Exhibit 10.1
 
 
REVOLVING CREDIT
AND
SECURITY AGREEMENT
 
 
PNC BANK, NATIONAL ASSOCIATION
(AS LENDER AND AS AGENT)
 
 
WITH
 
 
HORIZON OFFSHORE, INC.,
HORIZON OFFSHORE CONTRACTORS, INC.,
HOC OFFSHORE, S. DE R.L. DE C.V.,
HORIZON MARINE CONTRACTORS (MALAYSIA) SDN BHD,
PT HORIZON OFFSHORE INDONESIA,
HORIZON MARINE CONSTRUCTION (MAURITIUS) LTD.,
AND
HORIZON MARINE CONSTRUCTION LTD.
(BORROWERS)
 
 
April 28, 2006
 
 
Revolving Credit and Security Agreement

 

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TABLE OF CONTENTS

                  I   DEFINITIONS     1  
 
  1.1   Accounting Terms     1  
 
  1.2   General Terms     1  
 
  1.3   Uniform Commercial Code Terms     24  
 
  1.4   Certain Matters of Construction     24  
 
                II   ADVANCES, PAYMENTS     25  
 
  2.1   Revolving Advances     25  
 
  2.2   Procedure for Revolving Advances Borrowing     26  
 
  2.3   Disbursement of Advance Proceeds     29  
 
  2.4   Intentionally Omitted     29  
 
  2.5   Maximum Advances     29  
 
  2.6   Repayment of Advances     29  
 
  2.7   Repayment of Excess Advances     30  
 
  2.8   Statement of Account     30  
 
  2.9   Letters of Credit     30  
 
  2.10   Issuance of Letters of Credit     30  
 
  2.11   Requirements For Issuance of Letters of Credit     31  
 
  2.12   Disbursements, Reimbursement     31  
 
  2.13   Repayment of Participation Advances     32  
 
  2.14   Documentation     33  
 
  2.15   Determination to Honor Drawing Request     33  
 
  2.16   Nature of Participation and Reimbursement Obligations     33  
 
  2.17   Indemnity     35  
 
  2.18   Liability for Acts and Omissions     35  
 
  2.19   Additional Payments     36  
 
  2.20   Manner of Borrowing and Payment     36  
 
  2.21   Mandatory Payments     38  
 
  2.22   Use of Proceeds     38  
 
  2.23   Defaulting Lender     39  
 
                III   INTEREST AND FEES     39  
 
  3.1   Interest     39  
 
  3.2   Letter of Credit Fees     40  
 
  3.3   Closing Fee and Facility Fee     41  
 
  3.4   Collateral Evaluation Fee and Collateral Monitoring Fee     42  
 
  3.5   Computation of Interest and Fees     42  
 
  3.6   Maximum Charges     42  
 
  3.7   Increased Costs     43  
 
  3.8   Basis For Determining Interest Rate Inadequate or Unfair     44  
 
  3.9   Capital Adequacy     44  
 
  3.10   Gross Up for Taxes     45  
 
  3.11   Withholding Tax Exemption     45  

Revolving Credit and Security Agreement

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                  IV   COLLATERAL: GENERAL TERMS     46  
 
  4.1   Security Interest in the Collateral     46  
 
  4.2   Perfection of Security Interest     46  
 
  4.3   Disposition of Collateral     47  
 
  4.4   Preservation of Collateral     47  
 
  4.5   Ownership of Collateral     47  
 
  4.6   Defense of Agent’s and Lenders’ Interests     48  
 
  4.7   Books and Records     48  
 
  4.8   Financial Disclosure     49  
 
  4.9   Compliance with Laws     49  
 
  4.10   Inspection of Premises     49  
 
  4.11   Insurance     49  
 
  4.12   Failure to Pay Insurance     50  
 
  4.13   Payment of Taxes     50  
 
  4.14   Payment of Leasehold Obligations     51  
 
  4.15   Receivables     51  
 
  4.16   Intentionally Omitted     53  
 
  4.17   Maintenance of Equipment     53  
 
  4.18   Exculpation of Liability     54  
 
  4.19   Environmental Matters     54  
 
  4.20   Financing Statements     56  
 
                V   REPRESENTATIONS AND WARRANTIES     56  
 
  5.1   Authority     56  
 
  5.2   Formation and Qualification     56  
 
  5.3   Survival of Representations and Warranties     57  
 
  5.4   Tax Returns     57  
 
  5.5   Financial Statements     57  
 
  5.6   Entity Names     58  
 
  5.7   O.S.H.A. and Environmental Compliance     58  
 
  5.8   Solvency; No Litigation, Violation, Indebtedness or Default     58  
 
  5.9   Patents, Trademarks, Copyrights and Licenses     60  
 
  5.10   Licenses and Permits     60  
 
  5.11   Default of Indebtedness     60  
 
  5.12   No Default     60  
 
  5.13   No Burdensome Restrictions     61  
 
  5.14   No Labor Disputes     61  
 
  5.15   Margin Regulations     61  
 
  5.16   Investment Company Act     61  
 
  5.17   Disclosure     61  
 
  5.18   Delivery of Vessel Loan Documentation and Subordinated Loan
Documentation     61  
 
  5.19   Swaps     61  
 
  5.20   Conflicting Agreements     62  
 
  5.21   Application of Certain Laws and Regulations     62  
 
  5.22   Business and Property of Borrowers     62  
 
  5.23   Section 20 Subsidiaries     62  

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  5.24   Anti Terrorism Laws     62  
 
  5.25   Trading with the Enemy     63  
 
                VI   AFFIRMATIVE COVENANTS     63  
 
  6.1   Payment of Fees     63  
 
  6.2   Conduct of Business and Maintenance of Existence and Assets     63  
 
  6.3   Violations     63  
 
  6.4   Government Receivables     64  
 
  6.5   Financial Covenants     64  
 
  6.6   Execution of Supplemental Instruments     64  
 
  6.7   Payment of Indebtedness     64  
 
  6.8   Standards of Financial Statements     64  
 
                VII   NEGATIVE COVENANTS     64  
 
  7.1   Acquisition of Assets     65  
 
  7.2   Creation of Liens     65  
 
  7.3   Guarantees     65  
 
  7.4   Investments     65  
 
  7.5   Loans     65  
 
  7.6   Capital Expenditures     66  
 
  7.7   Dividends     66  
 
  7.8   Indebtedness     66  
 
  7.9   Nature of Business     66  
 
  7.10   Transactions with Affiliates     67  
 
  7.11   Intentionally Omitted     67  
 
  7.12   Subsidiaries     67  
 
  7.13   Fiscal Year and Accounting Changes     67  
 
  7.14   Pledge of Credit     67  
 
  7.15   Amendment of Articles of Incorporation, By-Laws or Certificate of
Formation, Operating Agreement, as Applicable     67  
 
  7.16   Compliance with ERISA     68  
 
  7.17   Intentionally Omitted     68  
 
  7.18   Anti Terrorism Laws     68  
 
  7.19   Membership/Partnership Interests     68  
 
  7.20   Trading with the Enemy Act     69  
 
  7.21   Prepayment of Indebtedness     69  
 
  7.22   Other Agreements     69  
 
                VIII   CONDITIONS PRECEDENT     69  
 
  8.1   Conditions to Initial Advances     69  
 
  8.2   Conditions to Each Advance     73  
 
                IX   INFORMATION AS TO BORROWERS     73  
 
  9.1   Disclosure of Material Matters     73  
 
  9.2   Schedules     73  
 
  9.3   Environmental Reports     74  
 
  9.4   Litigation     74  

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  9.5   Material Occurrences     74  
 
  9.6   Government Receivables     75  
 
  9.7   Annual Financial Statements     75  
 
  9.8   Quarterly Financial Statements     75  
 
  9.9   Monthly Financial Statements     75  
 
  9.10   Other Reports     75  
 
  9.11   Additional Information     75  
 
  9.12   Projected Operating Budget     76  
 
  9.13   Variances From Operating Budget     76  
 
  9.14   Notice of Communications with Governmental Bodies     76  
 
  9.15   ERISA Notices and Requests     76  
 
  9.16   Additional Documents     77  
 
                X   EVENTS OF DEFAULT     77  
 
  10.1   Nonpayment     77  
 
  10.2   Breach of Representation     77  
 
  10.3   Intentionally Omitted     77  
 
  10.4   Judicial Actions     77  
 
  10.5   Noncompliance     77  
 
  10.6   Judgments     78  
 
  10.7   Bankruptcy     78  
 
  10.8   Inability to Pay     78  
 
  10.9   Affiliate Bankruptcy     78  
 
  10.10   Material Adverse Effect     78  
 
  10.11   Lien Priority     78  
 
  10.12   Vessel Loan Default or Subordinated Loan Default     78  
 
  10.13   Cross Default     79  
 
  10.14   Breach of Guaranty     79  
 
  10.15   Change of Ownership     79  
 
  10.16   Invalidity     79  
 
  10.17   Licenses     79  
 
  10.18   Seizures     79  
 
  10.19   Operations     79  
 
  10.20   Pension Plans     79  
 
                XI   LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT     80  
 
  11.1   Rights and Remedies.     80  
 
  11.2   Agent’s Discretion     81  
 
  11.3   Setoff     81  
 
  11.4   Rights and Remedies not Exclusive     82  
 
  11.5   Allocation of Payments After Event of Default     82  
 
                XII   WAIVERS AND JUDICIAL PROCEEDINGS.     83  
 
  12.1   Waiver of Notice     83  
 
  12.2   Delay     83  
 
  12.3   Jury Waiver     83  
 
  12.4   Waiver of Rights Under Texas Deceptive Trade Practices Act     83  

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                  XIII   EFFECTIVE DATE AND TERMINATION     84  
 
  13.1   Term     84  
 
  13.2   Termination     84  
 
                XIV   REGARDING AGENT.     84  
 
  14.1   Appointment     84  
 
  14.2   Nature of Duties     85  
 
  14.3   Lack of Reliance on Agent and Resignation     85  
 
  14.4   Certain Rights of Agent     86  
 
  14.5   Reliance     86  
 
  14.6   Notice of Default     86  
 
  14.7   Indemnification     86  
 
  14.8   Agent in its Individual Capacity     87  
 
  14.9   Delivery of Documents     87  
 
  14.10   Borrowers’ Undertaking to Agent     87  
 
  14.11   No Reliance on Agent's Customer Identification Program     87  
 
  14.12   Other Agreements     88  
 
                XV   BORROWING AGENCY     88  
 
  15.1   Borrowing Agency Provisions     88  
 
  15.2   Waiver of Subrogation     88  
 
                XVI   MISCELLANEOUS.     89  
 
  16.1   Governing Law     89  
 
  16.2   Entire Understanding.     89  
 
  16.3   Successors and Assigns; Participations; New Lenders.     92  
 
  16.4   Application of Payments     93  
 
  16.5   Indemnity     93  
 
  16.6   Notice     94  
 
  16.7   Survival     96  
 
  16.8   Severability     96  
 
  16.9   Expenses     96  
 
  16.10   Injunctive Relief     96  
 
  16.11   Consequential Damages     97  
 
  16.12   Captions     97  
 
  16.13   Counterparts; Facsimile Signatures     97  
 
  16.14   Construction     97  
 
  16.15   Confidentiality; Sharing Information     97  
 
  16.16   Publicity     98  
 
  16.17   Non-applicability of Chapter 346     98  
 
  16.18   Certifications From Banks and Participants; US PATRIOT Act     98  

Revolving Credit and Security Agreement

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REVOLVING CREDIT
AND
SECURITY AGREEMENT
     Revolving Credit and Security Agreement dated as of April 28, 2006 among
HORIZON OFFSHORE, INC., a Delaware corporation (“Holdings”), HORIZON OFFSHORE
CONTRACTORS, INC., a Delaware corporation (“Contractors”), HOC OFFSHORE, S.DE
R.L. DE C.V., a Mexican limited liability company (“HOC”), HORIZON MARINE
CONTRACTORS (MALAYSIA) SDN BHD, a Malaysian private company (“Malaysia”), PT
HORIZON OFFSHORE INDONESIA, an Indonesia PMA (“Indonesia”), HORIZON MARINE
CONSTRUCTION (MAURITIUS) LTD., a Mauritius limited liability company
(“Mauritius”) and HORIZON MARINE CONSTRUCTION LTD., a Cayman Islands limited
liability company (“Construction”) (Holdings, Contractors, HOC, Malaysia,
Indonesia, Mauritius, and Construction, each a “Borrower”, and collectively
“Borrowers”), the financial institutions which are now or which hereafter become
a party hereto (collectively, the “Lenders” and individually a “Lender”) and PNC
BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity,
the “Agent”).
     IN CONSIDERATION of the mutual covenants and undertakings herein contained,
Borrowers, Lenders and Agent hereby agree as follows:
I DEFINITIONS.
     1.1 Accounting Terms. As used in this Agreement, the Other Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP.
     1.2 General Terms. For purposes of this Agreement the following terms shall
have the following meanings:
     “Accountants” shall have the meaning set forth in Section 9.7 hereof.
     “Advance Rate” shall have the meaning set forth in Section 2.1(a)(y)(i)
hereof.
     “Advances” shall mean and include the Revolving Advances and Letters of
Credit.
     “Affiliate” of any Person shall mean (a) any Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with
such Person, or (b) any Person who is a director, managing member, general
partner or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect, (x) to
vote 10% or more of the Equity Interests having ordinary voting power for the
election of directors of such Person or other Persons performing similar
functions for any such Person, or (y) to direct or cause the direction of the
management and policies of such Person whether by ownership of Equity Interests,
contract or otherwise.
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     “Agent” shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.
     “Agreement” shall mean this Revolving Credit and Security Agreement, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.
     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to
the higher of (i) the Base Rate in effect on such day and (ii) the Federal Funds
Open Rate in effect on such day plus 1/2 of 1%.
     “Anti-Terrorism Laws” shall mean any Applicable Laws relating to terrorism
or money laundering, including Executive Order No. 13224, the USA PATRIOT Act,
the Applicable Laws comprising or implementing the Bank Secrecy Act, and the
Applicable Laws administered by the United States Treasury Department’s Office
of Foreign Asset Control (as any of the foregoing Applicable Laws may from time
to time be amended, renewed, extended, or replaced).
     “Applicable Law” shall mean all laws, rules and regulations applicable to
the Person, conduct, transaction, covenant, Other Document or contract in
question, including all applicable common law and equitable principles; all
provisions of all applicable state, federal and foreign constitutions, statutes,
rules, regulations and orders of any Governmental Body, and all orders,
judgments and decrees of all courts and arbitrators.
     “Applicable Margins” means collectively, the Applicable Revolving Domestic
Rate Margin and the Applicable Revolving Eurodollar Rate Margin.
     “Applicable Revolving Domestic Rate Margin” shall mean the per annum
interest rate margin from time to time in effect applicable to Revolving
Advances, and payable in addition to the Alternate Base Rate with respect to
Domestic Rate Loans, which shall be zero percent (0.0%) as of the Closing Date,
and otherwise determined by reference to Section 3.1 of the Agreement.
     “Applicable Revolving Eurodollar Rate Margin” shall mean the per annum
interest rate margin from time to time in effect applicable to Revolving
Advances, and payable in addition to the Eurodollar Rate with respect to
Eurodollar Rate Loans, which shall be two and one-half percent (2.5%) as of the
Closing Date, and otherwise determined by reference to Section 3.1 of the
Agreement.
     “Authority” shall have the meaning set forth in Section 4.19(b).
     “Base Rate” shall mean the base commercial lending rate of PNC as publicly
announced to be in effect from time to time, such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined from time to time by PNC as a means of
pricing some loans to its customers and is neither tied to any external rate of
interest or index nor does it necessarily reflect the lowest rate of interest
actually charged by PNC to any particular class or category of customers of PNC.
     “Blocked Accounts” shall have the meaning set forth in Section 4.15(h).
     “Blocked Account Bank” shall have the meaning set forth in Section 4.15(h).
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     “Blocked Person” shall have the meaning set forth in Section 5.24(b)
hereof.
     “Borrower” or “Borrowers” shall have the meaning set forth in the preamble
to this Agreement and shall extend to all permitted successors and assigns of
such Persons.
     “Borrowers’ Account” shall have the meaning set forth in Section 2.8.
     “Borrowing Agent” shall mean Horizon Offshore, Inc., a Delaware
corporation.
     “Borrowing Base Certificate” shall mean a certificate in substantially the
form of Exhibit 1.2 duly executed by the President, Chief Financial Officer or
Controller of the Borrowing Agent and delivered to the Agent, appropriately
completed, by which such officer shall certify to Agent the Formula Amount and
calculation thereof as of the date of such certificate.
     “Business Day” shall mean any day other than Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required by law to be closed
for business in East Brunswick, New Jersey and, if the applicable Business Day
relates to any Eurodollar Rate Loans, such day must also be a day on which
dealings are carried on in the London interbank market.
     “Capital Expenditures” shall mean expenditures made or liabilities incurred
for the acquisition of any fixed assets or improvements, replacements,
substitutions or additions thereto which have a useful life of more than one
year, including the total principal portion of Capitalized Lease Obligations,
which, in accordance with GAAP, would be classified as capital expenditures.
     “Capitalized Dry Dock Cost” shall mean all costs associated with vessel
regulatory dry dock activity recorded on the balance sheet of Holdings on a
Consolidated Basis and amortized in accordance with the certification period.
     “Capitalized Lease Obligation” shall mean any Indebtedness of any Borrower
represented by obligations under a lease that is required to be capitalized for
financial reporting purposes in accordance with GAAP.
     “CERCLA” shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. §§9601 et seq.
     “Change of Control” shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any Borrower
to a Person who is not an Original Owner or (b) any merger or consolidation or
other reorganization of or with any Borrower other than a merger or
consolidation of or with one Borrower or Guarantor into another of which Agent
is given prior written notice (provided that, if a Borrower is a party thereto,
a Borrower shall be the surviving entity) or sale of all or substantially all of
the property or assets of any Borrower. For purposes of this definition,
“control of Borrower” shall mean the power, direct or indirect (x) to vote 50%
or more of the Equity Interests having ordinary voting power for the election of
directors (or the individuals performing similar functions) of any Borrower or
(y) to direct or cause the direction of the management and policies of any
Borrower by contract or otherwise.
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     “Change of Ownership” “ means any of the following: (a) any person or group
of persons (within the meaning of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended) of 50% or more of the issued and
outstanding Equity Interests of any Borrower (including shares of common stock
to be issued under any warrants, options or similar rights as outstanding for
the purpose of this definition) having the right to vote for the election of
directors any Borrower under ordinary circumstances; or (b) any merger,
consolidation or sale of substantially all of the property or assets of any
Borrower other than a merger or consolidation of or with one Borrower or
Guarantor into another of which Agent is given prior written notice (provided
that, if a Borrower is a party thereto, a Borrower shall be the surviving
entity); provided, that the sale by Holdings of any Equity Interests of any
Borrower shall be deemed a sale of substantially all of Holding’s assets.
     “Charges” shall mean all taxes, charges, fees, imposts, levies or other
assessments, including all net income, gross income, gross receipts, sales, use,
ad valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation and property taxes, custom duties, fees,
assessments, liens, claims and charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts, imposed by
any taxing or other authority, domestic or foreign (including the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, any Borrower or any of its Affiliates.
     “Charter Receivables” shall mean Receivables owed by a Customer (that is
not an Affiliate of Borrowers) to a Borrower with respect to the time charter of
a vessel for a period of time not more than six (6) months, so long as such
Receivable is subject to the first-priority security interest of Agent and is
otherwise an Eligible Receivable.
     “Closing Date” shall mean April 28, 2006 or such other date as may be
agreed to by the parties hereto.
     “Code” shall mean the Internal Revenue Code of 1986, as the same may be
amended or supplemented from time to time, and any successor statute of similar
import, and the rules and regulations thereunder, as from time to time in
effect.
     “Collateral” shall mean and include:
          (a) all Receivables;
          (b) all General Intangibles;
          (c) all Inventory;
          (d) all Investment Property;
          (e) all Subsidiary Stock;
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          (f) all of each Borrower’s right, title and interest in and to,
whether now owned or hereafter acquired and wherever located, (i) its respective
goods and other property including, but not limited to, all merchandise returned
or rejected by Customers, relating to or securing any of the Receivables;
(ii) all of each Borrower’s rights as a consignor, a consignee, an unpaid
vendor, mechanic, artisan, or other lienor, including stoppage in transit,
setoff, detinue, replevin, reclamation and repurchase; (iii) all additional
amounts due to any Borrower from any Customer relating to the Receivables;
(iv) other property, including warranty claims, relating to any goods securing
the Obligations; (v) all of each Borrower’s contract rights, rights of payment
which have been earned under a contract right, instruments (including promissory
notes), documents, chattel paper (including electronic chattel paper), warehouse
receipts, deposit accounts, letters of credit and money; (vi) all commercial
tort claims (whether now existing or hereafter arising); (vii) if and when
obtained by any Borrower, all personal property of third parties in which such
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; (viii) all letter of credit rights
(whether or not the respective letter of credit is evidenced by a writing);
(ix) all supporting obligations; and (x) any other goods, personal property or
real property now owned or hereafter acquired in which any Borrower has
expressly granted a security interest or may in the future grant a security
interest to Agent hereunder, or in any amendment or supplement hereto or
thereto, or under any other agreement between Agent and any Borrower;
          (g) all of each Borrower’s ledger sheets, ledger cards, files,
correspondence, records, books of account, business papers, computers, computer
software (owned by any Borrower or in which it has an interest), computer
programs, tapes, disks and documents relating to (a), (b), (c), (d), (e) or
(f) of this Paragraph; and
          (h) all proceeds and products of (a), (b), (c), (d), (e), (f) and
(g) in whatever form, including, but not limited to: cash, deposit accounts
(whether or not comprised solely of proceeds), certificates of deposit,
insurance proceeds (including hazard, flood and credit insurance), negotiable
instruments and other instruments for the payment of money, chattel paper,
security agreements, documents, eminent domain proceeds, condemnation proceeds
and tort claim proceeds. Notwithstanding the foregoing, the term “Collateral”
shall not include vessels.
     “Commitment Percentage” of any Lender shall mean the percentage set forth
below such Lender’s name on the signature page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.3(b) hereof.
     “Commitment Transfer Supplement” shall mean a document in the form of
Exhibit 16.3 hereto, properly completed and otherwise in form and substance
satisfactory to Agent by which the Purchasing Lender purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.
     “Compliance Certificate” shall mean a compliance certificate to be signed
by the Chief Financial Officer or Controller of Borrowing Agent, which shall
state that, based on an examination sufficient to permit such officer to make an
informed statement, no Default or Event of Default exists, or if such is not the
case, specifying such Default or Event of Default, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrowers with
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respect to such default and, such certificate shall have appended thereto
calculations which set forth Borrowers’ compliance with the requirements or
restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8, 7.10 and 7.11.
     “Consents” shall mean all filings and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Bodies and
other third parties, domestic or foreign, necessary to carry on any Borrower’s
business or necessary (including to avoid a conflict or breach under any
agreement, instrument, other document, license, permit or other authorization)
for the execution, delivery or performance of this Agreement, the Other
Documents, including any Consents required under all applicable federal, state
or other Applicable Law.
     “Controlled Group” shall mean, at any time, each Borrower and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control and all other entities which, together
with any Borrower, are treated as a single employer under Section 414 of the
Code.
     “Customer” shall mean and include the account debtor with respect to any
Receivable and/or the prospective purchaser of goods, services or both with
respect to any contract or contract right, and/or any party who enters into or
proposes to enter into any contract or other arrangement with any Borrower,
pursuant to which such Borrower is to deliver any personal property or perform
any services.
     “Debt Payments” shall mean, without duplication, the sum of (i) the
aggregate amount of all required cash payments of interest and fees (other than
non- recurring fees) on any Funded Debt and Advances hereunder of Borrowers and
their Subsidiaries, including the interest portion of any amount paid under the
Capitalized Lease Obligation and any “synthetic lease”, during such measurement
period, plus (ii) the principal amount due and payable during the next
succeeding twelve month period on the Funded Debt (excluding Funded Debt and
Advances hereunder), including the Subordinated Note and the Vessel Note
(excluding payments made with proceeds of the Pemex Litigation Receivable, the
Gulf Horizon insurance proceeds or the sale of Equity Interests), without
duplication.
     “Default” shall mean an event, circumstance or condition which, with the
giving of notice or passage of time or both, would constitute an Event of
Default.
     “Default Rate” shall have the meaning set forth in Section 3.1 hereof.
     “Defaulting Lender” shall have the meaning set forth in Section 2.23(a)
hereof.
     “Depository Accounts” shall have the meaning set forth in Section 4.15(h)
hereof.
     “Documents” shall have the meaning set forth in Section 8.1(c) hereof.
     “Dollar” and the sign “$” shall mean lawful money of the United States of
America.
     “Domestic Rate Loan” shall mean any Advance that bears interest based upon
the Alternate Base Rate.
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     “Drawing Date” shall have the meaning set forth in Section 2.12(b) hereof.
     “Early Termination Date” shall have the meaning set forth in Section 13.1
hereof.
     “Earnings Before Interest and Taxes” shall mean for any period the sum of
(i) net income (or loss) of Holdings on a Consolidated Basis for such period
(excluding extraordinary gains and extraordinary non-cash losses (including
impairment of assets, accelerated amortization of loan fees, discounts and
warrant expenses), plus (ii) all interest expense of Holdings on a Consolidated
Basis for such period, plus (iii) all charges based on income of Holdings on a
Consolidated Basis for such period for federal, state and local taxes.
     “EBITDA” shall mean for any period the sum of (i) Earnings Before Interest
and Taxes for such period plus (ii) depreciation expenses for such period, plus
(iii) amortization expenses for such period.
     “Eligible Receivables” shall mean and include with respect to each
Borrower, each Receivable of such Borrower arising in the Ordinary Course of
Business and which Agent, in its Permitted Discretion, shall deem to be an
Eligible Receivable, based on such considerations as Agent may from time to time
deem appropriate. A Receivable shall not be deemed eligible unless such
Receivable is subject to Agent’s first priority perfected security interest and
no other Lien (other than Permitted Encumbrances), and is evidenced by an
invoice or other documentary evidence satisfactory to Agent; except to the
extent it constitutes Eligible Unbilled Receivables or Eligible Retainage,
without duplication. In addition, no Receivable shall be an Eligible Receivable
if:
          (a) it arises (i) out of a sale made by any Borrower to an Affiliate
of any Borrower or to a Person controlled by an Affiliate of any Borrower or
(ii) in connection with the rental of any Vessel by any Borrower other than a
Charter Receivable;
          (b) it is due or unpaid more than ninety (90) days after the original
invoice date;
          (c) fifty percent (50%) or more of the Receivables from such Customer
are not deemed Eligible Receivables hereunder;
          (d) any covenant, representation or warranty contained in this
Agreement with respect to such Receivable has been breached;
          (e) the Customer shall (i) apply for, suffer, or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of all or a substantial part of its property or call
a meeting of its creditors, (ii) admit in writing its inability, or be generally
unable, to pay its debts as they become due or cease operations of its present
business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated a bankrupt or insolvent,
(vi) file a petition seeking to take advantage of any other law providing for
the relief of debtors, (vii) acquiesce to, or fail to have dismissed, any
petition which is filed against it in any involuntary case under such bankruptcy
laws, or (viii) take any action for the purpose of effecting any of the
foregoing;
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          (f) the sale is to a Customer outside the continental United States of
America, unless the sale is (i) on letter of credit, guaranty or acceptance
terms, in each case acceptable to Agent in its sole discretion, or (ii) subject
to the standards of eligibility contained herein, made to (A) a Customer
satisfactory to Agent in its Permitted Discretion; so long as such Receivable is
billed in Dollars only and is payable directly to a bank account physically
located within the continental United States of America or (B) Pemex by HOC, so
long as such Receivable is converted to Dollars and is remitted to a bank
account physically located within the continental United States of America on
the next Business Day following receipt thereof; in each case up to the Foreign
Receivable Sublimit;
          (g) the sale to the Customer is on a bill-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment, subject to retainage or any
other repurchase or return basis or is evidenced by chattel paper;
          (h) Agent determines, in its Permitted Discretion, that collection of
such Receivable is insecure or that such Receivable may not be paid by reason of
the Customer’s financial inability to pay;
          (i) the Customer is the United States of America, any state or any
department, agency or instrumentality of any of them, unless the applicable
Borrower assigns its right to payment of such Receivable to Agent pursuant to
the Assignment of Claims Act of 1940, as amended (31 U.S.C. Sub-Section 3727 et
seq. and 41 U.S.C. Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
          (j) the goods giving rise to such Receivable have not been delivered
to and accepted by the Customer or otherwise delivered in accordance with the
applicable procedures and provisions of an executed contract with the Customer
or the services giving rise to such Receivable have not been performed by the
applicable Borrower and accepted by the Customer or otherwise performed in
accordance with the applicable procedures and provisions of an executed contract
with the Customer or the Receivable represents a progress billing or is
otherwise contingent upon the applicable Borrower’s completion of any further
performance (other than a progress billing in accordance with the applicable
billing procedures and other provisions of an executed contract with the
Customer);
          (k) the Receivables of the Customer exceed a credit limit determined
by Agent, in its Permitted Discretion, to the extent such Receivable exceeds
such limit;
          (l) the Receivable is subject to any offset, deduction, defense,
dispute, or counterclaim that has been threatened or asserted by a Customer (to
the extent of such offset, deduction, defense, dispute, or counterclaim), the
Customer is also at such time a creditor or supplier of a Borrower (to the
extent of such amount owed by the Borrower to the Customer) or the Receivable is
contingent in any respect or for any reason (to the extent of such contingent
amount);
          (m) the applicable Borrower has made any agreement with any Customer
for any deduction therefrom, except for discounts or allowances made in the
Ordinary Course of
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Business for prompt payment, all of which discounts or allowances are reflected
in the calculation of the face value of each respective invoice related thereto;
          (n) any return, rejection or repossession of the merchandise has
occurred or the rendition of services has been disputed;
          (o) such Receivable is not payable to a Borrower;
          (p) such Receivable is not otherwise satisfactory to Agent as
determined in the exercise of its Permitted Discretion; or
          (q) such Receivable is derived from contracts that are bonded (other
than unsecured bonds issued for the benefit of HOC) or backed by a letter of
credit other than Letters of Credit (to the extent of such bond or such letter
of credit) or is subject to mechanics’, workers’, materialmen’s or other like
Liens that have been threatened or asserted.
     “Eligible Retainage” shall mean Retainage in an aggregate amount not to
exceed $5,000,000, that is evidenced by documentation satisfactory to Agent in
its Permitted Discretion showing that the applicable portion of the underlying
job related thereto has been completed and accepted by the Customer, all
conditions to such payment under the applicable contract have been satisfied,
such amount is due and payable and is not due or unpaid for more than ninety
(90) days after the date under the contract that such amounts are due and
payable, and that, but for the failure to satisfy clauses (g) and (j) of the
definition of Eligible Receivables, otherwise constitute Eligible Receivables.
     “Eligible Unbilled Receivables” shall mean Receivables in an aggregate
amount not to exceed $5,000,000, that are owing by Customers located within the
continental United States of America and that, but for the failure to be
evidenced by an invoice, otherwise constitute Eligible Receivables; provided
that no Receivable shall be considered an Eligible Unbilled Receivable if it is
unbilled for more than thirty (30) days.
     “Environmental Complaint” shall have the meaning set forth in
Section 4.19(b) hereof.
     “Environmental Laws” shall mean all federal, state and local environmental,
land use, zoning, health, chemical use, safety and sanitation laws, statutes,
ordinances and codes relating to the protection of the environment and/or
governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules,
regulations, policies, guidelines, interpretations, decisions, orders and
directives of federal, state and local governmental agencies and authorities
with respect thereto.
     “Equipment” shall mean and include as to each Borrower all of such
Borrower’s goods (other than Inventory) whether now owned or hereafter acquired
and wherever located including all equipment, machinery, apparatus, motor
vehicles, fittings, furniture, furnishings, fixtures, parts, accessories and all
replacements and substitutions therefor or accessions thereto.
     “Equity Interests” of any Person shall mean any and all shares, rights to
purchase, options, warrants, general, limited or limited liability partnership
interests, member interests, participation or other equivalents of or interest
in (regardless of how designated) equity of such
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Person, whether voting or nonvoting, including common stock, preferred stock,
convertible securities or any other “equity security” (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.
     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then
current Interest Period relating thereto the interest rate per annum determined
by Agent by dividing (the resulting quotient rounded upwards, if necessary, to
the nearest 1/100th of 1% per annum) (i) the rate of interest determined by
Agent in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London interbank
offered rates for U.S. Dollars quoted by the British Bankers’ Association as set
forth on Moneyline Telerate (or appropriate successor or, if British Banker’s
Association or its successor ceases to provide such quotes, a comparable
replacement determined by Agent) display page 3750 (or such other display page
on the Moneyline Telerate system as may replace display page 3750) two
(2) Business Days prior to the first day of such Interest Period for an amount
comparable to such Eurodollar Rate Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal to 1.00 minus
the Reserve Percentage. The Eurodollar Rate may also be expressed by the
following formula:
Average of London interbank offered rates quoted by BBA as shown on
Eurodollar Rate =Moneyline Telerate Service display page 3750 or appropriate
successor
1.00 — Reserve Percentage.
     The Eurodollar Rate shall be adjusted with respect to any Eurodollar Rate
Loan that is outstanding on the effective date of any change in the Reserve
Percentage as of such effective date. The Agent shall give prompt notice to the
Borrowing Agent of the Eurodollar Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest error.
     “Eurodollar Rate Loan” shall mean an Advance at any time that bears
interest based on the Eurodollar Rate.
     “Event of Default” shall have the meaning set forth in Article X hereof.
     “Exchange Act” shall have the mean the Securities Exchange Act of 1934, as
amended.
     “Executive Order No. 13224” shall mean the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has been, or
shall hereafter be, renewed, extended, amended or replaced.
     “Federal Funds Effective Rate” for any day shall mean the rate per annum
(based on a year of 360 days and actual days elapsed and rounded upward to the
nearest 1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
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computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.
     “Federal Funds Open Rate” shall mean the rate per annum determined by the
Agent in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the “open” rate for federal funds
transactions as of the opening of business for federal funds transactions among
members of the Federal Reserve System arranged by federal funds brokers on such
day, as quoted by Garvin Guybutler Corporation, any successor entity thereto, or
any other broker selected by the Agent, as set forth on the applicable Telerate
display page; provided, however; that if such day is not a Business Day, the
Federal Funds Open Rate for such day shall be the “open” rate on the immediately
preceding Business Day, or if no such rate shall be quoted by a Federal funds
broker at such time, such other rate as determined by the Agent in accordance
with its usual procedures.
     “Fixed Charge Coverage Ratio” shall mean and include (a) prior to an
Undrawn Availability Event, with respect to the applicable Fixed Charge
Measurement Period, the ratio of (i) EBITDA minus the aggregate amount of
federal, state and local income taxes actually paid or required to be paid by
the Borrower and their Subsidiaries during such Fixed Charge Measurement Period;
divided by (ii) the sum of (A) all Debt Payments under subsection (i) of such
definition for such Fixed Charge Measurement Period plus (B) all Debt Payments
under subsection (ii) of such definition for such Fixed Charge Measurement
Period divided by twelve (12) and multiplied by (w) three (3) on the first date
of determination, (x) six (6) on the second date of determination, (y) nine
(9) on the third date of determination and (z) twelve (12) for each date of
determination thereafter; and (b) following an Undrawn Availability Event, with
respect to the applicable Fixed Charge Measurement Period, the ratio of
(i) EBITDA for the twelve month period then ending minus Capital Expenditures
made during such Fixed Charge Measurement Period (excluding Capital Expenditures
to the extent financed with Funded Debt otherwise permitted under this Agreement
other than Revolving Advances), minus Capitalized Dry Dock Cost (without
duplication), minus the aggregate amount of federal, state and local income
taxes actually paid or required to be paid by the Borrower and their
Subsidiaries during the twelve-month period then ending; divided by (ii) the sum
of (A) all Debt Payments under subsection (i) of such definition for the
twelve-month period then ending plus (B) all Debt Payments under subsection
(ii) of such definition as of the applicable measurement date.
     “Fixed Charge Measurement Period” shall mean the period of time measured as
of (i) the last day of each fiscal quarter ending on or before December 31, 2006
for the period from the January 1, 2006 through each such quarter end, and
(ii) the last day of each fiscal quarter thereafter, for the four-quarter period
then ending; provided however, that following any Undrawn Availability Event,
such measurement period shall be (except as otherwise set forth in subsection
(b) of the definition of Fixed Charge Coverage Ratio) the period beginning on
the first day of the fiscal quarter following an Undrawn Availability Event,
through and including the applicable date of determination, until such
measurement period equals four quarters, and thereafter it shall be for the
four-quarter period then ending.
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     “Foreign Receivables Sublimit” shall mean an amount equal to (i) from the
Closing Date through and including July 31, 2006, $10,000,000, (ii) from
August 1, 2006 through and including January 31, 2007, $7,500,000, and
(iii) from February 1, 2007 and thereafter, $5,000,000.
     “Formula Amount” shall have the meaning set forth in Section 2.1(a).
     “Funded Debt” shall mean, with respect to any Person, without duplication,
all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness that by its terms matures more than one year
from, or is directly or indirectly renewable or extendible at such Person’s
option under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year from the date of
creation thereof, and specifically including Capitalized Lease Obligations,
current maturities of long-term debt, revolving credit and short-term debt
extendible beyond one year at the option of the debtor, and also including, in
the case of Borrower, the Obligations and, without duplication, Indebtedness
consisting of guaranties of Funded Debt of other Persons.
     “GAAP” shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
     “General Intangibles” shall mean and include as to each Borrower all of
such Borrower’s general intangibles, whether now owned or hereafter acquired,
including all payment intangibles, all choses in action, causes of action,
corporate or other business records, inventions, designs, patents, patent
applications, equipment formulations, manufacturing procedures, quality control
procedures, trademarks, trademark applications, service marks, trade secrets,
goodwill, copyrights, design rights, software, computer information, source
codes, codes, records and updates, registrations, licenses, franchises, customer
lists, tax refunds, tax refund claims, computer programs, all claims under
guaranties, security interests or other security held by or granted to such
Borrower to secure payment of any of the Receivables by a Customer (other than
to the extent covered by Receivables) all rights of indemnification and all
other intangible property of every kind and nature (other than Receivables).
     “Governmental Acts” shall have the meaning set forth in Section 2.17.
     “Governmental Body” shall mean any nation or government, any state or other
political subdivision thereof or any entity, authority, agency, division or
department exercising the legislative, judicial, regulatory or administrative
functions of or pertaining to a government.
     “Gross-Up Payment” shall have the meaning set forth in Section 3.10.
     “Guarantor” shall mean Horizon Subsea Services, Inc., a Delaware
corporation, Texas Offshore Contractors Corp., a Delaware corporation, Horizon
Vessels, Inc., a Delaware corporation, Affiliated Marine Contractors Inc., a
Delaware corporation, Bayou Marine Contractors Inc., a Delaware corporation,
Fleet Pipeline Services, Inc., a Delaware corporation, Gulf Offshore
Construction Inc., a Delaware corporation, HorizEN LLC, a Delaware limited
liability company, Progressive Pipeline Contractors Inc., a Delaware
corporation, and any other Person who may hereafter guarantee payment or
performance of the whole or any part of the Obligations and “Guarantors” means
collectively all such Persons.
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     “Guarantor Security Agreement” shall mean any security agreement executed
by any Guarantor in favor of Agent securing the Guaranty of such Guarantor.
     “Guaranty” shall mean any guaranty of the obligations of Borrowers executed
by a Guarantor in favor of Agent for its benefit and for the ratable benefit of
Lenders.
     “Hazardous Discharge” shall have the meaning set forth in Section 4.19(b)
hereof.
     “Hazardous Substance” shall mean, without limitation, any flammable
explosives, radon, radioactive materials, asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or
related materials as defined in CERCLA, the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New York State Environmental Conservation Law or any other applicable
Environmental Law and in the regulations adopted pursuant thereto.
     “Hazardous Wastes” shall mean all waste materials subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state laws now in force or hereafter enacted relating to hazardous waste
disposal.
     “Hedge Liabilities” shall have the meaning provided in the definition of
“Lender-Provided Interest Rate Hedge”.
     “Holdings” shall mean Horizon Offshore, Inc., a Delaware corporation.
     “Holdings on a Consolidated Basis” shall mean the consolidation in
accordance with GAAP of the accounts or other items of Holdings and its
respective Subsidiaries.
     “Horizon C-Bay” shall mean Horizon C-Bay Costa Afuera, S. De R.L. De C.V.,
a Mexican limited liability company.
     “Indebtedness” of a Person at a particular date shall mean all obligations
of such Person which in accordance with GAAP would be classified upon a balance
sheet as liabilities (except capital stock and surplus earned or otherwise) and
in any event, without limitation by reason of enumeration, shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed, and all premiums, if any, due at the required prepayment
dates of such indebtedness, and all indebtedness secured by a Lien on assets
owned by such Person, whether or not such indebtedness actually shall have been
created, assumed or incurred by such Person. Any indebtedness of such Person
resulting from the acquisition by such Person of any assets subject to any Lien
shall be deemed, for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the indebtedness secured thereby, whether or not
actually so created, assumed or incurred.
     “Ineligible Security” shall mean any security which may not be underwritten
or dealt in by member banks of the Federal Reserve System under Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.
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     “Intellectual Property” shall mean property constituting under any
Applicable Law a patent, patent application, copyright, trademark, service mark,
trade name, mask work, trade secret or license or other right to use any of the
foregoing.
     “Intellectual Property Claim” shall mean the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or otherwise)
that any Borrower’s ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other property or asset is
violative of any ownership of or right to use any Intellectual Property of such
Person.
     “Intercreditor Agreements” shall mean, collectively, any Intercreditor
Agreements entered into among Agent, Borrowers and Vessel Lender.
     “Interest Period” shall mean the period provided for any Eurodollar Rate
Loan pursuant to Section 2.2(b).
     “Interest Rate Hedge” shall mean an interest rate exchange, collar, cap,
swap, adjustable strike cap, adjustable strike corridor or similar agreements
entered into by any Borrower or in order to provide protection to, or minimize
the impact upon, such Borrower, and /or its Subsidiaries with respect to the
increasing floating rates of interest applicable to Indebtedness of the Borrower
and/or its Subsidiaries, as the case may be.
     “Inventory” shall mean and include as to each Borrower all of such
Borrower’s now owned or hereafter acquired goods, merchandise and other personal
property, wherever located, to be furnished under any consignment arrangement,
contract of service or held for sale or lease, all raw materials, work in
process, finished goods and materials and supplies of any kind, nature or
description which are or might be used or consumed in such Borrower’s business
or used in selling or furnishing such goods, merchandise and other personal
property, and all documents of title or other documents representing them.
     “Investment Property” shall mean and include as to each Borrower, all of
such Borrower’s now owned or hereafter acquired securities (whether certificated
or uncertificated), securities entitlements, securities accounts, commodities
contracts and commodities accounts.
     “Issuer” shall mean any Person who issues a Letter of Credit and/or accepts
a draft pursuant to the terms hereof.
     “Lender” and “Lenders” shall have the meaning ascribed to such term in the
preamble to this Agreement and shall include each Person which becomes a
transferee, successor or assign of any Lender.
     “Lender-Provided Interest Rate Hedge” shall mean an Interest Rate Hedge
which is provided by any Lender and with respect to which the Agent confirms
meets the following requirements: such Interest Rate Hedge (i) is documented in
a standard International Swap Dealer Association Agreement, (ii) provides for
the method of calculating the reimbursable amount of the provider’s credit
exposure in a reasonable and customary manner, and (iii) is entered into for
hedging (rather than speculative) purposes. The liabilities of any Borrower to
the provider of any Lender-Provided Interest Rate Hedge (the “Hedge
Liabilities”) shall be
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“Obligations” hereunder, guaranteed obligations under the Guaranty and secured
obligations under the Guarantor Security Agreement and otherwise treated as
Obligations for purposes of each of the Other Documents. The Liens securing the
Hedge Liabilities shall be pari passu with the Liens securing all other
Obligations under this Agreement and the Other Documents.
     “Letter of Credit Fees” shall have the meaning set forth in Section 3.2.
     “Letter of Credit Borrowing” shall have the meaning set forth in Section
2.12(d).
     “Letter of Credit Sublimit” shall mean $10,000,000.
     “Letters of Credit” shall have the meaning set forth in Section 2.9.
     “Lien” shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, security interest, lien (whether statutory or otherwise), Charge,
claim or encumbrance, or preference, priority or other security agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including any conditional sale or other title retention
agreement, any lease having substantially the same economic effect as any of the
foregoing, and the filing of, or agreement to give, any financing statement
under the Uniform Commercial Code or comparable law of any jurisdiction.
     “Lien Waiver Agreement” shall mean an agreement which is executed in favor
of Agent by a Person who owns or occupies premises on which any Collateral may
be located from time to time and by which each such Person shall waive any Lien
that each such Person may ever have with respect to any of the Collateral and
shall authorize Agent from time to time to enter upon the premises to inspect or
remove the Collateral from such premises or to use such premises to store or
dispose of such Inventory.
     “Material Adverse Effect” shall mean a material adverse effect on (a) the
condition (financial or otherwise), results of operations, assets, business or
properties of either (i) Holdings on a Consolidated Basis, or (ii) Borrowers on
a consolidated basis, (b) either (i) Holdings’ on a Consolidated Basis, or
(ii) Borrowers’ on a consolidated basis ability to duly and punctually pay or
perform the Obligations in accordance with the terms thereof, (c) the value of
the Collateral, or Agent’s Liens on the Collateral or the priority of any such
Lien or (d) the practical realization of the benefits of Agent’s and each
Lender’s rights and remedies under this Agreement and the Other Documents.
     “Maximum Face Amount” shall mean, with respect to any outstanding Letter of
Credit, the face amount of such Letter of Credit including all automatic
increases provided for in such Letter of Credit, whether or not any such
automatic increase has become effective.
     “Maximum Rate” shall have the meaning set forth in Section 3.6.
     “Maximum Revolving Advance Amount” shall mean $30,000,000, as such amount
may be reduced in accordance with Section 2.1(d).
     “Maximum Undrawn Amount” shall mean with respect to any outstanding Letter
of Credit, the amount of such Letter of Credit that is or may become available
to be drawn,
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including all automatic increases provided for in such Letter of Credit, whether
or not any such automatic increase has become effective.
     “Multiemployer Plan” shall mean a “multiemployer plan” as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
     “Multiple Employer Plan” shall mean a Plan which has two or more
contributing sponsors (including any Borrower or any member of the Controlled
Group) at least two of whom are not under common control, as such a plan is
described in Section 4064 of ERISA.
     “Note” shall mean the Revolving Credit Note.
     “Obligations” shall mean and include any and all loans, advances, debts,
liabilities, obligations, covenants and duties owing by any Borrower to Lenders
or Agent or to any other direct or indirect subsidiary or affiliate of Agent or
any Lender of any kind or nature, present or future (including any interest or
other amounts accruing thereon after maturity, or after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization or
like proceeding relating to any Borrower, whether or not a claim for post-filing
or post-petition interest or other amounts is allowed in such proceeding),
whether or not evidenced by any note, guaranty or other instrument, whether
arising under any agreement, instrument or document, (including this Agreement
and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit,
loan, equipment lease or guarantee, under any interest or currency swap, future,
option or other similar agreement, or in any other manner, whether arising out
of overdrafts or deposit or other accounts or electronic funds transfers
(whether through automated clearing houses or otherwise) or out of the Agent’s
or any Lenders non-receipt of or inability to collect funds or otherwise not
being made whole in connection with depository transfer check or other similar
arrangements, whether direct or indirect (including those acquired by assignment
or participation), absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising, contractual or tortious, liquidated or
unliquidated, regardless of how such indebtedness or liabilities arise or by
what agreement or instrument they may be evidenced or whether evidenced by any
agreement or instrument, including, but not limited to, any and all of any
Borrower’s Indebtedness and/or liabilities under this Agreement, the Other
Documents or under any other agreement between Agent or Lenders and any Borrower
and any amendments, extensions, renewals or increases and all costs and expenses
of Agent and any Lender incurred in the documentation, negotiation,
modification, enforcement, collection or otherwise in connection with any of the
foregoing, including but not limited to reasonable attorneys’ fees and expenses
and all obligations of any Borrower to Agent or Lenders to perform acts or
refrain from taking any action.
     “Operating Company Borrowers” shall mean Contractors, HOC and Construction.
     “Ordinary Course of Business” shall mean with respect to any Borrower, the
ordinary course of such Borrower’s business as conducted on the Closing Date.
     “Original Owners” shall mean Elliot Associates, L.P., Elliott
International, L,P., Manchester Securities Corp. and their Affiliates.
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     “Other Documents” shall mean any Pledge Agreement, the Note, the
Questionnaire, any Guaranty, any Guarantor Security Agreement, any
Lender-Provided Interest Rate Hedge and any and all other agreements,
instruments and documents, including guaranties, pledges, powers of attorney,
consents, interest or currency swap agreements or other similar agreements and
all other writings heretofore, now or hereafter executed by any Borrower or any
Guarantor and/or delivered to Agent or any Lender in respect of the transactions
contemplated by this Agreement.
     “Out-of-Formula Loans” shall have the meaning set forth in Section 15.2(b).
     “Parent” of any Person shall mean a corporation or other entity owning,
directly or indirectly at least 50% of the shares of stock or other ownership
interests having ordinary voting power to elect a majority of the directors of
the Person, or other Persons performing similar functions for any such Person.
     “Participant” shall mean each Person who shall be granted the right by any
Lender to participate in any of the Advances and who shall have entered into a
participation agreement in form and substance satisfactory to such Lender.
     “Participation Advance” shall have the meaning set forth in
Section 2.12(d).
     “Participation Commitment” shall mean each Lender’s obligation to buy a
participation of the Letters of Credit issued hereunder.
     “Payee” and “Payees” shall have the meanings set forth in Section 3.10.
     “Payment Office” shall mean initially Two Tower Center Boulevard, East
Brunswick, New Jersey 08816; thereafter, such other office of Agent, if any,
which it may designate by notice to Borrowing Agent and to each Lender to be the
Payment Office.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
     “Pemex” shall mean Pemex Exploracion y Produccion.
     “Pemex Litigation Receivable” shall mean any amount payable to ECH with
respect to its commercial litigation claim against Pemex pending as of the
Closing Date.
     “Pension Benefit Plan” shall mean at any time any employee pension benefit
plan (including a Multiple Employer Plan, but not a Multiemployer Plan) which is
covered by Title IV of ERISA or is subject to the minimum funding standards
under Section 412 of the Code and either (i) is maintained by any member of the
Controlled Group for employees of any member of the Controlled Group; or
(ii) has at any time within the preceding five years been maintained by any
entity which was at such time a member of the Controlled Group for employees of
any entity which was at such time a member of the Controlled Group.
     “Permanent Reserve” shall mean an amount equal to $6,000,000.
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     “Permitted Discretion” shall mean a determination made in good faith and in
the exercise of reasonable (from the perspective of a secured asset based
lender) business judgment.
     “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the
benefit of Agent and Lenders; (b) Liens for taxes, assessments or other
governmental charges not delinquent or being Properly Contested; (c) Liens
disclosed in the financial statements referred to in Section 5.5; (d) deposits
or pledges to secure obligations under worker’s compensation, social security or
similar laws, or under unemployment insurance; (e) deposits or pledges to secure
bids, tenders, contracts (other than contracts for the payment of money),
leases, statutory obligations, surety and appeal bonds (including performance,
warranty and bid bonds) to the extent the same are permitted under Section 7.8
and other obligations of like nature arising in the Ordinary Course of Business;
(f) Liens arising by virtue of the rendition, entry or issuance against any
Borrower or any Subsidiary, or any property of any Borrower or any Subsidiary,
of any judgment, writ, order, or decree for so long as each such Lien (i) is in
existence for less than 20 consecutive days after it first arises or is being
Properly Contested and (ii) is at all times junior in priority to any Liens in
favor of Agent; (g) maritime, shipyard, mechanics’, workers’, materialmen’s or
other like Liens arising in the Ordinary Course of Business with respect to
obligations which are not due or which are being Properly Contested; (h) Liens
placed upon fixed assets and equipment hereafter acquired to secure a portion of
the purchase price thereof, provided that (i) any such lien shall not encumber
any other property of any Borrower and (ii) the aggregate amount of Indebtedness
secured by such Liens incurred as a result of such purchases during any fiscal
year shall not exceed the amount provided for in Section 7.6; (i) Liens in favor
of the Vessel Lender securing the Vessel Loan and with respect to refinancing
thereof in accordance with Section 7.8, provided that any applicable
Intercreditor Agreement is in full force and effect; and (j) Liens disclosed on
Schedule 1.2 and refinancing thereof provided that such refinancings are for
amounts not greater than the amount thereof on the Closing Date and on terms
which are no more onerous than those in effect on the Closing Date.
     “Permitted Securities” shall mean any shares, units or interests of equity
securities or ownership interests of Holdings that by their 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 or otherwise (A) are not
convertible or exchangeable for Indebtedness or any securities that are not
Permitted Securities, (B) (i) do not mature and (ii) are not putable or
redeemable for cash at the option of the holder thereof, in each case under
clause (i) or (ii) in whole or in part on or prior to the date that is the
earlier to occur of the last day of the Term or the actual payment in full in
cash of the Obligations, (C) do not have payments of dividends on or prior to
the date that is the earlier to occur of the last day of the Term or the actual
payment in full of the Obligations, (D) are unsecured and by operation of law or
by legally binding agreement are subordinated in right of repayment, liens,
security and remedies to all of the Obligations and to all of Agent’s and
Purchasers’ rights, Liens and remedies, (E) do not have any veto or
supermajority voting rights or approval rights with respect to any issues,
and/or (F) are not sold, issued or otherwise transferred in connection with or
as a part of an Initial Public Offering.
     “Person” shall mean any individual, sole proprietorship, partnership,
corporation, business trust, joint stock company, trust, unincorporated
organization, association, limited liability company, limited liability
partnership, institution, public benefit corporation, joint
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venture, entity or Governmental Body (whether federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof).
     “Plan” shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (including a Pension Benefit Plan), maintained for
employees of any Borrower or any member of the Controlled Group or any such Plan
to which any Borrower or any member of the Controlled Group is required to
contribute on behalf of any of its employees.
     “Pledge Agreement” shall mean each pledge agreement executed by Borrowers
in favor of Agent.
     “PNC” shall have the meaning set forth in the preamble to this Agreement
and shall extend to all of its successors and assigns.
     “Pro Forma Balance Sheet” shall have the meaning set forth in
Section 5.5(a) hereof.
     “Pro Forma Financial Statements” shall have the meaning set forth in
Section 5.5(b) hereof.
     “Projections” shall have the meaning set forth in Section 5.5(b) hereof.
     “Properly Contested” shall mean, in the case of any Indebtedness of any
Person (including any taxes) that is not paid as and when due or payable by
reason of such Person’s bona fide dispute concerning its liability to pay same
or concerning the amount thereof, (i) such Indebtedness is being properly
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted; (ii) such Person has established appropriate reserves as
shall be required in conformity with GAAP; (iii) no Lien is imposed upon any of
such Person’s assets with respect to such Indebtedness unless enforcement of
such Lien is stayed during the period prior to the final resolution or
disposition of such dispute; and (iv) if such Indebtedness results from, or is
determined by the entry, rendition or issuance against a Person or any of its
assets of a judgment, writ, order or decree, enforcement of such judgment, writ,
order or decree is stayed pending a timely appeal or other judicial review.
     “Purchasing Lender” shall have the meaning set forth in Section 16.3
hereof.
     “Questionnaire” shall mean the UCC Information Request and Authorization
Form and the responses thereto provided by Borrowing Agent and delivered to
Agent.
     “RCRA” shall mean the Resource Conservation and Recovery Act, 42 U.S.C. §§
6901 et seq., as same may be amended from time to time.
     “Real Property” shall mean all of each Borrower’s right, title and interest
in and to the owned and leased premises identified on Schedule 4.19 hereto.
     “Receivables” shall mean and include, as to each Borrower, all of such
Borrower’s accounts, contract rights, instruments (including those evidencing
indebtedness owed to such Borrower by its Affiliates), documents, chattel paper
(including electronic chattel paper), general intangibles relating to accounts,
drafts and acceptances, credit card receivables and all other
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forms of obligations owing to such Borrower arising out of or in connection with
the sale or lease of Inventory or the rendition of services, all supporting
obligations, guarantees and other security therefor, whether secured or
unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.
     “Reimbursement Obligation” shall have the meaning set forth in
Section 2.12(b) hereof.
     “Release” shall have the meaning set forth in Section 5.7(c)(i) hereof.
     “Reportable Event” shall mean a reportable event described in Section
4043(c) of ERISA or the regulations promulgated thereunder.
     “Required Lenders” shall mean Lenders holding at least fifty-one percent
(51%) of the Advances and, if no Advances are outstanding, shall mean Lenders
holding fifty-one percent (51%) of the Commitment Percentages.
     “Reserve Percentage” shall mean as of any day the maximum percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”.
     “Retainage” shall mean, with respect to any contract with a Customer for
the furnishing of services by a Borrower, the portion of the contract price
owing to such Borrower that in the Ordinary Course of Business is retained by
such Customer pursuant to the terms of the contract for a period of time
following performance of the services by such Borrower.
     “Revenue Accrual Worksheet” means a revenue accrual worksheet reflecting
(i) the number of jobs of the Borrowers then outstanding, and (ii) for each job
of the Borrowers, the percentage complete, the estimated revenue, cost and
profit at completion, the billed costs to date, the unbilled revenue and actual
job cost incurred to date, the job to date profit and job to date profit
percentage, the projected completion date, the payables listing and the vessels
utilized for each job; as prepared at the direction of and certified by the
Chief Financial Officer of each Borrower.
     “Revolving Advances” shall mean Advances made other than Letters of Credit.
     “Revolving Credit Note” shall mean the promissory note referred to in
Section 2.1(a) hereof, as it may be increased, amended, extended or replaced
from time to time.
     “Revolving Interest Rate” shall mean an interest rate per annum equal to
(a) with respect to Domestic Rate Loans, the lesser of (i) the sum of the
Alternate Base Rate plus the Applicable Domestic Rate Margin, and (ii) the
Maximum Rate and (b) with respect to the Eurodollar Rate Loans, the lesser of
(i) the sum of the Eurodollar Rate plus the Applicable Eurodollar Rate Margin,
and (ii) the Maximum Rate.
     “SEC” shall mean the Securities and Exchange Commission or any successor
thereto.
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     “Section 20 Subsidiary” shall mean the Subsidiary of the bank holding
company controlling PNC, which Subsidiary has been granted authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.
     “Securities Act” shall mean the Securities Act of 1933, as amended.
     “Settlement Date” shall mean the Closing Date and thereafter Wednesday or
Thursday of each week or more frequently if Agent deems appropriate unless such
day is not a Business Day in which case it shall be the next succeeding Business
Day.
     “Subordinated Debt Payments” shall mean and include all cash actually
expended to make payments of principal and interest on the Subordinated Note.
     “Subordinated Lender” shall mean Elliott Associates, L.P.; Falcon Mezzanine
Partners, LP; Lloyd I. Miller; Milfam I. L.P.; Milfam II, L.P.; Milfam LLC;
Lloyd I. Miller Trust A-4; L. Miller III Generation Skipping Trust dated
12/31/91; Catherine C. Miller Irrevocable Trust dated 3/26/91; and Alexandra B.
Miller.
     “Subordinated Loan Documentation” shall mean the Amended and Restated
Purchase Agreements among Holdings as Issuer and Horizon Vessels, Inc.,
Contractors, Horizon Subsea Services, Inc. , Horizon Vessels International,
Ltd., HorizEn, LLC, ECH, and HOC as Guarantors and Subordinated Lender.
     “Subordinated Note” shall mean the 8% Subordinated Secured Notes due
April 31, 2010.
     “Subsidiary” of any Person shall mean a corporation or other entity of
whose Equity Interests having ordinary voting power (other than Equity Interests
having such power only by reason of the happening of a contingency) to elect a
majority of the directors of such corporation, or other Persons performing
similar functions for such entity, are owned, directly or indirectly, by such
Person.
     “Subsidiary Stock” shall mean the issued and outstanding Equity Interests
(not to exceed 65% of the Equity Interests of any foreign Subsidiary) of Horizon
Offshore Contractors, Inc., HOC Offshore, S. De R.L. de C.V., Horizon Marine
Contractors (Malaysia) SDN BHD, PT Horizon Offshore Indonesia, Horizon Marine
Construction (Mauritius) Ltd., Horizon Marine Construction Ltd., Horizon
Offshore International Ltd., Horizon Offshore Contractors Ltd., Horizon Subsea
Services, Inc., Horizon Offshore Pte. Ltd., Horizon Offshore Services, Ltd.,
Mojarra Costa Afuera S. de R.L. de C.V., Texas Offshore Contractors Corp.,
Tiburon Ingenieria S. de R.L. de C.V., Horizon Vessels International Ltd.,
Horizon Vessels, Inc., Affiliated Marine Contractors Inc., Bayou Marine
Contractors Inc., ECH Offshore, S. De R.L. de C.V., Horizon Offshore Nigeria
Ltd., Horizon Offshore Contractors (Mauritius) Ltd, and any other Subsidiary
owned by any Borrower that is an operating company.
     “Tangible Net Worth” shall mean, at any particular date, (a) the aggregate
amount of all assets of Holdings on a Consolidated Basis as may be properly
classified as such in accordance with GAAP consistently applied, including
deferred tax assets, all assets relating to intercompany or affiliate
transactions, plus non-cash losses due to asset impairment, but
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excluding such other assets as are properly classified as intangible assets
under GAAP, less (b) the aggregate amount of all liabilities of Holdings on a
Consolidated Basis.
     “Term” shall have the meaning set forth in Section 13.1 hereof.
     “Termination Event” shall mean (i) a Reportable Event with respect to any
Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower or any member of
the Controlled Group from a Plan or Multiemployer Plan during a plan year in
which such entity was a “substantial employer” as defined in Section 4001(a)(2)
of ERISA; (iii) the providing of notice of intent to terminate a Plan in a
distress termination described in Section 4041(c) of ERISA; (iv) the institution
by the PBGC of proceedings to terminate a Plan or Multiemployer Plan; (v) any
event or condition (a) which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan, or (b) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the partial or
complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of
any Borrower or any member of the Controlled Group from a Multiemployer Plan.
     “Toxic Substance” shall mean and include any material present on the Real
Property which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA),
15 U.S.C. §§ 2601 et seq., applicable state law, or any other applicable Federal
or state laws now in force or hereafter enacted relating to toxic substances.
“Toxic Substance” includes but is not limited to asbestos, polychlorinated
biphenyls (PCBs) and lead-based paints.
     “Trading with the Enemy Act” shall mean the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) and any enabling legislation or executive order relating
thereto.
     “Transferee” shall have the meaning set forth in Section 16.3(c) hereof.
     “Undrawn Availability” at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Revolving Advance
Amount (reduced by the Vendor Payable Reserve), minus (b) the sum of (i) the
outstanding amount of Advances, plus (ii) fees and expenses under this Agreement
for which Borrowers are liable but which have not been paid or charged to
Borrowers’ Account, plus, (c) without duplication, the sum of Borrower’s cash on
hand minus the aggregate amount of its checks then outstanding.
     “Undrawn Availability Event” shall mean such time as Undrawn Availability
falls below $15,000,000 at any reporting period under this Agreement.
     “Uniform Commercial Code” shall have the meaning set forth in Section 1.3
hereof.
     “USA PATRIOT Act” shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.
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     “Vendor Payable Reserve” shall mean all amounts over an aggregate amount of
$5,000,000 which are due to Borrower’s vendors and unpaid more than sixty
(60) days after the original invoice date therefor.
     “Vessel Debt Payments” shall mean collectively, the Vessel Debt 1 Payment,
the Vessel Debt 2 Payments, the Vessel Debt 3 Payments and the Vessel Debt 4
Payments.
     “Vessel Debt 1 Payments” shall mean and include all cash actually expended
to make payments of principal and interest on the Vessel Note 1.
     “Vessel Debt 2 Payments” shall mean and include all cash actually expended
to make payments of principal and interest on the Vessel Note 2.
     “Vessel Debt 3 Payments” shall mean and include all cash actually expended
to make payments of principal and interest on the Vessel Note 3.
     “Vessel Debt 4 Payments” shall mean and include all cash actually expended
to make payments of principal and interest on the Vessel Note 4.
     “Vessel Lender” shall mean, collectively, Vessel Lender 1, Vessel Lender 2,
Vessel Lender 3 and Vessel Lender 4.
     “Vessel Lender 1” shall mean The CIT Group/Equipment Financing, Inc. as
agent, for the other lenders specified in Vessel Loan 1 Documentation.
     “Vessel Lender 2” shall mean General Electric Capital Corporation.
     “Vessel Lender 3” shall mean General Electric Credit Corporation of
Tennessee.
     “Vessel Lender 4” shall mean General Electric Capital Corporation.
     “Vessel Loan” shall mean, collectively, Vessel Loan 1, Vessel Loan 2,
Vessel Loan 3 and Vessel Loan 4.
     “Vessel Loan 1” shall mean the loan evidenced by the Vessel Note 1.
     “Vessel Loan 2” shall mean the loan evidenced by the Vessel Note 2.
     “Vessel Loan 3” shall mean the loan evidenced by the Vessel Note 3.
     “Vessel Loan 4” shall mean the loan evidenced by the Vessel Note 4.
     “Vessel Loan Documentation” shall mean, collectively, the Vessel Loan 1
Documentation, the Vessel Loan 2 Documentation, the Vessel Loan 3 Documentation
and the Vessel Loan 4 Documentation.
     “Vessel Loan 1 Documentation” shall mean the Loan Agreement dated March 9,
2006 between Horizon Vessels, Inc. and Vessel Lender 1 and the material related
agreements.
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     “Vessel Loan 2 Documentation” shall mean the Loan Agreement dated June 29,
2001 among Horizon Vessels, Inc. as borrower, Holdings as guarantor and Vessel
Lender 2 and the material related agreements.
     “Vessel Loan 3 Documentation” shall mean the Loan Agreement dated June 30,
2003 among Horizon Vessels International, Ltd. as borrower, Holdings as
guarantor and Vessel Lender 3 and the material related agreements.
     “Vessel Loan 4 Documentation” shall mean the Loan Agreement dated
February 17, 2006 among Horizon Vessels International, Ltd. as borrower,
Holdings as guarantor and Vessel Lender 4 and the material related agreements.
     “Vessel Note” shall mean collectively, Vessel Note 1, Vessel Note 2, Vessel
Note 3 and Vessel Note 4 and the material related agreements.
     “Vessel Note 1” shall mean the promissory note issued by Horizon Vessels,
Inc. in favor of Vessel Lender 1 dated March 9, 2006 in the principal sum of
$77,403,827.05.
     “Vessel Note 2” shall mean the promissory note issued by Horizon Vessels,
Inc. in favor of Vessel Lender 2 dated June 29, 2001 in the principal sum of
$11,200,000.
     “Vessel Note 3” shall mean the promissory note dated June 30, 2003 in the
principal sum of $35,000,000.00 in favor of Vessel Lender 3.
     “Vessel Note 4” shall mean the promissory note dated February 17, 2006 in
the principal sum of $11,000,000 in favor of Vessel Lender 4.
     “Week” shall mean the time period commencing with the opening of business
on a Wednesday and ending on the end of business the following Tuesday.
     1.3 Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the State of Texas from time to time (the
“Uniform Commercial Code”) shall have the meaning given therein unless otherwise
defined herein. Without limiting the foregoing, the terms “accounts”, “chattel
paper”, “instruments”, “general intangibles”, “payment intangibles”, “supporting
obligations”, “securities”, “investment property”, “documents”, “deposit
accounts”, “software”, “letter of credit rights”, “inventory”, “equipment” and
“fixtures”, as and when used in the description of Collateral shall have the
meanings given to such terms in Articles 8 or 9 of the Uniform Commercial Code.
To the extent the definition of any category or type of collateral is expanded
by any amendment, modification or revision to the Uniform Commercial Code, such
expanded definition will apply automatically as of the date of such amendment,
modification or revision.
     1.4 Certain Matters of Construction. The terms “herein”, “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. All references
herein to Articles, Sections, Exhibits and Schedules shall be construed to refer
to Articles and Sections of, and Exhibits and Schedules to, this Agreement. Any
pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice
versa. All
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references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements to which Agent is a party, including
references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof. All references herein to the time of day shall mean the time in Dallas,
Texas. Unless otherwise provided, all financial calculations shall be performed
with Inventory valued on a first-in, first-out basis. Whenever the words
“including” or “include” shall be used, such words shall be understood to mean
“including, without limitation” or “include, without limitation”. A Default or
Event of Default shall be deemed to exist at all times during the period
commencing on the date that such Default or Event of Default occurs to the date
on which such Default or Event of Default is waived in writing pursuant to this
Agreement or, in the case of a Default, is cured within any period of cure
expressly provided for in this Agreement; and an Event of Default shall
“continue” or be “continuing” until such Event of Default has been waived in
writing by the Required Lenders. Any Lien referred to in this Agreement or any
of the Other Documents as having been created in favor of Agent, any agreement
entered into by Agent pursuant to this Agreement or any of the Other Documents,
any payment made by or to or funds received by Agent pursuant to or as
contemplated by this Agreement or any of the Other Documents, or any act taken
or omitted to be taken by Agent, shall, unless otherwise expressly provided, be
created, entered into, made or received, or taken or omitted, for the benefit or
account of Agent and Lenders. Wherever the phrase “to the best of Borrowers’
knowledge” or words of similar import relating to the knowledge or the awareness
of any Borrower are used in this Agreement or Other Documents, such phrase shall
mean and refer to (i) the actual knowledge of a senior officer of any Borrower
or (ii) the knowledge that a senior officer would have obtained if he had
engaged in good faith and diligent performance of his duties, including the
making of such reasonably specific inquiries as may be necessary of the
employees or agents of such Borrower and a good faith attempt to ascertain the
existence or accuracy of the matter to which such phrase relates. All covenants
hereunder shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or otherwise within the limitations of, another
covenant shall not avoid the occurrence of a default if such action is taken or
condition exists. In addition, all representations and warranties hereunder
shall be given independent effect so that if a particular representation or
warranty proves to be incorrect or is breached, the fact that another
representation or warranty concerning the same or similar subject matter is
correct or is not breached will not affect the incorrectness of a breach of a
representation or warranty hereunder.
II            ADVANCES, PAYMENTS.
     2.1 Revolving Advances.
          (a) Amount of Revolving Advances. Subject to the terms and conditions
set forth in this Agreement including Sections 2.1(b) and (c), each Lender,
severally and not jointly, will make Revolving Advances to Borrowers in
aggregate amounts outstanding at any time equal to such Lender’s Commitment
Percentage of the lesser of (x) the Maximum Revolving Advance Amount less the
aggregate Maximum Undrawn Amount of all outstanding Letters of Credit or (y) an
amount equal to the sum of:
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               (i) up to 85%, subject to the provisions of Section 2.1(c) hereof
(“Advance Rate”), of Eligible Receivables, minus
               (ii) the Permanent Reserve; minus
               (iii) the aggregate Maximum Undrawn Amount of all outstanding
Letters of Credit, minus
               (iv) such reserves as Agent may reasonably deem proper and
necessary from time to time in its Permitted Discretion, including, without
limitation, the Vendor Payable Reserve.
     The amount derived from the sum of (x) Sections 2.1(a)(y)(i) minus (y)
Section 2.1 (a)(y)(ii), (iii) and (iv) at any time and from time to time shall
be referred to as the “Formula Amount”. The Revolving Advances shall be
evidenced by one or more secured promissory notes (collectively, the “Revolving
Credit Note”) substantially in the form attached hereto as Exhibit 2.1(a).
          (b) Individual Revolving Advances. Each Lender, severally and not
jointly, will make Revolving Advances to each Borrower in aggregate amounts
outstanding at any time not greater than such Lender’s Commitment Percentage of
the lesser of (x) such Borrower’s Individual Maximum Revolving Advance Amount
less the aggregate amount of outstanding Letters of Credit or (y) such
Borrower’s Individual Formula Amount less the aggregate amount of outstanding
Letters of Credit.
          (c) Discretionary Rights. The Advance Rate may be increased or
decreased by Agent at any time and from time to time in the exercise of its
Permitted Discretion. Each Borrower consents to any such increases or decreases
and acknowledges that decreasing the Advance Rate or increasing or imposing
reserves may limit or restrict Advances requested by Borrowing Agent. Agent
agrees to promptly notify Borrower of any such increase or decrease in the
advance rates or imposition of new reserves; provided, that any failure to give
such notice shall not affect Agent’s right to implement the same. The rights of
Agent under this subsection are subject to the provisions of Section 16.2(b).
          (d) Reduction of Maximum Revolving Advance Amount. Borrowing Agent on
behalf of Borrowers may notify Agent prior to 10:00 a.m. (Dallas, Texas time) of
its request to reduce the Maximum Revolving Advance Amount on the following
Business Day (without premium), provided that Borrowing Agent may only make such
request one (1) time during the Term following the consummation of a financing
of Receivables from Customers outside the continental United States of America
that is either provided or led by Agent and guaranteed by the Export-Import Bank
of the United States, and the Maximum Revolving Advance Amount shall not be
reduced by more than the aggregate amount of such financing.
     2.2 Procedure for Revolving Advances Borrowing.
          (a) Borrowing Agent on behalf of any Borrower may notify Agent prior
to 10:00 a.m. on a Business Day of a Borrower’s request to incur, on that day, a
Revolving Advance hereunder. Should any amount required to be paid as interest
hereunder, or as fees or
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other charges under this Agreement or any other agreement with Agent or Lenders,
or with respect to any other Obligation, become due, same shall be deemed a
request for a Revolving Advance as of the date such payment is due, in the
amount required to pay in full such interest, fee, charge or Obligation under
this Agreement or any other agreement with Agent or Lenders, and such request
shall be irrevocable.
          (b) Notwithstanding the provisions of subsection (a) above, in the
event any Borrower desires to obtain a Eurodollar Rate Loan, Borrowing Agent
shall give Agent written notice by no later than 10:00 a.m. on the day which is
three (3) Business Days prior to the date such Eurodollar Rate Loan is to be
borrowed, specifying (i) the date of the proposed borrowing (which shall be a
Business Day), (ii) the type of borrowing and the amount on the date of such
Advance to be borrowed, which amount shall be an integral multiple of
$1,000,000, and (iii) the duration of the first Interest Period therefor.
Interest Periods for Eurodollar Rate Loans shall be for one, two or three
months; provided, if an Interest Period would end on a day that is not a
Business Day, it shall end on the next succeeding Business Day unless such day
falls in the next succeeding calendar month in which case the Interest Period
shall end on the next preceding Business Day. No Eurodollar Rate Loan shall be
made available to any Borrower during the continuance of a Default or an Event
of Default. After giving effect to each requested Eurodollar Rate Loan,
including those which are converted from a Domestic Rate Loan under
Section 2.2(d), there shall not be outstanding more than three (3) Eurodollar
Rate Loans, in the aggregate.
          (c) Each Interest Period of a Eurodollar Rate Loan shall commence on
the date such Eurodollar Rate Loan is made and shall end on such date as
Borrowing Agent may elect as set forth in subsection (b)(iii) above provided
that the exact length of each Interest Period shall be determined in accordance
with the practice of the interbank market for offshore Dollar deposits and no
Interest Period shall end after the last day of the Term.
     Borrowing Agent shall elect the initial Interest Period applicable to a
Eurodollar Rate Loan by its notice of borrowing given to Agent pursuant to
Section 2.2(b) or by its notice of conversion given to Agent pursuant to
Section 2.2(d), as the case may be. Borrowing Agent shall elect the duration of
each succeeding Interest Period by giving irrevocable written notice to Agent of
such duration not later than 10:00 a.m. on the day which is three (3) Business
Days prior to the last day of the then current Interest Period applicable to
such Eurodollar Rate Loan. If Agent does not receive timely notice of the
Interest Period elected by Borrowing Agent, Borrowing Agent shall be deemed to
have elected to convert to a Domestic Rate Loan subject to Section 2.2(d)
hereinbelow.
          (d) Provided that no Event of Default shall have occurred and be
continuing, Borrowing Agent may, on the last Business Day of the then current
Interest Period applicable to any outstanding Eurodollar Rate Loan, or on any
Business Day with respect to Domestic Rate Loans, convert any such loan into a
loan of another type in the same aggregate principal amount provided that any
conversion of a Eurodollar Rate Loan shall be made only on the last Business Day
of the then current Interest Period applicable to such Eurodollar Rate Loan. If
Borrowing Agent desires to convert a loan, Borrowing Agent shall give Agent
written notice by no later than 10:00 a.m. (i) on the day which is three
(3) Business Days’ prior to the date on which such conversion is to occur with
respect to a conversion from a Domestic Rate Loan to a Eurodollar
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Rate Loan, or (ii) on the day which is one (1) Business Day prior to the date on
which such conversion is to occur with respect to a conversion from a Eurodollar
Rate Loan to a Domestic Rate Loan, specifying, in each case, the date of such
conversion, the loans to be converted and if the conversion is from a Domestic
Rate Loan to any other type of loan, the duration of the first Interest Period
therefor.
          (e) At its option and upon written notice given prior to 10:00 a.m.
(Dallas, Texas time) at least three (3) Business Days’ prior to the date of such
prepayment, any Borrower may prepay the Eurodollar Rate Loans in whole at any
time or in part from time to time with accrued interest on the principal being
prepaid to the date of such repayment. Such Borrower shall specify the date of
prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is
required or permitted on a date other than the last Business Day of the then
current Interest Period with respect thereto, such Borrower shall indemnify
Agent and Lenders therefor in accordance with Section 2.2(f) hereof.
          (f) Each Borrower shall indemnify Agent and Lenders and hold Agent and
Lenders harmless from and against any and all losses or expenses that Agent and
Lenders may sustain or incur as a consequence of any prepayment, conversion of
or any default by any Borrower in the payment of the principal of or interest on
any Eurodollar Rate Loan or failure by any Borrower to complete a borrowing of,
a prepayment of or conversion of or to a Eurodollar Rate Loan after notice
thereof has been given, including, but not limited to, any interest payable by
Agent or Lenders to lenders of funds obtained by it in order to make or maintain
its Eurodollar Rate Loans hereunder. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by Agent or any Lender to
Borrowing Agent shall be conclusive absent manifest error.
          (g) Notwithstanding any other provision hereof, if any Applicable Law,
treaty, regulation or directive, or any change therein or in the interpretation
or application thereof, shall make it unlawful for any Lender (for purposes of
this subsection (g), the term “Lender” shall include any Lender and the office
or branch where any Lender or any corporation or bank controlling such Lender
makes or maintains any Eurodollar Rate Loans) to make or maintain its Eurodollar
Rate Loans, the obligation of Lenders to make Eurodollar Rate Loans hereunder
shall forthwith be cancelled and Borrowers shall, if any affected Eurodollar
Rate Loans are then outstanding, promptly upon request from Agent, either pay
all such affected Eurodollar Rate Loans or convert such affected Eurodollar Rate
Loans into loans of another type. If any such payment or conversion of any
Eurodollar Rate Loan is made on a day that is not the last day of the Interest
Period applicable to such Eurodollar Rate Loan, Borrowers shall pay Agent, upon
Agent’s request, such amount or amounts as may be necessary to compensate
Lenders for any loss or expense sustained or incurred by Lenders in respect of
such Eurodollar Rate Loan as a result of such payment or conversion, including
(but not limited to) any interest or other amounts payable by Lenders to lenders
of funds obtained by Lenders in order to make or maintain such Eurodollar Rate
Loan. A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by Lenders to Borrowing Agent shall be conclusive
absent manifest error.
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     2.3 Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and,
together with any and all other Obligations of Borrowers to Agent or Lenders,
shall be charged to Borrowers’ Account on Agent’s books. During the Term,
Borrowers may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof. The
proceeds of each Revolving Advance requested by Borrowing Agent on behalf of any
Borrower or deemed to have been requested by any Borrower under Section 2.2(a)
hereof shall, with respect to requested Revolving Advances to the extent Lenders
make such Revolving Advances, be made available to the applicable Borrower on
the day so requested by way of credit to such Borrower’s operating account at
PNC, or such other bank as Borrowing Agent may designate following notification
to Agent, in immediately available federal funds or other immediately available
funds or, with respect to Revolving Advances deemed to have been requested by
any Borrower, be disbursed to Agent to be applied to the outstanding Obligations
giving rise to such deemed request.
     2.4 Intentionally Omitted.
     2.5 Maximum Advances. The aggregate balance of Revolving Advances
outstanding at any time shall not exceed the lesser of (a) the Maximum Revolving
Advance Amount or (b) the Formula Amount less, in each case, the aggregate
Maximum Undrawn Amount of all issued and outstanding Letters of Credit.
     2.6 Repayment of Advances.
          (a) The Revolving Advances shall be due and payable in full on the
last day of the Term subject to earlier prepayment as herein provided.
          (b) Each Borrower recognizes that the amounts evidenced by checks,
notes, drafts or any other items of payment relating to and/or proceeds of
Collateral may not be collectible by Agent on the date received. In
consideration of Agent’s agreement to conditionally credit Borrowers’ Account as
of the Business Day on which Agent receives those items of payment, each
Borrower agrees that, in computing the charges under this Agreement, all items
of payment shall be deemed applied by Agent on account of the Obligations one
(1) Business Day after (i) the Business Day Agent receives such payments via
wire transfer or electronic depository check or (ii) in the case of payments
received by Agent in any other form, the Business Day such payment constitutes
good funds in Agent’s account. Agent may charge Borrowers’ Account for the
amount of any item of payment which is returned to Agent unpaid.
          (c) All payments of principal, interest and other amounts payable
hereunder, or under any of the Other Documents shall be made to Agent at the
Payment Office not later than 1:00 P.M. (Dallas, Texas time) on the due date
therefor in lawful money of the United States of America in federal funds or
other funds immediately available to Agent. Agent shall have the right to
effectuate payment on any and all Obligations due and owing hereunder by
charging Borrowers’ Account or by making Advances as provided in Section 2.2
hereof.
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          (d) Borrowers shall pay principal, interest, and all other amounts
payable hereunder, or under any related agreement, without any deduction
whatsoever, including, but not limited to, any deduction for any setoff or
counterclaim.
     2.7 Repayment of Excess Advances. The aggregate balance of Advances
outstanding at any time in excess of the maximum amount of Advances permitted
hereunder shall be immediately due and payable without the necessity of any
demand, at the Payment Office, whether or not a Default or Event of Default has
occurred.
     2.8 Statement of Account. Agent shall maintain, in accordance with its
customary procedures, a loan account (“Borrowers’ Account”) in the name of
Borrowers in which shall be recorded the date and amount of each Advance made by
Agent and the date and amount of each payment in respect thereof; provided,
however, the failure by Agent to record the date and amount of any Advance shall
not adversely affect Agent or any Lender. Each month, Agent shall send to
Borrowing Agent a statement showing the accounting for the Advances made,
payments made or credited in respect thereof, and other transactions between
Agent and Borrowers during such month. The monthly statements shall be deemed
correct and binding upon Borrowers in the absence of manifest error and shall
constitute an account stated between Lenders and Borrowers unless Agent receives
a written statement of Borrowers’ specific exceptions thereto within thirty
(30) days after such statement is received by Borrowing Agent. The records of
Agent with respect to the loan account shall be conclusive evidence absent
manifest error of the amounts of Advances and other charges thereto and of
payments applicable thereto.
     2.9 Letters of Credit. Subject to the terms and conditions hereof, Agent
shall issue or cause the issuance of standby and/or trade Letters of Credit
(“Letters of Credit”) for the account of any Borrower; provided, however, that
Agent will not be required to issue or cause to be issued any Letters of Credit
to the extent that the issuance thereof would then cause the sum of (i) the
outstanding Revolving Advances plus (ii) the Maximum Undrawn Amount of all
outstanding Letters of Credit to exceed the lesser of (x) the Maximum Revolving
Advance Amount or (y) the Formula Amount. The Maximum Undrawn Amount of all
outstanding Letters of Credit shall not exceed in the aggregate at any time the
Letter of Credit Sublimit. All disbursements or payments related to Letters of
Credit shall be deemed to be Domestic Rate Loans consisting of Revolving
Advances and shall bear interest at the Revolving Interest Rate for Domestic
Rate Loans; Letters of Credit that have not been drawn upon shall not bear
interest, but the Letter of Credit Fees shall be payable thereon as provided in
Section 3.2.
     2.10 Issuance of Letters of Credit.
          (a) Borrowing Agent, on behalf of Borrowers, may request Agent to
issue or cause the issuance of a Letter of Credit by delivering to Agent at the
Payment Office, prior to 10:00 a.m. (Dallas, Texas time), at least five
(5) Business Days’ prior to the proposed date of issuance, Agent’s form of
Letter of Credit Application (the “Letter of Credit Application”) completed to
the satisfaction of Agent; and, such other certificates, documents and other
papers and information as Agent may reasonably request. Borrowing Agent, on
behalf of Borrowers, also has the right to give instructions and make agreements
with respect to any application, any applicable letter of credit and security
agreement, any applicable letter of credit reimbursement
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agreement and/or any other applicable agreement, any letter of credit and the
disposition of documents, disposition of any unutilized funds, and to agree with
Agent upon any amendment, extension or renewal of any Letter of Credit.
          (b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts, other written demands for payment, or acceptances
of usance drafts when presented for honor thereunder in accordance with the
terms thereof and when accompanied by the documents described therein and
(ii) have an expiry date not later than twenty-four (24) months after such
Letter of Credit’s date of issuance and in no event later than the last day of
the Term. Each standby Letter of Credit shall be subject either to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, and any amendments or revision thereof
adhered to by the Issuer (“UCP 500”) or the International Standby Practices
(ISP98-International Chamber of Commerce Publication Number 590) (the “ISP98
Rules”), as determined by Agent, and each trade Letter of Credit shall be
subject to UCP 500.
          (c) Agent shall use its reasonable efforts to notify Lenders of the
request by Borrowing Agent for a Letter of Credit hereunder.
     2.11 Requirements For Issuance of Letters of Credit. Borrowing Agent shall
authorize and direct any Issuer to name the applicable Borrower as the
“Applicant” or “Account Party” of each Letter of Credit. If Agent is not the
Issuer of any Letter of Credit, Borrowing Agent shall authorize and direct the
Issuer to deliver to Agent all instruments, documents, and other writings and
property received by the Issuer pursuant to the Letter of Credit and to accept
and rely upon Agent’s instructions and agreements with respect to all matters
arising in connection with the Letter of Credit, the application therefor or any
acceptance therefor.
     2.12 Disbursements, Reimbursement.
          (a) Immediately upon the issuance of each Letter of Credit, each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from Agent a participation in such Letter of Credit and each drawing
thereunder in an amount equal to such Lender’s Commitment Percentage of the
Maximum Face Amount of such Letter of Credit and the amount of such drawing,
respectively.
          (b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, Agent will promptly notify Borrowing
Agent. Provided that Borrowing Agent shall have received such notice by
11:00 a.m., Dallas, Texas time, the Borrowers shall reimburse (such obligation
to reimburse Agent shall sometimes be referred to as a “Reimbursement
Obligation”) Agent prior to 12:00 Noon, Dallas, Texas time on each date that an
amount is paid by Agent under any Letter of Credit (each such date, a “Drawing
Date”) in an amount equal to the amount so paid by Agent. In the event Borrowers
fail to reimburse Agent for the full amount of any drawing under any Letter of
Credit by 12:00 Noon, Dallas, Texas time, on the Drawing Date, Agent will
promptly notify each Lender thereof, and Borrowers shall be deemed to have
requested that a Domestic Rate Loan be made by the Lenders to be disbursed on
the Drawing Date under such Letter of Credit, subject to the amount of the
unutilized portion of the lesser of Maximum Revolving Advance Amount, less the
aggregate Maximum Undrawn
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Amount of all issued and outstanding Letters of Credit, or the Formula Amount
and subject to Section 8.2 hereof. Any notice given by Agent pursuant to this
Section 2.12(b) may be oral if immediately confirmed in writing.
          (c) Each Lender shall upon any notice pursuant to Section 2.12(b) make
available to Agent an amount in immediately available funds equal to its
Commitment Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to Section 2.12(d)) each be deemed to have made a
Domestic Rate Loan to Borrowers in that amount. If any Lender so notified fails
to make available to Agent the amount of such Lender’s Commitment Percentage of
such amount by no later than 2:00 p.m., Dallas, Texas time on the Drawing Date,
then interest shall accrue on such Lender’s obligation to make such payment,
from the Drawing Date to the date on which such Lender makes such payment (i) at
a rate per annum equal to the Federal Funds Rate during the first three days
following the Drawing Date and (ii) at a rate per annum equal to the rate
applicable to Domestic Rate Loans on and after the fourth day following the
Drawing Date. Agent will promptly give notice of the occurrence of the Drawing
Date, but failure of Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Lender to effect such payment on such date shall
not relieve such Lender from its obligation under this Section 2.12(c), provided
that such Lender shall not be obligated to pay interest as provided in
Section 2.12(c)(i) and (ii) until and commencing from the date of receipt of
notice from Agent of a drawing.
          (d) With respect to any unreimbursed drawing that is not converted
into a Domestic Rate Loan to Borrowers in whole or in part as contemplated by
Section 2.12(b), because of Borrowers’ failure to satisfy the conditions set
forth in Section 8.2 (other than any notice requirements) or for any other
reason, Borrowers shall be deemed to have incurred from Agent a borrowing (each
a “Letter of Credit Borrowing”) in the amount of such drawing. Such Letter of
Credit Borrowing shall be due and payable on demand (together with interest) and
shall bear interest at the rate per annum applicable to a Domestic Rate Loan.
Each Lender’s payment to Agent pursuant to Section 2.12(c) shall be deemed to be
a payment in respect of its participation in such Letter of Credit Borrowing and
shall constitute a “Participation Advance” from such Lender in satisfaction of
its Participation Commitment under this Section 2.12.
          (e) Each Lender’s Participation Commitment shall continue until the
last to occur of any of the following events: (x) Agent ceases to be obligated
to issue or cause to be issued Letters of Credit hereunder; (y) no Letter of
Credit issued or created hereunder remains outstanding and uncancelled and
(z) all Persons (other than the Borrowers) have been fully reimbursed for all
payments made under or relating to Letters of Credit.
     2.13 Repayment of Participation Advances.
          (a) Upon (and only upon) receipt by Agent for its account of
immediately available funds from Borrowers (i) in reimbursement of any payment
made by the Agent under the Letter of Credit with respect to which any Lender
has made a Participation Advance to Agent, or (ii) in payment of interest on
such a payment made by Agent under such a Letter of Credit, Agent will pay to
each Lender, in the same funds as those received by Agent, the amount of such
Lender’s Commitment Percentage of such funds, except Agent shall retain the
amount of
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the Commitment Percentage of such funds of any Lender that did not make a
Participation Advance in respect of such payment by Agent.
          (b) If Agent is required at any time to return to any Borrower, or to
a trustee, receiver, liquidator, custodian, or any official in any insolvency
proceeding, any portion of the payments made by Borrowers to Agent pursuant to
Section 2.13(a) in reimbursement of a payment made under the Letter of Credit or
interest or fee thereon, each Lender shall, on demand of Agent, forthwith return
to Agent the amount of its Commitment Percentage of any amounts so returned by
Agent plus interest at the Federal Funds Effective Rate.
     2.14 Documentation. Each Borrower agrees to be bound by the terms of the
Letter of Credit Application and by Agent’s interpretations of any Letter of
Credit issued on behalf of such Borrower and by Agent’s written regulations and
customary practices relating to letters of credit, though Agent’s
interpretations may be different from such Borrower’s own. In the event of a
conflict between the Letter of Credit Application and this Agreement, this
Agreement shall govern and control. It is understood and agreed that, except in
the case of gross negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment), Agent shall not be
liable for any error, negligence and/or mistakes, whether of omission or
commission (INCLUDING WITHOUT LIMITATION, WITH RESPECT TO ANY ACT OR INACTION
ARISING FROM AGENT’S NEGLIGENCE OR STRICT LIABILITY), in following the Borrowing
Agent’s or any Borrower’s instructions or those contained in the Letters of
Credit or any modifications, amendments or supplements thereto.
     2.15 Determination to Honor Drawing Request. In determining whether to
honor any request for drawing under any Letter of Credit by the beneficiary
thereof, Agent shall be responsible only to determine that the documents and
certificates required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of such
Letter of Credit and that any other drawing condition appearing on the face of
such Letter of Credit has been satisfied in the manner so set forth.
     2.16 Nature of Participation and Reimbursement Obligations. Each Lender’s
obligation in accordance with this Agreement to make the Revolving Advances or
Participation Advances as a result of a drawing under a Letter of Credit, and
the obligations of Borrowers to reimburse Agent upon a draw under a Letter of
Credit, shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Section 2.16 under all
circumstances, including the following circumstances:
               (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against Agent, any Borrower or any other Person for
any reason whatsoever;
               (ii) the failure of any Borrower or any other Person to comply,
in connection with a Letter of Credit Borrowing, with the conditions set forth
in this Agreement for the making of a Revolving Advance, it being acknowledged
that such conditions are not required for the making of a Letter of Credit
Borrowing and the obligation of the Lenders to make Participation Advances under
Section 2.12;
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               (iii) any lack of validity or enforceability of any Letter of
Credit;
               (iv) any claim of breach of warranty that might be made by
Borrower or any Lender against the beneficiary of a Letter of Credit, or the
existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense
or other right which any Borrower or any Lender may have at any time against a
beneficiary, any successor beneficiary or any transferee of any Letter of Credit
or the proceeds thereof (or any Persons for whom any such transferee may be
acting), Agent or any Lender or any other Person, whether in connection with
this Agreement, the transactions contemplated herein or any unrelated
transaction (including any underlying transaction between any Borrower or any
Subsidiaries of such Borrower and the beneficiary for which any Letter of Credit
was procured);
               (v) the lack of power or authority of any signer of (or any
defect in or forgery of any signature or endorsement on) or the form of or lack
of validity, sufficiency, accuracy, enforceability or genuineness of any draft,
demand, instrument, certificate or other document presented under or in
connection with any Letter of Credit, or any fraud or alleged fraud in
connection with any Letter of Credit, or the transport of any property or
provisions of services relating to a Letter of Credit, in each case even if
Agent or any of Agent’s Affiliates has been notified thereof;
               (vi) payment by Agent under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
               (vii) the solvency of, or any acts or omissions by, any
beneficiary of any Letter of Credit, or any other Person having a role in any
transaction or obligation relating to a Letter of Credit, or the existence,
nature, quality, quantity, condition, value or other characteristic of any
property or services relating to a Letter of Credit;
               (viii) any failure by the Agent or any of Agent’s Affiliates to
issue any Letter of Credit in the form requested by Borrowing Agent, unless the
Agent has received written notice from Borrowing Agent of such failure within
three (3) Business Days after the Agent shall have furnished Borrowing Agent a
copy of such Letter of Credit and such error is material and no drawing has been
made thereon prior to receipt of such notice;
               (ix) any Material Adverse Effect on any Borrower or any
Guarantor;
               (x) any breach of this Agreement or any Other Document by any
party thereto;
               (xi) the occurrence or continuance of an insolvency proceeding
with respect to any Borrower or any Guarantor;
               (xii) the fact that a Default or Event of Default shall have
occurred and be continuing;
               (xiii) the fact that the Term shall have expired or this
Agreement or the Obligations hereunder shall have been terminated; and
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               (xiv) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing.
     2.17 Indemnity. In addition to amounts payable as provided in Section 16.5,
each Borrower hereby agrees to protect, indemnify, defend, pay and save harmless
Agent and any of Agent’s Affiliates that have issued a Letter of Credit from and
against any and all claims, demands, liabilities, damages, taxes, penalties,
interest, judgments, settlements, losses, costs, charges and expenses (including
reasonable fees, expenses and disbursements of counsel and allocated costs of
internal counsel) which the Agent or any of Agent’s Affiliates may incur or be
subject to as a consequence, direct or indirect, of the issuance of any Letter
of Credit, other than as a result of (A) the gross negligence or willful
misconduct of the Agent as determined by a final and non-appealable judgment of
a court of competent jurisdiction or (b) the wrongful dishonor by the Agent or
any of Agent’s Affiliates of a proper demand for payment made under any Letter
of Credit (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO ANY OTHERWISE
INDEMNIFIED MATTER ARISING FROM AGENT’S NEGLIGENCE OR STRICT LIABILITY), except
if such dishonor resulted from any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto Governmental Body (all
such acts or omissions herein called “Governmental Acts”).
     2.18 Liability for Acts and Omissions. As between Borrowers and Agent and
Lenders, each Borrower assumes all risks of the acts and omissions of, or misuse
of the Letters of Credit by, the respective beneficiaries of such Letters of
Credit (INCLUDING, WITHOUT LIMITATION, ALL RISKS ATTRIBUTABLE TO ANY ACT OR
OMISSION ARISING FROM AGENT’S OR LENDER’S NEGLIGENCE OR STRICT LIABILITY). In
furtherance and not in limitation of the respective foregoing, Agent shall not
be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness
or legal effect of any document submitted by any party in connection with the
application for an issuance of any such Letter of Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged (even if Agent shall have been notified thereof); (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) the failure of the beneficiary
of any such Letter of Credit, or any other party to which such Letter of Credit
may be transferred, to comply fully with any conditions required in order to
draw upon such Letter of Credit or any other claim of any Borrower against any
beneficiary of such Letter of Credit, or any such transferee, or any dispute
between or among any Borrower and any beneficiary of any Letter of Credit or any
such transferee; (iv) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (v) errors in interpretation of technical
terms; (vi) any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter
of Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control of Agent,
including any governmental acts, and none of the above shall affect or impair,
or prevent the vesting of, any of Agent’s rights or powers hereunder. Nothing in
the preceding sentence shall relieve Agent from liability for Agent’s gross
negligence or willful misconduct (as determined by a court of competent
jurisdiction in a final non-appealable judgment) in connection with actions or
omissions described in such clauses (i)
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through (viii) of such sentence. In no event shall Agent or Agent’s Affiliates
be liable to any Borrower for any indirect, consequential, incidental, punitive,
exemplary or special damages or expenses (including without limitation
attorneys’ fees), or for any damages resulting from any change in the value of
any property relating to a Letter of Credit.
     Without limiting the generality of the foregoing, Agent and each of its
Affiliates (i) may rely on any oral or other communication believed in good
faith by Agent or such Affiliate to have been authorized or given by or on
behalf of the applicant for a Letter of Credit, (ii) may honor any presentation
if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a
previously dishonored presentation under a Letter of Credit, whether such
dishonor was pursuant to a court order, to settle or compromise any claim of
wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the
same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is
payable upon presentation of a statement advising negotiation or payment, upon
receipt of such statement (even if such statement indicates that a draft or
other document is being delivered separately), and shall not be liable for any
failure of any such draft or other document to arrive, or to conform in any way
with the relevant Letter of Credit; (v) may pay any paying or negotiating bank
claiming that it rightfully honored under the laws or practices of the place
where such bank is located; and (vi) may settle or adjust any claim or demand
made on Agent or its Affiliate in any way related to any order issued at the
applicant’s request to an air carrier, a letter of guarantee or of indemnity
issued to a carrier or any similar document (each an “Order”) and honor any
drawing in connection with any Letter of Credit that is the subject of such
Order, notwithstanding that any drafts or other documents presented in
connection with such Letter of Credit fail to conform in any way with such
Letter of Credit.
     In furtherance and extension and not in limitation of the specific
provisions set forth above, any action taken or omitted by Agent under or in
connection with the Letters of Credit issued by it or any documents and
certificates delivered thereunder, if taken or omitted in good faith and without
gross negligence (as determined by a court of competent jurisdiction in a final
non-appealable judgment), shall not put Agent under any resulting liability to
any Borrower or any Lender.
     2.19 Additional Payments. Any sums expended by Agent or any Lender due to
any Borrower’s failure to perform or comply with its obligations under this
Agreement or any Other Document including any Borrower’s obligations under
Sections 4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrowers’
Account as a Revolving Advance and added to the Obligations.
     2.20 Manner of Borrowing and Payment.
          (a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.
          (b) Each payment (including each prepayment) by any Borrower on
account of the principal of and interest on the Revolving Advances, shall be
applied to the Revolving Advances pro rata according to the applicable
Commitment Percentages of Lenders. Except as
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expressly provided herein, all payments (including prepayments) to be made by
any Borrower on account of principal, interest and fees shall be made without
set off or counterclaim and shall be made to Agent on behalf of the Lenders to
the Payment Office, in each case on or prior to 1:00 p.m., Dallas, Texas time,
in Dollars and in immediately available funds.
          (c)
               (i) Notwithstanding anything to the contrary contained in
Sections 2.20(a) and (b) hereof, commencing with the first Business Day
following the Closing Date, each borrowing of Revolving Advances shall be
advanced by Agent and each payment by any Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent.
On or before 1:00 P.M., Dallas, Texas time, on each Settlement Date commencing
with the first Settlement Date following the Closing Date, Agent and Lenders
shall make certain payments as follows: (I) if the aggregate amount of new
Revolving Advances made by Agent during the preceding Week (if any) exceeds the
aggregate amount of repayments applied to outstanding Revolving Advances during
such preceding Week, then each Lender shall provide Agent with funds in an
amount equal to its applicable Commitment Percentage of the difference between
(w) such Revolving Advances and (x) such repayments and (II) if the aggregate
amount of repayments applied to outstanding Revolving Advances during such Week
exceeds the aggregate amount of new Revolving Advances made during such Week,
then Agent shall provide each Lender with funds in an amount equal to its
applicable Commitment Percentage of the difference between (y) such repayments
and (z) such Revolving Advances.
               (ii) Each Lender shall be entitled to earn interest at the
applicable Revolving Interest Rate on outstanding Advances which it has funded.
               (iii) Promptly following each Settlement Date, Agent shall submit
to each Lender a certificate with respect to payments received and Advances made
during the Week immediately preceding such Settlement Date. Such certificate of
Agent shall be conclusive in the absence of manifest error.
          (d) If any Lender or Participant (a “benefited Lender”) shall at any
time receive any payment of all or part of its Advances, or interest thereon, or
receive any Collateral in respect thereof (whether voluntarily or involuntarily
or by set-off) in a greater proportion than any such payment to and Collateral
received by any other Lender, if any, in respect of such other Lender’s
Advances, or interest thereon, and such greater proportionate payment or receipt
of Collateral is not expressly permitted hereunder, such benefited Lender shall
purchase for cash from the other Lenders a participation in such portion of each
such other Lender’s Advances, or shall provide such other Lender with the
benefits of any such Collateral, or the proceeds thereof, as shall be necessary
to cause such benefited Lender to share the excess payment or benefits of such
Collateral or proceeds ratably with each of the other Lenders; provided,
however, that if all or any portion of such excess payment or benefits is
thereafter recovered from such benefited Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the extent of such
recovery, but without interest. Each Lender so purchasing a portion of another
Lender’s Advances may exercise all rights of payment (including rights of
set-off) with respect to such portion as fully as if such Lender were the direct
holder of such portion.
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          (e) Unless Agent shall have been notified by telephone, confirmed in
writing, by any Lender that such Lender will not make the amount which would
constitute its applicable Commitment Percentage of the Advances available to
Agent, Agent may (but shall not be obligated to) assume that such Lender shall
make such amount available to Agent on the next Settlement Date and, in reliance
upon such assumption, make available to Borrowers a corresponding amount. Agent
will promptly notify Borrowing Agent of its receipt of any such notice from a
Lender. If such amount is made available to Agent on a date after such next
Settlement Date, such Lender shall pay to Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Rate (computed on the basis of a
year of 360 days) during such period as quoted by Agent, times (ii) such amount,
times (iii) the number of days from and including such Settlement Date to the
date on which such amount becomes immediately available to Agent. A certificate
of Agent submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive, in the absence of manifest error. If such
amount is not in fact made available to Agent by such Lender within three
(3) Business Days after such Settlement Date, Agent shall be entitled to recover
such an amount, with interest thereon at the rate per annum then applicable to
such Revolving Advances hereunder, on demand from Borrowers; provided, however,
that Agent’s right to such recovery shall not prejudice or otherwise adversely
affect Borrowers’ rights (if any) against such Lender.
     2.21 Mandatory Payments. Subject to Section 4.3 hereof, when any Borrower
sells or otherwise disposes of any Collateral other than Inventory in the
Ordinary Course of Business, Borrowers shall repay the Advances in an amount
equal to the net proceeds of such sale (i.e., gross proceeds less the reasonable
costs of such sales or other dispositions), such repayments to be made promptly
but in no event more than one (1) Business Day following receipt of such net
proceeds, and until the date of payment, such proceeds shall be held in trust
for Agent. The foregoing shall not be deemed to be implied consent to any such
sale otherwise prohibited by the terms and conditions hereof. Such repayments
shall be applied to the Advances in such order as Agent may determine, subject
to Borrowers’ ability to reborrow Revolving Advances in accordance with the
terms hereof.
     2.22 Use of Proceeds.
          (a) Borrowers shall apply the proceeds of Advances to (i) repay
existing indebtedness owed to certain creditors of Borrowers, (ii) pay fees and
expenses relating to this transaction, and (iii) provide for the working capital
needs of their businesses as conducted on the Closing Date, and (iv) reimburse
drawings under Letters of Credit, each as otherwise permitted (or not
prohibited) under this Agreement.
          (b) Without limiting the generality of Section 2.22(a) above, neither
the Borrowers, the Guarantors nor any other Person which may in the future
become party to this Agreement or the Other Documents as a Borrower or
Guarantor, intends to use nor shall they use any portion of the proceeds of the
Advances, directly or indirectly, for any purpose in violation of the Trading
with the Enemy Act.
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     2.23 Defaulting Lender.
          (a) Notwithstanding anything to the contrary contained herein, in the
event any Lender (x) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or to refund its portion of any excess interest received as provided
in Section 3.6 or (y) notifies either Agent or Borrowing Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute a breach by such Lender of its obligations under this Agreement)
(each, a “Lender Default”), all rights and obligations hereunder of such Lender
(a “Defaulting Lender”) as to which a Lender Default is in effect and of the
other parties hereto shall be modified to the extent of the express provisions
of this Section 2.23 while such Lender Default remains in effect.
          (b) Advances shall be incurred pro rata from Lenders (the
“Non-Defaulting Lenders”) which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender’s Commitment Percentage
of all Advances then outstanding.
          (c) A Defaulting Lender shall not be entitled to give instructions to
Agent or to approve, disapprove, consent to or vote on any matters relating to
this Agreement and the Other Documents. All amendments, waivers and other
modifications of this Agreement and the Other Documents may be made without
regard to a Defaulting Lender and, for purposes of the definition of “Required
Lenders”, a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.
          (d) Other than as expressly set forth in this Section 2.23, the rights
and obligations of a Defaulting Lender (including the obligation to indemnify
Agent) and the other parties hereto shall remain unchanged. Nothing in this
Section 2.23 shall be deemed to release any Defaulting Lender from its
obligations under this Agreement and the Other Documents, shall alter such
obligations, shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have against any Defaulting Lender as a result of any default by such
Defaulting Lender hereunder.
          (e) In the event a Defaulting Lender retroactively cures to the
satisfaction of Agent the breach which caused a Lender to become a Defaulting
Lender, such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.
III INTEREST AND FEES.
     3.1 Interest. Interest on Advances shall be payable in arrears on the first
day of each month with respect to Domestic Rate Loans and, with respect to
Eurodollar Rate Loans, at the end of each Interest Period. Interest charges
shall be computed on the actual principal amount of
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Advances outstanding during the month at a rate per annum equal to the
applicable Revolving Interest Rate. Whenever, subsequent to the date of this
Agreement, the Alternate Base Rate is increased or decreased, the Revolving
Interest Rate for Domestic Rate Loans shall be similarly changed without notice
or demand of any kind by an amount equal to the amount of such change in the
Alternate Base Rate during the time such change or changes remain in effect. The
Eurodollar Rate shall be adjusted with respect to Eurodollar Rate Loans without
notice or demand of any kind on the effective date of any change in the Reserve
Percentage as of such effective date. Upon and after the occurrence of an Event
of Default, and during the continuation thereof, at the option of Agent or at
the direction of Required Lenders, the Obligations shall bear interest at the
lesser of (x) the Maximum Rate, and (y) the Revolving Interest Rate plus two
(2%) percent per annum (the “Default Rate”).
     The Applicable Margin with respect to the Revolving Advances will be
adjusted (up or down) prospectively on a quarterly basis as determined by the
financial performance of Holdings on a Consolidated Basis, commencing with the
first day of the first calendar month that occurs after delivery of Borrowers’
quarterly financial statements to Agent for the fiscal quarter ending [June 30,
2006].

              Applicable Revolving         Eurodollar Rate   Applicable
Revolving If the Fixed Charge Coverage Ratio is:   Margin :   Domestic Rate
Margin:
Greater than or equal to 1.10:1.00 and less than 1.50:1.00
  2.75%   0.25%
Greater than or equal to 1.50:1.00 and less than 2.00:1.00
  2.50%   0.00%
Greater than or equal to 2.00:1.00
  2.25%   0.00%

     All adjustments in the Applicable Margins after [October 31, 2006] will be
implemented quarterly on a prospective basis, for each calendar month commencing
after the date of delivery to Lenders of the quarterly unaudited or annual
audited (as applicable) financial statements of Borrowers evidencing the need
for an adjustment. Concurrently with the delivery of such financial statements,
Borrowing Agent shall deliver to Agent and Lenders a certificate, signed by its
chief financial officer, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins. Failure to timely
deliver such financial statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the Applicable Margins
to the highest level set forth in the foregoing grid, until the first day of the
first calendar month following the delivery of those financial statements
demonstrating that such an increase is not required. If a Default or Event of
Default shall have occurred or be continuing at the time any reduction in the
Applicable Margins is to be implemented, that reduction shall be deferred until
the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
     3.2 Letter of Credit Fees.
          (a) Borrowers shall pay (x) to Agent, for the ratable benefit of
Lenders, fees for each Letter of Credit for the period from and excluding the
date of issuance of same to and
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including the date of expiration or termination, equal to the average daily face
amount of each outstanding Letter of Credit multiplied by two and one-half
percent (2.5%) per annum, such fees to be calculated on the basis of a 360-day
year for the actual number of days elapsed and to be payable quarterly in
arrears on the first day of each quarter and on the last day of the Term, and
(y) to the Issuer, a fronting fee of one quarter of one percent (0.25%) per
annum, together with any and all administrative, issuance, amendment, payment
and negotiation charges with respect to Letters of Credit and all fees and
expenses as agreed upon by the Issuer and the Borrowing Agent in connection with
any Letter of Credit, including in connection with the opening, amendment or
renewal of any such Letter of Credit and any acceptances created thereunder and
shall reimburse Agent for any and all fees and expenses, if any, paid by Agent
to the Issuer (all of the foregoing fees, the “Letter of Credit and Acceptance
Fees”). All such charges shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
pro-ration upon the termination of this Agreement for any reason. Any such
charge in effect at the time of a particular transaction shall be the charge for
that transaction, notwithstanding any subsequent change in the Issuer’s
prevailing charges for that type of transaction. All Letter of Credit Fees and
Acceptance Fees payable hereunder shall be deemed earned in full on the date
when the same are due and payable hereunder and shall not be subject to rebate
or pro-ration upon the termination of this Agreement for any reason.
     On demand, following the occurrence of a Default or an Event of Default,
Borrowers will cause cash to be deposited and maintained in an account with
Agent, as cash collateral, in an amount equal to one hundred and five percent
(105%) of the Maximum Undrawn Amount of all outstanding Letters of Credit, and
each Borrower hereby irrevocably authorizes Agent, in its Permitted Discretion,
on such Borrower’s behalf and in such Borrower’s name, to open such an account
and to make and maintain deposits therein, or in an account opened by such
Borrower, in the amounts required to be made by such Borrower, out of the
proceeds of Receivables or other Collateral or out of any other funds of such
Borrower coming into any Lender’s possession at any time. Agent will invest such
cash collateral (less applicable reserves) in such short-term money-market items
as to which Agent and such Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. No Borrower may withdraw amounts credited to any such account except
upon the occurrence of all of the following: (x) payment and performance in full
of all Obligations, (y) expiration of all Letters of Credit and (z) termination
of this Agreement.
     3.3 Closing Fee and Facility Fee.
          (a) Closing Fee. Upon the execution of this Agreement, Borrowers shall
pay to Agent for the ratable benefit of Lenders a closing fee of $150,000 less
that portion of the deposit of $65,000 heretofore paid by Borrowers to Agent
remaining after application of such deposit to out of pocket expenses.
          (b) Facility Fee. If, for any month during the Term, the average daily
unpaid balance of the Revolving Advances and undrawn amount of any outstanding
Letters of Credit for each day of such month does not equal the Maximum
Revolving Advance Amount, then Borrowers shall pay to Agent for the ratable
benefit of Lenders a fee at a rate equal to one-quarter of one percent (.25%)
per annum on the amount by which the Maximum Revolving
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Advance Amount exceeds such average daily unpaid balance. Such fee shall be
payable to Agent in arrears on the first day of each month with respect to the
previous month.
     3.4 Collateral Evaluation Fee and Collateral Monitoring Fee.
          (a) Collateral Evaluation Fee. Borrowers shall pay Agent a collateral
evaluation fee equal to $1,000 per month commencing on the first day of the
month following the Closing Date and on the first day of each month thereafter
during the Term. The collateral evaluation fee shall be deemed earned in full on
the date when same is due and payable hereunder and shall not be subject to
rebate or proration upon termination of this Agreement for any reason.
          (b) Collateral Monitoring Fee. Borrowers shall pay to Agent on the
first day of each month following any month in which Agent performs any
collateral monitoring — namely any field examination, collateral analysis or
other business analysis, the need for which is to be determined by Agent and
which monitoring is undertaken by Agent or for Agent’s benefit — a collateral
monitoring fee in an amount equal to $750 per day for each person employed to
perform such monitoring, plus all costs and disbursements incurred by Agent in
the performance of such examination or analysis; provided that, if (a) no
Default or Event of Default has occurred during the applicable calendar year,
and (b) no circumstance arises with respect to Borrowers’ and Guarantors’
business operations or Collateral giving Agent a reasonable concern about such
business operations or Collateral, then Borrowers shall not be obligated to pay
for more than four (4) field examinations during any calendar year.
     3.5 Computation of Interest and Fees. Interest and fees hereunder shall be
computed on the basis of a year of 360 days and for the actual number of days
elapsed. If any payment to be made hereunder becomes due and payable on a day
other than a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and interest thereon shall be payable at the Revolving
Interest Rate for Domestic Rate Loans during such extension.
     3.6 Maximum Charges. It is the intention of the parties to comply strictly
with applicable usury laws. Accordingly, notwithstanding any provision to the
contrary in this Agreement or the Other Documents, in no event shall any
Obligations require the payment or permit the payment, taking, reserving,
receiving, collection or charging of any sums constituting interest under
Applicable Laws that exceed the maximum amount permitted by such laws, as the
same may be amended or modified from time to time (the “Maximum Rate”). If any
such excess interest is called for, contracted for, charged, taken, reserved or
received in connection herewith or therewith, or in any communication by Agent,
any Lender or any other Person to any Borrower, any Guarantor or any other
Person liable for the Obligations, or in the event that all or part of the
principal or interest hereof or thereof shall be prepaid or accelerated, so that
under any of such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved or received on the
amount of principal actually outstanding from time to time under the Obligations
shall exceed the Maximum Rate, then in such event it is agreed that: (a) the
provisions of this paragraph shall govern and control; (b) neither any Borrower,
any Guarantor nor any other Person now or hereafter liable for the payment of
any of the Obligations shall be obligated to pay the amount of such interest to
the extent it is in excess of the Maximum Rate; (c) any such excess interest
which is or has been
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received by Agent or any Lender, notwithstanding this paragraph, shall be
credited against the then unpaid principal balance of the Obligations (or, if
the principal amount of the Obligations shall have been paid in full, refunded
by Lenders to the party primarily liable on the Obligation, and each Lender
shall refund its pro rata share of such interest); and (d) the provisions of
this Agreement and the Obligations, and any other communication to any Borrower
or any Guarantor, shall immediately be deemed reformed and such excess interest
reduced, without the necessity of executing any other document, to the Maximum
Rate. The right to accelerate the maturity of the Obligations does not include
the right to accelerate, collect or charge unearned interest, but only such
interest that has otherwise accrued as of the date of acceleration. Without
limiting the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved or received in connection with any of the Obligations
which are made for the purpose of determining whether such rate exceeds the
Maximum Rate shall be made to the extent permitted by Applicable Laws by
amortizing, prorating, allocating and spreading during the period of the full
term of such Obligations, including all prior and subsequent renewals and
extensions hereof or thereof, all interest at any time contracted for, charged,
taken, reserved or received by Agent or any Lender. To the extent that either
Chapter 303 or 306, or both, of the Texas Finance Code apply in determining the
Maximum Rate, Agent and Lenders hereby elect to determine the applicable rate
ceiling by using the weekly ceiling from time to time in effect, subject to
Agent’s right subsequently to change such method in accordance with Applicable
Law, as the same may be amended or modified from time to time.
     3.7 Increased Costs. In the event that any Applicable Law, treaty or
governmental regulation, or any change therein or in the interpretation or
application thereof, or compliance by any Lender (for purposes of this
Section 3.7, the term “Lender” shall include Agent or any Lender and any
corporation or bank controlling Agent or any Lender) and the office or branch
where Agent or any Lender (as so defined) makes or maintains any Eurodollar Rate
Loans with any request or directive (whether or not having the force of law)
from any central bank or other financial, monetary or other authority, shall:
          (a) subject Agent or any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Other Document or change the basis of taxation
of payments to Agent or any Lender of principal, fees, interest or any other
amount payable hereunder or under any Other Documents (except for changes in the
rate of tax on the overall net income of Agent or any Lender by the jurisdiction
in which it maintains its principal office);
          (b) impose, modify or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender, including pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or
          (c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement or any Other Document;
and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing or maintaining its Advances hereunder by an amount
that Agent or such Lender deems to be material or to reduce the amount of any
payment (whether of principal, interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to
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be material, then, in any case Borrowers shall promptly pay Agent or such
Lender, upon its demand, such additional amount as will compensate Agent or such
Lender for such additional cost or such reduction, as the case may be, provided
that the foregoing shall not apply to increased costs which are reflected in the
Eurodollar Rate, as the case may be. Agent or such Lender shall certify the
amount of such additional cost or reduced amount to Borrowing Agent, and such
certification shall be conclusive absent manifest error.
     3.8 Basis For Determining Interest Rate Inadequate or Unfair. In the event
that Agent or any Lender shall have determined that:
          (a) reasonable means do not exist for ascertaining the Eurodollar Rate
applicable pursuant to Section 2.2 hereof for any Interest Period; or
          (b) Dollar deposits in the relevant amount and for the relevant
maturity are not available in the London interbank Eurodollar market, with
respect to an outstanding Eurodollar Rate Loan, a proposed Eurodollar Rate Loan,
or a proposed conversion of a Domestic Rate Loan into a Eurodollar Rate Loan,
then Agent shall give Borrowing Agent prompt written, telephonic or telegraphic
notice of such determination. If such notice is given, (i) any such requested
Eurodollar Rate Loan shall be made as a Domestic Rate Loan, unless Borrowing
Agent shall notify Agent no later than 10:00 a.m. (Dallas, Texas time) two
(2) Business Days prior to the date of such proposed borrowing, that its request
for such borrowing shall be cancelled or made as an unaffected type of
Eurodollar Rate Loan, (ii) any Domestic Rate Loan or Eurodollar Rate Loan which
was to have been converted to an affected type of Eurodollar Rate Loan shall be
continued as or converted into a Domestic Rate Loan, or, if Borrowing Agent
shall notify Agent, no later than 10:00 a.m. (Dallas, Texas time) two (2)
Business Days prior to the proposed conversion, shall be maintained as an
unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected
Eurodollar Rate Loans shall be converted into a Domestic Rate Loan, or, if
Borrowing Agent shall notify Agent, no later than 10:00 a.m. (Dallas, Texas
time) two (2) Business Days prior to the last Business Day of the then current
Interest Period applicable to such affected Eurodollar Rate Loan, shall be
converted into an unaffected type of Eurodollar Rate Loan, on the last Business
Day of the then current Interest Period for such affected Eurodollar Rate Loans.
Until such notice has been withdrawn, Lenders shall have no obligation to make
an affected type of Eurodollar Rate Loan or maintain outstanding affected
Eurodollar Rate Loans and no Borrower shall have the right to convert a Domestic
Rate Loan or an unaffected type of Eurodollar Rate Loan into an affected type of
Eurodollar Rate Loan.
     3.9 Capital Adequacy.
          (a) In the event that Agent or any Lender shall have determined that
any Applicable Law, rule, regulation or guideline regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any Governmental Body, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.9, the term “Lender” shall include Agent
or any Lender and any corporation or bank controlling Agent or any Lender) and
the office or branch where Agent or any Lender (as so defined) makes or
maintains any
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Eurodollar Rate Loans with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on Agent or any Lender’s capital as a consequence of its obligations hereunder
to a level below that which Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration Agent’s and each
Lender’s policies with respect to capital adequacy) by an amount deemed by Agent
or any Lender to be material, then, from time to time, Borrowers shall pay upon
demand to Agent or such Lender such additional amount or amounts as will
compensate Agent or such Lender for such reduction. In determining such amount
or amounts, Agent or such Lender may use any reasonable averaging or attribution
methods. The protection of this Section 3.9 shall be available to Agent and each
Lender regardless of any possible contention of invalidity or inapplicability
with respect to the Applicable Law, regulation or condition.
          (b) A certificate of Agent or such Lender setting forth such amount or
amounts as shall be necessary to compensate Agent or such Lender with respect to
Section 3.9(a) hereof when delivered to Borrowing Agent shall be conclusive
absent manifest error.
     3.10 Gross Up for Taxes. If any Borrower shall be required by Applicable
Law to withhold or deduct any taxes from or in respect of any sum payable under
this Agreement or any of the Other Documents to Agent, or any Lender, assignee
of any Lender, or Participant (each, individually, a “Payee” and collectively,
the “Payees”), (a) the sum payable to such Payee or Payees, as the case may be,
shall be increased as may be necessary so that, after making all required
withholding or deductions, the applicable Payee or Payees receives an amount
equal to the sum it would have received had no such withholding or deductions
been made (the “Gross-Up Payment”), (b) such Borrower shall make such
withholding or deductions, and (c) such Borrower shall pay the full amount
withheld or deducted to the relevant taxation authority or other authority in
accordance with Applicable Law. Notwithstanding the foregoing, no Borrower shall
be obligated to make any portion of the Gross-Up Payment that is attributable to
any withholding or deductions that would not have been paid or claimed had the
applicable Payee or Payees properly claimed a complete exemption with respect
thereto pursuant to Section 3.11 hereof.
     3.11 Withholding Tax Exemption.
          (a) Each Payee that is not incorporated under the Laws of the United
States of America or a state thereof (and, upon the written request of Agent,
each other Payee) agrees that it will deliver to Borrowing Agent and Agent two
(2) duly completed appropriate valid Withholding Certificates (as defined under
§1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its
status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Code. The term “Withholding Certificate”
means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and the related
statements and certifications as required under §1.1441-1(e)(2) and/or (3) of
the Regulations; a statement described in §1.871-14(c)(2)(v) of the Regulations;
or any other certificates under the Code or Regulations that certify or
establish the status of a payee or beneficial owner as a U.S. or foreign person.
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          (b) Each Payee required to deliver to Borrowing Agent and Agent a
valid Withholding Certificate pursuant to Section 3.11(a) hereof shall deliver
such valid Withholding Certificate as follows: (A) each Payee which is a party
hereto on the Closing Date shall deliver such valid Withholding Certificate at
least five (5) Business Days prior to the first date on which any interest or
fees are payable by any Borrower hereunder for the account of such Payee;
(B) each Payee shall deliver such valid Withholding Certificate at least five
(5) Business Days before the effective date of such assignment or participation
(unless Agent in its sole discretion shall permit such Payee to deliver such
Withholding Certificate less than five (5) Business Days before such date in
which case it shall be due on the date specified by Agent). Each Payee which so
delivers a valid Withholding Certificate further undertakes to deliver to
Borrowing Agent and Agent two (2) additional copies of such Withholding
Certificate (or a successor form) on or before the date that such Withholding
Certificate expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent Withholding Certificate so delivered by
it, and such amendments thereto or extensions or renewals thereof as may be
reasonably requested by Borrowing Agent or Agent.
          (c) Notwithstanding the submission of a Withholding Certificate
claiming a reduced rate of or exemption from U.S. withholding tax required under
Section 3.11(b) hereof, Agent shall be entitled to withhold United States
federal income taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence requirements imposed
upon a withholding agent under §1.1441-7(b) of the Regulations. Further, Agent
is indemnified under §1.1461-1(e) of the Regulations against any claims and
demands of any Payee for the amount of any tax it deducts and withholds in
accordance with regulations under §1441 of the Code.
IV COLLATERAL: GENERAL TERMS
     4.1 Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, each Borrower hereby
assigns, pledges and grants to Agent for its benefit and for the ratable benefit
of each Lender a continuing security interest in and to and Lien on all of its
Collateral, whether now owned or existing or hereafter acquired or arising and
wheresoever located. Each Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent’s security
interest. Each Borrower shall promptly provide Agent with written notice of all
material commercial tort claims, such notice to contain the case title together
with the applicable court and a brief description of the claim(s). Upon delivery
of each such notice, such Borrower shall be deemed to hereby grant to Agent a
security interest and lien in and to such commercial tort claims and all
proceeds thereof.
     4.2 Perfection of Security Interest. Each Borrower shall take all action
that may be necessary or desirable, or that Agent may request, so as at all
times to maintain the validity, perfection, enforceability and priority of
Agent’s security interest in and Lien on the Collateral or to enable Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to, (i) immediately discharging all Liens other than
Permitted Encumbrances, (ii) obtaining Lien Waiver Agreements, (iii) delivering
to Agent, endorsed or accompanied by such instruments of assignment as Agent may
specify, and stamping or marking, in such manner as Agent may specify, any and
all chattel paper, instruments, letters of
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credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to Agent, and (v) executing and delivering financing
statements, control agreements, instruments of pledge, mortgages, notices and
assignments, in each case in form and substance satisfactory to Agent, relating
to the creation, validity, perfection, maintenance or continuation of Agent’s
security interest and Lien under the Uniform Commercial Code or other Applicable
Law. By its signature hereto, each Borrower hereby authorizes Agent to file
against such Borrower, one or more financing, continuation or amendment
statements pursuant to the Uniform Commercial Code in form and substance
satisfactory to Agent (which statements may have a description of collateral
which is broader than that set forth herein). All charges, expenses and fees
Agent may incur in doing any of the foregoing, and any local taxes relating
thereto, shall be charged to Borrowers’ Account as a Revolving Advance of a
Domestic Rate Loan and added to the Obligations, or, at Agent’s option, shall be
paid to Agent for its benefit and for the ratable benefit of Lenders immediately
upon demand.
     4.3 Disposition of Collateral. Each Borrower will safeguard and protect all
Collateral for Agent’s general account and make no disposition thereof whether
by sale, lease, transfer or otherwise unless Agent has been provided with 5 days
prior written notice thereof and has consented thereto, except (a) the sale of
Inventory in the Ordinary Course of Business and (b) the disposition or transfer
of obsolete and worn out Equipment in the Ordinary Course of Business.
     4.4 Preservation of Collateral. In addition to the rights and remedies set
forth in Section 11.1 hereof, Agent: (a) upon the occurrence and during the
continuation of an Event of Default, may at any time take such steps as Agent
deems necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security
protection measures as Agent may deem appropriate; (b) upon the occurrence and
during the continuation of an Event of Default, may employ and maintain at any
of any Borrower’s premises a custodian who shall have full authority to do all
acts necessary to protect Agent’s interests in the Collateral; (c) upon the
occurrence and during the continuation of an Event of Default, may lease
warehouse facilities to which Agent may move all or part of the Collateral; (d)
upon the occurrence and during the continuation of an Event of Default, may use
any Borrower’s owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is
hereby granted, a right of ingress and egress to the places where the Collateral
is located, and may proceed over and through any of Borrower’s owned or leased
property. Each Borrower shall cooperate fully with all of Agent’s efforts to
preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct. All of Agent’s expenses of preserving the Collateral,
including any expenses relating to the bonding of a custodian, shall be charged
to Borrowers’ Account as a Revolving Advance and added to the Obligations.
     4.5 Ownership of Collateral.
          (a) With respect to the Collateral, at the time the Collateral becomes
subject to Agent’s security interest: (i) each Borrower shall be the sole owner
of and fully authorized and able to sell, transfer, pledge and/or grant a first
priority security interest in each and every item of the its respective
Collateral to Agent; and, except for Permitted Encumbrances the Collateral shall
be free and clear of all Liens and encumbrances whatsoever; (ii) each document
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and agreement executed by each Borrower or delivered to Agent or any Lender in
connection with this Agreement shall be true and correct in all respects;
(iii) all signatures and endorsements of each Borrower that appear on such
documents and agreements shall be genuine and each Borrower shall have full
capacity to execute same; and (iv) each Borrower’s Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s) without
the prior written consent of Agent except with respect to the sale of Inventory
in the Ordinary Course of Business.
          (b) (i) There is no location at which any Borrower has any Inventory
(except for Inventory in transit) other than those locations listed on
Schedule 4.5; (ii) Schedule 4.5 hereto contains a correct and complete list, as
of the Closing Date, of the legal names and addresses of each warehouse at which
Inventory of any Borrower is stored; (iii) Schedule 4.5 hereto sets forth a
correct and complete list as of the Closing Date of (A) each place of business
of each Borrower and (B) the chief executive office of each Borrower; and (iv)
Schedule 4.5 hereto sets forth a correct and complete list as of the Closing
Date of the location, by state and street address, of all Real Property owned or
leased by each Borrower, together with the names and addresses of any landlords.
     4.6 Defense of Agent’s and Lenders’ Interests. Until (a) payment and
performance in full of all of the Obligations and (b) termination of this
Agreement, Agent’s interests in the Collateral shall continue in full force and
effect. During such period no Borrower shall, without Agent’s prior written
consent, pledge, sell, assign, transfer (except any sale, assignment or transfer
to the extent permitted in Section 4.3 hereof), create or suffer to exist a Lien
upon or encumber or allow or suffer to be encumbered in any way except for
Permitted Encumbrances, any part of the Collateral. Each Borrower shall defend
Agent’s interests in the Collateral against any and all Persons whatsoever. Upon
the occurrence and during the continuance of an Event of Default, Agent shall
have the right to take possession of the indicia of the Collateral and the
Collateral in whatever physical form contained, including: labels, stationery,
documents, instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral, Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient to Agent. In addition, with respect to all Collateral, Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further provided by the Uniform Commercial Code or other Applicable Law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers, carriers,
forwarders, warehousers or others receiving or holding cash, checks, documents
or instruments in which Agent holds a security interest to deliver same to Agent
and/or subject to Agent’s order and if they shall come into any Borrower’s
possession, they, and each of them, shall be held by such Borrower in trust as
Agent’s trustee, and such Borrower will immediately deliver them to Agent in
their original form together with any necessary endorsement.
     4.7 Books and Records. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books accruals with respect to all taxes, assessments, charges, levies and
claims; and (c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and investments and
all other proper accruals (including by reason of enumeration, accruals for
premiums, if any, due on required payments and accruals for depreciation,
obsolescence, or amortization of properties),
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which should be set aside from such earnings in connection with its business.
All determinations pursuant to this subsection shall be made in accordance with,
or as required by, GAAP consistently applied.
     4.8 Financial Disclosure. Each Borrower hereby irrevocably authorizes and
directs all accountants and auditors employed by such Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
such Borrower’s financial statements, trial balances or other accounting records
of any sort in the accountant’s or auditor’s possession, and to disclose to
Agent and each Lender any information such accountants may have concerning such
Borrower’s financial status and business operations. Each Borrower hereby
authorizes all Governmental Bodies to furnish to Agent and each Lender copies of
reports or examinations relating to such Borrower, whether made by such Borrower
or otherwise; however, Agent and each Lender will attempt to obtain such
information or materials directly from such Borrower prior to obtaining such
information or materials from such accountants or Governmental Bodies.
     4.9 Compliance with Laws. Each Borrower shall comply with all Applicable
Laws with respect to the Collateral or any part thereof or to the operation of
such Borrower’s business the non-compliance with which could reasonably be
expected to have a Material Adverse Effect. Each Borrower may, however, contest
or dispute any Applicable Laws in any reasonable manner, provided that any
related Lien is inchoate or stayed and sufficient reserves are established to
the reasonable satisfaction of Agent to protect Agent’s Lien on or security
interest in the Collateral. The assets of Borrowers at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the assets of Borrowers so that such insurance
shall remain in full force and effect.
     4.10 Inspection of Premises. At all reasonable times Agent and each Lender
shall have full access to and the right to audit, check, inspect and make
abstracts and copies from each Borrower’s books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of each
Borrower’s business. If (a) no Event of Default has occurred and is continuing,
upon one (1) Business Days’ prior notice to Borrower, Agent, any Lender and
their agents may enter upon any premises of any Borrower at any time during
business hours, and (b) an Event of Default has occurred and is continuing,
Agent, any Lender and their agents may enter upon any premises of any Borrower
at any time during business hours and at any other reasonable time, and from
time to time, for the purpose of inspecting the Collateral and any and all
records pertaining thereto and the operation of such Borrower’s business.
     4.11 Insurance. The assets and properties of each Borrower at all times
shall be maintained in accordance with the requirements of all insurance
carriers which provide insurance with respect to the assets and properties of
such Borrower so that such insurance shall remain in full force and effect. Each
Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At each Borrower’s own cost and expense in amounts
and with carriers acceptable to Agent (for purposes hereof, the carriers of
Borrowers’ insurance on the Closing Date are acceptable to Agent), each Borrower
shall (a) keep all its material insurable properties and properties in which
such Borrower has an interest insured against the hazards of fire, flood,
sprinkler leakage, those hazards covered by extended coverage insurance and such
other hazards, and for such amounts, as is customary in
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the case of companies engaged in businesses similar to such Borrower’s;
(b) maintain a bond in such amounts as is customary in the case of companies
engaged in businesses similar to such Borrower insuring against larceny,
embezzlement or other criminal misappropriation of insured’s officers and
employees who may either singly or jointly with others at any time have access
to the assets or funds of such Borrower either directly or through authority to
draw upon such funds or to direct generally the disposition of such assets; (c)
maintain public and product liability insurance against claims for personal
injury, death or property damage suffered by others; (d) maintain all such
worker’s compensation or similar insurance as may be required under the laws of
any state or jurisdiction in which such Borrower is engaged in business;
(e) furnish Agent with (i) copies of all policies and evidence of the
maintenance of such policies by the renewal thereof at least thirty (30) days
before any expiration date, and (ii) appropriate loss payable endorsements in
form and substance satisfactory to Agent, naming Agent as an additional insured
and loss payee as its interests may appear with respect to all insurance
coverage referred to in clauses (a), and (c) above, and providing (A) that all
proceeds thereunder shall be payable to Agent, (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such policy, and (C) that such policy and loss payable clauses may not be
cancelled, amended or terminated unless at least thirty (30) days’ prior written
notice is given to Agent. In the event of any loss thereunder, the carriers
named therein hereby are directed by Agent and the applicable Borrower to make
payment for such loss to Agent and not to such Borrower and Agent jointly. If
any insurance losses are paid by check, draft or other instrument payable to any
Borrower and Agent jointly, Agent may endorse such Borrower’s name thereon and
do such other things as Agent may deem advisable to reduce the same to cash.
Following the occurrence of an Event of Default, Agent is hereby authorized to
adjust and compromise claims under insurance coverage referred to in clauses
(a) and (b) above. All loss recoveries received by Agent upon any such insurance
may be applied to the Obligations, in such order as Agent in its sole discretion
shall determine. Any surplus shall be paid by Agent to Borrowers or applied as
may be otherwise required by law. Any deficiency thereon shall be paid by
Borrowers to Agent, on demand.
     4.12 Failure to Pay Insurance. If any Borrower fails to obtain insurance as
hereinabove provided, or to keep the same in force, Agent, if Agent so elects,
may obtain such insurance and pay the premium therefor on behalf of such
Borrower, and charge Borrowers’ Account therefor as a Revolving Advance of a
Domestic Rate Loan and such expenses so paid shall be part of the Obligations.
     4.13 Payment of Taxes. Unless such changes are being Properly Contested,
each Borrower will pay, when due, all taxes, assessments and other Charges
lawfully levied or assessed upon such Borrower or any of the Collateral
including real and personal property taxes, assessments and charges and all
franchise, income, employment, social security benefits, withholding, and sales
taxes. If any tax by any Governmental Body is or may be imposed on or as a
result of any transaction between any Borrower and Agent or any Lender which
Agent or any Lender may be required to withhold or pay or if any taxes,
assessments, or other Charges remain unpaid after the date fixed for their
payment, or if any claim shall be made which, in Agent’s or any Lender’s
opinion, may possibly create a valid Lien on the Collateral, Agent may without
notice to Borrowers pay the taxes, assessments or other Charges and each
Borrower hereby agrees to indemnify, defend and hold Agent and each Lender
harmless in respect thereof. The amount of any payment by Agent under this
Section 4.13 shall be charged to Borrowers’ Account as a Revolving Advance and
added to the Obligations and, until Borrowers shall furnish Agent with an
indemnity therefor (or supply Agent with evidence satisfactory to Agent that due
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provision for the payment thereof has been made), Agent may hold without
interest any balance standing to Borrowers’ credit and Agent shall retain its
security interest in and Lien on any and all Collateral held by Agent.
     4.14 Payment of Leasehold Obligations. Unless such payments are being
Properly Contested, each Borrower shall at all times pay, when and as due, its
rental obligations under all leases under which it is a tenant, and shall
otherwise comply, in all material respects, with all other terms of such leases
and keep them in full force and effect and, at Agent’s request will provide
evidence of having done so.
     4.15 Receivables.
          (a) Nature of Receivables. Each of the Receivables shall be a bona
fide and valid account representing a bona fide indebtedness incurred by the
Customer therein named, for a fixed sum as set forth in the invoice relating
thereto (provided immaterial or unintentional invoice errors shall not be deemed
to be a breach hereof) with respect to an absolute sale or lease and delivery of
goods upon stated terms of a Borrower, or work, labor or services theretofore
rendered by a Borrower as of the date each Receivable is created. Same shall be
due and owing in accordance with the applicable contract therefore without
dispute, setoff or counterclaim except for setoff rights existing, but not
threatened or asserted, under the terms of the applicable contract and as
otherwise may be stated on the accounts receivable schedules delivered by
Borrowers to Agent.
          (b) Solvency of Customers. Each Customer, to the best of each
Borrower’s knowledge, as of the date each Receivable is created, is and will be
solvent and able to pay all Receivables on which the Customer is obligated in
full when due or with respect to such Customers of any Borrower who are not
solvent such Borrower has set up on its books and in its financial records bad
debt reserves adequate to cover such Receivables.
          (c) Location of Borrowers. Each Borrower’s chief executive office is
located at the location set forth on Schedule 4.5. Until written notice is given
to Agent by Borrowing Agent of any other office at which any Borrower keeps its
records pertaining to Receivables, all such records shall be kept at such
executive office.
          (d) Collection of Receivables. Until any Borrower’s authority to do so
is terminated by Agent (which notice Agent may give at any time following the
occurrence of an Event of Default), each Borrower will, at such Borrower’s sole
cost and expense, but on Agent’s behalf and for Agent’s account, collect as
Agent’s property and in trust for Agent all amounts received on Receivables, and
shall not commingle such collections with any Borrower’s funds or use the same
except to pay Obligations. Each Borrower shall deposit in the Blocked Account
or, upon request by Agent, deliver to Agent, in original form and on the date of
receipt thereof, all checks, drafts, notes, money orders, acceptances, cash and
other evidences of Indebtedness.
          (e) Notification of Assignment of Receivables. At any time following
the occurrence of an Event of Default, Agent shall have the right to send notice
of the assignment of, and Agent’s security interest in and Lien on, the
Receivables to any and all Customers or any third party holding or otherwise
concerned with any of the Collateral. Thereafter, Agent shall
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have the sole right to collect the Receivables, take possession of the
Collateral, or both. Agent’s actual collection expenses, including, but not
limited to, stationery and postage, telephone and telegraph, secretarial and
clerical expenses and the salaries of any collection personnel used for
collection, may be charged to Borrowers’ Account and added to the Obligations.
          (f) Power of Agent to Act on Borrowers’ Behalf. Agent shall have the
right to receive, endorse, assign and/or deliver in the name of Agent or any
Borrower any and all checks, drafts and other instruments for the payment of
money relating to the Receivables, and each Borrower hereby waives notice of
presentment, protest and non-payment of any instrument so endorsed. Each
Borrower hereby constitutes Agent or Agent’s designee as such Borrower’s
attorney with power (i) following the occurrence of an Event of Default to
endorse such Borrower’s name upon any notes, acceptances, checks, drafts, money
orders or other evidences of payment or Collateral; (ii) following the
occurrence of an Event of Default to sign such Borrower’s name on any invoice or
bill of lading relating to any of the Receivables, drafts against Customers,
assignments and verifications of Receivables; (iii) to send verifications of
Receivables to any Customer; (iv) to sign such Borrower’s name on all financing
statements or any other documents or instruments deemed necessary or appropriate
by Agent to preserve, protect, or perfect Agent’s interest in the Collateral and
to file same; (v) following the occurrence of an Event of Default to demand
payment of the Receivables; (vi) following the occurrence of an Event of Default
to enforce payment of the Receivables by legal proceedings or otherwise;
(vii) following the occurrence of an Event of Default to exercise all of such
Borrower’s rights and remedies with respect to the collection of the Receivables
and any other Collateral; (viii) following the occurrence of an Event of Default
to settle, adjust, compromise, extend or renew the Receivables; (ix) following
the occurrence of an Event of Default to settle, adjust or compromise any legal
proceedings brought to collect Receivables; (x) following the occurrence of an
Event of Default to prepare, file and sign such Borrower’s name on a proof of
claim in bankruptcy or similar document against any Customer; (xi) following the
occurrence of an Event of Default to prepare, file and sign such Borrower’s name
on any notice of Lien, assignment or satisfaction of Lien or similar document in
connection with the Receivables; and (xii) to do all other acts and things
necessary to carry out this Agreement. All acts of said attorney or designee are
hereby ratified and approved, and said attorney or designee shall not be liable
for any acts of omission or commission nor for any error of judgment or mistake
of fact or of law (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO AN ACT OR
INACTION ARISING FROM AGENT’S NEGLIGENCE OR STRICT LIABILITY), unless done with
willful misconduct or with gross (not mere) negligence (as determined by a court
of competent jurisdiction in a final non-appealable judgment); this power being
coupled with an interest is irrevocable while any of the Obligations remain
unpaid. Agent shall have the right at any time to change the address for
delivery of mail addressed to any Borrower to such address as Agent may
designate and to receive, open and dispose of all mail addressed to any
Borrower.
     (g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind (INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO AN
ACT OR INACTION ARISING FROM AGENT’S OR LENDER’S NEGLIGENCE OR STRICT LIABILITY)
occurring in the settlement, collection or payment of any of the Receivables or
any instrument received in payment thereof, or for any damage resulting
therefrom unless done with
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willful misconduct or with gross (not mere) negligence (as determined by a court
of competent jurisdiction in a final non-appealable judgment). Following the
occurrence of an Event of Default, Agent may, without notice or consent from any
Borrower, sue upon or otherwise collect, extend the time of payment of,
compromise or settle for cash, credit or upon any terms any of the Receivables
or any other securities, instruments or insurance applicable thereto and/or
release any obligor thereof. Agent is authorized and empowered to accept the
return of the goods represented by any of the Receivables, without notice to or
consent by any Borrower, all without discharging or in any way affecting any
Borrower’s liability hereunder.
          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds
of Collateral shall be deposited by Borrowers into either (i) a lockbox account,
dominion account or such other “blocked account” (“Blocked Accounts”)
established at a bank or banks (each such bank, a “Blocked Account Bank”)
pursuant to an arrangement with such Blocked Account Bank as may be selected by
Borrowing Agent and be acceptable to Agent or (ii) depository accounts
(“Depository Accounts”) established at the Agent for the deposit of such
proceeds. Each applicable Borrower, Agent and each Blocked Account Bank shall
enter into a deposit account control agreement in form and substance
satisfactory to Agent directing such Blocked Account Bank to transfer such funds
so deposited to Agent, either to any account maintained by Agent at said Blocked
Account Bank or by wire transfer to appropriate account(s) of Agent. All funds
deposited in such Blocked Accounts shall immediately become the property of
Agent and Borrowing Agent shall obtain the agreement by such Blocked Account
Bank to waive any offset rights against the funds so deposited. Neither Agent
nor any Lender assumes any responsibility for such blocked account arrangement,
including any claim of accord and satisfaction or release with respect to
deposits accepted by any Blocked Account Bank thereunder. All deposit accounts
and investment accounts of each Borrower and its Subsidiaries are set forth on
Schedule 4.15(h). Notwithstanding anything to the contrary in this
Section 4.15(h), so long as no Default or Event of Default shall have occurred,
Agent, following the written request of Borrowing Agent with respect to the
same, shall give the Blocked Account Bank instructions in accordance with the
applicable agreement regarding the Blocked Account to disburse funds on deposit
in the account referenced therein to such account as the Borrowing Agent may
specify to Agent in writing until such time as an Event of Default shall have
occurred and Agent shall otherwise instruct the Blocked Account Bank.
          (i) Adjustments. No Borrower will, without Agent’s consent, compromise
or adjust any Receivables (or extend the time for payment thereof) or accept any
returns of merchandise or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns, discounts, credits
and allowances as have been heretofore customary in the business of such
Borrower.
     4.16 Intentionally Omitted.
     4.17 Maintenance of Equipment. The material Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear excepted) and
all necessary replacements of and repairs thereto shall be made so that the
operating efficiency of the material Equipment shall be maintained and
preserved. Each Borrower shall have the right to sell Equipment constituting
Collateral to the extent set forth in Section 4.3 hereof.
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     4.18 Exculpation of Liability. Nothing herein contained shall be construed
to constitute Agent or any Lender as any Borrower’s agent for any purpose
whatsoever, nor shall Agent or any Lender be responsible or liable for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and regardless of the cause thereof unless done
with willful misconduct or with gross (not mere) negligence (as determined by a
court of competent jurisdiction in a final non-appealable judgment). Following
the occurrence of an Event of Default (INCLUDING, WITHOUT LIMITATION, WITH
RESPECT TO AN ACT OR INACTION ARISING FROM AGENT’S NEGLIGENCE OR STRICT
LIABILITY). Neither Agent nor any Lender, whether by anything herein or in any
assignment or otherwise, assume any of any Borrower’s obligations under any
contract or agreement assigned to Agent or such Lender, and neither Agent nor
any Lender shall be responsible in any way for the performance by any Borrower
of any of the terms and conditions thereof.
     4.19 Environmental Matters.
          (a) Borrowers shall ensure that the Real Property and all operations
and businesses conducted thereon (including disposal of any Hazardous Waste
generated thereon) remains in material compliance with all Environmental Laws
and they shall not place or permit to be placed any Hazardous Substances on any
Real Property except as permitted by Applicable Law or appropriate governmental
authorities.
          (b) In the event any Borrower obtains, gives or receives notice of any
Release or threat of Release of a reportable quantity of any Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a “Hazardous Discharge”) or receives any notice of violation, request for
information or notification that it is potentially responsible for investigation
or cleanup of environmental conditions at the Real Property, demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental Laws affecting the Real Property or any
Borrower’s interest therein (any of the foregoing is referred to herein as an
“Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which
the Real Property is located or the United States Environmental Protection
Agency (any such person or entity hereinafter the “Authority”), then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and circumstances of which any Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint; provided, however, that
Borrowers shall only be required to deliver such information to Agent to the
extent any Borrower is required to give notice of the same to any lender
financing its Real Property. Such information is to be provided to allow Agent
to protect its security interest in and Lien on the Collateral and is not
intended to create nor shall it create any obligation upon Agent or any Lender
with respect thereto.
          (c) Borrowing Agent shall promptly forward to Agent copies of any
material request for information, notification of potential liability, demand
letter relating to potential responsibility with respect to the investigation or
cleanup of Hazardous Substances at any other site owned, operated or used by any
Borrower to dispose of Hazardous Substances and shall continue to forward copies
of correspondence between any Borrower and the Authority regarding such claims
to Agent until the claim is settled. Borrowing Agent shall promptly
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forward to Agent copies of all material documents and reports concerning a
Hazardous Discharge at the Real Property that any Borrower is required to file
under any Environmental Laws. Such information is to be provided solely to allow
Agent to protect Agent’s security interest in and Lien on the Collateral.
          (d) Borrowers shall respond promptly to any Hazardous Discharge or
Environmental Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid subjecting the Collateral to any Lien. If any
Borrower shall fail to respond promptly to any Hazardous Discharge or
Environmental Complaint or any Borrower shall fail to comply with any of the
requirements of any Environmental Laws, Agent on behalf of Lenders may, but
without the obligation to do so, for the sole purpose of protecting Agent’s
interest in the Collateral: (A) give such notices or (B) enter onto the Real
Property (or authorize third parties to enter onto the Real Property) and take
such actions as Agent (or such third parties as directed by Agent) deem
reasonably necessary or advisable, to clean up, remove, mitigate or otherwise
deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable costs and expenses incurred by Agent and Lenders (or such third
parties) in the exercise of any such rights, including any sums paid in
connection with any judicial or administrative investigation or proceedings,
fines and penalties, together with interest thereon from the date expended at
the Default Rate for Domestic Rate Loans constituting Revolving Advances shall
be paid upon demand by Borrowers, and until paid shall be added to and become a
part of the Obligations secured by the Liens created by the terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.
          (e) Borrowers shall promptly provide Agent, at Borrowers’ expense,
with any environmental site assessment or environmental audit report prepared at
the direction of any lender financing any Borrower’s Real Property.
          (f) Borrowers shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective employees, agents, directors and officers
harmless from and against all loss, liability (INCLUDING, WITHOUT LIMITATION,
ANY STRICT LIABILITY), damage and expense, claims, costs, fines and penalties,
including attorney’s fees, suffered or incurred by Agent or Lenders under or on
account of any Environmental Laws, including the assertion of any Lien
thereunder, with respect to any Hazardous Discharge, the presence of any
Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate,
including any loss of value of the Real Property as a result of the foregoing
except to the extent such loss, liability, damage and expense is attributable to
any Hazardous Discharge resulting from the willful misconduct or with gross (not
mere) negligence of Agent or any Lender (as determined by a court of competent
jurisdiction in a final non-appealable judgment), but INCLUDING, WITHOUT
LIMITATION, WITH RESPECT TO ANY ACT OR INACTION ARISING FROM AGENT’S OR ANY
LENDER’S NEGLIGENCE OR STRICT LIABILITY. Borrower’s obligations under this
Section 4.19 shall arise upon the discovery of the presence of any Hazardous
Substances at the Real Property, whether or not any federal, state, or local
environmental agency has taken or threatened any action in connection with the
presence of any Hazardous Substances. Borrowers’ obligation and the
indemnifications hereunder shall survive the termination of this Agreement.
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          (g) For purposes of Section 4.19 and 5.7, all references to Real
Property shall be deemed to include all of each Borrower’s right, title and
interest in and to its owned and leased premises.
     4.20 Financing Statements. Except as to the financing statements filed by
Agent and the financing statements described on Schedule 1.2, no financing
statement covering any of the Collateral or any proceeds thereof is on file in
any public office.
V REPRESENTATIONS AND WARRANTIES.
     Each Borrower represents and warrants on behalf of itself and, as
applicable, each Guarantor, as follows:
     5.1 Authority. Each Borrower has full power, authority and legal right to
enter into this Agreement and the Other Documents and to perform all of its
respective Obligations hereunder and thereunder. This Agreement and the Other
Documents have been duly executed and delivered by each Borrower, and this
Agreement and the Other Documents constitute the legal, valid and binding
obligation of such Borrower enforceable in accordance with their terms, except
as such enforceability may be limited by any applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors’ rights generally. The execution,
delivery and performance of this Agreement and of the Other Documents (a) are
within such Borrower’s corporate or limited liability company powers, as
applicable, have been duly authorized by all necessary corporate or company
action, as applicable, are not in contravention of law or the terms of such
Borrower’s by-laws, certificate of incorporation or operating agreement,
certificate of formation, as applicable, or other applicable documents relating
to such Borrower’s formation or to the conduct of such Borrower’s business or of
any material agreement or undertaking to which such Borrower is a party or by
which such Borrower is bound, including the Vessel Loan Documentation or the
Subordinated Loan Documentation, (b) will not conflict with or violate any law
or regulation, or any judgment, order or decree of any Governmental Body,
(c) will not require the Consent of any Governmental Body or any other Person,
except those Consents set forth on Schedule 5.1 hereto, all of which will have
been duly obtained, made or compiled prior to the Closing Date and which are in
full force and effect and (d) will not conflict with, nor result in any breach
in any of the provisions of or constitute a default under or result in the
creation of any Lien except Permitted Encumbrances upon any asset of such
Borrower under the provisions of any agreement, charter document, instrument,
by-law, or operating agreement, as applicable, or other instrument to which such
Borrower is a party or by which it or its property is a party or by which it may
be bound, including under the provisions of the Vessel Loan Documentation or the
Subordinated Loan Documentation.
     5.2 Formation and Qualification.
          (a) Each Borrower and each Guarantor is duly incorporated or formed,
as applicable, and in good standing under the laws of the jurisdictions listed
on Schedule 5.2(a) and is qualified to do business and is in good standing in
the jurisdictions listed on Schedule 5.2(a) which constitute all jurisdictions
in which qualification and good standing are necessary for such Borrower or
Guarantor to conduct its business and own its property and where the failure to
so qualify could reasonably be expected to have a Material Adverse Effect on
such Borrower. Each
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Borrower has delivered to Agent true and complete copies of its certificate of
incorporation and by-laws or certificate of formation and operating agreement,
as applicable, and will promptly notify Agent of any amendment or changes
thereto.
          (b) The only Subsidiaries of Holdings and each Borrower and each
Guarantor are listed on Schedule 5.2(b).
     5.3 Survival of Representations and Warranties. All representations and
warranties of such Borrower contained in this Agreement and the Other Documents
shall be true at the time of such Borrower’s execution of this Agreement and the
Other Documents, and shall survive the execution, delivery and acceptance
thereof by the parties thereto and the closing of the transactions described
therein or related thereto.
     5.4 Tax Returns. Each Borrower’s and each Guarantor’s federal tax
identification number, if applicable, is set forth on Schedule 5.4. Each
Borrower has filed all federal, state and local tax returns and other reports
each is required by law to file and has paid all taxes, assessments, fees and
other governmental charges that are due and payable. Federal, state and local
income tax returns of each Borrower have been examined and reported upon by the
appropriate taxing authority or closed by applicable statute and satisfied for
all fiscal years prior to and including the fiscal year ending December 31,
2004. The provision for taxes on the books of each Borrower and each Guarantor
is adequate for all years not closed by applicable statutes, and for its current
fiscal year, and no Borrower has any knowledge of any deficiency or additional
assessment in connection therewith not provided for on its books.
     5.5 Financial Statements.
          (a) The balance sheet of Holdings on a Consolidated Basis (the
“Balance Sheet”) furnished to Agent on the Closing Date is accurate, complete
and correct and fairly reflects the financial condition of Holdings on a
Consolidated Basis as of January 31, 2006, and has been prepared in accordance
with GAAP, consistently applied. The Balance Sheet has been certified as
accurate, complete and correct in all material respects by the President and
Chief Financial Officer of Borrowing Agent. All financial statements referred to
in this subsection 5.5(a), including the related schedules and notes thereto,
have been prepared, in accordance with GAAP, except as may be disclosed in such
financial statements.
          (b) The month-by-month and annual cash flow projections of Holdings on
a Consolidated Basis and their projected balance sheets as of the Closing Date,
copies of which are annexed hereto as Exhibit 5.5(b) (the “Projections”) were
prepared by or at the direction of the Chief Financial Officer of Holdings, are
based on underlying assumptions which provide a reasonable basis for the
projections contained therein and reflect Borrowers’ judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period. The cash flow Projections together with the Pro Forma Balance
Sheet, are referred to as the “Pro Forma Financial Statements”.
          (c) The balance sheet of Holdings on a Consolidated Basis (including
the accounts of all Subsidiaries for the respective periods during which a
subsidiary relationship existed) as of December 31, 2004, and the related
statement of income, change in stockholder’s
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equity, and change in cash flow for the period ended on such date, all
accompanied by reports thereon containing opinions without qualification by
independent certified public accountants, copies of which have been delivered to
Agent, have been prepared in accordance with GAAP, consistently applied (except
for changes in application in which such accountants concur) and present fairly
the financial position of Borrowers and their Subsidiaries at such date and the
results of their operations for such period. Since December 31, 2004 there has
been no change in the condition, financial or otherwise, of Holdings on a
Consolidated Basis as shown on the balance sheet as of such date, except changes
in the Ordinary Course of Business, none of which individually or in the
aggregate has been materially adverse.
     5.6 Entity Names. No Borrower has been known by any other corporate name in
the past five years and does not sell Inventory under any other name except as
set forth on Schedule 5.6, nor has any Borrower been the surviving corporation
or company, as applicable, of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five
(5) years.
     5.7 O.S.H.A. and Environmental Compliance.
          (a) To the extent expressly applicable, each Borrower and each
Guarantor has duly complied with, and its facilities, business, assets,
property, leaseholds, Real Property and Equipment are in compliance in all
material respects with, the provisions of the Federal Occupational Safety and
Health Act, the Environmental Protection Act, RCRA and all other Environmental
Laws; there are no outstanding violations thereof with respect to any Borrower
or any Guarantor or relating to its business, assets, property, leaseholds or
Equipment under any such laws, rules or regulations.
          (b) To the extent expressly applicable, each Borrower and each
Guarantor has been issued all required federal, state and local licenses,
certificates or permits relating to all applicable Environmental Laws.
          (c) (i) There are no visible signs of releases, spills, discharges,
leaks or disposal (collectively referred to as “Releases”) of Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
any Borrower or any Guarantor; (ii) there are no underground storage tanks or
polychlorinated biphenyls on the Real Property; (iii) neither the Real Property
nor any premises leased by any Borrower or any Guarantor has ever been used as a
treatment, storage or disposal facility of Hazardous Waste; and (iv) no
Hazardous Substances are present on the Real Property or any premises leased by
any Borrower, excepting such quantities as are handled in accordance with all
applicable manufacturer’s instructions and governmental regulations and in
proper storage containers and as are necessary for the operation of the
commercial business of any Borrower or of its tenants.
     5.8 Solvency; No Litigation, Violation, Indebtedness or Default.
          (a) Before and after giving effect to the funding of each Advance made
pursuant to this Agreement, each Borrower and each Guarantor is and will be
solvent, able to pay its debts as they mature, has and will have capital
sufficient to carry on its business and all businesses in which it is about to
engage, and (i) as of the Closing Date, the fair present saleable
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value of its assets, calculated on a going concern basis, is in excess of the
amount of its liabilities and (ii) subsequent to the Closing Date, the fair
saleable value of its assets (calculated on a going concern basis) will be in
excess of the amount of its liabilities.
          (b) Except as disclosed in Schedule 5.8(b), neither Borrower nor any
Guarantor has (i) any pending or threatened litigation, arbitration, actions or
proceedings which could reasonably be expected to have a Material Adverse
Effect, and (ii) any liabilities or indebtedness for borrowed money other than
the Obligations.
          (c) Neither Borrower nor any Guarantor is in violation of any
applicable statute, law, rule, regulation or ordinance in any respect which
could reasonably be expected to have a Material Adverse Effect, nor is Borrower
or any Guarantor in violation of any order of any court, Governmental Body or
arbitration board or tribunal.
          (d) No Borrower, Guarantor, nor any member of the Controlled Group
maintains or contributes to any Plan other than those listed on Schedule 5.8(d)
hereto. (i) No Plan has incurred any “accumulated funding deficiency,” as
defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code, whether or
not waived, and each Borrower and each member of the Controlled Group has met
all applicable minimum funding requirements under Section 302 of ERISA in
respect of each Plan; (ii) each Plan which is intended to be a qualified plan
under Section 401(a) of the Code as currently in effect has been determined by
the Internal Revenue Service to be qualified under Section 401(a) of the Code
and the trust related thereto is exempt from federal income tax under Section
501(a) of the Code; (iii) neither any Borrower, Guarantor, nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the
payment of premiums, and there are no premium payments which have become due
which are unpaid; (iv) no Plan has been terminated by the plan administrator
thereof nor by the PBGC, and there is no occurrence which would cause the PBGC
to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at
this time, the current value of the assets of each Plan exceeds the present
value of the accrued benefits and other liabilities of such Plan and neither any
Borrower nor any member of the Controlled Group knows of any facts or
circumstances which would materially change the value of such assets and accrued
benefits and other liabilities; (vi) neither any Borrower, Guarantor nor any
member of the Controlled Group has breached any of the responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan;
(vii) neither any Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the Code,
and no fact exists which could give rise to any such liability; (viii) neither
any Borrower, Guarantor nor any member of the Controlled Group nor any fiduciary
of, nor any trustee to, any Plan, has engaged in a “prohibited transaction”
described in Section 406 of the ERISA or Section 4975 of the Code nor taken any
action which would constitute or result in a Termination Event with respect to
any such Plan which is subject to ERISA; (ix) each Borrower, Guarantor and each
member of the Controlled Group has made all contributions due and payable with
respect to each Plan; (x) there exists no event described in Section 4043(b) of
ERISA, for which the thirty (30) day notice period has not been waived;
(xi) neither any Borrower, Guarantor nor any member of the Controlled Group has
any fiduciary responsibility for investments with respect to any plan existing
for the benefit of persons other than employees or former employees of any
Borrower and any member of the Controlled Group; (xii) neither any Borrower,
Guarantor nor any member of the Controlled Group maintains or contributes to any
Plan which provides health, accident or
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life insurance benefits to former employees, their spouses or dependents, other
than in accordance with Section 4980B of the Code; (xiii) neither any Borrower,
Guarantor nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the
Multiemployer Pension Plan Amendments Act of 1980 and there exists no fact which
would reasonably be expected to result in any such liability; and (xiv) no Plan
fiduciary (as defined in Section 3(21) of ERISA) has any liability for breach of
fiduciary duty or for any failure in connection with the administration or
investment of the assets of a Plan.
     5.9 Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, design rights, tradenames,
assumed names, trade secrets and licenses owned or utilized by any Borrower are
set forth on Schedule 5.9, are, to the best of Borrower’s knowledge, valid and
have been duly registered or filed with all appropriate Governmental Bodies and
constitute all of the material intellectual property rights which are necessary
for the operation of its business (other than mass marketed commercially
available software); there is no objection to or pending challenge to the
validity of any such patent, trademark, copyright, design rights, tradename,
trade secret or license and neither any Borrower nor any Guarantor is aware of
any grounds for any challenge, except as set forth in Schedule 5.9 hereto. Each
patent, patent application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service mark license,
design rights, copyright, copyright application and copyright license owned or
held by any Borrower or any Guarantor and all trade secrets used by any Borrower
or any Guarantor consist of original material or property developed by such
Borrower or such Guarantor or was lawfully acquired by such Borrower or such
Guarantor from the proper and lawful owner thereof. Each of such items has been
maintained so as to preserve the value thereof from the date of creation or
acquisition thereof. With respect to all software used by any Borrower or any
Guarantor, such Borrower or such Guarantor is in possession of all source and
object codes related to each piece of software or is the beneficiary of a source
code escrow agreement, each such source code escrow agreement being listed on
Schedule 5.9 hereto.
     5.10 Licenses and Permits. Except as set forth in Schedule 5.10, each
Borrower and each Guarantor (a) is in compliance with and (b) has procured and
is now in possession of, all material licenses or permits required by any
Applicable Law, rule or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business and
where the failure to procure such licenses or permits could have a Material
Adverse Effect.
     5.11 Default of Indebtedness. Neither any Borrower nor any Guarantor is in
default in the payment of the principal of or interest on any Funded Debt or
under any instrument or agreement under or subject to which any Funded Debt has
been issued and no event has occurred under the provisions of any such
instrument or agreement which with or without the lapse of time or the giving of
notice, or both, constitutes or would constitute an event of default thereunder.
     5.12 No Default. Neither any Borrower nor any Guarantor is in default in
the payment or performance of any of its contractual obligations and no Default
has occurred.
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     5.13 No Burdensome Restrictions. Neither any Borrower nor any Guarantor is
party to any contract or agreement the performance of which could reasonably be
expected to have a Material Adverse Effect. Each Borrower has heretofore
delivered to Agent true and complete copies of all material contracts to which
it is a party or to which it or any of its properties is subject, each as set
forth on Schedule 5.13. Neither any Borrower nor any Guarantor has agreed or
consented to cause or permit in the future (upon the happening of a contingency
or otherwise) any of its property, whether now owned or hereafter acquired, to
be subject to a Lien which is not a Permitted Encumbrance.
     5.14 No Labor Disputes. Neither any Borrower nor any Guarantor is involved
in any labor dispute; there are no strikes or walkouts or union organization of
any Borrower’s or of any Guarantor’s employees threatened or in existence and no
labor contract is scheduled to expire during the Term other than as set forth on
Schedule 5.14 hereto.
     5.15 Margin Regulations. Neither any Borrower nor any Guarantor is engaged,
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying” any
“margin stock” within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Advance
will be used for “purchasing” or “carrying” “margin stock” as defined in
Regulation U of such Board of Governors.
     5.16 Investment Company Act. Neither any Borrower nor any Guarantor is an
“investment company” registered or required to be registered under the
Investment Company Act of 1940, as amended, nor is it controlled by such a
company.
     5.17 Disclosure. No representation or warranty made by any Borrower in this
Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith or therewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact known to
any Borrower or which reasonably should be known to such Borrower which such
Borrower has not disclosed in Borrower’s publicly available securities filings
with respect to the transactions contemplated by this Agreement which could
reasonably be expected to have a Material Adverse Effect.
     5.18 Delivery of Vessel Loan Documentation and Subordinated Loan
Documentation. Agent has received complete copies of the material Vessel Loan
Documentation and the Subordinated Loan Documentation (including all exhibits,
schedules and disclosure letters referred to therein or delivered pursuant
thereto, if any) and all amendments or supplements thereto, waivers relating
thereto and other side letters or agreements affecting the terms thereof.
     5.19 Swaps. Neither any Borrower nor any Guarantor is a party to, nor will
it be a party to, any swap agreement whereby such Borrower has agreed or will
agree to swap interest rates or currencies unless same provides that damages
upon termination following an event of default thereunder are payable on an
unlimited “two-way basis” without regard to fault on the part of either party.
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     5.20 Conflicting Agreements. No provision of any mortgage, indenture,
contract, agreement, judgment, decree or order binding on any Borrower or
affecting the Collateral conflicts with, or requires any Consent which has not
already been obtained to, or would in any way prevent the execution, delivery or
performance of, the terms of this Agreement or the Other Documents.
     5.21 Application of Certain Laws and Regulations. Neither any Borrower, any
Guarantor, nor any Affiliate of any Borrower or any Guarantor is subject to any
law, statute, rule or regulation which regulates the incurrence of any
Indebtedness, including laws, statutes, rules or regulations relative to common
or interstate carriers or to the sale of electricity, gas, steam, water,
telephone, telegraph or other public utility services.
     5.22 Business and Property of Borrowers. Upon and after the Closing Date,
neither Borrowers nor Guarantors propose to engage in any business other than
providing marine construction services for the offshore oil and gas and other
energy related industries and activities incidental or reasonably related to the
foregoing. On the Closing Date, each Borrower will own or lease all the property
and possess all of the rights and Consents necessary for the conduct of the
business of such Borrower.
     5.23 Section 20 Subsidiaries. Borrowers do not intend to use and shall not
use any portion of the proceeds of the Advances, directly or indirectly, to
purchase during the underwriting period, or for 30 days thereafter, Ineligible
Securities being underwritten by a Section 20 Subsidiary.
     5.24 Anti-Terrorism Laws.
          (a) General. Neither any Borrower, any Guarantor, nor any Affiliate of
any Borrower or any Guarantor is in violation of any Anti-Terrorism Law or
engages in or conspires to engage in any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.
          (b) Executive Order No. 13224. Neither any Borrower, any Guarantor nor
any Affiliate of any Borrower or any Guarantor or their respective agents acting
or benefiting in any capacity in connection with the Advances or other
transactions hereunder, is any of the following (each a “Blocked Person”):
               (i) a Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order No. 13224;
               (ii) a Person owned or controlled by, or acting for or on behalf
of, any Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;
               (iii) a Person or entity with which any Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;
               (iv) a Person or entity that commits, threatens or conspires to
commit or supports “terrorism” as defined in the Executive Order No. 13224;
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               (v) a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or
               (vi) a Person or entity who is affiliated or associated with a
Person or entity listed above.
     Neither any Borrower, any Guarantor, nor to the knowledge of any Borrower,
any of its agents acting in any capacity in connection with the Advances or
other transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction
relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.
     5.25 Trading with the Enemy. Neither any Borrower nor any Guarantor has
engaged, nor does it intend to engage, in any business or activity prohibited by
the Trading with the Enemy Act.
VI AFFIRMATIVE COVENANTS.
     Each Borrower shall (and as applicable, shall cause each Guarantor to),
until the indefeasible payment in full of the Obligations and termination of
this Agreement:
     6.1 Payment of Fees. Pay to Agent on demand all usual and customary fees
and expenses which Agent incurs in connection with (a) the forwarding of Advance
proceeds and (b) the establishment and maintenance of any Blocked Accounts or
Depository Accounts as provided for in Section 4.15(h). Agent may, without
making demand, charge Borrowers’ Account for all such fees and expenses.
     6.2 Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its material properties useful or
necessary in its business in good working order and condition (reasonable wear
and tear excepted and except as may be disposed of in accordance with the terms
of this Agreement), including all licenses, patents, copyrights, design rights,
tradenames, trade secrets and trademarks and take all actions necessary to
enforce and protect the validity of any intellectual property right or other
right included in the Collateral; (b) keep in full force and effect its
existence and comply in all material respects with the laws and regulations
governing the conduct of its business where the failure to do so could
reasonably be expected to have a Material Adverse Effect; and (c) make all such
reports and pay all such franchise and other taxes and license fees and do all
such other acts and things as may be lawfully required to maintain its rights,
licenses, leases, powers and franchises under the laws of the United States or
any political subdivision thereof.
     6.3 Violations. Promptly notify Agent in writing of any violation of any
law, statute, regulation or ordinance of any Governmental Body, or of any agency
thereof, applicable to any Borrower which could reasonably be expected to have a
Material Adverse Effect.
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     6.4 Government Receivables. Take all steps necessary to protect Agent’s
interest in the Collateral under the Federal Assignment of Claims Act, as
applicable, the Uniform Commercial Code and all other applicable state or local
statutes or ordinances and deliver to Agent appropriately endorsed, any
instrument or chattel paper connected with any Receivable arising out of
contracts between any Borrower and the United States, any state or any
department, agency or instrumentality of any of them.
     6.5 Financial Covenants.
          (a) Tangible Net Worth. Holdings on a Consolidated Basis shall
maintain at all times a Tangible Net Worth in an amount not less than
$135,000,000.
          (b) Fixed Charge Coverage Ratio. Holdings on a Consolidated Basis
shall cause to be maintained as of the end of each fiscal quarter, a Fixed
Charge Coverage Ratio of not less than 1.1 to 1.0.
          (c) Minimum EBITDA. Holdings on a Consolidated Basis shall cause to be
maintained as of the end of each fiscal quarter, for the four-quarter period
then ending, EBITDA of not less than $30,000,000.
          (d) Estimated Contract Losses. Holdings on a Consolidated Basis shall
not have an estimated loss of more than twenty-five percent (25%) in the
aggregate of the revenue value of all of Borrowers’ jobs in progress during any
month, as reflected on the Revenue Accrual Worksheet for such month.
     6.6 Execution of Supplemental Instruments. Execute and deliver to Agent
from time to time, upon demand, such supplemental agreements, statements,
assignments and transfers, or instructions or documents relating to the
Collateral, and such other instruments as Agent may request, in order that the
full intent of this Agreement may be carried into effect.
     6.7 Payment of Indebtedness. Pay, discharge or otherwise satisfy at or
before maturity (subject, where applicable, to specified grace periods and, in
the case of the trade payables, to normal payment practices) all its obligations
and liabilities of whatever nature, except when the failure to do so could not
reasonably be expected to have a Material Adverse Effect or when the amount or
validity thereof is currently being Properly Contested, subject at all times to
any applicable subordination arrangement in favor of Lenders.
     6.8 Standards of Financial Statements. Cause all financial statements
referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and 9.14 as to
which GAAP is applicable to be complete and correct in all material respects
(subject, in the case of interim financial statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein (except as
concurred in by such reporting accountants or officer, as the case may be, and
disclosed therein).
VII NEGATIVE COVENANTS.
     No Borrower shall (and as applicable, shall not permit Guarantors to),
until satisfaction in full of the Obligations and termination of this Agreement:
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     7.1 Acquisition of Assets. Acquire all or a substantial portion of the
assets or Equity Interests of any Person or permit any other Person to
consolidate with or merge with it, except the acquisition of the vessel known as
the Sea Wrangler from Louisiana Pipelaying I, L.L.C. pursuant to the terms of a
Purchase and Sale Agreement dated as of February 1, 2006 and consummated on
February 17, 2006.
     7.2 Creation of Liens. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.
     7.3 Guarantees. Become liable upon the obligations or liabilities of any
Person by assumption, endorsement or guaranty thereof or otherwise (other than
to Lenders) except (a) as disclosed on Schedule 7.3, (b) guarantees made in the
Ordinary Course of Business and not otherwise prohibited hereunder up to the
aggregate amounts of $1,000,000, (c) the endorsement of checks in the Ordinary
Course of Business and (d) guarantees of Indebtedness or performance made in the
Ordinary Course of Business for the benefit of a wholly-owned Subsidiary, so
long as the Indebtedness guaranteed thereby is otherwise permitted under
Section 7.8.
     7.4 Investments. Purchase or acquire obligations or Equity Interests of, or
any other interest in, any Person, except (a) obligations issued or guaranteed
by the United States of America or any agency thereof, (b) commercial paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating), (c) certificates of time deposit and bankers’
acceptances having maturities of not more than 180 days and repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or
(ii) its debt obligations, or those of a holding company of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency, and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.
     7.5 Loans. Make advances, loans or extensions of credit to any Person,
including any Parent, Subsidiary or Affiliate except (a) intercompany loans and
advances made by any Borrower to any other Borrower and (b) intercompany loans
and advances made by any Borrower to any Guarantor in an aggregate amount not to
exceed $275,000,000, at any time; provided that in each case (i) if requested by
Agent, each Borrower or each Guarantor, as the case may be, shall execute and
deliver to each other Borrower a demand note (collectively, the “Intercompany
Notes”) to evidence any such intercompany Indebtedness owing at any time by such
Borrower or such Guarantor to such other Borrowers which Intercompany Notes
shall be in form and substance satisfactory to Agent and shall be pledged and
delivered to Agent as additional collateral security for the Obligations;
(ii) each Borrower shall record all intercompany transactions on its books and
records in a manner satisfactory to Agent; (iii) the obligations of each
Borrower and each Guarantor under any such Intercompany Notes shall be
subordinated to the Obligations of such Borrower and such Guarantor hereunder or
under any other Document in a manner satisfactory to Agent; (iv) at the time any
such intercompany loan or advance is made by any Borrower to any other Borrower
or any Guarantor and after giving effect thereto, each such Borrower or
Guarantor shall be solvent; and (v) no Event of Default would occur and be
continuing after giving effect to any such proposed intercompany loan. The
amount of all intercompany loans as of the Closing Date is set forth on
Schedule 7.5.
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     7.6 Capital Expenditures. Following an Undrawn Availability Event, contract
for, purchase or make any expenditure or commitments for unfinanced Capital
Expenditures and Capitalized Dry Dock Cost in the next four fiscal quarters in
an aggregate amount for Holdings on a Consolidated Basis in excess of
$15,000,000.
     7.7 Dividends. (a) Declare, pay or make any dividend or distribution on any
shares of the common stock or preferred stock of any Borrower to any Person that
is not a Borrower (other than dividends or distributions payable in its stock,
or split-ups or reclassifications of its stock) or apply any of its funds,
property or assets to the purchase, redemption or other retirement of any common
or preferred stock, or of any options to purchase or acquire any such shares of
common or preferred stock of any Borrower or any Guarantor that is a Subsidiary
of a Borrower.
          (b) Pay or make any distribution on any membership interests of any
Borrower or apply any of its funds, property or assets to the purchase,
redemption or other retirement of any membership interests, or of any options to
purchase or acquire any such membership interests of any Borrower to any Person
that is not a Borrower.
     7.8 Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of unsecured trade debt) except in respect of (i) Indebtedness to
Lenders; (ii) purchase money Indebtedness incurred for Capital Expenditures
permitted under Section 7.6 hereof, provided that any such Indebtedness incurred
for the purpose of purchasing or acquiring a vessel shall be subject to an
intercreditor agreement in form and substance satisfactory to Agent in its
Permitted Discretion; (iii) Indebtedness due under the Vessel Loan Documentation
and all extensions, renewals or refinancings thereof, provided, that the terms
and conditions of such refinancings are no more onerous to Borrowers than the
terms of such Indebtedness as in effect on the date hereof and the aggregate
amount thereof shall not exceed $150,000,000 (provided that with respect to any
refinancing of Vessel Loan 4, such refinancing may be for an amount not to
exceed eighty percent (80%) of the value of the vessel the subject of Vessel
Loan 4, for a term that may exceed the length of the original term thereof and
at an interest rate or margin commensurate with such term and the market
conditions at the time of such refinancing); (iv) Indebtedness due under the
Subordinated Loan Documentation; (v) deferred revenues reflected on Holdings’
balance sheet as a liability with respect to the prepayment of rent by Cal Dive
under the lease to Cal Dive; (vi) letters of credit, performance and bid bonds
obtained by Borrowers or Guarantors in the Ordinary Course of Business in an
aggregate amount not to exceed $40,000,000; (vii) supersedeas bonds obtained by
Borrowers or Guarantors in the Ordinary Course of Business; (viii) accrued
liabilities incurred in the Ordinary Course of Business; (ix) deferred taxes;
(x) Indebtedness for which Borrowers or Guarantors are contingently liable by
endorsement of instruments in the course of collection and performance
guarantees and similar transactions entered into in the Ordinary Course of
Business, each to the extent permitted in Section 7.3 hereof; and
(xi) Indebtedness set forth on Schedule 7.8 and extensions, renewals and
refinancings thereof on terms no less onerous than those in effect on the
Closing Date and in amounts not greater than those in effect on the Closing
Date.
     7.9 Nature of Business. Substantially change the nature of the business in
which it is presently engaged, nor except as specifically permitted hereby
purchase or invest, directly or indirectly, in any assets or property other than
in the Ordinary Course of Business for assets or
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property which are useful in, necessary for and are to be used in its business
as presently conducted.
     7.10 Transactions with Affiliates. Directly or indirectly, purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
or otherwise enter into any transaction or deal with, any Affiliate, except
transactions which are in the Ordinary Course of Business, on an arm’s-length
basis on terms and conditions no less favorable than terms and conditions which
would have been obtainable from a Person other than an Affiliate and, with
respect to an Affiliate that is not a Borrower or Guarantor, such transaction
has been disclosed to the Agent in writing.
     7.11 Intentionally Omitted.
     7.12 Subsidiaries.
          (a) Form any Subsidiary unless (i) such Subsidiary expressly joins in
this Agreement as a borrower or guarantor and becomes jointly and severally
liable for the obligations of Borrowers hereunder, under the Notes, and under
any other agreement between any Borrower and Lenders and (ii) Agent shall have
received all documents, including legal opinions, it may reasonably require to
establish compliance with each of the foregoing conditions.
          (b) Other than as set forth on Schedule 7.12(b), enter into any
partnership, joint venture or similar arrangement except that Borrowers may
enter into a partnership, joint venture or similar arrangement in the Ordinary
Course of Business solely for the purpose of procuring licenses and other
administrative items as necessary or appropriate in furtherance of the conduct
of its business in accordance with Section 7.9 so long as no Indebtedness or
other funding obligations are incurred in connection therewith.
     7.13 Fiscal Year and Accounting Changes. Change its fiscal year from the
twelve month period ending December 31 or make any significant change (i) in
accounting treatment and reporting practices except in accordance with GAAP or
(ii) in tax reporting treatment except as allowed by law; provided that
Borrowers shall give Agent prior written notice thereof and shall reasonably
agree to such amendments and modifications to this Agreement as are reasonably
requested by Agent in connection therewith.
     7.14 Pledge of Credit. Now or hereafter pledge Agent’s or any Lender’s
credit on any purchases or for any purpose whatsoever or use any portion of any
Advance in or for any business other than such Borrower’s business as conducted
on the date of this Agreement.
     7.15 Amendment of Articles of Incorporation, By-Laws or Certificate of
Formation, Operating Agreement, as Applicable. Amend, modify or waive (i) any
material term or provision of its Articles of Incorporation or By-Laws or
Certificate of Formation or Operating Agreement, as applicable, unless required
by Applicable Law, or (ii) any immaterial term or provision of its Articles of
Incorporation or By-Laws or Certificate of Formation or Operating Agreement, as
applicable, unless required by Applicable Law or written notice thereof promptly
thereafter is provided to Agent.
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     7.16 Compliance with ERISA. (i) (x) Maintain, or permit any member of the
Controlled Group to maintain, or (y) become obligated to contribute, or permit
any member of the Controlled Group to become obligated to contribute, to any
Plan, other than those Plans disclosed on Schedule 5.8(d), (ii) engage, or
permit any member of the Controlled Group to engage, in any non-exempt
“prohibited transaction”, as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (iii) incur, or permit any member of the Controlled
Group to incur, any “accumulated funding deficiency”, as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iv) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
result in any liability of any Borrower or any member of the Controlled Group or
the imposition of a lien on the property of any Borrower or any member of the
Controlled Group pursuant to Section 4068 of ERISA, (v) assume, or permit any
member of the Controlled Group to assume, any obligation to contribute to any
Multiemployer Plan not disclosed on Schedule 5.8(d), (vi) incur, or permit any
member of the Controlled Group to incur, any withdrawal liability to any
Multiemployer Plan; (vii) fail promptly to notify Agent of the occurrence of any
Termination Event, (viii) fail to comply, or permit a member of the Controlled
Group to fail to comply, with the requirements of ERISA or the Code or other
Applicable Laws in respect of any Plan, (ix) fail to meet, or permit any member
of the Controlled Group to fail to meet, all minimum funding requirements under
ERISA or the Code or postpone or delay or allow any member of the Controlled
Group to postpone or delay any funding requirement with respect of any Plan.
     7.17 Intentionally Omitted.
     7.18 Anti-Terrorism Laws. No Borrower shall, until satisfaction in full of
the Obligations and termination of this Agreement, nor shall it permit any
Affiliate or agent to:
          (a) Conduct any business or engage in any transaction or dealing with
any Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person.
          (b) Deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order
No. 13224.
          (c) Engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT
Act or any other Anti-Terrorism Law. Borrower shall deliver to Lenders any
certification or other evidence requested from time to time by any Lender in its
Permitted Discretion, confirming Borrower’s compliance with this Section.
     7.19 Membership/Partnership Interests. Elect to treat or permit any of its
Subsidiaries to (x) treat its limited liability company membership interests or
partnership interests, as the case may be, as securities as contemplated by the
definition of “security” in Section 8-102(15) and by Section 8-103 of Article 8
of Uniform Commercial Code or (y) except as set forth on Schedule 7.19 (so long
as the same has been delivered to Agent in accordance with the Pledge Agreement)
certificate its limited liability company membership interests or partnership
interests, as the case may be.
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     7.20 Trading with the Enemy Act. Engage in any business or activity in
violation of the Trading with the Enemy Act.
     7.21 Prepayment of Indebtedness. At any time, directly or indirectly
(i) prepay any Funded Debt of any Borrower except as payable to Lenders;
(ii) prepay, repurchase, redeem, retire or otherwise acquire or make any
prepayment on account of any principal of, interest on or premium payable (a) in
connection with the repayment or redemption of the Vessel Note, except as not
otherwise prohibited in the Intercreditor Agreement; or (b) in connection with
the repayment or redemption of the Subordinated Note except as expressly
permitted by the terms of the Subordinated Note as in effect on the Closing
Date. Notwithstanding the foregoing, the Borrowers may (i) exchange all or part
of the Subordinated Note for Permitted Securities, (ii) refinance the Vessel
Note or the Subordinate Note on terms no less onerous than those in effect on
the Closing Date and in amounts not greater than the amount thereof on the
Closing Date, and (iii) so long as no Event of Default would occur after giving
effect to such payment, otherwise prepay the Vessel Note prior to an Undrawn
Availability Event.
     7.22 Other Agreements. Enter into any material amendment, waiver or
modification of the Vessel Loan Documentation, the Subordinated Loan
Documentation or any related agreements.
VIII CONDITIONS PRECEDENT.
     8.1 Conditions to Initial Advances. The agreement of Lenders to make the
initial Advances requested to be made on the Closing Date is subject to the
satisfaction, or waiver by Agent, immediately prior to or concurrently with the
making of such Advances, of the following conditions precedent:
          (a) Note. Agent shall have received the Note duly executed and
delivered by an authorized officer of each Borrower;
          (b) Filings, Registrations and Recordings. Each document (including
any Uniform Commercial Code financing statement) required by this Agreement, any
related agreement or under law or reasonably requested by the Agent to be filed,
registered or recorded in order to create, in favor of Agent, a perfected
security interest in or lien upon the Collateral shall have been properly filed,
registered or recorded in each jurisdiction in which the filing, registration or
recordation thereof is so required or requested, and Agent shall have received
an acknowledgment copy, or other evidence satisfactory to it, of each such
filing, registration or recordation and satisfactory evidence of the payment of
any necessary fee, tax or expense relating thereto;
          (c) Corporate or Company Proceedings of Borrowers. Agent shall have
received a copy of the resolutions in form and substance reasonably satisfactory
to Agent, of the Board of Directors, Management Committee, or Managing Member,
as applicable, of each Borrower authorizing (i) the execution, delivery and
performance of this Agreement, the Note, and any related agreements
(collectively the “Documents”) and (ii) the granting by each Borrower of the
security interests in and liens upon the Collateral in each case certified by
the Secretary or an Assistant Secretary of each Borrower as of the Closing Date;
and, such certificate
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shall state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded as of the date of such certificate;
          (d) Incumbency Certificates of Borrowers. Agent shall have received a
certificate of the Secretary or an Assistant Secretary of each Borrower, dated
the Closing Date, as to the incumbency and signature of the officers of each
Borrower executing this Agreement, the Other Documents, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
          (e) Corporate or Company Proceedings of each Guarantor. Agent shall
have received a copy of the resolutions in form and substance reasonably
satisfactory to Agent, of the Board of Directors, Management Committee or
Managing Member, as applicable, of each Guarantor authorizing the execution,
delivery and performance of the Guaranty and each Other Document to which it is
a party certified by the Secretary or an Assistant Secretary of each Guarantor
as of the Closing Date; and, such certificate shall state that the resolutions
thereby certified have not been amended, modified, revoked or rescinded as of
the date of such certificate;
          (f) Incumbency Certificates of each Guarantor. Agent shall have
received a certificate of the Secretary or an Assistant Secretary of each
Guarantor, dated the Closing Date, as to the incumbency and signature of the
officers of each Guarantor executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
          (g) Certificates. Agent shall have received a copy of the Articles or
Certificate of Incorporation or Formation, as applicable, of Holdings, each
Borrower and each Guarantor, and all amendments thereto, certified by the
Secretary of State or other appropriate official of its jurisdiction of
incorporation or formation, as applicable, together with copies of the By-Laws
or Operating Agreement, as applicable, of Holdings, each Borrower and each
Guarantor and all agreements of Holdings’, each Borrower’s and each Guarantor’s
shareholders or members, as applicable, certified as accurate and complete by
the Secretary of Holdings, each Borrower and such Guarantor;
          (h) Good Standing Certificates. Agent shall have received good
standing certificates (to the extent available from the applicable jurisdiction)
for Holdings, each Borrower and each Guarantor issued by the Secretary of State
or other appropriate official of Holdings’, each Borrower’s and each Guarantor’s
jurisdiction of incorporation or formation, as applicable, and each jurisdiction
where the conduct of Holdings, each Borrower’s and each Guarantor’s business
activities or the ownership of its properties necessitates qualification;
          (i) Legal Opinion. Agent shall have received the executed legal
opinion of Borrower’s and Guarantor’s counsel in form and substance satisfactory
to Agent which shall cover such matters incident to the transactions
contemplated by this Agreement, the Note, the Other Documents, the Guaranty and
related agreements as Agent may reasonably require and each Borrower hereby
authorizes and directs such counsel to deliver such opinions to Agent and
Lenders;
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          (j) No Litigation. (i) No litigation, investigation or proceeding
before or by any arbitrator or Governmental Body shall be continuing or
threatened against Holdings or any Borrower or any Guarantor or against the
officers or directors of Holdings or any Guarantor or any Borrower (A) in
connection with this Agreement, the Other Documents, the Vessel Loan Documents,
the Subordinated Loan Documentation or any of the transactions contemplated
thereby and which, in the reasonable opinion of Agent, is deemed material or
(B) which could, in the reasonable opinion of Agent, have a Material Adverse
Effect; and (ii) no injunction, writ, restraining order or other order of any
nature materially adverse to Holdings or any Borrower or any Guarantor or the
conduct of their respective business or inconsistent with the due consummation
of the Transactions shall have been issued by any Governmental Body;
          (k) Financial Condition Certificates. Agent shall have received an
executed Financial Condition Certificate in the form of Exhibit 8.1(k).
          (l) Collateral Examination. Agent shall have completed Collateral
examinations and audits and received appraisals, the results of which shall be
satisfactory in form and substance to Lenders, of the Receivables, Inventory,
and General Intangibles of each Borrower and all books and records in connection
therewith;
          (m) Fees. Agent shall have received all fees payable to Agent and
Lenders on or prior to the Closing Date hereunder, including pursuant to
Article III hereof and received payment of all expenses reimbursable to Agent
pursuant to this Agreement;
          (n) Pro Forma Financial Statements. Agent shall have received a copy
of the Pro Forma Financial Statements which shall be satisfactory in all
respects to Lenders;
          (o) Certain Other Loan Documents. Agent shall have received final
executed copies of the Vessel Loan Documentation and the Subordinated Loan
Documentation, and all related material agreements, documents and instruments as
in effect on the Closing Date all of which shall be satisfactory in form and
substance to Agent and the transactions contemplated by such documentation shall
be consummated prior to the making of the initial Advance;
          (p) Insurance. Agent shall have received in form and substance
satisfactory to Agent, certified copies of Borrowers’ casualty insurance
policies, together with loss payable endorsements on Agent’s standard form of
loss payee endorsement naming Agent as loss payee, and certified copies of
Borrowers’ liability insurance policies, together with endorsements naming Agent
as an additional insured;
          (q) Payment Instructions. Agent shall have received written
instructions from Borrowing Agent directing the application of proceeds of the
initial Advances made pursuant to this Agreement;
          (r) Blocked Accounts. Agent shall have received duly executed
agreements establishing the Blocked Accounts or Depository Accounts with
financial institutions acceptable to Agent for the collection or servicing of
the Receivables and proceeds of the Collateral, and Agent shall have received
evidence that all Customers have been directed to make all remittances to the
lockbox associated with such Blocked Account;
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          (s) Consents. Agent shall have received any and all Consents necessary
to permit the effectuation of the transactions contemplated by this Agreement
and the Other Documents; and, Agent shall have received such Consents and
waivers of such third parties as might assert claims with respect to the
Collateral, as Agent and its counsel shall deem necessary;
          (t) No Adverse Material Change. (i) Since December 31, 2004, there
shall not have occurred any event, condition or state of facts which could
reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Agent or Lenders shall have been
proven to be inaccurate or misleading in any material respect;
          (u) Leasehold Agreements. Agent shall have received landlord,
mortgagee or warehouseman agreements satisfactory to Agent with respect to all
premises leased by Borrowers at which Inventory and books and records are
located;
          (v) Guarantees and Other Documents. Agent shall have received (i) the
executed Guarantees, (ii) the executed Guarantor Security Agreement, (iii) the
executed Pledge Agreements, and (iv) the executed Other Documents, all in form
and substance satisfactory to Agent;
          (w) Contract Review. Agent shall have reviewed all material contracts
of Borrowers set forth on Schedule 5.13 including leases, union contracts, labor
contracts, vendor supply contracts, license agreements and distributorship
agreements and such contracts and agreements shall be satisfactory in all
respects to Agent and its legal counsel;
          (x) Closing Certificate. Agent shall have received a closing
certificate signed by the Chief Financial Officer of Holdings and each Borrower
dated as of the date hereof, stating that (i) all representations and warranties
set forth in this Agreement and the Other Documents are true and correct on and
as of such date, (ii) Holdings and Borrowers are on such date in compliance with
all the terms and provisions set forth in this Agreement and the Other Documents
and (iii) on such date no Default or Event of Default has occurred or is
continuing;
          (y) Borrowing Base. Agent shall have received an executed Borrowing
Base Certificate dated as of the Closing Date in form and substance satisfaction
to Agent.
          (z) Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrowers shall have Undrawn Availability of at least $15,000,000;
and
          (aa) Compliance with Laws. Agent shall be reasonably satisfied that
each Borrower is in compliance with all pertinent federal, state, local or
territorial regulations, including those with respect to the Federal
Occupational Safety and Health Act, the Environmental Protection Act, ERISA and
the Trading with the Enemy Act.
          (bb) Field Examination. Agent shall have received a satisfactory
asset-based field examination to be completed by examiners selected by Agent.
          (cc) Other. All corporate and other proceedings, all background and
reference checks, examinations and other investigations, and all documents,
instruments and other legal matters in connection with this Agreement and the
Other Documents (including, but not limited
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to, those relating to the corporate and capital structures of Borrowers) shall
be satisfactory in form and substance to Agent and its counsel.
     8.2 Conditions to Each Advance. The agreement of Lenders to make any
Advance requested to be made on any date (including the initial Advance), is
subject to the satisfaction of the following conditions precedent as of the date
such Advance is made:
          (a) Representations and Warranties. Each of the representations and
warranties made by Holdings or any Borrower in or pursuant to this Agreement,
the Other Documents and any related agreements to which it is a party, and each
of the representations and warranties contained in any certificate, document or
financial or other statement furnished at any time under or in connection with
this Agreement, the Other Documents or any related agreement shall be true and
correct in all material respects on and as of such date as if made on and as of
such date;
          (b) No Default. No Event of Default or Default shall have occurred and
be continuing on such date, or would exist after giving effect to the Advances
requested to be made, on such date; provided, however that Agent, in its sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and
          (c) Maximum Advances. In the case of any type of Advance requested to
be made, after giving effect thereto, the aggregate amount of such type of
Advance shall not exceed the maximum amount of such type of Advance permitted
under this Agreement.
     Each request for an Advance by any Borrower hereunder shall constitute a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.
IX INFORMATION AS TO BORROWERS.
     Each Borrower shall, or (except with respect to Section 9.11) shall cause
Borrowing Agent on its behalf to, until satisfaction in full of the Obligations
and the termination of this Agreement:
     9.1 Disclosure of Material Matters. Immediately upon learning thereof,
report to Agent all matters materially affecting the value, enforceability or
collectibility of any portion of the Collateral, including any Borrower’s
reclamation or repossession of, or the return to any Borrower of, a material
amount of goods or claims or disputes asserted by any Customer or other obligor.
     9.2 Schedules. Deliver to Agent on or before the fifteenth (15th) day of
each month as and for the prior month (a) accounts receivable ageings inclusive
of reconciliations to the general ledger, (b) accounts payable schedules
inclusive of all sub-contractor balances and reconciliations to the general
ledger, (c) Inventory reports, (d) a Revenue Accrual Worksheet, (e) the backlog
report, (f) the bid activity report, (g) a report summarizing the projects of
the Borrowers then outstanding that are secured by either letters-of-credit or
performance bonds, and (h) a Borrowing Base Certificate in form and substance
satisfactory to Agent (which shall be
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calculated as of the last day of the prior month and which shall not be binding
upon Agent or restrictive of Agent’s rights under this Agreement). In addition,
Borrowers will deliver to Agent a project health report as requested by Agent as
soon as practical following such request, and each project health report
otherwise prepared by any Borrower promptly after the preparation thereof. In
addition, each Borrower will deliver to Agent at such intervals as Agent may
reasonably require: (i) confirmatory assignment schedules, (ii) copies of
Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such
further schedules, documents and/or information regarding the Collateral as
Agent may require including trial balances and test verifications. Agent shall
have the right to confirm and verify all Receivables by any manner and through
any medium it considers advisable and do whatever it may deem reasonably
necessary to protect its interests hereunder. The items to be provided under
this Section are to be in form satisfactory to Agent and executed by each
Borrower and delivered to Agent from time to time solely for Agent’s convenience
in maintaining records of the Collateral, and any Borrower’s failure to deliver
any of such items to Agent shall not affect, terminate, modify or otherwise
limit Agent’s Lien with respect to the Collateral.
     9.3 Environmental Reports. Furnish Agent, concurrently with the delivery of
the financial statements referred to in Sections 9.7 and 9.8, with a certificate
signed by the President of Borrowing Agent stating, to the best of his
knowledge, that each Borrower is in compliance in all material respects with all
federal, state and local Environmental Laws. To the extent any Borrower is not
in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action such Borrower
will implement in order to achieve full compliance.
     9.4 Litigation. Promptly notify Agent in writing of any claim, litigation,
suit or administrative proceeding affecting any Borrower, Holdings or any
Guarantor, whether or not the claim is covered by insurance which in any such
case affects the Collateral in excess of $1,000,000 or which could reasonably be
expected to have a Material Adverse Effect.
     9.5 Material Occurrences. Promptly notify Agent in writing upon the
occurrence of (a) any Event of Default or Default; (b) any event of default
under the Vessel Loan Documentation or the Subordinated Loan Documentation;
(c) any event which with the giving of notice or lapse of time, or both, would
constitute an event of default under the Vessel Loan Documentation or the
Subordinated Loan Documentation; (d) any event, development or circumstance
whereby any financial statements or other reports furnished to Agent fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of any Borrower as of the
date of such statements; (e) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Code, could subject any Borrower to a tax
imposed by Section 4971 of the Code; (f) each and every default by any Borrower
which might result in the acceleration of the maturity of any Funded Debt,
including the names and addresses of the holders of such Funded Debt with
respect to which there is a default existing or with respect to which the
maturity has been or could be accelerated, and the amount of such Indebtedness;
and (g) any other development in the business or affairs of any Borrower,
Holdings or any Guarantor, which could reasonably be expected to have a Material
Adverse Effect; in each case describing the nature thereof and the action
Borrowers propose to take with respect thereto.
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     9.6 Government Receivables. Notify Agent immediately if any of its
Receivables arise out of contracts between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.
     9.7 Annual Financial Statements. Furnish Agent no later than as required to
be delivered by a public company under the Securities Act, but in no event later
than one hundred and five (105) days after the end of each fiscal year of
Holdings, financial statements of Holdings on a Consolidated Basis including,
but not limited to, statements of income and stockholders’ equity and cash flow
from the beginning of the current fiscal year to the end of such fiscal year and
the balance sheet as at the end of such fiscal year, all prepared in accordance
with GAAP applied on a basis consistent with prior practices, and in reasonable
detail and reported upon without qualification by Grant Thornton, L.L.P., or
such other independent certified public accounting firm selected by Borrowers
and satisfactory to Agent (the “Accountants”). The reports shall be accompanied
by a Compliance Certificate.
     9.8 Quarterly Financial Statements. Furnish Agent no later than as required
to be delivered by a public company under the Securities Act, but in no event
later than fifty (50) days after the end of each fiscal quarter, an unaudited
balance sheet of Holdings on a Consolidated Basis and unaudited statements of
income and stockholders’ equity and cash flow of Holdings on a Consolidated
Basis reflecting results of operations from the beginning of the fiscal year to
the end of such quarter and for such quarter, prepared on a basis consistent
with prior practices and complete and correct in all material respects, subject
to normal and recurring year end adjustments that individually and in the
aggregate are not material to Borrowers’ business. The reports shall be
accompanied by a Compliance Certificate.
     9.9 Monthly Financial Statements. Furnish Agent within thirty (30) days
after the end of each month, an unaudited balance sheet of Holdings on a
Consolidated Basis and unaudited statements of income and stockholders’ equity
and cash flow of Holdings on a Consolidated Basis reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year end
adjustments that individually and in the aggregate are not material to
Borrowers’ business. The reports shall be accompanied by a Compliance
Certificate.
     9.10 Other Reports. To the extent not already provided pursuant to the
foregoing, furnish Agent as soon as available, but in any event within ten
(10) days after the issuance thereof, (i) with copies of such financial
statements, reports and returns as each Borrower shall send to its stockholders
and members, and (ii) copies of all material notices sent pursuant to the Vessel
Loan Documentation or the Subordinated Loan Documentation.
     9.11 Additional Information. Furnish Agent with such additional information
as Agent shall reasonably request in order to enable Agent to determine whether
the terms, covenants, provisions and conditions of this Agreement and the Note
have been complied with by Borrowers including, without the necessity of any
request by Agent, (a) copies of all environmental audits and reviews, (b) at
least thirty (30) days prior thereto, notice of any Borrower’s opening of any
new office or place of business or any Borrower’s closing of any existing office
or place of business, and (c) promptly upon any Borrower’s learning thereof,
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notice of any labor dispute to which any Borrower may become a party, any
strikes or walkouts relating to any of its plants or other facilities, and the
expiration of any labor contract to which any Borrower is a party or by which
any Borrower is bound.
     9.12 Projected Operating Budget. Furnish Agent, no later than one (1) day
prior to the beginning of each Borrower’s fiscal years commencing with fiscal
year 2007, a month by month projected operating budget and cash flow of Holdings
on a Consolidated Basis for such fiscal year (including an income statement for
each month and a balance sheet as at the end of the last month in each fiscal
quarter), such projections to be accompanied by a certificate signed by the
President or Chief Financial Officer of each Borrower to the effect that such
projections have been prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and that such officer has
no reason to question the reasonableness of any material assumptions on which
such projections were prepared.
     9.13 Variances From Operating Budget. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each
quarterly report, a written report summarizing all material variances from
budgets submitted by Borrowers pursuant to Section 9.12 and a discussion and
analysis by management with respect to such variances.
     9.14 Notice of Communications with Governmental Bodies. To the extent not
already provided pursuant to the foregoing, furnish Agent with prompt written
notice of (i) any lapse or other termination of any Consent issued to any
Borrower by any Governmental Body or any other Person that is material to the
operation of any Borrower’s business, (ii) any refusal by any Governmental Body
or any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by any Borrower or any Guarantor with any
Governmental Body or Person, if such reports indicate any material change in the
business, operations, affairs or condition of any Borrower or any Guarantor, or
if copies thereof are requested by Lender, and (iv) copies of any material
notices and other communications from any Governmental Body or Person which
specifically relate to any Borrower or any Guarantor.
     9.15 ERISA Notices and Requests. To the extent not already provided
pursuant to the foregoing, furnish Agent with immediate written notice in the
event that (i) any Borrower or any member of the Controlled Group knows or has
reason to know that a Termination Event has occurred, together with a written
statement describing such Termination Event and the action, if any, which such
Borrower or any member of the Controlled Group has taken, is taking, or proposes
to take with respect thereto and, when known, any action taken or threatened by
the Internal Revenue Service, Department of Labor or PBGC with respect thereto,
(ii) any Borrower or any member of the Controlled Group knows or has reason to
know that a prohibited transaction (as defined in Sections 406 of ERISA and 4975
of the Code) has occurred together with a written statement describing such
transaction and the action which such Borrower or any member of the Controlled
Group has taken, is taking or proposes to take with respect thereto, (iii) a
funding waiver request has been filed with respect to any Plan together with all
communications received by any Borrower or any member of the Controlled Group
with respect to such request, (iv) any increase in the benefits of any existing
Plan or the establishment of any new Plan or the commencement of contributions
to any Plan to which any Borrower or any member of the Controlled Group was not
previously contributing shall occur, (v) any Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of intention to
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terminate a Plan or to have a trustee appointed to administer a Plan, together
with copies of each such notice, (vi) any Borrower or any member of the
Controlled Group shall receive any favorable or unfavorable determination letter
from the Internal Revenue Service regarding the qualification of a Plan under
Section 401(a) of the Code, together with copies of each such letter; (vii) any
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) any Borrower or any member of the Controlled Group shall fail to
make a required installment or any other required payment under Section 412 of
the Code on or before the due date for such installment or payment; (ix) any
Borrower or any member of the Controlled Group knows that (a) a Multiemployer
Plan has been terminated, (b) the administrator or plan sponsor of a
Multiemployer Plan intends to terminate a Multiemployer Plan, or (c) the PBGC
has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
     9.16 Additional Documents. Execute and deliver to Agent, upon request, such
documents and agreements as Agent may, from time to time, reasonably request to
carry out the purposes, terms or conditions of this Agreement. Agent may, in its
Permitted Discretion, request that any of the reports, documents or other
information required to be delivered in this Article IX be delivered to Agent on
a more timely basis.
X EVENTS OF DEFAULT.
     The occurrence of any one or more of the following events shall constitute
an “Event of Default”:
     10.1 Nonpayment. Failure by any Borrower to pay any principal or interest
on the Obligations when due, whether at maturity or by reason of acceleration
pursuant to the terms of this Agreement or by notice of intention to prepay, or
by required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any Other Document;
     10.2 Breach of Representation. Any representation or warranty made by any
Borrower or any Guarantor in, or deemed to have been made pursuant to the
express provisions of, this Agreement, any Other Document or any related
agreement or in any certificate, document or financial or other statement
furnished at any time in connection herewith or therewith shall prove to have
been misleading in any material respect on the date when made or deemed to have
been made;
     10.3 Intentionally Omitted.
     10.4 Judicial Actions. Issuance of a notice of levy, assessment, injunction
or attachment against any Borrower’s Receivables or against a material portion
of any Borrower’s other property;
     10.5 Noncompliance. Except as otherwise provided for in Sections 10.1 and
10.5(ii), (i) failure or neglect of any Borrower or any Guarantor to perform,
keep or observe any term, provision, condition, covenant herein contained, or
contained in any Other Document or any other agreement or arrangement, now or
hereafter entered into between any Borrower or any Guarantor, and Agent or any
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or observe any term, provision, condition or covenant, contained in
Sections 4.6, 4.7, 4.9, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured
within ten (10) days from the occurrence of such failure or neglect;
     10.6 Judgments . Any judgment or judgments are rendered or judgment liens
are filed against any Borrower or any Guarantor, in each case, for an aggregate
amount in excess of $250,000 (unless such judgment, judgments, or judgment lien
is (a) Properly Contested, or (b) covered by insurance policies), and
enforcement proceedings shall have been commenced by a creditor upon such
judgment, and there shall be any period of thirty (30) consecutive days during
which a stay of enforcement of such judgment, by reason of a pending appeal or
otherwise, shall not be in effect;
     10.7 Bankruptcy. Any Borrower or any Guarantor shall (i) apply for, consent
to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of creditors, (iii) commence a voluntary case under any state or federal
bankruptcy laws (as now or hereafter in effect), (iv) be adjudicated a bankrupt
or insolvent, (v) file a petition seeking to take advantage of any other law
providing for the relief of debtors, (vi) acquiesce to, or fail to have
dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (vii) take any action for the
purpose of effecting any of the foregoing;
     10.8 Inability to Pay. Any Borrower or any Guarantor shall admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business;
     10.9 Affiliate Bankruptcy. Any Subsidiary of Holdings, or any Guarantor,
shall (i) apply for, consent to or suffer the appointment of, or the taking of
possession by, a receiver, custodian, trustee, liquidator or similar fiduciary
of itself or of all or a substantial part of its property, (ii) admit in writing
its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for
the benefit of creditors, (iv) commence a voluntary case under any state or
federal bankruptcy laws (as now or hereafter in effect), (v) be adjudicated a
bankrupt or insolvent, (vi) file a petition seeking to take advantage of any
other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any
involuntary case under such bankruptcy laws, or (viii) take any action for the
purpose of effecting any of the foregoing;
     10.10 Material Adverse Effect. Any change in any Borrower’s or any
Guarantor’s results of operations or condition (financial or otherwise) which
has a Material Adverse Effect;
     10.11 Lien Priority. Any Lien created hereunder or provided for hereby or
under any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest;
     10.12 Vessel Loan Default or Subordinated Loan Default. An event of default
has occurred under the Vessel Loan Documentation, the Subordinated Loan
Documentation or any
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Intercreditor Agreement, which default shall not have been cured or waived
within any applicable grace period;
     10.13 Cross Default. A default of the Funded Debt of any Borrower in excess
of $1,000,000 which default is not cured within any applicable grace period;
     10.14 Breach of Guaranty. Termination or breach of any Guaranty or
Guarantor Security Agreement or similar agreement executed and delivered to
Agent in connection with the Obligations of any Borrower, or if any Guarantor
attempts to terminate, challenges the validity of, or its liability under, any
such Guaranty or Guarantor Security Agreement or similar agreement;
     10.15 Change of Ownership. Any Change of Ownership or Change of Control
shall occur;
     10.16 Invalidity. Any material provision of this Agreement or any Other
Document shall, for any reason, cease to be valid and binding on Borrower or any
Guarantor, or any Borrower or any Guarantor shall so claim in writing to Agent
or any Lender;
     10.17 Licenses. (i) Any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any license, permit, patent trademark or tradename
of any Borrower or any Guarantor, or (B) commence proceedings to suspend,
revoke, terminate or adversely modify any such license, permit, trademark,
tradename or patent and such proceedings shall not be dismissed or discharged
within sixty (60) days, or (c) schedule or conduct a hearing on the renewal of
any license, permit, trademark, tradename or patent necessary for the
continuation of any Borrower’s or any Guarantor’s business and the staff of such
Governmental Body issues a report recommending the termination, revocation,
suspension or material, adverse modification of such license, permit, trademark,
tradename or patent; (ii) any agreement which is necessary or material to the
operation of any Borrower’s or any Guarantor’s business shall be revoked or
terminated and not replaced by a substitute acceptable to Agent within thirty
(30) days after the date of such revocation or termination, and such revocation
or termination and non-replacement would reasonably be expected to have a
Material Adverse Effect;
     10.18 Seizures. Any portion of the Collateral in excess of $500,000 shall
be seized or taken by a Governmental Body, or any Borrower or any Guarantor or
the title and rights of any Borrower or any Guarantor in the Collateral or in
any vessel shall have become the subject matter of claim, litigation, suit or
other proceeding which might, in the reasonable opinion of Agent, upon final
determination, result in impairment or loss of the security provided by this
Agreement or the Other Documents;
     10.19 Operations. Work on contracts representing fifty percent (50%) or
more of the value of all pending contracts of any Borrower or any Guarantor are
interrupted (other than in accordance with the applicable contract) at any time
for more than sixty (60) consecutive days; or
     10.20 Pension Plans. An event or condition specified in Sections 7.16 or
9.15 hereof shall occur or exist with respect to any Plan and, as a result of
such event or condition, together with all other such events or conditions, any
Borrower or any member of the Controlled Group
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shall incur, or in the opinion of Agent be reasonably likely to incur, a
liability to a Plan or the PBGC (or both) which, in the reasonable judgment of
Agent, would have a Material Adverse Effect.
XI LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT.
     11.1 Rights and Remedies.
          (a) Upon the occurrence of (i) an Event of Default pursuant to
Section 10.7 all Obligations shall be immediately due and payable and this
Agreement and the obligation of Lenders to make Advances shall be deemed
terminated (ii) any of the other Events of Default and at any time thereafter
(such default not having previously been cured), at the option of Required
Lenders all Obligations shall be immediately due and payable and Lenders shall
have the right to terminate this Agreement and to terminate the obligation of
Lenders to make Advances and (iii) a filing of a petition against any Borrower
in any involuntary case under any state or federal bankruptcy laws, all
Obligations shall be immediately due and payable and the obligation of Lenders
to make Advances hereunder shall be terminated other than as may be required by
an appropriate order of the bankruptcy court having jurisdiction over such
Borrower. Upon the occurrence of any Event of Default, Agent shall have the
right to exercise any and all rights and remedies provided for herein, under the
Other Documents, under the Uniform Commercial Code and at law or equity
generally, including the right to foreclose the security interests granted
herein and to realize upon any Collateral by any available judicial procedure
and/or to take possession of and sell any or all of the Collateral with or
without judicial process. Agent may enter any of any Borrower’s premises or
other premises without legal process and without incurring liability to any
Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
sole discretion without notice or demand, take the Collateral and remove the
same to such place as Agent may deem advisable and Agent may require Borrowers
to make the Collateral available to Agent at a convenient place. With or without
having the Collateral at the time or place of sale, Agent may sell the
Collateral, or any part thereof, at public or private sale, at any time or
place, in one or more sales, at such price or prices, and upon such terms,
either for cash, credit or future delivery, as Agent may elect. Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Agent shall
give Borrowers reasonable notification of such sale or sales, it being agreed
that in all events written notice mailed to Borrowing Agent at least ten
(10) days prior to such sale or sales is reasonable notification. At any public
sale Agent or any Lender may bid for and become the purchaser, and Agent, any
Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind,
including any equity of redemption and all such claims, rights and equities are
hereby expressly waived and released by each Borrower. In connection with the
exercise of the foregoing remedies, including the sale of Inventory, Agent is
granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent
is granted permission to use all of each Borrower’s (a) trademarks, trade
styles, trade names, patents, patent applications, copyrights, service marks,
licenses, franchises and other proprietary rights which are used or useful in
connection with Inventory for the purpose of marketing, advertising for sale and
selling or otherwise disposing of such Inventory and (b) Equipment for the
purpose of completing any unfinished job, contract, project or assignment as
deemed necessary by Agent, subject to the Intercreditor Agreement. The cash
proceeds realized from the sale of any Collateral shall be applied to the
Obligations in the
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order set forth in Section 11.5 hereof. Noncash proceeds will only be applied to
the Obligations as they are converted into cash. If any deficiency shall arise,
Borrowers shall remain liable to Agent and Lenders therefor.
          (b) To the extent that Applicable Law imposes duties on the Agent to
exercise remedies in a commercially reasonable manner, each Borrower
acknowledges and agrees that it is not commercially unreasonable for the Agent
(i) to fail to incur expenses reasonably deemed significant by the Agent to
prepare Collateral for disposition or otherwise to complete raw material or work
in process into finished goods or other finished products for disposition,
(ii) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against Customers or other Persons obligated on Collateral or to remove
Liens on or any adverse claims against Collateral, (iv) to exercise collection
remedies against Customers and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (v) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to
contact other Persons, whether or not in the same business as any Borrower, for
expressions of interest in acquiring all or any portion of such Collateral,
(vii) to hire one or more professional auctioneers to assist in the disposition
of Collateral, whether or not the Collateral is of a specialized nature,
(viii) to dispose of Collateral by utilizing internet sites that provide for the
auction of assets of the types included in the Collateral or that have the
reasonable capacity of doing so, or that match buyers and sellers of assets,
(ix) to dispose of assets in wholesale rather than retail markets, (x) to
disclaim disposition warranties, such as title, possession or quiet enjoyment,
(xi) to purchase insurance or credit enhancements to insure the Agent against
risks of loss, collection or disposition of Collateral or to provide to the
Agent a guaranteed return from the collection or disposition of Collateral, or
(xii) to the extent deemed appropriate by the Agent, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Agent in the collection or disposition of any of the Collateral. Each
Borrower acknowledges that the purpose of this Section 11.1(b) is to provide
non-exhaustive indications of what actions or omissions by the Agent would not
be commercially unreasonable in the Agent’s exercise of remedies against the
Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in this
Section 11.1(b). Without limitation upon the foregoing, nothing contained in
this Section 11.1(b) shall be construed to grant any rights to any Borrower or
to impose any duties on Agent that would not have been granted or imposed by
this Agreement or by Applicable Law in the absence of this Section 11.1(b).
     11.2 Agent’s Discretion. Agent shall have the right in its sole discretion
to determine which rights, Liens, security interests or remedies Agent may at
any time pursue, relinquish, subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent’s or Lenders’ rights hereunder.
     11.3 Setoff. Subject to Section 14.12, in addition to any other rights
which Agent or any Lender may have under Applicable Law, upon the occurrence of
an Event of Default hereunder, Agent and such Lender shall have a right,
immediately and without notice of any
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kind, to apply any Borrower’s property held by Agent and such Lender to reduce
the Obligations.
     11.4 Rights and Remedies not Exclusive. The enumeration of the foregoing
rights and remedies is not intended to be exhaustive and the exercise of any
rights or remedy shall not preclude the exercise of any other right or remedies
provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
     11.5 Allocation of Payments After Event of Default. Notwithstanding any
other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received
by the Agent on account of the Obligations or any other amounts outstanding
under any of the Other Documents or in respect of the Collateral may, at Agent’s
sole discretion, be paid over or delivered as follows:
     FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of the Agent in connection with enforcing
its rights and the rights of the Lenders under this Agreement and the Other
Documents and any protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of this Document;
     SECOND, to payment of any fees owed to the Agent;
     THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of each of the Lenders in connection with
enforcing its rights under this Agreement and the Other Documents or otherwise
with respect to the Obligations owing to such Lender;
     FOURTH, to the payment of all of the Obligations consisting of accrued fees
and interest;
     FIFTH, to the payment of the outstanding principal amount of the
Obligations (including the payment or cash collateralization of any outstanding
Letters of Credit and the payment of the Hedge Liabilities);
     SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid
pursuant to clauses “FIRST” through “FIFTH” above; and
     SEVENTH, to the payment of the surplus, if any, to whoever may be lawfully
entitled to receive such surplus.
     In carrying out the foregoing, (i) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (ii) each of the Lenders shall receive (so long as it is
not a Defaulting Lender) an amount equal to its pro rata share (based on the
proportion that the then outstanding Advances held by such Lender bears to the
aggregate then outstanding Advances) of amounts available to be applied pursuant
to clauses “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent that any
amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit,
such amounts shall be held by the Agent in a cash collateral
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account and applied (A) first, to reimburse the Issuer from time to time for any
drawings under such Letters of Credit and (B) then, following the expiration of
all Letters of Credit, to all other obligations of the types described in
clauses “FIFTH” and “SIXTH” above in the manner provided in this Section 11.5.
XII WAIVERS AND JUDICIAL PROCEEDINGS.
     12.1 Waiver of Notice. Each Borrower hereby waives notice of non-payment of
any of the Receivables, demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of
intent to accelerate, notice of acceleration, notice of loans or advances made,
credit extended, Collateral received or delivered, or any other action taken in
reliance hereon, and all other demands and notices of any description, except
such as are expressly provided for herein.
     12.2 Delay. No delay or omission on Agent’s or any Lender’s part in
exercising any right, remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any Default or Event of Default.
     12.3 Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO
OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT
ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE
CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
     12.4 Waiver of Rights Under Texas Deceptive Trade Practices Act. EACH
BORROWER HEREBY WAIVES ITS RIGHTS UNDER THE DECEPTIVE TRADE PRACTICES—CONSUMER
PROTECTION ACT, SECTION § 17.41 ET SEQ. TEXAS BUSINESS & COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN
ATTORNEY OF EACH BORROWER’S OWN SELECTION, EACH BORROWER VOLUNTARILY CONSENTS TO
THIS WAIVER. EACH BORROWER EXPRESSLY WARRANTS AND REPRESENTS THAT SUCH BORROWER
(A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION RELATIVE TO AGENT
AND/OR ANY LENDER, AND (B) HAS BEEN REPRESENTED BY LEGAL COUNSEL IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
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XIII EFFECTIVE DATE AND TERMINATION.
     13.1 Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of each Borrower,
Agent and each Lender, shall become effective on the date hereof and shall
continue in full force and effect until April 28, 2011 (the “Term”) unless
sooner terminated as herein provided. Borrowers may terminate this Agreement at
any time upon at least ninety (90) days’ prior written notice to Agent; provided
that Borrowers shall pay in full the Obligations on or prior to the termination
date set forth in such notice. In the event this Agreement is terminated prior
to the last day of the Term (the date of such prepayment hereinafter referred to
as the “Early Termination Date”), Borrowers shall pay to Agent for the benefit
of Lenders an early termination fee in an amount equal to (x) $450,000 if the
Early Termination Date occurs on or after the Closing Date to and including the
date immediately preceding the first anniversary of the Closing Date, (y)
$300,000 if the Early Termination Date occurs on or after the first anniversary
of the Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date, and (z) $150,000 if the Early Termination Date
occurs on or after the second anniversary of the Closing Date to and including
the date immediately preceding the third anniversary of the Closing Date.
     13.2 Termination. The termination of this Agreement shall not affect any
Borrower’s, Agent’s or any Lender’s rights, or any of the Obligations having
their inception prior to the effective date of such termination, and the
provisions hereof shall continue to be fully operative until all transactions
entered into, rights or interests created or Obligations have been fully and
indefeasibly paid, disposed of, concluded or liquidated. The security interests,
Liens and rights granted to Agent and Lenders hereunder and the financing
statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrowers’
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of each Borrower have been indefeasibly paid and
performed in full after the termination of this Agreement (other than
Obligations (such as indemnity and other contingent Obligations) that are not
then due and payable and for which any event or claim that would five rise
thereto have not occurred and are not then pending or threatened) or each
Borrower has furnished Agent and Lenders with an indemnification satisfactory to
Agent and Lenders with respect thereto. Accordingly, each Borrower waives any
rights which it may have under the Uniform Commercial Code to demand the filing
of termination statements with respect to the Collateral, and Agent shall not be
required to send such termination statements to each Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations have been
indefeasibly paid in full in immediately available funds. All representations,
warranties, covenants, waivers and agreements contained herein shall survive
termination hereof until all Obligations are indefeasibly paid and performed in
full.
XIV REGARDING AGENT.
     14.1 Appointment. Each Lender hereby designates PNC to act as Agent for
such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and the Other Documents and to exercise such powers
and to perform such duties hereunder and
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thereunder as are specifically delegated to or required of Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto
and Agent shall hold all Collateral, payments of principal and interest, fees
(except the fees set forth in Sections 3.3(a) and 3.4), charges and collections
(without giving effect to any collection days) received pursuant to this
Agreement, for the ratable benefit of Lenders. Agent may perform any of its
duties hereunder by or through its agents or employees. As to any matters not
expressly provided for by this Agreement (including collection of the Note)
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that Agent
shall not be required to take any action which exposes Agent to liability or
which is contrary to this Agreement or the Other Documents or Applicable Law
unless Agent is furnished with an indemnification reasonably satisfactory to
Agent with respect thereto.
     14.2 Nature of Duties. Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and the Other Documents.
Neither Agent nor any of its officers, directors, employees or agents shall be
(i) liable for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross (not mere) negligence or
willful misconduct (as determined by a court of competent jurisdiction in a
final non-appealable judgment), or (ii) responsible in any manner for any
recitals, statements, representations or warranties made by any Borrower or any
officer thereof contained in this Agreement, or in any of the Other Documents or
in any certificate, report, statement or other document referred to or provided
for in, or received by Agent under or in connection with, this Agreement or any
of the Other Documents or for the value, validity, effectiveness, genuineness,
due execution, enforceability or sufficiency of this Agreement, or any of the
Other Documents or for any failure of any Borrower to perform its obligations
hereunder. Agent shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any of the Other Documents, or
to inspect the properties, books or records of any Borrower. The duties of Agent
as respects the Advances to Borrowers shall be mechanical and administrative in
nature; Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon Agent any
obligations in respect of this Agreement except as expressly set forth herein.
     14.3 Lack of Reliance on Agent and Resignation. Independently and without
reliance upon Agent or any other Lender, each Lender has made and shall continue
to make (i) its own independent investigation of the financial condition and
affairs of each Borrower and each Guarantor in connection with the making and
the continuance of the Advances hereunder and the taking or not taking of any
action in connection herewith, and (ii) its own appraisal of the
creditworthiness of each Borrower and each Guarantor. Agent shall have no duty
or responsibility, either initially or on a continuing basis, to provide any
Lender with any credit or other information with respect thereto, whether coming
into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by any Borrower pursuant to the terms
hereof. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or
for the execution, effectiveness,
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genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of any Borrower
or any Guarantor, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement, the Note, the Other Documents or the financial condition of any
Borrower, or the existence of any Event of Default or any Default.
     Agent may resign on sixty (60) days’ written notice to each of Lenders and
Borrowing Agent and upon such resignation, the Required Lenders will promptly
designate a successor Agent reasonably satisfactory to Borrowers.
     Any such successor Agent shall succeed to the rights, powers and duties of
Agent, and the term “Agent” shall mean such successor agent effective upon its
appointment, and the former Agent’s rights, powers and duties as Agent shall be
terminated, without any other or further act or deed on the part of such former
Agent. After any Agent’s resignation as Agent, the provisions of this
Article XIV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under this Agreement.
     14.4 Certain Rights of Agent. If Agent shall request instructions from
Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain from such act or taking such action unless and until Agent shall have
received instructions from the Required Lenders; and Agent shall not incur
liability to any Person by reason of so refraining. Without limiting the
foregoing, Lenders shall not have any right of action whatsoever against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.
     14.5 Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, cablegram, order or other
document or telephone message believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters pertaining to this Agreement and the Other Documents and
its duties hereunder, upon advice of counsel selected by it. Agent may employ
agents and attorneys-in-fact and shall not be liable for the default or
misconduct of any such agents or attorneys-in-fact selected by Agent with
reasonable care.
     14.6 Notice of Default. Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default hereunder or under
the Other Documents, unless Agent has received notice from a Lender or Borrowing
Agent referring to this Agreement or the Other Documents, describing such
Default or Event of Default and stating that such notice is a “notice of
default”. In the event that Agent receives such a notice, Agent shall give
notice thereof to Lenders. Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required
Lenders; provided, that, unless and until Agent shall have received such
directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of Lenders.
     14.7 Indemnification. To the extent Agent is not reimbursed and indemnified
by Borrowers, each Lender will reimburse and indemnify Agent in proportion to
its respective
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portion of the Advances (or, if no Advances are outstanding, according to its
Commitment Percentage), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent in performing its duties hereunder, or in any way
relating to or arising out of this Agreement or any Other Document (INCLUDING,
WITHOUT LIMITATION, WITH RESPECT TO ANY OTHERWISE INDEMNIFIED MATTER ARISING
FROM AGENT’S NEGLIGENCE OR STRICT LIABILITY); provided that, Lenders shall not
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent’s gross (not mere) negligence or willful misconduct (as determined by
a court of competent jurisdiction in a final non-appealable judgment).
     14.8 Agent in its Individual Capacity. With respect to the obligation of
Agent to lend under this Agreement, the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein; and the term “Lender” or any similar term
shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity as a Lender. Agent may engage in business with any Borrower
as if it were not performing the duties specified herein, and may accept fees
and other consideration from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
     14.9 Delivery of Documents. To the extent Agent receives financial
statements required under Sections 9.7, 9.8, 9.9, 9.12 and 9.13 or Borrowing
Base Certificates from any Borrower pursuant to the terms of this Agreement
which any Borrower is not obligated to deliver to each Lender, Agent will
promptly furnish such documents and information to Lenders.
     14.10 Borrowers’ Undertaking to Agent. Without prejudice to their
respective obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby undertakes with Agent to pay to Agent from time to time on
demand all amounts from time to time due and payable by it for the account of
Agent or Lenders or any of them pursuant to this Agreement to the extent not
already paid. Any payment made pursuant to any such demand shall pro tanto
satisfy the relevant Borrower’s obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
     14.11 No Reliance on Agent’s Customer Identification Program. Each Lender
acknowledges and agrees that neither such Lender, nor any of its Affiliates,
participants or assignees, may rely on the Agent to carry out such Lender’s,
Affiliate’s, participant’s or assignee’s customer identification program, or
other obligations required or imposed under or pursuant to the USA PATRIOT Act
or the regulations thereunder, including the regulations contained in 31 CFR
103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other
Anti-Terrorism Law, including any programs involving any of the following items
relating to or in connection with any Borrower, its Affiliates or its agents,
this Agreement, the Other Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.
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     14.12 Other Agreements. Each of the Lenders agrees that it shall not,
without the express consent of Agent, and that it shall, to the extent it is
lawfully entitled to do so, upon the request of Agent, set off against the
Obligations, any amounts owing by such Lender to any Borrower or any deposit
accounts of any Borrower now or hereafter maintained with such Lender. Anything
in this Agreement to the contrary notwithstanding, each of the Lenders further
agrees that it shall not, unless specifically requested to do so by Agent, take
any action to protect or enforce its rights arising out of this Agreement or the
Other Documents, it being the intent of Lenders that any such action to protect
or enforce rights under this Agreement and the Other Documents shall be taken in
concert and at the direction or with the consent of Agent or Required Lenders.
XV BORROWING AGENCY.
     15.1 Borrowing Agency Provisions.
          (a) Each Borrower hereby irrevocably designates Borrowing Agent to be
its attorney and agent and in such capacity to borrow, sign and endorse notes,
and execute and deliver all instruments, documents, writings and further
assurances now or hereafter required hereunder, on behalf of such Borrower or
Borrowers, and hereby authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.
          (b) The handling of this credit facility as a co-borrowing facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Borrowers and at their request. Neither Agent nor any Lender
shall incur liability to Borrowers as a result thereof. To induce Agent and
Lenders to do so and in consideration thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender harmless from and against
any and all liabilities, expenses, losses, damages and claims of damage or
injury asserted against Agent or any Lender by any Person arising from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided herein, reliance by Agent or any Lender on any request or instruction
from Borrowing Agent or any other action taken by Agent or any Lender with
respect to this Section 15.1 except due to willful misconduct or gross (not
mere) negligence by the indemnified party (as determined by a court of competent
jurisdiction in a final and non-appealable judgment).
          (c) All Obligations shall be joint and several, and each Borrower
shall make payment upon the maturity of the Obligations by acceleration or
otherwise, and such obligation and liability on the part of each Borrower shall
in no way be affected by any extensions, renewals and forbearance granted to
Agent or any Lender to any Borrower, failure of Agent or any Lender to give any
Borrower notice of borrowing or any other notice, any failure of Agent or any
Lender to pursue or preserve its rights against any Borrower, the release by
Agent or any Lender of any Collateral now or thereafter acquired from any
Borrower, and such agreement by each Borrower to pay upon any notice issued
pursuant thereto is unconditional and unaffected by prior recourse by Agent or
any Lender to the other Borrowers or any Collateral for such Borrower’s
Obligations or the lack thereof. Each Borrower waives all suretyship defenses.
     15.2 Waiver of Subrogation. Each Borrower expressly waives any and all
rights of subrogation, reimbursement, indemnity, exoneration, contribution of
any other claim which such
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Borrower may now or hereafter have against the other Borrowers or other Person
directly or contingently liable for the Obligations hereunder, or against or
with respect to the other Borrowers’ property (including, without limitation,
any property which is Collateral for the Obligations), arising from the
existence or performance of this Agreement, until termination of this Agreement
and repayment in full of the Obligations.
XVI MISCELLANEOUS.
     16.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas applied to contracts to be
performed wholly within the State of Texas. Any judicial proceeding brought by
or against any Borrower with respect to any of the Obligations, this Agreement,
the Other Documents or any related agreement may be brought in any court of
competent jurisdiction in the State of Texas, United States of America, and, by
execution and delivery of this Agreement, each Borrower accepts for itself and
in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement. Each
Borrower hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by registered mail (return
receipt requested) directed to Borrowing Agent at its address set forth in
Section 16.6 and service so made shall be deemed completed five (5) days after
the same shall have been so deposited in the mails of the United States of
America, or, at the Agent’s option, by service upon Borrowing Agent which each
Borrower irrevocably appoints as such Borrower’s Agent for the purpose of
accepting service within the State of Texas. Nothing herein shall affect the
right to serve process in any manner permitted by law or shall limit the right
of Agent or any Lender to bring proceedings against any Borrower in the courts
of any other jurisdiction. Each Borrower waives any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum non conveniens. Each
Borrower waives the right to remove any judicial proceeding brought against such
Borrower in any state court to any federal court. Any judicial proceeding by any
Borrower against Agent or any Lender involving, directly or indirectly, any
matter or claim in any way arising out of, related to or connected with this
Agreement or any related agreement, shall be brought only in a federal or state
court located in the County of Dallas, State of Texas.
     16.2 Entire Understanding.
          (a) THIS AGREEMENT AND THE DOCUMENTS EXECUTED CONCURRENTLY HEREWITH
CONTAIN THE ENTIRE UNDERSTANDING AMONG EACH BORROWER, AGENT AND EACH LENDER AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES AND SUPERSEDES ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS, IF ANY, RELATING TO THE SUBJECT MATTER HEREOF. THERE ARE NO
UNWRITTEN AGREEMENTS AMONG THE PARTIES. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no
force and effect unless in writing, signed by each Borrower’s, Agent’s and each
Lender’s respective officers. Neither this Agreement nor any portion or
provisions hereof may be changed, modified, amended, waived, supplemented,
discharged, cancelled or terminated orally or by any course of dealing, or in
any manner other
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than by an agreement in writing, signed by the party to be charged. Each
Borrower acknowledges that it has been advised by counsel in connection with the
execution of this Agreement and Other Documents and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.
          (b) The Required Lenders, Agent with the consent in writing of the
Required Lenders, and Borrowers may, subject to the provisions of this
Section 16.2 (b), from time to time enter into written supplemental agreements
to this Agreement or the Other Documents executed by Borrowers, for the purpose
of adding or deleting any provisions or otherwise changing, varying or waiving
in any manner the rights of Lenders, Agent or Borrowers thereunder or the
conditions, provisions or terms thereof of waiving any Event of Default
thereunder, but only to the extent specified in such written agreements;
provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:
               (i) increase the Commitment Percentage, the maximum dollar
commitment of any Lender or the Maximum Amount.
               (ii) extend the maturity of any Note or the due date for any
amount payable hereunder, or decrease the rate of interest or reduce any fee
payable by Borrowers to Lenders pursuant to this Agreement.
               (iii) alter the definition of the term Required Lenders or alter,
amend or modify this Section 16.2(b).
               (iv) release any Collateral during any calendar year (other than
in accordance with the provisions of this Agreement) having an aggregate value
in excess of $1,500,000.
               (v) change the rights and duties of Agent.
               (vi) permit any Revolving Advance to be made if after giving
effect thereto the total of Revolving Advances outstanding hereunder would
exceed the Formula Amount for more than sixty (30) consecutive Business Days or
exceed one hundred and five percent (105%) of the Formula Amount.
               (vii) increase the Advance Rate above the Advance Rate in effect
on the Closing Date.
               (viii) release any Guarantor.
     Any such supplemental agreement shall apply equally to each Lender and
shall be binding upon Borrowers, Lenders and Agent and all future holders of the
Obligations. In the case of any waiver, Borrowers, Agent and Lenders shall be
restored to their former positions and rights, and any Event of Default waived
shall be deemed to be cured and not continuing, but no waiver of a specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the subsequent Event of Default is the same as the Event of Default which was
waived), or impair any right consequent thereon.
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     In the event that Agent requests the consent of a Lender pursuant to this
Section 16.2 and such Lender shall not respond or reply to Agent in writing
within five (5) days of delivery of such request, such Lender shall be deemed to
have consented to the matter that was the subject of the request. In the event
that Agent requests the consent of a Lender pursuant to this Section 16.2 and
such consent is denied, then PNC may, at its option, require such Lender to
assign its interest in the Advances to PNC or to another Lender or to any other
Person designated by the Agent (the “Designated Lender”), for a price equal to
(i) the then outstanding principal amount thereof plus (ii) accrued and unpaid
interest and fees (but not including any fees payable with respect to the
termination of this Agreement before the expiration of the Term) then due such
Lender, which interest and fees shall be paid when collected from Borrowers. In
the event PNC elects to require any Lender to assign its interest to PNC or to
the Designated Lender, PNC will so notify such Lender in writing within forty
five (45) days following such Lender’s denial, and such Lender will assign its
interest to PNC or the Designated Lender no later than five (5) days following
receipt of such notice pursuant to a Commitment Transfer Supplement executed by
such Lender, PNC or the Designated Lender, as appropriate, and Agent.
     Notwithstanding (a) the existence of a Default or an Event of Default,
(b) that any of the other applicable conditions precedent set forth in
Section 8.2 hereof have not been satisfied or (c) any other provision of this
Agreement, Agent may at its sole discretion and without the consent of the
Required Lenders, voluntarily permit the outstanding Revolving Advances at any
time to exceed an amount equal to the Formula Amount by up to ten percent (10%)
for up to thirty (30) consecutive Business Days (the “Out-of-Formula Loans”). If
Agent is willing in its sole discretion to make such Out-of-Formula Loans, such
Out-of-Formula Loans shall be payable on demand and shall bear interest at the
Default Rate for Revolving Advances consisting of Domestic Rate Loans; provided
that, if Lenders do make Out-of-Formula Loans, neither Agent nor Lenders shall
be deemed thereby to have changed the limits of Section 2.1(a). For purposes of
this paragraph, the discretion granted to Agent hereunder shall not preclude
involuntary overadvances that may result from time to time due to the fact that
the Formula Amount was unintentionally exceeded for any reason, including, but
not limited to, Collateral previously deemed to be “Eligible Receivables”
becomes ineligible, collections of Receivables applied to reduce outstanding
Revolving Advances are thereafter returned for insufficient funds or
overadvances are made to protect or preserve the Collateral. In the event Agent
involuntarily permits the outstanding Revolving Advances to exceed the Formula
Amount by more than ten percent (10%), Agent shall use its efforts to have
Borrowers decrease such excess in as expeditious a manner as is practicable
under the circumstances and not inconsistent with the reason for such excess.
Revolving Advances made after Agent has determined the existence of involuntary
overadvances shall be deemed to be involuntary overadvances and shall be
decreased in accordance with the preceding sentence.
     In addition to (and not in substitution of) the discretionary Revolving
Advances permitted above in this Section 16.2, the Agent is hereby authorized by
Borrowers and the Lenders, from time to time in the Agent’s sole discretion,
(A) after the occurrence and during the continuation of a Default or an Event of
Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make
Revolving Advances to Borrowers on behalf of the Lenders which the Agent, in its
reasonable business judgment, deems necessary or desirable (a) to preserve or
protect the Collateral, or any portion thereof, (b) to enhance the likelihood
of, or maximize the amount of, repayment of the Advances and other
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Obligations, or (c) to pay any other amount chargeable to Borrowers pursuant to
the terms of this Agreement; provided, that at any time after giving effect to
any such Revolving Advances the outstanding Revolving Advances do not exceed one
hundred and ten percent (110%) of the Formula Amount.
     16.3 Successors and Assigns; Participations; New Lenders.
          (a) This Agreement shall be binding upon and inure to the benefit of
Borrowers, Agent, each Lender, all future holders of the Obligations and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.
          (b) Each Borrower acknowledges that in the regular course of
commercial banking business one or more Lenders may at any time and from time to
time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
“Participant”). Each Participant may exercise all rights of payment (including
rights of set-off) with respect to the portion of such Advances held by it or
other Obligations payable hereunder as fully as if such Participant were the
direct holder thereof provided that Borrowers shall not be required to pay to
any Participant more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Participant had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrowers be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Participant. Each Borrower hereby grants to any
Participant a continuing security interest in any deposits, moneys or other
property actually or constructively held by such Participant as security for the
Participant’s interest in the Advances.
          (c) Any Lender may with the consent of Agent which shall not be
unreasonably withheld or delayed sell, assign or transfer all or any part of its
rights under this Agreement and the Other Documents to one or more additional
banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a “Purchasing Lender”,
and together with each Participant, each a “Transferee” and collectively the
“Transferees”), in minimum amounts of not less than $5,000,000, pursuant to a
Commitment Transfer Supplement, executed by a Purchasing Lender, the transferor
Lender, and Agent and delivered to Agent for recording. Upon such execution,
delivery, acceptance and recording, from and after the transfer effective date
determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such
Commitment Transfer Supplement, have the rights and obligations of a Lender
thereunder with a Commitment Percentage as set forth therein, and (ii) the
transferor Lender thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this Agreement, the
Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Agreement and the
Other Documents. Each Borrower hereby
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consents to the addition of such Purchasing Lender and the resulting adjustment
of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor
Lender under this Agreement and the Other Documents. Borrowers shall execute and
deliver such further documents and do such further acts and things in order to
effectuate the foregoing.
          (d) Agent shall maintain at its address a copy of each Commitment
Transfer Supplement delivered to it and a register (the “Register”) for the
recordation of the names and addresses of each Lender and the outstanding
principal, accrued and unpaid interest and other fees due hereunder. The entries
in the Register shall be conclusive, in the absence of manifest error, and
Borrowers, Agent and Lenders may treat each Person whose name is recorded in the
Register as the owner of the Advance recorded therein for the purposes of this
Agreement. The Register shall be available for inspection by Borrowers or any
Lender at any reasonable time and from time to time upon reasonable prior
notice. Agent shall receive a fee in the amount of $3,500 payable by the
applicable Purchasing Lender upon the effective date of each transfer or
assignment to such Purchasing Lender.
          (e) Each Borrower authorizes each Lender to disclose to any Transferee
and any prospective Transferee any and all financial information in such
Lender’s possession concerning such Borrower which has been delivered to such
Lender by or on behalf of such Borrower pursuant to this Agreement or in
connection with such Lender’s credit evaluation of such Borrower.
     16.4 Application of Payments. Agent shall have the continuing and exclusive
right to apply or reverse and re-apply any payment and any and all proceeds of
Collateral to any portion of the Obligations. To the extent that any Borrower
makes a payment or Agent or any Lender receives any payment or proceeds of the
Collateral for any Borrower’s benefit, which are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, debtor in possession, receiver, custodian or any other party under
any bankruptcy law, common law or equitable cause, then, to such extent, the
Obligations or part thereof intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Agent or such
Lender.
     16.5 Indemnity. Each Borrower shall indemnify and defend Agent, each Lender
and each of their respective officers, directors, Affiliates, attorneys,
employees and agents from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or
any Lender in any claim, litigation, proceeding or investigation instituted or
conducted by any Governmental Body or instrumentality or any other Person with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement or the Other Documents, whether or not
Agent or any Lender is a party thereto, except to the extent that any of the
foregoing arises out of the willful misconduct of the party being indemnified
(as determined by a court of competent jurisdiction in a final and
non-appealable judgment). WITHOUT LIMITING THE FOREGOING, (I) IT IS THE
INTENTION OF EACH BORROWER, AND EACH BORROWER AGREES, THAT THE INDEMNITY
PROVISIONS AND EXCULPATORY PROVISIONS CONTAINED IN THIS
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AGREEMENT SHALL APPLY WITH RESPECT TO LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SETTLEMENTS, SUITS, COSTS, EXPENSES AND
DISBURSEMENTS OF ANY KIND WHATSOEVER (INCLUDING, WITHOUT LIMITATION, FEES AND
DISBURSEMENTS OF COUNSEL) WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF ANY PARTY TO BE INDEMNIFIED, and (ii) this indemnity shall
extend to any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses and disbursements of any kind or nature
whatsoever (including fees and disbursements of counsel) asserted against or
incurred by any of the indemnitees described above in this Section 16.5 by any
Person under any Environmental Laws or similar laws by reason of any Borrower’s
or any other Person’s failure to comply with laws applicable to solid or
hazardous waste materials, including Hazardous Substances and Hazardous Waste,
or other Toxic Substances. Additionally, if any taxes (excluding taxes imposed
upon or measured solely by the net income of Agent and Lenders, but including
any intangibles taxes, stamp tax, recording tax or franchise tax) shall be
payable by Agent, Lenders or Borrowers on account of the execution or delivery
of this Agreement, or the execution, delivery, issuance or recording of any of
the Other Documents, or the creation or repayment of any of the Obligations
hereunder, by reason of any Applicable Law now or hereafter in effect, Borrowers
will pay (or will promptly reimburse Agent and Lenders for payment of) all such
taxes, including interest and penalties thereon, and will indemnify and hold the
indemnitees described above in this Section 16.5 harmless from and against all
liability in connection therewith.
     16.6 Notice. Any notice or request hereunder may be given to Borrowing
Agent or any Borrower or to Agent or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this
Section 16.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Loan Agreement shall be given or made by telephone
or in writing (which includes by means of electronic transmission (i.e.,
“e-mail”) or facsimile transmission or by setting forth such Notice on a site on
the World Wide Web (a “Website Posting”) if Notice of such Website Posting
(including the information necessary to access such site) has previously been
delivered to the applicable parties hereto by another means set forth in this
Section 16.6) in accordance with this Section 16.6. Any such Notice must be
delivered to the applicable parties hereto at the addresses and numbers set
forth under their respective names on Section 16.6 hereof or in accordance with
any subsequent unrevoked Notice from any such party that is given in accordance
with this Section 16.6. Any Notice shall be effective:
          (a) In the case of hand-delivery, when delivered;
          (b) If given by mail, four days after such Notice is deposited with
the United States Postal Service, with first-class postage prepaid, return
receipt requested;
          (c) In the case of a telephonic Notice, when a party is contacted by
telephone, if delivery of such telephonic Notice is confirmed no later than the
next Business Day by hand delivery, a facsimile or electronic transmission, a
Website Posting or an overnight courier delivery of a confirmatory Notice
(received at or before noon on such next Business Day);
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          (d) In the case of a facsimile transmission, when sent to the
applicable party’s facsimile machine’s telephone number, if the party sending
such Notice receives confirmation of the delivery thereof from its own facsimile
machine;
          (e) In the case of electronic transmission, when actually received;
          (f) In the case of a Website Posting, upon delivery of a Notice of
such posting (including the information necessary to access such site) by
another means set forth in this Section 16.6; and
          (g) If given by any other means (including by overnight courier), when
actually received.
     Any Lender giving a Notice to Borrowing Agent or any Borrower shall
concurrently send a copy thereof to the Agent, and the Agent shall promptly
notify the other Lenders of its receipt of such Notice.

         
 
  (A)   If to Agent or PNC at:

 
      PNC Bank, National Association
 
      2100 Ross Avenue, Suite 1850
 
      Dallas, Texas 75201
 
      Attention:    Robert Reaser
 
      Telephone:   (214) 871-1265
 
      Facsimile:      (214) 871-1043

 
      with a copy to:

 
      PNC Bank, National Association
 
      PNC Agency Services
 
      PNC Firstside Center
 
      500 First Avenue, 4th Floor
 
      Pittsburgh, Pennsylvania 15219
 
      Attention:    Lisa Pierce
 
      Telephone:    (412) 762-6442
 
      Facsimile:       (412) 762-8672

 
      with an additional copy to:

 
      Patton Boggs LLP
 
      2001 Ross Avenue, Suite 3000
 
      Dallas, Texas 75201
 
      Attention:    Michelle W. Suarez, Esq.
 
      Telephone:    (214) 758-1500
 
      Facsimile:       (214) 758-1550

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  (B)   If to a Lender other than Agent, as specified on the signature pages
hereof
 
       
 
  (C)   If to Borrowing Agent or any Borrower:
 
       
 
      2500 City West Boulevard, Suite 2200
 
      Houston, Texas 77042
 
      Attention:   Chief Financial Officer, and
 
                         General Counsel
 
      Telephone:   (713) 361-2600
 
      Facsimile:     (713) 361-2677

     16.7 Survival. The obligations of Borrowers under Sections 2.2(f), 3.7,
3.8, 3.9, 4.19(h), and 16.5 and the obligations of Lenders under Section 14.7,
shall survive termination of this Agreement and the Other Documents and payment
in full of the Obligations.
     16.8 Severability. If any part of this Agreement is contrary to, prohibited
by, or deemed invalid under Applicable Laws or regulations, such provision shall
be inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.
     16.9 Expenses. All costs and expenses including, without limitation, all
search, audit, appraisal, recording, accounting, professional and filing fees
and expenses and all other out-of-pocket charges and expenses and reasonable
attorneys’ fees (including the allocated costs of in house counsel) and all
other expenses and disbursements incurred by Agent on its behalf or on behalf of
Lenders and Lenders (a) in all efforts made to enforce payment of any Obligation
or effect collection of any Collateral, or (b) in connection with the entering
into, documenting, negotiating, structuring, reviewing and closing this
Agreement and the modification, amendment, administration, monitoring and
enforcement of this Agreement, the Intercreditor Agreement or any consents or
waivers hereunder or thereunder and all related agreements, documents and
instruments, or (c) in instituting, monitoring, maintaining, preserving,
enforcing and foreclosing on Agent’s security interest in or Lien on any of the
Collateral, or monitoring, maintaining, preserving or enforcing any of Agent’s
or any Lender’s rights hereunder, under the Intercreditor Agreement and all
related agreements, documents and instruments, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to Agent’s or any Lender’s transactions
with any Borrower, Holdings, any Guarantor, any Subordinated Lender or any
Vessel Lender or (e) in connection with any advice given to Agent or any Lender
with respect to its rights and obligations under this Agreement, the
Intercreditor Agreement and all related agreements, documents and instruments,
may be charged to Borrowers’ Account and shall be part of the Obligations.
     16.10 Injunctive Relief. Each Borrower recognizes that, in the event any
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, or threatens to fail to perform, observe or
discharge such obligations or liabilities, any remedy at law may prove to be
inadequate relief to Lenders; therefore, Agent, if Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

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     16.11 Consequential Damages. Neither Agent nor any Lender, nor any agent or
attorney for any of them, shall be liable to any Borrower, Holdings or any
Guarantor (or any Affiliate of any such Person) for indirect, punitive,
exemplary or consequential damages arising from any breach of contract, tort or
other wrong relating to the establishment, administration or collection of the
Obligations or as a result of any transaction contemplated under this Agreement
or any Other Document.
     16.12 Captions. The captions at various places in this Agreement are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.
     16.13 Counterparts; Facsimile Signatures. This Agreement may be executed in
any number of and by different parties hereto on separate counterparts, all of
which, when so executed, shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.
     16.14 Construction. The parties acknowledge that each party and its counsel
have reviewed this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.
     16.15 Confidentiality; Sharing Information. Agent, each Lender and each
Transferee shall hold all non-public information obtained by Agent, such Lender
or such Transferee pursuant to the requirements of this Agreement in accordance
with Agent’s, such Lender’s and such Transferee’s customary procedures for
handling confidential information of this nature; provided, however, Agent, each
Lender and each Transferee may disclose such confidential information (a) to its
examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by Applicable Law or court order, Agent, each Lender and each
Transferee shall use its reasonable best efforts prior to disclosure thereof, to
notify the applicable Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall Agent, any Lender or any Transferee
be obligated to return any materials furnished by any Borrower other than those
documents and instruments in possession of Agent or any Lender in order to
perfect its Lien on the Collateral once the Obligations have been paid in full
and this Agreement has been terminated. Each Borrower acknowledges that from
time to time financial advisory, investment banking and other services may be
offered or provided to such Borrower or one or more of its Affiliates (in
connection with this Agreement or otherwise) by any Lender or by one or more
Subsidiaries or Affiliates of such Lender and each Borrower hereby authorizes
each Lender to share any information delivered to such Lender by such Borrower
and its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such Subsidiary or
Affiliate of such Lender, it being understood that any such Subsidiary or
Affiliate of any Lender receiving such information shall be bound by the

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provisions of this Section 16.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the
termination of this Agreement.
     16.16 Publicity. Each Borrower and each Lender hereby authorizes Agent to
make appropriate announcements of the financial arrangement entered into among
Borrowers, Agent and Lenders, including announcements which are commonly known
as tombstones, in such publications and to such selected parties as Agent shall
in its sole discretion deem appropriate.
     16.17 Non-applicability of Chapter 346. Each Borrower, Agent and each
Lender hereby agree that, except for the opt-out provisions of Section 346.004
thereof, the provisions of Chapter 346 of the Texas Finance Code (regulating
certain revolving credit loans and revolving tri-party accounts) shall not apply
to this Agreement or any of the Other Documents.
     16.18 Certifications From Banks and Participants; US PATRIOT Act. Each
Lender or assignee or participant of a Lender that is not incorporated under the
Laws of the United States of America or a state thereof (and is not excepted
from the certification requirement contained in Section 313 of the USA PATRIOT
Act and the applicable regulations because it is both (i) an affiliate of a
depository institution or foreign bank that maintains a physical presence in the
United States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign bank)
shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a “shell” and certifying to
other matters as required by Section 313 of the USA PATRIOT Act and the
applicable regulations: (1) within 10 days after the Closing Date, and (2) as
such other times as are required under the USA PATRIOT Act.
[Remainder of Page Intentionally Blank; Signature Pages Follow]

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

              HORIZON OFFSHORE, INC.
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    VICE PRESIDENT, TREASURER AND CFO
 
       
 
            HORIZON OFFSHORE CONTRACTORS, INC.
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    VICE PRESIDENT, TREASURER AND CFO
 
       
 
            HOC OFFSHORE, S. DE R.L. DE C.V.
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    TREASURER
 
       
 
            HORIZON MARINE CONSTRUCTION LTD.
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    VICE PRESIDENT AND TREASURER
 
       
 
            HORIZON MARINE CONTRACTORS
(MALAYSIA) SDN BHD
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    DIRECTOR
 
       

      Revolving Credit and Security Agreement    

 

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              PT HORIZON OFFSHORE INDONESIA
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    COMMISSIONER
 
       
 
            HORIZON MARINE CONSTRUCTION
(MAURITIUS) LTD.
 
       
 
  By:    /s/ RONALD D. MOGEL
 
       
 
  Name:    RONALD D. MOGEL
 
       
 
  Title:    DIRECTOR
 
       

      Revolving Credit and Security Agreement    

 

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              PNC BANK, NATIONAL ASSOCIATION,
as Lender and as Agent
 
       
 
  By:    /s/ ROB REASER
 
       
 
  Name:    ROB REASER
 
       
 
  Title:    VICE PRESIDENT
 
       
 
            Commitment Percentage: 100%

             
STATE OF                     
    )      
 
    )   ss.
COUNTY OF                     
    )      

     On this ___day of                     _, 2006, before me personally came
                                        , to me known, who, being by me duly
sworn, did depose and say that s/he is the                      of PNC BANK,
NATIONAL ASSOCIATION, and that s/he was authorized to sign her/his name thereto.

     
 
   
 
  Notary Public

      Revolving Credit and Security Agreement    

 

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STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
                     of HORIZON OFFSHORE, INC., a Delaware corporation,
described in and which executed the foregoing instrument; and that s/he signed
her/his name thereto by order of the board of directors of said corporation.

     
 
   
 
  Notary Public

             
STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
                     of HORIZON OFFSHORE CONTRACTORS, INC., a Delaware
corporation, described in and which executed the foregoing instrument and that
s/he signed her/his name thereto by order of the board of directors of said
corporation.

     
 
   
 
  Notary Public

             
STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
___of HOC OFFSHORE, S. DE R.L. DE C.V., a Mexican limited liability company,
described in and which executed the foregoing instrument and that s/he signed
her/his name thereto by order of the management committee of said limited
liability company.

 
 
   
 
  Notary Public

      Revolving Credit and Security Agreement    

 

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STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
___of HORIZON MARINE CONTRACTORS (MALAYSIA) SDN BHD, a Mexican limited liability
company, described in and which executed the foregoing instrument and that s/he
signed her/his name thereto by order of the by order of the management committee
of said limited liability company.

     
 
   
 
  Notary Public

             
STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
                     of PT HORIZON OFFSHORE INDONESIA, an Indonesia PMA,
described in and which executed the foregoing instrument and that s/he signed
her/his name thereto by order of the board of directors of said corporation.

     
 
   
 
  Notary Public

             
STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
___of HORIZON MARINE CONSTRUCTION (MAURITIUS) LTD., a Mauritius limited
liability company, described in and which executed the foregoing instrument and
that s/he signed her/his name thereto by order of the management committee of
said limited liability company.

     
 
   
 
  Notary Public

      Revolving Credit and Security Agreement    

 

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STATE OF TEXAS
    )      
 
    )   ss.  
COUNTY OF DALLAS
    )      

     On this 28th day of April, 2006, before me personally came Ronald D. Mogel,
to me known, who, being by me duly sworn, did depose and say that he is the
___of HORIZON MARINE CONSTRUCTION, LTD., a Cayman Islands limited liability
company, described in and which executed the foregoing instrument and that s/he
signed her/his name thereto by order of the management committee of said limited
liability company.

     
 
   
 
  Notary Public

      Revolving Credit and Security Agreement    

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LIST OF EXHIBITS AND SCHEDULES
Exhibits

     
Exhibit 1.2
  Borrowing Base Certificate
Exhibit 2.1(a)
  Revolving Credit Note
Exhibit 5.5(b)
  Financial Projections
Exhibit 8.1(k)
  Financial Condition Certificate
Exhibit 16.3
  Commitment Transfer Supplement  
Schedules
     
Schedule 1.2
  Permitted Encumbrances
Schedule 4.5
  Equipment and Inventory Locations
Schedule 4.15(h)
  Deposit and Investment Accounts
Schedule 4.19
  Real Property
Schedule 5.1
  Consents
Schedule 5.2(a)
  States of Qualification and Good Standing
Schedule 5.2(b)
  Subsidiaries
Schedule 5.4
  Federal Tax Identification Number
Schedule 5.6
  Prior Names
Schedule 5.8(b)
  Litigation
Schedule 5.8(d)
  Plans
Schedule 5.9
  Intellectual Property, Source Code Escrow Agreements
Schedule 5.10
  Licenses and Permits
Schedule 5.14
  Labor Disputes
Schedule 7.3
  Guarantees
Schedule 7.5
  Amount of Intercompany Loans

Schedules and Exhibits have been intentionally omitted, and will be made
available to the Securities and Exchange Commission upon request.

      Revolving Credit and Security Agreement