to be a party hereto) but shall continue to be entitled to
the benefits of Section 2.10, Section 2.11, Section 2.13(b) and Section 9.1 with
respect to facts and circumstances occurring prior to the effective date of such
assignment; provided, that except to the extent otherwise expressly agreed by
the affected parties, no assignment by a Defaulting Lender will constitute a
waiver or release of any claim of any party hereunder arising from that Lender’s
having been a Defaulting Lender. Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (c) of this Section. For the avoidance of doubt, (a) commitments to
fund U.S. Loans and Canadian Loans may only be assigned on a ratable basis and
(b) no assignment of a commitment to fund U.S. Loans or Canadian Loans may be
made without a ratable assignment of an obligation to fund Canadian Loans or
U.S. Loans, respectively.

(b) Register. The Administrative Agent, acting solely for this purpose as a
nonfiduciary agent of the Credit Parties, shall maintain at its address referred
to in Section 9.9 a copy of each Assignment and Assumption delivered to it and a
register for the recordation of the names and addresses of the Lenders, the
Commitments, and principal amounts (and stated interest) of the Loans owing to,
each Lender pursuant to the terms hereof from time to time (the “Register”). The
entries in the applicable Register shall be conclusive absent manifest error,
and each Borrower and the Lender Parties shall treat each Person whose name is
recorded in the applicable Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. Each Borrower hereby agrees that the Administrative Agent acting as
its nonfiduciary agent solely for the purpose set forth above in this
clause (b), shall not subject the Administrative Agent to any fiduciary or other
implied duties, all of which are hereby waived by the Borrowers.

(c) Participations. Any Lender may at any time, without the consent of, or
notice to, the Applicable Borrower or the Administrative Agent, sell
participations to any Person (other than a natural person) (each, a
“Participant”) in all or a portion of such Lender’s rights and/or obligations
under this Agreement (including all or a portion of its Commitments and/or the
Loans owing to it); provided that, (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Applicable Borrower and the Lender Parties shall continue to deal
solely and directly with such Lender Party in connection with such Lender
Party’s rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that, such agreement or instrument may provide that such Lender

 

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will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in clauses (a)-(e) of Section 9.2 (that
adversely affects such Participant). Subject to paragraph (d) of this Section,
the Applicable Borrower agrees that each Participant shall be entitled to the
benefits of, and subject to the requirements of, Section 2.10, Section 2.11 and
Section 2.13 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to paragraph (a) of this Section. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 7.4 as though it were a Lender, provided such Participant agrees to be
subject to Section 2.18(d) as though it were a Lender.

Each Lender that sells a participation shall, acting solely for this purpose as
a nonfiduciary agent of the Credit Parties, maintain a register in the United
States on which it enters the name and address of each Participant and the
principal amounts (and stated interest) of each Participant’s interest in the
Obligations under the Credit Documents (the “Participant Register”) and no
Lender shall have any obligation to disclose any information contained in any
Participant Register (including the identity of any Participant or any
information relating to the Participant’s interests under this Agreement) except
to the extent that such disclosure is necessary to ensure that the rights and
obligations reflected in such register, or in any Register, are in registered
form under Section 5f.103-1(c) of the United States Treasury Regulations. The
entries in the Participant Register shall be conclusive absent manifest error,
and such Lender shall treat each Person whose name is recorded in the
Participant Register as the owner of such participation for all purposes of this
Agreement notwithstanding any notice to the contrary. Each Borrower hereby
agrees that each Lender acting as its nonfiduciary agent solely for the purpose
set forth above in this clause (c) shall not subject such Lender to any
fiduciary or other implied duties, all of which are hereby waived by the
Borrowers.

(d) Limitations upon Participant Rights. A Participant shall not be entitled to
receive any greater payment under Section 2.11 than the applicable Lender would
have been entitled to receive with respect to the participation sold to such
Participant (except to the extent such entitlement to receive a greater payment
results from a Change in Law that occurs after the Participant acquired the
applicable participation), unless the sale of the participation to such
Participant is made with the Applicable Borrower’s prior written consent. A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 2.13 unless the Applicable Borrower is
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Applicable Borrower, to comply with
Section 2.15(d), in which case Section 2.13 shall be applied as if such
Participant had become a Lender and had acquired its interest by assignment
pursuant to paragraph (a) of this Section; provided that, in no event shall such
Participant be entitled to receive any greater payment under Section 2.13 than
the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, except to the extent such entitlement to
receive a greater payment results from a Change in Law that occurs after the
Participant acquired the applicable participation.

(e) Certain Pledges. Any Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement to secure
obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank or any other central bank having
jurisdiction over such Lender; provided that, no such pledge or assignment shall
release such Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for such Lender as a party hereto.

Section 9.8 Confidentiality. Each of the Administrative Agent, each Issuing
Lender and each Lender agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (a) to its and its
Affiliates’ directors, officers, employees and agents, including accountants,
legal counsel and other advisors on a need-to-know basis who are involved in
evaluating, approving, structuring or administering the Loans and the
Commitments (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (b) to the extent requested
by any regulatory authority or any self-regulatory authority or agency
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members for non-compliance, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as, or otherwise consistent with, those of this
Section 9.8, to (i) any assignee (other than any non-Eligible Assignee) of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Credit Parties and their obligations, (g) with the consent of the Company,
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Issuing Lender or any Lender on a nonconfidential
basis from a source other than a Credit Party or (i) to the Administrative
Agent, any Issuing Lender or any Lender or Affiliate thereof. For the purposes
of this Section, “Information” means all information received from any
Restricted Entity relating to any Restricted Entity or its business, other than
any such information that is available to the Administrative Agent, any Issuing
Lender or any Lender on a nonconfidential basis prior to disclosure by any
Restricted Entity and other information pertaining to this Agreement routinely
provided by arrangers to data service providers, including league table
providers, that serve the lending industry provided that, in the case of
information received from any Restricted Entity after the date hereof, such
information shall be deemed confidential to the extent a reasonable person would
understand it to be confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section 9.8 shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information. In
addition, the Administrative Agent and each Lender may disclose the existence of
this Agreement and the information about this Agreement to service providers to
the Administrative Agent and the Lenders in connection with the administration
and management of this Agreement and the other Credit Documents.

Each Lender acknowledges that information furnished to it pursuant to this
Agreement or the other Credit Documents may include material non-public
information concerning the Company and its Affiliates and its Related Parties or
its respective securities, and confirms that it has developed compliance
procedures regarding the use of material non-public information and that it will
handle such material non-public information in accordance with those procedures
and applicable law, including federal and state securities laws.

All information, including requests for waivers and amendments, furnished by the
Company or the Administrative Agent pursuant to, or in the course of
administering, this Agreement or the other Credit Documents will be
syndicate-level information, which may contain material non-public information
about the Company and its Affiliates and its Related Parties or its respective
securities. Accordingly, each Lender represents to the Company and the
Administrative Agent that it has identified in its Administrative Questionnaire
a credit contact who may receive information that may contain material
non-public information in accordance with its compliance procedures and
applicable law, including federal and state securities laws.

Section 9.9 Notices, etc.

(a) Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
paragraph (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by facsimile as follows: (i) if
to a Borrower, at the applicable address (or facsimile numbers) set forth on
Schedule I or if to any other Credit Party, at the address of the Borrower
Representative set forth on Schedule I; (ii) if to the Administrative Agent or
an Issuing Lender, at the applicable address (or facsimile numbers) set forth on
Schedule I; and

 

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(iii) if to a Lender, to it at its address (or facsimile number) set forth in
its Administrative Questionnaire. Notices sent by hand or overnight courier
service, or mailed by certified or registered mail, shall be deemed to have been
given when received; notices sent by facsimile shall be deemed to have been
given when sent (except that, if not given during normal business hours for the
recipient, shall be deemed to have been given at the opening of business on the
next Business Day for the recipient). Notices delivered through electronic
communications to the extent provided in paragraph (b) below, shall be effective
as provided in said paragraph (b).

(b) Electronic Communications.

(i) The Company and the Lenders agree that the Administrative Agent may make any
material delivered by the Company to the Administrative Agent, as well as any
amendments, waivers, consents, and other written information, documents,
instruments and other materials relating to the Company, any of its
Subsidiaries, or any other materials or matters relating to this Agreement, the
Notes or any of the transactions contemplated hereby (collectively, the
“Communications”) available to the Lenders by posting such notices on an
electronic delivery system (which may be provided by the Administrative Agent,
an Affiliate of the Administrative Agent, or any Person that is not an Affiliate
of the Administrative Agent), such as IntraLinks, or a substantially similar
Electronic System (the “Platform”). The Company acknowledges that (i) the
distribution of material through an electronic medium is not necessarily secure
and that there are confidentiality and other risks associated with such
distribution, (ii) the Platform is provided “as is” and “as available” and
(iii) none of the Administrative Agent nor any of its Affiliates warrants the
accuracy, completeness, timeliness, sufficiency, or sequencing of the
Communications posted on the Platform. The Administrative Agent and its
Affiliates expressly disclaim with respect to the Platform any liability for
errors in transmission, incorrect or incomplete downloading, delays in posting
or delivery, or problems accessing the Communications posted on the Platform and
any liability for any losses, costs, expenses or liabilities that may be
suffered or incurred in connection with the Platform. No warranty of any kind,
express, implied or statutory, including, without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects, is made by the
Administrative Agent or any of their respective Affiliates in connection with
the Platform. In no event shall the Administrative Agent or any of its Related
Parties have any liability to the Company or the other Credit Parties, any
Lender Party or any other Person or entity for damages of any kind, including,
without limitation, direct or indirect, special, incidental or consequential
damages, losses or expenses (whether in tort, contract or otherwise) arising out
of any Credit Party’s or any Lender Party’s transmission of communications
through the Platform.

(ii) Each Lender agrees that notice to it (as provided in the next sentence) (a
“Notice”) specifying that any Communication has been posted to the Platform
shall for purposes of this Agreement constitute effective delivery to such
Lender of such information, documents or other materials comprising such
Communication. Each Lender agrees (i) to notify, on or before the date such
Lender becomes a party to this Agreement, the Administrative Agent in writing of
such Lender’s e-mail address to which a Notice may be sent (and from time to
time thereafter to ensure that the Administrative Agent has on record an
effective e-mail address for such Lender) and (ii) that any Notice may be sent
to such e-mail address.

(c) Change of Address, Etc. Any party hereto may change its address or facsimile
number for notices and other communications hereunder by notice to the other
parties hereto.

Section 9.10 Usury Not Intended. It is the intent of each Credit Party and each
Lender Party in the execution and performance of this Agreement and the other
Credit Documents to contract in strict compliance with applicable usury laws,
including conflicts of law concepts, governing the Loans of each Lender
including such applicable laws of the State of New York, if any, and the United
States of America

 

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from time to time in effect. In furtherance thereof, the Lender Parties and the
Credit Parties stipulate and agree that none of the terms and provisions
contained in this Agreement or the other Credit Documents shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the Maximum Rate and that
for purposes of this Agreement “interest” shall include the aggregate of all
charges which constitute interest under such laws that are contracted for,
charged or received under this Agreement; and in the event that, notwithstanding
the foregoing, under any circumstances the aggregate amounts taken, reserved,
charged, received or paid on the Loans, include amounts which by applicable
Legal Requirement are deemed interest which would exceed the Maximum Rate, then
such excess shall be deemed to be a mistake and each Lender receiving same shall
credit the same on the principal of its Obligations (or if such Obligations
shall have been paid in full, refund said excess to the Applicable Borrower). In
the event that the maturity of the Obligations are accelerated by reason of any
election of the holder thereof resulting from any Event of Default under this
Agreement or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the Maximum Rate, and excess interest, if any, provided for in this Agreement or
otherwise shall be canceled automatically as of the date of such acceleration or
prepayment and, if theretofore paid, shall be credited on the applicable
Obligations (or, if the applicable Obligations shall have been paid in full,
refunded to the Applicable Borrower of such interest). In determining whether or
not the interest paid or payable under any specific contingencies exceeds the
Maximum Rate, the Credit Parties and the Lender Parties shall to the maximum
extent permitted under applicable law amortize, prorate, allocate and spread in
equal parts during the period of the full stated term of the Obligations all
amounts considered to be interest under applicable law at any time contracted
for, charged, received or reserved in connection with the Obligations. The
provisions of this Section shall control over all other provisions of this
Agreement or the other Credit Documents which may be in apparent conflict
herewith.

Section 9.11 Usury Recapture. In the event the rate of interest chargeable under
this Agreement at any time is greater than the Maximum Rate, the unpaid
principal amount of the Loans shall bear interest at the Maximum Rate until the
total amount of interest paid or accrued on the Loans equals the amount of
interest which would have been paid or accrued on the Loans if the stated rates
of interest set forth in this Agreement had at all times been in effect. In the
event, upon Payment in Full of the Loans, the total amount of interest paid or
accrued under the terms of this Agreement and the Loans is less than the total
amount of interest which would have been paid or accrued if the rates of
interest set forth in this Agreement had, at all times, been in effect, then the
Applicable Borrower shall, to the extent permitted by applicable Legal
Requirement, pay the Administrative Agent for the account of the applicable
Lenders an amount equal to the difference between (i) the lesser of (A) the
amount of interest which would have been charged on its Loans if the Maximum
Rate had, at all times, been in effect and (B) the amount of interest which
would have accrued on its Loans if the rates of interest set forth in this
Agreement had at all times been in effect and (ii) the amount of interest
actually paid under this Agreement on its Loans. In the event the Lenders ever
receive, collect or apply as interest any sum in excess of the Maximum Rate,
such excess amount shall, to the extent permitted by applicable Legal
Requirement, be applied to the reduction of the principal balance of the Loans,
and if no such principal is then outstanding, such excess or part thereof
remaining shall be paid to the Applicable Borrower.

Section 9.12 Judgment Currency. If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due from the Applicable Borrower
hereunder in the currency expressed to be payable herein (the “specified
currency”) into another currency, the parties hereto agree, to the fullest
extent that they may effectively do so, that the rate of exchange used shall be
that at which in accordance with usual and customary banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at any of the Administrative Agent’s offices in the United States of
America on the Business Day preceding that on which final judgment is given. The
obligations of the Applicable Borrower in respect of any sum due to any Lender
Party hereunder shall, notwithstanding any judgment in a currency other than the
specified currency, be discharged only to the extent that on the Business Day

 

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following receipt by such Lender, the applicable Issuing Lender or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Lender, the applicable Issuing Lender or the
Administrative Agent (as the case may be) may in accordance with normal,
reasonable banking procedures purchase the specified currency with such other
currency. If the amount of the specified currency so purchased is less than the
sum originally due to such Lender, the applicable Issuing Lender or the
Administrative Agent, as the case may be, in the specified currency, the
Applicable Borrower agrees, to the fullest extent that it may effectively do so,
as a separate obligation and notwithstanding any such judgment, to indemnify
such Lender, the applicable Issuing Lender or the Administrative Agent, as the
case may be, against such loss, and if the amount of the specified currency so
purchased exceeds (a) the sum originally due to any Lender, the applicable
Issuing Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Section 2.12, each Lender, Issuing Lender or the Administrative Agent, as the
case may be, agrees to promptly remit such excess to the Applicable Borrower.

Section 9.13 Payments Set Aside. To the extent that any payment by or on behalf
of the Company is made to any Lender Party, or any Lender Party exercises its
right of setoff, and such payment or the proceeds of such setoff or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by any
Lender Party in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such setoff had
not occurred, and (b) each Lender and Issuing Lender severally agrees to pay to
the Administrative Agent upon demand its applicable share (without duplication)
of any amount so recovered from or repaid by the Administrative Agent, plus
interest thereon from the date of such demand to the date such payment is made
at a rate per annum equal to the Federal Funds Effective Rate from time to time
in effect, in the applicable currency of such recovery or payment. The
obligations of the Lenders and the Issuing Lenders under clause (b) of the
preceding sentence shall survive Payment in Full and the termination of this
Agreement.

Section 9.14 Governing Law. This Agreement, the Notes and the other Credit
Documents (other than such Credit Documents which expressly provide otherwise)
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York. Each Letter of Credit shall be governed by either (i) the
Uniform Customs and Practice for Documentary Credits (2007 Revision),
International Chamber of Commerce Publication No. 600, or (ii) the ISP, in
either case, including any subsequent revisions thereof approved by a Congress
of the International Chamber of Commerce and adhered to by the applicable
Issuing Lender.

Section 9.15 Submission to Jurisdiction. EACH PARTY TO THIS AGREEMENT
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LEGAL REQUIREMENT, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY

 

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OTHER MANNER PROVIDED BY APPLICABLE LEGAL REQUIREMENT. NOTHING IN THIS AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY OTHER PARTY OR ITS PROPERTIES
IN THE COURTS OF ANY JURISDICTION.

Section 9.16 Waiver of Venue. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO
IN SECTION 9.15. EACH OF THE PARTIES HERETO HEREBY AGREES THAT SECTIONS 5-1401
AND 4-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY
TO THIS AGREEMENT AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

Section 9.17 Service of Process.

(a) Each Borrower hereby irrevocably appoints the Borrower Representative as its
agent for service of process and agrees that the Borrower Representative shall
be the agent for service of process with respect to any action or proceeding
pertaining to each Borrower and service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail, postage prepaid, to the Borrower Representative.

(b) Each party hereto irrevocably consents to service of process in the manner
provided for notices in Section 9.9.

(c) Nothing in this Agreement will affect the right of any party hereto to serve
process in any other manner permitted by applicable Legal Requirement.

Section 9.18 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page of this Agreement by facsimile or by
e-mail “PDF” copy shall be effective as delivery of a manually executed
counterpart of this Agreement.

Section 9.19 Electronic Execution of Assignments. The words “execution,”
“signed,” “signature,” and words of like import in any Assignment and Assumption
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, the New York State Electronic Signatures and Records Act,
or any other similar state laws based on the Uniform Electronic Transactions
Act.

Section 9.20 Waiver of Jury. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PERSON HAS REPRESENTED,

 

127

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EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND
THE OTHER CREDIT DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

Section 9.21 USA Patriot Act. Each Lender that is subject to the Patriot Act and
the Administrative Agent (for itself and not on behalf of any Lender) hereby
notifies each Credit Party that pursuant to the requirements of the Patriot Act
it is required to obtain, verify and record information that identifies such
Credit Party, which information includes the name and address of such Credit
Party and other information that will allow such Lender or the Administrative
Agent, as applicable, to identify such Credit Party in accordance with the
Patriot Act.

Section 9.22 Canadian AML.

(a) Each Borrower (a) acknowledges that, pursuant to the AML Legislation, the
Lenders and the Administrative Agent may be required to obtain, verify and
record information regarding each Credit Party, its directors, authorized
signing officers, direct or indirect shareholders or other Persons in control of
each Credit Party, and the transactions contemplated hereby. Each Credit Party
shall promptly provide all such information, including supporting documentation
and other evidence, as may be reasonably requested by any Lender or the
Administrative Agent, or any prospective assign or participant of a Lender or
the Administrative Agent, in order to comply with any applicable AML
Legislation, whether now or hereafter in existence.

(b) If the Administrative Agent has ascertained the identity of each Credit
Party or any authorized signatories of each Credit Party for the purposes of
applicable AML Legislation, then the Administrative Agent:

(i) shall be deemed to have done so as an agent for each Lender, and this
Agreement shall constitute a “written agreement” in such regard between each
Lender and the Administrative Agent within the meaning of applicable AML
legislation; and

(ii) shall provide to each Lender copies of all information obtained in such
regard without any representation or warranty as to its accuracy or
completeness.

Notwithstanding Section 9.22(b) and except as may otherwise be agreed in
writing, each of the Lenders agrees that the Administrative Agent has no
obligation to ascertain the identity of each Credit Party or any authorized
signatories of each Credit Party on behalf of any Lender, or to confirm the
completeness or accuracy of any information it obtains from each Credit Party or
any such authorized signatory in doing so.

Section 9.23 Acknowledgement and Consent to Bail-In of EEA Financial
Institutions. Notwithstanding anything to the contrary in any Credit Document or
in any other agreement, arrangement or understanding among any such parties,
each party hereto acknowledges that any liability of any EEA Financial
Institution arising under any Credit Document may be subject to the Write-Down
and Conversion Powers of an EEA Resolution Authority and agrees and consents to,
and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution
Authority to any such liabilities arising hereunder which may be payable to it
by any party hereto that is an EEA Financial Institution; and

 

128

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(b) the effects of any Bail-In Action on any such liability, including, if
applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) conversion of all, or a portion of, such liability into shares or other
instruments of ownership in such EEA Financial Institution, its parent entity,
or a bridge institution that may be issued to it or otherwise conferred on it,
and that such shares or other instruments of ownership will be accepted by it in
lieu of any rights with respect to any such liability under this Agreement or
any other Credit Document; or

(iii) the variation of the terms of such liability in connection with the
exercise of the Write-Down and Conversion Powers of any EEA Resolution
Authority.

Section 9.24 Integration. THIS AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN
THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO
THE SUBJECT MATTERS SET FORTH HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

Section 9.25 No Fiduciary Duty, etc. Each Borrower acknowledges and agrees that
no Secured Party will have any obligations except those obligations with respect
to the Facility expressly set forth herein and in the other Credit Documents,
and each Secured Party is acting solely in the capacity of an arm’s length
contractual counterparty to each Borrower with respect to the Credit Documents
and the transactions contemplated therein and not as a financial advisor or a
fiduciary to, or an agent of, such Borrower or any other person. Each Borrower
agrees that it will not assert any claim against any Secured Party based on an
alleged breach of fiduciary duty by such Secured Party in connection with this
Agreement and the transactions contemplated hereby. Additionally, each Borrower
acknowledges and agrees that no Secured Party is advising such Borrower as to
any legal, tax, investment, accounting, regulatory or any other matters in any
jurisdiction. Each Borrower shall consult with its own advisors concerning such
matters and shall be responsible for making its own independent investigation
and appraisal of the transactions contemplated hereby, and the Secured Parties
shall have no responsibility or liability to such Borrower with respect thereto.

ARTICLE X

THE BORROWER REPRESENTATIVE

Section 10.1 Appointment; Nature of Relationship(a) . The Company is hereby
appointed by each of the Borrowers as its contractual representative (herein
referred to as the “Borrower Representative”) hereunder and under each other
Credit Document, and each of the Borrowers irrevocably authorizes the Borrower
Representative to act as the contractual representative of such Borrower with
the rights and duties expressly set forth herein and in the other Credit
Documents. The Borrower Representative agrees to act as such contractual
representative upon the express conditions contained in this Article X.
Additionally, the Borrowers hereby appoint the Borrower Representative as their
agent to receive all of the proceeds of the Loans in the Funding Accounts of the
Borrowers, at which time the Borrower Representative shall promptly disburse
such Loans to the appropriate Borrower(s), provided that, in the case of a Loan,
such amount shall not exceed the Availability, U.S. Availability or Canadian
Availability, as applicable. The Administrative Agent and the Lenders, and their
respective officers, directors, agents or employees, shall not be liable to the
Borrower Representative or any Borrower for any action taken or omitted to be
taken by the Borrower Representative or the Borrowers pursuant to this
Section 10.1.

 

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Section 10.2 Powers. The Borrower Representative shall have and may exercise
such powers under the Credit Documents as are specifically delegated to the
Borrower Representative by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Borrower Representative shall have no
implied duties to the Borrowers, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Credit
Documents to be taken by the Borrower Representative.

Section 10.3 Employment of Agents. The Borrower Representative may execute any
of its duties as the Borrower Representative hereunder and under any other
Credit Document by or through authorized officers.

Section 10.4 Notices. Each Borrower shall immediately notify the Borrower
Representative of the occurrence of any Default or Event of Default hereunder
referring to this Agreement describing such Default or Event of Default and
stating that such notice is a “notice of default.” In the event that the
Borrower Representative receives such a notice, the Borrower Representative
shall give prompt notice thereof to the Administrative Agent and the Lenders.
Any notice provided to the Borrower Representative hereunder shall constitute
notice to each Borrower on the date received by the Borrower Representative.

Section 10.5 Successor Borrower Representative. Upon the prior written consent
of the Administrative Agent, the Borrower Representative may resign at any time,
such resignation to be effective upon the appointment of a successor Borrower
Representative. The Administrative Agent shall give prompt written notice of
such resignation to the Lenders.

Section 10.6 Execution of Credit Documents; Borrowing Base Certificate. The
Borrowers hereby empower and authorize the Borrower Representative, on behalf of
the Borrowers, to execute and deliver to the Administrative Agent and the
Lenders the Credit Documents and all related agreements, certificates,
documents, or instruments as shall be necessary or appropriate to effect the
purposes of the Credit Documents, including, without limitation, the Borrowing
Base Certificates and the Compliance Certificates. Each Borrower agrees that any
action taken by the Borrower Representative or the Borrowers in accordance with
the terms of this Agreement or the other Credit Documents, and the exercise by
the Borrower Representative of its powers set forth therein or herein, together
with such other powers that are reasonably incidental thereto, shall be binding
upon all of the Borrowers.

[Remainder of this page intentionally left blank. Signature pages follow.]

 

130

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EXECUTED as of the date first above written.

 

BORROWER     NINE ENERGY SERVICE, INC.     By:  

/s/ Ann G. Fox

    Name:   Ann G. Fox     Title:   President and Chief Executive Officer
BORROWER     NINE ENERGY CANADA INC.     By:  

/s/ Ann G. Fox

    Name:   Ann G. Fox     Title:   President and Chief Executive Officer

Signature page to Credit Agreement

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

ADMINISTRATIVE AGENT, ISSUING LENDER AND A LENDER     JPMORGAN CHASE BANK, N.A.
    By:  

/s/ Arina Mavilian

    Name:   Arina Mavilian     Title:   Authorized Signatory

Signature page to Credit Agreement

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

ADMINISTRATIVE AGENT for Canadian Loans     JPMORGAN CHASE BANK, N.A.. TORONTO
BRANCH     By:  

/s/ Auggie Marchetti

    Name:   Auggie Marchetti     Title:   Authorized Officer

Signature page to Credit Agreement

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

LENDER AND AN ISSUING

LENDER

    WELLS FARGO BANK, NATIONAL ASSOCIATION     By:  

/s/ Anand Sekaran

    Name:   Anand Sekaran     Title:   Authorized Signatory LENDER    

WELLS FARGO CAPITAL FINANCE

CORPORATION CANADA

    By:  

/s/ David G. Phillips

    Name:   David G. Phillips     Title:  

Senior Vice President

Credit Officer, Canada

Wells Fargo Capital Finance Corporation, Canada

Signature page to Credit Agreement

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

LENDER     GOLDMAN SACHS BANK USA     By:  

/s/ Thomas Manning

    Name:   Thomas M. Manning     Title:  

Vice President

Authorized Signatory

Signature page to Credit Agreement

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

ISSUING LENDER AND A LENDER     Zions Bancorporation, N.A. dba Amegy Bank    
By:  

/s/ Rachel Pletcher

    Name:   Rachel Pletcher     Title:   Vice President

Signature page to Credit Agreement

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

SCHEDULE I

COMMITMENTS, CONTACT INFORMATION

 

ADMINISTRATIVE AGENT AND ISSUING LENDER

Notices: Principal/Interest/Fees

 

JPMorgan Chase Bank, N.A.

712 Main Street, 5th Floor

Houston, Texas 77002

 

Attn:

Phone:

Fax:

Email:

  

Documentation Contact

 

JPMorgan Chase Bank, N.A.

712 Main Street, 5th Floor

Houston, Texas 77002

 

Attn:

Phone:

Fax:

Email:

ISSUING LENDER

Notices:

 

Zions Bancorporation, N.A. dba Amegy Bank

1801 Main Street

Houston, Texas 77002

 

Attn:

Fax:

Email:

  

Documentation Contact:

 

Zions Bancorporation, N.A. dba Amegy Bank

1717 West Loop South, 23rd Floor

Houston, Texas 77027

 

Attn:

Phone:

Email:

Notices:

 

Wells Fargo Bank, National Association

14241 Dallas Parkway, Suite 900

Dallas, Texas 75254

 

Attn:

Phone:

Email:

  

Documentation Contact:

 

Wells Fargo Bank, National Association

14241 Dallas Parkway, Suite 900

Dallas, Texas 75254

 

Attn:

Phone:

Email:

 

CREDIT PARTIES

 

Borrowers:

 

Nine Energy Service, Inc.

Nine Energy Canada Inc.

 

Other Guarantors:

Beckman Production Services, Inc.

Beckman Production Services, Inc.

Big Lake Services, LLC

Big Lake Services Holdco, LLC

CDK Intermediate, LLC

CDK Perforating, LLC

  

Address  c/o Nine Energy Service, Inc.

               2001 Kirby Drive, Suite 200

               Houston, Texas 77019

Attn: Ann Fox

Fax: 713-227-7850

 

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

CDK Perforating Holdings, Inc.

Crest Pumping Technologies, LLC

Dak-Tana Wireline, LLC

J & R Well Service, LLC

Nine Downhole Technologies, LLC

Nine Energy Service, LLC

Northern Production Company, LLC

Northern States Completions, Inc.

Peak Pressure Control, LLC

R & S Well Service, Inc.

RedZone Coil Tubing, LLC

RedZone Holdco, LLC

SJL Well Service, LLC

MOTI Holdco, LLC

Magnum Oil Tools International, LTD

Magnum Oil Tools GP, LLC

Magnum Oil Tools Canada Ltd.

  

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

COMMITMENTS

 

LENDERS

   TOTAL
COMMITMENTS      CANADIAN
SUBLIMIT      LC FRONTING
LIMIT  

JPMorgan Chase Bank, N.A.

   $ 85,000,000.00        —        $ 10,000,000.00  

JPMorgan Chase Bank, N.A., Toronto Branch

     —        $ 13,750,000.00     

Wells Fargo Bank, National Association

   $ 65,000,000.00        —        $ 10,000,000.00  

Wells Fargo Capital Finance Corporation Canada

     —        $ 8,125,000.00        —    

Goldman Sachs Bank USA

   $ 25,000,000.00      $ 3,125,000.00        N/A  

Zions Bancorporation, N.A. dba Amegy Bank

   $ 25,000,000.00        N/A      $ 10,000,000.00     

 

 

    

 

 

    

 

 

 

TOTAL

   $ 200,000,000.00      $ 25,000,000.00      $ 30,000,000.00     

 

 

    

 

 

    

 

 

 

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

SCHEDULE II

EXISTING LETTER OF CREDIT

That certain Letter of Credit No. SBFTX300457, issued by ZB, N.A dba Amegy Bank,
in the amount of $450,000, for the account of Beckman Production Services, Inc.
in favor of Zurich American Insurance Company.

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

SCHEDULE 4.1

ORGANIZATIONAL INFORMATION

 

Entity Name

  

Type of Organization

  

Jurisdiction of

Formation

Beckman Production Services,

Inc. (Delaware)

   Corporation    Delaware

Beckman Production Services,

Inc. (Michigan)

   Corporation    Michigan Big Lake Services Holdco, LLC    Limited Liability
Company    Delaware Big Lake Services, LLC    Limited Liability Company   
Delaware CDK Intermediate, LLC    Limited Liability Company    Delaware CDK
Perforating Holdings, Inc.    Corporation    Delaware CDK Perforating, LLC   
Limited Liability Company    Texas

Crest Pumping Technologies,

LLC

   Limited Liability Company    Delaware Dak-Tana Wireline, LLC    Limited
Liability Company    Delaware J & R Well Service, LLC    Limited Liability
Company    Michigan Nine Downhole Technologies, LLC    Limited Liability Company
   Delaware Nine Energy Canada Inc.    Corporation    Alberta, Canada Nine
Energy Service, LLC    Limited Liability Company    Delaware Nine Energy
Service, Inc.    Corporation    Delaware

Northern Production Company,

LLC

   Limited Liability Company    Wyoming

Northern States Completions,

Inc.

   Corporation    Delaware Peak Pressure Control, LLC    Limited Liability
Company    Texas R & S Well Service, Inc.    Limited Liability Company   
Wyoming RedZone Coil Tubing, LLC    Limited Liability Company    Texas RedZone
Holdco, LLC    Limited Liability Company    Delaware SJL Well Service, LLC   
Limited Liability Company    Oklahoma MOTI Holdco, LLC    Limited Liability
Company    Delaware Magnum Oil Tools GP, LLC    Limited Liability Company   
Texas Magnum Oil Tools International, LTD    Limited Partnership    Texas Magnum
Oil Tools Canada Ltd.    Corporation    Alberta, Canada

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

SCHEDULE 4.10

ENVIRONMENTAL CONDITIONS

None.

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

SCHEDULE 4.11

SUBSIDIARIES

 

Entity Name:

Beckman Production Services, Inc. (Delaware) Beckman Production Services, Inc.
(Michigan) Big Lake Services Holdco, LLC Big Lake Services, LLC CDK
Intermediate, LLC CDK Perforating Holdings, Inc. CDK Perforating, LLC Crest
Pumping Technologies, LLC Dak-Tana Wireline, LLC First Call Well Services, LLC
J & R Well Service, LLC Nine Downhole Technologies, LLC Nine Energy Canada Inc.
Nine Energy Service, LLC Northern Production Company, LLC Northern States
Completions, Inc. Peak Pressure Control, LLC R & S Well Service, Inc. RedZone
Coil Tubing, LLC RedZone Holdco, LLC SJL Well Service, LLC MOTI Holdco, LLC
Magnum Oil Tools GP, LLC Magnum Oil Tools International, LTD Magnum Oil Tools
Canada Ltd. Frac Technology AS Nine Downhole Norway AS

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

SCHEDULE 5.7

REQUIREMENTS FOR NEW SUBSIDIARIES

Within 30 days of (i) creating a new Subsidiary or acquiring a new Subsidiary,
and (ii) 20 Business Days of designating an Unrestricted Subsidiary as a
Restricted Subsidiary under Section 5.7(b), the Administrative Agent shall have
received each of the following to the extent applicable:

(a) Guaranty. A joinder and supplement to the applicable Guaranty executed by
such Subsidiary if such Subsidiary is either a Wholly-Owned Domestic Restricted
Subsidiary or a Wholly-Owned Restricted Subsidiary organized or incorporated
under the federal laws of Canada or those of a province or territory of Canada
(a “Canadian Restricted Subsidiary”);

(b) Security Agreement. A joinder and/or supplement to the applicable Security
Agreement (1) if such Subsidiary is either a Wholly-Owned Domestic Restricted
Subsidiary or a Canadian Restricted Subsidiary, executed by such new Subsidiary
and (ii) if such new Subsidiary is a Domestic Subsidiary, a Subsidiary organized
or incorporated under the federal laws of Canada or those of a province or
territory of Canada or a First Tier Foreign Subsidiary, executed by the
applicable Borrower and any other Credit Party that owns Equity Interests in
such new Subsidiary, together with, if applicable, stock certificates and stock
powers executed in blank, UCC-1 financing statements, and any other documents,
agreements, or instruments necessary to create and perfect an Acceptable
Security Interest in the Collateral described in the Security Agreement, as so
supplemented, which joinder and/or supplement will grant a Lien in, among other
things, 100% of the Equity Interests of such new Subsidiary owned by the US
Borrower or any other Credit Party (but in the case of any First Tier Foreign
Subsidiary of a U.S. Credit Party limited to no greater than 65% of the Voting
Securities issued by such First Tier Foreign Subsidiary);

(c) Corporate Documents. A secretary’s certificate from such new Wholly-Owned
Domestic Restricted Subsidiary or Canadian Restricted Subsidiary certifying such
Subsidiary’s (1) officers’ incumbency, (ii) authorizing resolutions,
(iii) organizational documents, (iv) necessary governmental approvals, and
(v) certificate of good standing from the state in which each such Person is
organized dated a date not earlier than 15 days prior to date of delivery or
otherwise in effect on the date of delivery;

(d) Patriot Act; Beneficial Ownership Certification. (i) All documentation and
other information that is required by regulatory authorities under applicable
“know your customer” and anti-money-laundering rules and regulations, including,
without limitation, the Patriot Act and (ii) to the extent such Subsidiary
qualifies as a “legal entity customer” under the Beneficial Ownership
Regulation, a Beneficial Ownership Certification in relation to such Subsidiary
to the extent requested by a Lender or the Administrative Agent; and

(e) Opinion of Counsel. If reasonably requested by the Administrative Agent, an
opinion of counsel in form and substance reasonably acceptable to the
Administrative Agent related to such new Restricted Subsidiary and substantially
similar to the legal opinions delivered at the Funding Date with respect to the
other Restricted Subsidiaries in existence on the Funding Date.

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

SCHEDULE 6.1

PERMITTED DEBT

None.

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

SCHEDULE 6.2

PERMITTED LIENS

Lien in favor of Air Liquide Industrial US LP granted by RedZone Coil Tubing,
LLC encumbering Vessel - TW, S/N S1541, 13000 GAL Vaporizer - Thermax, S/N
A6632-1 hose fill stand assem - acme S/N 44728 Telemetry - Dataquest, S/N
FF793DE0.

Lien in favor of Air Liquide Industrial US LP granted by RedZone Coil Tubing,
LLC encumbering Vessel 241105-1-5 Vessel VT13000-S1541 exchanger A6632-1
assembly 44728 telemetry FF793DE0 Vessel VT13000 exchanger A6762-1 telemetry
2563035 assembly 46806 assembly 241105-2-4.

Lien in favor of Rowley Brothers, Inc. dba Rowleys Wholesale granted by Beckman
Production Services, Inc. encumbering the following described equipment, and any
equipment previously loaned or which may be added or substituted for the
following equipment, pursuant to a Loaned Equipment Agreement between “Secured
Party” and “Debtor” dated 10/08/2012: 2-S3338 Samson 330 poly tank 5:1 pump with
electronic meter, including 957 mini regulatore and 2051 1/4” steel nipple
pre-installed on unit from factory.

Lien in favor of First Fleet Corporation granted by Nine Energy Service, Inc.
encumbering the following described equipment: 1 new 2016 Mack GU813 Day Cab
Tractor w/pumps VIN 1M1AX16Y6GM032506, 2 new 2018 Mack GU713R with LV201 6x4 CH
Pump Down Logging IMaxx VINs 1M2AX09C4JM040360 and 1M2AX07Y0KM040971, and 2 new
2019 Mack GR64F with LV20-050i 6x4 CH Pump Down Logging IMaxx VINs
1M2GR3GCXKM004716 and 1M2GR3GC8KM004715.

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

SCHEDULE 6.3

PERMITTED INVESTMENTS

1. Promissory Note dated June 30, 2014, made by Kevin Palma in favor of Nine
Energy Service, Inc., in the original principal amount of $532,052.73.

2. Promissory Note dated June 30, 2014, made by Christopher Cole Ortowski in
favor of Nine Energy Service, Inc., in the original principal amount of
$3,547,056.28.

3. Promissory Note dated June 30, 2014, made by Cody Joe Ortowski in favor of
Nine Energy Service, Inc., in the original principal amount of $3,547,056.28.

4. Promissory Note dated April 4, 2018, made by Kenneth D. Preston in favor of
Nine Energy Service, Inc., in the original principal amount of $1,250,000.00.

5. Promissory Note dated April 4, 2018, made by Christopher A. Payson, in favor
of Nine Energy Service, Inc., in the original principal amount of $1,250,000.00.

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

SCHEDULE 6.11

PERMITTED AFFILIATE TRANSACTIONS

Commercial Lease Agreement dated January 1, 2018, by and between WTF Properties,
LLC, as landlord, and Magnum Oil Tools International, LTD, as tenant, for those
certain premises located at 5511 State Street, Midland, Midland County, Texas
79703.

Commercial Lease Agreement dated February 1, 2018 (as amended by that certain
First Amendment to Commercial Lease Agreement dated April 1, 2018, and as
further amended), by and between WTF Properties, LLC, as landlord, and Magnum
Oil Tools International, LTD, as tenant, for those certain premises located at
5655 Bear Lane, Corpus Christi, Nueces County, Texas 78405.

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

EXHIBIT A

[FORM OF]

ASSIGNMENT AND ASSUMPTION

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

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

 

1   Assignor:

  

2.  Assignee:

   [an Affiliate of [identify Lender]1]

3.  Borrowers:

   Nine Energy Service, Inc., as U.S. Borrower, and Nine Energy Canada Inc., as
Canadian Borrower

4.  Administrative Agent:

   JPMorgan Chase Bank, N.A., as the Administrative Agent under the Credit
Agreement

5.  Credit Agreement:

   The Credit Agreement dated as of October 25, 2018 among Nine Energy Service,
Inc., as U.S. Borrower, Nine Energy Canada Inc., as Canadian Borrower, the
Lenders party thereto, the Issuing Lenders, and JPMorgan Chase Bank N.A., as
Administrative Agent. Assigned Interest:   

 

1 

Include as applicable.

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

Facility Assigned

   Aggregate Amount of
Commitment/Loans for all
Lenders      Amount of
Commitment/Loans
Assigned      Percentage Assigned of
Commitment/Loans2      $        $          %      $        $          %      $  
     $          %  

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

The Assignee agrees to deliver to the Administrative Agent a completed
administrative questionnaire in which the Assignee designates one or more credit
contacts to whom all syndicate-level information (which may contain material
non-public information about the Borrowers and their Affiliates and their
Related Parties or their respective securities) will be made available and who
may receive such information in accordance with the Assignee’s compliance
procedures and applicable laws, including federal and state securities laws.

 

2 

Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of
all Lenders thereunder.

 

2

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

 

ASSIGNOR: [NAME OF ASSIGNOR] By:  

                    

Name:  

 

Title:  

 

Signature Page

Assignment and Assumption

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ASSIGNEE: [NAME OF ASSIGNEE] By:  

                

Name:  

 

Title:  

 

 

[Consented to and]3 Accepted:

JPMORGAN CHASE BANK N.A., as

Administrative Agent

By:  

                         

Name:  

 

Title:  

 

[Consented to:]4 [NAME OF RELEVANT PARTY] By:  

                

Name:  

 

Title:  

 

 

3 

To be added only if the consent of the Administrative Agent is required by the
terms of the Credit Agreement.

4 

To be added only if the consent of either Borrower and/or other parties (e.g.
Issuing Lender) is required by the terms of the Credit Agreement.

Signature Page

Assignment and Assumption

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ANNEX I

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

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

1.2 Assignee. The Assignee (a) represents and warrants that (i) it has full
power and authority, and has taken all action necessary, to execute and deliver
this Assignment and Assumption and to consummate the transactions contemplated
hereby and to become a Lender under the Credit Agreement,

(ii) it satisfies the requirements, if any, specified in the Credit Agreement
that are required to be satisfied by it in order to acquire the Assigned
Interest and become a Lender, (iii) from and after the Effective Date, it shall
be bound by the provisions of the Credit Agreement as a Lender thereunder and,
to the extent of the Assigned Interest, shall have the obligations of a Lender
thereunder, (iv) it has received a copy of the Credit Agreement, together with
copies of the most recent financial statements delivered pursuant to Section 5.2
thereof, as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on the Administrative Agent or any other Lender, and (v) attached to
the Assignment and Assumption is any documentation required to be delivered by
it pursuant to the terms of the Credit Agreement, duly completed and executed by
the Assignee; and (b) agrees that (i) it will, independently and without
reliance on the Administrative Agent, the Assignor or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Credit Agreement are
required to be performed by it as a Lender.

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

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

 

Annex I

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EXHIBIT C-1

[FORM OF]

GUARANTY AGREEMENT

This Guaranty Agreement dated as of October [25], 2018 (as amended,
supplemented, amended and restated or otherwise modified from time to time, this
“Guaranty”) is executed by each of the undersigned (individually a “Guarantor”
and collectively, the “Guarantors”), in favor of JPMorgan Chase Bank, N.A., as
Administrative Agent (as defined below) for the ratable benefit of the Secured
Parties (as defined in the Credit Agreement referred to herein).

INTRODUCTION

A. This Guaranty is given in connection with that certain Credit Agreement dated
as of October 25, 2018 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the “Credit Agreement”), by and among Nine
Energy Service, Inc. (the “Borrower”), Nine Energy Canada Inc., the lenders
party thereto from time to time (the “Lenders”), the Issuing Lenders (as defined
in the Credit Agreement) and JPMorgan Chase Bank, N.A., as the Administrative
Agent (in such capacity, the “Administrative Agent”).

B. Each Guarantor is a Domestic Restricted Subsidiary (as defined in the Credit
Agreement) of the Borrower and (i) the transactions contemplated by the Credit
Agreement and the other Credit Documents (as defined in the Credit Agreement),
(ii) the Swap Agreements (as defined in the Credit Agreement) entered into by
any Credit Party with a Swap Counterparty (as defined in the Credit Agreement),
and (iii) the Banking Services provided by any Lender or any Affiliate of a
Lender to any Credit Party, each are (a) in furtherance of such Domestic
Restricted Subsidiary’s corporate purposes, (b) necessary or convenient to the
conduct, promotion or attainment of such Domestic Restricted Subsidiary’s
business, and (c) for such Domestic Restricted Subsidiary’s direct or indirect
benefit.

C. The Borrower is a party to this Guaranty in order to guarantee the Secured
Obligations (as defined in the Credit Agreement) to the extent that the Secured
Obligations were directly incurred by a Credit Party other than the Borrower.

Each Guarantor is executing and delivering this Guaranty (i) to induce the
Lenders to provide and to continue to provide Loans under the Credit Agreement,
(ii) to induce the Issuing Lenders to provide and to continue to provide Letters
of Credit under the Credit Agreement, and (iii) intending it to be a legal,
valid, binding, enforceable and continuing obligation of such Guarantor.

NOW, THEREFORE, in consideration of the premises, each Guarantor hereby agrees
as follows:

Section 1. Definitions. All capitalized terms not otherwise defined in this
Guaranty that are defined in the Credit Agreement shall have the meanings
assigned to such terms by the Credit Agreement.

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Section 2. Guaranty.

(a) The Guarantors hereby, jointly and severally, absolutely, unconditionally
and irrevocably guarantee the punctual and complete payment and performance,
when due, whether at the stated maturity, by acceleration or otherwise, of all
Secured Obligations, whether absolute or contingent and whether for principal,
interest (including, without limitation, interest that but for the existence of
a bankruptcy, reorganization or similar proceeding would accrue), fees, amounts
owing in respect of Letter of Credit Obligations, amounts required to be
provided as collateral, indemnities, expenses or otherwise (collectively, the
“Guaranteed Obligations”). Without limiting the generality of the foregoing,
each Guarantor’s liability shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by the Borrower or any other Credit
Party to the Secured Parties but for the fact that they are unenforceable or not
allowable due to insolvency or the existence of a bankruptcy, reorganization or
similar proceeding involving the Borrower or any Credit Party.

(b) In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree that in the event a payment shall be made on
any date under this Guaranty by any Guarantor (the “Funding Guarantor”), each
other Guarantor (each a “Contributing Guarantor”) shall indemnify the Funding
Guarantor in an amount equal to the amount of such payment, in each case
multiplied by a fraction the numerator of which shall be the net worth of the
Contributing Guarantor as of such date and the denominator of which shall be the
aggregate net worth of all the Contributing Guarantors together with the net
worth of the Funding Guarantor as of such date. Any Contributing Guarantor
making any payment to a Funding Guarantor pursuant to this Section 2(b) shall be
subrogated to the rights of such Funding Guarantor to the extent of such
payment.

(c) Anything contained in this Guaranty to the contrary notwithstanding, the
obligations of each Guarantor under this Guaranty on any date shall be limited
to a maximum aggregate amount equal to the largest amount that would not, on
such date, render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of the Bankruptcy Code of the United
States or any applicable provisions of comparable laws relating to bankruptcy,
insolvency, or reorganization, or relief of debtors (collectively, the
“Fraudulent Transfer Laws”), but only to the extent that any Fraudulent Transfer
Law has been found in a final non-appealable judgment of a court of competent
jurisdiction to be applicable to such obligations as of such date, in each case:

(i) after giving effect to all liabilities of such Guarantor, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws, but
specifically excluding:

(A) any liabilities of such Guarantor in respect of intercompany indebtedness to
the Borrower or other affiliates of the Borrower to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by such
Guarantor hereunder;

(B) any liabilities of such Guarantor under this Guaranty; and

 

2

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(C) any liabilities of such Guarantor under each of its other guarantees of and
joint and several co-borrowings of Debt, in each case entered into on the date
this Guaranty becomes effective, which contain a limitation as to maximum amount
substantially similar to that set forth in this Section 2(c) (each such other
guarantee and joint and several co-borrowing entered into on the date this
Guaranty becomes effective, a “Competing Guaranty”) to the extent such
Guarantor’s liabilities under such Competing Guaranty exceed an amount equal to
(1) the aggregate principal amount of such Guarantor’s obligations under such
Competing Guaranty (notwithstanding the operation of that limitation contained
in such Competing Guaranty that is substantially similar to this Section 2(c)),
multiplied by (2) a fraction (i) the numerator of which is the aggregate
principal amount of such Guarantor’s obligations under such Competing Guaranty
(notwithstanding the operation of that limitation contained in such Competing
Guaranty that is substantially similar to this Section 2(c)), and (ii) the
denominator of which is the sum of (x) the aggregate principal amount of the
obligations of such Guarantor under all other Competing Guaranties
(notwithstanding the operation of those limitations contained in such other
Competing Guaranties that are substantially similar to this Section 2(c)), (y)
the aggregate principal amount of the obligations of such Guarantor under this
Guaranty (notwithstanding the operation of this Section 2(c)), and (z) the
aggregate principal amount of the obligations of such Guarantor under such
Competing Guaranty (notwithstanding the operation of that limitation contained
in such Competing Guaranty that is substantially similar to this Section 2(c));
and

(D) after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, reimbursement, indemnification or contribution of such Guarantor
pursuant to applicable Legal Requirement or pursuant to the terms of any
agreement (including any such right of contribution under Section 2(b)).

(d) The Borrower, unconditionally and irrevocably, with respect to each other
Guarantor, guarantees such Guarantor’s guarantee under Section 2(a) of any Swap
Agreements constituting Secured Obligations. The obligations of the Borrower
under this Section 2.1(d) shall remain in full force and effect until Payment in
Full. The Borrower intends that this Section 2.1(d) constitutes, and this
Section 2.1(d) shall be deemed to constitute, a guarantee or other agreement for
the benefit of each other Guarantor for all purposes of section 1a(18)(A)(v)(II)
of the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to
time, and any successor statute (the “Commodity Exchange Act”).

Section 3. Guaranty Absolute. Until Payment in Full, each Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Credit Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent, the Issuing Lenders, any Lender, any Banking
Service Provider or any Swap Counterparty with respect thereto but subject to
Section 2(c) above. The obligations of each Guarantor under this Guaranty are
independent of the Guaranteed Obligations or any other obligations of any other
Person under the Credit Documents or in connection with any Swap Agreement or
Banking Services,

 

3

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and a separate action or actions may be brought and prosecuted against a
Guarantor to enforce this Guaranty, irrespective of whether any action is
brought against any Guarantor or any other Person or whether any Guarantor or
any other Person is joined in any such action or actions. The liability of each
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor, to the extent not prohibited by applicable
Legal Requirement, hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Credit Document or any
agreement or instrument relating thereto or any part of the Guaranteed
Obligations being irrecoverable;

(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other obligations of any
Person under the Credit Documents or any agreement or instrument relating to
Swap Agreements with a Swap Counterparty or Banking Services with a Banking
Services Provider, or any other amendment or waiver of or any consent to
departure from any Credit Document or any agreement or instrument relating to
Swap Agreements with a Swap Counterparty or Banking Services with a Banking
Services Provider, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to the either
Borrower or otherwise;

(c) any taking, exchange, release or non-perfection of any Collateral, or any
taking, release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of Collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Guaranteed Obligations or any other obligations
of any other Person under the Credit Documents or any other assets of any
Guarantor;

(e) any change, restructuring or termination of the corporate structure or
existence of any Guarantor;

(f) any failure of any Lender, the Administrative Agent, any Issuing Lender, or
any other Secured Party to disclose to any Guarantor any information relating to
the business, condition (financial or otherwise), operations, properties or
prospects of any Person now or in the future known to the Administrative Agent,
the Issuing Lenders, any Lender or any other Secured Party (and each Guarantor
hereby irrevocably waives any duty on the part of any Secured Party to disclose
such information);

(g) any signature of any officer of any Guarantor being mechanically reproduced
in facsimile or otherwise; or

(h) any other circumstance or any existence of or reliance on any representation
by any Secured Party that might otherwise constitute a defense available to, or
a discharge of, any Guarantor or any other guarantor, surety or other Person.

 

4

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Section 4. Continuation and Reinstatement, Etc. Each Guarantor agrees that, to
the extent that payments of any of the Guaranteed Obligations are made, or any
Secured Party receives any proceeds of Collateral, and such payments or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, or otherwise required to be repaid, then to the extent
of such repayment the Guaranteed Obligations shall be reinstated and continued
in full force and effect as of the date such initial payment or collection of
proceeds occurred.

EACH GUARANTOR SHALL DEFEND AND INDEMNIFY EACH SECURED PARTY FROM AND AGAINST
ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE UNDER THIS SECTION 4
(INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH
ACTION OR SUIT, INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE
ARISING AS A RESULT OF THE INDEMNIFIED SECURED PARTY’S OWN NEGLIGENCE BUT
EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN
A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNIFIED SECURED PARTY’S GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT; PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE PARTIES HERETO
THAT EACH INDEMNIFIED SECURED PARTY BE INDEMNIFIED IN THE CASE OF ITS OWN
NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE
IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL.

Section 5. Waivers and Acknowledgments.

(a) Each Guarantor, to the extent not prohibited by applicable Legal
Requirement, hereby waives promptness, diligence, presentment, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that any Secured Party
protect, secure, perfect or insure any Lien or any property or exhaust any right
or take any action against the Borrower or any other Person or any collateral.

(b) Each Guarantor, to the extent not prohibited by applicable Legal
Requirement, hereby irrevocably waives any right to revoke this Guaranty, and
acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor acknowledges that it will receive substantial direct and
indirect benefits from (i) the financing arrangements involving any Guarantor
contemplated by the Credit Documents, (ii) the Swap Agreements entered into by a
Credit Party with a Swap Counterparty, and (iii) the Bank Services provided to
any Credit Party, and that the waivers set forth in this Guaranty are knowingly
made in contemplation of such benefits.

 

5

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Section 6. Subrogation and Subordination.

(a) No Guarantor will exercise any rights that it may now have or hereafter
acquire against any Credit Party to the extent that such rights arise from the
existence, payment, performance or enforcement of such Guarantor’s obligations
under this Guaranty or any other Credit Document, including, without limitation,
any right of subrogation, reimbursement, exoneration, contribution or
indemnification and any right to participate in any claim or remedy of any
Secured Party against any Credit Party, whether or not such claim, remedy or
right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from any Credit Party, directly
or indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim, remedy or right, until after
Payment in Full. If any amount shall be paid to a Guarantor in violation of the
preceding sentence at any time prior to or on the Payment in Full, such amount
shall be held in trust for the benefit of the Secured Parties and shall
forthwith be paid to the Administrative Agent to be credited and applied to the
Guaranteed Obligations and any and all other amounts payable by the Guarantors
under this Guaranty, whether matured or unmatured, in accordance with the terms
of the Credit Documents.

(b) Each Guarantor agrees that all Subordinated Guarantor Obligations (as
hereinafter defined) are and shall be subordinate and inferior in rank,
preference and priority to all obligations of such Guarantor in respect of the
Guaranteed Obligations hereunder, and such Guarantor shall, if requested by the
Administrative Agent, execute or cause, if applicable, a Restricted Subsidiary
to execute, a subordination agreement reasonably satisfactory to the
Administrative Agent to more fully set out the terms of such subordination. Each
Guarantor agrees that none of the Subordinated Guarantor Obligations shall be
secured by a lien or security interest on any assets of such Guarantor or any
ownership interests in any Subsidiary of such Guarantor. “Subordinated Guarantor
Obligations” means any and all obligations and liabilities of a Guarantor owing
to any other Guarantor or any Restricted Subsidiary, direct or contingent, due
or to become due, now existing or hereafter arising, including, without
limitation, all future advances, with interest, attorneys’ fees, expenses of
collection and costs.

Section 7. Representations and Warranties. Each Guarantor hereby represents and
warrants as follows:

(a) There are no conditions precedent to the effectiveness of this Guaranty.
Such Guarantor benefits from executing this Guaranty.

(b) Such Guarantor has, independently and without reliance upon the
Administrative Agent, any Lender or any other Secured Party and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Guaranty, and such Guarantor has
established adequate means of obtaining from each Credit Party on a continuing
basis information pertaining to, and is now and on a continuing basis will be
completely familiar with, the business, condition (financial and otherwise),
operations, properties and prospects of each Credit Party.

(c) The obligations of such Guarantor under this Guaranty are the valid, binding
and legally enforceable obligations of such Guarantor, (except as limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws at the time in effect affecting the rights of creditors generally and
(ii) general principles of equity whether applied by a court of law or equity),
and the execution and delivery of this Guaranty by such Guarantor has been duly
and validly authorized in all respects by all requisite corporate, limited

 

6

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liability company or partnership actions on the part of such Guarantor, and the
Person who is executing and delivering this Guaranty on behalf of such Guarantor
has full power, authority and legal right to so do, and to observe and perform
all of the terms and conditions of this Guaranty on such Guarantor’s part to be
observed or performed.

Section 8. Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default, any Lender, the Administrative Agent, any Issuing Lender
and any other Secured Party and each of their Affiliates is hereby authorized at
any time, to the fullest extent permitted by law, to set-off and apply any and
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Secured Party or any
such Affiliates to or for the credit or the account of each Guarantor against
any and all of the obligations of the Guarantors now or hereafter existing under
this Guaranty, irrespective of whether or not such Secured Party shall have made
any demand under this Guaranty and although such obligations may be contingent
and unmatured; provided that in the event that any Defaulting Lender shall
exercise any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Administrative Agent for further application in accordance
with the provisions of Section 2.20 of the Credit Agreement and, pending such
payment, shall be segregated by such Defaulting Lender from its other funds and
deemed held in trust for the benefit of the Administrative Agent, the Issuing
Lender and the Lenders, and (y) the Defaulting Lender shall provide promptly to
the Administrative Agent a statement describing in reasonable detail the
obligations owing to such Defaulting Lender as to which it exercised such right
of setoff. Such Secured Party shall promptly notify the affected Guarantor after
any such set-off and application is made, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Secured Parties under this Section 8 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which any
Secured Party may have.

Section 9. Amendments, Etc. No amendment or waiver of any provision of this
Guaranty and no consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
affected Guarantor and the Administrative Agent in accordance with Section 9.2
of the Credit Agreement, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

Section 10. Notices, Etc. All notices and other communications provided for
hereunder shall be sent in the manner provided for in Section 9.9 of the Credit
Agreement, in writing and hand delivered with written receipt, telecopied, sent
by facsimile, sent by a nationally recognized overnight courier, or sent by
certified mail, return receipt requested, if to a Guarantor, at its address for
notices specified in Schedule II to the Security Agreement, and if to the
Administrative Agent, the Issuing Lenders or any Lender, at its address
specified in or pursuant to the Credit Agreement. All such notices and
communications shall be effective when delivered.

Section 11. No Waiver: Remedies. No failure on the part of the Administrative
Agent or any other Secured Party to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

 

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Section 12. Continuing Guaranty: Assignments under the Credit Agreement. This
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until Payment in Full, (b) be binding upon each Guarantor and its successors and
assigns, (c) inure to the benefit of and, subject to Section 8.7(d) of the
Credit Agreement, be enforceable by the Administrative Agent, each Lender, each
Issuing Lender, each other Secured Party and their respective successors, and,
in the case of transfers and assignments made in accordance with the Credit
Agreement, transferees and assigns, and (d) inure to the benefit of and be
enforceable by a Swap Counterparty and each of its successors, transferees and
assigns to the extent such successor, transferee or assign is a Lender or an
Affiliate of a Lender. Without limiting the generality of the foregoing clause
(c), subject to Section 9.7 of the Credit Agreement, any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment, the Advances owing to it and the Note or Notes held by it) to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise, subject,
however, in all respects to the provisions of the Credit Agreement. Each
Guarantor acknowledges that upon any Person becoming a Lender, the
Administrative Agent or an Issuing Lender in accordance with the Credit
Agreement, such Person shall be entitled to the benefits hereof.

Section 13. Governing Law. This Guaranty shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.

Section 14. Submission to Jurisdiction. EACH GUARANTOR PARTY TO THIS GUARANTY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE GUARANTORS PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, IN SUCH FEDERAL COURT.
EACH OF THE GUARANTORS PARTY HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS GUARANTY SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGAINST ANY
OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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Section 15. Waiver of Venue. EACH GUARANTOR PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY IN
ANY COURT REFERRED TO IN SECTION 14. EACH OF THE PARTIES HERETO HEREBY AGREES
THAT SECTIONS 5-1401 AND 4-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK SHALL APPLY TO THIS GUARANTY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

Section 16. Service of Process. Each Guarantor party hereto irrevocably consents
to service of process in the manner provided for in Section 9.17 of the Credit
Agreement. Nothing in this Guaranty will affect the right of any party hereto to
serve process in any other manner permitted by applicable Legal Requirement.

Section 17. Waiver of Jury. EACH GUARANTOR PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
GUARANTOR PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 18. Indemnification. Each Guarantor shall, and does hereby indemnify,
the Administrative Agent (and any sub-agent thereof), each Lender and the
Issuing Lender, and each Related Party of any of the foregoing Persons (each
such Person being called an “Indemnitee”) against, and hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses (including the reasonable fees, charges and disbursements of any
counsel for any Indemnitee; provided that counsel shall be limited to (x) one
counsel to such Persons, taken as a whole and one local counsel in each relevant
jurisdiction, taken as a whole and (y) solely in the event of a conflict of
interest, one additional counsel (and, if necessary, one local counsel in each
relevant jurisdiction or for each matter) to each group of similarly situated
affected indemnified persons), incurred by any Indemnitee or asserted against
any Indemnitee by any third party or by the Borrower or any other Guarantor
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Guaranty or any agreement or instrument contemplated hereby,
the performance by the parties hereto of their respective obligations hereunder,
the consummation of the transactions contemplated hereby, or, in the case of the
Administrative Agent (and any sub-agent thereof) and its Related Parties only,
the administration of this Guaranty or (ii) any actual or prospective claim,
litigation, investigation or proceeding relating to the foregoing, whether based
on contract, tort or any other theory, whether brought by

 

9

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a third party or by any Guarantor, and regardless of whether any Indemnitee is a
party thereto, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN
PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE INDEMNITEE;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent jurisdiction by final and nonappealable
judgment in favor of such other Guarantor to have resulted (x) from the bad
faith, gross negligence or willful misconduct of such Indemnitee or (y) a
dispute among or between Indemnitees (except to the extent that such indemnified
loss was incurred by or asserted against the Administrative Agent, any arranger
or Issuing Lender in its capacity as such) and not involving any act or omission
of the Guarantors or any of their Affiliates. THIS SECTION 18 SHALL NOT APPLY
WITH RESPECT TO TAXES OTHER THAN TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES,
ETC. ARISING FROM ANY NON-TAX CLAIM.

Section 19. Additional Guarantors. Wholly-Owned Domestic Restricted Subsidiaries
of Borrower (a) may from time to time enter into this Guaranty as a Guarantor
and (b) the other Credit Parties shall cause their Wholly-Owned Domestic
Restricted Subsidiaries to become Guarantors hereunder to the extent required to
comply with Section 5.7 of the Credit Agreement. Upon execution and delivery
after the date hereof by the Administrative Agent and such Wholly- Owned
Domestic Restricted Subsidiary of an instrument in the form of Annex 1, such
Wholly- Owned Domestic Restricted Subsidiary shall become a Guarantor hereunder
with the same force and effect as if originally named as a Guarantor herein. The
execution and delivery of any instrument adding an additional Guarantor as a
party to this Guaranty shall not require the consent of any other Guarantor
hereunder. The rights and obligations of each Guarantor hereunder shall remain
in full force and effect notwithstanding the addition of any new Guarantor as a
party to this Guaranty.

Section 20. USA Patriot Act. Each Secured Party that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any other Secured Party) hereby notifies each Guarantor that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001))(the “Act”), it is required to obtain, verify and record
information that identifies such Guarantor, which information includes the name
and address of such Guarantor and other information that will allow such Secured
Party or the Administrative Agent, as applicable, to identify such Guarantor in
accordance with the Act. Following a request by any Secured Party, each
Guarantor shall promptly furnish all documentation and other information that
such Secured Party reasonably requests in order to comply with its ingoing
obligations under the applicable “know your customer” and anti-money laundering
rules and regulations, including the Act.

Section 21. No Fiduciary Duty, etc. The Guarantors hereby acknowledge and agree
that no Secured Party will have any obligations except those obligations with
respect to the Facilities expressly set forth in the Credit Agreement and in the
other Credit Documents, and each Secured Party is acting solely in the capacity
of an arm’s length contractual counterparty to the Guarantors with respect to
the Credit Documents and the transactions contemplated therein and not as a
financial advisor or a fiduciary to, or an agent of, any Guarantor or any other
person. Each Guarantor agrees that it will not assert any claim against any
Secured Party based on an alleged breach of fiduciary duty by such Secured Party
in connection with the Credit Documents

 

10

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and the transactions contemplated thereby. Additionally, each Guarantor
acknowledges and agrees that no Secured Party is advising it as to any legal,
tax, investment, accounting, regulatory or any other matters in any
jurisdiction. Each Guarantor shall consult with its own advisors concerning such
matters and shall be responsible for making its own independent investigation
and appraisal of the transactions contemplated hereby, and the Secured Parties
shall have no responsibility or liability to any Guarantor with respect thereto.

Section 22. NOTICE OF FINAL AGREEMENT. THIS GUARANTY AND THE CREDIT DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of this page intentionally left blank.]

 

11

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The Administrative Agent and each Guarantor has caused this Guaranty to be duly
executed as of the date first above written.

 

GUARANTORS: BECKMAN PRODUCTION SERVICES, INC. (DELAWARE) BECKMAN PRODUCTION
SERVICES, INC. (MICHIGAN)

BIG LAKE SERVICES HOLDCO, LLC

BIG LAKE SERVICES, LLC

CDK INTERMEDIATE, LLC

CDK PERFORATING HOLDINGS, INC.

CDK PERFORATING, LLC

CREST PUMPING TECHNOLOGIES, LLC

DAK-TANA WIRELINE, LLC

J & R WELL SERVICE, LLC

NINE DOWNHOLE TECHNOLOGIES, LLC

NINE ENERGY SERVICE, INC.

NINE ENERGY SERVICE, LLC

NORTHERN PRODUCTION COMPANY, LLC NORTHERN STATES COMPLETIONS, INC.

PEAK PRESSURE CONTROL, LLC

R & S WELL SERVICE, INC.

REDZONE COIL TUBING, LLC

REDZONE HOLDCO, LLC

SJL WELL SERVICE, LLC

MAGNUM OIL TOOLS GP, LLC

MAGNUM OIL TOOLS INTERNATIONAL, LTD

MOTI HOLDCO, LLC

By:  

                

Name: Ann G. Fox Title: President, Chief Executive Officer

 

[Signature Page to Guaranty]

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ADMINISTRATIVE AGENT:

 

JPMORGAN CHASE BANK, N.A.

By:  

                    

Name: Title:

 

[Signature Page to Guaranty]

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Annex 1 to the Guaranty Agreement

SUPPLEMENT NO.              dated as of            (the “Supplement”), to the
Guaranty Agreement dated as of [•], 20[•] (as amended, supplemented or otherwise
modified from time to time, the “Guaranty Agreement”), among Nine Energy
Service, Inc., a Delaware corporation (the “Borrower”), each Domestic Restricted
Subsidiary of the Borrower party thereto (together with the Borrower,
individually, a “Guarantor” and collectively, the “Guarantors”) and JPMorgan
Chase Bank, N.A., as administrative agent (the “Administrative Agent”) for the
benefit of the Secured Parties (as defined in the Credit Agreement referred to
herein).

A. Reference is made to the Credit Agreement dated as of October 25, 2018 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among the Borrower, Nine Energy Canada Inc., the lenders
from time to time party thereto (the “Lenders”), the Issuing Lenders (as defined
in the Credit Agreement), and JPMorgan Chase Bank, N.A., as Administrative
Agent.

B. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Guaranty Agreement and the Credit
Agreement.

C. The Guarantors have entered into the Guaranty Agreement in order to induce
the Lenders to make Loans and the Issuing Lenders to issue Letters of Credit.
Section 19 of the Guaranty Agreement provides that additional Domestic
Restricted Subsidiaries of the Borrower may become Guarantors under the Guaranty
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Domestic Restricted Subsidiary of the Borrower (the
“New Guarantor”) is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Guarantor under the Guaranty
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Lenders to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.

Accordingly, the Administrative Agent and the New Guarantor agree as follows:

SECTION 1. In accordance with Section 19 of the Guaranty Agreement, the New
Guarantor by its signature below becomes a Guarantor under the Guaranty
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) guarantees the Guaranteed
Obligations, (b) agrees to all the terms and provisions of the Guaranty
Agreement applicable to it as a Guarantor thereunder and (c) represents and
warrants that the representations and warranties made by it as a Guarantor
thereunder are true and correct in all material respects on and as of the date
hereof. Each reference to a “Guarantor” in the Guaranty Agreement shall be
deemed to include the New Guarantor. The Guaranty Agreement is hereby
incorporated herein by reference.

SECTION 2. The New Guarantor represents and warrants to the Administrative Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it by all requisite corporate, limited liability
company or partnership action and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).

 

Annex I-1

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SECTION 3. This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by fax transmission
shall be as effective as delivery of a manually executed counterpart of this
Supplement.

SECTION 4. Except as expressly supplemented hereby, the Guaranty Agreement shall
remain in full force and effect.

SECTION 5. Governing Law. This Supplement shall be deemed a contract under, and
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York, applicable to contracts made and to be performed entirely
within such state, including without regard to conflicts of laws principles.

SECTION 6. Submission to Jurisdiction. NEW GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS SUPPLEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND NEW GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENT, IN SUCH FEDERAL COURT. NEW GUARANTOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS SUPPLEMENT SHALL AFFECT ANY RIGHT THAT ANY
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
SUPPLEMENT AGAINST ANY OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

SECTION 7. Waiver of Venue. NEW GUARANTOR IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT IN ANY COURT
REFERRED TO IN SECTION 6. NEW GUARANTOR HEREBY AGREES THAT SECTIONS 5-1401 AND
4-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO
THIS SUPPLEMENT AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

Annex I-2

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SECTION 8. Service of Process. New Guarantor irrevocably consents to service of
process in the manner provided for in Section 9.17 of the Credit Agreement.
Nothing in this Supplement will affect the right of any party hereto to serve
process in any other manner permitted by applicable law.

SECTION 9. Waiver of Jury. NEW GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). NEW GUARANTOR (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SUPPLEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guaranty Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

SECTION 11. All communications and notices hereunder shall be in writing and
given as provided in Section 10 of the Guaranty Agreement.

THIS SUPPLEMENT, THE GUARANTY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS
DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

Annex I-3

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IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly
executed this Supplement to the Guaranty Agreement as of the day and year first
above written.

 

[Name of New Guarantor] By:  

                    

Name: Title:

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

By:  

                         

Name: Title:

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EXHIBIT C-2

[FORM OF]

CANADIAN GUARANTY AGREEMENT

This Canadian Guaranty Agreement dated as of October [25], 2018 (as amended,
supplemented, amended and restated or otherwise modified from time to time, this
“Guaranty”) is executed by each of the undersigned (individually a “Guarantor”
and collectively, the “Guarantors”), in favor of JPMorgan Chase Bank, N.A.,
Toronto Branch, as Administrative Agent (in such capacity, the “Administrative
Agent”) for the ratable benefit of the Secured Parties (as defined in the Credit
Agreement referred to herein).

INTRODUCTION

A. This Guaranty is given in connection with that certain Credit Agreement dated
as of October 25, 2018 (as amended, supplemented, amended and restated or
otherwise modified from time to time, the “Credit Agreement”), by and among Nine
Energy Service, Inc. (the “U.S. Borrower”), Nine Energy Canada Inc. (the
“Borrower”), the lenders party thereto from time to time (the “Lenders”), the
Issuing Lenders (as defined in the Credit Agreement) and JPMorgan Chase Bank,
N.A., as the administrative agent.

B. Each Guarantor is a Wholly-Owned Restricted Subsidiary (as defined in the
Credit Agreement) of the Borrower and organized under the federal laws of Canada
or those of a province or territory of Canada (each, a “Canadian Restricted
Subsidiary”) and (i) the transactions contemplated by the Credit Agreement and
the other Credit Documents (as defined in the Credit Agreement), (ii) the Swap
Agreements (as defined in the Credit Agreement) entered into by any Canadian
Credit Party with a Swap Counterparty (as defined in the Credit Agreement), and
(iii) the Banking Services provided by any Lender or any Affiliate of a Lender
to any Canadian Credit Party, each are (a) in furtherance of such Canadian
Restricted Subsidiary’s corporate purposes, (b) necessary or convenient to the
conduct, promotion or attainment of such Canadian Restricted Subsidiary’s
business, and (c) for such Canadian Restricted Subsidiary’s direct or indirect
benefit.

C. The Borrower is a party to this Guaranty in order to guarantee the Canadian
Secured Obligations (as defined in the Credit Agreement) to the extent that the
Canadian Secured Obligations were directly incurred by a Canadian Credit Party
other than the Borrower.

Each Guarantor is executing and delivering this Guaranty (i) to induce the
Lenders to provide and to continue to provide Loans to the Borrower under the
Credit Agreement, and (ii) intending it to be a legal, valid, binding,
enforceable and continuing obligation of such Guarantor.

NOW, THEREFORE, in consideration of the premises, each Guarantor hereby agrees
as follows:

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Section 1. Definitions. All capitalized terms not otherwise defined in this
Guaranty that are defined in the Credit Agreement shall have the meanings
assigned to such terms by the Credit Agreement.

Section 2. Guaranty.

(a) The Guarantors hereby, jointly and severally, absolutely, unconditionally
and irrevocably guarantee to and in favor of the Administrative Agent on behalf
of the Secured Parties the punctual and complete payment and performance, when
due, whether at the stated maturity, by acceleration or otherwise, of all
Canadian Secured Obligations, whether absolute or contingent and whether for
principal, interest (including, without limitation, interest that but for the
existence of a bankruptcy, winding-up, insolvency, receivership, reorganization,
liquidation, arrangement or similar proceeding would accrue), fees, amounts
required to be provided as collateral, indemnities, expenses or otherwise
(collectively, the “Guaranteed Obligations”). Without limiting the generality of
the foregoing, each Guarantor’s liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by the Borrower
or any other Canadian Credit Party to the Secured Parties but for the fact that
they are unenforceable or not allowable due to insolvency or the existence of a
bankruptcy, winding-up, insolvency, receivership, reorganization, liquidation,
arrangement or similar proceeding involving the Borrower or any Canadian Credit
Party.

(b) In order to provide for just and equitable contribution among the
Guarantors, the Guarantors agree that in the event a payment shall be made on
any date under this Guaranty by any Guarantor (the “Funding Guarantor”), each
other Guarantor (each a “Contributing Guarantor”) shall indemnify the Funding
Guarantor in an amount equal to the amount of such payment, in each case
multiplied by a fraction the numerator of which shall be the net worth of the
Contributing Guarantor as of such date and the denominator of which shall be the
aggregate net worth of all the Contributing Guarantors together with the net
worth of the Funding Guarantor as of such date. Any Contributing Guarantor
making any payment to a Funding Guarantor pursuant to this Section 2(b) shall be
subrogated to the rights of such Funding Guarantor to the extent of such
payment.

(c) Anything contained in this Guaranty to the contrary notwithstanding, the
obligations of each Guarantor under this Guaranty on any date shall be limited
to a maximum aggregate amount equal to the largest amount that would not, on
such date, render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of the Bankruptcy Code of the United
States or any applicable provisions of comparable laws relating to bankruptcy,
insolvency, or reorganization, or relief of debtors (collectively, the
“Fraudulent Transfer Laws”), but only to the extent that any Fraudulent Transfer
Law has been found in a final non-appealable judgment of a court of competent
jurisdiction to be applicable to such obligations as of such date, in each case:

(i) after giving effect to all liabilities of such Guarantor, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws, but
specifically excluding:

 

2

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(A) any liabilities of such Guarantor in respect of intercompany indebtedness to
the Borrower or other affiliates of the Borrower to the extent that such
indebtedness would be discharged in an amount equal to the amount paid by such
Guarantor hereunder;

(B) any liabilities of such Guarantor under this Guaranty; and

(C) any liabilities of such Guarantor under each of its other guarantees of and
joint and several co-borrowings of Debt, in each case entered into on the date
this Guaranty becomes effective, which contain a limitation as to maximum amount
substantially similar to that set forth in this Section 2(c) (each such other
guarantee and joint and several co-borrowing entered into on the date this
Guaranty becomes effective, a “Competing Guaranty”) to the extent such
Guarantor’s liabilities under such Competing Guaranty exceed an amount equal to
(1) the aggregate principal amount of such Guarantor’s obligations under such
Competing Guaranty (notwithstanding the operation of that limitation contained
in such Competing Guaranty that is substantially similar to this Section 2(c)),
multiplied by (2) a fraction (i) the numerator of which is the aggregate
principal amount of such Guarantor’s obligations under such Competing Guaranty
(notwithstanding the operation of that limitation contained in such Competing
Guaranty that is substantially similar to this Section 2(c)), and (ii) the
denominator of which is the sum of (x) the aggregate principal amount of the
obligations of such Guarantor under all other Competing Guaranties
(notwithstanding the operation of those limitations contained in such other
Competing Guaranties that are substantially similar to this Section 2(c)), (y)
the aggregate principal amount of the obligations of such Guarantor under this
Guaranty (notwithstanding the operation of this Section 2(c)), and (z) the
aggregate principal amount of the obligations of such Guarantor under such
Competing Guaranty (notwithstanding the operation of that limitation contained
in such Competing Guaranty that is substantially similar to this Section 2(c));
and

(D) after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, reimbursement, indemnification or contribution of such Guarantor
pursuant to applicable Legal Requirement or pursuant to the terms of any
agreement (including any such right of contribution under Section 2(b)).

(d) The Borrower, unconditionally and irrevocably, with respect to each other
Guarantor, guarantees such Guarantor’s guarantee under Section 2(a) of any Swap
Agreements constituting Secured Obligations. The obligations of the Borrower
under this Section 2.1(d) shall remain in full force and effect until Payment in
Full. The Borrower intends that this Section 2.1(d) constitutes, and this
Section 2.1(d) shall be deemed to constitute, a guarantee or other agreement for
the benefit of each other Guarantor for all purposes of section 1a(18)(A)(v)(II)
of the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to
time, and any successor statute (the “Commodity Exchange Act”).

 

3

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Section 3. Guaranty Absolute. Until Payment in Full, each Guarantor guarantees
that the Guaranteed Obligations will be paid strictly in accordance with the
terms of the Credit Documents, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Administrative Agent, any Lender, any Banking Service Provider or
any Swap Counterparty with respect thereto but subject to Section 2(c) above.
The obligations of each Guarantor under this Guaranty are independent of the
Guaranteed Obligations or any other obligations of any other Person under the
Credit Documents or in connection with any Swap Agreement or Banking Services,
and a separate action or actions may be brought and prosecuted against a
Guarantor to enforce this Guaranty, irrespective of whether any action is
brought against any Guarantor or any other Person or whether any Guarantor or
any other Person is joined in any such action or actions. The liability of each
Guarantor under this Guaranty shall be irrevocable, absolute and unconditional
irrespective of, and each Guarantor, to the extent not prohibited by applicable
Legal Requirement, hereby irrevocably waives any defenses it may now or
hereafter have in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Credit Document or any
agreement or instrument relating thereto or any part of the Guaranteed
Obligations being irrecoverable;

(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Guaranteed Obligations or any other obligations of any
Person under the Credit Documents or any agreement or instrument relating to
Swap Agreements with a Swap Counterparty or Banking Services with a Banking
Services Provider, or any other amendment or waiver of or any consent to
departure from any Credit Document or any agreement or instrument relating to
Swap Agreements with a Swap Counterparty or Banking Services with a Banking
Services Provider, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to the either
Borrower or otherwise;

(c) any taking, exchange, release or non-perfection of any Collateral, or any
taking, release or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of Collateral, or proceeds thereof, to all or any
of the Guaranteed Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Guaranteed Obligations or any other obligations
of any other Person under the Credit Documents or any other assets of any
Guarantor;

(e) any change, restructuring or termination of the corporate structure or
existence of any Guarantor;

(f) any failure of any Lender, the Administrative Agent or any other Secured
Party to disclose to any Guarantor any information relating to the business,
condition (financial or otherwise), operations, properties or prospects of any
Person now or in the future known to the Administrative Agent, any Lender or any
other Secured Party (and each Guarantor hereby irrevocably waives any duty on
the part of any Secured Party to disclose such information);

 

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(g) any signature of any officer of any Guarantor being mechanically reproduced
in facsimile or otherwise; or

(h) any other circumstance or any existence of or reliance on any representation
by any Secured Party that might otherwise constitute a defense available to, or
a discharge of, any Guarantor or any other guarantor, surety or other Person.

Section 4. Continuation and Reinstatement, Etc. Each Guarantor agrees that, to
the extent that payments of any of the Guaranteed Obligations are made, or any
Secured Party receives any proceeds of Collateral, and such payments or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, or otherwise required to be repaid, then to the extent
of such repayment the Guaranteed Obligations shall be reinstated and continued
in full force and effect as of the date such initial payment or collection of
proceeds occurred.

EACH GUARANTOR SHALL DEFEND AND INDEMNIFY EACH SECURED PARTY FROM AND AGAINST
ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE UNDER THIS SECTION 4
(INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH
ACTION OR SUIT, INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE
ARISING AS A RESULT OF THE INDEMNIFIED SECURED PARTY’S OWN NEGLIGENCE BUT
EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN
A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
RESULTED FROM SUCH INDEMNIFIED SECURED PARTY’S GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT; PROVIDED, HOWEVER, THAT IT IS THE INTENTION OF THE PARTIES HERETO
THAT EACH INDEMNIFIED SECURED PARTY BE INDEMNIFIED IN THE CASE OF ITS OWN
NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE
IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL.

Section 5. Waivers and Acknowledgments.

(a) Each Guarantor, to the extent not prohibited by applicable Legal
Requirement, hereby waives promptness, diligence, presentment, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that any Secured Party
protect, secure, perfect or insure any Lien or any property or exhaust any right
or take any action against the Borrower or any other Person or any Collateral.

(b) Each Guarantor, to the extent not prohibited by applicable Legal
Requirement, hereby irrevocably waives any right to revoke this Guaranty, and
acknowledges that this Guaranty is continuing in nature and applies to all
Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor acknowledges that it will receive substantial direct and
indirect benefits from (i) the financing arrangements involving any Guarantor
contemplated by the Credit Documents, (ii) the Swap Agreements entered into by a
Canadian Credit Party with a Swap Counterparty, and (iii) the Bank Services
provided to any Canadian Credit Party, and that the waivers set forth in this
Guaranty are knowingly made in contemplation of such benefits.

 

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Section 6. Subrogation and Subordination.

(a) No Guarantor will exercise any rights that it may now have or hereafter
acquire against any Canadian Credit Party to the extent that such rights arise
from the existence, payment, performance or enforcement of such Guarantor’s
obligations under this Guaranty or any other Credit Document, including, without
limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of any
Secured Party against any Canadian Credit Party, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law,
including, without limitation, the right to take or receive from any Canadian
Credit Party, directly or indirectly, in cash or other property or by set-off or
in any other manner, payment or security on account of such claim, remedy or
right, until after Payment in Full. If any amount shall be paid to a Guarantor
in violation of the preceding sentence at any time prior to or on the Payment in
Full, such amount shall be held in trust for the benefit of the Secured Parties
and shall forthwith be paid to the Administrative Agent to be credited and
applied to the Guaranteed Obligations and any and all other amounts payable by
the Guarantors under this Guaranty, whether matured or unmatured, in accordance
with the terms of the Credit Documents.

(b) Each Guarantor agrees that all Subordinated Guarantor Obligations (as
hereinafter defined) are and shall be subordinate and inferior in rank,
preference and priority to all obligations of such Guarantor in respect of the
Guaranteed Obligations hereunder, and such Guarantor shall, if requested by the
Administrative Agent, execute or cause, if applicable, a Restricted Subsidiary
to execute, a subordination agreement reasonably satisfactory to the
Administrative Agent to more fully set out the terms of such subordination. Each
Guarantor agrees that none of the Subordinated Guarantor Obligations shall be
secured by a lien or security interest on any assets of such Guarantor or any
ownership interests in any Subsidiary of such Guarantor. “Subordinated Guarantor
Obligations” means any and all obligations and liabilities of a Guarantor owing
to any other Guarantor or any Restricted Subsidiary, direct or contingent, due
or to become due, now existing or hereafter arising, including, without
limitation, all future advances, with interest, attorneys’ fees, expenses of
collection and costs.

Section 7. Representations and Warranties. Each Guarantor hereby represents and
warrants as follows:

(a) There are no conditions precedent to the effectiveness of this Guaranty.
Such Guarantor benefits from executing this Guaranty.

(b) Such Guarantor has, independently and without reliance upon the
Administrative Agent, any Lender or any other Secured Party and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Guaranty, and such Guarantor has
established adequate means of obtaining from each Credit Party on a continuing
basis information pertaining to, and is now and on a continuing basis will be
completely familiar with, the business, condition (financial and otherwise),
operations, properties and prospects of each Canadian Credit Party.

 

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(c) The obligations of such Guarantor under this Guaranty are the valid, binding
and legally enforceable obligations of such Guarantor, (except as limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws at the time in effect affecting the rights of creditors generally and
(ii) general principles of equity whether applied by a court of law or equity),
and the execution and delivery of this Guaranty by such Guarantor has been duly
and validly authorized in all respects by all requisite corporate, limited
liability company or partnership actions on the part of such Guarantor, and the
Person who is executing and delivering this Guaranty on behalf of such Guarantor
has full power, authority and legal right to so do, and to observe and perform
all of the terms and conditions of this Guaranty on such Guarantor’s part to be
observed or performed.

Section 8. Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default, any Lender, the Administrative Agent, and any other
Secured Party and each of their Affiliates is hereby authorized at any time, to
the fullest extent permitted by law, to set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Secured Party or any such
Affiliates to or for the credit or the account of each Guarantor against any and
all of the obligations of the Guarantors now or hereafter existing under this
Guaranty, irrespective of whether or not such Secured Party shall have made any
demand under this Guaranty and although such obligations may be contingent and
unmatured; provided that in the event that any Defaulting Lender shall exercise
any such right of setoff, (x) all amounts so set off shall be paid over
immediately to the Administrative Agent for further application in accordance
with the provisions of Section 2.20 of the Credit Agreement and, pending such
payment, shall be segregated by such Defaulting Lender from its other funds and
deemed held in trust for the benefit of the Administrative Agent and the
Lenders, and (y) the Defaulting Lender shall provide promptly to the
Administrative Agent a statement describing in reasonable detail the obligations
owing to such Defaulting Lender as to which it exercised such right of setoff.
Such Secured Party shall promptly notify the affected Guarantor after any such
set-off and application is made, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of the
Secured Parties under this Section 8 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which any
Secured Party may have.

Section 9. Amendments, Etc. No amendment or waiver of any provision of this
Guaranty and no consent to any departure by any Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the
affected Guarantor and the Administrative Agent in accordance with Section 9.2
of the Credit Agreement, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.

Section 10. Notices, Etc. All notices and other communications provided for
hereunder shall be sent in the manner provided for in Section 9.9 of the Credit
Agreement, in writing and hand delivered with written receipt, telecopied, sent
by facsimile, sent by a nationally recognized overnight courier, or sent by
certified mail, return receipt requested, if to a Guarantor, at its address for
notices specified in Schedule II to the Security Agreement, and if to the
Administrative Agent or any Lender, at its address specified in or pursuant to
the Credit Agreement. All such notices and communications shall be effective
when delivered.

 

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Section 11. No Waiver: Remedies. No failure on the part of the Administrative
Agent or any other Secured Party to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.

Section 12. Continuing Guaranty: Assignments under the Credit Agreement. This
Guaranty is a continuing guaranty and shall (a) remain in full force and effect
until Payment in Full, (b) be binding upon each Guarantor and its successors and
assigns, (c) inure to the benefit of and, subject to Section 8.7(d) of the
Credit Agreement, be enforceable by the Administrative Agent, each Lender, each
other Secured Party and their respective successors, and, in the case of
transfers and assignments made in accordance with the Credit Agreement,
transferees and assigns, and (d) inure to the benefit of and be enforceable by a
Swap Counterparty and each of its successors, transferees and assigns to the
extent such successor, transferee or assign is a Lender or an Affiliate of a
Lender. Without limiting the generality of the foregoing clause (c), subject to
Section 9.7 of the Credit Agreement, any Lender may assign or otherwise transfer
all or any portion of its rights and obligations under the Credit Agreement
(including, without limitation, all or any portion of its Commitment, the
Advances owing to it and the Note or Notes held by it) to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Lender herein or otherwise, subject, however, in all
respects to the provisions of the Credit Agreement. Each Guarantor acknowledges
that upon any Person becoming a Lender or the Administrative Agent in accordance
with the Credit Agreement, such Person shall be entitled to the benefits hereof.

Section 13. Governing Law. This Guaranty shall be governed by, and construed and
enforced in accordance with, the laws of the State of New York.

Section 14. Submission to Jurisdiction. EACH GUARANTOR PARTY TO THIS GUARANTY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW
YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY, OR FOR RECOGNITION OR ENFORCEMENT
OF ANY JUDGMENT, AND EACH OF THE GUARANTORS PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, IN SUCH FEDERAL COURT.
EACH OF THE GUARANTORS PARTY HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS GUARANTY SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS GUARANTY AGAINST ANY
OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

 

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Section 15. Waiver of Venue. EACH GUARANTOR PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY IN
ANY COURT REFERRED TO IN SECTION 14. EACH OF THE PARTIES HERETO HEREBY AGREES
THAT SECTIONS 5-1401 AND 4-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK SHALL APPLY TO THIS GUARANTY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT
FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

Section 16. Service of Process. Each Guarantor party hereto irrevocably consents
to service of process in the manner provided for in Section 9.17 of the Credit
Agreement. Nothing in this Guaranty will affect the right of any party hereto to
serve process in any other manner permitted by applicable Legal Requirement.

Section 17. Waiver of Jury. EACH GUARANTOR PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
GUARANTOR PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 18. Indemnification. Each Guarantor shall, and does hereby indemnify,
the Administrative Agent (and any sub-agent thereof), each Lender and each
Related Party of any of the foregoing Persons (each such Person being called an
“Indemnitee”) against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses (including the
reasonable fees, charges and disbursements of any counsel for any Indemnitee;
provided that counsel shall be limited to (x) one counsel to such Persons, taken
as a whole and one local counsel in each relevant jurisdiction, taken as a whole
and (y) solely in the event of a conflict of interest, one additional counsel
(and, if necessary, one local counsel in each relevant jurisdiction or for each
matter) to each group of similarly situated affected indemnified persons),
incurred by any Indemnitee or asserted against any Indemnitee by any third party
or by the Borrower or any other Guarantor arising out of, in connection with, or
as a result of (i) the execution or delivery of this Guaranty or any agreement
or instrument contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder, the consummation of the transactions
contemplated hereby, or, in the case of the Administrative Agent (and any sub-
agent thereof) and its Related Parties only, the administration of this Guaranty
or (ii) any actual

 

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or prospective claim, litigation, investigation or proceeding relating to the
foregoing, whether based on contract, tort or any other theory, whether brought
by a third party or by any Guarantor, and regardless of whether any Indemnitee
is a party thereto, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE
OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE
INDEMNITEE; provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final
and nonappealable judgment in favor of such other Guarantor to have resulted
(x) from the bad faith, gross negligence or willful misconduct of such
Indemnitee or (y) a dispute among or between Indemnitees (except to the extent
that such indemnified loss was incurred by or asserted against the
Administrative Agent or any arranger) and not involving any act or omission of
the Guarantors or any of their Affiliates. THIS SECTION 18 SHALL NOT APPLY WITH
RESPECT TO TAXES OTHER THAN TAXES THAT REPRESENT LOSSES, CLAIMS, DAMAGES, ETC.
ARISING FROM ANY NON- TAX CLAIM.

Section 19. Additional Guarantors. Canadian Restricted Subsidiaries (a) may from
time to time enter into this Guaranty as a Guarantor and (b) the other Canadian
Credit Parties shall cause their Canadian Restricted Subsidiaries to become
Guarantors hereunder to the extent required to comply with Section 5.7 of the
Credit Agreement. Upon execution and delivery after the date hereof by the
Administrative Agent and such Canadian Restricted Subsidiary of an instrument in
the form of Annex 1, such Canadian Restricted Subsidiary shall become a
Guarantor hereunder with the same force and effect as if originally named as a
Guarantor herein. The execution and delivery of any instrument adding an
additional Guarantor as a party to this Guaranty shall not require the consent
of any other Guarantor hereunder. The rights and obligations of each Guarantor
hereunder shall remain in full force and effect notwithstanding the addition of
any new Guarantor as a party to this Guaranty.

Section 20. USA Patriot Act. Each Secured Party that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any other Secured Party) hereby notifies each Guarantor that pursuant to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001))(the “Act”), it is required to obtain, verify and record
information that identifies such Guarantor, which information includes the name
and address of such Guarantor and other information that will allow such Secured
Party or the Administrative Agent, as applicable, to identify such Guarantor in
accordance with the Act. Following a request by any Secured Party, each
Guarantor shall promptly furnish all documentation and other information that
such Secured Party reasonably requests in order to comply with its ingoing
obligations under the applicable “know your customer” and anti-money laundering
rules and regulations, including the Act.

Section 21. CAML. (a) Each Guarantor (a) acknowledges that, pursuant to the
Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada), the
Criminal Code (Canada) and the United Nations Act (Canada), including the
Regulations Implementing the United Nations Resolutions on the Suppression of
Terrorism (Canada) and the United Nations Al-Qaida and Taliban Regulations
(Canada) promulgated under the United Nations Act (Canada), and other applicable
anti-money laundering, anti-terrorist financing, government sanction and “know
your client” laws, in each case, applicable to Secured Parties operating in

 

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Canada or any of its provinces or territories (collectively, including any
rules, regulations, directives, guidelines or orders thereunder, “CAML”), the
Secured Parties may be required to obtain, verify and record information
regarding each Guarantor, its directors, authorized signing officers, direct or
indirect shareholders or other Persons in control of each Guarantor, and the
transactions contemplated hereby. Each Guarantor shall promptly provide all such
information, including supporting documentation and other evidence, as may be
reasonably requested by any Secured Party, or any prospective assign or
participant thereof, in order to comply with any applicable CAML, whether now or
hereafter in existence.

(b) If the Administrative Agent has ascertained the identity of each Guarantor
or any authorized signatories of each Guarantor for the purposes of applicable
CAML, then the Administrative Agent:

(i) shall be deemed to have done so as an agent for each Secured Party, and this
Guarantee shall constitute a “written agreement” in such regard between each
such Secured Party and the Administrative Agent within the meaning of applicable
CAML legislation; and

(ii) shall provide to each Secured Party copies of all information obtained in
such regard without any representation or warranty as to its accuracy or
completeness.

(c) Notwithstanding Section 21(b) and except as may otherwise be agreed in
writing, each of the Secured Parties agrees that the Administrative Agent has no
obligation to ascertain the identity of each Guarantor or any authorized
signatories of each Guarantor on behalf of any Secured Party, or to confirm the
completeness or accuracy of any information it obtains from each Guarantor or
any such authorized signatory in doing so.

Section 22. Judgment Currency. If for the purposes of obtaining judgment in any
court it is necessary to convert a sum due from a Guarantor in the currency
expressed to be payable herein (the “specified currency”) into another currency,
each Guarantor agrees, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with usual
and customary banking procedures the Administrative Agent could purchase the
specified currency with such other currency at any of the Administrative Agent’s
offices in the United States of America on the Business Day preceding that on
which final judgment is given. The obligations of any Guarantor in respect of
any sum due to any Secured Party shall, notwithstanding any judgment in a
currency other than the specified currency, be discharged only to the extent
that on the Business Day following receipt by such Secured Party or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Secured Party or the Administrative Agent (as the case
may be) may in accordance with normal, reasonable banking procedures purchase
the specified currency with such other currency. If the amount of the specified
currency so purchased is less than the sum originally due to such Secured Party
or the Administrative Agent, as the case may be, in the specified currency, each
Guarantor agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Secured Party or the Administrative Agent, as the case may be, against such
loss, and if the amount of the specified currency so purchased exceeds (a) the
sum originally due to any Secured Party or the Administrative Agent, as the case
may be, in the specified currency and (b) any amounts shared with other Secured
Parties as a result of allocations of such excess as a disproportionate payment
to such Secured Party under Section 2.12 of the Credit Agreement, each Secured
Party or the Administrative Agent, as the case may be, agrees to promptly remit
such excess to the Borrower.

 

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Section 23. No Fiduciary Duty, etc. The Guarantors hereby acknowledge and agree
that no Secured Party will have any obligations except those obligations with
respect to the Facilities expressly set forth in the Credit Agreement and in the
other Credit Documents, and each Secured Party is acting solely in the capacity
of an arm’s length contractual counterparty to the Guarantors with respect to
the Credit Documents and the transactions contemplated therein and not as a
financial advisor or a fiduciary to, or an agent of, any Guarantor or any other
person. Each Guarantor agrees that it will not assert any claim against any
Secured Party based on an alleged breach of fiduciary duty by such Secured Party
in connection with the Credit Documents and the transactions contemplated
thereby. Additionally, each Guarantor acknowledges and agrees that no Secured
Party is advising it as to any legal, tax, investment, accounting, regulatory or
any other matters in any jurisdiction. Each Guarantor shall consult with its own
advisors concerning such matters and shall be responsible for making its own
independent investigation and appraisal of the transactions contemplated hereby,
and the Secured Parties shall have no responsibility or liability to any
Guarantor with respect thereto.

Section 24. NOTICE OF FINAL AGREEMENT. THIS GUARANTY AND THE CREDIT DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

[Remainder of this page intentionally left blank.]

 

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The Administrative Agent and each Guarantor has caused this Guaranty to be duly
executed as of the date first above written.

 

GUARANTOR[S] [                                                     ]

By:  

 

Name: Title:

 

[Signature Page to Guaranty]

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ADMINISTRATIVE AGENT: JPMORGAN CHASE BANK, N.A., TORONTO BRANCH

By:  

 

Name: Title:

 

[Signature Page to Guaranty]

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Annex 1 to the Guaranty Agreement

SUPPLEMENT NO.              dated as of                         (the
“Supplement”), to the Guaranty Agreement dated as of [•], 20[•] (as amended,
supplemented or otherwise modified from time to time, the “Guaranty Agreement”),
among Nine Energy Canada Inc. (the “Borrower”), each Canadian Restricted
Subsidiary of the Borrower party thereto (together with the Borrower,
individually, a “Guarantor” and collectively, the “Guarantors”) and JPMorgan
Chase Bank, N.A., Toronto Branch, as administrative agent (the “Administrative
Agent”) for the benefit of the Secured Parties (as defined in the Credit
Agreement referred to herein).

A. Reference is made to the Credit Agreement dated as of October 25, 2018 (as
amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”), among the Borrower, Nine Energy Service, Inc., the lenders
from time to time party thereto (the “Lenders”), the Issuing Lenders (as defined
in the Credit Agreement), and JPMorgan Chase Bank, N.A., as administrative
agent.

B. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Guaranty Agreement and the Credit
Agreement.

C. The Guarantors have entered into the Guaranty Agreement in order to induce
the Lenders to make Loans. Section 19 of the Guaranty Agreement provides that
additional Canadian Restricted Subsidiaries of the Borrower may become
Guarantors under the Guaranty Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned Canadian Restricted
Subsidiary of the Borrower (the “New Guarantor”) is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Guarantor
under the Guaranty Agreement in order to induce the Lenders to make additional
Loans and as consideration for Loans previously made and Letters of Credit
previously issued.

Accordingly, the Administrative Agent and the New Guarantor agree as follows:
SECTION 1. In accordance with Section 19 of the Guaranty Agreement, the New

Guarantor by its signature below becomes a Guarantor under the Guaranty
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby (a) guarantees the Guaranteed
Obligations, (b) agrees to all the terms and provisions of the Guaranty
Agreement applicable to it as a Guarantor thereunder and (c) represents and
warrants that the representations and warranties made by it as a Guarantor
thereunder are true and correct in all material respects on and as of the date
hereof. Each reference to a “Guarantor” in the Guaranty Agreement shall be
deemed to include the New Guarantor. The Guaranty Agreement is hereby
incorporated herein by reference.

SECTION 2. The New Guarantor represents and warrants to the Administrative Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it by all requisite corporate, limited liability
company or partnership action and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).

 

Annex I-1

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SECTION 3. This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Guarantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by fax transmission
shall be as effective as delivery of a manually executed counterpart of this
Supplement.

SECTION 4. Except as expressly supplemented hereby, the Guaranty Agreement shall
remain in full force and effect.

SECTION 5. Governing Law. This Supplement shall be deemed a contract under, and
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York, applicable to contracts made and to be performed entirely
within such state, including without regard to conflicts of laws principles.

SECTION 6. Submission to Jurisdiction. NEW GUARANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS SUPPLEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND NEW GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENT, IN SUCH FEDERAL COURT. NEW GUARANTOR AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW. NOTHING IN THIS SUPPLEMENT SHALL AFFECT ANY RIGHT THAT ANY
PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS
SUPPLEMENT AGAINST ANY OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

SECTION 7. Waiver of Venue. NEW GUARANTOR IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT IN ANY COURT
REFERRED TO IN SECTION 6. NEW GUARANTOR HEREBY AGREES THAT SECTIONS 5-1401 AND
4-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO
THIS SUPPLEMENT AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM TO THE
MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

Annex I-2

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SECTION 8. Service of Process. New Guarantor irrevocably consents to service of
process in the manner provided for in Section 9.17 of the Credit Agreement.
Nothing in this Supplement will affect the right of any party hereto to serve
process in any other manner permitted by applicable law.

SECTION 9. Waiver of Jury. NEW GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). NEW GUARANTOR (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SUPPLEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 10. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guaranty Agreement shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision hereof in a particular jurisdiction shall not in and of itself affect
the validity of such provision in any other jurisdiction). The parties hereto
shall endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.

SECTION 11. All communications and notices hereunder shall be in writing and
given as provided in Section 10 of the Guaranty Agreement.

THIS SUPPLEMENT, THE GUARANTY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS
DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

Annex I-3

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IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly
executed this Supplement to the Guaranty Agreement as of the day and year first
above written.

 

[Name of New Guarantor] By:  

                 

Name:   Title:   JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Administrative
Agent By:  

                     

Name:   Title:  

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EXHIBIT D-1

PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT, dated as of October [25], 2018 (as amended,
supplemented, amended and restated or otherwise modified from time to time, this
“Security Agreement”), is by and among NINE ENERGY SERVICE, INC., a Delaware
corporation (the “Borrower”), each Domestic Subsidiary (as defined in the Credit
Agreement (as hereinafter defined)) of the Borrower party hereto from time to
time (collectively with the Borrower, the “Grantors” and individually, a
“Grantor”), and JPMorgan Chase Bank, N.A., as Administrative Agent (in such
capacity, the “Administrative Agent”) for the ratable benefit of the Secured
Parties (as defined in the Credit Agreement referred to herein).

W I T N E S S E T H:

WHEREAS, this Security Agreement is entered into in connection with that certain
Credit Agreement dated as of the date hereof (as amended, supplemented, amended
and restated or otherwise modified from time to time, the “Credit Agreement”),
by and among the Borrower, Nine Energy Canada Inc., the lenders party thereto
from time to time (the “Lenders”), the Issuing Lenders (as defined in the Credit
Agreement) and JPMorgan Chase Bank, N.A., as Administrative Agent; and

WHEREAS, pursuant to the terms of the Credit Agreement, and in consideration of
the credit extended by the Lenders to the Borrower and the letters of credit
issued by the Issuing Lenders for the account of the Borrower or any subsidiary
of the Borrower, the Grantors have executed and delivered the Guaranty (as
defined in the Credit Agreement); and

WHEREAS, as a condition precedent to the initial extension of credit under the
Credit Agreement, each Grantor is required to execute and deliver this Security
Agreement; and

WHEREAS, it is in the best interests of each Grantor to execute this Security
Agreement inasmuch as each Grantor will derive substantial direct and indirect
benefits from (i) the transactions contemplated by the Credit Agreement and the
other Credit Documents (as defined in the Credit Agreement), (ii) the Swap
Agreements (as defined in the Credit Agreement) entered into by the Borrower or
any other U.S. Credit Party (as defined in the Credit Agreement) with a Swap
Counterparty (as defined in the Credit Agreement), and (iii) the Banking
Services (as defined in the Credit Agreement) provided by any Banking Services
Provider to the Borrower or any other U.S. Credit Party, and each Grantor is
willing to execute, deliver and perform its obligations under this Security
Agreement to secure the U.S. Secured Obligations (as defined in the Credit
Agreement).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each Grantor agrees, for the benefit of each
Secured Party, as follows:

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ARTICLE I

DEFINITIONS

Section 1.1 Certain Terms. The following capitalized terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):

“Administrative Agent” has the meaning set forth in the preamble. “Borrower” has
the meaning set forth in the preamble.

“Certificated Equipment” means any Equipment the ownership of which is evidenced
by, or under any applicable Legal Requirement is required to be evidenced by, a
certificate of title.

“Collateral” has the meaning set forth in Section 2.1(a).

“Collateral Access Agreement” means any landlord waiver or other agreement, in
form and substance reasonably satisfactory to the Administrative Agent, between
the Administrative Agent and any third party (including any bailee, consignee,
customs broker, or other similar Person) in possession of any Collateral or any
landlord of any real property where any Collateral is located, as such landlord
waiver or other agreement may be amended, restated, supplemented or otherwise
modified from time to time.

“Collateral Account” has the meaning set forth in Section 4.3(b).

“Collateral Report” means any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the
Administrative Agent or any Lender with respect to the Collateral pursuant to
any Credit Document.

“Computer Hardware and Software Collateral” means (a) all computer and other
electronic data processing hardware, integrated computer systems, central
processing units, memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware, including all operating
system software, utilities and application programs in whatsoever form owned by
a Grantor or leased or licensed to Grantor, (b) software programs (including
both source code, object code and all related applications and data files),
designed for use on the computers and electronic data processing hardware
described in clause (a) above owned by a Grantor or leased or licensed to a
Grantor, (c) all firmware associated therewith, (d) all documentation (including
flow charts, logic diagrams, manuals, guides, specifications, training
materials, charts and pseudo codes) with respect to such hardware, software and
firmware described in the preceding clauses (a) through (c), and (e) all rights
with respect to all of the foregoing, including copyrights (including renewal
rights) and trade secrets rights, contract rights of a Grantor with respect to
all or any of the foregoing, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions, replacements,
improvements, error corrections, updates, additions or model conversions of any
of the foregoing.

 

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“Control” shall have the meaning set forth in Section 9-104, 9-105, 9-106 or
9-107 of Article 9 of the UCC.

“Control Agreement” means an authenticated record in form and substance
reasonably satisfactory to the Administrative Agent, that provides for the
Administrative Agent (for the benefit of the Secured Parties) to have Control
over certain Collateral.

“Copyright Collateral” means all copyrights of any Grantor, registered or
unregistered and whether published or unpublished, now or hereafter in force
throughout the world including all of such Grantor’s rights, titles and
interests in and to all copyrights registered in the United States Copyright
Office or anywhere else in the world, including those copyright registrations or
applications therefor set forth in Schedule III-C hereto, and registrations and
recordings thereof and all applications for registration thereof, whether
pending or in preparation, all copyright licenses, the right to sue for past,
present and future infringements of any of the foregoing, all rights
corresponding thereto, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and Proceeds of suit, which are owned or licensed by such
Grantor.

“Credit Agreement” has the meaning set forth in the first recital.

“Distributions” means all cash, cash dividends, stock dividends, other
distributions, liquidating dividends, shares of stock resulting from (or in
connection with the exercise of) stock splits, reclassifications, warrants,
options, non-cash dividends, and all other distributions or payments (whether
similar or dissimilar to the foregoing) on or with respect to, or on account of,
any Pledged Interest or other rights or interests constituting Collateral.

“Equipment” has the meaning set forth in Section 2.1(a)(i). “Excluded
Collateral” has the meaning set forth in Section 2.1(b).

“Excluded Contracts” means any contract to which any of the Grantors is a party
on the date hereof or which is entered into by any Grantor after the date hereof
which complies with Section 6.5 of the Credit Agreement (and the provisions of
which are not agreed to by a Grantor for the purposes of excluding such contract
from the Lien granted hereunder) to the extent (but only to the extent) that the
granting of a security interest therein would be prohibited by (a) such contract
under a provision (unless a Restricted Entity may unilaterally waive such
prohibition) in such contract in existence on the date hereof or, as to
contracts entered into after the date hereof, in existence in compliance with
Section 6.5 of the Credit Agreement (and the provisions of which are not agreed
to by a Grantor for the purposes of excluding such contract from the Lien
granted hereunder), or (b) an applicable Legal Requirement to which such Grantor
or such contract is subject; provided, however, to the extent that (i) either of
the prohibitions discussed in clause (a) and clause (b) above is ineffective or
subsequently rendered ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of
the UCC or under any other Legal Requirement or is otherwise no longer in effect
or enforceable, or (ii) the applicable Grantor has obtained the consent of the
other parties to such Excluded Contract to the creation of a lien and security
interest in such Excluded Contract, then such contract shall cease to be an
“Excluded Contract” and shall automatically be subject to the lien and security
interests granted hereby and to the terms and

 

3

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provisions of this Security Agreement as “Collateral”; provided further, that
any proceeds received by any Grantor from the sale, transfer or other
disposition of Excluded Contracts shall constitute Collateral unless any
Property constituting such proceeds are themselves subject to the exclusions set
forth above or otherwise constitute Excluded Collateral.

“Excluded Foreign Stock” means the Equity Interests issued by Foreign
Subsidiaries other than (a) 65% of the Voting Securities issued by a First-Tier
Foreign Subsidiary and (b) 100% of Equity Interests issued by a First-Tier
Foreign Subsidiary that are not Voting Securities.

“Excluded Governmental Approvals” means any Governmental Approval to the extent
(but only to the extent) that a Grantor is prohibited from granting a security
interest in, pledge of, or charge, mortgage or lien upon any such Property by
reason of applicable Legal Requirement to which such Grantor or such Property is
subject; provided, however, to the extent that (i) such prohibition is
ineffective or subsequently rendered ineffective under Sections 9-406, 9-407, 9-
408 or 9-409 of the UCC or under any other Legal Requirement or is otherwise no
longer in effect or enforceable, or (ii) the applicable Grantor has obtained the
consent of the applicable Governmental Authority to the creation of a lien and
security interest in such Excluded Governmental Approval, then such Governmental
Approval shall cease to be an “Excluded Governmental Approval” and shall
automatically be subject to the lien and security interests granted hereby and
to the terms and provisions of this Security Agreement as “Collateral”; provided
further, that any proceeds received by any Grantor from the sale, transfer or
other disposition of Excluded Governmental Approval shall constitute Collateral
unless any Property constituting such proceeds are themselves subject to the
exclusions set forth above or otherwise constitute Excluded Collateral.

“Excluded JV Equity Interests” means the Equity Interests owned by any Grantor
in a Joint Venture to the extent (but only to the extent) (a) the organizational
documents of such Joint Venture prohibit the granting of a Lien on such Equity
Interests or (b) such Equity Interests of such Joint Venture are expressly
required to be pledged as collateral to secure (i) obligations to the other
holders of the Equity Interests in such Joint Venture (other than a holder that
is a Subsidiary of the Borrower) or (ii) Debt of such Joint Venture that is
non-recourse to any of the Credit Parties or to any of the Credit Parties’
Properties; provided, however, if any of the foregoing conditions ceases to be
in effect for any reason, then the Equity Interest in such Joint Venture shall
cease to be an “Excluded JV Equity Interest” and shall automatically be subject
to the Lien and security interest granted hereby and to the terms and provisions
of this Security Agreement as “Collateral”; provided further, that any proceeds
received by any Grantor in respect of any (including from the sale, transfer or
other disposition of) Excluded JV Equity Interest shall constitute Collateral
unless any Property constituting such proceeds are themselves subject to the
exclusions set forth above.

“Excluded Perfection Collateral” has the meaning set forth in the Credit
Agreement. “Excluded PMSI Collateral” means any Property and proceeds thereof
(including insurance proceeds) of a Grantor that is now or hereafter subject to
a Lien securing (and, for the avoidance of doubt, acquired with the proceeds of)
purchase money debt or a Capital Lease obligation to the extent (and only to the
extent) that (a) the Debt associated with such Lien is permitted under
Section 6.1(e), (k) or (m) of the Credit Agreement, and (b) the documents

 

4

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evidencing such purchase money debt or Capital Lease obligation prohibit or
restrict the granting of a Lien in such Property; provided, however, to the
extent that (i) either of the prohibitions discussed in clauses (a) and (b)
above is ineffective or subsequently rendered ineffective under Sections 9-406,
9-407, 9-408 or 9-409 of the UCC or under any other Legal Requirement or is
otherwise no longer in effect or (ii) the holder of such Lien consents to the
granting of a Lien in favor of the Administrative Agent, then such Property and
proceeds thereof shall cease to be “Excluded PMSI Collateral” and shall
automatically be subject to the lien and security interests granted hereby and
to the terms and provisions of this Security Agreement as “Collateral”; provided
further, that any proceeds received by any Grantor from the sale, transfer or
other disposition of Excluded PMSI Collateral shall constitute Collateral unless
any Property constituting such proceeds are themselves subject to the exclusions
set forth above or otherwise constitute Excluded Collateral.

“Excluded Real Property” means all fee owned and leased real property (including
all leases related thereto) of any Credit Party.

“Excluded Trademark Collateral” means all United States intent to use trademark
applications with respect to which the grant of a security interest therein
would impair the validity or enforceability of said intent to use trademark
application under federal law; provided, however, to the extent that such law is
no longer in effect, then such trademark application shall cease to be “Excluded
Trademark Collateral” and shall automatically be subject to the lien and
security interests granted hereby and to the terms and provisions of this
Security Agreement as “Collateral”; provided further, that any proceeds received
by any Grantor from the sale, transfer or other disposition of Excluded
Trademark Collateral shall constitute Collateral unless any Property
constituting such proceeds are themselves subject to the exclusions set forth
above or otherwise constitute Excluded Collateral.

“First-Tier Foreign Subsidiary” means any Foreign Subsidiary the Equity
Interests of which are held directly by the Borrower or a Wholly-Owned Domestic
Restricted Subsidiary.

“Foreign Subsidiary” means any Subsidiary of the Borrower that is not a United
States Person within the meaning of Section 7701(a)(30) of the Code.

“General Intangibles” means all “general intangibles” and all “payment
intangibles”, each as defined in the UCC, and shall include all interest rate or
currency protection or hedging arrangements, all tax refunds, all licenses,
permits, concessions and authorizations and all Intellectual Property Collateral
(in each case, regardless of whether characterized as general intangibles under
the UCC).

“Governmental Approval” has the meaning set forth in Section 2.1(a)(vi).
“Grantor” has the meaning set forth in the preamble.

“Indemnitee” has the meaning set forth in Section 6.3(a).

“Intellectual Property Collateral” means, collectively, the Computer Hardware
and Software Collateral, the Copyright Collateral, the Patent Collateral, the
Trademark Collateral and the Trade Secrets Collateral.

 

5

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“Inventory” has the meaning set forth in Section 2.1(a)(ii).

“Joint Venture” means, with respect to any Person (the “holder”) at any time,
any incorporated, formed or organized corporation, limited liability company,
partnership, association or other entity, which is not a Subsidiary of the
Borrower and less than a majority of whose outstanding Voting Securities are at
such time owned by the holder or one or more Subsidiaries of the holder. Unless
expressly provided otherwise, all references herein to any “Joint Venture” or
“Joint Ventures” means a Joint Venture or Joint Ventures of a Grantor.

“Lenders” has the meaning set forth in the first recital.

“Letter-of-Credit Rights” has the meaning given to such term in the UCC.

“Patent Collateral” means (a) all inventions and discoveries, whether patentable
or not, all letters patent and applications for letters patent throughout the
world, including those patents and patent applications referred to in Schedule
III-A hereto, (b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in clause
(a), (c) all patent licenses, and other agreements providing any Grantor with
the right to use any items of the type referred to in clauses (a) and (b) above,
and (d) all proceeds of, and rights associated with, the foregoing (including
licenses, royalties income, payments, claims, damages and proceeds of
infringement suits), the right to sue third parties for past, present or future
infringements of any patent or patent application, and for breach or enforcement
of any patent license.

“Pledged Interests” means all Equity Interests or other ownership interests of
any Pledged Interests Issuer, including those described in Schedule I-A hereto;
all registrations, certificates, articles, by-laws, regulations, limited
liability company agreements or constitutive agreements governing or
representing any such interests; all options and other rights, contractual or
otherwise, at any time existing with respect to such interests, as such
interests are amended, modified, or supplemented from time to time, and together
with any interests in any Pledged Interests Issuer taken in extension or renewal
thereof or substitution therefor.

“Pledged Interests Issuer” means each Person identified in Schedule I-A hereto
as the issuer of the Pledged Interests identified opposite the name of such
Person or any other issuer of Pledged Interests.

“Pledged Note Issuer” means any issuer of Pledged Notes.

“Pledged Notes” means all promissory notes listed on Schedule I–B hereto
together with any intercompany notes and any other promissory notes issued to or
held by any Grantor, excluding, in each case, any Excluded Collateral.

“Pledged Property” means all Pledged Notes, Pledged Interests, all assignments
of any amounts due or to become due with respect to the Pledged Interests, all
other instruments which are now being delivered by any Grantor to the
Administrative Agent or may from time to time hereafter be delivered by any
Grantor to the Administrative Agent for the purpose of pledging under this
Security Agreement or any other Credit Document, and all proceeds of any of the
foregoing.

 

6

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“Receivables” has the meaning set forth in Section 2.1(a)(iii). “Related
Contracts” has the meaning set forth in Section 2.1(a)(iii).

“Secured Obligations” means the Secured Obligations as defined in the Credit
Agreement.

“Secured Parties” has the meaning set forth in the Credit Agreement. “Security
Agreement” has the meaning set forth in the preamble. “Payment in Full” has the
meaning set forth in the Credit Agreement.

“Trademark Collateral” means (a) (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos and other source or
business identifiers, and all goodwill of the business associated therewith, now
existing or hereafter adopted or acquired, including those trademarks referred
to in Schedule III-B hereto, whether currently in use or not, all registrations
and recordings thereof and all applications in connection therewith, whether
pending or in preparation for filing, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any office
or agency of the United States of America, or any State thereof or any other
country or political subdivision thereof or otherwise, and all common-law rights
relating to the foregoing, and (ii) the right to obtain all reissues, extensions
or renewals of the foregoing (collectively referred to as the “Trademark”), (b)
all trademark licenses for the grant by or to any Grantor of any right to use
any trademark, (c) all of the goodwill of the business connected with the use
of, and symbolized by the items described in, clause (a), and to the extent
applicable, clause (b), (d) the right to sue third parties for past, present and
future infringements of any Trademark Collateral described in clause (a) and, to
the extent applicable, clause (b), and (e) all Proceeds of, and rights
associated with, the foregoing, including any claim by any Grantor against third
parties for past, present or future infringement or dilution of any Trademark,
Trademark registration or Trademark license, or for any injury to the goodwill
associated with the use of any such Trademark or for breach or enforcement of
any Trademark license and all rights corresponding thereto throughout the world.

“Trade Secrets Collateral” means all common law and statutory trade secrets and
all other confidential, proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
any Grantor, and any patent applications in preparation for filing (all of the
foregoing being collectively called a “Trade Secret”), including all documents
and things embodying, incorporating or referring in any way to such Trade
Secret, all Trade Secret licenses, and including the right to sue for and to
enjoin and to collect damages for the actual or threatened misappropriation of
any Trade Secret and for the breach or enforcement of any such Trade Secret
license.

“UCC” means the Uniform Commercial Code, as in effect in the State of New York,
as the same may be amended from time to time.

 

7

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Section 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

Section 1.3 UCC Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the UCC are used in
this Security Agreement, including its preamble and recitals, with such
meanings.

Section 1.4 Miscellaneous. Article, Section, Schedule, Annex and Exhibit
references are to Articles and Sections of and Schedules, Annexes and Exhibits
to this Security Agreement, unless otherwise specified. All references to
instruments, documents, contracts, and agreements (including this Security
Agreement) are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified and shall include all schedules,
annexes and exhibits thereto unless otherwise specified. The words “hereof”,
“herein”, and “hereunder” and words of similar import when used in this Security
Agreement shall refer to this Security Agreement as a whole and not to any
particular provision of this Security Agreement. The term “including” means
“including, without limitation,”. Paragraph headings have been inserted in this
Security Agreement as a matter of convenience for reference only and it is
agreed that such paragraph headings are not a part of this Security Agreement
and shall not be used in the interpretation of any provision of this Security
Agreement.

ARTICLE II

SECURITY INTEREST

Section 2.1 Grant of Security Interest.

(a) Each Grantor hereby pledges, hypothecates, assigns, charges, mortgages,
delivers, and transfers to the Administrative Agent, for the ratable benefit of
each Secured Party, and hereby grants to the Administrative Agent, for the
ratable benefit of each Secured Party, a continuing security interest in all of
such Grantor’s right, title and interest in, to and under, all of the following,
whether now owned or hereafter acquired by such Grantor, and wherever located
and whether now owned or hereafter existing or arising (collectively, the
“Collateral”) as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor’s Secured Obligations:

(i) all equipment in all of its forms (including all drilling platforms and rigs
and remotely operated vehicles, trenchers, and other equipment used by any
Grantor, vehicles, motor vehicles, rolling stock, vessels and aircraft) of such
Grantor, wherever located, and all surface or subsurface machinery, equipment,
facilities, supplies, or other tangible personal property, including tubing,
rods, pumps, pumping units and engines, pipe, pipelines, meters, apparatus,
boilers, compressors, liquid extractors, connectors, valves, fittings, power
plants, poles, lines, cables, wires, transformers, starters and controllers,
machine shops, tools, machinery and parts, telegraph, telephone, and other
communication systems, loading docks, loading racks, and shipping facilities,
and any manuals, instructions, blueprints, computer software (including software
that is imbedded in and part of the equipment), and similar items which relate
to the above, and

 

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any and all additions, substitutions and replacements of any of the foregoing,
wherever located together with all improvements thereon and all attachments,
components, parts, equipment and accessories installed thereon or affixed
thereto (any and all of the foregoing being the “Equipment”);

(ii) all inventory in all of its forms of such Grantor, wherever located,
including (A) all oil, gas, or other hydrocarbons and all products and
substances derived therefrom, all raw materials and work in process therefore,
finished goods thereof, and materials used or consumed in the manufacture or
production thereof, (B) all documents of title covering any inventory, including
work in process, materials used or consumed in any Grantor’s business, now owned
or hereafter acquired or manufactured by any Grantor and held for sale in the
ordinary course of its business, (C) all goods in which such Grantor has an
interest in mass or a joint or other interest or right of any kind (including
goods in which such Grantor has an interest or right as consignee), (D) all
goods which are returned to or repossessed by such Grantor, and all accessions
thereto, products thereof and documents therefore, and (E) any other item
constituting “inventory” under the UCC (any and all such inventory, materials,
goods, accessions, products and documents being the “Inventory”);

(iii) all accounts, money, payment intangibles, deposit accounts (including the
Collateral Accounts and all amounts on deposit therein and all cash equivalent
investments carried therein and all proceeds thereof), contracts, contract
rights, all rights constituting a right to the payment of money, chattel paper,
documents, documents of title, instruments, and General Intangibles of such
Grantor, whether or not earned by performance or arising out of or in connection
with the sale or lease of goods or the rendering of services, including all
moneys due or to become due in repayment of any loans or advances, and all
rights of such Grantor now or hereafter existing in and to all security
agreements, guaranties, leases, agreements and other contracts securing or
otherwise relating to any such accounts, money, payment intangibles, deposit
accounts, contracts, contract rights, rights to the payment of money, chattel
paper, documents, documents of title, instruments, and General Intangibles (any
and all such accounts, money, payment intangibles, deposit accounts, contracts,
contract rights, rights to the payment of money, chattel paper, documents,
documents of title, instruments, and General Intangibles being the
“Receivables”, and any and all such security agreements, guaranties, leases,
agreements and other contracts being the “Related Contracts”);

(iv) all Intellectual Property Collateral of such Grantor;

(v) all books, correspondence, credit files, records, invoices, tapes, cards,
computer runs, writings, data bases, information in all forms, paper and
documents and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the foregoing in
this Section 2.1(a);

(vi) all governmental approvals, permits, licenses, authorizations, consents,
rulings, tariffs, rates, certifications, waivers, exemptions, filings, claims,
orders, judgments and decrees and other Legal Requirements (each a “Governmental
Approval”);

 

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(vii) all interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements, and all other agreements or arrangements
designed to protect such Grantor against fluctuations in interest rates or
currency exchange rates and all commodity hedge, commodity swap, exchange,
forward, future, floor, collar or cap agreements, fixed price agreements and all
other agreements or arrangements designed to protect such Grantor against
fluctuations in commodity prices (including any Swap Agreement);

(viii) to the extent not included in the foregoing, all bank accounts,
investment property, fixtures, supporting obligations, and goods;

(ix) all Pledged Interests, Pledged Notes, and any other Pledged Property and
all Distributions, interest, and other payments and rights with respect to such
Pledged Property;

(x) (A) all policies of insurance now or hereafter held by or on behalf of such
Grantor, including casualty, liability, key man life insurance, business
interruption, foreign credit insurance, and any title insurance, (B) all
proceeds of insurance, and (C) all rights, now or hereafter held by such Grantor
to any warranties of any manufacturer or contractor of any other Person;

(xi) all Commercial Tort Claims as set forth on Schedule IV;

(xii) all accessions, substitutions, replacements, products, offspring, rents,
issues, profits, returns, income and proceeds of and from any and all of the
foregoing Collateral (including proceeds which constitute property of the types
described in sub-clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix)
and (x) and proceeds deposited from time to time in any lock boxes of such
Grantor, and, to the extent not otherwise included, all payments and proceeds
under insurance (whether or not the Administrative Agent is the loss payee
thereof), or any condemnation award, indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the Collateral);

(xiii) any and all Liens and security interests (together with the documents
evidencing such security interests) granted to such Grantor by an obligor to
secure such obligor’s obligations owing under any Instrument, Chattel Paper, or
contract that is pledged hereunder or with respect to which a security interest
in such Grantor’s rights in such Instrument, Chattel Paper, or contract is
granted hereunder;

(xiv) any and all guaranties given by any Person for the benefit of such Grantor
which guarantees the obligations of an obligor under any instrument, chattel
paper, or contract, which are pledged hereunder;

(xv) all of such Grantor’s other property and rights of every kind and
description and interests therein, including all other “Account”, “Certificated
Securities”, “Chattel Paper”, “Commodity Accounts”, “Commodity Contracts”,
“Deposit Account”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”,
“Goods”, “Instruments”, “Inventory”, “Investment Property”, “Money”, “Payment
Intangibles”, “Proceeds”, “Securities”, “Securities Account”, “Security
Entitlements”, “Supporting Obligations” and “Uncertificated Securities” as each
such term is defined in the UCC.

 

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(b) Notwithstanding anything to the contrary contained in Section 2(a) and other
than to the extent set forth in this Section 2(b), the following property shall
be excluded from the lien and security interest granted hereunder (and shall not
be included as “Collateral” for purposes of this Agreement) (collectively, the
“Excluded Collateral”):

(i) Letter-of-Credit Rights (other than to the extent constituting Supporting
Obligations);

(ii) Excluded Governmental Approvals;

(iii) Excluded Contracts;

(iv) Excluded JV Equity Interests;

(v) Excluded PMSI Collateral;

(vi) Excluded Real Property;

(vii) Excluded Foreign Stock (with respect to the U.S. Secured Obligations
only); and

(viii) Excluded Trademark Collateral;

provided, however, that (x) the exclusion from the Lien and security interest
granted by any Grantor hereunder of any Excluded Collateral shall not limit,
restrict or impair the grant by such Grantor of the Lien and security interest
in any accounts or receivables arising under any such Excluded Collateral or any
payments due or to become due thereunder unless the conditions in effect which
qualify such Property as Excluded Collateral applies with respect to such
accounts and receivables, (y) any proceeds received by any Grantor from the
sale, transfer or other disposition of Excluded Collateral shall constitute
Collateral unless the conditions in effect which qualify such Property as an
Excluded Collateral applies with respect to such proceeds and (z) for the
avoidance of doubt, no Excluded Foreign Stock shall secure the U.S. Secured
Obligations and all of the Pledged Interests of a Foreign Subsidiary shall
secure the Canadian Secured Obligations.

Section 2.2 Security for Obligations.

(a) This Security Agreement, and the Collateral in which the Administrative
Agent for the benefit of the Secured Parties is granted a security interest
hereunder by each Grantor, secures the prompt and complete payment in cash and
performance of the Secured Obligations.

 

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(b) Notwithstanding anything contained herein to the contrary, it is the
intention of each Grantor, the Administrative Agent and the other Secured
Parties that the amount of the Secured Obligations secured by each Grantor’s
interests in any of its Property shall be in, but not in excess of, the maximum
amount permitted by fraudulent conveyance, fraudulent transfer and other similar
law, rule or regulation of any Governmental Authority applicable to such
Grantor. Accordingly, notwithstanding anything to the contrary contained in this
Security Agreement or in any other agreement or instrument executed in
connection with the payment of any of the Secured Obligations, the amount of the
Secured Obligations secured by each Grantor’s interests in any of its Property
pursuant to this Security Agreement shall be limited to an aggregate amount
equal to the largest amount that would not render such Grantor’s obligations
hereunder or the Liens and security interest granted to the Administrative Agent
hereunder subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provision of any other applicable Legal Requirement.

Section 2.3 Continuing Security Interest; Transfer of Loans; Reinstatement. This
Security Agreement shall create continuing security interests in the Collateral
and shall (a) except as otherwise provided in the Credit Agreement, remain in
full force and effect until Payment in Full, (b) be binding upon each Grantor
and its successors, transferees and assigns, and (c) inure, together with the
rights and remedies of the Administrative Agent hereunder, to the benefit of the
Administrative Agent and each other Secured Party and its respective permitted
successors, transferees and assigns, subject to the limitations as set forth in
the Credit Agreement. Without limiting the generality of the foregoing clause
(c), any Lender may assign or otherwise transfer (in whole or in part) all or
any part of its Commitment and Loans held by or owing to it as provided in
Section 9.7 of the Credit Agreement, and any successor or assignee thereof shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Secured Party under any Credit Document (including this Security
Agreement), or otherwise. If at any time all or any part of any payment
theretofore applied by the Administrative Agent or any other Secured Party to
any of the Secured Obligations is or must be rescinded or returned by the
Administrative Agent or any such Secured Party for any reason whatsoever
(including the insolvency, bankruptcy, reorganization or other similar
proceeding of any Grantor or any other Person), such Secured Obligations shall,
for purposes of this Security Agreement, to the extent that such payment is or
must be rescinded or returned, be deemed to have continued to be in existence,
notwithstanding any application by the Administrative Agent or such Secured
Party or any termination agreement or release provided to any Grantor, and this
Security Agreement shall continue to be effective or reinstated, as the case may
be, as to such Secured Obligations, all as though such application by the
Administrative Agent or such Secured Party had not been made.

Section 2.4 Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein, and will
perform all of its duties and obligations under such contracts and agreements to
the same extent as if this Security Agreement had not been executed, (b) the
exercise by the Administrative Agent of any of its rights hereunder shall not
release any Grantor from any of its duties or obligations under any such
contracts or agreements included in the Collateral, and (c) neither the
Administrative Agent nor any other Secured Party shall have any obligation or
liability under any contracts or agreements included in the Collateral by reason
of this Security Agreement, nor shall the Administrative Agent nor any Secured
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

 

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Section 2.5 Delivery of Pledged Property; Instruments and Tangible Chattel
Paper. Other than as provided in the first sentence of Section 4.5 below, all
certificates or instruments representing or evidencing (i) all Pledged Interests
and Pledged Notes and (ii) other Collateral consisting of Instruments and
Tangible Chattel Paper individually or collectively evidencing amounts payable
in excess of $3,000,000 shall be delivered to and held by or on behalf of (or in
the case of the Pledged Notes, endorsed to the order of) the Administrative
Agent pursuant hereto, shall be in suitable form for transfer by delivery, and
shall be accompanied by all necessary endorsements or instruments of transfer or
assignment, duly executed in blank. To the extent any of the Collateral
constitutes an “uncertificated security” (as defined in Section 8- 102(a)(18) of
the UCC) or a “security entitlement” (as defined in Section 8-102(a)(17) of the
UCC), then at the Administrative Agent’s request and its determination that such
Property is not an Excluded Perfection Collateral, the applicable Grantor shall
take and cause the appropriate Person (including any issuer, entitlement holder
or securities intermediary thereof) to take all actions necessary to grant
“control” (as defined in 8-106 of the UCC) to the Agent (for the benefit of the
Secured Parties) over such Collateral.

Section 2.6 Distributions on Pledged Interests. So long as no Event of Default
shall have occurred and be continuing, in the event that any Distribution with
respect to any Pledged Interest pledged hereunder is permitted to be paid (in
accordance with Section 6.9 of the Credit Agreement), such Distribution or
payment may be paid directly to the applicable Grantor. If any Distribution is
made in contravention of Section 6.9 of the Credit Agreement or this
Section 2.6, the applicable Grantor shall hold the same segregated and in trust
for the Administrative Agent until paid to the Administrative Agent in
accordance with Section 4.1(e).

Section 2.7 Security Interest Absolute, etc. This Security Agreement shall in
all respects be a continuing, absolute, unconditional and irrevocable grant of
security interest, and shall remain in full force and effect until Payment in
Full. All rights of the Secured Parties and the security interests granted to
the Administrative Agent (for its benefit and the ratable benefit of each other
Secured Party) hereunder, and all obligations of each Grantor hereunder, shall,
in each case, be absolute, unconditional and irrevocable irrespective of (a) any
lack of validity, legality or enforceability of any Credit Document, (b) the
failure of any Secured Party (i) to assert any claim or demand or to enforce any
right or remedy against any Grantor or any other Person under the provisions of
any Credit Document or otherwise, or (ii) to exercise any right or remedy
against any other guarantor of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any other term
of, all or any part of the Secured Obligations, or any other extension,
compromise or renewal of any Secured Obligations, (d) any reduction, limitation,
impairment or termination of any Secured Obligations (other than Payment in
Full) for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and each Grantor hereby
waives any right to or claim of) any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, any Secured Obligations or otherwise, (e) any
amendment to, rescission, waiver, or other modification of, or any consent to or
departure from, any of the terms of any Credit Document, (f) any addition,
exchange or release of any Collateral of the Secured Obligations, or any
surrender or non-perfection of any collateral, or any amendment to or waiver or
release or addition to, or consent to or departure from, any other guaranty held
by any Secured Party securing any of the Secured Obligations, or (g) any other
circumstance which might otherwise constitute a defense available to, or a legal
or equitable discharge of, any Grantor or any other Credit Party, any surety or
any guarantor.

 

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Section 2.8 Waiver of Subrogation. Until 91 days after Payment in Full, each
Grantor hereby irrevocably waives any claim or other rights which it may now or
hereafter acquire against any Credit Party that arise from the existence,
payment, performance or enforcement of such Grantor’s obligations under this
Security Agreement or any other Credit Document, including any right of
subrogation, reimbursement, exoneration or indemnification, any right to
participate in any claim or remedy of any Secured Party against any Credit Party
or any collateral which any Secured Party now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including the right to take or receive from any Credit Party,
directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Grantor in violation of the preceding sentence and
Payment in Full shall not have occurred, then such amount shall be deemed to
have been paid to such Grantor for the benefit of, and held in trust for, the
Administrative Agent (on behalf of the Secured Parties), and shall forthwith be
paid to the Administrative Agent to be credited and applied upon the Secured
Obligations, whether matured or unmatured. Each Grantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement and that the waiver set forth in this
Section 2.8 is knowingly made in contemplation of such benefits.

Section 2.9 Election of Remedies. Except as otherwise provided in the Credit
Agreement, if any Secured Party may, under applicable Legal Requirement, proceed
to realize its benefits under this Security Agreement or the other Credit
Documents giving any Secured Party a Lien upon any Collateral, either by
judicial foreclosure or by non-judicial sale or enforcement, such Secured Party
may, at its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Security Agreement.
If, in the exercise of any of its rights and remedies, any Secured Party shall
forfeit any of its rights or remedies, including its right to enter a deficiency
judgment against any Credit Party or any other Person, whether because of any
applicable Legal Requirements pertaining to “election of remedies” or the like,
each Grantor hereby consents to such action by such Secured Party and waives any
claim based upon such action, even if such action by such Secured Party shall
result in a full or partial loss of any rights of subrogation that such Grantor
might otherwise have had but for such action by such Secured Party.

Section 2.10 Pledged Securities. The granting of the foregoing security interest
does not make the Administrative Agent or any Secured Party a successor to
Grantor as a partner or member in any Pledged Interests Issuer that is a
partnership, limited partnership or limited liability company, as applicable,
and neither the Administrative Agent, any Secured Party, nor any of their
respective successors or assigns hereunder shall be deemed to have become a
partner or member in any Issuer, as applicable, by accepting this Agreement or
exercising any right granted herein unless and until such time, if any, when any
such Person expressly becomes a partner or member in any Pledged Interests
Issuer, as applicable, and complies with any applicable transfer provisions set
forth in the charter or organizational documents relating to an applicable
Pledged Security after a foreclosure thereon.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

In order to induce the Secured Parties to enter into the Credit Agreement and
extend credit to the Borrower thereunder and for the Issuing Lenders to issue
Letters of Credit thereunder, and to induce the Secured Parties to enter into
Swap Agreements and Banking Services, each Grantor represents and warrants unto
each Secured Party as set forth in this Article.

Section 3.1 Ownership, No Liens, etc. Such Grantor is the legal and beneficial
owner    of, and has good title to (and has full right and authority to pledge,
grant and assign) the Collateral free and clear of all Liens, except for any
Lien that is a Permitted Lien. No effective UCC financing statement or other
filing similar in effect covering all or any part of the Collateral is on file
in any recording office, except those filed in favor of the Administrative Agent
relating to this Security Agreement, Permitted Liens or as to which a duly
authorized termination statement relating to such UCC financing statement or
other instrument has been delivered to the Administrative Agent on the Closing
Date. This Security Agreement creates a valid security interest in the
Collateral, securing the payment of the Secured Obligations, and, except for
(a) the proper filing of the applicable financing statements with the filing
offices listed on Schedule II-A attached hereto, (b) the recordation of security
agreements with the U.S. Patent and Trademark Office and the U.S. Copyright
Office, and (c) taking possession of any Pledged Property with necessary
endorsements, all filings and other actions necessary to perfect and protect
such security interest in the Collateral (other than, as to perfection, Excluded
Perfection Collateral) have been duly taken and, subject to Permitted Liens,
such security interest shall be a first priority security interest.

Section 3.2 As to Equity Interests of the Subsidiaries, Investment Property.

(a) With respect to the Pledged Interests, all such Pledged Interests (i) other
than with respect to Pledged Interests in limited liability companies and
partnerships, are duly authorized and validly issued, fully paid and
non-assessable, and (ii) unless otherwise noted on Schedule I, are represented
by a certificate.

(b) With respect to the Pledged Interests, no such Pledged Interests (i) are
dealt in or traded on securities exchanges or in securities markets, or (ii) are
held in a Securities Account, except, with respect to this clause (b), Pledged
Interests (A) for which the Administrative Agent is the registered owner or
(B) with respect to which the Pledged Interests Issuer has agreed in an
authenticated record with such Grantor and the Administrative Agent to comply
with any instructions of the Administrative Agent without the consent of such
Grantor.

(c) Such Grantor has delivered all Certificated Securities constituting
Collateral held by such Grantor on the Closing Date to the Administrative Agent,
together with duly executed undated blank stock powers, or other equivalent
instruments of transfer reasonably acceptable to the Administrative Agent.

 

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(d) With respect to Uncertificated Securities constituting Collateral, such
Grantor has caused the Pledged Interests Issuer or other issuer thereof either
(i) to register the Administrative Agent as the registered owner of such
security, or (ii) to agree in an authenticated record with such Grantor and the
Administrative Agent that such Pledged Interests Issuer or other issuer will
comply with instructions with respect to such security originated by the
Administrative Agent without further consent of such Grantor.

(e) The percentage of the issued and outstanding Pledged Interests of each
Pledged Interests Issuer pledged by such Grantor hereunder is as set forth on
Schedule I-A and the percentage of the total membership, partnership and/or
other Equity Interests in the Pledged Interests Issuer is indicated on Schedule
I-A, in each case, as such Schedule I-A may be supplemented from time to time
pursuant to the terms hereof. All of the Pledged Interests constitute one
hundred percent (100%) of such Grantor’s interest in the applicable Pledged
Interests Issuer, except in the case of the Pledged Interests that are issued by
First-Tier Foreign Subsidiaries with respect to which such Grantor has pledged
(i) up to sixty-five percent (65%) of the outstanding Voting Securities issued
by such First-Tier Foreign Subsidiaries and (ii) one hundred percent (100%) of
all Equity Interests issued by such First-Tier Foreign Subsidiaries that are not
Voting Securities, in any case, as indicated on Schedule I-A.

(f) There are no outstanding rights, rights to subscribe, options, warrants or
convertible securities outstanding or any other rights outstanding whereby any
Person would be entitled to acquire shares, member interests or units of any
Pledged Interests Issuer other than (i) as to Pledged Interests Issuers that are
not Wholly-Owned Subsidiaries or (ii) such rights that constitute Collateral.

(g) In the case of each Pledged Note, all of such Pledged Notes are as set forth
on Schedule I-B and have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuers
thereof, and, as of the Closing Date, are not in default.

Section 3.3 Grantor’s Name, Location, etc.

(a) Other than as otherwise permitted pursuant to any Credit Document, (i) the
jurisdiction in which such Grantor is located for purposes of Sections 9-301 and
9-307 of the UCC is set forth in Schedule II-A hereto, (ii) as of the Closing
Date or such later date on which such Grantor joins this Security Agreement, the
place of business of such Grantor or, if such Grantor has more than one place of
business, the chief executive office of such Grantor and the office where such
Grantor keeps its records concerning the Receivables, is set forth in Schedule
II-B hereto, and (iii) such Grantor’s federal taxpayer identification number is
set forth in Schedule II-C hereto.

(b) Within the past five years, such Grantor has not been known by any legal
name different from the one set forth on the signature page hereto, nor has such
Grantor been the subject of any merger or other corporate reorganization, except
as set forth in Schedule II-D hereto.

(c) None of the Receivables in excess of $3,000,000 is evidenced by a promissory
note or other instrument other than a promissory note or instrument that has
been delivered to the Administrative Agent (with appropriate endorsements).

 

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(d) As of the Closing Date or such later date on which such Grantor joins this
Security Agreement, the name set forth on the signature page attached hereto
(or, if applicable, the signature page to the supplement document pursuant to
which such Grantor joins this Security Agreement) is the true and correct legal
name (as defined in the UCC) of such Grantor.

Section 3.4 Possession of Inventory; Control. Such Grantor has exclusive
possession and control, subject to Permitted Liens, of the Equipment and
Inventory, except as otherwise required, necessary or customary in the ordinary
course of its business. Such Grantor has not consented to, and is otherwise
unaware of, any Person (other than, if applicable, the Administrative Agent
pursuant to Section 4.3(b) or Section 4.1(b)(i) hereof) having control (within
the meaning of Section 9-104 or Section 8-106 of the UCC) over any Collateral,
or any other interest in any of such Grantor’s rights in respect thereof other
than, with respect to Deposit Accounts and Securities Accounts, as to Liens
permitted under Section 6.2(b), (h), (i), (l) and (m) of the Credit Agreement.

Section 3.5 Pledged Property, Instruments and Tangible Chattel Paper. Such
Grantor has, contemporaneously herewith, delivered to the Administrative Agent
possession of all originals of all certificates or instruments representing or
evidencing (i) any Pledged Interests and Pledged Notes, and (ii) other
Collateral consisting of Instruments and Tangible Chattel Paper individually, or
collectively, evidencing amounts payable in excess of $3,000,000, owned or held
by such Grantor (duly endorsed, in blank, if requested by the Administrative
Agent).

Section 3.6 Intellectual Property Collateral. Such Grantor represents that
except for any Patent Collateral, Trademark Collateral, and Copyright Collateral
specified in Item A, Item B and Item C, respectively, of Schedule III hereto,
and any and all Trade Secrets Collateral, as of the date hereof, such Grantor
does not own and has no interests in any other Intellectual Property Collateral
material to the operations or business of such Grantor, other than the Computer
Hardware and Software Collateral. Such Grantor further represents and warrants
that, with respect to all Intellectual Property Collateral material to the
conduct of such Grantor’s business (a) such Intellectual Property Collateral is
valid, subsisting, unexpired and enforceable and has not been abandoned or
adjudged invalid or unenforceable, in whole or in part, (b) other than with
respect to Intellectual Property Collateral licensed to it, such Grantor is the
sole and exclusive owner of the right, title and interest in and to such
Intellectual Property Collateral, subject to Permitted Liens, and, to such
Grantor’s knowledge, no claim has been made that the use of such Intellectual
Property Collateral does or may, conflict with, infringe, misappropriate,
dilute, misuse or otherwise violate any of the rights of any third party in any
material respects, (c) such Grantor has made all necessary filings and
recordations to protect its interest in such Intellectual Property Collateral,
including recordations of any of its interests in the Patent Collateral and
Trademark Collateral in the United States Patent and Trademark Office and, if
requested by the Administrative Agent, in corresponding offices throughout the
world, and its claims to the Copyright Collateral in the United States Copyright
Office and, if requested by the Administrative Agent, in corresponding offices
throughout the world, (d) such Grantor has taken all reasonable steps to
safeguard its material Trade Secrets Collateral and to its knowledge none of
such Trade Secrets Collateral of such Grantor has been used, divulged, disclosed
or appropriated for the benefit of any other Person other than such Grantor, the
Borrower or any Subsidiary thereof, (e) to such Grantor’s knowledge, no third
party is infringing upon any such Intellectual Property Collateral owned or used
by such Grantor in any material respect, or any of

 

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its respective licensees, (f) no settlement or consents, covenants not to sue,
nonassertion assurances, or releases have been entered into by such Grantor or
to which such Grantor is bound that adversely affects its rights to own or use
any such Intellectual Property Collateral, and (g) the consummation of the
transactions contemplated by the Credit Agreement and this Security Agreement
will not result in the termination or material impairment of any material
portion of such Intellectual Property Collateral.

Section 3.7 Commercial Tort Claims. As of the date hereof, no Grantor has rights
in any commercial tort claim with potential value in excess of $3,000,000.

Section 3.8 Authorization, Approval, etc. Except as have been obtained or made
and are in full force and effect, no Governmental Approval, authorization,
approval or other action by, and no notice to or filing with, any Governmental
Authority or any other third party is required either (a) for the grant by such
Grantor of the security interest granted hereby, (b) except with respect to
Excluded Perfection Collateral, for the perfection or maintenance of the
security interests hereunder including the first priority (subject to Permitted
Liens) nature of such security interest (except with respect to the financing
statements or, with respect to Intellectual Property Collateral, the recordation
of any agreements with the U.S. Patent and Trademark Office or the U.S.
Copyright Office) or the exercise by the Administrative Agent of its rights and
remedies hereunder, or (c) for the exercise by the Administrative Agent of the
voting or other rights provided for in this Security Agreement, except (i) with
respect to any Pledged Interests, as may be required in connection with a
disposition of such Pledged Interests by laws affecting the offering and sale of
securities generally, the remedies in respect of the Collateral pursuant to this
Security Agreement and (ii) any “change of control” or similar filings required
by state licensing agencies.

Section 3.9 Best Interests. It is in the best interests of each Grantor to
execute this Security Agreement in as much as such Grantor will, as a result of
being the Borrower, or a Restricted Subsidiary of the Borrower, derive
substantial direct and indirect benefits from (a) the extensions of credit
(including Letters of Credit) made from time to time to the Borrower or any
other Grantor by the Lenders and the Issuing Lenders pursuant to the Credit
Agreement, (b) the Swap Agreements entered into with the Swap Counterparties,
and (c) the Banking Services provided by the Banking Services Providers, and
each Grantor agrees that the Secured Parties are relying on this representation
in agreeing to make such extensions of credit pursuant to the Credit Agreement
to the Borrower. Furthermore, such extensions of credit, Swap Agreements and
Banking Services are (i) in furtherance of each Grantor’s corporate purposes,
and (ii) necessary or convenient to the conduct, promotion or attainment of each
Grantor’s business.

Section 3.10 Inventory and Real Property Locations.

(a) As of the date of this Agreement, Schedule IV (as such Schedule IV may be
supplemented from time to time) to this Security Agreement sets forth the
address of each parcel of real property that is owned or leased by any Grantor
at which Inventory with a book value in excess of $1,000,000 (the “Material
Inventory Locations”) is located. To the extent such real property is leased,
each of such leases and subleases is valid and enforceable against the
applicable Grantor in accordance with its terms and is in full force and effect,
and no material default by such Grantor to any such lease or sublease exists.
Each of the Grantors and each of its Restricted Subsidiaries has good and
indefeasible title to, or valid leasehold interests in, all of its material real
and personal property, free of all Liens other than those permitted by
Section 6.2 of the Credit Agreement.

 

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(b) With respect to any of its Inventory scheduled or listed on the most recent
Collateral Report, (i) all such Inventory is located at a Material Inventory
Location, in transit, located at a customer’s location, being replaced or
repaired, or located at locations which are not Material Inventory Locations,
(ii) no such Inventory (other than Inventory in transit, Inventory located at a
customer’s location and Inventory which is being replaced or repaired) is now,
or shall at any time or times hereafter be stored at any other location except
as permitted by Section 4.11, (iii) such Grantor has good, indefeasible and
merchantable title to such Inventory and such Inventory is not subject to any
Lien or security interest or document whatsoever except for Liens permitted
under Section 6.2 of the Credit Agreement, (iv) except as specifically disclosed
in the most recent Collateral Report, such Inventory is Eligible Inventory of
good and merchantable quality, free from any material defects, (v) such
Inventory is not subject to any licensing, patent, royalty, trademark, trade
name or copyright agreements with any third parties which would require any
consent of any third party upon sale or disposition of that Inventory or the
payment of any monies to any third party upon such sale or other disposition,
(vi) such Inventory has been produced in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders
thereunder and (vii) the completion of manufacture, sale or other disposition of
such Inventory by the Administrative Agent following an Event of Default shall
not require the consent of any Person and shall not constitute a breach or
default under any material contract or agreement to which such Grantor is a
party or to which such property is subject.    

Section 3.11 Accounts. All of the Deposit Accounts of each Grantor as of the
Closing Date are identified as such on Exhibit A to this Agreement.

ARTICLE IV

COVENANTS

Each Grantor covenants and agrees that, until Payment in Full, it will perform,
comply with and be bound by the obligations set forth below.

Section 4.1 As to Investment Property, etc.

(a) Equity Interests of Subsidiaries. No Grantor shall allow or permit any of
its Subsidiaries (i) that is a corporation, business trust, joint stock company
or similar Person, to issue Uncertificated Securities, unless such Person
promptly (and, in any case, within five (5) Business Days (or such later date as
the Administrative Agent may agree in its sole discretion) of such issuance)
takes the actions set forth in Section 4.1(b)(ii) with respect to any such
Uncertificated Securities, (ii) that is a partnership or limited liability
company, to (A) issue Equity Interests that are to be dealt in or traded on
securities exchanges or in securities markets, (B) expressly provide in its
organizational documents that its Equity Interests are securities governed by
Article 8 of the UCC, or (C) place such Subsidiary’s Equity Interests in a
Securities Account, unless such Person promptly (and, in any case, within five
(5) Business Days (or such

 

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later date as the Administrative Agent may agree in its sole discretion) of such
placement) takes the actions set forth in Section 4.1(b)(ii) with respect to any
such Equity Interests, and (iii) to issue Equity Interests in addition to or in
substitution for the Pledged Property or any other Equity Interests pledged
hereunder, except for additional Equity Interests issued to such Grantor;
provided that (x) such Equity Interests are pledged and delivered to the
Administrative Agent promptly (and in any event within ten (10) Business Days of
issuance), and (y) such Grantor delivers a supplement to Schedule I to the
Administrative Agent identifying such new Equity Interests as Pledged Property,
in each case pursuant to the terms of this Security Agreement. No Grantor shall
permit any of its Subsidiaries to issue any warrants, options, contracts or
other commitments or other securities that are convertible to any of the
foregoing (except as to Equity Interests issued by Subsidiaries that are not
Wholly-Owned) or that entitle any Person to purchase any of the foregoing, and
except for this Security Agreement or any other Credit Document, shall not, and
shall not permit any of its Subsidiaries to, enter into any agreement creating
any restriction or condition upon the transfer, voting or control of any Pledged
Property.

(b) Investment Property (other than Certificated Securities).

(i) With respect to any Commodity Contracts or Security Entitlements
constituting Investment Property owned or held by any Grantor, such Grantor
will, (A) with respect to any Commodity Contracts or Security Entitlements
existing on the Closing Date, within 60 days of the Closing Date and (B) with
respect to Commodity Contracts or Security Entitlements acquired after the
Closing Date, within 30 calendar days of such acquisition, cause the
intermediary maintaining such Investment Property to execute a Control Agreement
relating to such Investment Property pursuant to which such intermediary agrees
to comply with the Administrative Agent’s instructions with respect to such
Investment Property without further consent by such Grantor, or (2) transfer
such Investment Property to intermediaries that have or will agree to execute
such Control Agreements.

(ii) With respect to any Uncertificated Securities (other than Uncertificated
Securities credited to a Securities Account) owned or held by any Grantor, such
Grantor will (y) cause the Pledged Interests Issuer or other issuer of such
securities to either (A) register the Administrative Agent as the registered
owner thereof on the books and records of the issuer, or (B) execute a Control
Agreement relating to such Investment Property pursuant to which the Pledged
Interests Issuer or other issuer agrees to comply with the Administrative
Agent’s instructions with respect to such Uncertificated Securities (provided
that, it is understood that the Administrative Agent shall not deliver such
instructions except following the occurrence and during the continuance of an
Event of Default), and (z) take and cause the appropriate Person (including any
issuer, entitlement holder or securities intermediary thereof) to take all other
actions necessary to grant “control” (as defined in 8-106 of the UCC) to the
Administrative Agent (for the ratable benefit of the Secured Parties) over such
Collateral.

(c) Certificated Securities (Stock Powers). Each Grantor agrees that all Pledged
Interests which are certificated (and all other certificated shares of Equity
Interests constituting Collateral) delivered by such Grantor pursuant to this
Security Agreement will be accompanied by duly endorsed undated blank stock
powers, or other equivalent instruments of

 

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transfer reasonably acceptable to the Administrative Agent. Each Grantor will,
from time to time upon the reasonable request of the Administrative Agent,
promptly deliver to the Administrative Agent such stock powers, instruments and
similar documents, reasonably satisfactory in form and substance to the
Administrative Agent, with respect to the Collateral and will, from time to time
upon the request of the Administrative Agent during the continuance of any Event
of Default, promptly transfer any Pledged Interests or other shares of Equity
Interests constituting Collateral into the name of any nominee designated by the
Administrative Agent.

(d) Continuous Pledge. Each Grantor will (subject to the terms of the Credit
Agreement and this Security Agreement) at all times keep pledged to the
Administrative Agent pursuant hereto, on a first-priority, perfected basis all
Pledged Property and all Distributions with respect thereto, and all Proceeds
and rights from time to time received by or distributable to such Grantor in
respect of any of the foregoing Collateral (other than, as to perfection,
Excluded Perfection Collateral). Each Grantor agrees that it will promptly (and
no later than ten (10) Business Days following receipt thereof unless consented
to by the Administrative Agent) deliver to the Administrative Agent possession
of all originals of Pledged Property that it acquires following the Closing Date
and shall deliver to the Administrative Agent a supplement to Schedule I
identifying any such new Pledged Property.

(e) Voting Rights; Dividends, etc. Each Grantor agrees:

(i) that promptly upon receipt of notice of the occurrence and continuance of an
Event of Default from the Administrative Agent and without any request therefor
by the Administrative Agent, so long as such Event of Default shall continue, to
deliver (properly endorsed where required hereby or requested by the
Administrative Agent) to the Administrative Agent all Distributions with respect
to Investment Property, all interest principal and other cash payments on the
Pledged Property and all Proceeds of the Pledged Property, in case thereafter
received by such Grantor, all of which shall be held by the Administrative Agent
as additional Collateral; and

(ii) if an Event of Default shall have occurred and be continuing and the
Administrative Agent has notified such Grantor of the Administrative Agent’s
intention to exercise its voting power under this Section 4.1(e)(ii),

(A) the Administrative Agent may exercise (to the exclusion of such Grantor) the
voting power and all other incidental rights of ownership with respect to any
Pledged Interests, Investment Property or other Equity Interests constituting
Collateral. EACH GRANTOR HEREBY GRANTS THE ADMINISTRATIVE AGENT AN IRREVOCABLE
PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT UNTIL SUCH EVENT OF
DEFAULT SHALL HAVE BEEN CURED OR WAIVED) EXERCISABLE UNDER SUCH CIRCUMSTANCES,
TO VOTE THE PLEDGED INTERESTS, INVESTMENT PROPERTY AND SUCH OTHER COLLATERAL;
AND

 

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(B) promptly to deliver to the Administrative Agent such additional proxies and
other documents as may be necessary to allow the Administrative Agent to
exercise such voting power.

All Distributions, interest, principal, cash payments, Payment Intangibles and
Proceeds that may at any time and from time to time be held by any Grantor but
which such Grantor is then obligated to deliver to the Administrative Agent,
shall, until delivery to the Administrative Agent, be held by such Grantor
separate and apart from its other property in trust for the Administrative
Agent. The Administrative Agent agrees that unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
the notice referred to in Section 4.1(e), each Grantor shall be entitled to
receive and retain all Distributions and shall have the exclusive voting power,
and is granted a proxy, with respect to any Equity Interests constituting
Collateral. Administrative Agent shall, upon the written request of any Grantor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by such Grantor which are necessary to allow such Grantor
to exercise that voting power with respect to any such Equity Interests
constituting Collateral; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by such Grantor that
would violate any provision of the Credit Agreement or any other Credit Document
(including this Security Agreement).

Section 4.2 As to Deposit Accounts.

With respect to any Deposit Account, Securities Account and Commodity Account
(other than any Excluded Account for so long as such account is an Excluded
Account) owned or held by any Grantor, such Grantor shall deliver an Account
Control Agreement or lockbox agreement to the Administrative Agent in the manner
set forth in Section 2.5(b) of the Credit Agreement.

Section 4.3 As to Accounts.

(a) Each Grantor shall have the right to collect all Accounts so long as no
Event of Default shall have occurred and be continuing.

(b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the
delivery of notice by the Administrative Agent to each Grantor, all Proceeds of
Collateral received by any Grantor shall be delivered in kind to the
Administrative Agent for deposit in a Deposit Account of such Grantor maintained
with the Administrative Agent and subject to a Control Agreement (any such
Deposit Accounts, together with any other Deposit Accounts pursuant to which any
portion of the Collateral is deposited with the Administrative Agent, a
“Collateral Account,” and collectively, the “Collateral Accounts”), and such
Grantor shall not commingle any such Proceeds, and shall hold separate and apart
from all other property, all such Proceeds in express trust for the benefit of
the Administrative Agent until delivery thereof is made to the Administrative
Agent.

(c) Following the delivery of notice pursuant to clause (b)(ii) during the
continuance of an Event of Default, the Administrative Agent shall have the
right to apply any amount in the Collateral Account to the payment of any
Secured Obligations which are due and payable or in accordance with Section 7.6
of the Credit Agreement.

 

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(d) With respect to each of the Collateral Accounts, it is hereby confirmed and
agreed that (i) deposits in such Collateral Account are subject to a security
interest as contemplated hereby, (ii) such Collateral Account shall be under the
control of the Administrative Agent after the occurrence and during the
continuance of an Event of Default (unless otherwise agreed to by the Borrower
and the Majority Lenders), and (iii) the Administrative Agent shall have the
sole right of withdrawal over such Collateral Account; provided that such
withdrawals shall only be made during the existence of an Event of Default.

(e) No Grantor shall adjust, settle, or compromise the amount or payment of any
Receivable, nor release wholly or partly any account debtor or obligor thereof,
nor allow any credit or discount thereon; provided that, a Grantor may make such
adjustments, settlements or compromises and release wholly or partly any account
debtor or obligor thereof and allow any credit or discounts thereon so long as
(i) such action is taken in the ordinary course of business, and (ii) such
action is, in such Grantor’s good faith business judgment, advisable.

Section 4.4 As to Grantor’s Use of Collateral.

(a) Subject to clause (b), each Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the contracts of
service any of the Inventory held by such Grantor for such purpose, and use and
consume any raw materials, work in process or materials held by such Grantor for
such purpose, (ii) following the occurrence and during the continuance of an
Event of Default, shall, at its own expense, endeavor to collect, as and when
due, all amounts due with respect to any of the Collateral, including the taking
of such action with respect to such collection as the Administrative Agent may
request or, in the absence of such request, as such Grantor may deem advisable,
and (iii) may grant, in the ordinary course of business, to any party obligated
on any of the Collateral, any rebate, refund or allowance to which such party
may be lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Collateral.

(b) At any time following the occurrence and during the continuance of an Event
of Default, whether before or after the maturity of any of the Secured
Obligations, the Administrative Agent may (i) revoke any or all of the rights of
any Grantor set forth in clause (a), (ii) notify any parties obligated on any of
the Collateral to make payment to the Administrative Agent of any amounts due or
to become due thereunder, and (iii) enforce collection of any of the Collateral
by suit or otherwise and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder or evidenced thereby.

(c) Upon request of the Administrative Agent following the occurrence and during
the continuance of an Event of Default, each Grantor will, at its own expense,
notify any parties obligated on any of the Collateral to make payment to the
Administrative Agent of any amounts due or to become due thereunder.

(d) At any time following the occurrence and during the continuation of an Event
of Default, the Administrative Agent may endorse, in the name of the applicable
Grantor, any item, howsoever received by the Administrative Agent, representing
any payment on or other Proceeds of any of the Collateral.

 

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Section 4.5 As to Equipment and Inventory and Goods. Each Grantor agrees to take
such action (or cause its Restricted Subsidiaries that are also Credit Parties
to take such action) as is reasonably requested by the Administrative Agent to
enable it to properly perfect and protect its Lien on Equipment and Inventory
and Goods that such Grantor has transferred from a jurisdiction within the
United States of America or its offshore waters to a jurisdiction outside of the
United States of America or its offshore waters. Notwithstanding anything else
in this Section 4.5, it is understood and agreed that no such actions shall be
required with respect to Excluded Collateral or Excluded Perfection Collateral.

Section 4.6 As to Intellectual Property Collateral. Each Grantor covenants and
agrees to comply with the following provisions as such provisions relate to any
Intellectual Property Collateral material to the operations or business of such
Grantor:

(a) such Grantor will not (i) do or fail to perform any act whereby any such
Patent Collateral may lapse or become abandoned or dedicated to the public or
unenforceable except upon the expiration of the life of the applicable patent,
(ii) permit any of its licensees to (A) fail to continue to use any of such
Trademark Collateral in order to maintain all of such Trademark Collateral in
full force free from any claim of abandonment for non-use, (B) fail to maintain
as in the past the quality of products and services offered under all such
Trademark Collateral, (C) fail to employ all of such Trademark Collateral
registered with any federal or state, or if requested by the Administrative
Agent, foreign authority with an appropriate notice of such registration,
(D) knowingly adopt or use any other Trademark which is confusingly similar or a
colorable imitation of any such Trademark Collateral, (E) use any such Trademark
Collateral registered with any federal, state or if requested by the
Administrative Agent, foreign authority except for the uses for which
registration or application for registration of all of the Trademark Collateral
has been made, or (F) do or permit any act or knowingly omit to do any act
whereby any such Trademark Collateral may lapse or become invalid or
unenforceable, or (iii) do or permit any act or knowingly omit to do any act
whereby any such Copyright Collateral or any such Trade Secrets Collateral may
lapse or become invalid or unenforceable or placed in the public domain except
upon expiration of the end of an unrenewable term of a registration thereof,
unless, in the case of any of the foregoing requirements in clauses (i), (ii)
and (iii), such Grantor shall reasonably and in good faith determine that any of
such Intellectual Property Collateral is of negligible economic value to such
Grantor or in the case of Trade Secret Collateral, the publication of such
information is customary in the ordinary course of business of such Grantor;

(b) such Grantor shall promptly notify the Administrative Agent if it knows that
any application or registration relating to any material item of such
Intellectual Property Collateral may become abandoned or dedicated to the public
or placed in the public domain or invalid or unenforceable (other than upon the
expiration of the life of the applicable patent), or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or if requested by the
Administrative Agent, any foreign counterpart thereof or any court) regarding
such Grantor’s ownership of any such Intellectual Property Collateral, its right
to register the same or to keep and maintain and enforce the same;

 

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(c) in no event will such Grantor or any of its agents, employees, designees or
licensees file an application for the registration of any such material
Intellectual Property Collateral with the United States Patent and Trademark
Office, the United States Copyright Office or any similar office or agency in
any other country or any political subdivision thereof, unless it promptly
informs the Administrative Agent, and upon request of the Administrative Agent
(subject to the terms of the Credit Agreement), such Grantor shall execute and
deliver all agreements, instruments and documents as the Administrative Agent
may reasonably request to evidence the Administrative Agent’s security interest
in such Intellectual Property Collateral;

(d) such Grantor will take all necessary steps, including in any proceeding
before the United States Patent and Trademark Office, the United States
Copyright Office or (subject to the terms of the Credit Agreement), if requested
by the Administrative Agent, any similar office or agency in any other country
or any political subdivision thereof, to maintain and pursue any application
(and to obtain the relevant registration) filed with respect to, and to maintain
any registration of, each such Intellectual Property Collateral, including the
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
the payment of fees and taxes (except to the extent that dedication, abandonment
or invalidation is permitted under the foregoing clause (a) or (b) or to the
extent such Grantor shall reasonably and in good faith determine is of
immaterial economic value to such Grantor);

(e) following the obtaining of an interest in any such Intellectual Property
Collateral by such Grantor, such Grantor shall deliver a supplement to Schedule
III identifying such new Intellectual Property Collateral; and

(f) following the obtaining of an interest in any such Intellectual Property
Collateral by such Grantor or, following the occurrence and during the
continuance of an Event of Default, upon the request of the Administrative
Agent, such Grantor shall deliver all agreements, instruments and documents the
Administrative Agent may reasonably request to evidence the Administrative
Agent’s security interest in such Intellectual Property Collateral and as may
otherwise be required to acknowledge or register or perfect the Administrative
Agent’s interest in any part of such item of Intellectual Property Collateral
unless such Grantor shall determine in good faith (and if an Event of Default
has occurred and is continuing, with the consent of the Administrative Agent)
that any Intellectual Property Collateral is of negligible economic value to
such Grantor.

Section 4.7 As to Electronic Chattel Paper and Transferable Records. If any
Grantor at any time holds or acquires an interest in any electronic chattel
paper or any “transferable record,” as that term is defined in Section 201 of
the U.S. Federal Electronic Signatures in Global and National Commerce Act, or
in Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in
any relevant jurisdiction, with a value in excess of $3,000,000, such Grantor
shall promptly notify the Administrative Agent thereof and, at the reasonable
request of the Administrative Agent, shall take such action as the
Administrative Agent may reasonably request to vest in the Administrative Agent
control (for the ratable benefit of Secured Parties) under Section 9-105 of the
UCC of such electronic chattel paper or control under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in
such

 

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jurisdiction, of such transferable record. The Administrative Agent agrees with
each Grantor that the Administrative Agent will arrange, pursuant to procedures
reasonably satisfactory to the Administrative Agent and so long as such
procedures will not result in the Administrative Agent’s loss of control, for
such Grantor to make alterations to the electronic chattel paper or transferable
record permitted under Section 9-105 of the UCC or, as the case may be,
Section 201 of the U.S. Federal Electronic Signatures in Global and National
Commerce Act or Section 16 of the U.S. Uniform Electronic Transactions Act for a
party in control to allow without loss of control, unless an Event of Default
has occurred and is continuing or would occur after taking into account any
action by such Grantor with respect to such electronic chattel paper or
transferable record.

Section 4.8 As to Certificated Equipment. The certificates of title with respect
to Certificated Equipment shall be maintained at the applicable Grantor’s
offices or at such other new location of the Grantor’s office as to which
written notice has been given to the Administrative Agent in accordance with
Section 4.11.

Section 4.9 Trade Secrets. With respect to any patent applications in
preparation for filing that comprise Trade Secret Collateral, Grantor shall have
the right to assert its attorney-client privilege in such applications and not
to disclose such applications unless and until an Event of Default has occurred
and is continuing. If an Event of Default has occurred and is continuing, then
at the request of the Administrative Agent, the Grantors shall deliver to the
Administrative Agent any patent applications in preparation for filing and all
documents and things embodying, incorporating or referring to inventions that in
any way relate to such patent application.

Section 4.10 As to Commercial Tort Claims. If any Grantor shall obtain an
interest in any commercial tort claim with a potential value in excess of
$3,000,000, such Grantor shall within 20 days of obtaining such interest sign
and deliver documentation acceptable to the Administrative Agent granting a
security interest under the terms and provisions of this Agreement in and to
such commercial tort claim including a supplement to Schedule IV hereto.

Section 4.11 Locations. Each Grantor shall not (i) maintain any tangible
Collateral owned by it with a book value in excess of $1,000,000 at any location
other than those locations listed on Schedule IV to this Agreement (as such
Schedule may be supplemented from time to time), (ii) otherwise change, or add
to, such locations without providing written notice to the Administrative Agent
no less than five (5) days prior to such change or addition of a location and
such Grantor will concurrently therewith obtain a Collateral Access Agreement
for each such location to the extent required by Section 4.12, or (iii) change
its principal place of business or chief executive office from the location
identified on Schedule II–B to this Agreement, other than as permitted by the
Credit Agreement.

Section 4.12 Collateral Access Agreements. Each Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement from the lessor of
each Material Inventory Location, which agreement or letter shall provide access
rights, contain a waiver or subordination of all Liens or claims that the
landlord, mortgagee, bailee or consignee may assert against the Material
Inventory at that location, and shall otherwise be reasonably satisfactory in
form and substance to the Administrative Agent. With respect to such Material
Inventory

 

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Locations as of the Closing Date and thereafter, if the Administrative Agent has
not received a Collateral Access Agreement within sixty (60) days of the Closing
Date (or, if such location is subsequently acquired or leased after the date
that is sixty (60) days after the Closing Date, as of the date that such
location is subsequently acquired or leased), the U.S. Borrower’s Eligible
Inventory at that location shall be subject to Reserves as may be established by
the Administrative Agent in accordance with the Credit Agreement. Grantor shall
use commercially reasonable efforts to obtain a Collateral Access Agreement for
all locations to which Eligible Inventory with a book value in excess of
$500,000 is being shipped to a processor or converter under arrangements
established after the Closing Date and, to the extent a Collateral Access
Agreement has not been obtained with respect to any location, the U.S.
Borrower’s Eligible Inventory at that location shall be subject to the
establishment of Reserves as may be established by the Administrative Agent in
accordance with the Credit Agreement. Such Grantor shall timely and fully pay
and perform its obligations under all leases and other agreements with respect
to each leased location or third party warehouse where any Inventory is or may
be located.

Section 4.13 Further Assurances, etc. Each Grantor shall warrant and defend the
right and title herein granted unto the Administrative Agent in and to the
Collateral (and all right, title and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. Each Grantor agrees
that, from time to time at its own expense, it will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or that the Administrative Agent may reasonably request, in order to
perfect, preserve and protect any security interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral (other than, as to
perfection, Excluded Perfection Collateral) subject to the terms hereof. Each
Grantor agrees that, upon the acquisition after the date hereof by such Grantor
of any Collateral, with respect to which the security interest granted hereunder
is not perfected automatically upon such acquisition, to take such actions with
respect to such Collateral (other than, as to perfection, Excluded Perfection
Collateral) or any part thereof as required by the Credit Documents. Without
limiting the generality of the foregoing, each Grantor will:

(a) from time to time upon the request of the Administrative Agent, promptly
deliver to the Administrative Agent such stock powers, instruments and similar
documents, reasonably satisfactory in form and substance to the Administrative
Agent, with respect to such Collateral as the Administrative Agent may
reasonably request and will, from time to time upon the request of the
Administrative Agent, after the occurrence and during the continuance of any
Event of Default, (i) promptly transfer any securities constituting Collateral
into the name of any nominee designated by the Administrative Agent and (ii) if
any Collateral shall be evidenced by an Instrument, negotiable Document,
promissory note or tangible Chattel Paper, deliver and pledge to the
Administrative Agent hereunder such Instrument, negotiable Document, promissory
note, Pledged Note or tangible Chattel Paper duly endorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to the Administrative Agent;

 

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(b) file (and hereby authorize the Administrative Agent to file) such financing
statements or continuation statements, or amendments thereto, and such other
instruments or notices (including any assignment of claim form under or pursuant
to the federal assignment of claims statute, 31 U.S.C. § 3726, any successor or
amended version thereof or any regulation promulgated under or pursuant to any
version thereof), as may be necessary or that the Administrative Agent may
reasonably request in order to perfect and preserve the security interests and
other rights granted or purported to be granted to the Administrative Agent
hereby; and

(c) furnish to the Administrative Agent, from time to time at the Administrative
Agent’s reasonable request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.

The authorization contained in Section 4.10(b) above shall be irrevocable and
continuing until Payment in Full. Each Grantor agrees that a carbon,
photographic or other reproduction of this Security Agreement or any UCC
financing statement covering the Collateral or any part thereof shall be
sufficient as a UCC financing statement where permitted by law. Each Grantor
hereby authorizes the Administrative Agent to file financing statements
describing as the collateral covered thereby “all of the debtor’s personal
property or assets” or words to that effect, notwithstanding that such wording
may be broader in scope than the Collateral described in this Security
Agreement.

ARTICLE V

THE ADMINISTRATIVE AGENT

Section 5.1 Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Administrative Agent its attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Administrative Agent’s discretion,
following the occurrence and during the continuance of an Event of Default, to
take any action and to execute any instrument which the Administrative Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including (a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral, (b) to receive, endorse, and collect any
drafts or other Instruments, Documents and Chattel Paper, in connection with
clause (a) above, (c) to file any claims or take any action or institute any
proceedings which the Administrative Agent may deem necessary or desirable for
the collection of any of the Collateral or otherwise to enforce the rights of
the Administrative Agent with respect to any of the Collateral, and (d) to
perform the affirmative obligations of such Grantor hereunder. EACH GRANTOR
HEREBY ACKNOWLEDGES, CONSENTS AND AGREES THAT THE POWER OF ATTORNEY GRANTED
PURSUANT TO THIS SECTION 5.1 IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND
SHALL BE EFFECTIVE UNTIL PAYMENT IN FULL.

Section 5.2 Administrative Agent May Perform. If any Grantor fails to perform
any agreement contained herein, the Administrative Agent may, during the
continuance of any Event of Default, itself perform, or cause performance of,
such agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by such Grantor pursuant to Section 6.3
hereof and Section 9.1 of the Credit Agreement and the Administrative Agent may
from time to time take any other action which the Administrative Agent
reasonably deems necessary for the maintenance, preservation or protection of
any of the Collateral or of its security interest therein.

 

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Section 5.3 Administrative Agent Has No Duty. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Investment
Property and any other Pledged Property, whether or not the Administrative Agent
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.

Section 5.4 Reasonable Care. The Administrative Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, that the Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral (a) if such Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own personal property, or (b) if
the Administrative Agent takes such action for that purpose as any Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of an Event of Default; provided, further, that failure
of the Administrative Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.

ARTICLE VI

REMEDIES

Section 6.1 Certain Remedies. If any Event of Default shall have occurred and be
continuing:

(a) The Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the UCC
(whether or not the UCC applies to the affected Collateral) and also may
(i) take possession of any Collateral not already in its possession without
demand and without legal process, (ii) require any Grantor to, and each Grantor
hereby agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the Collateral as
directed by the Administrative Agent and make it available to the Administrative
Agent at a place to be designated by the Administrative Agent that is reasonably
convenient to both parties, (iii) subject to applicable Legal Requirement or
agreements with landlords, bailees, or warehousemen, enter onto the property
where any Collateral is located and take possession thereof without demand and
without legal process, (iv) without notice except as specified below, lease,
license, sell or otherwise dispose of the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Administrative Agent’s
offices or elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Administrative Agent may deem commercially reasonable. Each
Grantor agrees that, to the extent notice of sale shall be required by law, at
least ten (10) days’ prior notice to the applicable Grantor of the time and
place of any public sale or the time of any

 

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private sale is to be made shall constitute reasonable notification; provided,
however, that with respect to Collateral that is (x) perishable or threatens to
decline speedily in value, or (y) is of a type customarily sold on a recognized
market (including Investment Property), no notice of sale or disposition need be
given. For purposes of this Article VI, notice of any intended sale or
disposition of any Collateral may be given by first-class mail, hand-delivery
(through a delivery service or otherwise), facsimile or email, and shall be
deemed to have been “sent” upon deposit in the U.S. Mails with adequate postage
properly affixed, upon delivery to an express delivery service or upon
electronic submission through telephonic or internet services, as applicable.
The Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Administrative Agent may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.

(b) Each Grantor that is or may become a fee estate owner of property where any
Collateral is located (regardless of ownership thereof by any other Grantor)
agrees and acknowledges that (i) Administrative Agent may remove the Collateral
or any part thereof from such property in accordance with statutory law
appertaining thereto without objection, delay, hindrance or interference by such
Grantor and in such case such Grantor will make no claim or demand whatsoever
against the Collateral, (ii) it will (x) cooperate with Administrative Agent in
its efforts to assemble and/or remove all of the Collateral located on such
property; (y) permit Administrative Agent and its agents to enter upon such
property and occupy the property at any or all times to conduct an auction or
sale, and/or to inspect, audit, examine, safeguard, assemble, appraise, display,
remove, maintain, prepare for sale or lease, repair, lease, transfer, auction
and/or sell the Collateral; and (z) not hinder Administrative Agent’s actions in
enforcing its security interest in the Collateral.

(c) Each Grantor agrees and acknowledges that a commercially reasonable
disposition of Inventory, Equipment, Goods, Computer Hardware and Software
Collateral, or Intellectual Property Collateral may be by lease or license of,
in addition to the sale of, such Collateral. Each Grantor further agrees and
acknowledges that the following shall be deemed a reasonable commercial
disposition: (i) a disposition made in the usual manner on any recognized
market, (ii) a disposition at the price current in any recognized market at the
time of disposition, and (iii) a disposition in conformity with reasonable
commercial practices among dealers in the type of property subject to the
disposition.

(d) All cash Proceeds received by the Administrative Agent in respect of any
sale of, collection from, or other realization upon, all or any part of the
Collateral shall be applied by the Administrative Agent against, all or any part
of the Obligations as set forth in Section 7.6 of the Credit Agreement. The
Administrative Agent shall not be obligated to apply or pay over for application
noncash proceeds of collection or enforcement unless (i) the failure to do so
would be commercially unreasonable, and (ii) the affected party has provided the
Administrative Agent with a written demand to apply or pay over such noncash
proceeds on such basis.

(e) The Administrative Agent may do any or all of the following: (i) transfer
all or any part of the Collateral into the name of the Administrative Agent or
its nominee, with or without disclosing that such Collateral is subject to the
Lien hereunder, (ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount

 

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due or to become due thereunder, (iii) withdraw, or cause or direct the
withdrawal, of all funds with respect to the Collateral Account, (iv) enforce
collection of any of the Collateral by suit or otherwise, and surrender, release
or exchange all or any part thereof, or compromise or extend or renew for any
period (whether or not longer than the original period) any obligations of any
nature of any party with respect thereto, (v) endorse any checks, drafts, or
other writings in the applicable Grantor’s name to allow collection of the
Collateral, (vi) take control of any Proceeds of the Collateral, or
(vii) execute (in the name, place and stead of the applicable Grantor)
endorsements, assignments, stock powers and other instruments of conveyance or
transfer with respect to all or any of the Collateral.

Section 6.2    Compliance with Restrictions. Each Grantor agrees that in any
sale of any of the Collateral whenever an Event of Default shall have occurred
and be continuing, the Administrative Agent is hereby authorized to comply with
any limitation or restriction in connection with such sale as it may be advised
by counsel is necessary in order to avoid any violation of applicable Legal
Requirement (including compliance with such procedures as may restrict the
number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any Governmental Authority
or official, and each Grantor further agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Administrative Agent be liable nor
accountable to such Grantor for any discount allowed by the reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.

Section 6.3 Indemnity and Expenses.

(a) WITHOUT LIMITING THE GENERALITY OF THE PROVISIONS OF SECTION 9.1 OF THE
CREDIT AGREEMENT, EACH GRANTOR HEREBY INDEMNIFIES AND HOLDS HARMLESS THE
ADMINISTRATIVE AGENT, EACH SECURED PARTY AND EACH OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS (ANY OF THE FOREGOING BEING, AN “INDEMNITEE”)
FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES AND LIABILITIES ARISING OUT
OF OR RESULTING FROM THIS SECURITY AGREEMENT OR ANY OTHER CREDIT DOCUMENT
(INCLUDING ENFORCEMENT OF THIS SECURITY AGREEMENT), EXCEPT CLAIMS, LOSSES OR
LIABILITIES THAT (I) ARE FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S BAD FAITH, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, (II) RESULT FROM A CLAIM BROUGHT BY A GRANTOR
AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT, IF SUCH GRANTOR HAS OBTAINED A
FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOR ON SUCH CLAIM AS DETERMINED BY A
COURT OF COMPETENT JURISDICTION OR (III) A DISPUTE AMONG OR BETWEEN INDEMNITEES
(EXCEPT TO THE EXTENT THAT SUCH INDEMNIFIED LOSS WAS INCURRED BY OR ASSERTED
AGAINST THE ADMINISTRATIVE AGENT, ANY

 

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ARRANGER OR ISSUING LENDER IN ITS CAPACITY AS SUCH) AND NOT INVOLVING ANY ACT OR
OMISSION OF THE GRANTORS; PROVIDED, HOWEVER, THAT, TO THE EXTENT THIS INDEMNITY
WOULD OTHERWISE APPLY, IT IS THE INTENTION OF THE PARTIES HERETO THAT EACH
INDEMNITEE BE INDEMNIFIED IN THE CASE OF ITS OWN NEGLIGENCE (OTHER THAN GROSS
NEGLIGENCE), REGARDLESS OF WHETHER SUCH NEGLIGENCE IS SOLE OR CONTRIBUTORY,
ACTIVE OR PASSIVE, IMPUTED, JOINT OR TECHNICAL. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, each Grantor hereby
agrees to make the maximum contribution to the payment and satisfaction of each
of the foregoing which is permissible under applicable Legal Requirement.

(b) Other than as set forth in clause (c) below, each Grantor will upon demand
pay to the Administrative Agent the amount of any and all out-of-pocket
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Administrative Agent may incur in connection
herewith, including in connection with the administration of this Security
Agreement and the custody, preservation, use or operation of, any of the
Collateral in accordance with Section 9.1 of the Credit Agreement.

(c) Each Grantor will upon demand pay to the Administrative Agent the amount of
any and all out-of-pocket expenses, including the fees and disbursements of its
counsel and of any experts and agents, which the Administrative Agent may incur
in connection (i) the sale of, collection from, or other realization upon, any
of the Collateral, (ii) the exercise or enforcement of any of the rights of the
Administrative Agent or any of the Secured Parties hereunder, or (iii) the
failure by any Grantor to perform or observe any of the provisions hereof.

Section 6.4 Warranties. The Administrative Agent may sell the Collateral without
giving any warranties or representations as to the Collateral. The
Administrative Agent may disclaim any warranties of title or the like. Each
Grantor agrees that this procedure will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Credit Document. This Security Agreement is a Credit Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article 9 thereof.

Section 7.2 Binding on Successors, Transferees and Assigns; Assignment. This
Security Agreement shall remain in full force and effect until Payment in Full,
shall be binding upon each Grantor and its successors, transferees and assigns
and, subject to the limitations set forth in the Credit Agreement, shall inure
to the benefit of and be enforceable by each Secured Party and its successors,
transferees and assigns; provided that, no Grantor shall assign any of its
obligations hereunder (unless otherwise permitted under the terms of the Credit
Agreement or this Security Agreement).

 

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Section 7.3 Amendments, etc. No amendment to or waiver of any provision of this
Security Agreement, nor consent to any departure by any Grantor from its
obligations under this Security Agreement, shall in any event be effective
unless the same shall be in writing and signed by the Administrative Agent (on
behalf of the Lenders or the Majority Lenders, as the case may be, pursuant to
Section 9.2 of the Credit Agreement) and such Grantor and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

Section 7.4 Notices. Except as otherwise provided in this Security Agreement,
all notices and other communications provided for hereunder shall be in writing
and hand delivered with written receipt, telecopied, sent by facsimile (with a
hard copy sent as otherwise permitted pursuant to the Credit Agreement), sent by
a nationally recognized overnight courier, or sent by certified mail, return
receipt requested to the appropriate party at the address or facsimile number of
such party specified in the Credit Agreement, on the signature pages of this
Security Agreement or at such other address or facsimile number as may be
designated by such party in a notice to the other party. Except as otherwise
provided in this Security Agreement, all such notices and communications shall
be effective when delivered.

Section 7.5 No Waiver; Remedies. In addition to, and not in limitation of
Section 2.7, no failure on the part of any Secured Party to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

Section 7.6 Headings. The various headings of this Security Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provisions thereof.

Section 7.7 Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Security
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.

Section 7.8 Counterparts. This Security Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Security
Agreement by facsimile or other electronic transmission shall be effective as
delivery of a manually executed counterpart of this Security Agreement.

Section 7.9 Consent as Holder of Equity and as Pledged Interests Issuer. Each
Grantor hereby (a) consents to the execution by each other Grantor of this
Security Agreement and grant by each other Grantor of a security interest,
encumbrance, pledge and hypothecation in all Pledged Interests and other
Collateral of such other Grantor to the Administrative Agent pursuant hereto,
and (b) without limiting the generality of the foregoing, consents to the
transfer of any Pledged Interest to the Administrative Agent or its nominee
pursuant to the terms of this Security Agreement following the occurrence and
during the continuance of an Event of Default

 

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and to the substitution of the Administrative Agent or its nominee as a partner
under the limited partnership agreement or as a member under the limited
liability company agreement, in any case, as heretofore and hereafter amended.
Furthermore, each Grantor as the holder of any Equity Interests in a Pledged
Interests Issuer, hereby (i) waives all rights of first refusal, rights to
purchase, and rights to consent to transfer (to any Secured Party or to any
purchaser resulting from the exercise of a Secured Party’s remedy provided
hereunder or under applicable Legal Requirement) and (ii) if required by the
organizational documents of such Pledged Interests Issuer, agrees to cause such
Pledged Interests Issuer to register the Lien granted hereunder and encumbering
such Equity Interests in the registry books of such Pledged Interests Issuer.

Section 7.10 Additional Grantors. Additional Wholly-Owned Domestic Restricted
Subsidiaries of Borrower may from time to time enter into this Security
Agreement as a Grantor. Upon execution and delivery after the date hereof by the
Administrative Agent and such Wholly- Owned Domestic Restricted Subsidiary of an
instrument in the form of Annex 1, such Wholly- Owned Domestic Restricted
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor herein. The execution and delivery of any
instrument adding an additional Grantor as a party to this Security Agreement
shall not require the consent of any other Grantor hereunder. The rights and
obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Security
Agreement.

Section 7.11 Acknowledgment of Pledged Interests Issuers. Each Pledged Interests
Issuer that is party hereto agrees that it will comply with instructions of the
Administrative Agent with respect to the applicable Uncertificated Securities
without further consent by the applicable Grantor.

Section 7.12 Conflicts with Credit Agreement. To the fullest extent possible,
the terms and provisions of the Credit Agreement shall be read together with the
terms and provisions of this Security Agreement so that the terms and provisions
of this Security Agreement do not conflict with the terms and provisions of the
Credit Agreement; provided, however, notwithstanding the foregoing, in the event
that any of the terms or provisions of this Security Agreement conflict with any
terms or provisions of the Credit Agreement, the terms or provisions of the
Credit Agreement shall govern and control for all purposes; provided that the
inclusion in this Security Agreement of terms and provisions, supplemental
rights or remedies in favor of the Administrative Agent not addressed in the
Credit Agreement shall not be deemed to be in conflict with the Credit Agreement
and all such additional terms, provisions, supplemental rights or remedies
contained herein shall be given full force and effect.

Section 7.13 Governing Law. This Security Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York.

Section 7.14 Submission to Jurisdiction. EACH GRANTOR PARTY TO THIS SECURITY
AGREEMENT IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY,
TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING
IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR

 

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PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE GRANTORS PARTY
HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE
COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, IN
SUCH FEDERAL COURT. EACH OF THE GRANTORS PARTY HERETO AGREES THAT A FINAL
JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY APPLICABLE LEGAL REQUIREMENT. NOTHING IN THIS SECURITY AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS SECURITY AGREEMENT AGAINST ANY OTHER PARTY OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

Section 7.15 Waiver of Venue. EACH GRANTOR PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT IN ANY COURT REFERRED TO IN SECTION 7.14. EACH OF THE PARTIES HERETO
HEREBY AGREES THAT SECTIONS 5-1401 AND 4-1402 OF THE GENERAL OBLIGATIONS LAW OF
THE STATE OF NEW YORK SHALL APPLY TO THIS SECURITY AGREEMENT AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.

Section 7.16 Service of Process. Each Grantor party hereto irrevocably consents
to service of process in the manner provided for notices in Section 9.9 of the
Credit Agreement.

Nothing in this Security Agreement will affect the right of any party hereto to
serve process in any other manner permitted by applicable Legal Requirement.

Section 7.17 Waiver of Jury. EACH GRANTOR PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH GRANTOR PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

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THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND
AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR
HEREIN AND THEREIN. ADDITIONALLY, THIS SECURITY AGREEMENT AND THE CREDIT
DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of this page intentionally left blank. Signature pages to follow.]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be duly executed and delivered by its Responsible Officer as of the
date first above written.

 

GRANTORS

NINE ENERGY SERVICES, INC.

BECKMAN PRODUCTION SERVICES, INC.

(DELAWARE)

BECKMAN PRODUCTION SERVICES, INC. (MICHIGAN) BIG LAKE SERVICE, LLC

BIG LAKE SERVICES HOLDCO, LLC

CDK INTERMEDIATE, LLC

CDK PERFORATING, LLC

CDK PERFORATING HOLDINGS, INC.

CREST PUMPING TECHNOLOGIES, LLC

DAK-TANA WIRELINE, LLC

J & R WELL SERVICE, LLC

NINE DOWNHOLE TECHNOLOGIES, LLC

NINE ENERGY SERVICE, LLC

NORTHERN PRODUCTION COMPANY, LLC

NORTHERN STATES COMPLETIONS, INC.

PEAK PRESSURE CONTROL, LLC

R & S WELL SERVICE, INC.

REDZONE COIL TUBING, LLC

REDZONE HOLDCO, LLC

SJL WELL SERVICE, LLC

MAGNUM OIL TOOLS GP, LLC

MAGNUM OIL TOOLS INTERNATIONAL, LTD MOTI HOLDCO, LLC By:  

 

Name:   Ann G. Fox Title:   President, Chief Executive Officer

[Signature Page to Pledge and Security Agreement]

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JPMORGAN CHASE BANK, N.A., as Administrative Agent By:  

                                              

Name:   Title:  

[Signature Page to Pledge and Security Agreement]

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ANNEX 1 to Pledge and Security

Agreement

SUPPLEMENT TO U.S. PLEDGE AND SECURITY AGREEMENT

SUPPLEMENT NO.          dated as of        , 20         (this “Supplement”), to
the Pledge and Security Agreement dated as of         , 2018 (as amended,
supplemented, restated, or otherwise modified from time to time, the “Security
Agreement”), among NINE ENERGY SERVICE, INC., a Delaware corporation (the
“Borrower”) and each domestic subsidiary of the Borrower party thereto from time
to time (collectively with the Borrower, the “Grantors” and individually, a
“Grantor”), and JPMorgan Chase Bank, N.A., as Administrative Agent (in such
capacity, the “Administrative Agent”) for the ratable benefit of the Secured
Parties (as defined in the Credit Agreement referred to herein).

A. Reference is made to the Credit Agreement dated as of                     ,
2018 (as amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among the Borrower, Nine Energy Canada, Inc., the
lenders from time to time party thereto (the “Lenders”), the Issuing Lenders (as
defined in the Credit Agreement), and JPMorgan Chase Bank, N.A., as
Administrative Agent.

B. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Security Agreement and the Credit
Agreement.

C. Section 7.10 of the Security Agreement provides that additional Wholly-Owned
Domestic Restricted Subsidiaries of the Borrower may become Grantors under the
Security Agreement by execution and delivery of an instrument in the form of
this Supplement. The undersigned Wholly-Owned Domestic Restricted Subsidiary of
the Borrower (the “New Grantor”) is executing this Supplement in accordance with
the requirements of the Credit Agreement to become a Grantor under the Security
Agreement.

Accordingly, the Administrative Agent and the New Grantor agree as follows:

SECTION 1. In accordance with Section 7.10 of the Security Agreement, the New
Grantor by its signature below becomes a Grantor under the Security Agreement
with the same force and effect as if originally named therein as a Grantor and
the New Grantor hereby agrees (a) to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Grantor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Grantor, as security for the payment and performance in
full of the U.S. Secured Obligations (as defined in the Credit Agreement), does
hereby create and grant to the Administrative Agent, its successors and assigns,
for the benefit of the Secured Parties, their successors and assigns as provided
in the Security Agreement, a continuing security interest in and Lien on all of
the New Grantor’s right, title and interest in and to the Collateral (as defined
in the Security Agreement) of the New Grantor. Each reference to a “Grantor” in
the Security Agreement shall be deemed to include the New Grantor. The Security
Agreement is hereby incorporated herein by reference.

 

[Annex I – Supplement to Pledge and Security Agreement]

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SECTION 2. The New Grantor represents and warrants to the Administrative Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).

SECTION 3. This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile or other
electronic transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.

SECTION 4. The New Grantor hereby agrees that the schedules attached to the
Security Agreement are hereby supplemented by the corresponding schedules
attached to this Supplement. The New Grantor hereby represents and warrants that
the information provided in the schedules attached hereto is true and correct as
of the date hereof.

SECTION 5. The New Grantor hereby expressly acknowledges and agrees to the terms
of Section 6.3. (Indemnity and Expenses) of the Security Agreement and expressly
acknowledges the irrevocable proxy provided in Section 4.1(e) of the Security
Agreement. In furtherance thereof, NEW GRANTOR HEREBY GRANTS THE ADMINISTRATIVE
AGENT AN IRREVOCABLE PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT
UNTIL PAYMENT IN FULL) EXERCISABLE UNDER THE CIRCUMSTANCES PROVIDED IN SECTION
4.1 OF THE SECURITY AGREEMENT, TO VOTE THE PLEDGED INTERESTS, INVESTMENT
PROPERTY AND SUCH OTHER COLLATERAL.

SECTION 6. Except as expressly supplemented hereby, the Security Agreement shall
remain in full force and effect.

SECTION 7. This Supplement shall be deemed a contract under, and shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York (including Section 5-1401 and Section 5-1402 of the General
Obligations Law of the State of New York), applicable to contracts made and to
be performed entirely within such state, including without regard to conflicts
of laws principles, except to the extent that the validity or perfection of the
security interests hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of a jurisdiction other than the
State of New York.

SECTION 8. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired.

 

[Annex I – Supplement to Pledge and Security Agreement]

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The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

SECTION 9. All communications and notices hereunder shall be in writing and
given as provided in the Security Agreement. All communications and notices
hereunder to the New Grantor shall be given to it at the address set forth under
its signature hereto.

SECTION 10. The New Grantor agrees to reimburse the Administrative Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the
Administrative Agent.

SECTION 11. Submission to Jurisdiction. NEW GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS SUPPLEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND NEW GRANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, IN SUCH FEDERAL COURT. NEW GRANTOR AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS SUPPLEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS SUPPLEMENT AGAINST ANY
OTHER PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.

SECTION 12. Waiver of Venue. NEW GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT IN ANY COURT REFERRED
TO IN SECTION 11. NEW GRANTOR HEREBY AGREES THAT SECTIONS 5-1401 AND 4-1402 OF
THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS
SUPPLEMENT AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

SECTION 13. Service of Process. New Grantor irrevocably consents to service of
process in the manner provided for notices in Section 9.9 of the Credit
Agreement. Nothing in this Supplement will affect the right of any party hereto
to serve process in any other manner permitted by applicable Legal Requirement.

 

[Annex I – Supplement to Pledge and Security Agreement]

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Section 7.18 Waiver of Jury. NEW GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). NEW GRANTOR (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS SUPPLEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS
DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

IN WITNESS WHEREOF, the New Grantor and the Administrative Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.

 

[Name of New Grantor] By:  

                 

Name: Title: Address: JPMORGAN CHASE BANK, N.A., as Administrative Agent By:  

                 

Name: Title:

 

[Annex I – Supplement to Pledge and Security Agreement]

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JPMORGAN CHASE BANK, N.A., as Administrative Agent By:  

                     

Name: Title:

 

[Signature Page to Pledge and Security Agreement]

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SCHEDULES TO SUPPLEMENT NO. 1

[AS APPROPRIATE]

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EXHIBIT A TO SUPPLEMENT

DEPOSIT ACCOUNTS

[            ]

LOCK BOXES

[            ]

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EXHIBIT D-2

CANADIAN PLEDGE AND SECURITY AGREEMENT

This CANADIAN PLEDGE AND SECURITY AGREEMENT, dated as of October [25], 2018 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, this “Security Agreement”), is by and among NINE ENERGY CANADA INC., an
Alberta corporation (the “Borrower”), each subsidiary of the Borrower which is a
Canadian Restricted Subsidiary (as defined below) party hereto from time to time
(collectively with the Borrower, the “Grantors” and individually, a “Grantor”),
and JPMorgan Chase Bank, N.A., Toronto Branch, as Administrative Agent (in such
capacity, the “Administrative Agent”) for the ratable benefit of the Secured
Parties (as defined in the Credit Agreement referred to herein).

W I T N E S S E T H:

WHEREAS, this Security Agreement is entered into in connection with that certain
Credit Agreement dated as of the date hereof (as amended, supplemented, amended
and restated or otherwise modified from time to time, the “Credit Agreement”),
by and among Nine Energy Service, Inc. (the “U.S. Borrower”), the Borrower, the
lenders party thereto from time to time (the “Lenders”), the Issuing Lenders (as
defined in the Credit Agreement) and JPMorgan Chase Bank, N.A., as
administrative agent; and

WHEREAS, pursuant to the terms of the Credit Agreement, and in consideration of
the credit extended by the Lenders to the Borrower, the Grantors have executed
and delivered the Guaranty (as defined in the Credit Agreement); and

WHEREAS, as a condition precedent to the initial extension of credit under the
Credit Agreement, each Grantor is required to execute and deliver this Security
Agreement; and

WHEREAS, it is in the best interests of each Grantor to execute this Security
Agreement inasmuch as each Grantor will derive substantial direct and indirect
benefits from (i) the transactions contemplated by the Credit Agreement and the
other Credit Documents (as defined in the Credit Agreement), (ii) the Swap
Agreements (as defined in the Credit Agreement) entered into by the Borrower or
any other Canadian Credit Party (as defined in the Credit Agreement) with a Swap
Counterparty (as defined in the Credit Agreement), and (iii) the Banking
Services (as defined in the Credit Agreement) provided by any Banking Services
Provider to the Borrower or any other Canadian Credit Party, and each Grantor is
willing to execute, deliver and perform its obligations under this Security
Agreement to secure the Canadian Secured Obligations (as defined in the Credit
Agreement).

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, each Grantor agrees, for the benefit of each
Secured Party, as follows:

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ARTICLE I

DEFINITIONS

Section 1.1 Certain Terms. The following capitalized terms when used in this
Security Agreement, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):

“Accounts” means, with respect to any Grantor, all “accounts,” as such term is
defined in the PPSA, now owned or hereafter acquired by such Grantor and, in any
event, includes all accounts due or accruing due and all agreements, books,
accounts receivable, other receivables, book debts, claims and demand of every
nature and kind and other forms of monetary obligations (other than forms of
monetary obligations evidenced by Chattel Paper, Securities or Instruments) now
owned or hereafter received or acquired by or belonging or owing to such
Grantor, whether or not yet earned by performance on the part of such Grantor
and all invoices, letters, documents and papers recording, evidencing or
relating thereto.

“Administrative Agent” has the meaning set forth in the preamble.

“Blocked Account Agreements” means all agreements, in form and substance
satisfactory to the Administrative Agent, among any Grantor, any banking
institution holding such Grantor’s funds, and the Administrative Agent with
respect to collection and control of all deposits and balances held in any
Deposit Account maintained by such Grantor with such banking institutions.

“Borrower” has the meaning set forth in the preamble.

“Certificated Equipment” means any Equipment the ownership of which is evidenced
by, or under any applicable Legal Requirement is required to be evidenced by, a
certificate of title.

“Chattel Paper” (i) means all “chattel paper” as defined in the PPSA and
(ii) includes all chattel paper in which a Grantor now or hereafter has an
interest, and any part of such interest.

“Collateral” has the meaning set forth in Section 2.1(a).

“Collateral Access Agreement” means any landlord waiver or other agreement, in
form and substance reasonably satisfactory to the Administrative Agent, between
the Administrative Agent and any third party (including any bailee, consignee,
customs broker, or other similar Person) in possession of any Collateral or any
landlord of any real property where any Collateral is located, as such landlord
waiver or other agreement may be amended, restated, supplemented or otherwise
modified from time to time.

“Collateral Account” has the meaning set forth in Section 4.3(b).

“Collateral Report” means any certificate (including any Borrowing Base
Certificate), report or other document delivered by any Grantor to the
Administrative Agent or any Lender with respect to the Collateral pursuant to
any Credit Document.

 

2

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“Computer Hardware and Software Collateral” means (a) all computer and other
electronic data processing hardware, integrated computer systems, central
processing units, memory units, display terminals, printers, features, computer
elements, card readers, tape drives, hard and soft disk drives, cables,
electrical supply hardware, generators, power equalizers, accessories and all
peripheral devices and other related computer hardware, including all operating
system software, utilities and application programs in whatsoever form owned by
a Grantor or leased or licensed to Grantor, (b) software programs (including
both source code, object code and all related applications and data files),
designed for use on the computers and electronic data processing hardware
described in clause (a) above owned by a Grantor or leased or licensed to a
Grantor, (c) all firmware associated therewith, (d) all documentation (including
flow charts, logic diagrams, manuals, guides, specifications, training
materials, charts and pseudo codes) with respect to such hardware, software and
firmware described in the preceding clauses (a) through (c), and (e) all rights
with respect to all of the foregoing, including copyrights (including renewal
rights) and trade secrets rights, contract rights of a Grantor with respect to
all or any of the foregoing, licenses, options, warranties, service contracts,
program services, test rights, maintenance rights, support rights, improvement
rights, renewal rights and indemnifications and any substitutions, replacements,
improvements, error corrections, updates, additions or model conversions of any
of the foregoing.

“Control” means, with respect to a specified form of Investment Property,
“control” as defined in sections 23 through 26 of the STA as applicable to such
form of Investment Property.

“Control Agreement” means an authenticated record in form and substance
reasonably satisfactory to the Administrative Agent, that provides for the
Administrative Agent (for the benefit of the Secured Parties) to have Control
over certain Collateral.

“Copyright Collateral” means all copyrights of any Grantor, registered or
unregistered and whether published or unpublished, now or hereafter in force
throughout the world including all of such Grantor’s rights, titles and
interests in and to all copyrights registered in the Canadian Intellectual
Property Office or anywhere else in the world, including those copyright
registrations or applications therefor set forth in Schedule III-C hereto, and
registrations and recordings thereof and all applications for registration
thereof, whether pending or in preparation, all copyright licenses, the right to
sue for past, present and future infringements of any of the foregoing, all
rights corresponding thereto, all extensions and renewals of any thereof and all
proceeds of the foregoing, including licenses, royalties, income, payments,
claims, damages and Proceeds of suit, which are owned or licensed by such
Grantor.

“Credit Agreement” has the meaning set forth in the first recital.

“Deposit Accounts” means any demand, time, savings, passbook or like account
maintained with a depository institution.

“Design Collateral” means all of any Grantor’s right, title and interest in and
to the following: (a) all industrial designs and intangibles of like nature
(whether registered or unregistered), all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the Canadian Industrial Design Office or in any
similar office or agency in any other country or any political subdivision
thereof, and (b) all reissues, extensions or renewals thereof.

 

3

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“Distributions” means all cash, cash dividends, stock dividends, other
distributions, liquidating dividends, shares of stock resulting from (or in
connection with the exercise of) stock splits, reclassifications, warrants,
options, non-cash dividends, and all other distributions or payments (whether
similar or dissimilar to the foregoing) on or with respect to, or on account of,
any Pledged Interest or other rights or interests constituting Collateral.

“Documents of Title” (i) means all “documents of title” as defined in the PPSA
and (ii) includes, without limitation, all documents of title, whether
negotiable or non-negotiable, including, without limitation, all warehouse
receipts and bills of lading, in which the Grantor now or hereafter has an
interest, and any part thereof.

“Equipment” means: all Goods owned by the Grantors which constitute machinery,
“equipment” (as defined in the PPSA) and other and similar goods used in the
business of the Grantors, including, without limitation, all manufacturing
equipment, data processing equipment, computers, office equipment, furnishings,
furniture, appliances, and serial number goods of the Grantors.

“Excluded Collateral” has the meaning set forth in Section 2.1(b).

“Excluded Contracts” means any contract to which any of the Grantors is a party
on the date hereof or which is entered into by any Grantor after the date hereof
which complies with Section 6.5 of the Credit Agreement (and the provisions of
which are not agreed to by a Grantor for the purposes of excluding such contract
from the Lien granted hereunder) to the extent (but only to the extent) that the
granting of a security interest therein would be prohibited by (a) such contract
under a provision (unless a Restricted Entity may unilaterally waive such
prohibition) in such contract in existence on the date hereof or, as to
contracts entered into after the date hereof, in existence in compliance with
Section 6.5 of the Credit Agreement (and the provisions of which are not agreed
to by a Grantor for the purposes of excluding such contract from the Lien
granted hereunder), or (b) an applicable Legal Requirement to which such Grantor
or such contract is subject; provided, however, to the extent that (i) either of
the prohibitions discussed in clause (a) and clause (b) above is ineffective or
subsequently rendered ineffective under any Legal Requirement or is otherwise no
longer in effect or enforceable, or (ii) the applicable Grantor has obtained the
consent of the other parties to such Excluded Contract to the creation of a lien
and security interest in such Excluded Contract, then such contract shall cease
to be an “Excluded Contract” and shall automatically be subject to the lien and
security interests granted hereby and to the terms and provisions of this
Security Agreement as “Collateral”; provided further, that any proceeds received
by any Grantor from the sale, transfer or other disposition of Excluded
Contracts shall constitute Collateral unless any Property constituting such
proceeds are themselves subject to the exclusions set forth above or otherwise
constitute Excluded Collateral.

“Excluded Governmental Approvals” means any Governmental Approval to the extent
(but only to the extent) that a Grantor is prohibited from granting a security
interest in, pledge of, or charge, mortgage or lien upon any such Property by
reason of applicable Legal Requirement to which such Grantor or such Property is
subject; provided, however, to the extent that (i) such

 

4

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prohibition is ineffective or subsequently rendered ineffective under any Legal
Requirement or is otherwise no longer in effect or enforceable, or (ii) the
applicable Grantor has obtained the consent of the applicable Governmental
Authority to the creation of a lien and security interest in such Excluded
Governmental Approval, then such Governmental Approval shall cease to be an
“Excluded Governmental Approval” and shall automatically be subject to the lien
and security interests granted hereby and to the terms and provisions of this
Security Agreement as “Collateral”; provided further, that any proceeds received
by any Grantor from the sale, transfer or other disposition of Excluded
Governmental Approval shall constitute Collateral unless any Property
constituting such proceeds are themselves subject to the exclusions set forth
above or otherwise constitute Excluded Collateral.

“Excluded JV Equity Interests” means the Equity Interests owned by any Grantor
in a Joint Venture to the extent (but only to the extent) (a) the organizational
documents of such Joint Venture prohibit the granting of a Lien on such Equity
Interests or (b) such Equity Interests of such Joint Venture are expressly
required to be pledged as collateral to secure (i) obligations to the other
holders of the Equity Interests in such Joint Venture (other than a holder that
is a Subsidiary of the Borrower) or (ii) Debt of such Joint Venture that is
non-recourse to any of the Credit Parties or to any of the Credit Parties’
Properties; provided, however, if any of the foregoing conditions ceases to be
in effect for any reason, then the Equity Interest in such Joint Venture shall
cease to be an “Excluded JV Equity Interest” and shall automatically be subject
to the Lien and security interest granted hereby and to the terms and provisions
of this Security Agreement as “Collateral”; provided further, that any proceeds
received by any Grantor in respect of any (including from the sale, transfer or
other disposition of) Excluded JV Equity Interest shall constitute Collateral
unless any Property constituting such proceeds are themselves subject to the
exclusions set forth above.

“Excluded Perfection Collateral” has the meaning set forth in the Credit
Agreement. “Excluded PMSI Collateral” means any Property and proceeds thereof
(including

insurance proceeds) of a Grantor that is now or hereafter subject to a Lien
securing (and, for the avoidance of doubt, acquired with the proceeds of)
purchase money debt or a Capital Lease obligation to the extent (and only to the
extent) that (a) the Debt associated with such Lien is permitted under
Section 6.1(e), (k) or (m) of the Credit Agreement, and (b) the documents
evidencing such purchase money debt or Capital Lease obligation prohibit or
restrict the granting of a Lien in such Property; provided, however, to the
extent that (i) either of the prohibitions discussed in clauses (a) and (b)
above is ineffective or subsequently rendered ineffective under any Legal
Requirement or is otherwise no longer in effect or (ii) the holder of such Lien
consents to the granting of a Lien in favour of the Administrative Agent, then
such Property and proceeds thereof shall cease to be “Excluded PMSI Collateral”
and shall automatically be subject to the lien and security interests granted
hereby and to the terms and provisions of this Security Agreement as
“Collateral”; provided further, that any proceeds received by any Grantor from
the sale, transfer or other disposition of Excluded PMSI Collateral shall
constitute Collateral unless any Property constituting such proceeds are
themselves subject to the exclusions set forth above or otherwise constitute
Excluded Collateral.

“Excluded Real Property” means all fee owned and leased real property (including
all leases related thereto) of any Credit Party.

 

5

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“Excluded Trademark Collateral” means all Canadian proposed use trademark
applications with respect to which the grant of a security interest therein
would impair the validity or enforceability of said trademark application under
federal law; provided, however, to the extent that such law is no longer in
effect, then such trademark application shall cease to be “Excluded Trademark
Collateral” and shall automatically be subject to the lien and security
interests granted hereby and to the terms and provisions of this Security
Agreement as “Collateral”; provided further, that any proceeds received by any
Grantor from the sale, transfer or other disposition of Excluded Trademark
Collateral shall constitute Collateral unless any Property constituting such
proceeds are themselves subject to the exclusions set forth above or otherwise
constitute Excluded Collateral.

“Goods” (i) means all “goods” as defined in the PPSA and (ii) includes, without
limitation, all Inventory and Equipment.

“Governmental Approval” has the meaning set forth in Section 2.1(a)(vi).
“Grantor” has the meaning set forth in the preamble.

“Indemnitee” has the meaning set forth in Section 6.3(a).

“Instruments” means all “instruments” as defined in the PPSA and (ii) shall
include all letters of credit, advices of and all other instruments in which any
Grantor now or hereafter has an interest, and any part thereof.

“Intangibles” (i) means all “intangibles” as defined in the PPSA and
(ii) includes, without limitation, all interest rate or currency protection or
hedging arrangements, all tax refunds, all rights in action, and all licenses,
permits, concessions and authorizations, (in each case, regardless of whether
characterized as intangibles under the PPSA).

“Intellectual Property Collateral” means, collectively, the Computer Hardware
and Software Collateral, the Copyright Collateral, the Design Collateral, the
Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral.

“Inventory” means: (i) all “inventory” as defined in the PPSA and (ii) includes,
without limitation, all goods held for sale or lease or to be furnished under
contracts of service or so leased or furnished, all raw materials, spare and
replacement parts, manufacturing supplies, subassemblies, work in process,
finished goods, and materials used or consumed in the manufacture, packing,
shipping, advertising, selling, leasing, furnishing or production of such
inventory or otherwise used or consumed in any of the Grantors’ respective
businesses; all goods in which the Grantor has an interest in mass or a joint or
other interest or right of any kind; and all goods which are returned to or
repossessed by any Grantor, and all accessions thereto and products thereof (in
each case, regardless of whether characterized as inventory under the PPSA).

“Joint Venture” means, with respect to any Person (the “holder”) at any time,
any incorporated, formed or organized corporation, limited liability company,
partnership, association or other entity, which is not a Subsidiary of the
Borrower and less than a majority of whose outstanding Voting Securities are at
such time owned by the holder or one or more Subsidiaries of the holder. Unless
expressly provided otherwise, all references herein to any “Joint Venture” or
“Joint Ventures” means a Joint Venture or Joint Ventures of a Grantor.

 

6

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“Lenders” has the meaning set forth in the first recital. “Money” means “money”
as defined in the PPSA.

“Patent Collateral” means (a) all inventions and discoveries, whether patentable
or not, all letters patent and applications for letters patent throughout the
world, including those patents and patent applications referred to in Schedule
III-A hereto, (b) all reissues, divisions, continuations, continuations-in-part,
extensions, renewals and reexaminations of any of the items described in clause
(a), (c) all patent licenses, and other agreements providing any Grantor with
the right to use any items of the type referred to in clauses (a) and (b) above,
and (d) all proceeds of, and rights associated with, the foregoing (including
licenses, royalties income, payments, claims, damages and proceeds of
infringement suits), the right to sue third parties for past, present or future
infringements of any patent or patent application, and for breach or enforcement
of any patent license.

“Payment in Full” has the meaning set forth in the Credit Agreement.

“Pledged Interests” means all Equity Interests or other ownership interests of
any Pledged Interests Issuer, including those described in Schedule I-A hereto;
all registrations, certificates, articles, by-laws, regulations, limited
liability company agreements or constitutive agreements governing or
representing any such interests; all options and other rights, contractual or
otherwise, at any time existing with respect to such interests, as such
interests are amended, modified, or supplemented from time to time, and together
with any interests in any Pledged Interests Issuer taken in extension or renewal
thereof or substitution therefor.

“Pledged Interests Issuer” means each Person identified in Schedule I-A hereto
as the issuer of the Pledged Interests identified opposite the name of such
Person or any other issuer of Pledged Interests.

“Pledged Note Issuer” means any issuer of Pledged Notes.

“Pledged Notes” means all promissory notes listed on Schedule I–B hereto
together with any intercompany notes and any other promissory notes issued to or
held by any Grantor, excluding, in each case, any Excluded Collateral.

“Pledged Property” means all Pledged Notes, Pledged Interests, all assignments
of any amounts due or to become due with respect to the Pledged Interests, all
other instruments which are now being delivered by any Grantor to the
Administrative Agent or may from time to time hereafter be delivered by any
Grantor to the Administrative Agent for the purpose of pledging under this
Security Agreement or any other Credit Document, and all proceeds of any of the
foregoing.

 

7

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“PPSA” means the Personal Property Security Act (Alberta), including the
regulations thereto, provided that, if perfection or the effect of perfection or
non-perfection or the priority of any Lien created hereunder on the Collateral
is governed by the personal property security legislation or other applicable
legislation with respect to personal property security as in effect in a
jurisdiction other than Alberta, “PPSA” means the Personal Property Security Act
or such other applicable legislation as in effect from time to time in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection, effect of perfection or non-perfection or priority.

“Proceeds” (i) shall mean all “proceeds” as defined in the PPSA and (ii) shall
include, without limitation, whatever is receivable or received when Collateral
or proceeds are sold, leased, licensed, exchanged, collected or otherwise
disposed of, whether such disposition is voluntary or involuntary.

“Receivables” has the meaning set forth in Section 2.1(a)(iii).

“Related Contracts” has the meaning set forth in Section 2.1(a)(iii).

“Secured Obligations” means the Canadian Secured Obligations as defined in the
Credit Agreement.

“Secured Parties” has the meaning set forth in the Credit Agreement. “Security
Agreement” has the meaning set forth in the preamble.

“STA” means the Securities Transfer Act (Alberta), including the regulations
thereto, provided that, to the extent that perfection or the effect of
perfection or non-perfection or the priority of any Lien created hereunder on
Collateral that is Investment Property is governed by the laws in effect in any
province or territory of Canada other than Alberta in which there is in force
legislation substantially the same as the Securities Transfer Act (Alberta) (an
“Other STA Province”), then “STA” shall mean such other legislation as in effect
from time to time in such Other STA Province for purposes of the provisions
hereof referring to or incorporating by reference provisions of the STA; and to
the extent that such perfection or the effect of perfection or non-perfection or
the priority of any Lien created hereunder on the Collateral is governed by the
laws of a jurisdiction other than Alberta or an Other STA Province, then
references herein to the STA shall be disregarded except for the terms
“Certificated Security” and “Uncertificated Security”, which shall have the
meanings herein as defined in the Securities Transfer Act (Alberta) regardless
of whether the STA is in force in the applicable jurisdiction.

“Trademark Collateral” means (a) (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, certification marks, collective marks, logos and other source or
business identifiers, and all goodwill of the business associated therewith, now
existing or hereafter adopted or acquired, including those trademarks referred
to in Schedule III-B hereto, whether currently in use or not, all registrations
and recordings thereof and all applications in connection therewith, whether
pending or in preparation for filing, including registrations, recordings and
applications in the Canadian Intellectual Property Office, or in any office or
agency of the United States of America, or any State thereof or any other
country or political subdivision thereof or otherwise, and all common-law rights
relating to the foregoing, and (ii) the right to obtain all reissues, extensions
or renewals of the foregoing (collectively referred to as the “Trademark”), (b)
all trademark licenses for the grant by or to any Grantor of any right to use
any trademark, (c) all of

 

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the goodwill of the business connected with the use of, and symbolized by the
items described in, clause (a), and to the extent applicable, clause (b), (d)
the right to sue third parties for past, present and future infringements of any
Trademark Collateral described in clause (a) and, to the extent applicable,
clause (b), and (e) all Proceeds of, and rights associated with, the foregoing,
including any claim by any Grantor against third parties for past, present or
future infringement or dilution of any Trademark, Trademark registration or
Trademark license, or for any injury to the goodwill associated with the use of
any such Trademark or for breach or enforcement of any Trademark license and all
rights corresponding thereto throughout the world.

“Trade Secrets Collateral” means all common law and statutory trade secrets and
all other confidential, proprietary or useful information and all know-how
obtained by or used in or contemplated at any time for use in the business of
any Grantor, and any patent applications in preparation for filing (all of the
foregoing being collectively called a “Trade Secret”), including all documents
and things embodying, incorporating or referring in any way to such Trade
Secret, all Trade Secret licenses, and including the right to sue for and to
enjoin and to collect damages for the actual or threatened misappropriation of
any Trade Secret and for the breach or enforcement of any such Trade Secret
license.

“ULC” means an issuer that is an unlimited company, unlimited liability company
or unlimited liability corporation.

“ULC Laws” means the Business Corporations Act (Alberta), similar legislation
from other jurisdictions governing the formation and operation of ULC’s within
such jurisdictions and any future legislation governing the formation and
operation of ULCs.

“ULC Shares” means shares or other equity interests in the capital stock of a
ULC. “U.S.$” means lawful money of the United States.

Section 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used in this Security Agreement,
including its preamble and recitals, have the meanings provided in the Credit
Agreement.

Section 1.3 PPSA Definitions. Unless otherwise defined herein or the context
otherwise requires, terms for which meanings are provided in the PPSA, including
without limitation, “Accessions”, “Chattel Paper”, “Documents of Title”,
“Goods”, “Intangible”, “Instruments”, “Investment Property”, “Money”,
“equipment”, “financing statement”, “financing change statement”, “aircraft”,
“serial number goods” and “Proceeds” are used in this Security Agreement,
including its preamble and recitals, with such meanings. However, the term
“Goods” when used herein does not include “consumer goods” as that term is
defined in the PPSA.

Section 1.4 STA Definitions. Unless otherwise defined herein or the PPSA, or the
context otherwise requires, terms for which meanings are provided in the STA,
including without limitation, “Certificated Security”, “Securities Account”,
“Securities Intermediary”, “Security Entitlement”, and “Uncertificated Security”
are used in this Security Agreement, including its preamble and recitals, with
such meanings.

 

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Section 1.5 Miscellaneous. Article, Section, Schedule, Annex and Exhibit
references are to Articles and Sections of and Schedules, Annexes and Exhibits
to this Security Agreement, unless otherwise specified. All references to
instruments, documents, contracts, and agreements (including this Security
Agreement) are references to such instruments, documents, contracts, and
agreements as the same may be amended, supplemented, and otherwise modified from
time to time, unless otherwise specified and shall include all schedules,
annexes and exhibits thereto unless otherwise specified. The words “hereof”,
“herein”, and “hereunder” and words of similar import when used in this Security
Agreement shall refer to this Security Agreement as a whole and not to any
particular provision of this Security Agreement. The term “including” means
“including, without limitation,”. Paragraph headings have been inserted in this
Security Agreement as a matter of convenience for reference only and it is
agreed that such paragraph headings are not a part of this Security Agreement
and shall not be used in the interpretation of any provision of this Security
Agreement.

ARTICLE II

SECURITY INTEREST

Section 2.1 Grant of Security Interest.

(a) Each Grantor hereby pledges, hypothecates, assigns, charges, mortgages,
delivers, and transfers to the Administrative Agent, for the ratable benefit of
each Secured Party, and hereby grants to the Administrative Agent, for the
ratable benefit of each Secured Party, a continuing security interest in all of
such Grantor’s right, title and interest in, to and under, all of the following,
whether now owned or hereafter acquired by such Grantor, and wherever located
and whether now owned or hereafter existing or arising (collectively, the
“Collateral”) as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor’s Secured Obligations:

(i) all Equipment (including all drilling platforms and rigs and remotely
operated vehicles, trenchers, and other equipment used by any Grantor, vehicles,
motor vehicles, serial number goods, rolling stock, vessels, aircraft and
airplanes) of such Grantor, wherever located, and all surface or subsurface
machinery, equipment, facilities, supplies, or other tangible personal property,
including tubing, rods, pumps, pumping units and engines, pipe, pipelines,
meters, apparatus, boilers, compressors, liquid extractors, connectors, valves,
fittings, power plants, poles, lines, cables, wires, transformers, starters and
controllers, machine shops, tools, machinery and parts, telegraph, telephone,
and other communication systems, loading docks, loading racks, and shipping
facilities, and any manuals, instructions, blueprints, computer software
(including software that is imbedded in and part of the equipment), and similar
items which relate to the above, and any and all additions, substitutions and
replacements of any of the foregoing, wherever located together with all
improvements thereon and all attachments, components, parts, equipment and
accessories installed thereon or affixed thereto;

 

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(ii) all Inventory of such Grantor, wherever located, including (A) all oil,
gas, or other hydrocarbons and all products and substances derived therefrom,
all raw materials and work in process therefore, finished goods thereof, and
materials used or consumed in the manufacture or production thereof, (B) all
Documents of Title covering any Inventory, including work in process, materials
used or consumed in any Grantor’s business, now owned or hereafter acquired or
manufactured by any Grantor and held for sale in the ordinary course of its
business, (C) all goods in which such Grantor has an interest in mass or a joint
or other interest or right of any kind (including goods in which such Grantor
has an interest or right as consignee), and (D) all goods which are returned to
or repossessed by such Grantor, and all accessions thereto, products thereof and
documents therefore;

(iii) all Accounts, Money, payment intangibles, Deposit Accounts (including the
Collateral Accounts and all amounts on deposit therein and all cash equivalent
investments carried therein and all proceeds thereof), contracts, contract
rights, all rights constituting a right to the payment of money, Chattel Paper,
documents, Documents of Title, Instruments, and Intangibles of such Grantor,
whether or not earned by performance or arising out of or in connection with the
sale or lease of goods or the rendering of services, including all moneys due or
to become due in repayment of any loans or advances, and all rights of such
Grantor now or hereafter existing in and to all security agreements, guaranties,
leases, agreements and other contracts securing or otherwise relating to any
such Accounts, Money, payment intangibles, Deposit Accounts, contracts, contract
rights, rights to the payment of money, Chattel Paper, documents, Documents of
Title, Instruments, and Intangibles (any and all such Accounts, Money, payment
intangibles, Deposit Accounts, contracts, contract rights, rights to the payment
of money, Chattel Paper, documents, Documents of Title, Instruments, and
Intangibles being the “Receivables”, and any and all such security agreements,
guaranties, leases, agreements and other contracts being the “Related
Contracts”);

(iv) all Intellectual Property Collateral of such Grantor;

(v) all books, correspondence, credit files, records, invoices, tapes, cards,
computer runs, writings, data bases, information in all forms, paper and
documents and other property relating to, used or useful in connection with,
evidencing, embodying, incorporating or referring to, any of the foregoing in
this Section 2.1(a);

(vi) all governmental approvals, permits, licenses, authorizations, consents,
rulings, tariffs, rates, certifications, waivers, exemptions, filings, claims,
orders, judgments and decrees and other Legal Requirements (each a “Governmental
Approval”);

(vii) all interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements, and all other agreements or arrangements
designed to protect such Grantor against fluctuations in interest rates or
currency exchange rates and all commodity hedge, commodity swap, exchange,
forward, future, floor, collar or cap agreements, fixed price agreements and all
other agreements or arrangements designed to protect such Grantor against
fluctuations in commodity prices (including any Swap Agreement);

 

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(viii) to the extent not included in the foregoing, all bank accounts,
Investment Property, fixtures, supporting obligations, and Goods;

(ix) all Pledged Interests, Pledged Notes, and any other Pledged Property and
all Distributions, interest, and other payments and rights with respect to such
Pledged Property;

(x) (A) all policies of insurance now or hereafter held by or on behalf of such
Grantor, including casualty, liability, key man life insurance, business
interruption, foreign credit insurance, and any title insurance, (B) all
proceeds of insurance, and (C) all rights, now or hereafter held by such Grantor
to any warranties of any manufacturer or contractor of any other Person;

(xi) all accessions, substitutions, replacements, products, offspring, rents,
issues, profits, returns, income and proceeds of and from any and all of the
foregoing Collateral (including proceeds which constitute property of the types
described in sub-clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii), (ix)
and (x) and proceeds deposited from time to time in any lock boxes of such
Grantor, and, to the extent not otherwise included, all payments and proceeds
under insurance (whether or not the Administrative Agent is the loss payee
thereof), or any condemnation award, indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the Collateral);

(xii) any and all Liens and security interests (together with the documents
evidencing such security interests) granted to such Grantor by an obligor to
secure such obligor’s obligations owing under any Instrument, Chattel Paper, or
contract that is pledged hereunder or with respect to which a security interest
in such Grantor’s rights in such Instrument, Chattel Paper, or contract is
granted hereunder;

(xiii) any and all guaranties given by any Person for the benefit of such
Grantor which guarantees the obligations of an obligor under any instrument,
chattel paper, or contract, which are pledged hereunder;

(xiv) all of such Grantor’s other property and rights of every kind and
description and interests therein, including all other “Chattel Paper”,
“Documents of Title”, “Intangibles”, “Goods”, “Instruments”, “Investment
Property” and “Money”, as each such term is defined in the PPSA, and all
Proceeds thereof.

(b) Notwithstanding anything to the contrary contained in Section 2.1(a) and
other than to the extent set forth in this Section 2.1(b), the following
property shall be excluded from the lien and security interest granted hereunder
(and shall not be included as “Collateral” for purposes of this Security
Agreement) (collectively, the “Excluded Collateral”):

 

  (i)

Excluded Governmental Approvals;

 

  (ii)

Excluded Contracts;

 

  (iii)

Excluded JV Equity Interests;

 

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  (iv)

Excluded PMSI Collateral;

 

  (v)

Excluded Real Property; and

 

  (vi)

Excluded Trademark Collateral;

provided, however, that (x) the exclusion from the Lien and security interest
granted by any Grantor hereunder of any Excluded Collateral shall not limit,
restrict or impair the grant by such Grantor of the Lien and security interest
in any accounts or receivables arising under any such Excluded Collateral or any
payments due or to become due thereunder unless the conditions in effect which
qualify such Property as Excluded Collateral applies with respect to such
accounts and receivables and (y) any proceeds received by any Grantor from the
sale, transfer or other disposition of Excluded Collateral shall constitute
Collateral unless the conditions in effect which qualify such Property as an
Excluded Collateral applies with respect to such proceeds.

Section 2.2 Exception Respecting Trademarks. Notwithstanding Section 2.1, the
Grantors’ grant of security in Trade-marks (as defined in the Trade-marks Act
(Canada)) under this Security Agreement shall be limited to a grant by the
Grantors of a security interest in all of the Grantors’ right, title and
interest in such Trademarks.

Section 2.3 Security for Obligations. This Security Agreement, and the
Collateral in which the Administrative Agent for the benefit of the Secured
Parties is granted a security interest hereunder by each Grantor, secures the
prompt and complete payment in cash and performance of the Secured Obligations.

Section 2.4 Attachment of Security Interests. Each Grantor and the
Administrative Agent hereby acknowledge that (a) value has been given; (b) each
Grantor has rights in the Collateral in which it has granted a security
interest; (c) this Security Agreement constitutes a security agreement as that
term is defined in the PPSA; and (d) the security interest attaches upon the
execution of this Security Agreement (or in the case of any after-acquired
property, at the time of acquisition thereof).

Section 2.5 Continuing Security Interest; Transfer of Loans; Reinstatement. This
Security Agreement shall create continuing security interests in the Collateral
and shall (a) except as otherwise provided in the Credit Agreement, remain in
full force and effect until Payment in Full, (b) be binding upon each Grantor
and its successors, transferees and assigns, and (c) inure, together with the
rights and remedies of the Administrative Agent hereunder, to the benefit of the
Administrative Agent and each other Secured Party and its respective permitted
successors, transferees and assigns, subject to the limitations as set forth in
the Credit Agreement. Without limiting the generality of the foregoing clause
(c), any Lender may assign or otherwise transfer (in whole or in part) all or
any part of its Commitment and Loans held by or owing to it as provided in
Section 9.7 of the Credit Agreement, and any successor or assignee thereof shall
thereupon become vested with all the rights and benefits in respect thereof
granted to such Secured Party under any Credit Document (including this Security
Agreement), or otherwise. If at any time all or any part of any payment
theretofore applied by the Administrative Agent or any other Secured Party to
any of the Secured Obligations is or must be rescinded or returned by the
Administrative Agent or any such Secured Party for

 

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any reason whatsoever (including the insolvency, bankruptcy, reorganization or
other similar proceeding of any Grantor or any other Person), such Secured
Obligations shall, for purposes of this Security Agreement, to the extent that
such payment is or must be rescinded or returned, be deemed to have continued to
be in existence, notwithstanding any application by the Administrative Agent or
such Secured Party or any termination agreement or release provided to any
Grantor, and this Security Agreement shall continue to be effective or
reinstated, as the case may be, as to such Secured Obligations, all as though
such application by the Administrative Agent or such Secured Party had not been
made.

Section 2.6 Grantors Remain Liable. Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein, and will
perform all of its duties and obligations under such contracts and agreements to
the same extent as if this Security Agreement had not been executed, (b) the
exercise by the Administrative Agent of any of its rights hereunder shall not
release any Grantor from any of its duties or obligations under any such
contracts or agreements included in the Collateral, and (c) neither the
Administrative Agent nor any other Secured Party shall have any obligation or
liability under any contracts or agreements included in the Collateral by reason
of this Security Agreement, nor shall the Administrative Agent nor any Secured
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

Section 2.7 Delivery of Pledged Property; Instruments and Chattel Paper. Other
than as provided in the first sentence of Section 3.5 below, all certificates or
instruments representing or evidencing (i) all Pledged Interests and Pledged
Notes and (ii) other Collateral consisting of Instruments and Chattel Paper
individually or collectively evidencing amounts payable in excess of
U.S.$3,000,000 (or the Dollar Equivalent Amount in Canadian Dollars) shall be
delivered to and held by or on behalf of (or in the case of the Pledged Notes,
endorsed to the order of) the Administrative Agent pursuant hereto, shall be in
suitable form for transfer by delivery, and shall be accompanied by all
necessary endorsements or instruments of transfer or assignment, duly executed
in blank. To the extent any of the Collateral constitutes an “Uncertificated
Security” or a “Security Entitlement” (as defined in the STA), then at the
Administrative Agent’s request and its determination that such Property is not
an Excluded Perfection Collateral, the applicable Grantor shall take and cause
the appropriate Person (including any issuer, entitlement holder or securities
intermediary thereof) to take all actions necessary to grant “control” (as
defined in the STA) to the Agent (for the benefit of the Secured Parties) over
such Collateral.

Section 2.8 Distributions on Pledged Interests. So long as no Event of Default
shall have occurred and be continuing, in the event that any Distribution with
respect to any Pledged Interest pledged hereunder is permitted to be paid (in
accordance with Section 6.9 of the Credit Agreement), such Distribution or
payment may be paid directly to the applicable Grantor. If any Distribution is
made in contravention of Section 6.9 of the Credit Agreement or this
Section 2.8, the applicable Grantor shall hold the same segregated and in trust
for the Administrative Agent until paid to the Administrative Agent in
accordance with Section 4.1(e).

 

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Section 2.9 Security Interest Absolute, etc. This Security Agreement shall in
all respects be a continuing, absolute, unconditional and irrevocable grant of
security interest, and shall remain in full force and effect until Payment in
Full. All rights of the Secured Parties and the security interests granted to
the Administrative Agent (for its benefit and the ratable benefit of each other
Secured Party) hereunder, and all obligations of each Grantor hereunder, shall,
in each case, be absolute, unconditional and irrevocable irrespective of (a) any
lack of validity, legality or enforceability of any Credit Document, (b) the
failure of any Secured Party (i) to assert any claim or demand or to enforce any
right or remedy against any Grantor or any other Person under the provisions of
any Credit Document or otherwise, or (ii) to exercise any right or remedy
against any other guarantor of, or collateral securing, any Secured Obligations,
(c) any change in the time, manner or place of payment of, or in any other term
of, all or any part of the Secured Obligations, or any other extension,
compromise or renewal of any Secured Obligations, (d) any reduction, limitation,
impairment or termination of any Secured Obligations (other than Payment in
Full) for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to (and each Grantor hereby
waives any right to or claim of) any defense or setoff, counterclaim, recoupment
or termination whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise, unenforceability of, or any other
event or occurrence affecting, any Secured Obligations or otherwise, (e) any
amendment to, rescission, waiver, or other modification of, or any consent to or
departure from, any of the terms of any Credit Document, (f) any addition,
exchange or release of any Collateral of the Secured Obligations, or any
surrender or non-perfection of any collateral, or any amendment to or waiver or
release or addition to, or consent to or departure from, any other guaranty held
by any Secured Party securing any of the Secured Obligations, or (g) any other
circumstance which might otherwise constitute a defense available to, or a legal
or equitable discharge of, any Grantor or any other Credit Party, any surety or
any guarantor.

Section 2.10 Waiver of Subrogation. Until 91 days after Payment in Full, each
Grantor hereby irrevocably waives any claim or other rights which it may now or
hereafter acquire against any Credit Party that arise from the existence,
payment, performance or enforcement of such Grantor’s obligations under this
Security Agreement or any other Credit Document, including any right of
subrogation, reimbursement, exoneration or indemnification, any right to
participate in any claim or remedy of any Secured Party against any Credit Party
or any collateral which any Secured Party now has or hereafter acquires, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including the right to take or receive from any Credit Party,
directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any
amount shall be paid to any Grantor in violation of the preceding sentence and
Payment in Full shall not have occurred, then such amount shall be deemed to
have been paid to such Grantor for the benefit of, and held in trust for, the
Administrative Agent (on behalf of the Secured Parties), and shall forthwith be
paid to the Administrative Agent to be credited and applied upon the Secured
Obligations, whether matured or unmatured. Each Grantor acknowledges that it
will receive direct and indirect benefits from the financing arrangements
contemplated by the Credit Agreement and that the waiver set forth in this
Section 2.10 is knowingly made in contemplation of such benefits.

Section 2.11 Election of Remedies. Except as otherwise provided in the Credit
Agreement, if any Secured Party may, under applicable Legal Requirement, proceed
to realize its benefits under this Security Agreement or the other Credit
Documents giving any Secured Party a Lien upon any Collateral, either by
judicial foreclosure or by non-judicial sale or enforcement,

 

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such Secured Party may, at its sole option, determine which of its remedies or
rights it may pursue without affecting any of its rights and remedies under this
Security Agreement. If, in the exercise of any of its rights and remedies, any
Secured Party shall forfeit any of its rights or remedies, including its right
to enter a deficiency judgment against any Credit Party or any other Person,
whether because of any applicable Legal Requirements pertaining to “election of
remedies” or the like, each Grantor hereby consents to such action by such
Secured Party and waives any claim based upon such action, even if such action
by such Secured Party shall result in a full or partial loss of any rights of
subrogation that such Grantor might otherwise have had but for such action by
such Secured Party.

Section 2.12 Pledged Securities. The granting of the foregoing security interest
does not make the Administrative Agent or any Secured Party a successor to
Grantor as a partner or member in any Pledged Interests Issuer that is a
partnership, limited partnership or limited liability company, as applicable,
and neither the Administrative Agent, any Secured Party, nor any of their
respective successors or assigns hereunder shall be deemed to have become a
partner or member in any Pledged Interest Issuer, as applicable, by accepting
this Security Agreement or exercising any right granted herein unless and until
such time, if any, when any such Person expressly becomes a partner or member in
any Pledged Interests Issuer, as applicable, and complies with any applicable
transfer provisions set forth in the charter or organizational documents
relating to an applicable Pledged Security after a foreclosure thereon.

(b) Each Grantor acknowledges that certain of the Pledged Securities of a
Grantor may now or in the future consist of ULC Shares, and that it is the
intention of the Administrative Agent and each Grantor that neither the
Administrative Agent nor any other Secured Party should under any circumstances
prior to realization be held to be a “member” or a “shareholder”, as applicable,
of a ULC for the purposes of any ULC Laws. Therefore, notwithstanding any
provisions to the contrary contained in this Security Agreement, the Credit
Agreement or any other Credit Document, each Grantor is and will remain the sole
registered and beneficial owner of ULC Shares constituting Pledged Securities
until such time as written notice is given by the Administrative Agent to the
Grantor and such ULC Shares are effectively transferred into the name of the
Administrative Agent, any other Secured Party, or any other Person, as directed
by the Administrative Agent, on the books and records of the applicable ULC.
Accordingly, each Grantor shall be entitled to receive and retain for its own
account any dividend, property or other distribution, if any, in respect of such
ULC Shares (except insofar as the applicable Grantor has granted a security
interest or other lien in such dividend or other distribution and any
distribution constituting Pledged Securities shall be delivered to the
Administrative Agent to hold as security hereunder) and shall have the right to
vote such ULC Shares and to control the direction, management and policies of
the applicable ULC to the same extent as the Grantor would if such ULC Shares
were not pledged to the Administrative Agent pursuant hereto. Nothing in this
Security Agreement, the Credit Agreement or any other Credit Document is
intended to, and nothing in this Security Agreement, the Credit Agreement or any
other Credit Document shall, constitute the Administrative Agent, any other
Secured Party, or any other Person other than the applicable Grantor, a member
or shareholder (whether listed or unlisted, registered or beneficial) of a ULC
for the purposes of any ULC Laws, until such time as notice is given by the
Administrative Agent to the Grantor and all further steps are taken pursuant
hereto or thereto so as to register the Administrative Agent, any other Secured
Party, or such other Person, as specified in such notice, as the holder of the
ULC Shares. To the extent

 

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any other provision hereof or any provision of the Credit Agreement or any other
Credit Document would have the effect of constituting the Administrative Agent
or any other Secured Party or any other Person other than the applicable Grantor
as a member or a shareholder, as applicable, of any ULC prior to such time, such
provision shall be severed herefrom and shall be ineffective with respect to ULC
Shares which are Pledged Securities without otherwise invalidating or rendering
unenforceable this Security Agreement or invalidating or rendering unenforceable
such provision insofar as it relates to Pledged Securities which are not ULC
Shares, if any. Notwithstanding anything contained herein, in the Credit
Agreement or any other Credit Document to the contrary (except to the extent, if
any, that the Administrative Agent, the Secured Parties or any of their
successors or assigns hereafter expressly becomes a registered member or
shareholder of a ULC), neither the Administrative Agent, the Secured Parties nor
any of their respective successors or assigns shall be deemed to have assumed or
otherwise become liable for any debts or obligations of any ULC. Except upon the
exercise of rights of the Administrative Agent or other Persons to sell,
transfer or otherwise dispose of ULC Shares in accordance with this Security
Agreement, or exercise other remedies following the occurrence or during the
continuance of an Event of Default, each Grantor shall not cause or permit, or
enable the applicable issuer to cause or permit, the Administrative Agent or any
other Secured Party or any other Person to: (a) be registered as a shareholder
or member of the issuer; (b) have any notation entered in their favour in the
share register of the issuer; (c) be held out as shareholders or members of the
issuer; (d) receive, directly or indirectly, any dividends, property or other
distributions from the issuer by reason of the Administrative Agent holding the
security interests over the ULC Shares; or (e) act as a shareholder or member of
the issuer, or exercise any rights of a shareholder or member including the
right to attend a meeting of members or shareholders of the issuer or to vote
its ULC Shares.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

In order to induce the Secured Parties to enter into the Credit Agreement and
extend credit to the Borrower thereunder, and to induce the Secured Parties to
enter into Swap Agreements and Banking Services, each Grantor represents and
warrants unto each Secured Party as set forth in this Article.

Section 3.1 Ownership, No Liens, etc. Such Grantor is the legal and beneficial
owner of, and has good title to (and has full right and authority to pledge,
grant and assign) the Collateral free and clear of all Liens, except for any
Lien that is a Permitted Lien. No effective PPSA financing statement, financing
change statement or other filing similar in effect covering all or any part of
the Collateral is on file in any recording office, except those filed in favour
of the Administrative Agent relating to this Security Agreement, Permitted Liens
or as to which a duly authorized termination statement relating to such PPSA
financing statement, financing change statement or other instrument has been
delivered to the Administrative Agent on the Closing Date. This Security
Agreement creates a valid security interest in the Collateral, securing the
payment of the Secured Obligations, and, except for (a) the proper filing of the
applicable PPSA financing statements or financing change statements with the
filing offices listed on Schedule II-A attached hereto, (b) the recordation of
security agreements with the Canadian Intellectual Property Office, and any
other intellectual property office in which Intellectual Property Collateral is
registered, and (c) taking possession of any Pledged Property

 

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with necessary endorsements, all filings and other actions necessary to perfect
and protect such security interest in the Collateral (other than, as to
perfection, Excluded Perfection Collateral) have been duly taken and, subject to
Permitted Liens, such security interest shall be a first priority security
interest. Any reference in this Security Agreement or any other Credit Document
to a Permitted Lien is not intended to subordinate or postpone, and shall not be
interpreted as subordinating or postponing, or as any agreement to subordinate
or postpone, any Lien created by any of the Credit Documents or the Permitted
Lien.

Section 3.2 As to Equity Interests of the Subsidiaries, Investment Property.

(a) With respect to the Pledged Interests, all such Pledged Interests (i) other
than with respect to Pledged Interests in limited liability companies and
partnerships, are duly authorized and validly issued, fully paid and
non-assessable, and (ii) unless otherwise noted on Schedule I, are represented
by a certificate.

(b) With respect to the Pledged Interests, no such Pledged Interests (i) are
dealt in or traded on securities exchanges or in securities markets, or (ii) are
held in a Securities Account, except, with respect to this clause (b), Pledged
Interests (A) for which the Administrative Agent is the registered owner or
(B) with respect to which the Pledged Interests Issuer has agreed in a Control
Agreement with such Grantor and the Administrative Agent to comply with any
instructions of the Administrative Agent without the consent of such Grantor.

(c) Such Grantor has delivered all Certificated Securities constituting
Collateral held by such Grantor on the Closing Date to the Administrative Agent,
together with duly executed undated blank stock transfer forms, or other
equivalent instruments of transfer reasonably acceptable to the Administrative
Agent.

(d) With respect to Uncertificated Securities constituting Collateral, such
Grantor has caused the Pledged Interests Issuer or other issuer thereof either
(i) to register the Administrative Agent as the registered owner of such
security, or (ii) to agree in a Control Agreement with such Grantor and the
Administrative Agent that such Pledged Interests Issuer or other issuer will
comply with instructions with respect to such security originated by the
Administrative Agent without further consent of such Grantor.

(e) The percentage of the issued and outstanding Pledged Interests of each
Pledged Interests Issuer pledged by such Grantor hereunder is as set forth on
Schedule I-A and the percentage of the total membership, partnership and/or
other Equity Interests in the Pledged Interests Issuer is indicated on Schedule
I-A, in each case, as such Schedule I-A may be supplemented from time to time
pursuant to the terms hereof. All of the Pledged Interests constitute one
hundred percent (100%) of such Grantor’s interest in the applicable Pledged
Interests Issuer.

(f) There are no outstanding rights, rights to subscribe, options, warrants or
convertible securities outstanding or any other rights outstanding whereby any
Person would be entitled to acquire shares, member interests or units of any
Pledged Interests Issuer other than (i) as to Pledged Interests Issuers that are
not Wholly-Owned Subsidiaries or (ii) such rights that constitute Collateral.

 

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(g) In the case of each Pledged Note, all of such Pledged Notes are as set forth
on Schedule I-B and have been duly authorized, executed, endorsed, issued and
delivered, and are the legal, valid and binding obligation of the issuers
thereof, and, as of the Closing Date, are not in default.

Section 3.3 Grantor’s Name, Location, etc.

(a) Other than as otherwise permitted pursuant to any Credit Document, (i) each
Grantor’s jurisdiction of incorporation, amalgamation, formation or
organization, incorporation, amalgamation, formation or organizational
identification number, if any, federal employer or other business identification
number, if any, is set forth in Schedule II-A hereto, and (ii) as of the Closing
Date or such later date on which such Grantor joins this Security Agreement, the
place of business of such Grantor or, if such Grantor has more than one place of
business, the chief executive office (and domicile for the purposes of the
Quebec Civil Code) of such Grantor and the office where such Grantor keeps its
records concerning the Receivables, is set forth in Schedule II-B hereto.

(b) Within the past five years, such Grantor has not been known by any legal
name different from the one set forth on the signature page hereto, nor has such
Grantor been the subject of any merger, amalgamation or other corporate
reorganization, except as set forth in Schedule II-D hereto.

(c) None of the Receivables in excess of U.S.$3,000,000 (or the Dollar
Equivalent Amount in Canadian Dollars) is evidenced by a promissory note or
other instrument other than a promissory note or instrument that has been
delivered to the Administrative Agent (with appropriate endorsements).

(d) As of the Closing Date or such later date on which such Grantor joins this
Security Agreement, the name set forth on the signature page attached hereto
(or, if applicable, the signature page to the supplement document pursuant to
which such Grantor joins this Security Agreement) is the exact name of such
Grantor as it appears in such Grantor’s organizational documents, as amended, as
filed with the Grantor’s jurisdiction of incorporation, amalgamation, formation
or organization.

Section 3.4 Possession of Inventory; Control. Such Grantor has exclusive
possession and control, subject to Permitted Liens, of the Equipment and
Inventory, except as otherwise required, necessary or customary in the ordinary
course of its business. Such Grantor has not consented to, and is otherwise
unaware of, any Person (other than, if applicable, the Administrative Agent
pursuant to Section 6.1(a) or Section 6.1(f) hereof) having possession or
control over any Collateral, or any other interest in any of such Grantor’s
rights in respect thereof other than, with respect to Deposit Accounts and
Securities Accounts, as to Liens permitted under Section 6.2(b), (h), (i), (l)
and (m) of the Credit Agreement.

Section 3.5 Pledged Property, Instruments and Chattel Paper. Such Grantor has,
contemporaneously herewith, delivered to the Administrative Agent possession of
all originals of all certificates or instruments representing or evidencing
(i) any Pledged Interests and Pledged Notes, and (ii) other Collateral
consisting of Instruments and Chattel Paper individually, or collectively,
evidencing amounts payable in excess of U.S.3,000,000 (or the Dollar Equivalent
Amount in Canadian Dollars), owned or held by such Grantor (duly endorsed, in
blank, if requested by the Administrative Agent).

 

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Section 3.6 Intellectual Property Collateral. Such Grantor represents that
except for any Patent Collateral, Trademark Collateral, Copyright Collateral,
and Design Collateral specified in Item A, Item B, Item C, and Item D
respectively, of Schedule III hereto, and any and all Trade Secrets Collateral,
as of the date hereof, such Grantor does not own and has no interests in any
other Intellectual Property Collateral material to the operations or business of
such Grantor, other than the Computer Hardware and Software Collateral. Such
Grantor further represents and warrants that, with respect to all Intellectual
Property Collateral material to the conduct of such Grantor’s business (a) such
Intellectual Property Collateral is valid, subsisting, unexpired and enforceable
and has not been abandoned or adjudged invalid or unenforceable, in whole or in
part, (b) other than with respect to Intellectual Property Collateral licensed
to it, such Grantor is the sole and exclusive owner of the right, title and
interest in and to such Intellectual Property Collateral, subject to Permitted
Liens, and, to such Grantor’s knowledge, no claim has been made that the use of
such Intellectual Property Collateral does or may, conflict with, infringe,
misappropriate, dilute, misuse or otherwise violate any of the rights of any
third party in any material respects, (c) such Grantor has made all necessary
filings and recordations to protect its interest in such Intellectual Property
Collateral, including recordations of any of its interests in the Intellectual
Property Collateral in the Canadian Intellectual Property Office and the
Canadian Industrial Design Office, and, if requested by the Administrative
Agent, in corresponding offices throughout the world, (d) such Grantor has taken
all reasonable steps to safeguard its material Trade Secrets Collateral and to
its knowledge none of such Trade Secrets Collateral of such Grantor has been
used, divulged, disclosed or appropriated for the benefit of any other Person
other than such Grantor, the Borrower or any Subsidiary thereof, (e) to such
Grantor’s knowledge, no third party is infringing upon any such Intellectual
Property Collateral owned or used by such Grantor in any material respect, or
any of its respective licensees, (f) no settlement or consents, covenants not to
sue, nonassertion assurances, or releases have been entered into by such Grantor
or to which such Grantor is bound that adversely affects its rights to own or
use any such Intellectual Property Collateral, and (g) the consummation of the
transactions contemplated by the Credit Agreement and this Security Agreement
will not result in the termination or material impairment of any material
portion of such Intellectual Property Collateral.

Section 3.7 Authorization, Approval, etc. Except as have been obtained or made
and are in full force and effect, no Governmental Approval, authorization,
approval or other action by, and no notice to or filing with, any Governmental
Authority or any other third party is required either (a) for the grant by such
Grantor of the security interest granted hereby, (b) except with respect to
Excluded Perfection Collateral, for the perfection or maintenance of the
security interests hereunder including the first priority (subject to Permitted
Liens) nature of such security interest (except with respect to the financing
statements or financing change statements, or, with respect to Intellectual
Property Collateral, the recordation of any agreements with the Canadian
Intellectual Property Office and the Canadian Industrial Design Office) or the
exercise by the Administrative Agent of its rights and remedies hereunder, or
(c) for the exercise by the Administrative Agent of the voting or other rights
provided for in this Security Agreement, except (i) with respect to any Pledged
Interests, as may be required in connection with a disposition of such Pledged
Interests by laws affecting the offering and sale of securities generally, the
remedies in respect of the Collateral pursuant to this Security Agreement and
(ii) any “change of control” or similar filings required by state, provincial or
territorial licensing agencies.

 

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Section 3.8 Best Interests. It is in the best interests of each Grantor to
execute this Security Agreement in as much as such Grantor will, as a result of
being the Borrower, or a Restricted Subsidiary of the Borrower, derive
substantial direct and indirect benefits from (a) the extensions of credit made
from time to time to the Borrower or any other Grantor by the Lenders pursuant
to the Credit Agreement, (b) the Swap Agreements entered into with the Swap
Counterparties, and (c) the Banking Services provided by the Banking Services
Providers, and each Grantor agrees that the Secured Parties are relying on this
representation in agreeing to make such extensions of credit pursuant to the
Credit Agreement to the Borrower. Furthermore, such extensions of credit, Swap
Agreements and Banking Services are (i) in furtherance of each Grantor’s
corporate purposes, and (ii) necessary or convenient to the conduct, promotion
or attainment of each Grantor’s business.

Section 3.9 Inventory and Real Property Locations.

(a) As of the date of this Security Agreement, Schedule IV to this Security
Agreement (as such Schedule IV may be supplemented from time to time) sets forth
the address of each parcel of real property that is owned or leased by any
Grantor at which Inventory with a book value in excess of U.S.$1,000,000 (or the
Dollar Equivalent Amount in Canadian Dollars) is located (the “Material
Inventory Locations”). To the extent such real property is leased, each of such
leases and subleases is valid and enforceable against the applicable Grantor in
accordance with its terms and is in full force and effect, and no material
default by such Grantor to any such lease or sublease exists. Each of the
Grantors and each of its Restricted Subsidiaries has good and indefeasible title
to, or valid leasehold interests in, all of its material real and personal
property, free of all Liens other than those permitted by Section 6.2 of the
Credit Agreement.

(b) With respect to any of its Inventory scheduled or listed on the most recent
Collateral Report, (i) all such Inventory is located at a Material Inventory
Location, in transit, located at a customer’s location, being replaced or
repaired, or located at locations which are not Material Inventory Locations,
(ii) no such Inventory (other than Inventory in transit, Inventory located at a
customer’s location and Inventory which is being replaced or repaired) is now,
or shall at any time or times hereafter be stored at any other location except
as permitted by Section 4.9, (iii) such Grantor has good, indefeasible and
merchantable title to such Inventory and such Inventory is not subject to any
Lien or security interest or document whatsoever except for Liens permitted
under Section 6.2 of the Credit Agreement, (iv) except as specifically disclosed
in the most recent Collateral Report, such Inventory is Eligible Inventory of
good and merchantable quality, free from any material defects, (v) such
Inventory is not subject to any licensing, patent, royalty, trademark, trade
name or copyright agreements with any third parties which would require any
consent of any third party upon sale or disposition of that Inventory or the
payment of any monies to any third party upon such sale or other disposition,
(vi) all Legal Requirements and (vii) the completion of manufacture, sale or
other disposition of such Inventory by the Administrative Agent following an
Event of Default shall not require the consent of any Person and shall not
constitute a breach or default under any material contract or agreement to which
such Grantor is a party or to which such property is subject.

 

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Section 3.10 Accounts. All of the Deposit Accounts of each Grantor as of the
Closing Date are identified as such on Exhibit A to this Security Agreement.

Section 3.11 Securities Intermediaries Jurisdiction. Each agreement between the
Grantor and a Securities Intermediary that governs any Securities Account
included in the Collateral or to which any Collateral that is Investment
Property has been credited either (i) specifies that the Province of Alberta is
the Securities Intermediary’s jurisdiction for the purposes of the PPSA or
(ii) is expressed to be governed by the laws of the Province of Alberta.

ARTICLE IV

COVENANTS

Each Grantor covenants and agrees that, until Payment in Full, it will perform,
comply with and be bound by the obligations set forth below.

Section 4.1 As to Investment Property, etc.

(a) Equity Interests of Subsidiaries. No Grantor shall allow or permit any of
its Subsidiaries (i) that is a corporation, business trust, joint stock company
or similar Person, to issue Uncertificated Securities, unless such Person
promptly (and, in any case, within five (5) Business Days (or such later date as
the Administrative Agent may agree in its sole discretion) of such issuance)
takes the actions set forth in Section 4.1(b)(ii) with respect to any such
Uncertificated Securities, (ii) that is a partnership or limited liability
company, to (x) issue Equity Interests (A) unless Section 12(1)(b) of the STA is
complied with, or (B) that are to be dealt in or traded on securities exchanges
or in securities markets, or (y) place such Subsidiary’s Equity Interests in a
Securities Account, unless such Person promptly (and, in any case, within five
(5) Business Days (or such later date as the Administrative Agent may agree in
its sole discretion) of such placement) takes the actions set forth in
Section 4.1(b)(ii) with respect to any such Equity Interests, and (iii) to issue
Equity Interests in addition to or in substitution for the Pledged Property or
any other Equity Interests pledged hereunder, except for additional Equity
Interests issued to such Grantor; provided that (x) such Equity Interests are
pledged and delivered to the Administrative Agent promptly (and in any event
within ten (10) Business Days of issuance), and (y) such Grantor delivers a
supplement to Schedule I to the Administrative Agent identifying such new Equity
Interests as Pledged Property, in each case pursuant to the terms of this
Security Agreement. No Grantor shall permit any of its Subsidiaries to issue any
warrants, options, contracts or other commitments or other securities that are
convertible to any of the foregoing (except as to Equity Interests issued by
Subsidiaries that are not Wholly-Owned) or that entitle any Person to purchase
any of the foregoing, and except for this Security Agreement or any other Credit
Document, shall not, and shall not permit any of its Subsidiaries to, enter into
any agreement creating any restriction or condition upon the transfer, voting or
control of any Pledged Property.

 

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(b) Investment Property (other than Certificated Securities).

(i) With respect to any Commodity Contracts or Security Entitlements
constituting Investment Property owned or held by any Grantor, such Grantor
will, (A) with respect to any Commodity Contracts or Security Entitlements
existing on the Closing Date, within 60 days of the Closing Date and (B) with
respect to Commodity Contracts or Security Entitlements acquired after the
Closing Date, within 30 calendar days of such acquisition, cause the
intermediary maintaining such Investment Property to execute a Control Agreement
relating to such Investment Property pursuant to which such intermediary agrees
to comply with the Administrative Agent’s instructions with respect to such
Investment Property without further consent by such Grantor, or (2) transfer
such Investment Property to intermediaries that have or will agree to execute
such Control Agreements.

(ii) With respect to any Uncertificated Securities (other than Uncertificated
Securities credited to a Securities Account) owned or held by any Grantor, such
Grantor will (y) cause the Pledged Interests Issuer or other issuer of such
securities to either (A) register the Administrative Agent as the registered
owner thereof on the books and records of the issuer, or (B) execute a Control
Agreement relating to such Investment Property pursuant to which the Pledged
Interests Issuer or other issuer agrees to comply with the Administrative
Agent’s instructions with respect to such Uncertificated Securities (provided
that, it is understood that the Administrative Agent shall not deliver such
instructions except following the occurrence and during the continuance of an
Event of Default), and (z) take and cause the appropriate Person (including any
issuer, entitlement holder or securities intermediary thereof) to take all other
actions necessary to grant “control” (as defined in the STA) to the
Administrative Agent (for the ratable benefit of the Secured Parties) over such
Collateral.

(c) Certificated Securities (Stock Transfer Forms). Each Grantor agrees that all
Pledged Interests which are certificated (and all other certificated shares of
Equity Interests constituting Collateral) delivered by such Grantor pursuant to
this Security Agreement will be accompanied by duly endorsed undated blank stock
transfer forms, or other equivalent instruments of transfer reasonably
acceptable to the Administrative Agent. Each Grantor will, from time to time
upon the reasonable request of the Administrative Agent, promptly deliver to the
Administrative Agent such stock transfer forms, instruments and similar
documents, reasonably satisfactory in form and substance to the Administrative
Agent, with respect to the Collateral and will, from time to time upon the
request of the Administrative Agent during the continuance of any Event of
Default, promptly transfer any Pledged Interests or other shares of Equity
Interests constituting Collateral into the name of any nominee designated by the
Administrative Agent.

(d) Continuous Pledge. Each Grantor will (subject to the terms of the Credit
Agreement and this Security Agreement) at all times keep pledged to the
Administrative Agent pursuant hereto, on a first-priority, perfected basis all
Pledged Property and all Distributions with respect thereto, and all Proceeds
and rights from time to time received by or distributable to such Grantor in
respect of any of the foregoing Collateral (other than, as to perfection,
Excluded Perfection Collateral). Each Grantor agrees that it will promptly (and
no later than ten (10) Business Days following receipt thereof unless consented
to by the Administrative Agent) deliver to the Administrative Agent possession
of all originals of Pledged Property that it acquires following the Closing Date
and shall deliver to the Administrative Agent a supplement to Schedule I
identifying any such new Pledged Property.

 

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(e) Voting Rights; Dividends, etc. Each Grantor agrees:

(i) that promptly upon receipt of notice of the occurrence and continuance of an
Event of Default from the Administrative Agent and without any request therefor
by the Administrative Agent, so long as such Event of Default shall continue, to
deliver (properly endorsed where required hereby or requested by the
Administrative Agent) to the Administrative Agent all Distributions with respect
to Investment Property, all interest principal and other cash payments on the
Pledged Property and all Proceeds of the Pledged Property, in case thereafter
received by such Grantor, all of which shall be held by the Administrative Agent
as additional Collateral; and

(ii) if an Event of Default shall have occurred and be continuing and the
Administrative Agent has notified such Grantor of the Administrative Agent’s
intention to exercise its voting power under this Section 4.1(e)(ii),

(A) the Administrative Agent may exercise (to the exclusion of such Grantor) the
voting power and all other incidental rights of ownership with respect to any
Pledged Interests, Investment Property or other Equity Interests constituting
Collateral. EACH GRANTOR HEREBY GRANTS THE ADMINISTRATIVE AGENT AN IRREVOCABLE
PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT UNTIL SUCH EVENT OF
DEFAULT SHALL HAVE BEEN CURED OR WAIVED) EXERCISABLE UNDER SUCH CIRCUMSTANCES,
TO VOTE THE PLEDGED INTERESTS, INVESTMENT PROPERTY AND SUCH OTHER COLLATERAL;
AND

(B) promptly to deliver to the Administrative Agent such additional proxies and
other documents as may be necessary to allow the Administrative Agent to
exercise such voting power.

All Distributions, interest, principal, cash payments, payment intangibles and
Proceeds that may at any time and from time to time be held by any Grantor but
which such Grantor is then obligated to deliver to the Administrative Agent,
shall, until delivery to the Administrative Agent, be held by such Grantor
separate and apart from its other property in trust for the Administrative
Agent. The Administrative Agent agrees that unless an Event of Default shall
have occurred and be continuing and the Administrative Agent shall have given
the notice referred to in Section 4.1(e), each Grantor shall be entitled to
receive and retain all Distributions and shall have the exclusive voting power,
and is granted a proxy, with respect to any Equity Interests constituting
Collateral. Administrative Agent shall, upon the written request of any Grantor,
promptly deliver such proxies and other documents, if any, as shall be
reasonably requested by such Grantor which are necessary to allow such Grantor
to exercise that voting power with respect to any such Equity Interests
constituting Collateral; provided, however, that no vote shall be cast, or
consent, waiver, or ratification given, or action taken by such Grantor that
would violate any provision of the Credit Agreement or any other Credit Document
(including this Security Agreement).

 

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Section 4.2 As to Deposit Accounts and Securities Accounts. With respect to any
Deposit Account and Securities Accounts (other than any Excluded Account for so
long as such account is an Excluded Account) owned or held by any Grantor, such
Grantor shall deliver a Control Agreement or lockbox agreement to the
Administrative Agent in the manner set forth in Section 2.5(b) of the Credit
Agreement.

Section 4.3 As to Accounts.

(a) Each Grantor shall have the right to collect all Accounts so long as no
Event of Default shall have occurred and be continuing.

(b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the
delivery of notice by the Administrative Agent to each Grantor, all Proceeds of
Collateral received by any Grantor shall be delivered in kind to the
Administrative Agent for deposit in a Deposit Account of such Grantor maintained
with the Administrative Agent and subject to a Control Agreement (any such
Deposit Accounts, together with any other Deposit Accounts pursuant to which any
portion of the Collateral is deposited with the Administrative Agent, a
“Collateral Account,” and collectively, the “Collateral Accounts”), and such
Grantor shall not commingle any such Proceeds, and shall hold separate and apart
from all other property, all such Proceeds in express trust for the benefit of
the Administrative Agent until delivery thereof is made to the Administrative
Agent.

(c) Following the delivery of notice pursuant to clause (b)(ii) during the
continuance of an Event of Default, the Administrative Agent shall have the
right to apply any amount in the Collateral Account to the payment of any
Secured Obligations which are due and payable or in accordance with Section 7.6
of the Credit Agreement.

(d) With respect to each of the Collateral Accounts, it is hereby confirmed and
agreed that (i) deposits in such Collateral Account are subject to a security
interest as contemplated hereby, (ii) such Collateral Account shall be under the
control of the Administrative Agent after the occurrence and during the
continuance of an Event of Default (unless otherwise agreed to by the Borrower
and the Majority Lenders), and (iii) the Administrative Agent shall have the
sole right of withdrawal over such Collateral Account; provided that such
withdrawals shall only be made during the existence of an Event of Default.

(e) No Grantor shall adjust, settle, or compromise the amount or payment of any
Receivable, nor release wholly or partly any account debtor or obligor thereof,
nor allow any credit or discount thereon; provided that, a Grantor may make such
adjustments, settlements or compromises and release wholly or partly any account
debtor or obligor thereof and allow any credit or discounts thereon so long as
(i) such action is taken in the ordinary course of business, and (ii) such
action is, in such Grantor’s good faith business judgment, advisable.

 

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Section 4.4 As to Grantor’s Use of Collateral.

(a) Subject to clause (b), each Grantor (i) may in the ordinary course of its
business, at its own expense, sell, lease or furnish under the contracts of
service any of the Inventory held by such Grantor for such purpose, and use and
consume any raw materials, work in process or materials held by such Grantor for
such purpose, (ii) following the occurrence and during the continuance of an
Event of Default, shall, at its own expense, endeavor to collect, as and when
due, all amounts due with respect to any of the Collateral, including the taking
of such action with respect to such collection as the Administrative Agent may
request or, in the absence of such request, as such Grantor may deem advisable,
and (iii) may grant, in the ordinary course of business, to any party obligated
on any of the Collateral, any rebate, refund or allowance to which such party
may be lawfully entitled, and may accept, in connection therewith, the return of
Goods, the sale or lease of which shall have given rise to such Collateral.

(b) At any time following the occurrence and during the continuance of an Event
of Default, whether before or after the maturity of any of the Secured
Obligations, the Administrative Agent may (i) revoke any or all of the rights of
any Grantor set forth in clause (a), (ii) notify any parties obligated on any of
the Collateral to make payment to the Administrative Agent of any amounts due or
to become due thereunder, and (iii) enforce collection of any of the Collateral
by suit or otherwise and surrender, release, or exchange all or any part
thereof, or compromise or extend or renew for any period (whether or not longer
than the original period) any indebtedness thereunder or evidenced thereby.

(c) Upon request of the Administrative Agent following the occurrence and during
the continuance of an Event of Default, each Grantor will, at its own expense,
notify any parties obligated on any of the Collateral to make payment to the
Administrative Agent of any amounts due or to become due thereunder.

(d) At any time following the occurrence and during the continuation of an Event
of Default, the Administrative Agent may endorse, in the name of the applicable
Grantor, any item, howsoever received by the Administrative Agent, representing
any payment on or other Proceeds of any of the Collateral.

Section 4.5 As to Equipment and Inventory and Goods. Each Grantor agrees to take
such action (or cause its Restricted Subsidiaries that are also Credit Parties
to take such action) as is reasonably requested by the Administrative Agent to
enable it to properly perfect and protect its Lien on Equipment and Inventory
and Goods that such Grantor has transferred from a jurisdiction within Canada to
any other jurisdiction within Canada or any jurisdiction outside of Canada.
Notwithstanding anything else in this Section 4.5, it is understood and agreed
that no such actions shall be required with respect to Excluded Collateral or
Excluded Perfection Collateral.

Section 4.6 As to Intellectual Property Collateral. Each Grantor covenants and
agrees to comply with the following provisions as such provisions relate to any
Intellectual Property Collateral material to the operations or business of such
Grantor:

(a) such Grantor will not (i) do or fail to perform any act whereby any such
Patent Collateral may lapse or become abandoned or dedicated to the public or
unenforceable except upon the expiration of the life of the applicable patent,
(ii) permit any of its licensees to

 

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(A) fail to continue to use any of such Trademark Collateral in order to
maintain all of such Trademark Collateral in full force free from any claim of
abandonment for non-use, (B) fail to maintain as in the past the quality of
products and services offered under all such Trademark Collateral, (C) fail to
employ all of such Trademark Collateral registered with any federal or state, or
if requested by the Administrative Agent, foreign authority with an appropriate
notice of such registration, (D) knowingly adopt or use any other Trademark
which is confusingly similar or a colorable imitation of any such Trademark
Collateral, (E) use any such Trademark Collateral registered with any federal,
state or if requested by the Administrative Agent, foreign authority except for
the uses for which registration or application for registration of all of the
Trademark Collateral has been made, or (F) do or permit any act or knowingly
omit to do any act whereby any such Trademark Collateral may lapse or become
invalid or unenforceable, or (iii) do or permit any act or knowingly omit to do
any act whereby any such Copyright Collateral or any such Trade Secrets
Collateral may lapse or become invalid or unenforceable or placed in the public
domain except upon expiration of the end of an unrenewable term of a
registration thereof, unless, in the case of any of the foregoing requirements
in clauses (i), (ii) and (iii), such Grantor shall reasonably and in good faith
determine that any of such Intellectual Property Collateral is of negligible
economic value to such Grantor or in the case of Trade Secret Collateral, the
publication of such information is customary in the ordinary course of business
of such Grantor;

(b) such Grantor shall promptly notify the Administrative Agent if it knows that
any application or registration relating to any material item of such
Intellectual Property Collateral may become abandoned or dedicated to the public
or placed in the public domain or invalid or unenforceable (other than upon the
expiration of the life of the applicable patent), or of any adverse
determination or development (including the institution of, or any such
determination or development in, any proceeding in the Canadian Intellectual
Property Office or the Canadian Industrial Design Office or if requested by the
Administrative Agent, any foreign counterpart thereof or any court) regarding
such Grantor’s ownership of any such Intellectual Property Collateral, its right
to register the same or to keep and maintain and enforce the same;

(c) in no event will such Grantor or any of its agents, employees, designees or
licensees file an application for the registration of any such material
Intellectual Property Collateral with the Canadian Intellectual Property Office,
the Canadian Industrial Design Office or any similar office or agency in any
other country or any political subdivision thereof, unless it promptly informs
the Administrative Agent, and upon request of the Administrative Agent (subject
to the terms of the Credit Agreement), such Grantor shall execute and deliver
all agreements, instruments and documents as the Administrative Agent may
reasonably request to evidence the Administrative Agent’s security interest in
such Intellectual Property Collateral;

(d) such Grantor will take all necessary steps, including in any proceeding
before the Canadian Intellectual Property Office, the Canadian Industrial Design
Office or (subject to the terms of the Credit Agreement), if requested by the
Administrative Agent, any similar office or agency in any other country or any
political subdivision thereof, to maintain and pursue any application (and to
obtain the relevant registration) filed with respect to, and to maintain any
registration of, each such Intellectual Property Collateral, including the
filing of applications for renewal, affidavits of use, affidavits of
incontestability and opposition, interference and cancellation proceedings and
the payment of fees and taxes (except to the extent that dedication, abandonment
or invalidation is permitted under the foregoing clause (a) or (b) or to the
extent such Grantor shall reasonably and in good faith determine is of
immaterial economic value to such Grantor);

 

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(e) following the obtaining of an interest in any such Intellectual Property
Collateral by such Grantor, such Grantor shall deliver a supplement to Schedule
III identifying such new Intellectual Property Collateral; and

(f) following the obtaining of an interest in any such Intellectual Property
Collateral by such Grantor or, following the occurrence and during the
continuance of an Event of Default, upon the request of the Administrative
Agent, such Grantor shall deliver all agreements, instruments and documents the
Administrative Agent may reasonably request to evidence the Administrative
Agent’s security interest in such Intellectual Property Collateral and as may
otherwise be required to acknowledge or register or perfect the Administrative
Agent’s interest in any part of such item of Intellectual Property Collateral
unless such Grantor shall determine in good faith (and if an Event of Default
has occurred and is continuing, with the consent of the Administrative Agent)
that any Intellectual Property Collateral is of negligible economic value to
such Grantor.

Section 4.7 As to Certificated Equipment. The certificates of title with respect
to Certificated Equipment shall be maintained at the applicable Grantor’s
offices or at such other new location of the Grantor’s office as to which
written notice has been given to the Administrative Agent in accordance with
Section 4.9.

Section 4.8 Trade Secrets. With respect to any patent applications in
preparation for filing that comprise Trade Secret Collateral, Grantor shall have
the right to assert its attorney- client privilege in such applications and not
to disclose such applications unless and until an Event of Default has occurred
and is continuing. If an Event of Default has occurred and is continuing, then
at the request of the Administrative Agent, the Grantors shall deliver to the
Administrative Agent any patent applications in preparation for filing and all
documents and things embodying, incorporating or referring to inventions that in
any way relate to such patent application.

Section 4.9 Locations. Each Grantor shall not (i) maintain any tangible
Collateral owned by it with a book value in excess of U.S.$1,000,000 (or the
Dollar Equivalent Amount in Canadian Dollars) at any location other than those
locations listed on Schedule IV to this Security Agreement (as such Schedule may
be supplemented from time to time), (ii) otherwise change, or add to, such
locations without providing written notice to the Administrative Agent no less
than five (5) days prior to such change or addition of a location and such
Grantor will concurrently therewith obtain a Collateral Access Agreement for
each such location to the extent required by Section 4.10, (iii) change its
jurisdiction of incorporation, amalgamation, formation or organization from the
jurisdiction identified on Schedule II–A to this Security Agreement, or (iv)
change its principal place of business or chief executive office (or domicile)
from the location identified on Schedule II–B to this Security Agreement, other
than as permitted by the Credit Agreement.

 

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Section 4.10 Collateral Access Agreements. Each Grantor shall use commercially
reasonable efforts to obtain a Collateral Access Agreement, from the lessor of
each Material Inventory Location, which agreement or letter shall provide access
rights, contain a waiver or subordination of all Liens or claims that the
landlord, mortgagee, bailee or consignee may assert against the Material
Inventory at that location, and shall otherwise be reasonably satisfactory in
form and substance to the Administrative Agent. With respect to such Material
Inventory Locations as of the Closing Date and thereafter, if the Administrative
Agent has not received a Collateral Access Agreement within sixty (60) days of
the Closing Date (or, if such location is subsequently acquired or leased after
the date that is sixty (60) days after the Closing Date, as of the date that
such location is subsequently acquired or leased), the Borrower’s Eligible
Inventory at that location shall be subject to Reserves as may be established by
the Administrative Agent in accordance with the Credit Agreement. Each Grantor
shall use commercially reasonable efforts to obtain a Collateral Access
Agreement for all locations to which Eligible Inventory with a book value in
excess of U.S.$500,000 (or the Dollar Equivalent Amount in Canadian Dollars) is
being shipped to a processor or converter under arrangements established after
the Closing Date, and, to the extent a Collateral Access Agreement has not been
obtained with respect to any such location, the U.S. Borrower’s Eligible
Inventory at that location shall be subject to the establishment of Reserves as
may be established by the Administrative Agent in accordance with the Credit
Agreement. Such Grantor shall timely and fully pay and perform its obligations
under all leases and other agreements with respect to each leased location or
third party warehouse where any Inventory is or may be located.

Section 4.11 Further Assurances, etc. Each Grantor shall warrant and defend the
right and title herein granted unto the Administrative Agent in and to the
Collateral (and all right, title and interest represented by the Collateral)
against the claims and demands of all Persons whomsoever. Each Grantor agrees
that, from time to time at its own expense, it will promptly execute and deliver
all further instruments and documents, and take all further action, that may be
necessary or that the Administrative Agent may reasonably request, in order to
perfect, preserve and protect any security interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and enforce its
rights and remedies hereunder with respect to any Collateral (other than, as to
perfection, Excluded Perfection Collateral) subject to the terms hereof. Each
Grantor agrees that, upon the acquisition after the date hereof by such Grantor
of any Collateral, with respect to which the security interest granted hereunder
is not perfected automatically upon such acquisition, to take such actions with
respect to such Collateral (other than, as to perfection, Excluded Perfection
Collateral) or any part thereof as required by the Credit Documents. Without
limiting the generality of the foregoing, each Grantor will:

(a) from time to time upon the request of the Administrative Agent, promptly
deliver to the Administrative Agent such stock transfer forms, instruments and
similar documents, reasonably satisfactory in form and substance to the
Administrative Agent, with respect to such Collateral as the Administrative
Agent may reasonably request and will, from time to time upon the request of the
Administrative Agent, after the occurrence and during the continuance of any
Event of Default, (i) promptly transfer any securities constituting Collateral
into the name of any nominee designated by the Administrative Agent and (ii) if
any Collateral shall be evidenced by an Instrument, negotiable Documents of
Title, promissory note or Chattel Paper, deliver and pledge to the
Administrative Agent hereunder such Instrument, negotiable Documents of Title,
promissory note, Pledged Note or Chattel Paper duly endorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance
satisfactory to the Administrative Agent;

 

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(b) file (and hereby authorize the Administrative Agent to file) such financing
or financing change statements, or amendments thereto, and such other
instruments or notices, as may be necessary or that the Administrative Agent may
reasonably request in order to perfect and preserve the security interests and
other rights granted or purported to be granted to the Administrative Agent
hereby; and

(c) furnish to the Administrative Agent, from time to time at the Administrative
Agent’s reasonable request, statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.

The authorization contained in Section 4.11(b) above shall be irrevocable and
continuing until Payment in Full. Each Grantor agrees that a carbon,
photographic or other reproduction of this Security Agreement or any PPSA
financing statement or financing change statement covering the Collateral or any
part thereof shall be sufficient as a PPSA financing statement or financing
change statement where permitted by law. Each Grantor hereby authorizes the
Administrative Agent to file financing statements or financing change statements
describing as the collateral covered thereby “all of the debtor’s present and
after-acquired personal property” or words to that effect, notwithstanding that
such wording may be broader in scope than the Collateral described in this
Security Agreement.

ARTICLE V

THE ADMINISTRATIVE AGENT

Section 5.1 Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Administrative Agent its attorney-in-fact, with full
authority in the place and stead of such Grantor and in the name of such Grantor
or otherwise, from time to time in the Administrative Agent’s discretion,
following the occurrence and during the continuance of an Event of Default, to
take any action and to execute any instrument which the Administrative Agent may
deem necessary or advisable to accomplish the purposes of this Security
Agreement, including (a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral, (b) to receive, endorse, and collect any
drafts or other Instruments, Documents of Title and Chattel Paper, in connection
with clause (a) above, (c) to file any claims or take any action or institute
any proceedings which the Administrative Agent may deem necessary or desirable
for the collection of any of the Collateral or otherwise to enforce the rights
of the Administrative Agent with respect to any of the Collateral, and (d) to
perform the affirmative obligations of such Grantor hereunder. EACH GRANTOR
HEREBY ACKNOWLEDGES, CONSENTS AND AGREES THAT THE POWER OF ATTORNEY GRANTED
PURSUANT TO THIS SECTION 5.1 IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND
SHALL BE EFFECTIVE UNTIL PAYMENT IN FULL.

 

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Section 5.2 Administrative Agent May Perform. If any Grantor fails to perform
any agreement contained herein, the Administrative Agent may, during the
continuance of any Event of Default, itself perform, or cause performance of,
such agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by such Grantor pursuant to Section 6.3
hereof and Section 9.1 of the Credit Agreement and the Administrative Agent may
from time to time take any other action which the Administrative Agent
reasonably deems necessary for the maintenance, preservation or protection of
any of the Collateral or of its security interest therein.

Section 5.3 Administrative Agent Has No Duty. The powers conferred on the
Administrative Agent hereunder are solely to protect its interest (on behalf of
the Secured Parties) in the Collateral and shall not impose any duty on it to
exercise any such powers. Except for reasonable care of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or responsibility
for (a) ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Investment
Property and any other Pledged Property, whether or not the Administrative Agent
has or is deemed to have knowledge of such matters, or (b) taking any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.

Section 5.4 Reasonable Care. The Administrative Agent is required to exercise
reasonable care in the custody and preservation of any of the Collateral in its
possession; provided, that the Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any of the
Collateral (a) if such Collateral is accorded treatment substantially equal to
that which the Administrative Agent accords its own personal property, or (b) if
the Administrative Agent takes such action for that purpose as any Grantor
reasonably requests in writing at times other than upon the occurrence and
during the continuance of an Event of Default; provided, further, that failure
of the Administrative Agent to comply with any such request at any time shall
not in itself be deemed a failure to exercise reasonable care.

ARTICLE VI

REMEDIES

Section 6.1 Certain Remedies. If any Event of Default shall have occurred and be
continuing:

(a) The Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the PPSA
(whether or not the PPSA applies to the affected Collateral) and also may
(i) take possession of any Collateral not already in its possession without
demand and without legal process, (ii) require any Grantor to, and each Grantor
hereby agrees that it will, at its expense and upon request of the
Administrative Agent forthwith, assemble all or part of the Collateral as
directed by the Administrative Agent and make it available to the Administrative
Agent at a place to be designated by the Administrative Agent that is reasonably
convenient to both parties, (iii) subject to applicable Legal Requirement or
agreements with landlords, bailees, or warehousemen, enter onto the property
where any Collateral is located and take possession thereof without demand and
without legal process, (iv)

 

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without notice except as specified below, lease, license, sell or otherwise
dispose of the Collateral or any part thereof in one or more parcels at public
or private sale, at any of the Administrative Agent’s offices or elsewhere, for
cash, on credit or for future delivery, and upon such other terms as the
Administrative Agent may deem commercially reasonable. Each Grantor agrees that,
to the extent notice of sale shall be required by law, at least ten (10) days’
prior notice to the applicable Grantor of the time and place of any public sale
or the time of any private sale is to be made shall constitute reasonable
notification; provided, however, that with respect to Collateral that is
(x) perishable or threatens to decline speedily in value, or (y) is of a type
customarily sold on a recognized market (including Investment Property), no
notice of sale or disposition need be given. For purposes of this Article VI,
notice of any intended sale or disposition of any Collateral may be given by
first-class mail, hand-delivery (through a delivery service or otherwise),
facsimile or email, and shall be deemed to have been “sent” upon deposit in the
U.S. Mails or Canada Post with adequate postage properly affixed, upon delivery
to an express delivery service or upon electronic submission through telephonic
or internet services, as applicable. The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Administrative Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.

(b) Each Grantor that is or may become a fee estate owner of property where any
Collateral is located (regardless of ownership thereof by any other Grantor)
agrees and acknowledges that (i) Administrative Agent may remove the Collateral
or any part thereof from such property in accordance with statutory law
appertaining thereto without objection, delay, hindrance or interference by such
Grantor and in such case such Grantor will make no claim or demand whatsoever
against the Collateral, (ii) it will (x) cooperate with Administrative Agent in
its efforts to assemble and/or remove all of the Collateral located on such
property; (y) permit Administrative Agent and its agents to enter upon such
property and occupy the property at any or all times to conduct an auction or
sale, and/or to inspect, audit, examine, safeguard, assemble, appraise, display,
remove, maintain, prepare for sale or lease, repair, lease, transfer, auction
and/or sell the Collateral; and (z) not hinder Administrative Agent’s actions in
enforcing its security interest in the Collateral.

(c) Each Grantor agrees and acknowledges that a commercially reasonable
disposition of Inventory, Equipment, Goods, Computer Hardware and Software
Collateral, or Intellectual Property Collateral may be by lease or license of,
in addition to the sale of, such Collateral. Each Grantor further agrees and
acknowledges that the following shall be deemed a reasonable commercial
disposition: (i) a disposition made in the usual manner on any recognized
market, (ii) a disposition at the price current in any recognized market at the
time of disposition, and (iii) a disposition in conformity with reasonable
commercial practices among dealers in the type of property subject to the
disposition.

(d) All cash Proceeds received by the Administrative Agent in respect of any
sale of, collection from, or other realization upon, all or any part of the
Collateral shall be applied by the Administrative Agent against, all or any part
of the Obligations as set forth in Section 7.6 of the Credit Agreement. The
Administrative Agent shall not be obligated to apply or pay over for application
noncash proceeds of collection or enforcement unless (i) the failure to do so
would be commercially unreasonable, and (ii) the affected party has provided the
Administrative Agent with a written demand to apply or pay over such noncash
proceeds on such basis.

 

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(e) The Administrative Agent may do any or all of the following: (i) transfer
all or any part of the Collateral into the name of the Administrative Agent or
its nominee, with or without disclosing that such Collateral is subject to the
Lien hereunder, (ii) notify the parties obligated on any of the Collateral to
make payment to the Administrative Agent of any amount due or to become due
thereunder, (iii) withdraw, or cause or direct the withdrawal, of all funds with
respect to the Collateral Account, (iv) enforce collection of any of the
Collateral by suit or otherwise, and surrender, release or exchange all or any
part thereof, or compromise or extend or renew for any period (whether or not
longer than the original period) any obligations of any nature of any party with
respect thereto, (v) endorse any checks, drafts, or other writings in the
applicable Grantor’s name to allow collection of the Collateral, (vi) take
control of any Proceeds of the Collateral, or (vii) execute (in the name, place
and stead of the applicable Grantor) endorsements, assignments, stock transfer
forms and other instruments of conveyance or transfer with respect to all or any
of the Collateral.

(f) If an Event of Default shall have occurred and be continuing, the
Administrative Agent may appoint or reappoint by instrument in writing, any
Person or Persons, whether an officer or officers or an employee or employees of
any Grantor or not, to be an interim receiver, receiver or receivers
(hereinafter called a “Receiver”, which term when used herein shall include a
receiver and manager) of the Collateral of such Grantor (including any interest,
income or profits therefrom) and may remove any Receiver so appointed and
appoint another in his/her/its stead. Any such Receiver shall, to the extent
permitted by applicable Legal Requirement, so far as concerns responsibility for
his/her/its acts, be deemed the agent of such Grantor and not of the
Administrative Agent, and the Administrative Agent shall not be in any way
responsible for any misconduct, negligence or non-feasance on the part of any
such Receiver or his/her/its servants, agents or employees. Subject to the
provisions of the instrument appointing him/her/it, any such Receiver shall
(i) have such powers as have been granted to the Administrative Agent under this
Section 6.1, and (ii) shall be entitled to exercise such powers at any time that
such powers would otherwise be exercisable by the Administrative Agent under
this Section 6.1, which powers shall include the power to take possession of the
Collateral, to preserve the Collateral or its value, to carry on or concur in
carrying on all or any part of the business of the Grantor and to sell, lease,
license or otherwise dispose of or concur in selling, leasing, licensing or
otherwise disposing of the Collateral. To facilitate the foregoing powers, any
such Receiver may, to the exclusion of all others, including the Grantor, enter
upon, use and occupy all premises owned or occupied by the Grantor wherein the
Collateral may be situate, maintain the Collateral upon such premises, borrow
money on a secured or unsecured basis and use the Collateral directly in
carrying on the Grantor’s business or as security for loans or advances to
enable the Receiver to carry on the Grantor’s business or otherwise, as such
Receiver shall, in its reasonable discretion, determine. Except as may be
otherwise directed by the Administrative Agent, all money received from time to
time by such Receiver in carrying out his/her/its appointment shall be received
in trust for and be paid over to the Administrative Agent, and any surplus shall
be applied in accordance with Legal Requirement. Every such Receiver may, in the
discretion of the Administrative Agent, be vested with all or any of the rights
and powers of the Administrative Agent.

 

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Section 6.2 Compliance with Restrictions. Each Grantor agrees that in any sale
of any of the Collateral whenever an Event of Default shall have occurred and be
continuing, the Administrative Agent is hereby authorized to comply with any
limitation or restriction in connection with such sale as it may be advised by
counsel is necessary in order to avoid any violation of applicable Legal
Requirement (including compliance with such procedures as may restrict the
number of prospective bidders and purchasers, require that such prospective
bidders and purchasers have certain qualifications, and restrict such
prospective bidders and purchasers to Persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of such Collateral), or in order to obtain any
required approval of the sale or of the purchaser by any Governmental Authority
or official, and each Grantor further agrees that such compliance shall not
result in such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Administrative Agent be liable nor
accountable to such Grantor for any discount allowed by the reason of the fact
that such Collateral is sold in compliance with any such limitation or
restriction.

Section 6.3 Indemnity and Expenses.

(a) WITHOUT LIMITING THE GENERALITY OF THE PROVISIONS OF SECTION 9.1 OF THE
CREDIT AGREEMENT, EACH GRANTOR HEREBY INDEMNIFIES AND HOLDS HARMLESS THE
ADMINISTRATIVE AGENT, EACH SECURED PARTY AND EACH OF THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS (ANY OF THE FOREGOING BEING, AN “INDEMNITEE”)
FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES AND LIABILITIES ARISING OUT
OF OR RESULTING FROM THIS SECURITY AGREEMENT OR ANY OTHER CREDIT DOCUMENT
(INCLUDING ENFORCEMENT OF THIS SECURITY AGREEMENT), EXCEPT CLAIMS, LOSSES OR
LIABILITIES THAT (I) ARE FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S BAD FAITH, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, (II) RESULT FROM A CLAIM BROUGHT BY A GRANTOR
AGAINST AN INDEMNITEE FOR BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS
HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT, IF SUCH GRANTOR HAS OBTAINED A
FINAL AND NONAPPEALABLE JUDGMENT IN ITS FAVOUR ON SUCH CLAIM AS DETERMINED BY A
COURT OF COMPETENT JURISDICTION OR (III) A DISPUTE AMONG OR BETWEEN INDEMNITEES
(EXCEPT TO THE EXTENT THAT SUCH INDEMNIFIED LOSS WAS INCURRED BY OR ASSERTED
AGAINST THE ADMINISTRATIVE AGENT, ANY ARRANGER OR ISSUING LENDER IN ITS CAPACITY
AS SUCH) AND NOT INVOLVING ANY ACT OR OMISSION OF THE GRANTORS; PROVIDED,
HOWEVER, THAT, TO THE EXTENT THIS INDEMNITY WOULD OTHERWISE APPLY, IT IS THE
INTENTION OF THE PARTIES HERETO THAT EACH INDEMNITEE BE INDEMNIFIED IN THE CASE
OF ITS OWN NEGLIGENCE (OTHER THAN GROSS NEGLIGENCE), REGARDLESS OF WHETHER SUCH
NEGLIGENCE IS SOLE OR CONTRIBUTORY, ACTIVE OR PASSIVE, IMPUTED, JOINT OR
TECHNICAL. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, each Grantor hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the foregoing which is
permissible under applicable Legal Requirement.

 

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(b) Other than as set forth in clause (c) below, each Grantor will upon demand
pay to the Administrative Agent the amount of any and all out-of-pocket
expenses, including the reasonable fees and disbursements of its counsel and of
any experts and agents, which the Administrative Agent may incur in connection
herewith, including in connection with the administration of this Security
Agreement and the custody, preservation, use or operation of, any of the
Collateral in accordance with Section 9.1 of the Credit Agreement.

(c) Each Grantor will upon demand pay to the Administrative Agent the amount of
any and all out-of-pocket expenses, including the fees and disbursements of its
counsel and of any experts and agents, which the Administrative Agent may incur
in connection (i) the sale of, collection from, or other realization upon, any
of the Collateral, (ii) the exercise or enforcement of any of the rights of the
Administrative Agent or any of the Secured Parties hereunder, or (iii) the
failure by any Grantor to perform or observe any of the provisions hereof.

Section 6.4 Warranties. The Administrative Agent may sell the Collateral without
giving any warranties or representations as to the Collateral. The
Administrative Agent may disclaim any warranties of title or the like. Each
Grantor agrees that this procedure will not be considered to adversely affect
the commercial reasonableness of any sale of the Collateral.

ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.1 Credit Document. This Security Agreement is a Credit Document
executed pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof, including Article 9 thereof.

Section 7.2 Binding on Successors, Transferees and Assigns; Assignment. This
Security Agreement shall remain in full force and effect until Payment in Full,
shall be binding upon each Grantor and its successors, transferees and assigns
and, subject to the limitations set forth in the Credit Agreement, shall inure
to the benefit of and be enforceable by each Secured Party and its successors,
transferees and assigns; provided that, no Grantor shall assign any of its
obligations hereunder (unless otherwise permitted under the terms of the Credit
Agreement or this Security Agreement).

Section 7.3 Amendments, etc. No amendment to or waiver of any provision of this
Security Agreement, nor consent to any departure by any Grantor from its
obligations under this Security Agreement, shall in any event be effective
unless the same shall be in writing and signed by the Administrative Agent (on
behalf of the Lenders or the Majority Lenders, as the case may be, pursuant to
Section 9.2 of the Credit Agreement) and such Grantor and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.

Section 7.4 Notices. Except as otherwise provided in this Security Agreement,
all notices and other communications provided for hereunder shall be in writing
and hand delivered with written receipt, telecopied, sent by facsimile (with a
hard copy sent as otherwise permitted pursuant to the Credit Agreement), sent by
a nationally recognized overnight courier, or sent by

 

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certified mail, return receipt requested to the appropriate party at the address
or facsimile number of such party specified in the Credit Agreement, on the
signature pages of this Security Agreement or at such other address or facsimile
number as may be designated by such party in a notice to the other party. Except
as otherwise provided in this Security Agreement, all such notices and
communications shall be effective when delivered.

Section 7.5 No Waiver; Remedies. In addition to, and not in limitation of
Section 2.9, no failure on the part of any Secured Party to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

Section 7.6 Headings. The various headings of this Security Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Security Agreement or any provisions thereof.

Section 7.7 Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Security
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.

Section 7.8 Counterparts. This Security Agreement may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Security
Agreement by facsimile or other electronic transmission shall be effective as
delivery of a manually executed counterpart of this Security Agreement.

Section 7.9 Consent as Holder of Equity and as Pledged Interests Issuer. Each
Grantor hereby (a) consents to the execution by each other Grantor of this
Security Agreement and grant by each other Grantor of a security interest,
encumbrance, pledge and hypothecation in all Pledged Interests and other
Collateral of such other Grantor to the Administrative Agent pursuant hereto,
and (b) without limiting the generality of the foregoing, consents to the
transfer of any Pledged Interest to the Administrative Agent or its nominee
pursuant to the terms of this Security Agreement following the occurrence and
during the continuance of an Event of Default and to the substitution of the
Administrative Agent or its nominee as a partner under the limited partnership
agreement or as a member under the limited liability company agreement, in any
case, as heretofore and hereafter amended. Furthermore, each Grantor as the
holder of any Equity Interests in a Pledged Interests Issuer, hereby (i) waives
all rights of first refusal, rights to purchase, and rights to consent to
transfer (to any Secured Party or to any purchaser resulting from the exercise
of a Secured Party’s remedy provided hereunder or under applicable Legal
Requirement) and (ii) if required by the organizational documents of such
Pledged Interests Issuer, agrees to cause such Pledged Interests Issuer to
register the Lien granted hereunder and encumbering such Equity Interests in the
registry books of such Pledged Interests Issuer.

 

36

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Section 7.10 Additional Grantors. Additional Wholly-Owned Restricted
Subsidiaries of Borrower and organized under the federal laws of Canada or those
of a province or territory of Canada (each, a “Canadian Restricted Subsidiary”)
may from time to time enter into this Security Agreement as a Grantor. Upon
execution and delivery after the date hereof by the Administrative Agent and
such Canadian Restricted Subsidiary of an instrument in the form of Annex 1,
such Canadian Restricted Subsidiary shall become a Grantor hereunder with the
same force and effect as if originally named as a Grantor herein. The execution
and delivery of any instrument adding an additional Grantor as a party to this
Security Agreement shall not require the consent of any other Grantor hereunder.
The rights and obligations of each Grantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Grantor as a party to this
Security Agreement.

Section 7.11 Acknowledgment of Pledged Interests Issuers. Each Pledged Interests
Issuer that is party hereto agrees that it will comply with instructions of the
Administrative Agent with respect to the applicable Uncertificated Securities
without further consent by the applicable Grantor.

Section 7.12 Joint and Several Liability. Notwithstanding any provision to the
contrary contained herein, in any other of the Credit Documents or in any other
documents relating to the Secured Obligations, if a “secured creditor” (as that
term is defined under the Bankruptcy and Insolvency Act (Canada)) is determined
by a court of competent jurisdiction not to include a Person to whom obligations
are owed on a joint or joint and several basis, then each Grantor’s obligations
(and the obligations of each other Grantor), to the extent such obligations are
secured, shall be several obligations and not joint or joint and several
obligations.

Section 7.13 Copy of Agreement. Each Grantor hereby acknowledges receipt of a
copy of this security Agreement.

Section 7.14 Waiver. To the extent permitted by applicable law, each Grantor
waives its right to receive a copy of any financing statement or financing
change statement registered by the Administrative Agent, or of any verification
statement with respect to any financing statement or financing change statement
registered by the Administrative Agent.

Section 7.15 Conflicts with Credit Agreement. To the fullest extent possible,
the terms and provisions of the Credit Agreement shall be read together with the
terms and provisions of this Security Agreement so that the terms and provisions
of this Security Agreement do not conflict with the terms and provisions of the
Credit Agreement; provided, however, notwithstanding the foregoing, in the event
that any of the terms or provisions of this Security Agreement conflict with any
terms or provisions of the Credit Agreement, the terms or provisions of the
Credit Agreement shall govern and control for all purposes; provided that the
inclusion in this Security Agreement of terms and provisions, supplemental
rights or remedies in favour of the Administrative Agent not addressed in the
Credit Agreement shall not be deemed to be in conflict with the Credit Agreement
and all such additional terms, provisions, supplemental rights or remedies
contained herein shall be given full force and effect.

Section 7.16 Governing Law. This Security Agreement shall be deemed a contract
under, and shall be governed by, and construed and enforced in accordance with,
the laws of the Province of Alberta, and the federal laws of Canada applicable
therein.

 

37

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Section 7.17 Submission to Jurisdiction. EACH GRANTOR PARTY TO THIS SECURITY
AGREEMENT IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY,
TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE PROVINCE OF ALBERTA, AND
ANY APPELLATE COURT THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE GRANTORS PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH COURT. EACH OF THE GRANTORS PARTY HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY APPLICABLE LEGAL REQUIREMENT. NOTHING IN THIS SECURITY AGREEMENT
SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS SECURITY AGREEMENT AGAINST ANY OTHER PARTY OR ITS
PROPERTIES IN THE COURTS OF ANY JURISDICTION.

Section 7.18 Waiver of Venue. EACH GRANTOR PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY
AGREEMENT IN ANY COURT REFERRED TO IN SECTION 7.14. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL
REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.

Section 7.19 Service of Process. Each Grantor party hereto irrevocably consents
to service of process in the manner provided for notices in Section 9.9 of the
Credit Agreement. Nothing in this Security Agreement will affect the right of
any party hereto to serve process in any other manner permitted by applicable
Legal Requirement.

Section 7.20 Waiver of Jury. EACH GRANTOR PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY). EACH GRANTOR PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS SECURITY AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

38

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THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND
AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR
HEREIN AND THEREIN. ADDITIONALLY, THIS SECURITY AGREEMENT AND THE CREDIT
DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[Remainder of this page intentionally left blank. Signature pages to follow.]

 

39

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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be duly executed and delivered by its Responsible Officer as of the
date first above written.

 

GRANTORS

 

NINE ENERGY CANADA INC.

MAGNUM OIL TOOLS CANADA INC.

 

By:  

 

Name:   Ann G. Fox Title:   President, Chief Executive Officer

 

 

[Signature Page to Canadian Pledge and Security Agreement]

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JPMORGAN CHASE BANK, N.A., TORONTO BRANCH, as Administrative Agent

 

By:  

 

Name:   Title:  

 

[Signature Page to Canadian Pledge and Security Agreement]

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ANNEX 1 to Canadian Pledge and

Security Agreement

SUPPLEMENT TO CANADIAN PLEDGE AND SECURITY AGREEMENT

SUPPLEMENT NO.        dated as of        ,        20 (this “Supplement”), to the
Pledge and Security Agreement dated as of         , 2018 (as amended,
supplemented, restated, or otherwise modified from time to time, the “Security
Agreement”), among NINE ENERGY CANADA INC., an Alberta corporation (the
“Borrower”), each domestic subsidiary of the Borrower party thereto from time to
time (collectively with the Borrower, the “Grantors” and individually, a
“Grantor”), and JPMorgan Chase Bank, N.A., Toronto Branch, as Administrative
Agent (in such capacity, the “Administrative Agent”) for the ratable benefit of
the Secured Parties (as defined in the Credit Agreement referred to herein).

A. Reference is made to the Credit Agreement dated as of , 2018 (as amended,
restated, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Nine Energy Service, Inc. (the “U.S. Borrower”), the
Borrower, the lenders from time to time party thereto (the “Lenders”), the
Issuing Lenders (as defined in the Credit Agreement), and JPMorgan Chase Bank,
N.A., as administrative agent.

B. Capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in the Security Agreement and the Credit
Agreement.

C. Section 7.10 of the Security Agreement provides that additional Canadian
Restricted Subsidiaries of the Borrower may become Grantors under the Security
Agreement by execution and delivery of an instrument in the form of this
Supplement. The undersigned Canadian Restricted Subsidiary of the Borrower (the
“New Grantor”) is executing this Supplement in accordance with the requirements
of the Credit Agreement to become a Grantor under the Security Agreement.

Accordingly, the Administrative Agent and the New Grantor agree as follows:

SECTION 1. In accordance with Section 7.10 of the Security Agreement, the New
Grantor by its signature below becomes a Grantor under the Security Agreement
with the same force and effect as if originally named therein as a Grantor and
the New Grantor hereby agrees (a) to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Grantor
thereunder are true and correct on and as of the date hereof. In furtherance of
the foregoing, the New Grantor, as security for the payment and performance in
full of the Canadian Secured Obligations (as defined in the Credit Agreement),
does hereby create and grant to the Administrative Agent, its successors and
assigns, for the benefit of the Secured Parties, their successors and assigns as
provided in the Security Agreement, a continuing security interest in and Lien
on all of the New Grantor’s right, title and interest in and to the Collateral
(as defined in the Security Agreement) of the New Grantor. Each reference to a
“Grantor” in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is hereby incorporated herein by reference.

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

SECTION 2. The New Grantor represents and warrants to the Administrative Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws
affecting creditors’ rights generally and subject, as to enforceability, to
equitable principles of general application (regardless of whether enforcement
is sought in a proceeding in equity or at law)).

SECTION 3. This Supplement may be executed in counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. This Supplement shall become effective when the Administrative
Agent shall have received counterparts of this Supplement that, when taken
together, bear the signatures of the New Grantor and the Administrative Agent.
Delivery of an executed signature page to this Supplement by facsimile or other
electronic transmission shall be as effective as delivery of a manually signed
counterpart of this Supplement.

SECTION 4. The New Grantor hereby agrees that the schedules attached to the
Security Agreement are hereby supplemented by the corresponding schedules
attached to this Supplement. The New Grantor hereby represents and warrants that
the information provided in the schedules attached hereto is true and correct as
of the date hereof.

SECTION 5. The New Grantor hereby expressly acknowledges and agrees to the terms
of Section 6.3 (Indemnity and Expenses) of the Security Agreement and expressly
acknowledges the irrevocable proxy provided in Section 4.1(e) of the Security
Agreement. In furtherance thereof, NEW GRANTOR HEREBY GRANTS THE ADMINISTRATIVE
AGENT AN IRREVOCABLE PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT
UNTIL PAYMENT IN FULL) EXERCISABLE UNDER THE CIRCUMSTANCES PROVIDED IN SECTION
4.1 OF THE SECURITY AGREEMENT, TO VOTE THE PLEDGED INTERESTS, INVESTMENT
PROPERTY AND SUCH OTHER COLLATERAL.

SECTION 6. Except as expressly supplemented hereby, the Security Agreement shall
remain in full force and effect.

SECTION 7. This Supplement shall be deemed a contract under, and shall be
governed by, and construed and enforced in accordance with, the laws of the
Province of Alberta and the federal laws of Canada applicable therein.

SECTION 8. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

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

SECTION 9. All communications and notices hereunder shall be in writing and
given as provided in the Security Agreement. All communications and notices
hereunder to the New Grantor shall be given to it at the address set forth under
its signature hereto.

SECTION 10. The New Grantor agrees to reimburse the Administrative Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursements of counsel for the
Administrative Agent.

SECTION 11. Submission to Jurisdiction. NEW GRANTOR IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE PROVINCE OF ALBERTA, AND ANY APPELLATE COURT
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
SUPPLEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND NEW GRANTOR
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURT. NEW GRANTOR
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS SUPPLEMENT SHALL AFFECT ANY
RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS SUPPLEMENT AGAINST ANY OTHER PARTY OR ITS PROPERTIES IN THE
COURTS OF ANY JURISDICTION.

SECTION 12. Waiver of Venue. NEW GRANTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT IN ANY COURT REFERRED
TO IN SECTION 11. NEW GRANTOR IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LEGAL REQUIREMENT, THE DEFENSE OF AN INCONVENIENT FORUM
TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

SECTION 13. Service of Process. New Grantor irrevocably consents to service of
process in the manner provided for notices in Section 9.9 of the Credit
Agreement. Nothing in this Supplement will affect the right of any party hereto
to serve process in any other manner permitted by applicable Legal Requirement.

Section 7.21 Waiver of Jury. NEW GRANTOR HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS SUPPLEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). NEW GRANTOR (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER

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

PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS SUPPLEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION.

THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS
DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

IN WITNESS WHEREOF, the New Grantor and the Administrative Agent have duly
executed this Supplement to the Security Agreement as of the day and year first
above written.

 

[Name of New Grantor] By:  

                                              

Name:   Title:   Address:   JPMORGAN CHASE BANK, N.A., TORONTO BRANCH as
Administrative Agent By:  

 

Name:   Title:  

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

SCHEDULES TO SUPPLEMENT NO. 1

[AS APPROPRIATE]

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

EXHIBIT A TO SUPPLEMENT

ACCOUNTS

 

Name of Grantor

  

Name of

Institution

  

Account

Number

  

Check here if Account
is a Deposit Account

  

Check here if Account
is a Securities Account

  

Description of Deposit
Account if Account is
an Excluded Account

 

2

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EXHIBIT E

[FORM OF]

COMPLIANCE CERTIFICATE

To: JPMorgan Chase Bank, N.A. and each of the Lenders party to the Credit
Agreement (as defined below)

This Compliance Certificate (this “Certificate”) is furnished pursuant to that
certain Credit Agreement dated as of October 25, 2018 (as amended, restated,
supplemented or otherwise modified from time to time, the “Credit Agreement”)
among Nine Energy Service, Inc., a Delaware corporation (the “U.S. Borrower” or
the “Company”), Nine Energy Canada Inc., a corporation organized under the laws
of Alberta, Canada (the “Canadian Borrower” and, together with the U.S.
Borrower, the “Borrowers”), the lenders party thereto (the “Lenders”), the
Issuing Lenders and JPMorgan Chase Bank, N.A., as Administrative Agent (as each
such term is defined in the Credit Agreement). Unless otherwise defined in this
certificate, capitalized terms used herein that are defined in the Credit
Agreement shall have the meanings assigned to them in the Credit Agreement.

I, the undersigned, in my capacity as [                 ] of the Borrower
Representative, do hereby certify, for and on behalf of the Borrowers in the
foregoing capacity, and not in my personal capacity, as follows:

1. I am the duly elected                     1 of the Borrower Representative.

2. I have reviewed the terms of the Credit Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Company and its Subsidiaries during the accounting period
covered by the attached financial statements [for quarterly financial statements
add: and such financial statements present fairly in all material respects the
financial condition and results of operations of the Company and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, subject to normal year-end audit adjustments and the
absence of footnotes].

3. To my knowledge, no Default or Event of Default[, except as specified on
Attachment A,2] has occurred and is continuing as of the date of this
Certificate, and I have no knowledge of any condition or event which constitutes
a Default existing at the end of the accounting period covered by the financial
statements attached hereto.

4. [Schedule I hereto sets forth (a) the computations necessary to determine the
Applicable Margin commencing on the Business Day this Certificate is delivered
and (b) the Level from the definition of Applicable Margin determined by such
computations.] 3

5. [Schedule II attached hereto sets forth in detail the calculations and
computations of the Fixed Charge Coverage Ratio for the most recent period for
which financial statements are available. [The Company is [not] in compliance
with Section 6.18.]4

 

1 

Responsible Officer of the Company.

2 

Add if disclosures are made under this paragraph and describe in reasonable
detail on Attachment A the nature of the condition or event, the period during
which it has existed and the action which the Company has taken, is taking or
proposes to take with respect to such condition or event.

3 

Only to be included when delivered in connection with quarterly or annual
financial statements.

4 

To be included during the continuance of a Financial Covenant Trigger Period.

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6. No Credit Party has changed its name, changed its jurisdiction of
incorporation, formation or organization, changed its organizational
identification number or reorganized in another jurisdiction without having
given the Administrative Agent notice thereof in accordance with the Credit
Agreement.

The foregoing certifications, together with the data and computations set forth
in the Schedules hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this      day of
            ,         .

 

                                                                          

                                     , as

Borrower Representative

By:  

 

  Name:     Title:  

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EXHIBIT F

[FORM OF]

NOTICE OF BORROWING

                             ,                 

JPMorgan Chase Bank, N.A.

712 Main Street, 5th Floor

Houston, Texas 77002

Ladies and Gentlemen:

The undersigned, [Nine Energy Service, Inc., a Delaware corporation][Nine Energy
Canada Inc., a corporation organized under the laws of Alberta, Canada]
(“Borrower”), refers to the Credit Agreement dated as of October 25, 2018 (as
the same may be amended or modified from time to time, the “Credit Agreement,”
the defined terms of which are used in this Notice of Borrowing as defined
therein unless otherwise defined in this Notice of Borrowing) among the
Borrower, [Nine Energy Service, Inc.,][Nine Energy Canada Inc.,] the lenders
party thereto (the “Lenders”), the Issuing Lenders, and JPMorgan Chase Bank,
N.A., as Administrative Agent (as each such term is defined therein). The
Borrower hereby gives you irrevocable notice pursuant to Section 2.3(a) of the
Credit Agreement that the Borrower hereby requests a Borrowing consisting of
[Base Rate Loans][Non-Base Rate Loans], and in connection with that request sets
forth below the information relating to such Borrowing (the “Proposed
Borrowing”) as required by Section 2.3(b) of the Credit Agreement:

(a) The Business Day of the Proposed Borrowing is             ,             .

(b) The Proposed Borrowing will be composed of [ABR][CBR][CPR][Eurodollar][CDOR]
Loans.

(c) The aggregate amount of the Proposed Borrowing is $                        .

(d) [The Interest Period for each Eurodollar Loan made as part of the Proposed
Borrowing is month(s)].

The Borrower hereby certifies that the following statements are true on the date
hereof, and will be true on the date of the Proposed Borrowing:

[(i) the representations and warranties contained in the Credit Agreement and
each of the other Credit Documents are true and correct in all material respects
(except that such materiality qualifier does not apply to any representations
and warranties that already are qualified or modified by materiality in the text
thereof), on and as of the date of the Proposed Borrowing, before and after
giving effect to such Proposed Borrowing, as though made on the date of the
Proposed Borrowing except for those representations and warranties that are
expressly made as of an earlier date or period which are true and correct as of
such earlier date or period (except that such materiality qualifier does not
apply to any representations and warranties that already are qualified or
modified by materiality in the text thereof); and

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

(ii) no Default has occurred and is continuing, or would result from such
Proposed Borrowing]1.

[(i) the representations and warranties (i) made by the Credit Parties under
Sections 4.1, 4.2, 4.3, 4.15, 4.19 and 4.20 of the Credit Agreement and
(ii) made by the Magnum Targets and their affiliates in the Magnum Purchase
Agreement as are material to the interests of the Lenders, but only to the
extent that the breach of any such representations results in the Company or any
of its affiliates having the right to terminate its obligations under the Magnum
Purchase Agreement (after giving effect to any applicable notice and cure
period) or otherwise decline to consummate the Magnum Acquisition, are true and
correct in all material respects.]2

 

1 

NTD: For each Borrowing other than the initial Borrowing.

2 

NTD: For the initial Borrowing.

 

2

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Very truly yours,

 

[NINE ENERGY SERVICE, INC.][NINE ENERGY CANADA INC.]

 

By:                                     
                                                            
Name:                                     
                                                      
Title:                                     
                                                        

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EXHIBIT G-1

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 25, 2018
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Nine Energy Service, Inc., a Delaware corporation (the
“U.S. Borrower”), Nine Energy Canada Inc., a corporation organized under the
laws of Alberta, Canada (the “Canadian Borrower” and, together with the U.S.
Borrower, the “Borrowers”), the Lenders party thereto, the Issuing Lenders and
JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for the
Lenders.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of
which it is providing this certificate, (ii) it is not a bank within the meaning
of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder
of any Borrower within the meaning of Section 871(h)(3)(B) of the Code and
(iv) it is not a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code.

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

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

 

[NAME OF LENDER]

 

By:  

                          

  Name:   Title: Date:         ,         , 20[     ]

 

 

EXHIBIT G-1

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EXHIBIT G-2

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 25, 2018
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Nine Energy Service, Inc., a Delaware corporation (the
“U.S. Borrower”), Nine Energy Canada Inc., a corporation organized under the
laws of Alberta, Canada (the “Canadian Borrower” and, together with the U.S.
Borrower, the “Borrowers”), the Lenders party thereto, the Issuing Lenders and
JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for the
Lenders.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record and beneficial owner
of the participation in respect of which it is providing this certificate,
(ii) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code,
(iii) it is not a ten percent shareholder of any Borrower within the meaning of
Section 871(h)(3)(B) of the Code, and (iv) it is not a controlled foreign
corporation related to any Borrower as described in Section 881(c)(3)(C) of the
Code.

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

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

 

[NAME OF PARTICIPANT]

 

By:  

                          

  Name:   Title: Date:         ,         , 20[     ]

 

EXHIBIT G-2

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EXHIBIT G-3

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax
Purposes)

Reference is hereby made to the Credit Agreement dated as of October 25, 2018
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Nine Energy Service, Inc., a Delaware corporation (the
“U.S. Borrower”), Nine Energy Canada Inc., a corporation organized under the
laws of Alberta, Canada (the “Canadian Borrower” and, together with the U.S.
Borrower, the “Borrowers”), the Lenders party thereto, the Issuing Lenders and
JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for the
Lenders.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the
participation in respect of which it is providing this certificate, (ii) its
direct or indirect partners/members are the sole beneficial owners of such
participation, (iii) with respect such participation, neither the undersigned
nor any of its direct or indirect partners/members is a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of its trade or
business within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of
its direct or indirect partners/members is a ten percent shareholder of any
Borrower within the meaning of Section 871(h)(3)(B) of the Code and (v) none of
its direct or indirect partners/members is a controlled foreign corporation
related to any Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY
accompanied by one of the following forms from each of its partners/members that
is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form
W-8BEN-E, as applicable, or (ii) an IRS Form W-8IMY accompanied by an IRS Form
W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, from each of such
partner’s/member’s beneficial owners that is claiming the portfolio interest
exemption. By executing this certificate, the undersigned agrees that (1) if the
information provided on this certificate changes, the undersigned shall promptly
so inform such Lender and (2) the undersigned shall have at all times furnished
such Lender with a properly completed and currently effective certificate prior
to the first payment to be made to the undersigned, or in either of the two
calendar years preceding such payments.

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

 

[NAME OF PARTICIPANT]

 

By:  

                          

  Name:   Title: Date:         ,         , 20[     ]

 

 

EXHIBIT G-3

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

EXHIBIT G-4

[FORM OF]

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to the Credit Agreement dated as of October 25, 2018
(as amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”) among Nine Energy Service, Inc., a Delaware corporation (the
“U.S. Borrower”), Nine Energy Canada Inc., a corporation organized under the
laws of Alberta, Canada (the “Canadian Borrower” and, together with the U.S.
Borrower, the “Borrowers”), the Lenders party thereto, the Issuing Lenders and
JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent for the
Lenders.

Pursuant to the provisions of Section 2.17 of the Credit Agreement, the
undersigned hereby certifies that (i) it is the sole record owner of the Loan(s)
(as well as any Note(s) evidencing such Loan(s)) in respect of which it is
providing this certificate, (ii) its direct or indirect partners/members are the
sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such
Loan(s)), (iii) with respect to the extension of credit pursuant to the Credit
Agreement or any other Loan Document, neither the undersigned nor any of its
direct or indirect partners/members is a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business
within the meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct
or indirect partners/members is a ten percent shareholder of any Borrower within
the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or
indirect partners/members is a controlled foreign corporation related to any
Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower
Representative with IRS Form W-8IMY accompanied by one of the following forms
from each of its partners/members that is claiming the portfolio interest
exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or
(ii) an IRS Form W-8IMY accompanied by an IRS Form W-8ECI, IRS Form W-8BEN or
IRS Form W-8BEN-E, as applicable, from each of such partner’s/member’s
beneficial owners that is claiming the portfolio interest exemption. By
executing this certificate, the undersigned agrees that (1) if the information
provided on this certificate changes, the undersigned shall promptly so inform
the Borrower Representative and the Administrative Agent, and (2) the
undersigned shall have at all times furnished the Borrower Representative and
the Administrative Agent with a properly completed and currently effective
certificate prior to the first payment to be made to the undersigned, or in
either of the two calendar years preceding such payments.

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

 

[NAME OF LENDER]

 

By:  

                     

  Name:   Title: Date:         ,         , 20[     ]

 

EXHIBIT G-4