Exhibit
10.3


 


INTERCREDITOR
AGREEMENT


 


(PENHALL)


 


INTERCREDITOR
AGREEMENT (this “Agreement”) dated as of November 1, 2005, by and
among the First Lien Agent and the Second Lien Agent (each as defined below).


 


W I T N E S S E T H:


 


WHEREAS,
PENHALL INTERNATIONAL CORP., an Arizona corporation (“Holdings”),
PENHALL COMPANY, a California corporation (“Penhall”), PENHALL LEASING,
L.L.C., a California limited liability company (“Penhall Leasing”),
CAPITOL DRILLING SUPPLIES, INC., an Indiana corporation (“Capitol Drilling”)
and BOB MACK CO., INC., a California corporation  (“Bob Mack” and together with
Holdings, Penhall, Penhall Leasing and Capitol Drilling, together with their
successors and assigns, including any receiver, trustee or
debtor-in-possession, individually a “Borrower” and collectively and
jointly and severally, the “Borrowers”), the Credit Parties (as defined
therein), the Lenders (as defined therein), and General Electric Capital
Corporation, as agent, are parties to an Amended and Restated Credit Agreement,
dated as of November 1, 2005 (as amended or otherwise modified from time
to time, in accordance with the terms of this Agreement, the “GE Credit
Agreement”), pursuant to which such Lenders have made and will from time to
time make loans and provide other financial accommodations to the Borrowers;


 


WHEREAS,
Holdings, the Lenders (as defined therein) (together with their successors and
assigns, the “Second Lien Lenders”) and Deutsche Bank Trust Company
Americas, as agent (the “Second Lien Agent”), are parties to a Second
Lien Credit Agreement dated November 1, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, in accordance with the
terms of this Agreement the “Second Lien Loan Agreement”) pursuant to
which the Second Lien Lenders have made or will make certain loans to Holdings;


 


WHEREAS, the
Borrowers and the other Obligors (as hereinafter defined) have granted to the
First Lien Agent, a lien on, and security interest in, substantially all of
their assets and properties, all as more particularly described in the First
Lien Loan Documents;


 


WHEREAS, the
Borrowers and the other Obligors have granted to the Second Lien Creditors a
lien on, and security interest in, substantially all of their assets and
properties, all as more particularly described in the Second Lien Loan
Documents;


 


WHEREAS, the
Second Lien Creditors and the First Lien Creditors wish to set forth their
agreement as to certain of their respective rights and obligations with respect
to the assets and properties of the Borrowers and the other Obligors and their
understanding relative to their respective positions in certain assets and
properties of the Borrowers and the other Obligors; and


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:


 





















 


Section 1.              Definitions.


 


1.1          General Terms.  As used in
this Agreement, the following terms shall have the respective meanings
indicated below, such meanings to be applicable equally to both the singular
and the plural forms of the terms defined:


 


“Bankruptcy Code” means the provisions of
Title 11 of the United States Code, 11 U.S.C. §§101 et  seq.


 


“Borrower” shall have the meaning set forth
in the recitals hereof.


 


“Business Day” shall mean any day that is
not a Saturday, a Sunday or a day on which banks are required or permitted to
be closed in the State of New York.


 


“Collateral” means all assets and
properties of any kind whatsoever, real or personal, tangible or intangible and
wherever located, of any Obligor, whether now owned or hereafter acquired, upon
which a Lien is now or hereafter granted or purported to be granted by such
Person in favor of a Secured Creditor, as security for all or any part of the
Obligations.


 


“Distribution”
means, with respect to any indebtedness or obligation, (a) any payment or
distribution by any Person of cash, securities or other property, by set-off or
otherwise, on account of such indebtedness or obligation or (b) any
redemption, purchase or other acquisition of such indebtedness or obligation by
any Person.


 


“Documents” means the First Lien Loan
Documents and the Second Lien Loan Documents, collectively.


 


“Enforcement Action” means (i) any
action by any Secured Creditor to foreclose on the Lien of such Person in any
Collateral, (ii) any action by any Secured Creditor to take possession of,
or sell or otherwise realize upon, or to exercise any other rights or remedies
with respect to, any Collateral, including a sale or other disposition after
the occurrence of an Event of Default of any Collateral by an Obligor with the
consent of, or at the direction of, a Secured Creditor, (iii) the exercise
of any right of setoff with respect to, any Collateral of any Obligor or the
sale or other disposition of such Collateral and/or (iv) the commencement
by any Secured Creditor of any legal proceedings or actions against or with
respect to any Collateral of any Obligor to facilitate the actions described in
clauses (i), (ii) and (iii) above, including any action to have the automatic
stay with respect to any Collateral lifted in any Insolvency Proceeding of an
Obligor; provided that the filing
of any notice of claim in any Insolvency Proceeding involving an Obligor shall
not be deemed to be an Enforcement Action.


 


“Event of Default” means each “Event of
Default” or similar term, as such term is defined in any First Lien Loan
Document or any Second Lien Loan Document.


 


“First Lien Agent” means General Electric
Capital Corporation in its capacity as agent for the First Lien Creditors under
the First Lien Loan Documents, and its successors and assigns in such capacity
(including one or more other agents or similar contractual representatives for
one or more lenders that at any time succeeds to or refinances, replaces or
substitutes for any or all of the First Lien Loan Obligations at any time and
from time to time).


 


“First Lien Creditors” means the First Lien
Agent and the First Lien Lenders, collectively.


 





















 


“First Lien Default”
shall mean any  “Event of Default” under
the First Lien Loan Documents , or any condition or event that, after notice or
lapse of time or both, would constitute such an Event of Default if that
condition or event were not cured or removed within any applicable grace or
cure period set forth therein.


 


“First Lien Lenders” means all lenders from
time to time party to the First Lien Loan Documents.


 


“First Lien Letter of Credit Obligations”
means all outstanding obligations incurred by or owing to the First Lien
Creditors, whether direct or indirect, contingent or otherwise, due or not due,
in connection with the issuance of letters of credit by a First Lien Creditor
or another issuer pursuant to the First Lien Loan Documents or the purchase of
a participation with respect to any letter of credit, including any unpaid
reimbursement obligations in respect thereof. 
The amount of such Letter of Credit Obligations shall equal the maximum
amount that may be payable at such time or at any time thereafter by the First
Lien Creditors thereupon or pursuant thereto plus the amount thereof that are
reimbursable to the First Lien Creditors in respect of drawings under such
letters of credit.


 


“First Lien Loan Agreement” means (i) the
GE Credit Agreement and (ii) each loan or credit agreement evidencing any
replacement, substitution, renewal, or refinancing for the Obligations under
the GE Credit Agreement which purports to be secured by the Collateral, in each
case as the same may from time to time be amended, restated, supplemented,
modified, replaced, substituted, renewed or refinanced. in accordance with the
terms of this Agreement.


 


“First Lien Loan Documents” means the First
Lien Loan Agreement, all Loan Documents (as such term is defined in the First
Lien Loan Agreement) and all other agreements, documents and instruments at any
time executed and/or delivered by any Obligor or any other Person with, to or
in favor of the First Lien Agent or any First Lien Lender in connection
therewith or related thereto, in each case, as amended or otherwise modified
from time to time in accordance with the terms of this Agreement.


 


“First Lien Loans” means any loans or
advances outstanding under the First Lien Loan Documents.


 


“First Lien Loan Obligations” means all
obligations, liabilities and indebtedness of every kind, nature and description
owing by one or more Borrowers or any other Obligor to the First Lien Creditors
evidenced by or arising under the First Lien Loan Documents (including any
First Lien Loans and First Lien Letter of Credit Obligations), whether direct
or indirect, absolute or contingent, joint or several, due or not due, primary
or secondary, liquidated or unliquidated, including principal, interest,
charges, fees, costs, indemnities and reasonable expenses, however evidenced,
and whether as principal, surety, endorser, guarantor or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of the First Lien Loan Agreement whether arising
before, during or after the commencement of any Insolvency Proceeding with
respect to one or more of the Borrowers or any Obligor (and including the
payment of any principal, interest, fees, cost, expenses and other amounts
which would accrue and become due but for the commencement of such Insolvency
Proceeding whether or not such amounts are allowed or allowable in whole or in
part in any such Insolvency Proceeding).


 


“First Lien Loan Termination Date” means
the date on which all First Lien Loan Obligations have been Paid in Full.


 


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


 





















 


“Insolvency Proceeding” means, as to any
Obligor, any of the following:  (i) any
case or proceeding with respect to such Person under the Bankruptcy Code or any
other Federal or State bankruptcy, insolvency, reorganization or other law
affecting creditors’ rights or any other or similar proceedings seeking any
stay, reorganization, arrangement, composition or readjustment of the
obligations and indebtedness of such Obligor, (ii) any proceeding seeking
the appointment of any trustee, receiver, liquidator, custodian or other
insolvency official with similar powers with respect to such Obligor or any of
its assets, (iii) any proceeding for liquidation, dissolution or other
winding up of the business of such Obligor or (iv) any assignment for the
benefit of creditors or any marshalling of assets of such Obligor.


 


“Lien” means any mortgage, deed of trust,
pledge, lien (statutory or otherwise), security interest, charge or other
encumbrance or security or preferential arrangement of any nature, including
any conditional sale or title retention arrangement, any capitalized lease and
any assignment, deposit arrangement or financing lease intended as, or having
the effect of, security.


 


“Maximum First Lien Principal Amount” means
as of any date of determination (x) $61,000,000 minus (y) the sum of all
permanent reductions of revolving loan commitments under the First Lien Loan
Documents after the date hereof (other than in connection with a refinancing of
a like amount of such commitments), provided that each advance of a loan under
the First Lien Loan Document and each letter of credit issued under a First
Lien Loan Document shall be within the Maximum First Lien Principal Amount if,
as of the date of the making of such loan or of such issuance, and immediately
after giving effect thereto, the aggregate outstanding principal amount of the
First Lien Loan Obligations, including First Lien Letter of Credit Obligations,
does not exceed the Maximum First Lien Principal Amount as of the date such
loan was made or Letter of Credit was issued.


 


“Obligations” means the First Lien Loan
Obligations and the Second Lien Loan Obligations, collectively.


 


“Obligor” means each Borrower and each
other Person liable on or in respect of the Obligations or that has granted a
Lien on any property or assets as collateral for the Obligations, together with
such Person’s successors and assigns, including a receiver, trustee or
debtor-in-possession on behalf of such Person.


 


“Paid in Full”
shall mean, with respect to any Obligations, that:  (a) all of such Obligations (other than
contingent indemnification obligations not yet due and payable) have been
indefeasibly paid, performed or discharged in full (with all such Obligations
consisting of monetary or payment obligations having been paid in full in cash
or cash equivalents acceptable to the First Lien Lenders), (b) no Person
has any further right to obtain any loans, letters of credit, bankers’
acceptances, or other extensions of credit under the documents relating to such
Obligations, and (c) any and all letters of credit, bankers’ acceptances
or similar instrument issued under such documents have been cancelled and
returned (or, to the extent permitted by the applicable First Lien Loan
Documents, backed by stand-by guarantees or cash collateralized) in accordance
with the terms of such documents.


 


“Permitted Collateral Sale” means (i) any
sale or other disposition of Collateral permitted under the First Lien Loan
Agreement as in effect on the date hereof and (ii) any other sale or other
disposition of Collateral permitted by the First Lien Creditors having a sales
price not exceeding $1,000,000 in the aggregate in any fiscal year.


 


“Person” means an individual, corporation,
partnership, limited liability company, limited liability partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, governmental authority or other regulatory body.


 





















 


 “Purchase
Notice” shall have the meaning set forth in Section 6.1.


 


“Release Documents” shall have the meaning
set forth in Section 3.5.


 


“Release Event” means, with respect to any
Collateral, the occurrence and continuance of an Event of Default and the
taking of any Enforcement Action by the First Lien Creditors against such Collateral
or, after the occurrence and during the continuance of an Insolvency Proceeding
by or against any Obligor, the entry of an order of the Bankruptcy Court
pursuant to Section 363 of the Bankruptcy Code authorizing the sale of
such Collateral.


 


“Second Lien Agent” shall have the meaning set
forth in the recitals hereto and shall include its successors and assigns
(including one or more other agents or similar contractual representatives for
one or more lenders that at any time succeeds to or refinances, replaces or
substitutes for any or all of the Obligations under the Second Lien Loan
Agreement at any time and from time to time).


 


“Second Lien Creditors” means the Second Lien
Agent and the Second Lien Lenders.


 


“Second Lien Lenders” shall have the meaning
set forth in the recitals hereto and shall include all lenders from time to
time party to the Second Lien Loan Documents.


 


“Second Lien Loan Agreement” shall have the
meaning set forth in the recitals hereto and shall include each loan or credit
agreement evidencing any replacement, substitution, renewal, or refinancing for
the Obligations under the Second Loan Agreement in accordance with the terms of
this Agreement which purports to be secured by the Collateral, in each case as
the same may from time to time be amended, restated, supplemented, modified,
replaced, substituted, renewed or refinanced. in accordance with the terms of
this Agreement.


 


“Second Lien Loan Default Notice” means
with respect to any Event of Default under the Second Lien Loan Documents, a
written notice from the Second Lien Creditors to the First Lien Agent
describing such Event of Default in reasonable detail.


 


“Second Lien Loan Documents” means the
Second Lien Loan Agreement, all Loan Documents (as such term is defined in the
Second Lien Loan Agreement) and all other agreements, documents and instruments
at any time executed and/or delivered by any Obligor or any other Person with,
to or in favor of the Second Lien Creditors in connection therewith or related
thereto, in each case, as amended or otherwise modified from time to time in
accordance with the terms of this Agreement.


 


“Second Lien Loan Obligations” means all
obligations, liabilities and indebtedness of every kind, nature and description
owing by one or more Borrowers or any other Obligor to one or more of Second
Lien Creditors evidenced by or arising under one or more of the Second Lien
Loan Documents, whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or un-liquidated,
including principal, interest, charges, fees, costs, indemnities and reasonable
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of the Second Lien Loan
Agreement, whether arising before, during or after the commencement of any
Insolvency Proceeding with respect to any Obligor (and including the payment of
interest which would accrue and become due but for the commencement of such
Insolvency Proceeding, whether or not such interest is allowed or allowable in
whole or in part in any such Insolvency Proceeding).


 





















 


 “Secured
Creditors” means the First Lien Creditors and the Second Lien
Creditors, collectively.


 


“Standstill Period” means the period during
which the Second Lien Creditors are not permitted to take Enforcement Action
under Section 4.1 commencing on the date of the occurrence of an
Event of Default under the Second Lien Loan Agreement and ending (subject to
the final proviso to Section 4.1), upon the date which is 120 days
after the First Lien Agent has received a Second Lien Loan Default Notice with
respect to such Event of Default.


 


“Uniform Commercial Code” means the Uniform
Commercial Code as in effect from time to time in the State of New York; provided,
however, that, at any time, if by reason of mandatory provisions of law,
any or all of the perfection or priority of any Secured Creditors’ security
interest in any item or portion of the Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of New
York, the term “Uniform Commercial Code” shall mean the Uniform Commercial Code
as in effect, at such time, in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or priority and for purposes of
definitions relating to such provisions.


 


1.2          Certain Matters of Construction. 
The words “hereof”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement and section references are to
this Agreement unless otherwise specified. 
For purposes of this Agreement, the following additional rules of
construction shall apply: (i) wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include
the singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, the feminine and the neuter; (ii) the
term “including” shall not be limiting or exclusive, unless specifically
indicated to the contrary; (iii) all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations; and (iv) unless otherwise specified, all references to any
instruments or agreements, including references to any of this Agreement and
the Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof, in each case, made in
accordance with the terms hereof.


 


Section 2.              No
New Liens. 


 


2.1          So long as the First Lien
Loan Obligations have not been Paid in Full, the Borrowers agree that no
Obligor shall (i) grant or permit any additional Liens on any asset or
property to secure any Second Lien Loan Obligation unless (and the Second Lien
Agent and each Second Lien Lender shall not accept any such Lien unless) such
Obligor has granted a Lien on such asset or property to secure the First Lien
Loan Obligations and (ii) grant or permit any additional Liens on any
asset or property to secure any First Lien Loan Obligation unless (and the
First Lien Agent and each First Lien Lender shall not accept any such Lien unless)
such Obligor has granted a Lien on such asset or property to secure the Second
Lien Loan Obligations.  To the extent
that the foregoing provisions of this Section 2.1 are not complied with
for any reason, without limiting any other rights and remedies available to the
First Lien Agent and/or First Lien Lenders, Second Lien Agent on behalf of
itself and the Second Lien Lenders, agrees that any amounts received by or
distributed to any of them pursuant to or as a result of Liens granted to any
of them in contravention of this Section 2.1 shall be subject to Section 3.4.


 


2.2          Similar Liens and Agreements.  The parties hereto agree that it is their
intention that the Collateral securing the First Lien Loan Obligations and the
Collateral securing the Second Lien Loan Obligations be identical.  In furtherance of the foregoing, the parties
hereto agree, subject to the other provisions of this Agreement:


 





















 


(a)  upon request by the First Lien Agent or
the Second Lien Agent, to cooperate in good faith (and to direct their counsel
to cooperate in good faith) from time to time in order to determine the
specific items included in the Collateral securing the First Lien Loan
Obligations or Collateral securing the Second Lien Loan Obligations and the
steps taken to perfect their respective Liens thereon and the identity of the
respective parties obligated under the First Lien Loan Credit Documents and the
Second Lien Loan Documents; and


 


(b)  that the documents and agreements creating or
evidencing the Collateral securing the First Lien Loan Obligations and the
Collateral securing the Second Lien Loan Obligations shall be in all material
respects the same forms of documents other than with respect to the respective
priorities thereof and the nature of the Obligations thereunder, it being
understood that the First Lien Agent shall have exclusive control over all
lockbox accounts, deposit accounts and securities entitlements until the First
Lien Loan Obligations have been Paid in Full.


 


Section 3.              Security
Interests; Priorities.


 


3.1          Priorities.  Each Secured
Creditor hereby acknowledges that other Secured Creditors have been granted
Liens upon the Collateral to secure their respective Obligations.  The Liens of the First Lien Agent on the
Collateral, to the extent that such Liens secure the First Lien Loan
Obligations, have and shall be senior and prior in right to the Liens of the
Second Lien Creditors on the Collateral, and such Liens of the Second Lien
Creditors on the Collateral are and shall be junior and subordinate to the
Liens of the First Lien Agent, to the extent that such Liens secure the First
Lien Loan Obligations.  The priorities of
the Liens provided in this Section 3.1 shall not be altered or
otherwise affected by any amendment, modification, supplement, extension,
renewal, restatement, replacement or refinancing of any of the Obligations, nor
by any action or inaction which any of the Secured Creditors may take or fail
to take in respect of the Collateral.


 


3.2          No Alteration of Priority. 
The priorities set forth in this Agreement are applicable irrespective
of the order or time of attachment, or the order, time or manner of perfection,
or the order or time of filing or recordation of any document or instrument, or
other method of perfecting a Lien in favor of each Secured Creditor in any
Collateral, and notwithstanding any conflicting terms or conditions which may
be contained in any of the Documents. 
Each First Lien Creditor agrees not to enter in any agreement with another
creditor of any Borrower or any Obligor to subordinate the Lien of First Lien
Creditors in any Collateral under the First Lien Loan Documents to the Lien of
such other creditor in the Collateral, or to subordinate the right of the First
Lien Creditors to the payment of the First Lien Loan Obligations to the payment
of the indebtedness or claim of any other creditor of any Borrower or any
Obligor, in each case without the prior written consent of Second Lien
Creditors other than in connection with bailee, landlord, control, consignment
and similar third parties letters that do not involve subordination to liens
securing indebtedness for borrowed money.


 


3.3          Perfection.  Subject to Section 4.4,
each Secured Creditor shall be solely responsible for perfecting and
maintaining the perfection of its Lien in and to each item constituting the
Collateral in which such Secured Creditor has been granted a Lien.  The foregoing provisions of this Agreement
are intended solely to govern the respective Lien priorities as among the
Secured Creditors and shall not impose on any Secured Creditor any obligations
in respect of the disposition of proceeds of any Collateral that would conflict
with prior perfected claims therein in favor of any other Person or any order
or decree of any court or governmental authority or any applicable law.  Whether or not an Insolvency Proceeding is
continuing, each Secured Creditor agrees not to initiate, prosecute or
participate in any claim, action or other proceeding challenging the enforceability,
validity, perfection or priority of any or all of the First Lien Loan
Obligations or Second Lien Loan Obligations or any Liens securing the First
Lien Loan Obligations or Second Lien Loan Obligations.


 





















 


3.4          Proceeds of Collateral. 
Subject to Section 3.1, all proceeds of the Collateral
received by any Second Lien Creditor in connection with or pursuant to an
Enforcement Action shall be forthwith paid over, in the funds and currency
received, to the First Lien Agent for application to the First Lien Loan
Obligations (except as otherwise required by law or court order).  Subject to Section 3.1,all
proceeds of the Collateral received by any First Lien Creditor after the First
Lien Loan Termination Date shall be forthwith paid over, in the funds and
currency received, to the Second Lien Creditors for application to the Second
Lien Loan Obligations.


 


3.5          Release of Collateral Upon Permitted Collateral Sale. 
The Second Lien Creditors shall at any time in connection with any
Permitted Collateral Sale:  (i) upon
the request of the First Lien Agent with respect to the Collateral subject to
such Permitted Collateral Sale, release or otherwise terminate its Liens on
such Collateral; (ii) deliver such terminations of financing statements,
partial lien releases, mortgage satisfactions and discharges, endorsements,
assignments or other instruments of transfer, termination or release
(collectively, “Release Documents”) and take such further actions as the
First Lien Agent shall reasonably require in order to release and/or terminate
such Second Lien Creditor’s Liens on the Collateral subject to such Permitted
Collateral Sale; provided that if the closing of the sale or disposition
of the Collateral is not consummated, the First Lien Agent shall promptly
return all Release Documents to such Second Lien Creditor; and (iii) be
deemed to have consented under the Second Lien Loan Documents to such sale or
other disposition free and clear of such Second Lien Creditor’s security
interest, it being understood that such Second Lien Creditor still, but subject
to this Agreement, has rights with respect to the proceeds of such Collateral
(and waived any provision of the Second Lien Loan Documents to the extent such
transaction would be otherwise prohibited under such provision).


 


3.6          Release of Collateral Upon Release Event. 
Each Second Lien Creditor shall, at any time in connection with a
Release Event with respect to any Collateral: 
(i) upon the request of the First Lien Agent with respect to the
Collateral subject to such Release Event (which request will specify the
proposed terms of the sale and the type and amount of consideration expected to
be received in connection therewith), release or otherwise terminate its Liens
on such Collateral, to the extent such Collateral is to be sold or otherwise
disposed of either by (A) the First Lien Agent or its agents or
representatives, or (B) any Obligor with the consent of the First Lien
Creditors; (ii) be deemed to have consented under the Second Lien Loan
Documents to such sale or other disposition free and clear of such Second Lien
Creditor’s security interest, it being understood that such Second Lien
Creditor still, but subject to this Agreement, has rights with respect to the
proceeds of such Collateral (and waived the provisions of the Second Lien Loan
Documents to the extent necessary to permit such transaction); and (iii) deliver
such Release Documents and take such further actions as First Lien Agent may
reasonably require in connection therewith; provided that, (A) such
release by the Second Lien Creditors shall not extend to or otherwise affect
any of the rights of the Second Lien Creditors to the proceeds from any such
sale or other disposition of Collateral, (B) the First Lien Creditors
shall promptly apply such proceeds to permanently repay the First Lien Loan
Obligations until the same have been Paid in Full, (C) after such
application, the First Lien Agent shall, subject to Section 3.1,  promptly deliver any excess proceeds from
such sale or disposition of such Collateral to the Second Lien Agent for
application to the Second Lien Loan Obligations or as otherwise required under
applicable law or as a court of competent jurisdiction may direct and (D) no
such release and/or authorization documents shall be delivered (1) to any
Obligor or (2) less than two or more than 10 Business Days prior to the
date of the closing of the sale or disposition of such Collateral, provided
further that if the closing of the sale or disposition of the Collateral
subject to such Release Event is not consummated, the First Lien Agent shall
promptly return all Release Documents to such Second Lien Creditor.


 


3.7          Power of Attorney.  The Second
Lien Agent, on behalf of each Second Lien Creditor, hereby irrevocably
constitutes and appoints the First Lien Agent and any officer of First Lien
Agent, with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority


 





















 


in the place and stead of the Second Lien
Agent and in the name of the Second Lien Agent or in the First Lien Agent’s own
name, from time to time in the First Lien Agent’s discretion, for the purpose
of carrying out the terms of Sections 3.5 and 3.6 hereof, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of such Section,
including any Release Documents, and, in addition, to take any and all other
appropriate and commercially reasonable action for the purpose of carrying out
the terms of such Sections.  Each Second
Lien Creditor hereby ratifies all that said attorneys shall lawfully do or
cause to be done pursuant to the power of attorney granted in this Section 3.7.  No Person to whom this power of attorney is
presented, as authority for First Lien Agent to take any action or actions
contemplated hereby, shall be required to inquire into or seek confirmation
from any Second Lien Creditor as to the authority of First Lien Agent to take
any action described herein, or as to the existence of or fulfillment of any
condition to this power of attorney, which is intended to grant to First Lien
Agent unconditionally the authority to take and perform the actions
contemplated herein.  Each Second Lien
Creditor irrevocably waives any right to commence any suit or action, in law or
equity, against any Person which acts in reliance upon or acknowledges the
authority granted under this power of attorney.


 


3.8          Waiver.  Each Secured
Creditor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations under the First Lien Loan Documents or the
Second Lien Loan Documents and notice of or proof of reliance by the First Lien
Creditors or the Second Lien Creditors upon this Agreement and protest, demand
for payment or notice except to the extent otherwise specified herein.  Each Secured Creditor acknowledges and agrees
that the other Secured Creditors have relied upon the lien priority and other
provisions hereof in entering into the Documents and in making funds available
to the Borrowers thereunder.


 


3.9          Notice of Interest In Collateral. 
This Agreement is intended, in part, to constitute an authenticated
notification of a claim by each Secured Creditor to the other Secured Creditors
of an interest in the Collateral in accordance with the provisions of Sections 9-611
and 9-621 of the Uniform Commercial Code.


 


Section 4.              Enforcement
of Security.


 


4.1          Management of Collateral. 
Subject to the other terms and conditions of this Agreement, the First
Lien Creditors shall have the exclusive right to manage, perform and enforce
the terms of the Documents with respect to the Collateral, to exercise and
enforce all privileges and rights thereunder according to their discretion and
the exercise of their sole business judgment, including the exclusive right to
take or retake control or possession of the Collateral and to hold, prepare for
sale, process, sell, lease, dispose of, or liquidate the Collateral and to
incur expenses in connection with such sale or disposition and to exercise all
the rights and remedies of a secured lender under the Uniform Commercial Code
of any applicable jurisdiction.  In
conducting any public or private sale under the Uniform Commercial Code, the
First Lien Agent shall give the Second Lien Agent such notice of such sale as
may be required by the applicable Uniform Commercial Code; provided, however,
that 10 days’ notice shall be deemed to be commercially reasonable notice.  Except as specifically provided in this Section 4.1
below, notwithstanding any rights or remedies available to an Second Lien Creditor
under any of the Second Lien Loan Documents, applicable law or otherwise, no
Second Lien Creditor shall, directly or indirectly, take any Enforcement
Action; provided, further, that subject at all times to the
provisions of Section 3, upon the expiration of the Standstill
Period, the Second Lien Creditors may take any Enforcement Action with respect
to any Collateral, but only so long as the First Lien Creditors are not
pursuing diligently in good faith an Enforcement Action with respect to such Collateral,
or diligently attempting in good faith to vacate any stay prohibiting an
Enforcement Action with respect to such Collateral; provided, further,
that notwithstanding the foregoing, nothing contained in this Section 4.1
shall prohibit or limit the right of the Second Lien Creditors, or any one or
more of them, from accelerating the Second Lien Loan Obligations


 





















 


in accordance with the Second Lien Loan
Documents.  Subject at all times to the
provisions of Section 3 and to the preceding sentence, if any
Second Lien Creditor commences any Enforcement Action to enforce its Lien on
all or any material portion of the Collateral in accordance with the terms of
this Agreement, and is diligently pursuing in good faith such Enforcement
Action, the First Lien Creditors shall not take any Enforcement Action of a
similar nature with respect to such Collateral. 
Until the First Lien Loan Termination Date, subject to the rights of the
Obligors, the First Lien Agent shall have (i) the exclusive right to
adjust settlement of any insurance policy covering the Collateral and to
approve any award in any condemnation or similar proceeding affecting the
Collateral, (ii) the right to receive all proceeds of such policies and
awards, and (iii) the right to endorse the name of the Second Lien Agent
on any checks or other items of payment evidencing such proceeds.


 


4.2          Notices of Default.  Each Secured
Creditor shall give to the other Secured Creditors (or the agent therefor)
concurrently with the giving thereof to any Obligor (i) a copy of any
written notice by such Secured Creditor of an Event of Default under any of its
Documents or a written notice of demand for payment from any Obligor, and (ii) a
copy of any written notice sent by such Secured Creditor to any Obligor stating
such Secured Creditor’s intention to exercise any material enforcement rights
or remedies against such Obligor, including written notice pertaining to any
foreclosure on all or any material part of the Collateral or other judicial or
non-judicial remedy in respect thereof, and any legal process served or filed
in connection therewith; provided that the failure of any Secured
Creditor to give such required notice shall not result in any liability to such
Secured Creditor or affect the enforceability of any provision of this
Agreement, including the relative priorities of the Liens of the Secured
Creditors as provided herein, and shall not affect the validity or
effectiveness of any such notice as against any Obligor.  Each of First Lien Agent and Second Lien
Creditors will provide such information as it may have to the other as the
other may from time to time reasonably request concerning the status of the
exercise of any Enforcement Action and First Lien Agent and Second Lien
Creditors shall be available on a reasonable basis during normal business hours
to review with each other alternatives available in exercising such rights,
including, but not limited to, advising each other of any offers which may be
made from time to time by prospective purchasers of the Collateral, provided,
that, the failure of any party to do any of the foregoing shall not affect the
relative priorities of First Lien Agent’s or Second Lien Creditor’s respective
Liens as provided herein or the validity or effectiveness of any notices or
demands as against any Borrower or any Obligor. 
Each Borrower and Obligor hereby consents and agrees to each Secured
Creditor providing any such information to the other Secured Creditors and to
such actions by the Secured Creditors and waive any rights or claims against
any Secured Creditors arising as a result of such information or actions.


 


4.3          Permitted Actions.  Section 4.1
shall not be construed to limit or impair in any way the right of:  (i) any Secured Creditor to bid for or
purchase Collateral at any private or judicial foreclosure upon such Collateral
initiated by any Secured Creditor, (ii) any Secured Creditor to join (but
not control) any foreclosure or other judicial lien enforcement proceeding with
respect to the Collateral initiated by another Secured Creditor for the sole
purpose of protecting such Secured Creditor’s Lien on the Collateral, so long
as it does not delay or interfere with the exercise by such other Secured
Creditor of its rights under this Agreement, the Documents and under applicable
law, (iii) the Second Lien Creditors to receive any remaining proceedings
of Collateral after the First Lien Loan Obligations have been Paid in Full and (iv) any
Second Lien Creditor from (w) taking any action (not adverse to the prior Liens
on the Collateral securing the First Lien Loan Obligations) or the rights of
any First Lien Creditor to exercise remedies in respect of such Liens in order
to preserve or protect its Lien on Collateral, (x) filing any necessary
responsive or defensive pleading in opposition to any motion, claim, adversary
proceeding or other pleading made by any person objecting to or otherwise
seeking the disallowance of the claims of the Second Lien Creditors, including,
without limitation, any such claims secured by the Collateral, (y) filing any
pleadings, objections, motions or agreements which assert rights or interests
available to unsecured creditors of the Obligors arising under with the
Bankruptcy Code or other applicable law, in each case, in


 





















 


accordance with the terms of this Agreement
or (z) filing any proof of claim and other filings and making arguments and
motions that are, in each case, in accordance with the terms of this Agreement.


 


4.4          Collateral
In Possession.


 


(a)           In the event that the First Lien Agent (i) takes
possession of or has “control” (as such term is used in the Uniform Commercial
Code as in effect in each applicable jurisdiction) over any Collateral for
purposes of perfecting its Lien therein or (ii) is named as the sole lien
holder on any certificate of title for any vehicle owned by any Obligor, the
First Lien Agent shall be deemed to be holding such Collateral or named as such
lien holder, as agent for the Secured Creditors, including the Second Lien
Creditors, solely for purposes of perfection of its Lien under the Uniform
Commercial Code or comparable applicable law; provided that, absent
gross negligence or willful misconduct on the part of the First Lien Agent, the
First Lien Agent shall not have any duty or liability of any kind whatsoever in
connection with such possession or control or being named as such lienholder,
including, without limitation, to protect or preserve any rights pertaining to
any of the Collateral for the Second Lien Creditors and each Second Lien
Creditor hereby acknowledges that in its capacity as such agent, in its
capacity as a secured party under the security interest granted below in this
paragraph (a), and in its capacity as lienholder for the Second Lien Lenders on
any such certificate of title, the First Lien Agent is entitled to
indemnification by the Second Lien Lenders under the terms of the GE Credit
Agreement as in effect on the date hereof to the same extent as the “Agent” (as
such term is defined therein as of the date hereof) and each Second Lien Creditor
hereby waives and releases the First Lien Agent from all claims and liabilities
arising pursuant to its role as such representative, except for claims and
liabilities arising from gross negligence or willful misconduct as finally
determined pursuant to a final order of a court of competent jurisdiction.  In order to secure the prompt payment and
performance of the Second Lien Loan Obligations, each Obligor hereby grants to
the First Lien Agent, as agent for the Second Lien Agent, a security interest
in all right, title and interest of such Obligor in, to and under all vehicles
for which a certificate or title has been or at any time may be issued, now
owned or hereafter acquired by such Obligor. 
The Second Lien Agent irrevocably agrees to perform all duties and
discharge all obligations of the First Lien Agent in the First Lien Agent’s
capacity as such secured party (other than furnishing such titles and signing
any documents pertaining to any such certificates of title that can be signed
only by the First Lien Agent) and each Obligor acknowledges that all such
duties and obligations shall be performed by the Second Lien Agent and to the
extent permitted by applicable law that such Obligor will not seek performance
of any such duties and obligations from the First Lien Agent.  All costs and expenses incurred by the First
Lien Agent in its capacity as such secured party shall be paid on demand by the
Obligors, jointly and severally, and failing such payment by the Second Lien Lenders
(and upon request in connection with any such costs and expenses, Second Lien
Agent shall provide to the First Lien Agent names and contact information for
all Second Lien Lenders).  Such grant
creates a security interest wholly separate from the security interest in such
titled vehicles granted to the First Lien Agent in the First Lien Loan
Documents as security for the First Lien Loan Obligations.  Upon the First Lien Loan Termination Date, at
the cost and expense of the Obligors, all certificates of title naming First
Lien Agent shall be re-submitted in order to remove the First Lien Agent and
(if any Second Lien Loan Obligations are then outstanding) to name solely the
Second Lien Agent thereon (it being understood that the First Lien Agent shall
continue to hold the security interest granted pursuant to this Section 4.4(a) until
such titles are so amended). Subject to Section 3.1, promptly
following the First Lien Loan Termination Date, the First Lien Agent shall,
upon the request of the Second Lien Agent, (i) deliver the remainder of
the Collateral, if any, in its possession to the designee of the Second Lien
Agent or as otherwise required under applicable law or as a court of competent
jurisdiction may direct, in any case without representation or warranty of any
kind and without recourse and (ii) shall deliver any notices contemplated
by any deposit account control agreement, delivery of which transfers exclusive
control rights to the Second Lien Agent. 
The First Lien Agent makes no representation or warranty that any Lien securing
the Second Lien Loan Obligations intended to be perfected by the provisions of
this Section 4.4(a) will be perfected.  Nothing


 





















 


contained in this Section 4.4(a) shall
limit or restrict in any way the rights of the First Lien Agent to deal with any
Collateral referred to in this Section 4.4(a) as permitted by the
First Lien Loan Documents and without regard to any rights of the Second Lien
Creditors in such Collateral except as provided in the immediately preceding
sentence.


 


(b)           In the event that any Second Lien Creditor takes
possession of or has “control” (as such term is used in the Uniform Commercial
Code as in effect in each applicable jurisdiction) over any Collateral for
purposes of perfecting its Lien therein, such Second Lien Creditor shall be
deemed to be holding such Collateral as agent for the Secured Creditors,
including the First Lien Creditors, solely for purposes of perfection of its
Lien under the Uniform Commercial Code or comparable applicable law; provided
that such Second Lien Creditor shall not have any duty or liability whatsoever
to protect or preserve any rights pertaining to any of the Collateral for the
First Lien Creditors, and each First Lien Creditors hereby waives and releases
the Second Lien Creditors from all claims and liabilities arising pursuant to
its role as such agent, except for claims and liabilities arising from gross
negligence or willful misconduct as finally determined pursuant to a final
order of a court of competent jurisdiction. 
The Second Lien Agent makes no representation or warranty that any Lien
securing the First Lien Loan Obligations intended to be perfected by the
provisions of this Section 4.4(b) will be perfected.  Nothing contained in this Section 4.4(b) shall
limit or restrict in any way the rights of the Second Lien Agent to deal with
any Collateral referred to in this Section 4.4(b) as permitted by the
Second Lien Loan Documents and the other provisions of this Agreement.


 


(c)           It is
understood and agreed that this Section 4.4 is intended solely to
assure continuous perfection of the Liens granted under the applicable
Documents, and nothing in this Section 4.4 shall be deemed or
construed as altering the priorities or obligations set forth elsewhere in this
Agreement.


 


4.5          Waiver of Marshalling and Similar Rights. 
Each Secured Creditor, to the fullest extent permitted by applicable
law, waives as to each other Secured Creditor any requirement regarding, and
agrees not to demand, request, plead or otherwise claim the benefit of, any
marshalling, appraisement, valuation or other similar right that may otherwise
be available under applicable law.


 


4.6          Titled Vehicles.  The First Lien Agent, the Second Lien Agent
and the Obligors each agree that until the First Lien Loan Termination Date and
the re-issuance of titles with respect to titled vehicles constituting
Collateral as contemplated by Section 4.4(a), each certificate of title
with respect to any titled vehicle constituting part of the Collateral shall,
except as provided in the following proviso, name the First Lien Agent as
secured party and such notation shall be intended to perfect the security
interest of the First Lien Agent for the benefit of the First Lien Secured
Parties and the security interest of the First Lien Agent as agent for the
Second Lien Agent (for the benefit of the Second Lien Agent and the Second Lien
Lenders) granted pursuant to Section 4.4(a) hereof in such titled
vehicles; provided, that unless the Second Lien Agent determines that
the notation of the Second Lien Agent as a secured party in addition to the
First Lien Agent is not required in the States of Arizona and Minnesota or any
other State which reserves an area on certificates of title specifically for
the entry of the name of a second lien creditor (any such State being referred
to as a “Separate Title State”) in order to perfect the security interest for
the benefit of Second Lien Agent and the Second Lien Lenders, then for so long
as such separate notation is permitted under applicable law, the Obligors at
their sole cost and expense shall cause (and the First Lien Agent shall execute
at the cost and expense of the Obligors such documents as may be necessary to
cause) Second Lien Agent’s security interest to be separately noted on each
certificate of title as a second priority lien (while retaining the notation of
the First Lien Agent as the first priority lien) under the laws of the
applicable Separate Title State governing titled vehicles constituting part of
the Collateral.  Until the First Lien
Loan Termination Date, each Obligor that submits to any governmental agency or
authority (i) any request for issuance in the name of any Obligor any
certificate of title for any


 





















 


vehicle included in the Collateral or (ii) any
certificate of title for a vehicle included in the Collateral for notation on
such certificate of title of a lien, shall request that the Lien of the First
Lien Agent be noted on such certificate of title, either as the sole
lien-holder or, to the extent that the lien of the Second Lien Agent is to be
separately noted on such certificate of title in accordance with the foregoing
provisions of this Section 4.6 or as requested by the Second Lien Agent in
accordance with the Second Lien Loan Documents, as the first priority lien with
the lien of the Second Lien Agent being noted on such certificate of title as
the second priority lien.


 


Section 5.              Covenants


 


5.1          Amendment of First Lien Loan Documents. 
The First Lien Creditors may at any time and from time to time and
without consent of or notice to any Second Lien Creditor, without incurring any
liability to any Second Lien Creditor and without impairing or releasing any
rights or obligations hereunder or otherwise, amend, restate, refinance,
refund, replace supplement or otherwise modify any or all of the First Lien
Documents; provided  however, that without the consent of the
Second Lien Creditors, the First Lien Creditors shall not amend, restate,
refinance, refund, replace supplement or otherwise modify any or all of the
First Lien Documents to (i) increase the interest rates on the First Lien
Loan Obligations to an amount greater than 3.0% per annum above the rates as
are in effect on the date hereof (excluding, without limitation, fluctuations
in underlying rate indices and imposition of a default rate of 2% per annum) (i) change
the final maturity date of the First Lien Loan Obligations to a date later than
November 1, 2010, (iii) increase the principal amount of the First
Lien Loan Obligations in excess of the Maximum First Lien Principal Amount, other
than as a result of the capitalization of accrued interest and expenses, (iv) modify
or add any covenant or event of default under the First Lien Documents which
directly restricts one or more Obligors from making payments under the Second
Lien Loan Documents which would otherwise be permitted under the First Lien
Documents as in effect on the date hereof or (v) modify in a manner
adverse to the Obligors, any right contained in the GE Credit Agreement as of
the date hereof, to refinance the Second Lien Loan Obligations.


 


5.2          Amendments to Second Lien Loan Documents. 
Until the First Lien Loan Obligations have been Paid in Full, and
notwithstanding anything to the contrary contained in the Second Lien Loan
Documents, the Second Lien Creditors shall not, without the prior written
consent of the First Lien Agent, agree to any amendment, modification or
supplement to the Second Lien Loan Documents or any refinancing of the Second
Lien Loan Documents that that would (i) increase the interest rates on the
Second Lien Loan Obligations to an amount greater than 3.0% per annum above the
rates as are in effect on the date hereof (excluding, without limitation,
fluctuations in underlying rate indices and imposition of a default rate of 2%
per annum, (ii) shorten the maturity or weighted average life to maturity
of the Second Lien Loan Obligations, (iii) increase the amount of the
Second Lien Loan Obligations (other than through the addition to principal of
capitalized interest and expenses), or (iv) change any requirement as to
prepayment of the Second Lien Loan Obligations that would increase the amount
of any required prepayment under the Second Lien Loan Documents, create a new
prepayment requirement or move to an earlier date any prepayment requirement
under the Second Lien Loan Documents, or (v) add or make more restrictive
any covenants, agreements, or events of default under the Second Lien Loan
Documents.


 


5.3          Enforcement Actions by Second Lien Creditors;
Prepayments.


 


(a)           The Second Lien Creditors shall give the First Lien
Agent at least five (5) Business Days’ written notice prior to taking any
Enforcement Action, which notice may be given during the pendency of any
Standstill Period.


 





















 


(b)           Except as otherwise permitted by this Agreement or the
terms of the First Lien Loan Documents as in effect at such time, without the
prior written consent of the First Lien Agent, no Second Lien Creditor will
take, demand or receive from any Obligor any payment or prepayment of principal
of the Second Lien Loan Obligations that is not permitted under the terms of
the GE Credit Agreement as in effect on the date hereof, provided, however that
notwithstanding the foregoing, the Second Lien Agent and any Second Lien
Lenders payment may receive payments of principal, premium, interests, fees and
other amounts due under the Second Lien Loan Documents and so permitted so long
as such receipt is not the direct or indirect result of the enforcement or
exercise by the Second Lien Agent or any Second Lien Lender of rights or
remedies as a secured creditor (including any right of setoff) or enforcement
in contravention of this Agreement of any Lien in favor of the Second Lien
Creditors..


 


Section 6.              Second
Lien Creditors Purchase Option.


 


6.1          Purchase Notice.  Upon the
Second Lien Creditors’ receipt of a notice from First Lien Agent (the “Agent’s
Notice”) that First Lien Agent has accelerated the First Lien Loan
Obligations (which the First Lien Agent agrees to give promptly following any
such acceleration), the Second Lien Creditors shall have the option to purchase
all of the First Lien Loan Obligations owing to the First Lien Lenders from the
First Lien Lenders by giving a written notice (the “Purchase Notice”) to
the First Lien Agent no later than the fifth Business Day after receipt by the
Second Lien Creditors of the Agent’s Notice. 
The Purchase Notice from the Second Lien Creditors to the First Lien
Agent shall be irrevocable.


 


6.2          Purchase Option Closing. 
On the date specified by the Second Lien Creditors electing to exercise
such option in the Purchase Notice (which shall not be less than three (3) Business
Days nor more than five (5) Business Days, after the receipt by the First
Lien Agent of the Purchase Notice), the First Lien Lenders shall sell to the
Second Lien Creditors, and the applicable Second Lien Creditors shall purchase
from the First Lien Lenders, the First Lien Loan Obligations owing to the First
Lien Lenders, and during such period, the First Lien Creditors shall not take
any Enforcement Action (other than acceleration of any or all of the First Lien
Loan Obligations and exercise of control over Obligors’ depository accounts).


 


6.3          Purchase Price.  Such purchase
and sale shall be made by execution and delivery by the applicable Secured
Creditors of an Assignment Agreement in the form attached to the First Lien
LoanAgreement.  Upon the date of such
purchase and sale, the Second Lien Creditors shall (i) pay to the First
Lien Agent for the benefit of the First Lien Lenders as the purchase price
therefor the sum of (a) the full amount of all the First Lien Loan
Obligations then outstanding and unpaid (including principal, interest, fees
and expenses, including reasonable attorneys’ fees and legal expenses) plus (b) any
early termination fee, prepayment fee or other similar fee payable pursuant to
the First Lien Loan Agreement (calculated as if the First Lien Loan Obligations
were repaid in full by the Obligors at such time), (ii) furnish cash
collateral to the First Lien Agent with respect to the outstanding First Lien
Letter of Credit Obligations in such amounts as are required under the First
Lien Loan Agreement, and (iii) agree to reimburse the First Lien Creditors
for any loss, cost, damage or expense (including reasonable attorneys’ fees and
legal expenses) in connection with any checks or other payments provisionally
credited to the First Lien Loan Obligations, and/or as to which the First Lien
Creditors have not yet received final payment. 
Such purchase price and cash collateral shall be remitted by wire
transfer of immediately available funds to such bank account of the First Lien
Agent in New York, New York, as the First Lien Agent may designate in writing
to the Second Lien Agent for such purpose. 
Interest shall be calculated to but excluding the Business Day on which
such purchase and sale shall occur if the amounts so paid by the Second Lien
Creditors to the bank account designated by the First Lien Agent are received
in such bank account prior to 1:00 p.m., New York City time and interest
shall be calculated to and


 





















 


including such Business Day if the amounts so
paid by the Second Lien Creditors to the bank account designated by the First
Lien Agent are received in such bank account later than 1:00 p.m., New
York City time.


 


6.4          Nature of Sale.  Such purchase
and sale shall be expressly made without representation or warranty of any kind
by the First Lien Creditors as to the First Lien Loan Obligations or otherwise
and without recourse to the First Lien Creditors, except for representations
and warranties as to the following:  (i) the
amount of the First Lien Loan Obligations being purchased (including as to the
principal of and accrued and unpaid interest on such First Lien Loan
Obligations, fees and expenses thereof), (ii) that the First Lien Lenders
own the First Lien Loan Obligations free and clear of any Liens, and (iii) each
First Lien Lender has the full right and power to assign its First Lien Loan
Obligations and such assignment has been duly authorized by all necessary
corporate action by such First Lien Lender.


 


Section 7.              Bankruptcy
Matters.


 


7.1          Relief from the Automatic Stay. 
Until the First Lien Loan Termination Date, the Second Lien Agent, on
behalf of itself and the Second Lien Creditors, agrees that none of them shall
seek (or support any other Person (other than the First Lien Agent) seeking)
reflief from the automatic say or any other stay in any Insolvency Proceeding
in respect of the Collateral, without the prior written consent of the First
Lien Agent.


 


7.2          Post Petition Financing.


 


(a)           If any Obligor or Obligors shall become subject to a
case under the Bankruptcy Code and such Obligor or Obligors as
debtor(s)-in-possession (or a trustee appointed on behalf of such Obligor or
Obligors) shall move for either (x) approval of financing (“DIP Financing”)
to be provided by one or more of the First Lien Creditors under Section 364
of the Bankruptcy Code or (y) the use of cash collateral with the consent of
the First Lien Creditors under Section 363 of the Bankruptcy Code, subject
to Section 7.2(b), the Second Lien Creditors agree as follows:  (a) adequate notice to Second Lien
Creditors for such financing or use of cash collateral shall be delivered to
the Second Lien Creditors if the Second Lien Creditors receives notice two (2) Business
Days prior to the entry of the order approving such financing or use of cash
collateral, (b) such financing (including any First Lien Loan Obligations
which arose prior to the Insolvency Proceeding) may be secured by Liens on all
or a part of the assets of the Obligors which shall be superior in priority to
the Liens on the assets of the Obligors held by any other Person, and (c) the
Second Lien Creditors shall not contest or oppose in any manner such financing
or cash collateral use and shall be deemed to have waived any objections to
such financing or cash collateral use, including by any objection alleging
Obligors’ failure to provide “adequate protection” for the Liens of the Second
Lien Creditors or otherwise, as long as (i) the Second Lien Creditors
retain a Lien on the Collateral (including proceeds thereof arising after the
commencement of such proceeding) with the same priority as existed prior to the
commencement of the case under the Bankruptcy Code (subject to the Liens
securing such financing as described above), (ii) the First Lien Creditors
do not object to Second Lien Creditors receiving a replacement Lien on
post-petition assets, with the same priority as existed prior to the
commencement of the case under the Bankruptcy Code (provided that the inability
of the Second Lien Creditors to receive a Lien on actions under Chapter 5 of
the Bankruptcy Code or proceeds thereof shall not affect the agreements and
waivers set forth in this clause (a)), (iii) the aggregate principal
amount of loans and letter of credit accommodations outstanding under such
post-petition financing, together with the principal amount of the pre-petition
First Lien Loan Obligations, shall not exceed the Maximum First Lien Principal
Amount, and (iv) such financing or use of cash collateral is subject to
the terms of this Agreement.


 





















 


(b)           Notwithstanding the
foregoing provisions in this Section 7.2, in any Insolvency
Proceeding, (i) if the First Lien Creditors (or any subset thereof) are
granted adequate protection in the form of additional collateral in connection
with any DIP Financing, the Second Lien Creditors may seek adequate protection
in the form of a Lien on such additional collateral, which Lien, if granted,
will be subordinate to the Liens securing the First Lien Loan Obligations and
such DIP Financing on the same basis as the other Liens securing the Second
Lien Loan Obligations are so subordinated under this Agreement (provided that
any failure of the Second Lien Creditors to obtain such adequate protection
shall not impair or otherwise affect the agreements, undertakings and consents
of the Second Lien Creditors pursuant to Section 7.2(a)), and (ii) in
the event one or more Second Lien Creditors seek or request such adequate
protection in respect of Second Lien Loan Obligations and such adequate
protection is granted in the form of a Lien on additional collateral , then
each Second Lien Creditor agrees that the First Lien Agent may seek and obtain,
and each Second Lien Creditor hereby consents to the granting of, a senior Lien
on such additional collateral as security for the First Lien Loan Obligations
and for any such DIP Financing provided by the First Lien Creditors and to any
other Liens granted to the First Lien Creditors as adequate protection on the
same basis as the other Liens securing the Second Lien Loan Obligations are
subordinated under this Agreement.


 


(c)           The Second Lien Creditors may seek post-petition
interest and/or adequate protection payments in any Insolvency Proceeding, and
the First Lien Lenders may oppose such motions.


 


7.3          Sale of Collateral; Waivers. 
The Second Lien Creditors agree that they will not object to or oppose a
sale or other disposition of any assets securing the Obligations under the
First Lien Loan Documents (or any portion thereof) free and clear of Liens or
other claims under Section 363 of the Bankruptcy Code or any other
provision of the Bankruptcy Code if First Lien Creditors have consented to such
sale or disposition of such assets, except that they may assert any such
objection that could be asserted by an unsecured creditor.  The Second Lien Creditors waive any claim
they may now or hereafter have arising out of the First Lien Creditors’
election in any proceeding instituted under Chapter 11 of the Bankruptcy Code
of the application of Section 1111(b)(2) of the Bankruptcy Code.  The Second Lien Creditors agree not to
initiate or prosecute or join with any other Person to initiate or prosecute
any claim, action or other proceeding (i) challenging the enforceability
of the First Lien Creditors’ claim as a fully secured claim with respect to all
or part of the First Lien Loan Obligations, or opposing any action by the First
Lien Creditors to enforce their rights or remedies relating under the First
Lien Loan Documents, (ii) challenging the enforceability, validity,
priority or perfected status of any Liens on assets securing the First Lien
Loan Obligations under the First Lien Loan Documents, (iii) asserting any
claims which the Obligors may hold with respect to the First Lien Creditors, (iv) seeking
to lift the automatic stay to the extent that such action is opposed by the
First Lien Agent, or (v) opposing a motion by the First Lien Agent to lift
the automatic stay.


 


7.4          Invalidated Payments. 
Subject to Section 2(e), to the extent that the First Lien
Creditors receive payments on, or proceeds of Collateral for, the Obligations
under the First Lien Loan Documents which are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law, or equitable cause, then to the extent of
such payment or proceeds received, such Obligations, or part thereof, intended
to be satisfied shall be revived and continue in full force and effect as if
such payments or proceeds had not been received by the First Lien Creditors.


 


7.5          Payments.  In the event of any Insolvency Proceeding
involving one or more Obligors, subject to the Second Lien Creditors’ rights to
receive post-petition interest and adequate protection payments (subject to the
limitations set forth in Section 7.2(c)), all proceeds of
Collateral shall be applied to the First Lien Loan Obligations until all First
Lien Loan Obligations are Paid in Full before any


 





















 


Distribution, whether in cash, securities or other property,
shall be made to one or more Second Lien Creditors on account of any Second
Lien Loan Obligations.


 


7.6          Notice of Claims.  The parties
acknowledge and agree that (i) the claims and interests of the First Lien
Creditors under the First Lien Loan Documents are substantially different from
the claims and interests of the Second Lien Creditors under the Second Lien
Loan Documents and (ii) such claims and interests should be treated as
separate classes for purposes of Section 1122 of the Bankruptcy Code and,
in any Insolvency Proceeding, the Second Lien Creditors will not make any
assertion to the contrary or object to the assertion that the claims and
interests of the First Lien Creditors under the First Lien Loan Documents are
substantially different from the claims of the Second Lien Creditors under the
Second Lien Loan Documents.


 


7.7          Rights as Unsecured Creditors. 
The Second Lien Creditors may exercise rights and remedies as unsecured
creditors against the Borrowers and other Obligors in accordance with the
Second Lien Loan Documents and applicable law, in each case, in accordance with
the terms of this Agreement, provided that any judgment lien on Collateral
obtained by any Second Lien Creditor in respect of the Second Lien Loan
Obligations shall be subject in all respects to this Agreement.


 


Section 8.              Miscellaneous.


 


8.1          Termination.  This
Agreement shall terminate and be of no further force and effect upon either (a) the
First Lien Loan Termination Date, or (b) Payment in Full of all of the
Obligations (as defined in the Second Lien Loan Documents) and the termination
or expiration of any commitment of the Second Lien Creditors under the Second
Lien Loan Agreement.


 


8.2          Successors and Assigns.


 


(a)           This Agreement shall be binding upon each Secured
Creditor and its respective successors and assigns and shall inure to the
benefit of each Secured Creditor and its respective successors, participants
and assigns.


 


(b)           Each Secured Creditor reserves the right to grant
participations in, or otherwise sell, assign, transfer or negotiate all or any
part of, or any interest in, their respective Obligations; provided that
no Secured Creditor shall be obligated to give any notices to or otherwise in
any manner deal directly with any participant in the Obligations and no
participant shall be entitled to any rights or benefits under this Agreement,
except through the Secured Creditor with which it is a participant.


 


(c)           In connection with any participation or other transfer
or assignment, a Secured Creditor (i) may, subject to its respective
Documents, disclose to such assignee, participant or other transferee or
assignee all documents and information which such Secured Creditor now or
hereafter may have relating to any Obligor or the Collateral and (ii) shall
disclose to such participant or other transferee or assignee the existence and
terms and conditions of this Agreement.


 


8.3          Notices.  All notices
and other communications provided for hereunder shall be in writing and shall
be mailed, sent by overnight courier, telecopied, or delivered, as follows:


 


(a)           if to any First Lien Creditor, to it at the following
address:


 


c/o General
Electric Capital Corporation, as First Lien Agent

299 Park Avenue

New York, New York 10171


 





















 


Attention:  Penhall Account Manager

Telephone:  (646) 428-7000

Telecopier:  (646) 428-7398


 


with a copy to


 


General Electric Capital
Corporation
201 Merritt
7

Norwalk, Connecticut 06840  

Attention:  General Counsel – Global
Sponsor Finance 

Telephone:  (203) 956-4377

Telecopier:  (203) 956-4216


 


with a copy to


 


King & Spalding LLP

1185 Avenue of the Americas

New York, New York 10036

Attention: Robert S. Finley

Telephone:  (212) 556-2142

Telecopier:  (212) 556-2222


 


(b)           if to Second Lien Agent, to it at the following
address:


 


DEUTSCHE BANK TRUST


COMPANY AMERICAS

Global Credit Products

Leveraged Loan Portfolio


60 Wall Street NYC60-104


New York, New York 10005-2858


Attention: Jean Travis


Telephone: (212) 250-6158


Telecopier: (212) 797-5690


 


with a copy to:


 


Cahill Gordon &
Reindel LLP

80 Pine Street


New York, New York 10005

Attention: William M. Hartnett

Telephone:  (212) 701-3000


Telecopier:  (212) 269-5420


 


or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other parties complying as to delivery with the terms of this Section 8.3.  All such notices and other communications
shall be effective (i) if sent by registered mail, return receipt
requested, when received or three Business Days after mailing, whichever first
occurs, (ii) if telecopied, when transmitted and a confirmation is
received, provided the same is on a Business Day and, if not, on the
next Business Day, or (iii) if delivered by messenger or overnight
courier, upon delivery, provided the same
is on a Business Day and, if not, on the next Business Day.


 





















 


8.4          Counterparts.  This
Agreement may be executed by the parties hereto in several counterparts, and
each such counterpart shall be deemed to be an original and all of which shall
constitute together but one and the same agreement.


 


8.5          GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. 
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.  EACH OF THE PARTIES HERETO HEREBY CONSENTS
AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK SHALL
HAVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES AMONG THE
PARTIES HERETO PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT, PROVIDED, THAT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF NEW YORK, NEW YORK. 
EACH OF THE PARTIES HERETO EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH
OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS.  EACH OF THE PARTIES HERETO HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO IT AT THE
ADDRESS SET FORTH HEREIN, AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH PARTY’S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS
AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.


 


8.6          MUTUAL WAIVER OF JURY TRIAL. 
THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE, BETWEEN THE PARTIES ARISING OUT OF, CONNECTED WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION
WITH, THIS AGREEMENT OR THE TRANSACTIONS RELATED THERETO.


 


8.7          Amendments.  No amendment
or waiver of any provision of this Agreement, and no consent to any departure
by any Person from the terms hereof, shall in any event be effective unless it
is in writing and signed by the Second Lien Agent and the First Lien Agent.  In no event shall the consent of any Obligor
be required in connection with any amendment or other modification of this
Agreement.


 


8.8          No Waiver.  No failure or
delay on the part of any Secured Creditor in exercising any power or right
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right.


 


8.9          Severability.  Any provision
of this Agreement which is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
of this Agreement or affecting the validity or enforceability of such provisions
in any other jurisdiction.


 





















 


8.10        Further Assurances.  Each of the
Second Lien Creditors and the First Lien Agent agrees to cooperate fully with
each other party hereto to effectuate the intent and provisions of this
Agreement and, from time to time, to execute and deliver any and all other
agreements, documents or instruments, and to take such other actions, as may be
reasonably necessary or desirable to effectuate the intent and provisions of
this Agreement.


 


8.11        Headings.  The section headings
contained in this Agreement are and shall be without meaning or content
whatsoever and are not part of this Agreement.


 


8.12        Lien Priority Provisions. 
This Agreement and the rights and benefits hereunder shall inure solely
to the benefit of the First Lien Creditors and the Second Lien Creditors and
their respective successors and permitted assigns and no other Person
(including the Obligors, or any trustee, receiver, debtor in possession or
bankruptcy estate in a bankruptcy or like proceeding) shall have or be entitled
to assert rights or benefits hereunder. 
Nothing contained in this Agreement is intended to or shall impair the
obligation of any Obligor to pay the Obligations as and when the same shall
become due and payable in accordance with their respective terms, or to affect
the relative rights of the creditors of any Obligor, other than First Lien
Creditors and the Second Lien Creditors as between themselves.


 


8.13        Credit Analysis.  The Secured
Creditors shall each be responsible for keeping themselves informed of (i) the
financial condition of the Obligors and all other all endorsers, obligors
and/or guarantors of the Obligations and (ii) all other circumstances
bearing upon the risk of nonpayment of the Obligations.  No Secured Creditor shall have any duty to
advise any other Secured Creditor of information known to it regarding such
condition or any such other circumstances. 
No Secured Creditor assumes any liability to any other Secured Creditor
or to any other Person with respect to:  (a) the
financial or other condition of Obligors under any instruments of guarantee
with respect to the Obligations, (b) the enforceability, validity, value
or collectibility of the Obligations, any Collateral therefor, or any guarantee
or security which may have been granted in connection with any of the
Obligations or (c) any Obligor’s title or right to transfer any Collateral
or security.


 


8.14        Waiver of Claims.  To the
maximum extent permitted by law, each party hereto waives any claim it might
have against the any Secured Creditor with respect to, or arising out of, any
action or failure to act or any error of judgment, negligence, or mistake or
oversight whatsoever on the part of the any party hereto or their respective
directors, officers, employees or agents with respect to any exercise of rights
or remedies under the Documents or any transaction relating to the
Collateral.  None of the Secured
Creditors, nor any of their respective directors, officers, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or, except as specifically provided
herein, shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of any Obligor or any Secured Creditor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof.


 


8.15        Conflicts.  In the event
of any conflict between the provisions of this Agreement and the provisions of
the Documents, the provisions of this Agreement shall govern.


 


8.16        Bankruptcy. This Agreement shall be applicable both before and
after the filing of any petition by or against any Obligor under the Bankruptcy
Code or any other Insolvency Proceeding and all converted or succeeding cases
in respect thereof, and all references herein to any Obligor shall be deemed to
apply to the trustee for such Obligor and such Obligor as a
debtor-in-possession.  The relative
rights of the First Lien Creditors and the Second Lien Creditors in or to any
distributions from or in respect of any Collateral or proceeds of Collateral
shall continue after the filing of such petition on the same basis as prior to
the date of such filing, subject to any court order approving the financing of,
or use of cash collateral by, any Obligor as debtor-in-possession.


 





















 


IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized as of the day and year first
above written.


 


	
   

  	
  First Lien Agent:

  
	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL CORPORATION, as

  First Lien Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gina Provenzale

  	
   

  
	
   

  	
   

  	
  Name: Gina Provenzale

  	
   

  
	
   

  	
   

  	
  Title: Its Duly Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
  Second Lien Agent:

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY AMERICAS

  
	
   

  	
  as Second Lien Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Omayra Laucella

  	
   

  
	
   

  	
   

  	
  Name: Omayra Laucella

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Evelyn Lazala

  	
   

  
	
   

  	
   

  	
  Name: Evelyn Lazala

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  	
   

  
					



 


Each of the
undersigned hereby acknowledges and agrees to the foregoing terms and
provisions.


 


	
   

  	
  PENHALL INTERNATIONAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey E. Platt

  
	
   

  	
  Name:

  	
  Jeffrey E. Platt

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  PENHALL COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey E. Platt

  
	
   

  	
  Name:

  	
  Jeffrey E. Platt

  
	
   

  	
  Title:

  	
  Vice President

  
					



 





















 


	
   

  	
  PENHALL LEASING, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey E. Platt

  
	
   

  	
  Name:

  	
  Jeffrey E. Platt

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  BOB MACK CO., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey E. Platt

  
	
   

  	
  Name:

  	
  Jeffrey E. Platt

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CAPITOL DRILLING SUPPLIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffrey E. Platt

  
	
   

  	
  Name:

  	
  Jeffrey E. Platt

  
	
   

  	
  Title:

  	
  Vice President