SECOND AMENDMENT TO AMENDED AND RESTATED

REVOLVING CREDIT AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AND SECURITY
AGREEMENT (this “Amendment”) is entered into as of October 17, 2013, among
INTEGRATED DRILLING EQUIPMENT, LLC, a Delaware limited liability company (“IDE”
and “Borrowing Agent”), INTEGRATED DRILLING EQUIPMENT COMPANY HOLDINGS, LLC, a
Delaware limited liability company (“Holdings”), and Integrated Drilling
Equipment Holdings Corp., formerly known as Empeiria Acquisition Corp., a
Delaware corporation (“Empeiria,” and collectively with IDE and Holdings,
“Borrowers”), each of the financial institutions which are now or which
hereafter become a party hereto (individually, each a “Lender” and collectively,
the “Lenders”) and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders
(PNC, in such capacity, the “Agent”). Capitalized terms used but not defined in
this Amendment shall have the meanings given them in the Credit Agreement
(defined below).

 

RECITALS

 

A.           Borrowers, Agent and the Lenders are parties to that certain
Amended and Restated Revolving Credit and Security Agreement, dated as of
December 14, 2012 (as amended by the First Amendment dated April 9, 2013, and as
amended, restated, joined, extended, supplemented or otherwise modified from
time to time, the “Credit Agreement”);

 

B.           The following Events of Default have occurred and are continuing:

 

(i)          an Event of Default under Section 10.5 of the Credit Agreement as a
result of Borrowers’ failure to comply with the Minimum Liquidity Test set forth
in Section 6.5(c) of the Credit Agreement for each of the periods of two
consecutive months ending June 30, 2013, July 31, 2013, August 31, 2013, and
September 30, 2013;

 

(ii)         an Event of Default under Section 10.5 of the Term Loan and
Security Agreement as a result of Borrowers’ failure to comply with the Minimum
EBITDA covenant set forth in Section 6.5 of the Term Loan and Security Agreement
for each of the twelve-month periods ending June 30, 2013 and September 30,
2013; and

 

(iii)        an Event of Default under Section 10.5 of the Term Loan and
Security Agreement as a result of Borrowers’ failure to comply with the Total
Leverage Ratio covenant set forth in Section 6.5(d) of the Term Loan and
Security Agreement for each of the quarters ending June 30, 2013 and September
30, 2013; and

 

(iv)        an Event of Default under Section 10.12(b) of the Credit Agreement
as a result of events of default occurring under the Elm Park Loan Agreement
relating to the Borrowers’ failure to comply with Sections 6.5(c), 6.5(d) and
6.5(f) of the Elm Park Loan Agreement (the Events of Default described in
foregoing clauses (i) through (iv), collectively, the “Existing Defaults”).

 

C.           As a condition to waiving the Existing Defaults, Agent and Lender
have required, and Borrowers have agreed, among other conditions and terms, that
(i) Borrowers shall only be permitted to have Domestic Rate Loans, and that
Borrower shall not request any Eurodollar Rate Loans, (ii) the stated maturity
date under the Credit Agreement shall be March 31, 2014, (iii) the Maximum
Revolving Advance Amount shall be reduced to $15,000,000, (iv) the Applicable
Margin for Domestic Rate Loans shall increase, (v) Borrowers shall pay a
non-refundable amendment fee to Lender, and (vi) Borrowers shall expressly
release Agent and Lender from all claims arising prior to the date hereof as
provided in Section 3.04 of this Amendment.

 

 

 

 

D.           Borrowers, Agent and Lender have agreed to amend the Credit
Agreement and Other Documents, subject to the terms and conditions of this
Amendment.

 

AGREEMENTS

 

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are acknowledged, the undersigned hereby agree as follows:

 

Article I

Amendments to Credit Agreement

 

1.01         The definitions for Applicable Margin and Maximum Revolving Advance
Amount contained in Section 1.2 of the Credit Agreement are hereby deleted in
their entirety and replaced with the following:

 

“Applicable Margin” for Revolving Advances shall mean 4.50%.

 

“Maximum Revolving Advance Amount” shall mean $15,000,000.

 

1.02         Section 2.1(a)(y)(ii)(B) of the Credit Agreement is hereby amended
to delete the amount “$5,000,000” where it appears and to replace it with
“$3,750,000.”

 

1.03         Section 2.1(a)(y)(iii) of the Credit Agreement is hereby amended to
delete the amount “$15,000,000” where it appears and to replace it with
“$10,000,000.”

 

1.04         The first sentence of Section 3.2(a)(x) of the Credit Agreement is
hereby amended to delete the percentage “2.50%” where it appears and to replace
it with “4.50%”.

 

1.05         Section 6.5 (Financial Covenants) of the Credit Agreement is
deleted in its entirety and replaced with the following:

 

“(a)  [Intentionally Omitted].

 

(b)  [Intentionally Omitted].

 

(c)  [Intentionally Omitted].

 

(d)  Minimum EBITDA.  Achieve EBITDA, measured on a quarter-end basis, of at
least the required amount set forth in the following table for the applicable
period set forth opposite thereto:

 

Applicable Amount    Applicable Period $ 3,000,000    For the twelve month
period ending December 31, 2013 $ 5,000,000    For the twelve month period
ending March 31, 2014 and thereafter

 

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1.06         Section 7.6 (Capital Expenditures) of the Credit Agreement is
deleted in its entirety and replaced with the following:

 

“Section 7.6 Capital Expenditures. Contract for, purchase or make any
expenditure or commitments for Capital Expenditures in any fiscal year in an
aggregate amount for all Borrowers in excess of (a) for the fiscal year ending
December 31, 2013, $2,000,000 and (b) for the twelve months ended on March 31,
2014, $3,000,000.”

 

1.07         The first sentence of Section 13.1 (Term) of the Credit Agreement
is hereby amended by deleting the date “June 30, 2016” where it appears and
replacing it with “March 31, 2014”.

 

1.08         Notwithstanding anything to the contrary in the Credit Agreement or
in any Other Document (whether in Section 2.2 of the Credit Agreement or
otherwise), commencing on the Second Amendment Effective Date, Borrowers agree
that they may not select or continue any Eurodollar Rate Loans. Each Borrower
expressly covenants and agrees that commencing on the Second Amendment Effective
Date all Advances under the Credit Agreement shall be Domestic Rate Loans only
and that only the Alternate Base Rate is available to Borrowers under the Credit
Agreement or under any Other Document.

 

Article II

effectiveness of amendments

 

2.01         Conditions. This Amendment shall be effective as of the date hereof
(the “Second Amendment Effective Date”) once each of the following has been
delivered to Agent or performed to Agent and Lender’s satisfaction:

 

(a)          this Amendment executed by Borrowers, Agent and Lender;

 

(b)          Secretary’s Certificate of Borrowers including incumbency of
officers and resolutions of the board of directors approving the terms of this
Amendment and the EP Amendment (defined below);

 

(c)          replacement Revolving Credit Note payable by Borrowers to PNC Bank,
as Lender, in the amount of $15,000,000;

 

(d)          payment by Borrowers to Agent for the account of PNC Bank, as
Lender, an amendment and waiver fee pursuant to the terms of the confidential
fee letter dated of even date herewith;

 

(e)          an executed copy of an amendment to the Elm Park Loan Agreement in
form and substance satisfactory to Agent and Lender in all respects, and which,
among other things, waives Borrowers’ non-compliance with the minimum liquidity
test and certain other covenants set forth in the Elm Park Loan Agreement, and
modifies the stated maturity date under the Elm Park Loan Agreement to no
earlier than September 30, 2014 (the “EP Amendment”);

 

(f)          written consent from the Elm Park Lenders to all terms and
conditions of this Amendment and that this Amendment is expressly permitted
under the Elm Park Intercreditor Agreement; and

 

(g)          such other documents, instruments and information as Agent or
Lender may reasonably request.

 

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Article III

WAIVERS, CoNSENT, REPRESENTATIONS AND WARRANTIES

 

3.01         Waiver of Existing Default. Subject to the terms and conditions set
out in this Amendment, and in reliance of the representations and warranties of
Borrowers set forth in Section 3.05 hereof, Agent and Lender hereby (a) waive
any violation of, or noncompliance with, any provision of Credit Agreement or
any Other Documents caused solely by the Existing Defaults, and (b) agree not to
exercise any of their rights available under the Credit Agreement or the Other
Documents solely as a result of any such violation or noncompliance described in
clause (a) of this Section 3.01. Except as set forth in the first sentence of
this Section 3.01, Borrowers hereby agree that (i) such waiver does not
constitute a waiver of any present or future violation of or noncompliance with
any provision of the Credit Agreement or Other Documents or a waiver of Agent’s
or Lender’s rights to insist upon strict compliance with each term, covenant,
condition, and provision of the Credit Agreement or any Other Documents executed
from time to time in connection therewith, or (ii) prejudice any right or remedy
Agent or Lender may now have (after giving effect to the foregoing waiver) or
may have in the future under or in connection with the Credit Agreement or any
Other Documents. Except as set forth in the first sentence of this Section 3.01,
Agent and Lender hereby reserve all rights granted under the Credit Agreement,
this Amendment, and any other contract or instrument among Borrowers, Lender and
Agent.

 

3.02         Consent to Amendment. Agent and Lenders hereby consent to the
execution and delivery of the amendment to the EP Amendment in the final form
provided to Agent on the date hereof.

 

3.03         Scope of Agreement. Except as specifically amended and/or waived by
this Amendment, the Credit Agreement and Other Documents are unchanged and
continue in full force and effect and are valid, binding and enforceable against
Borrowers in accordance with their respective terms.

 

3.04         RELEASE. Borrowers hereby acknowledge as of the date hereof that
they have no knowledge of any defense, counterclaim, offset, cross complaint,
claim or demand of any kind or nature whatsoever that can be asserted by them
against Agent or any Lender or to reduce or eliminate all or any part of their
liability to repay any advances or extensions of credit from Lenders to
Borrowers under the Credit Agreement, as amended hereby, or the other documents
or to seek affirmative relief or damages of any kind or nature from Lenders or
Agent. For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, each Borrower hereby, for itself and its successors and
assigns, fully and without reserve, releases and forever discharges each Agent
and Lender, its respective successors and assigns, officers, directors,
employees, representatives, trustees, attorneys, agents and affiliates
(collectively the "Released Parties" and individually a "Released Party") from
any and all actions, claims, demands, causes of action, judgments, executions,
suits, debts, liabilities, costs, damages, expenses or other obligations of any
kind and nature whatsoever, known or unknown, direct and/or indirect, at law or
in equity, whether now existing or hereafter asserted (INCLUDING, WITHOUT
LIMITATION, ANY OFFSETS, REDUCTIONS, REBATEMENT, CLAIMS OF USURY OR CLAIMS WITH
RESPECT TO THE NEGLIGENCE OF ANY RELEASED PARTY), for or because of any matters
or things occurring, existing or actions done, omitted to be done, or suffered
to be done by any of the Released Parties, in each case, on or prior to the
Second Amendment Effective Date and are in any way directly or indirectly
arising out of or in any way connected to any of this Amendment, the Credit
Agreement, any other Document, or any of the transactions contemplated hereby or
thereby (collectively, the "Released Matters"). Each Borrower, by execution
hereof, hereby acknowledges and agrees that the agreements in this Section 3.04
are intended to cover and be in full satisfaction for all or any alleged
injuries or damages arising in connection with the Released Matters.

 

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Article IV

 

4.01         Representations and Warranties. Borrowers jointly and severally
represent and warrant to Agent and Lender that (a) they possess all requisite
company or corporate power and authority to execute, deliver and comply with the
terms of this Amendment, (b) this Amendment has been duly authorized and
approved by all requisite company or corporate action on the part of each
Borrower, (c) no other consent of any individual or entity (other than Agent and
Lender and the Elm Park Agent and Elm Park Lenders to the extent required by
Section 2.01(d)) is required for this Amendment to be effective, (d) the
execution and delivery of this Amendment does not violate the organizational
documents of any Borrower, (e) the representations and warranties in the Credit
Agreement and each Other Document to which each Borrower is a party are true and
correct in all material respects on and as of the date of this Amendment as
though made on the date of this Amendment (except to the extent that such
representations and warranties speak to a specific date or to the extent such
representations and warranties relate to the Existing Defaults), (f) each
Borrower is in compliance with all covenants and agreements, other than with
respect to the Existing Defaults, contained in the Credit Agreement and each
Other Document to which it is a party, (g) no Default or Event of Default (other
than the Existing Defaults) has occurred and is continuing, (h) Borrowers have
delivered to Agent a true and correct copy of the Rig & Equipment Sale Agreement
effective as of September 11, 2013 (the “Olmos Contract”), between IDE and Olmos
Drilling, LLC, for the design, manufacture and servicing by Borrowers of a
Sparta Series Model 1500 drilling rig, (i) the Olmos Contract is in full force
and effect, has not been amended or modified in any manner adverse to the
interests of Agent and Lenders, and IDE is not in default thereunder, and (j)
the aggregate revenue that IDE reasonably expects to receive in cash thereunder
is greater than $14,000,000. The representations and warranties made in this
Amendment shall survive the execution and delivery of this Amendment. No
investigation by Agent or Lender is required for Agent or Lender to rely on the
representations and warranties in this Amendment.

 

Article V

COVENANTS

 

5.01         Cost Reduction Plan. Borrowers shall at all times comply in all
respects with the provisions of the cost reduction plan approved by the board of
directors of Empeiria, which shall be in form and substance satisfactory to
Agent and Lenders (it being agreed that the cost reduction plan delivere to
Agent and included in the board resolutions of the Borrowers attached to the
Secretary’s Certificate delivered pursuant to Section 2.01(b) hereof is
satisfactory to Agent and Lenders).

 

5.02         Preferred Stock Issuance. In the event that Borrowers do not comply
with the requirements set forth in Section 5.03 by the date specified therein,
(a) on or before October 31, 2013, Agent shall have received a binding term
sheet entered into by Borrowers in connection with a preferred stock investment
in Empeiria, in an aggregate amount of at least $1,000,000, to be made on or
before November 14, 2013, and (b) on or prior to November 14, 2013, (i)
Borrowers shall deliver to Agent copies of the material definitive agreements to
be executed in connection with such preferred stock investment in Empeiria in an
aggregate amount of at least $1,000,000; provided that any issuance of Equity
Interests in connection with such investment would not constitute Disqualified
Equity Interests, and (ii) Agent shall have received evidence in form
satisfactory to it that (A) Empeiria has received net cash proceeds of such
preferred stock investment in an aggregate amount of at least $1,000,000;
provided that any issuance of Equity interests in connection with such
investment would not constitute Disqualified Equity Interests, (B) Empeiria has
made a capital contribution to Holdings equal to 100% of such net cash proceeds,
and (C) Holdings has made a capital contribution to IDE equal to 100% of such
net cash proceeds, all of which proceeds shall be deposited into a deposit
account of IDE maintained with Agent and shall be immediately applied to repay
the outstanding Advances under the Credit Agreement, and no portion of such
proceeds shall be used to prepay or repay any Elm Park Indebtedness.

 

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5.03         Backlog. On or before October 31, 2013, Agent shall have received
evidence satisfactory to it that IDE has received purchase orders or entered
into executed contracts (in addition to the Olmos Contract) with Customers, each
of which shall be dated on or after August 25, 2013, for the design,
manufacture, and servicing by Borrowers of one or more drilling rigs (together
with the Olmos Contract and each other contract and purchase order for the
design and manufacture of drilling rigs entered into by IDE after August 23,
2013, collectively, “Rig Contracts”), and all of which Rig Contracts shall have
aggregate revenue value attributable thereto of at least $28,000,000; provided
that Rig Contracts executed by IDE and PEMEX Procurement International, Inc.
(formerly Integrated Trade Systems, Inc.), as agent for PEMEX-Exploración y
Producción shall be excluded from such revenue calculation. Upon the request of
Agent or contemporaneously with the delivery to the Elm Park Lenders or to the
agent for the Elm Park Lenders, Borrowers shall provide to Agent (a) a detailed
report reflecting the unrealized revenue attributable to the Rig Contracts, on a
contract by contract basis and (b) copies of underlying Rig Contracts. Anything
to the contrary contained herein notwithstanding, any Event of Default resulting
from the failure by Borrowers to comply with the provisions of this Section 5.03
shall be deemed cured by a preferred stock investment in IDE Holdings Corp., in
an aggregate amount of at least $1,000,000, pursuant to Section 5.02(b) and, on
and after the date of such equity contribution, such failure by Borrowers to
comply with this Section 5.03 shall no longer constitute an Event of Default.

 

Article VI

Miscellaneous.

 

6.01         No Waiver of Defaults. Except as expressly set forth herein, this
Amendment does not constitute (i) a waiver of, or a consent to, (A) any
provision of any Credit Agreement or any Other Document not expressly referred
to in this Amendment, or (B) any present or future violation of, or default
under, any provision of the Credit Agreement or Other Documents, or (ii) a
waiver of Agent or Lender’s right to insist upon future compliance with each
term, covenant, condition and provision of the Credit Agreement or Other
Documents.

 

6.02         Form. Each agreement, document, instrument or other writing to be
furnished to Agent under any provision of this Amendment must be in form and,
other than Cash Flow Projections, in substance satisfactory to Agent.

 

6.03         Headings. The headings and captions used in this Amendment are for
convenience only and will not be deemed to limit, amplify or modify the terms of
this Amendment, the Credit Agreement, or the Other Documents.

 

6.04         Costs, Expenses and Attorneys’ Fees. Borrowers jointly and
severally agree to pay or reimburse Agent and Lender on demand for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
preparation, negotiation, and execution of this Amendment and other documents
executed in connection therewith, including, without limitation, the reasonable
fees and disbursements of Agent and Lender’s counsel.

 

6.05         Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of each of the undersigned and their respective successors,
assigns, heirs and legal representatives, as applicable.

 

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6.06         Multiple Counterparts. This Amendment may be executed in any number
of counterparts with the same effect as if all signatories had signed the same
document. All counterparts must be construed together to constitute one and the
same instrument. This Amendment may be transmitted and signed by facsimile,
portable document format (PDF), and other electronic means. The effectiveness of
any such documents and signatures shall, subject to applicable law, have the
same force and effect as manually-signed originals and shall be binding on
Borrowers, Agent and Lender.

 

6.07         Governing Law. This Amendment must be construed, and its
performance enforced, under Texas law.

 

6.08         Entirety. This Amendment, the Credit Agreement and the Other
Documents (as amended hereby) represent the final agreement among the parties
and may not be contradicted by evidence of prior, contemporaneous, or subsequent
oral agreements by the Parties. There are no unwritten oral agreements among the
Parties.

 

[Signatures are on the following pages]

 

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IN WITNESS WHEREOF, this Amendment is executed by each of the undersigned as of
the date first written above.

 

  BORROWERS:       INTEGRATED DRILLING EQUIPMENT, LLC         By: /s/ Norman
Michael Dion   Name: Norman Michael Dion   Title: Chief Financial Officer      
 

INTEGRATED DRILLING EQUIPMENT COMPANY

HOLDINGS, LLC

        By: /s/ Norman Michael Dion   Name: Norman Michael Dion   Title: Chief
Financial Officer        

Integrated Drilling Equipment Holdings

Corp., formerly known as Empeiria Acquisition Corp.

        By: /s/ Norman Michael Dion   Name: Norman Michael Dion   Title: Chief
Financial Officer

 

Signature Page to Second Amendment to Amended and Restated Revolving Credit and
Security Agreement

 

 

 

 

  AGENT AND LENDER:       PNC BANK, NATIONAL ASSOCIATION         By: Kay L.
Murphy     Kay L. Murphy     Vice President

 

Signature Page to Second Amendment to Amended and Restated Revolving Credit and
Security Agreement