Document:

alye_ex41.htm

EXHIBIT 4.1

 

Execution Version

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

dated as of April 15, 2014

 

Among

 

ALY ENERGY SERVICES, INC.,

 

as Borrower,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

 

as Administrative Agent, Issuing Lender and Swing Line Lender,

 

and

 

THE LENDERS NAMED HEREIN,

 

as Lenders

 

$30,000,000

 

  

  

  

Table of Contents

 

	 	 	 	 	Page	 
	ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS	 	 	9	 
	 	 	 	 	 	 
	
Section 1.1

	
Certain Defined Terms

	 	 	9	 
	 	 	 	 	 	 
	
Section 1.2

	
Computation of Time Periods

	 	 	43	 
	 	 	 	 	 	 
	
Section 1.3

	
Accounting Terms; Changes in GAAP

	 	 	44	 
	 	 	 	 	 	 
	
Section 1.4

	
Classes and Types of Advances

	 	 	44	 
	 	 	 	 	 	 
	
Section 1.5

	
Miscellaneous

	 	 	44	 
	 	 	 	 	 	 
	ARTICLE 2 CREDIT FACILITIES	 	 	45	 
	 	 	 	 	 
	
Section 2.1

	
Revolving and Term Commitments

	 	 	45	 
	 	 	 	 	 	 
	
Section 2.2

	
Letters of Credit

	 	 	47	 
	 	 	 	 	 	 
	
Section 2.3

	
Advances

	 	 	53	 
	 	 	 	 	 	 
	
Section 2.4

	
Prepayments

	 	 	58	 
	 	 	 	 	 	 
	
Section 2.5

	
Repayment

	 	 	60	 
	 	 	 	 	 	 
	
Section 2.6

	
Fees

	 	 	60	 
	 	 	 	 	 	 
	
Section 2.7

	
Interest

	 	 	61	 
	 	 	 	 	 	 
	
Section 2.8

	
Illegality

	 	 	62	 
	 	 	 	 	 	 
	
Section 2.9

	
Breakage Costs

	 	 	63	 
	 	 	 	 	 	 
	
Section 2.10

	
Increased Costs

	 	 	63	 
	 	 	 	 	 	 
	
Section 2.11

	
Payments and Computations

	 	 	65	 
	 	 	 	 	 	 
	
Section 2.12

	
Taxes

	 	 	66	 
	 	 	 	 	 	 
	
Section 2.13

	
Mitigation Obligations; Replacement of Lenders

	 	 	69	 
	 	 	 	 	 	 
	
Section 2.14

	
Defaulting Lender

	 	 	71	 
	 	 	 	 	 	 
	ARTICLE 3 CONDITIONS OF LENDING	 	 	74	 
	 	 	 	 	 
	
Section 3.1

	
Conditions Precedent to Initial Borrowings and the Initial Letter of Credit

	 	 	74	 
	 	 	 	 	 	 
	
Section 3.2

	
Conditions Precedent to Each Borrowing and to Each Issuance, Extension or Renewal of a Letter of Credit

	 	 	77	 
	 	 	 	 	 	 
	
Section 3.3

	
Conditions Precedent to Effectiveness of Revolving Facility

	 	 	78	 
	 	 	 	 	 	 
	
Section 3.4

	
Determinations Under Sections 3.1, 3.2, and 3.3

	 	 	78	 

 

  

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	ARTICLE 4 REPRESENTATIONS AND WARRANTIES	 	 	79	 
	 	 	 	 	 
	
Section 4.1

	
Organization

	 	 	79	 
	 	 	 	 	 	 
	
Section 4.2

	
Authorization

	 	 	79	 
	 	 	 	 	 	 
	
Section 4.3

	
Enforceability

	 	 	79	 
	 	 	 	 	 	 
	
Section 4.4

	
Financial Condition

	 	 	80	 
	 	 	 	 	 	 
	
Section 4.5

	
Ownership and Liens; Real Property

	 	 	80	 
	 	 	 	 	 	 
	
Section 4.6

	
True and Complete Disclosure

	 	 	81	 
	 	 	 	 	 	 
	
Section 4.7

	
Litigation

	 	 	81	 
	 	 	 	 	 	 
	
Section 4.8

	
Compliance with Agreements

	 	 	81	 
	 	 	 	 	 	 
	
Section 4.9

	
Pension Plans

	 	 	82	 
	 	 	 	 	 	 
	
Section 4.10

	
Environmental Condition

	 	 	82	 
	 	 	 	 	 	 
	
Section 4.11

	
Subsidiaries

	 	 	83	 
	 	 	 	 	 	 
	
Section 4.12

	
Investment Company Act

	 	 	83	 
	 	 	 	 	 	 
	
Section 4.13

	
Taxes

	 	 	83	 
	 	 	 	 	 	 
	
Section 4.14

	
Permits, Licenses, etc

	 	 	83	 
	 	 	 	 	 	 
	
Section 4.15

	
Use of Proceeds

	 	 	83	 
	 	 	 	 	 	 
	
Section 4.16

	
Condition of Property; Casualties

	 	 	84	 
	 	 	 	 	 	 
	
Section 4.17

	
Insurance

	 	 	84	 
	 	 	 	 	 	 
	
Section 4.18

	
Security Interest

	 	 	84	 
	 	 	 	 	 	 
	
Section 4.19

	
OFAC; Anti-Terrorism

	 	 	84	 
	 	 	 	 	 	 
	
Section 4.20

	
Solvency

	 	 	84	 
	 	 	 	 	 	 
	
Section 4.21

	
Material Agreements

	 	 	84	 

 

  

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	ARTICLE 5 AFFIRMATIVE COVENANTS	 	 	85	 
	 	 	 	 	 
	
Section 5.1

	
Organization

	 	 	85	 
	 	 	 	 	 	 
	
Section 5.2

	
Reporting

	 	 	85	 
	 	 	 	 	 	 
	
Section 5.3

	
Insurance

	 	 	89	 
	 	 	 	 	 	 
	
Section 5.4

	
Compliance with Laws

	 	 	90	 
	 	 	 	 	 	 
	
Section 5.5

	
Taxes

	 	 	90	 
	 	 	 	 	 	 
	
Section 5.6

	
New Subsidiaries

	 	 	90	 
	 	 	 	 	 	 
	
Section 5.7

	
Security

	 	 	90	 
	 	 	 	 	 	 
	
Section 5.8

	
Deposit Accounts

	 	 	91	 
	 	 	 	 	 	 
	
Section 5.9

	
Records; Inspection

	 	 	91	 
	 	 	 	 	 	 
	
Section 5.10

	
Maintenance and Operation of Property

	 	 	91	 
	 	 	 	 	 	 
	
Section 5.11

	
Certificates of Title

	 	 	91	 
	 	 	 	 	 	 
	
Section 5.12

	
Appraisal Reports; Field Audits

	 	 	91	 
	 	 	 	 	 	 
	
Section 5.13

	
Material Contracts

	 	 	92	 
	 	 	 	 	 	 
	
Section 5.14

	
Further Assurances; Cure of Title Defects

	 	 	92	 
	 	 	 	 	 	 
	
Section 5.15

	
Post-Closing

	 	 	92	 
	 	 	 	 	 	 
	ARTICLE 6 NEGATIVE COVENANTS	 	 	93	 
	 	 	 	 	 
	
Section 6.1

	
Debt

	 	 	93	 
	 	 	 	 	 	 
	
Section 6.2

	
Liens

	 	 	94	 
	 	 	 	 	 	 
	
Section 6.3

	
Investments

	 	 	96	 
	 	 	 	 	 	 
	
Section 6.4

	
Acquisitions

	 	 	96	 

 

  

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Section 6.5

	
Agreements Restricting Liens

	 	 	97	 
	 	 	 	 	 	 
	
Section 6.6

	
Use of Proceeds; Use of Letters of Credit

	 	 	97	 
	 	 	 	 	 	 
	
Section 6.7

	
Corporate Actions; Accounting Changes

	 	 	97	 
	 	 	 	 	 	 
	
Section 6.8

	
Sale of Assets

	 	 	98	 
	 	 	 	 	 	 
	
Section 6.9

	
Restricted Payments

	 	 	98	 
	 	 	 	 	 	 
	
Section 6.10

	
Affiliate Transactions

	 	 	98	 
	 	 	 	 	 	 
	
Section 6.11

	
Line of Business

	 	 	98	 
	 	 	 	 	 	 
	
Section 6.12

	
Hazardous Materials

	 	 	98	 
	 	 	 	 	 	 
	
Section 6.13

	
Compliance with ERISA

	 	 	99	 
	 	 	 	 	 	 
	
Section 6.14

	
Sale and Leaseback Transactions

	 	 	99	 
	 	 	 	 	 	 
	
Section 6.15

	
Limitation on Hedging

	 	 	99	 
	 	 	 	 	 	 
	
Section 6.16

	
Leverage Ratio

	 	 	99	 
	 	 	 	 	 	 
	
Section 6.17

	
Fixed Charge Coverage Ratio

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.18

	
Capital Expenditures

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.19

	
[Reserved]

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.20

	
Landlord Agreements

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.21

	
[Reserved]

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.22

	
Operating Leases

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.23

	
Prepayment of Certain Debt and Other Obligations

	 	 	100	 
	 	 	 	 	 	 
	
Section 6.24

	
Material Agreements

	 	 	100	 

 

  

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	ARTICLE 7 DEFAULT AND REMEDIES	 	 	101	 
	 	 	 	 	 
	
Section 7.1

	
Events of Default

	 	 	101	 
	 	 	 	 	 	 
	
Section 7.2

	
Optional Acceleration of Maturity

	 	 	101	 
	 	 	 	 	 	 
	
Section 7.3

	
Automatic Acceleration of Maturity

	 	 	103	 
	 	 	 	 	 	 
	
Section 7.4

	
Set-off

	 	 	103	 
	 	 	 	 	 	 
	
Section 7.5

	
Remedies Cumulative, No Waiver

	 	 	104	 
	 	 	 	 	 	 
	
Section 7.6

	
Application of Payments

	 	 	104	 
	 	 	 	 	 	 
	ARTICLE 8 THE ADMINISTRATIVE AGENT AND ISSUING LENDER	 	 	106	 
	 	 	 	 	 
	
Section 8.1

	
Appointment and Authority

	 	 	106	 
	 	 	 	 	 	 
	
Section 8.2

	
Rights as a Lender

	 	 	106	 
	 	 	 	 	 	 
	
Section 8.3

	
Exculpatory Provisions

	 	 	106	 
	 	 	 	 	 	 
	
Section 8.4

	
Reliance by Administrative Agent, Swing Line Lender and Issuing Lender

	 	 	107	 
	 	 	 	 	 	 
	
Section 8.5

	
Delegation of Duties

	 	 	108	 
	 	 	 	 	 	 
	
Section 8.6

	
Resignation of Administrative Agent or Issuing Lender

	 	 	108	 
	 	 	 	 	 	 
	
Section 8.7

	
Non-Reliance on Administrative Agent and Other Lenders

	 	 	109	 
	 	 	 	 	 	 
	
Section 8.8

	
No Other Duties, etc

	 	 	109	 
	 	 	 	 	 	 
	
Section 8.9

	
Indemnification

	 	 	109	 
	 	 	 	 	 	 
	
Section 8.10

	
Administrative Agent May File Proofs of Claim

	 	 	110	 
	 	 	 	 	 	 
	
Section 8.11

	
Collateral and Guaranty Matters

	 	 	111	 

 

  

6

  

 

	ARTICLE 9 MISCELLANEOUS	 	 	112	 
	 	 	 	 	 
	
Section 9.1

	
Costs and Expenses

	 	 	112	 
	 	 	 	 	 	 
	
Section 9.2

	
Indemnification; Waiver of Damages

	 	 	112	 
	 	 	 	 	 	 
	
Section 9.3

	
Waivers and Amendments

	 	 	113	 
	 	 	 	 	 	 
	
Section 9.4

	
Severability

	 	 	114	 
	 	 	 	 	 	 
	
Section 9.5

	
Survival of Representations and Obligations

	 	 	115	 
	 	 	 	 	 	 
	
Section 9.6

	
Binding Effect

	 	 	115	 
	 	 	 	 	 	 
	
Section 9.7

	
Successors and Assigns

	 	 	115	 
	 	 	 	 	 	 
	
Section 9.8

	
Confidentiality

	 	 	118	 
	 	 	 	 	 	 
	
Section 9.9

	
Notices, Etc

	 	 	119	 
	 	 	 	 	 	 
	
Section 9.10

	
Usury Not Intended

	 	 	119	 
	 	 	 	 	 	 
	
Section 9.11

	
Usury Recapture

	 	 	120	 
	 	 	 	 	 	 
	
Section 9.12

	
Payments Set Aside

	 	 	120	 
	 	 	 	 	 	 
	
Section 9.13

	
Governing Law; Service of Process

	 	 	120	 
	 	 	 	 	 	 
	
Section 9.14

	
Submission to Jurisdiction

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.15

	
Electronic Execution of Assignments

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.16

	
Execution in Counterparts

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.17

	
Waiver of Jury

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.18

	
USA Patriot Act

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.19

	
Confirmation of Flood Policies and Procedures

	 	 	121	 
	 	 	 	 	 	 
	
Section 9.20

	
Keepwell

	 	 	122	 
	 	 	 	 	 	 
	
Section 9.21

	
Amendment and Restatement

	 	 	122	 
	 	 	 	 	 	 
	
Section 9.22

	
Integration

	 	 	122	 

  

7

  

 

	
SCHEDULES:

	 	 
	 	 	 
	
Schedule I

	
–

	
Pricing Schedule

	
Schedule II

	
–

	
Commitments, Contact Information

	
Schedule III

	
–

	
Additional Conditions and Requirements for New Subsidiaries

	
Schedule 3.1

	
–

	
Owned and Leased Real Properties

	
Schedule 3.1(q)

	
–

	
Certificates of Title to be Delivered Post-Closing

	
Schedule 4.1

	
–

	
Organizational Information

	
Schedule 4.7

	
–

	
Litigation

	
Schedule 4.10

	
–

	
Environmental Matters

	
Schedule 4.11

	
–

	
Subsidiaries

	
Schedule 4.21

	
–

	
Material Agreements

	
Schedule 6.3

	
–

	
Investments

	
Schedule 6.10

	
–

	
Affiliate Transactions

	 	 	 
	
EXHIBITS:

	 	 
	 	 	 
	
Exhibit A

	
–

	
Form of Assignment and Acceptance

	
Exhibit B

	
–

	
Form of Borrowing Base Certificate

	
Exhibit C

	
–

	
Form of Compliance Certificate

	
Exhibit D

	
–

	
Form of Amended and Restated Guaranty

	
Exhibit E-1

	
–

	
Form of Notice of Revolving Borrowing

	
Exhibit E-2

	
–

	
Form of Notice of Term Borrowing

	
Exhibit F

	
–

	
Form of Notice of Continuation or Conversion

	
Exhibit G

	
–

	
Form of Amended and Restated Pledge and Security Agreement

	
Exhibit H-1

	
–

	
Form of Revolving Note

	
Exhibit H-2

	
–

	
Form of Term Note

	
Exhibit H-3

	
–

	
Form of Swing Line Note

	
Exhibit I-1

	
–

	
Form of U.S. Tax Compliance Certificate

	
Exhibit I-2

	
–

	
Form of U.S. Tax Compliance Certificate

	
Exhibit I-3

	
–

	
Form of U.S. Tax Compliance Certificate

	
Exhibit I-4

	
–

	
Form of U.S. Tax Compliance Certificate

  

8

  

 

AMENDED AND RESTATED CREDIT AGREEMENT

 

This AMENDED AND RESTATED CREDIT AGREEMENT dated as of April 15, 2014 (this “Agreement”) is among Aly Energy Services, Inc., a Delaware corporation (the “Borrower”), the Lenders (as defined below) and Wells Fargo Bank, National Association as Administrative Agent (as defined below) for the Lenders, as Issuing Lender (as defined below) and as Swing Line Lender (as defined below).

 

R E C I T A L S

 

A. The Borrower has assumed the obligations of the Existing Borrower (as defined below) under the Existing Credit Agreement (as defined below) and desires to amend and restate the Existing Credit Agreement pursuant to this Agreement. The Borrower has also requested that the Lenders provide certain loans to and extensions of credit on behalf of the Borrower pursuant to this Agreement.

 

B. In consideration of the mutual covenants and agreements herein contained and of the loans, extensions of credit and commitments hereinafter referred to, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS AND ACCOUNTING TERMS

 

Section 1.1 Certain Defined Terms. The following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“Acceptable Letter of Credit Maturity Date” has the meaning assigned to it in Section 2.2(a)(ii) of this Agreement.

 

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

 

“Account Control Agreement” shall mean, as to any deposit account of any Credit Party held with a bank, an agreement or agreements in form and substance reasonably acceptable to the Administrative Agent, among the Credit Party owning such deposit account, the Administrative Agent and such other bank governing such deposit account.

 

“Account Debtor” shall mean an account debtor as defined in the Uniform Commercial Code, as in effect in the State of New York.

 

“Acquisition” means the purchase by any Credit Party of (a) all or substantially all of the assets of a Person, (b) substantially all of the equity interests of a Person, or (c) any business, division or enterprise, including the purchase of associated assets or operations or the Equity Interests of a Person and for the avoidance of doubt, excludes purchases of equipment only with no other tangible or intangible property associated with such equipment purchase unless such purchase of equipment involves all or substantially all the assets of the seller.

 

  

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“Adjusted Base Rate” means, for any day, the fluctuating rate per annum of interest equal to the greatest of (a) the Federal Funds Rate in effect on such day plus 0.50%, (b) the Prime Rate in effect on such day, and (c) a rate determined by the Administrative Agent to be the Daily One-Month LIBOR plus 1.00%. Any change in the Adjusted Base Rate due to a change in the Prime Rate, Daily One-Month LIBOR or the Federal Funds Rate shall be effective on the effective date of such change in the Prime Rate, Daily One-Month LIBOR or the Federal Funds Rate, respectively.

 

“Administrative Agent” means Wells Fargo in its capacity as agent for the Lenders pursuant to Article 8 and any successor agent pursuant to Section 8.6.

 

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

 

“Advance” means any advance by a Lender or the Swing Line Lender to the Borrower as a part of a Borrowing.

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person. The term “control” (including the terms “controlled by” or “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.

 

“Agreement” has the meaning specified in the introductory paragraph hereto.

 

“Aly Centrifuge” means Aly Centrifuge Inc., a Delaware corporation.

 

“Aly Operating” means Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.).

 

“Applicable Margin” means, at any time with respect to each Type of Advance, the Letters of Credit and the Commitment Fees, the percentage rate per annum which is applicable at such time with respect to such Advance, Letter of Credit or Commitment Fees as set forth in Schedule I and subject to further adjustments as set forth in Section 2.7(d).

 

“Asset Sale” means (a) any sale, transfer, or other disposition of any Property, by any Credit Party and (b) any issuance or sale of any Equity Interests of any Subsidiary of the Borrower, in each case, to any Person other than a Credit Party; provided that, any sale, transfer or other disposition of Property from one Credit Party to another Credit Party as permitted under Section 6.8(b) and the sale of inventory or equipment in the ordinary course as permitted under Section 6.8(a) shall not constitute an “Asset Sale” for purposes of this Agreement.

 

  

10

  

 

“Assignment and Acceptance” means an assignment and acceptance executed by a Lender and an Eligible Assignee and accepted by the Administrative Agent, in substantially the same form as Exhibit A or any other form approved by the Administrative Agent.

 

“Assumption Agreement” means the Assignment and Assumption by and between the Borrower and the Existing Borrower dated as of even date herewith pursuant to which the Borrower assumed all obligations of the Existing Borrower under the Existing Credit Agreement.

 

"Austin Chalk Corp." means Austin Chalk Petroleum Services Corp., a Texas corporation.

 

 “AutoBorrow Agreement” means any agreement providing for automatic borrowing services between the Borrower and the Swing Line Lender.

 

“Banking Services” means each and any of the following bank services: (a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services).

 

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

 

“Banking Services Provider” means any Lender (other than a Defaulting Lender) or Affiliate of a Lender (other than a Defaulting Lender) that provides Banking Services to the Borrower or any Subsidiary.

 

“Base Rate Advance” means an Advance which bears interest based upon the Adjusted Base Rate.

 

“BHP” means BHP Billiton Limited, together with any of its Affiliates.

 

“Blockers” means Canadian Nitrogen Services USA, Inc. and United Centrifuge, Inc., (USA).

 

“Borrower” means Aly Energy Services, Inc., a Delaware corporation (f/k/a Preferred Voice, Inc.).

 

“Borrowing” means a Revolving Borrowing, a Swing Line Borrowing, or a Term Borrowing.

 

  

11

  

 

“Borrowing Base” means, without duplication, the sum of (a) 80% of an amount equal to the Eligible Receivables plus (b) 50% of the value of Eligible Inventory valued at the lower of actual or fair market value in accordance with GAAP, in each case, determined as of the date of the Borrowing Base Certificate then most recently delivered pursuant to this Agreement minus (c) the Reserves; provided that (i) in no event shall the amount determined under clause (b) exceed 50% of the total amount of the Borrowing Base and (ii) notwithstanding the foregoing rates, the Lender may from time to time modify the percentage set forth in this definition if it determines, in its reasonable judgment, that such advance rate should be reduced based upon a Field Exam pursuant to Section 5.10 or a Field Audit pursuant to Section 5.12. Any change in the Borrowing Base shall be effective as of the date of the Borrowing Base Certificate then most recently delivered pursuant to this Agreement; provided that, should the Borrower fail to deliver the Administrative Agent and the Lenders the Borrowing Base Certificate as required under Section 5.2(e), the Administrative Agent may nonetheless redetermine the Borrowing Base from time-to-time thereafter in its sole discretion until the Administrative Agent and the Lenders receive the required Borrowing Base Certificate, whereupon the Administrative Agent shall redetermine the Borrowing Base based on such Borrowing Base Certificate and the other terms hereof. Anything to the contrary contained herein notwithstanding, the Lender shall, upon not less 30 days’ prior written notice to the Borrower, have the right (but not the obligation), in the exercise of its reasonable judgment, to establish and increase or decrease Reserves against the Borrowing Base. The amount of any Reserve established by the Lender shall have a reasonable relationship to the event, condition, other circumstance, or fact that is the basis for such reserve and shall not be duplicative of any other reserve established and currently maintained. Furthermore, the event, condition, circumstance or fact addressed in such reserve shall not be an event, condition, circumstance or fact otherwise addressed by the Lender in a change to any criteria for Eligible Inventory or Eligible Receivable then in effect.

 

“Borrowing Base Certificate” means a certificate executed by a Responsible Officer of the Borrower in the form of the attached Exhibit B and including the following: (a) accounts receivable and accounts payable aging reports for each Credit Party with grand totals and (b) all other information as reasonably requested by the Administrative Agent.

 

“Borrowing Base Deficiency” means the excess, if any, of (a) the Revolving Outstandings over (b) the lesser of (i) aggregate amount of Revolving Commitments, and (ii) the Borrowing Base then in effect.

 

“Business Day” means a day (a) other than a Saturday, Sunday, or other day on which the Administrative Agent is authorized to close under the laws of, or is in fact closed in, New York or Texas, and (b) if the applicable Business Day relates to any Eurodollar Advances, on which dealings are carried on by commercial banks in the London interbank market.

 

“CapEx Basket Amount” means $10,000,000 for fiscal year 2014 and $7,500,000 for each fiscal year thereafter.

 

“Capital Expenditures” for any Person and period of its determination means, without duplication, the aggregate of all expenditures and costs (whether paid in cash or accrued as liabilities during that period and including that portion of payments under Capital Leases that are capitalized on the balance sheet of such Person) of such Person during such period that, in conformity with GAAP, are required to be included in or reflected by the property, plant, or equipment or similar fixed asset accounts reflected in the balance sheet of such Person.

 

  

12

  

 

“Capital Leases” means, for any Person, subject to Section 1.3(c), any lease of any Property by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

 

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

 

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

 

“Casualty Event” means the damage, destruction or condemnation, including by process of eminent domain or any transfer or disposition of property in lieu of condemnation, as the case may be, of property of any Person.

 

“Centrifuge Acquisition” means the purchase by the Borrower from the Sellers of United Centrifuge and the merger of United Centrifuge into Aly Centrifuge, with Aly Centrifuge being the sole survivor, all pursuant to the Centrifuge Acquisition Agreement.

 

“Centrifuge Acquisition Agreement” means that certain Asset Purchase Agreement, Stock Purchase Agreement and Merger Agreement between the Borrower, Aly Centrifuge, United Centrifuge, and the Sellers dated April 11, 2014.

 

“Centrifuge Acquisition Documents” means the Centrifuge Acquisition Agreement and all agreements, assignments, deeds, conveyances, certificates and other documents and instruments now or hereafter executed and delivered by the Borrower pursuant to the Centrifuge Acquisition Agreement or in connection with the Centrifuge Acquisition.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.), as amended, together with any analogous state and local counterparts or equivalents, and all rules and regulations and requirements thereunder in each case as now or hereafter in effect.

 

“Certificated Equipment” means any equipment the ownership of which is evidenced by, or under applicable Legal Requirement, is required to be evidenced by, a certificate of title.

 

“Change in Control” means the occurrence of any of the following events:

 

  

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(a) the Borrower ceases to directly or indirectly own 100% of the Voting Securities of any Subsidiary, including Aly Centrifuge, Aly Operating and Austin Chalk Corp., other than as a result of a sale of assets or merger permitted under Section 6.07;

 

(b) during any period of two consecutive calendar quarters, individuals who at the beginning of such period were members of the Borrower’s board of directors cease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of such period (or by directors so elected) or by the stockholders pursuant to the nomination of the existing directors, or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability;

 

(c) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than one or more Permitted Holders, becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than 35% of the Equity Interests in the Borrower entitled to vote for members of the board of directors or equivalent governing body of the Borrower, determined on a fully-diluted basis (and taking into account all such Equity Interests that a person or group has the right to acquire pursuant to any option right); or

 

(d) two or more of the Key Individuals shall cease to be actively engaged in the executive management of the Borrower and each such Key Individual is not replaced with an individual reasonably acceptable to the Administrative Agent who has comparable qualifications within one hundred twenty (120) days after such Person ceases to be so actively engaged.

 

“Change in Law” means the occurrence, after the date of this Agreement (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives made or issued by any Governmental Authority thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Class” has the meaning set forth in Section 1.4.

 

  

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“Closing Date” means April 15, 2014.

 

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereof.

 

“Collateral” means all property of the Credit Parties which is “Collateral” or “Mortgaged Property” (as defined in each of the Mortgages or the Security Agreement, as applicable) or similar terms used in the Security Documents.

 

“Commitment Fees” means the fees required under Section 2.6(a).

 

“Commitments” means, as to any Lender, its Revolving Commitment and its Term Commitment, if applicable.

 

“Compliance Certificate” means a compliance certificate executed by the chief executive officer or chief financial officer of the Borrower in substantially the same form as Exhibit C.

 

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

 

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

 

“Convert,” “Conversion,” and “Converted” each refers to a conversion of Advances of one Type into Advances of another Type pursuant to Section 2.3(b).

 

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

 

“Credit Extension” means an Advance or a Letter of Credit Extension.

 

“Credit Parties” means the Borrower and the Guarantors.

 

“Daily One-Month LIBOR” means, for any day, the rate of interest equal to the Eurodollar Rate then in effect for delivery for a one (1) month period.

 

  

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“Debt” means, for any Person, without duplication: (a) indebtedness of such Person for borrowed money, including the face amount of any letters of credit supporting the repayment of indebtedness for borrowed money issued for the account of such Person; (b) to the extent not covered under clause (a) above, obligations under letters of credit and agreements relating to the issuance of letters of credit or acceptance financing, including Letters of Credit; (c) obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, or upon which interest payments are customarily made; (d) obligations of such Person under conditional sale or other title retention agreements relating to any Properties purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business); (e) obligations of such Person to pay the deferred purchase price of property or services (including, without limitation, any contingent obligations or other similar obligations associated with such purchase, and including obligations that are non-recourse to the credit of such Person but are secured by the assets of such Person but excluding trade payables incurred in the ordinary course of such Person’s business which are either (i) not more than 90 days past due or (ii) subject to a good faith dispute); (f) obligations of such Person as lessee under Capital Leases and obligations of such Person in respect of Synthetic Leases; (g) obligations of such Person under any Hedging Arrangement (except that such obligations shall not constitute Debt for purposes of the calculations for compliance under Sections 6.16 and 6.17); (h) all obligations of such Person to mandatorily purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person on a date certain or upon the occurrence of certain events or conditions; (i) the Debt of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer, but only to the extent to which there is recourse to such Person for the payment of such Debt; (j) obligations of such Person under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) of such Person to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (i) above; (k) indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) secured by any Lien on or in respect of any Property of such Person provided that, solely in the case of liabilities of any Person not a Subsidiary or the Borrower secured by such a Lien, the amount of such Debt shall be deemed to the lesser of (i) the net book value of the property so encumbered and (ii) the amount of such liabilities, and (l) all liabilities of such Person in respect of unfunded vested benefits under any Plan.

 

“Debt Funded Capital Expenditure” means Capital Expenditures to the extent funded with proceeds from Permitted Debt.

 

“Debt Incurrence” means any issuance or sale by the Borrower or any of its Subsidiaries of any Debt after the Closing Date other than Permitted Debt.

 

“Debt Incurrence Proceeds” means, with respect to any Debt Incurrence, all cash and cash equivalent investments received by the Borrower or any of its Subsidiaries from such Debt Incurrence after payment of, or provision for, all underwriter fees and expenses, original issued discount, SEC and blue sky fees, printing costs, fees and expenses of accountants, lawyers and other professional advisors, brokerage commissions and other reasonable out-of-pocket fees and expenses actually incurred in connection with such Debt Incurrence; provided that, an original issued discount shall not reduce the amount of such Debt Incurrence Proceeds unless such discount is due and payable at or immediately following the closing of such Debt Incurrence and such discount has not already been taken into account to reduce the amount of proceeds received by the Borrower or such Subsidiary from such Debt Incurrence.

 

“Debtor Relief Laws” means (a) the Bankruptcy Code of the United States of America, and (b) all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

 

  

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

 

“Default Rate” means a per annum rate equal to (a) in the case of principal of any Advance, 2.00% plus the rate otherwise applicable to such Advance as provided in Sections 2.7(a), (b), (c) or (d), (b) in the case of any other Obligation other than Letter of Credit Fees, 2.00% plus the non-default rate applicable to Base Rate Advances as provided in Section 2.7(a) or (d), and (c) when used with respect to Letter of Credit Fees, a rate equal to the Applicable Margin for Eurodollar Advances plus 2.00% per annum.

 

“Defaulting Lender” means, subject to Section 2.14(b), any Lender that (a) (except, with regards to the funding of Swing Line Advances, the Swing Line Lender) has failed to (i) fund all or any portion of its Advances within two Business Days of the date such Advances were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, the Issuing Lender, the Swing Line Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swing Line Advances) within two Business Days of the date when due, (b) ) (except, with regards to the funding of Swing Line Advances, the Swing Line Lender) has notified the Borrower, the Administrative Agent or the Issuing Lender or the Swing Line Lender in writing, or has made a public statement to the effect, that it does not intend to comply with its funding obligations hereunder or generally under other agreements in which it commits to extend credit (unless such writing or public statement relates to such Lender’s obligation to fund an Advance hereunder and states that such position is based on such Lender’s good faith determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower in form and substance satisfactory to the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, or (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.14(b)) upon delivery of written notice of such determination to the Borrower, the Issuing Lender, the Swing Line Lender and each Lender.

 

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

 

  

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“Domestic Subsidiary” means, with respect to any Person, any of its Subsidiaries that (a) is incorporated or organized under the laws of the United States, any State thereof or the District of Columbia, (b) could provide a guarantee without any material adverse federal income tax consequence of the Borrower (by constituting an investment of earnings in United States property under Section 956 (or any successor provision) of the Code, triggering an increase in the gross income of the Borrower pursuant to Section 951 (or a successor provision) of the Code without corresponding credits or other offsets), or (c) any Foreign Subsidiary that is disregarded for tax purposes so long as each Person who, directly or indirectly, holds the Equity Interests of such Foreign Subsidiary is the Borrower, is a Domestic Subsidiary, or is a Foreign Subsidiary disregarded for U.S. Federal income tax purposes.

 

“EBITDA” means for the Borrower and its Subsidiaries, on a consolidated basis for any period, the sum of (a) Net Income for such period, plus (b) without duplication and to the extent deducted in determining such Net Income (i) depreciation and amortization for such period, plus (ii) Interest Expense for such period, plus (iii) Income Tax Expense for such period, plus (iv) non-cash charges plus (v) fees and expenses accrued under, or incurred in connection with, the closing of the Credit Documents and other Transactions in an amount not to exceed $750,000, minus (c) to the extent included in determining Net Income, all non-cash items of income; provided that such EBITDA shall be subject to pro forma adjustments for acquisitions and asset sales assuming that such transactions had occurred on the first day of the determination period, which adjustments shall be made in a manner, and subject to supporting documentation, acceptable to the Administrative Agent.

 

“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 9.7(b)(iii), (v) and (vi) (subject to such consents, if any, as may be required under Section 9.7(b)(iii)).

 

“Eligible Inventory” means at any time Inventory that is ready and available to be sold without requiring any additional processing and then owned by, and in the possession of, any Credit Party (or in the possession of a third party lessor or landlord that is party to a collateral access agreement or landlord waiver agreement with the Administrative Agent on terms reasonably satisfactory to the Administrative Agent), and held for sale or disposition in the ordinary course of the Credit Parties’ business and in which the Administrative Agent has an Acceptable Security Interest but specifically excluding Inventory which meets any of the following conditions or descriptions:

 

(a) Inventory with respect to which a claim exists disputing applicable Credit Party’s title to or right to possession;

 

(b) obsolete or slow moving Inventory;

 

  

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(c) rejected, spoiled or damaged Inventory, or Inventory otherwise not readily saleable or usable in its present state for the use for which it was processed or purchased;

 

(d) Inventory that the Administrative Agent has determined (in its reasonable credit judgment) to be unmarketable;

 

(e) Inventory that has been shipped or delivered to a customer on consignment, on a sale or return basis, or on the basis of any similar understanding;

 

(f) Inventory which is in transit (other than Inventory in transit between locations of Credit Parties so long as a Credit Party maintains sole control and possession of such Inventory while it is in transit);

 

(g) Inventory held for lease;

 

(h) Inventory which is located on premises owned or operated by the customer that is to purchase such Inventory or which is located on premises leased by a Credit Party that is not subject to a landlord lien waiver or subordination reasonably acceptable to the Administrative Agent;

 

(i) Inventory that is not in good condition or does not comply with any Legal Requirement or the standards imposed by any Governmental Authority with respect to its manufacture, use, or sale;

 

(j) Inventory that is bill and hold goods or deferred shipment;

 

(k) Inventory evidenced by any negotiable or non-negotiable document of title;

 

(l) Inventory produced in violation of the Fair Labor Standards Act or that is subject to the “hot goods” provisions contained in Title 29 U.S.C. §215;

 

(m) Inventory that is subject to any agreement which would, in any material respect, restrict the Lender’s ability to sell or otherwise dispose of such Inventory;

 

(n) Inventory that is located in a jurisdiction outside the United States or in any territory or possession of the United States that has not adopted Article 9 of the Uniform Commercial Code;

 

(o) Inventory that is subject to any third party’s rights (including Permitted Liens) which would be superior to the lien and rights of the Administrative Agent created under the Credit Documents;

 

(p) Inventory that has been reflected on any Credit Party’s books for more than one year; and

 

(q) Inventory that is otherwise deemed ineligible by the Administrative Agent in its reasonable discretion.

 

  

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Inventory which is at any time Eligible Inventory but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible Inventory until such time as the foregoing requirements are met with respect to such Inventory. Notwithstanding the foregoing, the Administrative Agent may, from time to time, and upon not less than 30 days’ prior written notice to the Borrower, in the exercise of its reasonable judgment, change the criteria for Eligible Inventory based on either: (A) an event, condition or other circumstance arising after the Closing Date, or (B) an event, condition or other circumstance existing on the Closing Date to the extent the Administrative Agent has no written notice thereof from the Borrower prior to the Closing Date, in either case under clause (A) or (B) which adversely affects (other than in a de minimus manner) or, in the Administrative Agent’s reasonable judgment, could reasonably be expected to adversely affect (other than in a de minimus manner), the Inventory as determined by Administrative Agent.

 

“Eligible Receivables” means, as to the Borrower and its consolidated Subsidiaries, on a consolidated basis and without duplication, all Receivables of such Person, in each case reflected on its books in accordance with GAAP which conform to the representations and warranties in Article 4 hereof and in the Security Documents to the extent such provisions are applicable to the Receivables, and each of which meets all of the following criteria on the date of any determination:

 

(a) such Receivable is subject to an Acceptable Security Interest;

 

(b) such Credit Party has good and marketable title to such Receivable,

 

(c) such Receivable has been billed substantially in accordance with customary billing practices of such Credit Party in effect on the Closing Date and such Receivable is not unpaid for more than 90 days from the date of the invoice;

 

(d) such Receivable was created in the ordinary course of business of any Credit Party from the performance by such Credit Party of services which have been fully and satisfactorily performed (and not a progress billing or contingent upon any further performance), or from the absolute sale on open account (and not on consignment, on approval or on a “sale or return” basis) by such Credit Party of goods (i) in which such Credit Party had sole and complete ownership and (ii) which have been shipped or delivered to the Account Debtor, and such Credit Party has possession of shipping or delivery receipts evidencing such shipment or delivery;

 

(e) such Receivable represents a legal, valid and binding payment obligation of the Account Debtor thereof enforceable in accordance with its terms and arises from an enforceable contract;

 

  

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(f) such Receivable is owed by an Account Debtor that the Credit Parties deem to be creditworthy and is not owed by an Account Debtor which has, (i) applied for, suffered, or consented to the appointment of any receiver, custodian, trustee, or liquidator of its assets, (ii) has had possession of all or a material part of its property taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had filed against it, any request or petition for liquidation, reorganization, arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case under any state, federal or foreign bankruptcy laws, (iv) has admitted in writing its inability to, or is generally unable to, pay its debts as they become due, (v) become insolvent, or (vi) ceased operation of its business;

 

(g) the Account Debtor on such Receivable is not a Credit Party, an Affiliate of a Credit Party, nor a director, officer or employee of a Credit Party or of an Affiliate of a Credit Party;

 

(h) such Receivable is evidenced by an invoice and not by any chattel paper, promissory note or other instrument;

 

(i) such Receivable is not due from an Account Debtor from whom on the date of determination more than 20% of its aggregate Receivables owed to any Credit Party are more than 90 days past the invoice date;

 

(j) such Receivable, together with all other Receivables due from the same Account Debtor does not comprise more than 25% of the aggregate Eligible Receivables (provided, however, that the amount of any such Receivable excluded pursuant to this clause (j) shall only be the amount by which Eligible Receivables due from such Account Debtor exceed 25% of the aggregate Eligible Receivables and provided further that all Receivables due from BHP shall be included notwithstanding anything to the contrary contained in this clause (j) so long as BHP is rated at least A1 by Moody’s or A+ by S&P);

 

(k) such Receivable is not subject to any set-off, counterclaim, defense, allowance or adjustment and there has been no dispute, objection or complaint by the Account Debtor concerning its liability for such Receivable or a claim for any such set-off, counterclaim, defense, allowance or adjustment by the Account Debtor thereof (provided, however, that the amount of any such Receivable excluded pursuant to this clause (k) shall only be only the amount of such set-off, counterclaim, allowance or adjustment or claimed set-off, counterclaim, allowance or adjustment);

 

(l) such Receivable is owed in Dollars and is due from an Account Debtor that is organized under the laws of the U.S. or any state of the U.S.;

 

(m) such Receivable is not due from the United States government, or any department, agency, public corporation, or instrumentality thereof, unless the Federal Assignment of Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps necessary to perfect the Lien of the Administrative Agent in such Receivable has been complied with to the Administrative Agent’s satisfaction;

 

  

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(n) such Receivable is not owed by an Account Debtor located in any jurisdiction which requires filing of a “Notice of Business Activities Report” or other similar report or requires any Credit Party to qualify to do business in order to permit such Credit Party to seek judicial enforcement in such jurisdiction of payment of such Receivable, unless such Credit Party has filed such report or qualified to do business in such jurisdiction;

 

(o) such Receivable is not the result of (i) a credit balance relating to a Receivable more than 90 days past the invoice date, (ii) work-in-progress, (iii) finance or service charges, or (iv) payments of interest;

 

(p) such Receivable has not been written off the books of any Credit Party or otherwise designated as uncollectible by any Credit Party;

 

(q) such Receivable is not subject to any reduction thereof, other than discounts and adjustments given in the ordinary course of business and deducted from such Receivable;

 

(r) such Receivable is not a newly created Receivable resulting from the unpaid portion of a partially paid Receivable;

 

(s) such Receivable is not subject to any third party’s rights (including Permitted Liens) which would be superior to the lien and rights of Administrative Agent created under the Credit Documents; and

 

(t) such Receivable is not otherwise deemed ineligible by the Administrative Agent in its reasonable credit judgment, including such Receivable from any Account Debtor that does not have a satisfactory credit standing (as determined in the reasonable discretion of the Administrative Agent).

 

In the event that a Receivable which was previously an Eligible Receivable ceases to be an Eligible Receivable hereunder, the Borrower shall notify the Administrative Agent thereof at the time of submission to the Administrative Agent of the next Borrowing Base Certificate. In determining the amount of an Eligible Receivable, the face amount of such Receivable shall be reduced by, without duplication, to the extent not reflected in such face amount, (i) the amount of all accrued and actual discounts, claims, credits or credits pending, promotional program allowances, price adjustments, finance charges or other allowances, payables or obligations to the Account Debtor (including any amount that any Credit Party may be obligated to rebate to an Account Debtor pursuant to the terms of any agreement or understanding (written or oral)), (ii) all taxes, duties or other governmental charges included in such Receivable, and (iii) the aggregate amount of all cash received in respect of such Receivable but not yet applied by any Credit Party to reduce the amount of such Receivable. Notwithstanding the foregoing, the Administrative Agent may, from time to time, and upon not less than 30 days’ prior written notice to the Borrower, in the exercise of its reasonable judgment, change the criteria for Eligible Receivables based on either: (A) an event, condition or other circumstance arising after the Closing Date, or (B) an event, condition or other circumstance existing on the Closing Date to the extent the Lender has no written notice thereof from the Borrower prior to the Closing Date or is not otherwise reflected in any appraisals, reports or other similar written information received by the Administrative Agent in connection with this Agreement prior to the Closing Date, in either case under clause (A) or (B) which adversely affects (other than in a de minimus manner) or, in the Administrative Agent’s reasonable judgment, could reasonably be expected to adversely affect (other than in de minimus manner), the Receivables as determined by the Administrative Agent.

 

  

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“Environment” or “Environmental” shall have the meanings set forth in 42 U.S.C. 9601(8) (1988).

 

“Environmental Claim” means any third party (including any governmental agency and employees) action, lawsuit, claim, demand, regulatory action or proceeding, order, decree, consent agreement or written notice of potential or actual responsibility or violation (including claims or proceedings under the Occupational Safety and Health Acts or similar Legal Requirements relating to health or safety of employees) that seeks to impose liability under any Environmental Law.

 

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

 

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

 

“Equity Funded Capital Expenditures” means Capital Expenditures that are fully funded solely with Equity Issuance Proceeds.

 

“Equity Interest” means with respect to any Person, any shares, interests, participation, or other equivalents (however designated) of corporate stock, membership interests or partnership interests (or any other ownership interests) of such Person.

 

“Equity Issuance” means any issuance of equity securities or any other Equity Interests (including any preferred equity securities) by the Borrower or any of its Subsidiaries other than equity securities issued (i) to the Borrower or one of its Subsidiaries, (ii) the Preferred Equity Investment, and (iii) pursuant to employee or director and officer unit option or restricted unit plans in the ordinary course of business.

 

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

 

  

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

 

“Eurocurrency Liabilities” has the meaning assigned to that term in Regulation D of the Federal Reserve Board as in effect from time to time.

 

“Eurodollar Advance” means an Advance that bears interest based upon the Eurodollar Rate (other than Advances that bear interest based upon the Daily One Month LIBOR).

 

“Eurodollar Base Rate” means (a) in determining Eurodollar Rate for purposes of the “Daily One Month LIBOR”, the rate per annum for Dollar deposits quoted by the Administrative Agent for the purpose of calculating effective rates of interest for loans making reference to the “Daily One-Month LIBOR” or the “LIBOR Market Index Rate” or other words of similar import, as the inter-bank offered rate in effect from time to time for delivery of funds for one (1) month in amounts approximately equal to the principal amount of the applicable Advances; provided that, the Administrative Agent may base its quotation of the inter-bank offered rate upon the rates appearing on Reuters Reference LIBOR01 page, Bloomberg L.P.’s page BBAM, or such other screen rates offered to the inter-bank market, in any case, as the Administrative Agent in its reasonable discretion deems appropriate, and (b) in determining Eurodollar Rate for all other purposes, the rate per annum (rounded upward to the nearest whole multiple of 1/100 of 1%) equal to the interest rate per annum set forth on the Reuters Reference LIBOR01 page (or on any successor or substitute page of such service, or any successor to or substitute for such service, as determined by the Administrative Agent from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as the London Interbank Offered Rate, for deposits in Dollars at 11:00 a.m. (London, England time) two Business Days before the first day of the applicable Interest Period and for a period equal to such Interest Period; provided that, if such quotation is not available for any reason, then for purposes of this clause (b), Eurodollar Base Rate shall then be the rate determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in immediately available funds in the approximate amount of the Advances being made, continued or Converted by the Lenders and with a term equivalent to such Interest Period would be offered by the Administrative Agent’s London Branch (or other branch or Affiliate of the Administrative Agent, or in the event that the Administrative Agent does not have a London branch, the London branch of a Lender chosen by the Administrative Agent) to major banks in the London or other offshore inter-bank market for Dollars at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

 

“Eurodollar Rate” means a rate per annum determined by the Administrative Agent pursuant to the following formula:

 

	
Eurodollar Rate =

	 	
Eurodollar Base Rate                            

1.00 – Eurodollar Reserve Percentage

 

Where,

 

“Eurodollar Reserve Percentage” means, as of any day, the reserve percentage (expressed as a decimal, carried out to five decimal places) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to liabilities or assets consisting of or including Eurocurrency Liabilities. The Eurodollar Rate for each outstanding Advance shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.

 

  

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“Event of Default” has the meaning specified in Section 7.1.

 

“Excluded Certificated Equipment” means, as of the date of determination, any Certificated Equipment owned by the Borrower or any Subsidiary that is subject to the senior rights of any third party, including a Permitted Lien of the type described under Section 6.2(e).

 

“Excluded Equity Issuance” means (a) an Equity Issuance to management or employees of a Credit Party under any employee stock option or stock purchase plan or other employee benefits plan in existence from time to time, and (b) an Equity Issuance by a Credit Party to another Credit Party.

 

“Excluded Property” has the meaning given such term in the Security Agreement.

 

“Excluded Swap Obligations” means, with respect to any Credit Party other than the Borrower, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Credit Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the guarantee of such Credit Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is or becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in an Advance or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Advance or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.13 or reallocation pursuant to Section 2.14) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.12, additional amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.12(g), and (d) any U.S. federal withholding Taxes imposed under FATCA.

 

  

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“Existing Borrower” means Aly Operating in its capacity as borrower under the Existing Credit Agreement.

 

“Existing Credit Agreement” means the Credit Agreement dated as of October 26, 2012 among the Existing Borrower, the Administrative Agent, the Issuing Lender, the Swing Line Lender and the Existing Lenders, as amended or supplemented to the date hereof.

 

“Existing Credit Documents” means (a) the Existing Credit Agreement and (b) all deeds of trust, mortgages, security agreements, and other documents, instruments or agreements executed and delivered in connection therewith by any Credit Party, or any predecessor in interest to any Credit Party, in each case, as amended or supplemented to the date hereof.

 

“Existing Indebtedness” means all Debt outstanding under the Existing Credit Documents on the date hereof.

 

“Existing Lenders” means the Persons party to the Existing Credit Agreement as “Lenders” thereunder.

 

“Extraordinary Receipts” means any proceeds of insurance, including any insurance proceeds resulting from a Casualty Event, property insurance proceeds, and life insurance proceeds, and any other extraordinary cash receipts, including any award or other compensation as a result of a Casualty Event and any settlement or other litigation proceeds.

 

“Facility” means the Revolving Facility or the Term Facility.

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with) and any current or future regulations or official interpretations thereof.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day immediately succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Administrative Agent (in its individual capacity) on such day on such transactions as determined by the Administrative Agent.

 

  

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

 

“Fee Letter” means that certain Fee Letter dated as April 15, 2014, by and between the Borrower and Wells Fargo.

 

“Field Audit” means an audit, verification and inspection of the books and records, accounts receivable and inventory of the Borrower and its Subsidiaries, conducted by the Administrative Agent or any other Person selected by the Administrative Agent.

 

“Field Exam” means a field inspection of the books, records and asset value of the Properties of the Borrower and its Subsidiaries, conducted by the Administrative Agent or any other Person selected by the Administrative Agent.

 

“Financial Statements” means, for any period, the consolidated financial statements of the Borrower and its Subsidiaries, including statements of income, retained earnings, changes in equity and cash flow for such period as well as a balance sheet as of the end of such period, all prepared in accordance with GAAP.

 

“First Tier Foreign Subsidiary” means any Foreign Subsidiary the Equity Interests of which are held directly by the Borrower or a Domestic Subsidiary.

 

“Fixed Charge Coverage Ratio” means, for each fiscal quarter, the ratio of (a) the amount equal to (i) EBITDA for the four-fiscal quarter period then ended minus (ii) the sum of (A) cash taxes paid by the Credit Parties during such four-fiscal quarter period plus (B) Maintenance Capital Expenditures paid during such four-fiscal quarter period; to (b) Interest Expense for such four-fiscal quarter period plus scheduled principal payments of Funded Debt required during such four-fiscal quarter period, including scheduled principal payments of Advances (but excluding payments of Swing Line Advances).

 

“Flood Laws” shall have the meaning set forth in Section 9.19.

 

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

 

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

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to the Issuing Lender, such Defaulting Lender’s Revolving Pro Rata Share of the outstanding Letter of Credit Exposure other than Letter of Credit Exposure as to which such Defaulting Lender’s participation obligation has been funded by it, reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Revolving Pro Rata Share of outstanding Swing Line Advances other than Swing Line Advances as to which such Defaulting Lender’s participation obligation has been funded by it or reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

 

  

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“Fund” means any Person (other than a natural Person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.

 

“Funded Debt” of any Credit Party means, at any time, without duplication, Debt of such Credit Party (a) of the type described in clauses (a), (b), (c), (f), and (h) of the definition of “Debt”; provided that Debt with respect to letters of credit referred to in clause (b) of such definition shall be considered “Funded Debt” regardless of whether such letters of credit are drawn or funded, (b) of the type described in clause (i) of the definition of “Debt”; provided that such Debt would otherwise qualify as “Funded Debt” under this definition, or (c) of the type described in clauses (j) or (k) of the definition of “Debt” to the extent that such guaranty covers, or such Lien secures, Debt of the type described in clause (a) or clause (b) of this definition of “Funded Debt”.

 

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

 

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

 

“Guarantors” means any Person that now or hereafter executes a Guaranty, including (a) the Subsidiaries of the Borrower listed on Schedule 4.11, (b) Austin Chalk Corp., (c) Aly Operating, (d) Aly Centrifuge, and (e) each Subsidiary that becomes a guarantor of all or a portion of the Obligations and which has entered into either a joinder agreement substantially in the form attached to the Guaranty or a new Guaranty, in each case, other than those released from their obligations under such Guaranties in accordance with the terms and provisions of the Credit Documents.

 

“Guaranty” means the Amended and Restated Guaranty Agreement executed by the Credit Parties in substantially the same form as Exhibit D.

 

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

 

  

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“Hazardous Waste” means any substance or material regulated or designated as such pursuant to any Environmental Law, including without limitation, pollutants, contaminants, flammable substances and materials, explosives, radioactive materials, oil, petroleum and petroleum products, chemical liquids and solids, polychlorinated biphenyls, asbestos, toxic substances, and similar substances and materials.

 

“Hedging Arrangement” means a hedge, call, swap, collar, floor, cap, option, forward sale or purchase or other contract or similar arrangement (including any obligations to purchase or sell any commodity or security at a future date for a specific price) which is entered into to reduce or eliminate or otherwise protect against the risk of fluctuations in prices or rates, including interest rates, foreign exchange rates, commodity prices and securities prices.

 

“Income Tax Expense” means for Borrower and its Subsidiaries, on a consolidated basis for any period, all state and federal income taxes (including without limitation franchise taxes) paid or due to be paid during such period.

 

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Credit Document and (b) to the extent not otherwise described in clause (a), Other Taxes.

 

“Interest Expense” means, for any period and with respect to any Person, total cash interest expense, letter of credit fees and other fees and expenses incurred by such Person in connection with any Debt (including but not limited to Debt under this Agreement) for such period, whether paid or accrued (including that attributable to obligations which have been or should be, in accordance with GAAP, recorded as Capital Leases), including, without limitation, all commissions, discounts, and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, fees owed with respect to the Secured Obligations, and net costs under Hedging Arrangements entered into addressing interest rates, all as determined in conformity with GAAP.

 

“Interest Period” means for each Eurodollar Advance comprising part of the same Borrowing, the period commencing on the date of such Eurodollar Advance is made or deemed made and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.3, and thereafter, each subsequent period commencing on the day following the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below and Section 2.3. The duration of each such Interest Period shall be one, three, or six months, in each case as the Borrower may select, provided that:

 

(a) the Borrower shall select Interest Periods so that it is not necessary to repay any portion of any Term Advance prior to the last day of the applicable Interest Period in order to make a mandatory scheduled repayment required pursuant to Section 2.5(b);

 

  

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(b) Interest Periods commencing on the same date for Advances comprising part of the same Borrowing shall be of the same duration;

 

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

 

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

 

(e) the Borrower may not select any Interest Period for any Advance which ends after the Term Maturity Date or the Revolving Maturity Date, as applicable.

 

“Inventory” of any Person means all inventory (as defined in the Uniform Commercial Code, as in effect in the State of New York) now owned or hereafter acquired by such Person, wherever located and whether or not in transit, which is held for sale; provided, that Inventory shall not include raw materials or supplies or materials consumed in the business of such Person or, subject to clause (b) below, work in progress; and provided further that (a) purchased items (including plain end tubulars) shall be considered Inventory and not raw materials if such purchased items could be resold in their existing condition as finished goods without requiring further modification, and (b) items that are work in progress shall be considered Inventory if such items could be sold in their existing condition as goods.

 

“IRS” means the United States Internal Revenue Service.

 

“Issuing Lender” means Wells Fargo in its capacity as the issuer of Letters of Credit for the account of any Credit Party pursuant to the terms of this Agreement, and its successors in such capacity.

 

“Key Individuals” means (a) Mark Patterson, (b) Munawar H. Hidayatallah, (c) Kurt Chew and (d) any individual acceptable to the Administrative Agent that has replaced any of the foregoing persons in a comparable executive or officer position.

 

“Key Employment Agreements” means the employment agreements for the Key Individuals.

 

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

 

  

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“Lender Insolvency Event” means that (a) a Lender or its Lender Parent Company is insolvent, or is generally unable to pay its debts as they become due, or admits in writing its inability to pay its debts as they become due, or makes a general assignment for the benefit of its creditors, or (b) such Lender or its Lender Parent Company is the subject of a bankruptcy, insolvency, reorganization, liquidation or similar proceeding, or a receiver, trustee, conservator, intervenor or sequestrator or the like has been appointed for such Lender or its Lender Parent Company, or such Lender or its Lender Parent Company has taken any action in furtherance of or indicating its consent to or acquiescence in any such proceeding or appointment; provided, that a Lender Insolvency Event shall not be triggered solely as the result of the acquisition or maintenance of an ownership interest in such Lender or its Lender Parent Company by a Governmental Authority or an instrumentality thereof so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender.

 

“Lender Parent Company” means, with respect to a Lender, the bank holding company (as defined in Federal Reserve Board Regulation Y), if any, of such Lender, and/or any Person owning, beneficially or of record, directly or indirectly, a majority of the shares of such Lender.

 

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

 

“Lenders” means the Persons listed on the signature pages hereto as Lenders, any other Person that shall have become a Lender hereto pursuant to Section 2.13, and any other Person that shall have become a Lender hereto pursuant to an Assignment and Acceptance, but in any event, excluding any such Person that ceases to be a party hereto pursuant to an Assignment and Acceptance. Unless the context otherwise requires, the term “Lenders” includes the Revolving Lenders, the Swing Line Lender and the Term Lenders.

 

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

 

“Letter of Credit” means any standby or commercial letter of credit issued by the Issuing Lender for the account of a Credit Party pursuant to the terms of this Agreement, in such form as may be agreed by the Borrower and the Issuing Lender.

 

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

 

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

 

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

 

  

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“Letter of Credit Exposure” means, at the date of its determination by the Administrative Agent, the aggregate outstanding undrawn amount of Letters of Credit plus the aggregate unpaid amount of all of the Borrower’s payment obligations under drawn Letters of Credit.

 

“Letter of Credit Maximum Amount” means $1,000,000; provided that, on and after the Revolving Maturity Date, the Letter of Credit Maximum Amount shall be zero.

 

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

 

“Letter of Credit Reimbursement Agreement” means the Issuing Lender’s standard form letter of credit reimbursement agreement (with such modifications thereto as may be agreed between the Borrower and the Issuing Lender) for standby or commercial letters of credit which has been executed by the Borrower and accepted by such Issuing Lender in connection with the issuance of a Letter of Credit.

 

“Leverage Ratio” means, for each fiscal quarter, the ratio of (a) the consolidated Funded Debt of the Borrower as of the last day of such fiscal quarter to (b) EBITDA for the four-fiscal quarter period then ended.

 

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

 

“Liquid Investments” means (a) readily marketable direct full faith and credit obligations of the United States of America or obligations unconditionally guaranteed by the full faith and credit of the United States of America; (b) commercial paper issued by (i) any Lender or any Affiliate of any Lender or (ii) any commercial banking institutions or corporations rated at least P-1 by Moody’s or A-1 by S&P; (c) certificates of deposit, time deposits, and bankers’ acceptances issued by (i) any of the Lenders or (ii) any other commercial banking institution which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $250,000,000 and rated Aa by Moody’s or AA by S&P; (d) repurchase agreements which are entered into with any of the Lenders or any commercial banking institutions described in clause (c) and which are secured by readily marketable direct full faith and credit obligations of the government of the United States of America or any agency thereof; (e) investments in any money market fund which holds investments substantially of the type described in the foregoing clauses (a) through (d); (f) readily and immediately available cash held in any money market account maintained with any Lender; provided that, such money market accounts and the funds therein shall be unencumbered and free and clear of all Liens and other third party rights other than a Lien in favor of the Administrative Agent pursuant to the Security Documents and Liens of the type described in Section 6.2(g); and (g) other investments made through the Administrative Agent or its Affiliates and approved by the Administrative Agent. All the Liquid Investments described in clauses (a) through (d) above shall have maturities of not more than 365 days from the date of issue.

 

  

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“Maintenance Capital Expenditure” means Capital Expenditures made by any Credit Party related to extending the life of, or maintaining the working condition of, existing assets. The term “Maintenance Capital Expenditures” does not include capital spending for new assets or expansion or enhancement of existing assets (so-called “growth capital expenditures”).

 

“Majority Lenders” means (a) other than as provided in clauses (b) and (c) below, Lenders holding greater than 50% of the aggregate Maximum Exposure Amount, (b) at any time when there are only two Lenders, both Lenders, and (c) at any time when there is only one Lender, such Lender; provided that,

 

(i) with respect to amendments, waivers or consents relating to Section 2.1(a) and Section 2.1(c)(i), “Majority Lenders” means the Majority Revolving Lenders;

 

(ii) with respect to amendments, waivers or consents relating to Section 2.1(b) and Section 2.1(c)(ii), “Majority Lenders” means the Majority Term Lenders;

 

(iii) with respect to Section 2.3(c)(v), “Majority Lenders” means Lenders that would be required to fund more than 50% of the Eurodollar Advances comprising such requested Borrowing;

 

(iv) with respect to Section 7.2(a)(i), 7.2(b) and 7.3(b), “Majority Lenders” means the Majority Revolving Lenders; and

 

(v) in any event, if there are two or more Lenders, the Commitments of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Lenders unless all Lenders are Defaulting Lenders.

 

“Majority Revolving Lenders” means (a) other than as provided in clause (b) and (c) below, Revolving Lenders holding greater than 50% of the sum of (i) the aggregate unfunded Revolving Commitments at such time plus (ii) the aggregate unpaid principal amount of the Revolving Notes (with the aggregate amount of each Lender’s risk participation and funded participation in the Letter of Credit Exposure (including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14) and Swing Line Advances being deemed as unpaid principal under such Lender’s Revolving Note); (b) at any time when there are only two Revolving Lenders, both Revolving Lenders, and (c) at any time when there is only one Revolving Lender, such Revolving Lender; provided that, in any event, if there are two or more Lenders, the Commitment of, and the portion of the Advances and Letter of Credit Exposure held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Revolving Lenders unless all Revolving Lenders are Defaulting Lenders.

 

“Majority Term Lenders” means (a) other than as provided in clauses (b) and (c) below, Term Lenders holding greater than 50% of the sum of (i) the aggregate unfunded Term Commitments at such time plus (ii) the aggregate unpaid principal amount of the Term Notes, (b) at any time when there are only two Term Lenders, both Term Lenders, and (c) at any time when there is only one Term Lender, such Term Lender; provided that, in any event, if there are two or more Term Lenders, the Term Commitment of, and the portion of the Term Advances held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Majority Term Lenders unless all Term Lenders are Defaulting Lenders.

 

  

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 “Material Adverse Change” means a material adverse change in, or a material adverse effect on, (a) the operations, business, assets, properties, liabilities (actual or contingent) or condition (financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole; (b) the rights and remedies of the Administrative Agent or any Lender under any Credit Document; (c) of the ability of the Credit Parties, taken as a whole, to perform their obligations under any Credit Document to which they are a party or (d) the legality, validity, binding effect or enforceability against any Credit Party of any Credit Document to which it is a party.

 

“Material Agreements” means the agreements set forth in Schedule 4.21, and all amendments, supplements, and restatements thereof.

 

“Maximum Exposure Amount” means, at any time for each Lender, the sum of (a) the unfunded Revolving Commitment held by such Lender at such time; plus (b) the aggregate unpaid principal amount of the Revolving Note held by such Lender at such time, (with the aggregate amount of such Lender’s risk participation and funded participation in the Letter of Credit Exposure (including any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14) and Swing Line Advances being deemed as unpaid principal under such Lender’s Revolving Note); plus (c) the aggregate unpaid principal amount of the Term Note held by such Lender at such time; plus (d) the unfunded Term Commitment held by such Lender at such time.

 

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

 

“Minimum Collateral Amount” means, at any time, (a) with respect to Cash Collateral consisting of cash or deposit account balances, an amount equal to the sum of (i) 105% of the Fronting Exposure of the Issuing Lender with respect to Letters of Credit issued and outstanding at such time and (ii) 100% of the Fronting Exposure of the Swing Line Lender with respect to Swing Line Sublimit Amount, and (b) otherwise, an amount determined by the Administrative Agent and the Issuing Lender in their sole discretion.

 

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

 

“Mortgage” means each mortgage or deed of trust in form acceptable to the Administrative Agent executed by any Credit Party to secure all or a portion of the Secured Obligations.

 

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

 

“Net Cash Proceeds” means with respect to any sale, transfer, or other disposition of any Property belonging to any Person (including the sale or transfer of stock or other Equity Interest and property insurance proceeds) all cash and Liquid Investments received from such sale, transfer or other disposition after (a) payment of, or provision for, all brokerage commissions and other reasonable out-of-pocket fees and expenses actually incurred; (b) payment of any outstanding obligations relating to such Property paid in connection with any such sale, transfer, or other disposition; (c) the amount of reserves recorded in accordance with GAAP for indemnity or similar obligations of such Person and its Affiliates directly related to such sale, transfer or other disposition and (d) in the case of an Asset Sale, all income taxes and other taxes assessed by a Governmental Authority as a result of such transaction.

 

  

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

 

“NOLV” means with respect to any fixed assets of any Credit Party permanently located in the United States of America and any machinery, parts, equipment and other fixed assets acquired by a Credit Party the net orderly liquidation value thereof (taking into account any loss, destruction, damage, condemnation, seizure or taking, by exercise of the power of eminent domain or otherwise, confiscation, or the requisition, of such Property and after taking into account all soft costs associated with the liquidation thereof, including but not limited to, delivery fees, interest charges, finance fees, taxes, installation fees and professional fees) as established by a written appraisal conducted by an industry recognized third party appraiser acceptable to the Administrative Agent.

 

“Non-Consenting Lender” means any Lender that does not approve any consent, waiver or amendment that (i) requires unanimous approval or approval of all affected Lenders in accordance with the terms of Section 9.3 and (ii) has been approved by the Majority Lenders.

 

“Non-Defaulting Lender” means any Lender that is not a Defaulting Lender at such time.

 

“Notes” means the Revolving Notes, the Swing Line Note and the Term Notes.

 

“Notice of Borrowing” means a Notice of Revolving Borrowing or a Notice of Term Borrowing.

 

“Notice of Continuation or Conversion” means a notice of continuation or conversion signed by the Borrower in substantially the same form as Exhibit F.

 

“Notice of Revolving Borrowing” means a Notice of Borrowing signed by the Borrower in substantially the same form as Exhibit E-1.

 

“Notice of Term Borrowing” means a Notice of Borrowing signed by the Borrower in substantially the same form as Exhibit E-2.

 

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

 

  

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

 

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

 

“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Credit Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.13).

 

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

 

“Participant Register” has the meaning specified in clause (d) of Section 9.7.

 

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

 

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

 

“Permitted Asset Sale” means any Asset Sale that is permitted under Section 6.8.

 

“Permitted Debt” has the meaning set forth in Section 6.1.

 

“Permitted Holders” means (1) the members of the board of directors of the Borrower and Aly Operating, (2) the officers of the Borrower and Aly Operating, and (3) all of the holders of Equity Interest in Aly Operating prior to giving effect to that certain Share Exchange Agreement dated as of May 14, 2013.

 

 “Permitted Investments” has the meaning set forth in Section 6.3.

 

“Permitted Liens” has the meaning set forth in Section 6.2.

 

 “Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, limited liability company, limited liability partnership, unincorporated association, joint venture, Governmental Authority, or other entity, or a government or any political subdivision or agency thereof, or any trustee, receiver, custodian, or similar official.

 

  

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

 

“Preferred Equity” means 5,000 shares of preferred stock of Aly Centrifuge issued to certain of the Sellers pursuant to the Centrifuge Acquisition Agreement, which shares are exchangeable for shares of common stock of the Borrower.

 

“Preferred Equity Investment” means the issuance of the Preferred Equity on terms reasonably acceptable to the Administrative Agent.

 

“Prime Rate” means the per annum rate of interest established from time to time by the Administrative Agent at its principal office in Houston as its prime rate, which rate may not be the lowest rate of interest charged by such Lender to its customers.

 

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

 

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

 “Recipient” means (a) the Administrative Agent, (b) any Lender and (c) the Issuing Lender, as applicable, in each case, in its capacity as such.

 

“Receivables” of any Person means, at any date of determination thereof, the unpaid portion of the obligation, as stated on the respective invoice or other writing of a customer of such Person in respect of goods sold or services rendered by such Person.

 

“Register” has the meaning set forth in Section 9.7(c).

 

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

 

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

 

  

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

 

“Reserves” means, as of any date of determination, those reserves that the Administrative Agent deems necessary or appropriate, in its reasonable judgment and subject to the limitations in the last sentence of the definition of “Borrowing Base”, to establish and maintain with respect to the Borrowing Base.

 

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

 

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

 

“Responsible Officer” means (a) with respect to any Person that is a corporation, such Person’s Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, or Vice President, and if such Person is managed by its sole shareholder, then a Responsible Officer of such Person’s sole shareholder, (b) with respect to any Person that is a limited liability company, if such Person has officers, then such Person’s Chief Executive Officer, President, Chief Financial Officer, Vice President, and if such Person is managed by members, then a Responsible Officer of such Person’s managing member, and if such Person is managed by managers, then a manager (if such manager is an individual) or a Responsible Officer of such manager (if such manager is an entity), and (c) with respect to any Person that is a general partnership, limited partnership or a limited liability partnership, the Responsible Officer of such Person’s general partner or partners.

 

“Restricted Payment” means, with respect to any Person, (a) any direct or indirect dividend or distribution (whether in cash, securities or other Property) or any direct or indirect payment of any kind or character (whether in cash, securities or other Property) made in connection with the Equity Interest of such Person, including those dividends, distributions and payments made in consideration for or otherwise in connection with any retirement, purchase, redemption or other acquisition of any Equity Interest of such Person, or of any options, warrants or rights to purchase or acquire any such Equity Interest of such Person or (b) principal or interest payments (in cash, Property or otherwise) on, or redemptions of, subordinated debt of such Person; provided that the term “Restricted Payment” shall not include any (i) dividend or distribution payable solely in common Equity Interests of such Person or warrants, options or other rights to purchase common Equity Interests or (ii) with respect to the Preferred Equity only, the dividend payable thereon in additional Preferred Equity pursuant to the terms thereof.

 

“Revolving Advance” means any advance by a Lender to the Borrower as part of a Revolving Borrowing.

 

“Revolving Borrowing” means a Borrowing consisting of simultaneous Revolving Advances of the same Type made by the Revolving Lenders pursuant to Section 2.1(a) or Converted by each Revolving Lender to Revolving Advances of a different Type pursuant to Section 2.3(b).

 

“Revolving Commitment” means, for each Revolving Lender, the obligation of such Revolving Lender to advance to the Borrower the amount set opposite such Revolving Lender’s name on Schedule II as its Revolving Commitment and to acquire participations in Letters of Credit and Swing Line Borrowings hereunder, or if such Revolving Lender has entered into any Assignment and Acceptance, set forth for such Revolving Lender as its Revolving Commitment in the Register, as such amount may be reduced pursuant to Section 2.1(c)(i); provided that, after the Revolving Maturity Date, the Revolving Commitment for each Lender shall be zero. The initial aggregate Revolving Commitment on the date hereof is $5,000,000.

 

  

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“Revolving Facility” means, collectively, (a) the revolving credit facility described in Section 2.1(a), (b) the Swing Line subfacility provided by the Swing Line Lender described in Section 2.3(g) and (c) the letter of credit subfacility provided by the Issuing Lender described in Section 2.2.

 

“Revolving Lenders” means Lenders having a Revolving Commitment or, if such Revolving Commitments have been terminated, Lenders that are owed Revolving Advances.

 

“Revolving Maturity Date” means the earlier of (a) April 30, 2017 and (b) the earlier termination in whole of the Revolving Commitments pursuant to Section 2.1(c)(i) or Article 7.

 

“Revolving Note” means a promissory note of the Borrower payable to the order of a Lender in the amount of such Lender’s Revolving Commitment, in substantially the same form as Exhibit H-1, evidencing indebtedness of the Borrower to such Lender resulting from Revolving Advances owing to such Lender.

 

“Revolving Outstandings” means, as of any date of determination, the sum of (a) the aggregate outstanding amount of all Revolving Advances plus (b) the Letter of Credit Exposure plus (c) the aggregate outstanding amount of all Swing Line Advances.

 

“Revolving Pro Rata Share” means, at any time with respect to any Revolving Lender, (i) the ratio (expressed as a percentage) of such Lender’s Revolving Commitment at such time to the aggregate Revolving Commitments at such time, or (ii) if all of the Revolving Commitments have been terminated, the ratio (expressed as a percentage) of such Lender’s aggregate outstanding Revolving Advances at such time to the total aggregate outstanding Revolving Advances at such time.

 

“S&P” means Standard & Poor’s Rating Agency Group, a division of McGraw-Hill Companies, Inc., or any successor thereof which is a national credit rating organization.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

 

  

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“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

 

“SEC” means, the United States Securities and Exchange Commission, or any Governmental Authority succeeding to the functions of such Commission.

 

“Secured Obligations” means (a) the Obligations, (b) the Banking Services Obligations, and (c) all obligations of any of the Credit Parties owing to Swap Counterparties under any Hedging Arrangements; provided that, (i) when any Swap Counterparty assigns or otherwise transfers any interest held by it under any Hedging Arrangement to any other Person pursuant to the terms of such agreement, the obligations thereunder shall constitute Secured Obligations only if such assignee or transferee is also then a Lender or an Affiliate of a Lender and (ii) if a Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder, obligations owing to such Swap Counterparty shall be included as Secured Obligations only to the extent such obligations arose from transactions under such individual Hedging Arrangement entered into prior to the date hereof or at the time such Swap Counterparty was a Lender hereunder or an Affiliate of a Lender hereunder, without giving effect to any extension, increases, or modifications thereof which are made after such Swap Counterparty ceases to be a Lender hereunder or an Affiliate of a Lender hereunder (and excluding any transactions thereafter entered into under any master agreement between such parties); provided, however that “Secured Obligations” shall not include the Excluded Swap Obligations.

 

“Secured Parties” means the Administrative Agent, the Issuing Lender, the Lenders, the Swap Counterparties and Banking Services Providers.

 

“Security Agreement” means the Amended and Restated Pledge and Security Agreement among the Credit Parties and the Administrative Agent in substantially the same form as Exhibit G.

 

“Security Documents” means, collectively, the Mortgages, Security Agreement, and any and all other instruments, documents or agreements, including Account Control Agreements, now or hereafter executed by any Credit Party or any other Person to secure the Secured Obligations.

 

“Sellers” means United Oilfield, Inc., an Alberta Limited Corporation, Canadian Nitrogen Services Ltd., an Alberta Limited Corporation, 1211296 Alberta Inc., an Alberta Limited Corporation, Jorge Rivera, and Myles Bowman.

 

“Solvent” means, as to any Person, on the date of any determination (a) the fair value of the Property of such Person is greater than the total amount of debts and other liabilities (including without limitation, contingent liabilities) of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts and other liabilities (including, without limitation, contingent liabilities) as they become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities (including, without limitation, contingent liabilities) as they mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities (including, without limitation, contingent liabilities) beyond such Person’s ability to pay as such debts and liabilities mature, (e) such Person is not engaged in, and is not about to engage in, business or a transaction for which such Person’s Property would constitute unreasonably small capital, and (f) such Person has not transferred, concealed or removed any Property with intent to hinder, delay or defraud any creditor of such Person.

 

  

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“Specified Information” has the meaning assigned to it in Section 9.8 of this Agreement.

 

“Subsidiary” means, with respect to any Person (the “holder”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the holder in the holder’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity, a majority of whose outstanding Voting Securities shall at any time be owned by the holder or one more Subsidiaries of the holder; provided that neither Blocker shall be considered a Subsidiary of any Credit Party for purposes of the Credit Documents. Unless expressly provided otherwise, all references herein and in any other Credit Document to any “Subsidiary” or “Subsidiaries” means a Subsidiary or Subsidiaries of the Borrower.

 

“Swap Counterparty” means a Lender or an Affiliate of a Lender that has entered into a Hedging Arrangement with a Credit Party as permitted by the terms of this Agreement.

 

“Swap Obligation” means, with respect to any Credit Party other than the Borrower, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

 

 “Swap Termination Value” means, in respect of any one or more Hedging Arrangements, after taking into account the effect of any legally enforceable netting agreement relating to such Hedging Arrangements, (a) for any date on or after the date such Hedging Arrangements have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Hedging Arrangements, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Hedging Arrangements (which may include a Lender or any Affiliate of a Lender).

 

“Swing Line Advance” means an advance by the Swing Line Lender to the Borrower as part of a Swing Line Borrowing.

 

“Swing Line Borrowing” means the Borrowing consisting of a Swing Line Advance made by the Swing Line Lender pursuant to Section 2.3(g) or, if an AutoBorrow Agreement is in effect, any transfer of funds pursuant to such AutoBorrow Agreement.

 

“Swing Line Lender” means Wells Fargo.

 

“Swing Line Note” means the promissory note made by the Borrower payable to the order of the Swing Line Lender evidencing the indebtedness of the Borrower to the Swing Line Lender resulting from Swing Line Advances in substantially the same form as Exhibit H-3.

 

  

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“Swing Line Payment Date” means (a) if an AutoBorrow Agreement is in effect, the earliest to occur of (i) the date required by such AutoBorrow Agreement, (ii) (1) so long as no Event of Default has occurred and is continuing, three (3) Business Days after demand is made by the Swing Line Lender or (2) if an Event of Default has occurred and is continuing, demand is made by the Swing Line Lender, and (iii) the Revolving Maturity Date, or (b) if an AutoBorrow Agreement is not in effect, the earlier to occur of (i) three (3) Business Days after demand is made by the Swing Line Lender if no Default exists, and otherwise upon demand by the Swing Line Lender and (ii) the Revolving Maturity Date.

 

“Swing Line Sublimit Amount” means $1,000,000; provided that, on and after the Revolving Maturity Date, the Swing Line Sublimit Amount shall be zero.

 

“Synthetic Lease” means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease under GAAP.

 

 “Tax Group” has the meaning assigned to it in Section 4.13 of this Agreement.

 

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

 

“Term Advance” means any advance by a Term Lender to the Borrower as part of a Term Borrowing.

 

 “Term Borrowing” means a Borrowing consisting of simultaneous Term Advances of the same Type made by each Term Lender pursuant to Section 2.1(b) or Converted by each Term Lender to Term Advances of a different Type pursuant to Section 2.3(b).

 

“Term Commitment” means, for each Term Lender, the obligation of such Term Lender to advance to the Borrower the amount set opposite such Term Lender’s name on Schedule II as its Term Commitment, or if such Term Lender has entered into any Assignment and Acceptance, set forth for such Term Lender as its Term Commitment in the Register; provided that, on the making of the Term Advances on the Closing Date, the Term Commitment for each Term Lender shall be zero. The aggregate Term Commitments on the date hereof is equal to $25,000,000.00, of which $9,876,563 shall be deemed to refinance the Existing Indebtedness.

 

 “Term Lenders” means Lenders having a Term Commitment or if such Term Commitments have been terminated, Lenders that are owed Term Advances.

 

“Term Maturity Date” means the earlier of (a) April 30, 2017, and (b) acceleration of the Term Advances pursuant to Article 7.

 

  

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“Term Note” means a promissory note made by the Borrower payable to the order of a Term Lender in the amount of such Term Lender’s Term Commitment, in substantially the same form as Exhibit H-2, evidencing indebtedness of the Borrower to such Term Lender resulting from the Term Advances owing to such Lender.

 

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

 

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

 

“Type” has the meaning set forth in Section 1.4.

 

“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

 

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in paragraph (g) of Section 2.12.

 

“United Centrifuge” means United Centrifuge USA, LLC, a Texas limited liability company.

 

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

 

 “Wells Fargo” means Wells Fargo Bank, National Association.

 

“Withholding Agent” means any Credit Party and the Administrative Agent.

 

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

 

  

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Section 1.3 Accounting Terms; Changes in GAAP.

 

(a) All accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP applied on a consistent basis with those applied in the preparation of the financial statements referred to in Section 4.4.

 

(b) Unless otherwise indicated, all financial statements of the Borrower, all calculations for compliance with covenants in this Agreement, all determinations of the Applicable Margin, and all calculations of any amounts to be calculated under the definitions in Section 1.1 shall be based upon the consolidated accounts of the Borrower and its Subsidiaries in accordance with GAAP and consistent with the principles of consolidation applied in preparing the financial statements referred to in Section 4.4.

 

(c) If at any time any change in GAAP or in the application thereof would affect the computation of any financial ratio or requirement set forth in any Credit Document, and either the Borrower or the Majority Lenders shall so request, the Administrative Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or in the application thereof (subject to the approval of the Majority Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP or in the application thereof prior to such change therein and (ii) the Borrower shall provide to the Administrative Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

 

Section 1.4 Classes and Types of Advances. Advances are distinguished by “Class” and “Type”. The “Class” of an Advance refers to the determination of whether such Advance is a Revolving Advance, a Term Advance or a Swing Line Advance. The “Type” of an Advance refers to the determination of whether such Advance is a Base Rate Advance or a Eurodollar Advance.

 

Section 1.5 Miscellaneous. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) 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, (e) any reference to any law or regulation herein shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (f) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

 

  

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ARTICLE 2

 

CREDIT FACILITIES

 

Section 2.1 Revolving and Term Commitments.

 

(a) Revolving Commitment. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make Revolving Advances to the Borrower from time to time on any Business Day during the period from April 15, 2014 until the Revolving Maturity Date; provided that after giving effect to such Revolving Advances, the Revolving Outstandings shall not exceed the lesser of (i) the Borrowing Base in effect at such time and (ii) the aggregate Revolving Commitments in effect at such time. Each Revolving Borrowing shall (A) if comprised of Base Rate Advances be in an aggregate amount not less than $250,000 and in integral multiples of $50,000 in excess thereof, (B) if comprised of Eurodollar Advances be in an aggregate amount not less than $250,000 and in integral multiples of $50,000 in excess thereof, and (C) consist of Revolving Advances of the same Type made on the same day by the Revolving Lenders ratably according to their respective Revolving Commitments. Within the limits of each Lender’s Revolving Commitment, the Borrower may from time to time borrow, prepay pursuant to Section 2.4, and reborrow Revolving Advances under this Section 2.1(a).

 

(b) Term Commitment. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make to the Borrower on the Closing Date, a Term Advance in an amount equal to such Lender’s Term Commitment less an amount equal to such Lender’s pro rata share of $9,876,563, which shall be deemed to refinance such Lender’s pro rata share of the Existing Indebtedness. The Borrower may not reborrow any Term Advance once it has been repaid.

 

(c) Reduction of the Commitments.

 

(i) Revolving Commitments. The Borrower shall have the right, upon at least three Business Days’ irrevocable notice to the Administrative Agent, to terminate in whole or reduce in part the unused portion of the Revolving Commitments; provided that each partial reduction shall be in a minimum amount of $1,000,000 and in integral multiples of $1,000,000 in excess thereof. Each such notice delivered by the Borrower pursuant to this Section 2.1(c)(i) shall be irrevocable; provided that a notice of termination in whole of the Revolving Commitments may state that such notice is conditioned upon the effectiveness of other credit facilities or the closing of one or more securities offerings, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any reduction or termination of the Commitments pursuant to this Section 2.1(c)(i) shall be applied ratably to each Lender’s Revolving Commitment and shall be permanent, with no obligation of the Lenders to reinstate such Revolving Commitments, and the applicable Commitment Fees shall thereafter be computed on the basis of the Revolving Commitments, as so reduced.

 

  

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(ii) Term Commitment. On the making of the Term Advances on the Closing Date, the Lender’s Term Commitment shall be reduced to zero. Such reduction of the Term Commitment pursuant to this Section 2.1(c)(ii) shall be permanent, with no obligation of any Lender to reinstate such Term Commitment.

 

(iii) Defaulting Lender. At any time when a Lender is then a Defaulting Lender, the Borrower, at the Borrower’s election, may elect to terminate such Defaulting Lender’s Revolving Commitment hereunder or such Defaulting Lender’s Term Commitment; provided that (A) such termination must be of the Defaulting Lender’s entire Revolving Commitment or Term Commitment, (B) the Non-Defaulting Lenders shall each have the option to accept an assignment of the Defaulting Lender’s Revolving Commitment or Term Commitment pursuant to Section 2.13 in lieu of a termination of Commitments pursuant to this Section 2.1(c)(iii), (C) to the extent that the Non-Defaulting Lenders do not take an assignment as provided in the immediately preceding clause (B), the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender in such Defaulting Lender’s capacity as a Revolving Lender under this Agreement and under the other Credit Documents (including principal of and interest on the Revolving Advances owed to such Defaulting Lender, accrued Commitment Fees (subject to Section 2.6(a)), and letter of credit fees but specifically excluding any amounts owing under Section 2.9 as result of such repayment of such Advances) and shall deposit with the Administrative Agent into the Cash Collateral Account cash collateral in the amount equal to such Defaulting Lender’s ratable share of the Letter of Credit Exposure (other than any such Letter of Credit Exposure that has been reallocated pursuant to Section 2.14), (D) if any Term Commitment is being terminated pursuant to this clause (iii), the Borrower shall pay all amounts owed by the Borrower to such Defaulting Lender in such Lender’s capacity as a Term Lender under this Agreement and under the other Credit Documents (including principal of and interest on the Term Advances owed to such Defaulting Lender, and accrued Commitment Fees (subject to Section 2.6(a)) but specifically excluding any amounts owing under Section 2.9 as result of such payment of such Advances), (E) a Defaulting Lender’s Revolving Commitment and unused Term Commitment may be terminated by the Borrower under this Section 2.1(c)(iii) if and only if at such time, the Borrower has elected, or is then electing, to terminate the Revolving Commitments and the unused Term Commitments of all then existing Defaulting Lenders, and (F) such termination shall not be permitted if an Event of Default has occurred and is continuing. Upon written notice to the Defaulting Lender and Administrative Agent of the Borrower’s election to terminate a Defaulting Lender’s Revolving Commitment and Term Commitment pursuant to this clause (iii) and the payment and deposit of amounts required to be made by the Borrower under clause (C) above, (1) such Defaulting Lender shall cease to be a “Revolving Lender” or a “Term Lender”, as applicable, hereunder for all purposes except that such Lender’s rights and obligations as a Revolving Lender or a Term Lender, as applicable, under Sections 2.10, 2.12, 8.9 and 9.1 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Revolving Lender” or “Term Lender”, as applicable, hereunder, (2) such Defaulting Lender’s Revolving Commitment and Term Commitment shall be deemed terminated, and (3) such Defaulting Lender shall be relieved of its obligations hereunder as a “Revolving Lender” and a “Term Lender” ,as applicable, except as to its obligations under Section 8.9 shall continue with respect to events and occurrences occurring before or concurrently with its ceasing to be a “Revolving Lender” or a “Term Lender”, as applicable, hereunder, provided that, any such termination will not be deemed to be a waiver or release of any claim that the Borrower, the Administrative Agent, the Swing Line Lender, the Issuing Lender or any Lender may have against such Defaulting Lender. Notwithstanding anything herein to the contrary, (x) if no Term Commitment is then being terminated pursuant to this clause (iii), the termination of commitments, rights and obligations provided for in this clause (iii) shall not affect rights and obligations that a Lender may have in its capacity as a Term Lender, and (z) any termination of a Defaulting Lender’s Revolving Commitment pursuant to this clause (iii) must occur concurrently with a termination of such Defaulting Lender’s Term Commitments. Notwithstanding anything herein to the contrary, the Non-Defaulting Lenders’ option to take an assignment as provided in Section 2.1(c)(iii)(B) may be exercised by a Non-Defaulting Lender in its sole and absolute discretion and nothing contained herein shall obligate any Non-Defaulting Lender to take any such assignment.

 

  

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(d) Notes. The indebtedness of the Borrower to each Revolving Lender resulting (i) from Revolving Advances owing to such Revolving Lender shall be evidenced by a Revolving Note, (ii) from Term Advances owing to such Term Lender made pursuant to Section 2.1(b) shall be evidenced by a Term Note, and (iii) from Swing Line Advances owing to the Swing Line Lender, as set forth in Section 2.3(g) below, shall be evidenced by a Swing Line Note.

 

Section 2.2 Letters of Credit

 

(a) Commitment for Letters of Credit. Subject to the terms and conditions set forth in this Agreement, the Issuing Lender agrees, in reliance upon the agreements of the other Lenders set forth in this Section 2.2, from time to time on any Business Day during the period from April 15, 2014 until the Revolving Maturity Date, to issue, increase or extend the expiration date of, Letters of Credit for the account of any Credit Party, provided that no Letter of Credit will be issued, increased, or extended:

 

(i) if such issuance, increase, or extension would cause the Letter of Credit Exposure to exceed the lesser of (A) the Letter of Credit Maximum Amount and (B) an amount equal to (1) the lesser of the Borrowing Base and the aggregate Revolving Commitments, in either case, in effect at such time minus (2) the sum of the aggregate outstanding amount of all Revolving Advances and all Swing Line Advances;

 

(ii) unless such Letter of Credit has an expiration date not later than the earlier of (A) one year after its issuance or extension and (B) five Business Days prior to the Revolving Maturity Date (an “Acceptable Letter of Credit Maturity Date”); provided that, (1) if the Revolving Commitments are terminated in whole pursuant to Section 2.1(c)(i), the Borrower shall either (A) deposit into the Cash Collateral Account cash in an amount equal to 105% of the Letter of Credit Exposure for the Letters of Credit which have an expiry date beyond the date the Revolving Commitments are terminated or (B) provide a replacement letter of credit (or other security) reasonably acceptable to the Administrative Agent and the Issuing Lender in an amount equal to 105% of the Letter of Credit Exposure, and (2) any such Letter of Credit with a one-year tenor may expressly provide for an automatic extension of one additional year so long as such Letter of Credit expressly allows the Issuing Lender, at its sole discretion, to elect not to provide such extension; provided that, in any event, such automatic extension may not result in an expiration date that occurs after the fifth Business Day prior to the Revolving Maturity Date;

 

(iii) unless such Letter of Credit is (A) a standby letter of credit not supporting the repayment of indebtedness for borrowed money of any Person, or (B) with the consent of the Issuing Lender, a commercial letter of credit;

 

(iv) unless such Letter of Credit is in form and substance acceptable to the Issuing Lender in its sole discretion;

 

(v) unless the Borrower has delivered to the Issuing Lender a completed and executed Letter of Credit Application and a Letter of Credit Reimbursement Agreement;

 

  

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(vi) unless such Letter of Credit is governed by (A) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (B) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender;

 

(vii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Lender from issuing, increasing or extending such Letter of Credit, or any Legal Requirement applicable to the Issuing Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance, increase or extension of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Lender with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Lender any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Issuing Lender in good faith deems material to it;

 

(viii) if the issuance, increase or extension of such Letter of Credit would violate one or more policies of the Issuing Lender applicable to letters of credit generally;

 

(ix) if Letter of Credit is to be denominated in a currency other than Dollars;

 

(x) if such Letter of Credit supports the obligations of any Person in respect of (x) a lease of real property, or (y) an employment contract if the Issuing Lender reasonably determines that the Borrower’s obligation to reimburse any draws under such Letter of Credit may be limited; or

 

(xi) any Revolving Lender is at such time a Defaulting Lender hereunder, unless such Defaulting Lender’s Fronting Exposure as to Letters of Credit has been fully reallocated or Cash Collateralized pursuant to Section 2.14 below or the Issuing Lender has entered into other satisfactory arrangements with the Borrower or such Lender to eliminate the Issuing Lender’s risk with respect to such Lender.

 

(b) Requesting Letters of Credit. Each Letter of Credit shall be issued, increased or extended pursuant to a Letter of Credit Application given by the Borrower to the Administrative Agent and the Issuing Lender by facsimile or other writing not later than 11:00 a.m. (Houston, Texas time) on the third Business Day before the proposed date of issuance, increase or extension for the Letter of Credit. Each Letter of Credit Application shall be fully completed and shall specify the information required therein. Each Letter of Credit Application shall be irrevocable and binding on the Borrower. Subject to the terms and conditions hereof, the Issuing Lender shall before 2:00 p.m. (Houston, Texas time) on the date of such Letter of Credit Application issue, increase or extend such Letter of Credit to the beneficiary of such Letter of Credit.

 

  

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(c) Reimbursements for Letters of Credit; Funding of Participations.

 

(i) With respect to any Letter of Credit, in accordance with the related Letter of Credit Application, the Borrower agrees to pay on demand to the Administrative Agent on behalf of the Issuing Lender an amount equal to any amount paid by the Issuing Lender under such Letter of Credit. Upon the Issuing Lender’s demand for payment of any amount paid by the Issuing Lender under any Letter of Credit, the Borrower may, with a written notice, request that the Borrower’s obligations to reimburse the Issuing Lender thereunder be satisfied with the proceeds of a Revolving Advance in the same amount (notwithstanding any minimum size or increment limitations on individual Revolving Advances). If the Borrower does not make such request and does not otherwise make the payments demanded by the Issuing Lender as required under this Agreement or the Letter of Credit Application, then the Borrower shall be deemed for all purposes of this Agreement to have requested such a Revolving Advance in the same amount and the transfer of the proceeds thereof to satisfy the Borrower’s obligations to the Issuing Lender, and the Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Lenders to make such Revolving Advance, to transfer the proceeds thereof to the Issuing Lender in satisfaction of such obligations, and to record and otherwise treat such payments as a Revolving Advance to the Borrower. The Administrative Agent and each Lender may record and otherwise treat the making of such Revolving Borrowings as the making of a Revolving Borrowing to the Borrower under this Agreement as if requested by the Borrower. Nothing herein is intended to release any of the Borrower’s obligations under any Letter of Credit Application, but only to provide an additional method of payment therefor. The making of any Revolving Borrowing under this Section 2.2(c) shall not constitute a cure or waiver of any Default, other than the payment Default which is satisfied by the application of the amounts deemed advanced hereunder, caused by the Borrower’s failure to comply with the provisions of this Agreement or the Letter of Credit Application.

 

(ii) Each Lender (including the Lender acting as Issuing Lender) shall, upon notice from the Administrative Agent that the Borrower has requested or is deemed to have requested a Revolving Advance pursuant to Section 2.3 and regardless of whether (A) the conditions in Section 3.2 have been met, (B) such notice complies with Section 2.3, or (C) a Default exists, make funds available to the Administrative Agent for the account of the Issuing Lender in an amount equal to such Lender’s Revolving Pro Rata Share of the amount of such Revolving Advance not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon each Lender that so makes funds available shall be deemed to have made a Revolving Advance to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the Issuing Lender.

 

(iii) If any such Lender shall not have so made its Revolving Advance available to the Administrative Agent pursuant to this Section 2.2, then (x) the unpaid Letter of Credit Obligations then due from the Borrower shall bear interest at the Default Rate and such interest shall be payable as provided in Section 2.7(d) and (y) to the extent the Borrower has not paid such interest or is not required to pay such interest, then such Lender agrees to pay interest thereon for each day from such date until the date such amount is paid at the lesser of (A) the Federal Funds Rate for such day for the first three days and thereafter the interest rate applicable to the Revolving Advance and (B) the Maximum Rate. Whenever, at any time after the Administrative Agent has received from any Lender such Lender’s Revolving Advance, the Administrative Agent receives any payment on account thereof, the Administrative Agent will pay to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Revolving Advance was outstanding and funded), which payment shall be subject to repayment by such Lender if such payment received by the Administrative Agent is required to be returned. Each Lender’s obligation to make the Revolving Advance pursuant to this Section 2.2 shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Issuing Lender, the Administrative Agent or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or the termination of the Commitments; (3) any breach of this Agreement by any Credit Party or any other Lender; or (4) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

 

  

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(iv) If at any time, the Revolving Commitments shall have expired or shall have been terminated while any Letter of Credit Exposure is outstanding, each Revolving Lender, at the sole option of the Issuing Lender, shall fund its participation in such Letters of Credit in an amount equal to such Lender’s Revolving Pro Rata Share of the unpaid amount of the Borrower’s payment obligations under drawn Letters of Credit. The Issuing Lender shall notify the Administrative Agent, and in turn, the Administrative Agent shall notify each such Lender of the amount of such participation, and such Lender will transfer to the Administrative Agent for the account of the Issuing Lender on the next Business Day following such notice, in immediately available funds, the amount of such participation. At any time after the Issuing Lender has made a payment under any Letter of Credit and has received from any Lender funding of its participation in respect of such payment in accordance with this clause (iv), if the Administrative Agent receives for the account of the Issuing Lender any payment in respect of the related Letter of Credit Exposure or interest thereon (whether directly from the Borrower or otherwise, including proceeds of cash collateral applied thereto by the Administrative Agent), the Administrative Agent shall distribute to such Lender its Revolving Pro Rata Share thereof in the same funds as those received by the Administrative Agent.

 

(d) Participations. Upon the date of the issuance or increase of a Letter of Credit, the Issuing Lender shall be deemed to have sold to each other Lender and each other Lender shall have been deemed to have purchased from the Issuing Lender a participation in the related Letter of Credit Obligations equal to such Lender’s Revolving Pro Rata Share at such date and such sale and purchase shall otherwise be in accordance with the terms of this Agreement. The Issuing Lender shall promptly notify each such participant Lender by facsimile, telephone, or electronic mail (with a PDF of the notification) of each Letter of Credit issued or increased and the actual dollar amount of such Lender’s participation in such Letter of Credit.

 

(e) Obligations Unconditional. The obligations of the Borrower under this Agreement in respect of each Letter of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, notwithstanding the following circumstances:

 

(i) any lack of validity or enforceability of any Letter of Credit Documents;

 

(ii) any amendment or waiver of or any consent to departure from any Letter of Credit Documents;

 

(iii) the existence of any claim, set-off, defense (other than payment or reimbursement in full of such obligations) or other right which any Credit Party may have at any time against any beneficiary or transferee of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Lender, any Lender or any other person or entity, whether in connection with this Agreement, the transactions contemplated in this Agreement or in any Letter of Credit Documents or any unrelated transaction;

 

(iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect to the extent the Issuing Lender would not be liable therefor pursuant to the following paragraph (g);

 

(v) payment by the Issuing Lender under such Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or

 

  

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

 

provided, however, that nothing contained in this paragraph (e) shall be deemed to constitute a waiver of any remedies of the Borrower in connection with the Letters of Credit.

 

(f) Prepayments of Letters of Credit. In the event that any Letter of Credit shall be outstanding or shall be drawn and not reimbursed on or prior to the Acceptable Letter of Credit Maturity Date, the Borrower shall pay to the Administrative Agent an amount equal to 105% of the Letter of Credit Exposure allocable to such Letter of Credit, such amount to be due and payable on the Acceptable Letter of Credit Maturity Date, and to be held in the Cash Collateral Account and applied in accordance with paragraph (h) below.

 

(g) Liability of Issuing Lender. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Issuing Lender nor any of its officers or directors shall be liable or responsible for:

 

(i) the use which may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith;

 

(ii) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged;

 

(iii) payment by the Issuing Lender against presentation of documents which do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the relevant Letter of Credit; or

 

(iv) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit (INCLUDING THE ISSUING LENDER’S OWN NEGLIGENCE),

 

except that the Borrower shall have a claim against the Issuing Lender, and the Issuing Lender shall be liable to, and shall promptly pay to, the Borrower, to the extent of any direct, as opposed to consequential, damages suffered by the Borrower which the Borrower proves were caused by the Issuing Lender’s willful misconduct or gross negligence (as determined in a final, non-appealable judgment of a court of competent jurisdiction) in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

 

(h) Cash Collateral Account.

 

(i) If the Borrower is required to deposit funds in the Cash Collateral Account pursuant to Sections 2.2(g), 2.4(c), 2.14, 7.2(b) or 7.3(b) or any other provision under this Agreement, then the Borrower and the Administrative Agent shall establish the Cash Collateral Account and the Borrower shall execute any documents and agreements, including the Administrative Agent’s standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish the Cash Collateral Account and grant the Administrative Agent a first priority, perfected Lien in such account and the funds therein. The Borrower hereby pledges to the Administrative Agent and grants the Administrative Agent a security interest in the Cash Collateral Account, whenever established, all funds held in the Cash Collateral Account from time to time, and all proceeds thereof as security for the payment of the Secured Obligations. The Borrower hereby agrees to take such actions as the Administrative Agent may reasonably request to maintain a first priority security interest in all the Cash Collateral Account and such Cash Collateral as security for the Secured Obligations and as security for the Defaulting Lenders’ obligation to fund participations in respect of Letter of Credit Exposure, to be applied pursuant to Section 2.2(i)(ii) below.

 

  

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(ii) Funds held in the Cash Collateral Account shall be held as cash collateral for obligations with respect to Letters of Credit and promptly applied by the Administrative Agent at the request of the Issuing Lender to any reimbursement or other obligations under Letters of Credit that exist or occur. To the extent that any surplus funds are held in the Cash Collateral Account above the Letter of Credit Exposure during the existence of an Event of Default the Administrative Agent may (A) hold such surplus funds in the Cash Collateral Account as cash collateral for the Secured Obligations or (B) apply such surplus funds to any Secured Obligations in any manner directed by the Majority Lenders. If no Default exists, then at the Borrower’s written request, the Administrative Agent shall release any surplus funds held in the Cash Collateral Account above the sum of (x) 105% of the Letter of Credit Exposure and (y) all Defaulting Lenders’ Revolving Pro Rata Share of outstanding Swing Line Advances other than Swing Line Advances as to which such Defaulting Lender’s participation obligation has been funded by it or reallocated to other Lenders.

 

(iii) Funds held in the Cash Collateral Account may be invested in Liquid Investments maintained with, and under the sole dominion and control of, the Administrative Agent or in another investment if mutually agreed upon by the Borrower and the Administrative Agent, but the Administrative Agent shall have no obligation to make any investment of the funds therein. The Administrative Agent shall exercise reasonable care in the custody and preservation of any funds held in the Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which the Administrative Agent accords its own property, it being understood that the Administrative Agent shall not have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any such funds.

 

(i) Defaulting Lender. At any time that there shall exist a Defaulting Lender, within one Business Day following the written request of the Administrative Agent or the Issuing Lender (with a copy to the Administrative Agent) the Borrower shall Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender (determined after giving effect to Section 2.14(a)(iv) and any Cash Collateral provided by such Defaulting Lender) in an amount not less than the Minimum Collateral Amount.

 

(i) Grant of Security Interest by Defaulting Lender; Agreement to Provide Cash Collateral. To the extent cash collateral is provided by any Defaulting Lender, such Defaulting Lender hereby grants to the Administrative Agent, for the benefit of the Issuing Lender, and agrees to maintain, a first priority security interest in all such Cash Collateral as security for such Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Obligations, to be applied pursuant to clause (ii) below. Such Defaulting Lender shall execute any documents and agreements, including the Administrative Agent’s standard form assignment of deposit accounts, that the Administrative Agent requests in connection therewith to establish such cash collateral account and to grant the Administrative Agent a first priority security interest in such account and the funds therein. If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative Agent and the Issuing Lender as herein provided, or that the total amount of such Cash Collateral is less than the Minimum Collateral Amount, the Borrower will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency (after giving effect to any Cash Collateral provided by the Defaulting Lender).

 

  

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(ii) Application. Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.2(i) or Section 2.14 in respect of Letters of Credit shall be applied to the satisfaction of the Defaulting Lender’s obligation to fund participations in respect of Letter of Credit Exposure (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) for which the Cash Collateral was so provided, prior to any other application of such property as may otherwise be provided for herein.

 

(iii) Termination of Requirement. Cash Collateral (or the appropriate portion thereof) provided to reduce the Issuing Lender’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section 2.2(i) following the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender); provided that, subject to Section 2.14, the Person providing Cash Collateral and the Issuing Lender may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations; and provided further that to the extent that such Cash Collateral was provided by the Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to the Credit Documents.

 

(j) Letters of Credit Issued for Guarantors or any Subsidiary. Notwithstanding that a Letter of Credit issued or outstanding hereunder has been issued in support of any obligations of, or has been issued for the account of, a Guarantor or any Subsidiary, the Borrower shall be obligated to reimburse the Issuing Lender hereunder for any and all drawings under such Letter of Credit issued hereunder by the Issuing Lender. The Borrower hereby acknowledges that the issuance of Letters of Credit for the account of any Guarantor, the Borrower or any Subsidiary inures to the benefit of the Borrower, and that the Borrower’s business (indirectly or directly) derives substantial benefits from the businesses of such other Persons.

 

Section 2.3 Advances.

 

(a) Notice. Each Borrowing (other than (x) the Borrowings to be made on the Closing Date and (y) Swing Line Borrowings which shall be governed by clause (g) below), shall be made pursuant to the applicable Notice of Borrowing given by the Borrower to the Administrative Agent not later than (i) 11:00 a.m. (Houston, Texas time) on the third Business Day before the date of the proposed Borrowing, in the case of a Eurodollar Advance or (ii) 11:00 a.m. (Houston, Texas time) on the Business Day before the date of the proposed Borrowing (or, so long as the Administrative Agent is the only Lender under this Agreement, 11:00 a.m. (Houston, Texas time) on the date of the Proposed Borrowing), in the case of a Base Rate Advance, by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice of such proposed Borrowing, by facsimile or by electronic mail. The Borrowings to be made on the Closing Date shall be made pursuant to the applicable Notices of Borrowing given not later than 11:00 a.m. (Houston, Texas time) on the Closing Date by the Borrower to the Administrative Agent, which shall give to each Lender prompt notice of such proposed Borrowing, by facsimile or by electronic mail. Each Notice of Borrowing shall be by facsimile or by electronic mail (with a PDF file of the executed Notice of Borrowing attached), specifying (i) the requested date of such Borrowing, (ii) the requested Type and Class of Advances comprising such Borrowing, (iii) the aggregate amount of such Borrowing, and (iv) if such Borrowing is to be comprised of Eurodollar Advances, the requested Interest Period for each such Advance; provided that, and all Borrowings to be made on the Closing Date shall consist only of Base Rate Advance which may, subject to the terms of this Agreement, be thereafter Converted into Eurodollar Advances. In the case of a proposed Borrowing comprised of Eurodollar Advances, the Administrative Agent shall promptly notify each Lender of the applicable interest rate under Section 2.7(b). Each Lender shall, before 12:00 noon (Houston, Texas time) on the date of such Borrowing, make available for the account of its applicable Lending Office to the Administrative Agent at its address referred to in Section 9.9, or such other location as the Administrative Agent may specify by notice to the Lenders, in same day funds, such Lender’s pro rata share of such Borrowing. After the Administrative Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article 3, the Administrative Agent will make such funds available to the Borrower at its account with the Administrative Agent or as otherwise directed by the Borrower with written notice to the Administrative Agent.

 

  

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(b) Conversions and Continuations. In order to elect to Convert or continue a Term Advance or a Revolving Advance under this paragraph, the Borrower shall deliver an irrevocable Notice of Continuation or Conversion to the Administrative Agent at the Administrative Agent’s office no later than 11:00 a.m. (Houston, Texas time) (i) on the Business Day before the date of the proposed conversion date in the case of a Conversion to a Base Rate Advance and (ii) at least three Business Days in advance of the proposed Conversion or continuation date in the case of a Conversion to, or a continuation of, a Eurodollar Advance. Each such Notice of Conversion or Continuation shall be in writing sent by facsimile or by electronic mail as an attachment thereto, specifying (i) the requested Conversion or continuation date (which shall be a Business Day), (ii) the amount, Type, and Class of the Advance to be Converted or continued, (iii) whether a Conversion or continuation is requested and, if a Conversion, into what Type of Advance, and (iv) in the case of a Conversion to, or a continuation of, a Eurodollar Advance, the requested Interest Period. Promptly after receipt of a Notice of Continuation or Conversion under this paragraph, the Administrative Agent shall provide each Lender with a copy thereof and, in the case of a Conversion to or a Continuation of a Eurodollar Advance, notify each Lender of the applicable interest rate under Section 2.7(b). The portion of Advances comprising part of the same Borrowing that are Converted to Advances of another Type shall constitute a new Borrowing.

 

(c) Certain Limitations. Notwithstanding anything in paragraphs (a) and (b) above:

 

(i) at no time shall there be more than five Interest Periods applicable to outstanding Eurodollar Advances;

 

(ii) the Borrower may not select Eurodollar Advances for any Borrowing at any time when a Default has occurred and is continuing;

 

(iii) if any Lender shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the introduction of or any change in or in the interpretation of any Legal Requirement makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its applicable Lending Office to perform its obligations under this Agreement to make Eurodollar Advances or to fund or maintain Eurodollar Advances, (A) the obligation of such Lender to make such Eurodollar Advance as part of the requested Borrowing or for any subsequent Borrowing shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist and such Lender’s portion of such requested Borrowing or any subsequent Borrowing of Eurodollar Advances shall be made in the form of a Base Rate Advance, and (B) such Lender agrees to use commercially reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to designate a different Lending Office if the making of such designation would avoid the effect of this paragraph and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender;

 

(iv) if the Administrative Agent is unable to determine the Eurodollar Rate for Eurodollar Advances comprising any requested Borrowing, the right of the Borrower to select Eurodollar Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Base Rate Advance;

 

  

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(v) if the Majority Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Advances comprising such Borrowing will not adequately reflect the cost to such Lenders of making or funding their respective Eurodollar Advances, as the case may be, for such Borrowing, the right of the Borrower to select Eurodollar Advances for such Borrowing or for any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist, and each Advance comprising such Borrowing shall be a Base Rate Advance; and

 

(vi) if the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Advances, or fail to deliver a timely Notice of Continuation with respect thereto, in accordance with the provisions contained in the definition of Interest Period in Section 1.1 and paragraph (b) above, the Administrative Agent will forthwith so notify the Borrower and the Lenders and such Advances will be made available to the Borrower on the date of such Borrowing as Base Rate Advances or, if an existing Advance, Convert into Base Rate Advances.

 

(d) Notices Irrevocable. Each Notice of Borrowing and Notice of Continuation or Conversion delivered by the Borrower hereunder, including its deemed request for borrowing made under Section 2.2(c), shall be irrevocable and binding on the Borrower.

 

(e) Funding by Lenders; Administrative Agent Reliance. Unless the Administrative Agent shall have received notice from a Lender before the date of any Term Borrowing or Revolving Borrowing that such Lender will not make available to the Administrative Agent such Lender’s applicable pro rata share of any Borrowing, the Administrative Agent may assume that such Lender has made its applicable pro rata share of such Borrowing available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.3(a), and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made its applicable pro rata share of such Borrowing available to the Administrative Agent, such Lender and the Borrower severally agree to immediately repay to the Administrative Agent on demand such corresponding amount, together with interest on such amount, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, the interest rate applicable on such day to Advances comprising such Borrowing and (ii) in the case of such Lender, the lesser of (A) the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation and (B) the Maximum Rate. If such Lender shall repay to the Administrative Agent such corresponding amount and interest as provided above, such corresponding amount so repaid shall constitute such Lender’s Advance as part of such Borrowing for purposes of this Agreement even though not made on the same day as the other Advances comprising such Borrowing.

 

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

 

  

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(g) Swing Line Advances.

 

(i) Facility. On the terms and conditions set forth in this Agreement, and if an AutoBorrow Agreement is in effect, subject to the terms and conditions of such AutoBorrow Agreement, the Swing Line Lender may, in its sole discretion, from time-to-time on any Business Day during the period from April 15, 2014 until the last Business Day occurring before the Revolving Maturity Date, make Swing Line Advances under the Swing Line Note to the Borrower which shall be due and payable on the Swing Line Payment Date (except that no Swing Line Advance may mature after the Revolving Maturity Date), and in an aggregate outstanding principal amount not to exceed the Swing Line Sublimit Amount at any time; provided that (A) after giving effect to such Swing Line Advance, the Revolving Outstandings shall not exceed the aggregate Revolving Commitments in effect at such time; (B) no Swing Line Advance shall be made by the Swing Line Lender if the conditions set forth in Section 3.2 have not been met as of the date of such Swing Line Advance, it being agreed by the Borrower that the giving of the applicable Notice of Revolving Borrowing and the acceptance by the Borrower of the proceeds of such Swing Line Advance shall constitute a representation and warranty by the Borrower that on the date of such Swing Line Advance such conditions have been met; (C) only if an AutoBorrow Agreement is not in effect, each Swing Line Advance shall be in an aggregate amount not less than $100,000 and in integral multiples of $50,000 in excess thereof; and (D) if an AutoBorrow Agreement is in effect, such additional terms and conditions of such AutoBorrow Agreement shall have been satisfied, and in the event that any of the terms of this Section 2.3(g)(i) conflict with such AutoBorrow Agreement, the terms of the AutoBorrow Agreement shall govern and control. The indebtedness of the Borrower to the Swing Line Lender resulting from Swing Line Advances shall be evidenced by the Swing Line Note. No Lender shall have any rights or obligations under any AutoBorrow Agreement, but each Lender shall have the obligation to purchase and fund risk participations in the Swing Line Advances and to refinance Swing Line Advances as provided below.

 

(ii) Prepayment. Within the limits expressed in this Agreement, amounts advanced pursuant to Section 2.3(g)(i) may from time to time be borrowed, prepaid without penalty, and reborrowed. If the aggregate outstanding principal amount of the Swing Line Advances ever exceeds the Swing Line Sublimit Amount, the Borrower shall prepay to the Swing Line Lender outstanding principal of the Swing Line Advances such that such excess is eliminated. If an AutoBorrow Agreement is in effect, each prepayment of a Swing Line Borrowing shall be made as provided in such AutoBorrow Agreement.

 

(iii) Reimbursements for Swing Line Obligations.

 

(A) With respect to the Swing Line Advances and the interest, premium, fees, and other amounts owed by the Borrower to the Swing Line Lender in connection with the Swing Line Advances, the Borrower agrees to pay to the Swing Line Lender such amounts when due and payable to the Swing Line Lender under the terms of this Agreement and, if an AutoBorrow Agreement is in effect, in accordance with the terms of such AutoBorrow Agreement. If the Borrower does not pay to the Swing Line Lender any such amounts when due and payable to the Swing Line Lender, the Swing Line Lender may upon notice to the Administrative Agent request the satisfaction of such obligation by the making of a Revolving Borrowing in the amount of any such amounts not paid when due and payable. Upon such request, the Borrower shall be deemed to have requested the making of a Revolving Borrowing in the amount of such obligation and the transfer of the proceeds thereof to the Swing Line Lender. The Administrative Agent shall promptly forward notice of such Revolving Borrowing to the Borrower and the Lenders, and each Lender shall, regardless of whether (A) the conditions in Section 3.2 have been met, (B) such notice complies with Section 2.3(a), or (C) a Default exists, make available such Lender’s ratable share of such Revolving Borrowing to the Administrative Agent, and the Administrative Agent shall promptly deliver the proceeds thereof to the Swing Line Lender for application to such amounts owed to the Swing Line Lender. The Borrower hereby unconditionally and irrevocably authorizes, empowers, and directs the Swing Line Lender to make such requests for Revolving Borrowings on behalf of the Borrower, and for the Lenders to make Revolving Advances to the Administrative Agent for the benefit of the Swing Line Lender in satisfaction of such obligations. The Administrative Agent and each Lender may record and otherwise treat the making of such Revolving Borrowings as the making of a Revolving Borrowing to the Borrower under this Agreement as if requested by the Borrower. Nothing herein is intended to release the Borrower’s obligations under the Swing Line Note, but only to provide an additional method of payment therefor. The making of any Revolving Borrowing under this Section 2.3(g)(iii)(A) shall not constitute a cure or waiver of any Default or Event of Default, other than the payment Default or Event of Default which is satisfied by the application of the amounts deemed advanced hereunder, caused by the Borrower’s failure to comply with the provisions of this Agreement or the Swing Line Note.

 

  

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(B) If at any time, the Revolving Commitments shall have expired or be terminated while any Swing Line Advance is outstanding, each Lender, at the sole option of the Swing Line Lender, shall either (A) notwithstanding the expiration or termination of the Revolving Commitments, make a Revolving Advance as a Base Rate Advance, or (B) be deemed, without further action by any Person, to have purchased from the Swing Line Lender a participation in such Swing Line Advance, in either case in an amount equal to the product of such Lender’s Revolving Pro Rata Share times the outstanding aggregate principal balance of the Swing Line Advances. The Administrative Agent shall notify each such Lender of the amount of such Revolving Advance or participation, and such Lender will transfer to the Administrative Agent for the account of the Swing Line Lender on the next Business Day following such notice, in immediately available funds, the amount of such Revolving Advance or participation.

 

(C) If any such Lender shall not have so made its Revolving Advance or its percentage participation available to the Administrative Agent pursuant to this Section 2.3(g), such Lender agrees to pay interest thereon for each day from the date Administrative Agent delivers notice to such Lender pursuant to Section 2.3(g)(iii)(A) or (B) until the date such amount is paid at a per annum rate equal to the lesser of (A) the Federal Funds Rate for such day and for the first three days after such date and thereafter the interest rate applicable to the Revolving Advance and (B) the Maximum Rate. Whenever, at any time after the Administrative Agent has received from any Lender such Lender’s Revolving Advance or participating interest in a Swing Line Advance, the Administrative Agent receives any payment on account thereof, the Administrative Agent will pay to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s Revolving Advance or participating interest was outstanding and funded), which payment shall be subject to repayment by such Lender if such payment received by the Administrative Agent is required to be returned. Each Lender’s obligation to make the Revolving Advance or to purchase such participating interests pursuant to this Section 2.3(g) shall be absolute and unconditional and shall not be affected by any circumstance, including (1) any set-off, counterclaim, recoupment, defense or other right which such Lender or any other Person may have against the Swing Line Lender, the Administrative Agent or any other Person for any reason whatsoever; (2) the occurrence or continuance of a Default or the termination of any Commitments; (3) any breach of this Agreement by the Borrower or any other Lender; or (4) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Each Swing Line Advance, once so participated by any Lender, shall cease to be a Swing Line Advance with respect to that amount for purposes of this Agreement, but shall continue to be Revolving Advances.

 

(iv) Method of Borrowing. If an AutoBorrow Agreement is in effect, each Swing Line Borrowing shall be made as provided in such AutoBorrow Agreement. Otherwise, and except as provided in the clause (c) above, each request for a Swing Line Advance shall be made pursuant to telephone notice to the Swing Line Lender given no later than 1:00 p.m. (Houston, Texas time) on the date of the proposed Swing Line Advance, promptly confirmed by a completed and executed Notice of Revolving Borrowing sent via facsimile, facsimile or, unless otherwise required by the Administrative Agent or Swing Line Lender prior to such delivery, electronic mail (PDF), to the Administrative Agent and the Swing Line Lender. The Swing Line Lender will promptly make the Swing Line Advance available to the Borrower at the Borrower’s account with the Swing Line Lender.

 

  

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(v) Interest for Account of Swing Line Lender. Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Advances (provided that any failure of the Swing Line Lender to provide such invoice shall not release the Borrower from its obligation to pay such interest). Until each Lender funds its Revolving Advance or risk participation pursuant to clause (iii) above, interest in respect of Lender’s Revolving Pro Rata Share of the Swing Line Advances shall be solely for the account of the Swing Line Lender.

 

(vi) Payments Directly to Swing Line Lender. The Borrower shall make all payments of principal and interest in respect of the Swing Line Advances directly to the Swing Line Lender.

 

(vii) Discretionary Nature of the Swing Line Facility. Notwithstanding any terms to the contrary contained herein or in any AutoBorrow Agreement, the swing line facility provided herein or in any AutoBorrow Agreement (i) is an uncommitted facility and the Swing Line Lender may, but shall not be obligated to, make Swing Line Advances, and (ii) may be terminated at any time by the Swing Line Lender upon written notice to the Borrower.

 

Section 2.4 Prepayments.

 

(a) Right to Prepay; Ratable Prepayment. The Borrower shall have no right to prepay any principal amount of any Advance except as provided in this Section 2.4 and, with respect to Swing Line Advances, Section 2.3(g)(ii), and all notices given pursuant to this Section 2.4 shall be irrevocable (except as described in clause (b) of this Section 2.4) and binding upon the Borrower. Each payment of any Advance pursuant to this Section 2.4 shall be made in a manner such that all Advances comprising part of the same Borrowing are paid in whole or ratably in part other than Advances owing to a Defaulting Lender as provided in Section 2.14.

 

(b) Optional. The Borrower may elect to prepay any of the Advances without penalty or premium except as set forth in Section 2.9 and after giving by 11:00 a.m. (Houston, Texas time) (i) in the case of Eurodollar Advances, at least three Business Days’ or (ii) in case of Base Rate Advances, same Business Day’s prior written notice to the Administrative Agent stating the proposed date and aggregate principal amount of such prepayment; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.1(b), then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.1(b). If any such notice is given, the Borrower shall prepay Advances comprising part of the same Borrowing in whole or ratably in part in an aggregate principal amount equal to the amount specified in such notice, together with accrued interest to the date of such prepayment on the principal amount prepaid and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date; provided that (A) each optional prepayment of Eurodollar Advances shall be in a minimum amount not less than $1,000,000 and in multiple integrals of $500,000 in excess thereof (B) each optional prepayment of Base Rate Advances shall be in a minimum amount not less than $500,000 and in multiple integrals of $100,000 in excess thereof, and (C) only if an AutoBorrow Agreement is not in effect, each optional prepayment of Swing Line Advances shall be in a minimum amount not less than $250,000 and in multiple integrals of $50,000 in excess thereof. If an AutoBorrow Agreement is in effect, each prepayment of Swing Line Advances shall be made as provided in such AutoBorrow Agreement.

 

  

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(c) Mandatory.

 

(i) On any date that a Borrowing Base Deficiency exists as stated in the Borrowing Base Certificate delivered pursuant to Section 5.2(e) or as notified to the Borrower by the Administrative Agent (with such calculation set forth in reasonable detail which shall be conclusive absent manifest error), the Borrower shall, within three Business Days, to the extent of such deficiency, first prepay to the Swing Line Lender the outstanding principal amount of the Swing Line Advances, second prepay to the Lenders on a pro rata basis the outstanding principal amount of the Revolving Advances, and third make deposits with the Administrative Agent into the Cash Collateral Account to provide Cash Collateral in the amount of such excess (if any) for the Letter of Credit Exposure.

 

(ii) If the Borrower or any Subsidiary receives Debt Incurrence Proceeds other than those resulting from Permitted Debt, then not later than three Business Days following the receipt of such proceeds, the Borrower shall prepay the Term Advances in an amount equal to 100% of such Debt Incurrence Proceeds.

 

(iii) If the Borrower or any Subsidiary receives Equity Issuance Proceeds (other than Equity Issuance Proceeds from an Excluded Equity Issuance) or receives cash capital contributions on account of then existing Equity Interests of the Borrower, then not later than three Business Days following the receipt of such proceeds, the Borrower shall prepay the Term Advances in an amount equal to 100% of such Equity Issuance Proceeds or contribution; provided that, (A) if no Default exists or would arise therefrom, then such Equity Issuance Proceeds or contributions shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such proceeds or contributions are reasonably expected to be reinvested in Capital Expenditures not prohibited under Section 6.18, Investments permitted by Section 6.3(c), or Acquisitions permitted under Section 6.4 within 180 days following the date the Borrower or such Subsidiary received such proceeds or contribution (which written notice shall set forth the estimates of the amounts to be so expended); and (B) if all or any portion of such proceeds and contributions are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances.

 

(iv) If the Borrower or any Subsidiary completes an Asset Sale which is not a Permitted Asset Sale, then the Borrower shall, no later than three Business Days following the completion such Asset Sale, prepay the Term Advances in an amount equal to 100% of the Net Cash Proceeds generated from such Asset Sale.

 

(v) If the Borrower or any Subsidiary completes a Permitted Asset Sale which is permitted under Section 6.8(d) or (e) and the Net Cash Proceeds thereof exceeds $50,000 individually or $250,000 when aggregated with all such Permitted Asset Sales completed from the date hereof through and including the date of such Permitted Asset Sale, then the Borrower shall, no later than three Business Days following the completion such Asset Sale, prepay the Term Advances in an amount equal to 100% of the Net Cash Proceeds generated from such Asset Sale in excess of such $50,000 (or such $250,000, if applicable); provided that, (A) if no Default exists or would arise therefrom, then such proceeds shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such Net Cash Proceeds are reasonably expected to be reinvested in fixed or capital assets of any Credit Party within 180 days following the date of such Asset Sale (which officers’ certificate shall set forth the estimates of the proceeds to be so expended); and (B) if all or any portion of such Net Cash Proceeds are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances.

 

  

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(vi) If the Borrower or any Subsidiary receives any Extraordinary Receipts (whether from a single event or related series of events and whether as one payment or a series of payments) in excess of $50,000 individually or $250,000 when aggregated with all such Extraordinary Receipts received from the date hereof through and including the date of determination, then the Borrower shall, no later than three Business Days following the receipt of such Extraordinary Receipts, prepay the Term Advances in an amount equal to 100% of the amount of such Extraordinary Receipts in excess of such $50,000 (or such $250,000, if applicable); provided that, (A) if no Default exists or would arise therefrom, then such Extraordinary Receipts shall not be required to be so applied on such date to the extent that Borrower shall have notified the Administrative Agent in writing on or prior to such date stating that such Extraordinary Receipts are reasonably expected to be reinvested in fixed or capital assets of any Credit Party within 180 days following the date the Borrower or such Subsidiary received such Extraordinary Receipts (which written notice shall set forth the estimates of the amounts to be so expended); (B) if all or any portion of such Extraordinary Receipts are not reinvested within such 180-day period as provided in clause (A) above, then 100% of such unused portion shall be applied on the last day of such period as a mandatory prepayment of the Term Advances; and (C) if an Event of Default exists and such Extraordinary Receipts are insurance proceeds, the Borrower shall turn such proceeds over to the Administrative Agent in accordance with Section 5.3(d).

 

(d) Interest; Costs. Each prepayment pursuant to this Section 2.4 shall be accompanied by accrued interest on the amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date.

 

(e) Application of Prepayments. Each mandatory prepayment of an Advance required by Section 2.4(c)(ii) – (vi) shall be applied to the scheduled principal installments of the Term Advances on a pro rata basis until such time as all Term Advances are repaid in full.

 

Section 2.5 Repayment.

 

(a) Revolving Advances. The Borrower shall pay to the Administrative Agent for the ratable benefit of each Revolving Lender the aggregate outstanding principal amount of the Revolving Advances on the Revolving Maturity Date.

 

(b) Term Advances. The Borrower shall pay to the Administrative Agent for the ratable benefit of each Term Lender the aggregate outstanding principal amount of the Term Advances in quarterly installments each equal to $1,250,000 (which is equal to five percent (5%) of $25,000,000). Such quarterly installments shall be due and payable on each March 31st, June 30th, September 30th, and December 31st, commencing with June 30, 2014, and a final installment of the remaining, unpaid principal balance of the Term Advances payable on the Term Maturity Date.

 

(c) Swing Line Advances. Each Swing Line Advance shall be paid in full on each Swing Line Payment Date.

 

Section 2.6 Fees.

 

(a) Commitment Fees. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee equal to the Applicable Margin for Commitment Fees for such period on the average daily amount by which (i) such Lender’s Revolving Commitment exceeds (ii) the sum of such Lender’s outstanding Revolving Advances plus such Lender’s Revolving Pro Rata Share of the Letter of Credit Exposure; provided that, no such commitment fee shall accrue on the Revolving Commitment of a Defaulting Lender during the period such Lender remains a Defaulting Lender. Such Commitment Fee is due quarterly in arrears on March 31st, June 30th, September 30th, and December 31st of each year commencing on June 30, 2014 and on the Revolving Maturity Date. For the avoidance of doubt and for purposes of this Section 2.6(a)(i) only, outstanding Swing Line Advances shall not reduce the amount of unused Revolving Commitment.

 

  

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(b) Fees for Letters of Credit. The Borrower agrees to pay the following:

 

(i) Subject to Section 2.14, to the Administrative Agent for the pro rata benefit of the Revolving Lenders a per annum letter of credit fee for each Letter of Credit issued hereunder, for the period such Letter of Credit is to be outstanding, in an amount equal to the greater of (A) the Applicable Margin then in effect for Eurodollar Advances per annum on the face amount of such Letter of Credit and (B) $750 per Letter of Credit. Such fee shall be due and payable quarterly in arrears March 31st, June 30th, September 30th, and December 31st of each year, and on the Revolving Maturity Date.

 

(ii) To the Issuing Lender, a fronting fee for each Letter of Credit equal to the greater of (A) 0.25% per annum on the face amount of such Letter of Credit and (B) $750. Such fee shall be due and payable quarterly in arrears on March 31st, June 30th, September 30th, and December 31st of each year, and on the Revolving Maturity Date.

 

(iii) To the Issuing Lender such other usual and customary fees associated with any transfers, amendments, drawings, negotiations or reissuances of any Letters of Credit. Such fees shall be due and payable as requested by the Issuing Lender in accordance with the Issuing Lender’s then current fee policy.

 

The Borrower shall have no right to any refund of letter of credit fees previously paid by the Borrower, including any refund claimed because any Letter of Credit is canceled prior to its expiration date.

 

(c) Administrative Agent Fee. The Borrower agrees to pay the fees to the Administrative Agent as set forth in the Fee Letter.

 

Section 2.7 Interest.

 

(a) Base Rate Advances. Each Base Rate Advance shall bear interest at the Adjusted Base Rate in effect from time to time plus the Applicable Margin for Base Rate Advances in effect from time to time. The Borrower shall pay to the Administrative Agent for the ratable account of each Lender all accrued but unpaid interest on such Lender’s Base Rate Advances, quarterly in arrears, on each March 31st, June 30th, September 30th, and December 31st commencing on June 30, 2014, and on the Revolving Maturity Date or the Term Maturity Date, as applicable.

 

(b) Eurodollar Advances. Each Eurodollar Advance shall bear interest during its Interest Period at a rate per annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Margin for Eurodollar Advances for such period. The Borrower shall pay to the Administrative Agent for the ratable account of each Lender all accrued but unpaid interest on each of such Lender’s Eurodollar Advances on the last day of the Interest Period therefor (provided that for Eurodollar Advances with six month Interest Periods, accrued but unpaid interest shall also be due on the day three months from the first day of such Interest Period), on the date any Eurodollar Advance is repaid, and on the Revolving Maturity Date or the Term Maturity Date, as applicable.

 

  

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(c) Swing Line Advances. The Swing Line Advances shall bear interest at the Adjusted Base Rate plus the Applicable Margin for Base Rate Advances or such other per annum rate to be agreed to between the Borrower and the Swing Line Lender. The Borrower shall pay all accrued but unpaid interest on each Swing Line Advance to the Swing Line Lender, quarterly in arrears, on each March 31, June 30, September 30, and December 31 commencing on June 30, 2014, and on the Maturity Date or such dates as otherwise agreed to between the Swing Line Lender and the Borrower.

 

(d) Retroactive Adjustments of Applicable Margin. In the event that any financial statement or Compliance Certificate delivered pursuant to Section 5.2 is shown to be inaccurate (regardless of whether this Agreement or the Commitments are in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Period”) than the Applicable Margin applied for such Applicable Period, then (i) the Borrower shall immediately deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Period, (ii) the Applicable Margin shall be determined as if the higher Applicable Margin that would have applied were applicable for such Applicable Period (and in any event at Level I, as set forth in Schedule I, if the inaccuracy was the result of dishonesty, fraud or willful misconduct), and (iii) the Borrower shall immediately, without further action by the Administrative Agent, any Lender or any Issuing Lender, pay to the Administrative Agent for the account of the applicable Lenders, the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Period. This Section 2.7(d) shall not limit the rights of the Administrative Agent and Lenders with respect to the Default Rate of interest as set forth in Section 2.7(e) or Article 7. The Borrower’s obligations under this Section 2.7(d) shall survive the termination of the Commitments and the repayment of all other Obligations hereunder.

 

(e) Default Rate. Notwithstanding the foregoing, (i) upon the occurrence and during the continuance of an Event of Default under Section 7.1(a) or Section 7.1(g), all Obligations shall bear interest, after as well as before judgment, at the Default Rate and (ii) upon the occurrence and during the continuance of any Event of Default (including under Section 7.1(a) or Section 7.1(g)), upon the request of the Majority Lenders, all Obligations shall bear interest, after as well as before judgment, at the Default Rate. Interest accrued pursuant to this Section 2.7(e) and all interest accrued but unpaid on or after the Revolving Maturity Date and the Term Maturity Date, as applicable, shall be due and payable on demand.

 

Section 2.8 Illegality. If any Lender shall notify the Borrower that the introduction of or any change in or in the interpretation of any Legal Requirement makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its applicable Lending Office to perform its obligations under this Agreement to make, maintain, or fund any Eurodollar Advances of such Lender then outstanding hereunder, (a) the Borrower shall, no later than 11:00 a.m. (Houston, Texas, time) (i) if not prohibited by law, on the last day of the Interest Period for each outstanding Eurodollar Advance or (ii) if required by such notice, on the second Business Day following its receipt of such notice, prepay all of the Eurodollar Advances of such Lender then outstanding, together with accrued interest on the principal amount prepaid to the date of such prepayment and amounts, if any, required to be paid pursuant to Section 2.9 as a result of such prepayment being made on such date, (b) such Lender shall simultaneously make a Base Rate Advance to the Borrower on such date in an amount equal to the aggregate principal amount of the Eurodollar Advances prepaid to such Lender, and (c) the right of the Borrower to select Eurodollar Advances from such Lender for any subsequent Borrowing shall be suspended until such Lender shall notify the Borrower that the circumstances causing such suspension no longer exist. Each Lender agrees to use commercially reasonable efforts (consistent with its internal policies and legal and regulatory restrictions) to designate a different Lending Office if the making of such designation would avoid the effect of this paragraph and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.

 

  

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Section 2.9 Breakage Costs. Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of:

 

(a) any continuation, conversion, payment or prepayment (including any deemed payment or repayment and any reallocated repayment to Non-Defaulting Lenders provided for in Section 2.11(a) or Section 2.14) of any Eurodollar Advance on a day other than the last day of the Interest Period for such Advance (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise);

 

(b) any failure by the Borrower (for a reason other than the failure of such Lender to make an Advance) to prepay, borrow, continue or Convert any Eurodollar Advance on the date or in the amount notified by the Borrower; or

 

(c) any assignment of an Eurodollar Advance on a day other than the last day of the Interest Period therefor as a result of a request by the Borrower pursuant to Section 2.13;

 

including any loss of anticipated profits, any foreign exchange losses and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Advance, from fees payable to terminate the deposits from which such funds were obtained or from the performance of any foreign exchange contract. The Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 2.9, the requesting Lender shall be deemed to have funded the Eurodollar Advances made by it at the Eurodollar Base Rate used in determining the Eurodollar Rate for such Advance by a matching deposit or other borrowing in the offshore interbank market for Dollars for a comparable amount and for a comparable period, whether or not such Eurodollar Advance was in fact so funded.

 

Section 2.10 Increased Costs.

 

(a) Increased Costs Generally. If any Change in Law shall:

 

(i) impose, modify, or deem applicable any reserve, special deposit, compulsory loan, insurance charge, or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, financial institutions generally, including any Lender (or its applicable Lending Office) (except any reserve requirement included in the Eurodollar Reserve Percentage) or the Issuing Lender;

 

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

 

  

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(iii) impose on financial institutions generally, including any Lender (or its applicable Lending Office) or on the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Advances made by such Lender or any Letter of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to such Lender (or its applicable Lending Office) or such other Recipient of making, Converting to, continuing or maintaining any loan or of maintaining its obligation to make or accept and purchase any such loan, or to increase the cost to such Lender, the Issuing Lender or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender (or its applicable Lending Office), the Issuing Lender or such other Recipient hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Issuing Lender or such other Recipient, the Borrower will pay to such Lender within three Business Days after written demand made by such Lender, the Issuing Lender or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Lender or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

 

(b) Capital Requirements. If any Lender or Issuing Lender determines that any Change in Law affecting such Lender or Issuing Lender or any Lending Office of such Lender or such Lender’s or Issuing Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or Issuing Lender’s capital or on the capital of financial institutions generally, including such Lender’s or Issuing Lender’s holding company or any corporation controlling such Lender or the Issuing Lender, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit or Swing Line Advances held by, such Lender, or the Letters of Credit issued by the Issuing Lender, to a level below that which such Lender, the Issuing Lender, the corporation controlling such Lender or the Issuing Lender, or such Lender’s or Issuing Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Lender’s policies, the policies of the corporation controlling such Lender or the Issuing Lender, and the policies of such Lender’s or Issuing Lender’s holding company with respect to capital adequacy), then from time to time within three Business Days after written demand by such Lender or the Issuing Lender, as the case may be, the Borrower shall pay to such Lender or Issuing Lender, such additional amount or amounts as will compensate such Lender or the Issuing Lender, the corporation controlling such Lender or the Issuing Lender, or such Lender’s or Issuing Lender’s holding company for any such reduction suffered.

 

(c) Mitigation. Each Lender shall promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the Closing Date, which will entitle such Lender to compensation pursuant to this Section 2.10 and will designate a different Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to it. Any Lender claiming compensation under this Section 2.10 shall furnish to the Borrower and the Administrative Agent a statement setting forth the additional amount or amounts to be paid to it hereunder which shall be determined by such Lender in good faith and which shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. The Borrower shall pay such Lender or Issuing Lender, as the case may be, the amount shown as due on any such certificate within 10 days after receipt thereof.

 

  

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(d) Delay in Requests. Failure or delay on the part of any Lender or Issuing Lender to demand compensation pursuant to this Section 2.10 shall not constitute a waiver of such Lender’s or such Issuing Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or Issuing Lender pursuant to this Section 2.10 for any increased costs incurred or reductions suffered more than 180 days prior to the date that such Lender or Issuing Lender, as the case may be, notifies the Borrower and the Administrative Agent of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof).

 

Section 2.11 Payments and Computations.

 

(a) Payments. All payments of principal, interest, and other amounts to be made by the Borrower under this Agreement and other Credit Documents shall be made to the Administrative Agent in Dollars and in immediately available funds, without setoff, deduction, or counterclaim.

 

(b) Payment Procedures. The Borrower shall make each payment under this Agreement not later than 11:00 a.m. (Houston, Texas time) on the day when due in Dollars to the Administrative Agent at the location referred to in the Notes (or such other location as the Administrative Agent shall designate in writing to the Borrower) in same day funds. The Administrative Agent will promptly thereafter, and in any event prior to the close of business on the day any timely payment is made, cause to be distributed like funds relating to the payment of principal, interest or fees ratably (other than amounts payable solely to the Administrative Agent or a specific Lender pursuant to Sections 2.8, 2.9, 2.10, 2.12, 2.13, and 9.2 and such other provisions herein which expressly provide for payments to a specific Lender, but after taking into account payments effected pursuant to Section 9.1) in accordance with each Lender’s applicable pro rata share to the Lenders for the account of their respective applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon receipt of other amounts due solely to the Administrative Agent, the Issuing Lender, the Swing Line Lender or a specific Lender, the Administrative Agent shall distribute such amounts to the appropriate party to be applied in accordance with the terms of this Agreement.

 

(c) Non-Business Day Payments. Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be; provided that if such extension would cause payment of interest on or principal of Eurodollar Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.

 

(d) Computations. All computations of interest for Base Rate Advances shall be made by the Administrative Agent on the basis of a year of 365/366 days and all computations of all other interest and fees shall be made by the Administrative Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Administrative Agent of an amount of interest or fees shall be conclusive and binding for all purposes, absent manifest error.

 

  

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(e) Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Advances or other Obligations hereunder resulting in such Lender receiving payment of a proportion of the aggregate amount of its Advances and accrued interest thereon or other such Obligations greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Advances and such other Obligations of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Advances and other Obligations owing them; provided that:

 

(i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and

 

(ii) the provisions of this paragraph shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letter of Credit Exposure to any assignee or participant, other than to the Borrower or any Subsidiary, or any Affiliate of any of the foregoing (as to which the provisions of this paragraph shall apply).

 

Each Credit Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable Legal Requirement, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against each Credit Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of each Credit Party in the amount of such participation.

 

Section 2.12 Taxes.

 

(a) Issuing Lender. For purposes of this Section 2.12, the term “Lender” includes any Issuing Lender.

 

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

 

  

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(c) Payment of Other Taxes by Credit Parties. The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with applicable Legal Requirement, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

 

(d) Indemnification by Credit Parties. The Credit Parties shall jointly and severally indemnify each Recipient, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

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

 

(f) Evidence of Payments. As soon as practicable after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 2.12, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(g) Status of Lenders.

 

(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Credit Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Legal Requirement or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.12(g)(ii)(A), and (ii)(B) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

 

  

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(ii) Without limiting the generality of the foregoing,

 

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

 

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable: (i) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Credit Document, properly completed and executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Credit Document, properly completed and executed IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty; (ii) properly completed and executed originals of IRS Form W-8ECI; (iii) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit I-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) properly completed and executed originals of IRS Form W-8BEN; or (iv) to the extent a Foreign Lender is not the beneficial owner, properly completed and executed originals of IRS Form W-8IMY, accompanied by properly completed and executed originals of IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-2 or Exhibit I-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit I-4 on behalf of each such direct and indirect partner;

 

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

 

(D) if a payment made to a Lender under any Credit Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by Legal Requirement and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable Legal Requirement (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

  

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

 

(h) Treatment of Certain Refunds. If any party determines, in its sole discretion, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.12 (including by the payment of additional amounts pursuant to this Section 2.12), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (h), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this paragraph (h) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

 

(i) Survival. Each party’s obligations under this Section 2.12 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Credit Document.

 

Section 2.13 Mitigation Obligations; Replacement of Lenders.

 

(a) Designation of a Different Lending Office. If any Lender requests compensation under Section 2.10, or requires the Borrower or any Guarantor to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12, then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different lending office for funding or booking its Advances hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.10 or 2.12, as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b) Replacement Lender. If any Lender requests compensation under Section 2.10, or if the Borrower or any Guarantor is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.12 and, in each case, such Lender has declined or is unable to designate a different lending office in accordance with Section 2.13(a), or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort (and in the case of a Defaulting Lender, the Administrative Agent may) upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 9.7), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.10 or Section 2.12) and obligations under this Agreement and the related Credit Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that:

 

  

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(i) as to assignments required by the Borrower, the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 9.7, unless such fee has been waived by the Administrative Agent;

 

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its applicable Advances and participations in outstanding Letter of Credit Obligations, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Credit Documents (including any amounts under Section 2.9) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

 

(iii) in the case of any such assignment resulting from a claim for compensation under Section 2.10 or payments required to be made pursuant to Section 2.12, such assignment will result in a reduction in such compensation or payments thereafter;

 

(iv) such assignment does not conflict with applicable Legal Requirement;

 

(v) with respect to a Non-Consenting Lender, the proposed amendment, modification, waiver, consent or release with respect to this Agreement or any other Credit Document has been approved by the Majority Lenders and such agreement, amendment, waiver, consent or release can be effected as a result of such assignment (and, if applicable, one or more other assignments) contemplated by this Section; and

 

(vi) if such Lender is being replaced solely as a result of it being a Defaulting Lender, then such Lender may only be replaced in its capacity as a Revolving Lender and, if it has any unused Term Commitment, in its capacity as a Term Lender but, in any event, if its Term Commitment is fully funded, then not in its capacity as a Term Lender.

 

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower or the Administrative Agent to require such assignment and delegation cease to apply. Solely for purposes of effecting any assignment involving a Defaulting Lender under this Section 2.13 and to the extent permitted under applicable Legal Requirements, each Lender hereby designates and appoints the Administrative Agent as true and lawful agent and attorney-in-fact, with full power and authority, for and on behalf of and in the name of such Lender to execute, acknowledge and deliver the Assignment and Acceptance required hereunder if such Lender is a Defaulting Lender and such Lender shall be bound thereby as fully and effectively as if such Lender had personally executed, acknowledged and delivered the same. In lieu of the Borrower or the Administrative Agent replacing a Defaulting Lender as provided in this Section 2.13, the Borrower may terminate such Defaulting Lender’s applicable Commitment as provided in Section 2.1(c)(iii).

 

  

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Section 2.14 Defaulting Lender.

 

(a) Defaulting Lender Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Legal Requirement:

 

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of Majority Lenders.

 

(ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article 8 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 7.4 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to the Issuing Lender or Swing Line Lender hereunder; third, to Cash Collateralize the Issuing Lender’s Fronting Exposure with respect to such Defaulting Lender in accordance with Section 2.2(i) and the Swing Line Lender’s Fronting Exposure, if any, with respect to such Defaulting Lender; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Advance hereunder in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released pro rata in order to (x) satisfy such Defaulting Lender’s current or potential future funding obligations with respect to Advances under this Agreement and (y) Cash Collateralize the Issuing Lender’s future Fronting Exposure with respect to such Defaulting Lender with respect to future Letters of Credit issued under this Agreement, in accordance with Section 2.2(i) and the Swing Line Lender’s Fronting Exposure with respect to such Defaulting Lender with respect to future Swing Line Advances; sixth, to the payment of any amounts owing to the Lenders, the Issuing Lender or the Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, the Issuing Lender or the Swing Line Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Advances or Letter of Credit Obligations in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Advances were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 3.2 were satisfied or waived, such payment shall be applied solely to pay the Advances of, and Letter of Credit Obligations owed to, all Non-Defaulting Lenders on the applicable pro rata basis prior to being applied to the payment of any Advances of, or Letter of Credit Obligations owed to, such Defaulting Lender until such time as all Advances and funded and unfunded participations in Letter of Credit Obligations and Swing Line Advances are held by the Revolving Lenders pro rata in accordance with the applicable Commitments without giving effect to Section 2.14(a)(iv). Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.14(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

 

  

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(iii) Certain Fees.

 

(A) No Defaulting Lender shall be entitled to receive any Commitment Fee for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender).

 

(B) Each Defaulting Lender shall be entitled to receive fees under Section 2.6(b)(i) for any period during which that Lender is a Defaulting Lender only to the extent allocable to its Revolving Pro Rata Share of the stated amount of Letters of Credit for which it has provided Cash Collateral pursuant to Section 2.2(i).

 

(C) With respect to any fee under Section 2.6(b)(i) not required to be paid to any Defaulting Lender pursuant to clause (A) or (B) above, the Borrower shall (x) pay to each Non-Defaulting Lender that portion of any such fee otherwise payable to such Defaulting Lender with respect to such Defaulting Lender’s participation in Letter of Credit Exposure that has been reallocated to such Non-Defaulting Lender pursuant to clause (iv) below, (y) pay to the Issuing Lender the amount of any such fee otherwise payable to such Defaulting Lender to the extent allocable to the Issuing Lender’s Fronting Exposure to such Defaulting Lender, and (z) not be required to pay the remaining amount of any such fee.

 

(iv) Reallocation of Participations to Reduce Fronting Exposure. All or any part of such Defaulting Lender’s participation in Letter of Credit Exposure and Swing Line Advances shall be reallocated among the Non-Defaulting Lenders in accordance with their respective Revolving Pro Rata Share (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) the conditions set forth in Section 3.2 are satisfied at the time of such reallocation (and, unless the Borrower shall have otherwise notified the Administrative Agent at such time, the Borrower shall be deemed to have represented and warranted that such conditions are satisfied at such time), and (y) such reallocation does not cause the aggregate Revolving Outstandings of any Non-Defaulting Lender to exceed such Non-Defaulting Lender’s Revolving Commitment. No reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a Non-Defaulting Lender as a result of such Non-Defaulting Lender’s increased exposure following such reallocation.

 

(v) Cash Collateral, Repayment of Swing Line Advances. If the reallocation described in clause (iv) above cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under Legal Requirement, (x) first, prepay Swing Line Advances in an amount equal to the Swing Line Lender’s Fronting Exposure and (y) second, Cash Collateralize the Issuing Lender’s Fronting Exposure in accordance with the procedures set forth in Section 2.2(i).

 

  

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(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swing Line Lender and the Issuing Lender agree in writing that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase at par that portion of outstanding Revolving Advances or the Term Advances, as applicable, of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Advances and funded and unfunded participations in Letters of Credit and Swing Line Advances to be held pro rata by the Lenders in accordance with their respective Commitments (without giving effect to Section 2.14(a)(iv), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Notwithstanding the above, the Borrower’s and the Administrative Agent’s right to replace a Defaulting Lender pursuant to this Agreement shall be in addition to, and not in lieu of, all other rights and remedies available to the Borrower or the Administrative Agent against such Defaulting Lender under this Agreement, at law, in equity or by statute.

 

(c) Letters of Credit. So long as any Lender is a Defaulting Lender, the Issuing Lender shall not be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

 

(d) Swing Line Advances. So long as any Lender is a Defaulting Lender, the Swing Line Lender shall not be required to make any Swing Line Advances unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

 

  

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ARTICLE 3

 

CONDITIONS OF LENDING

 

Section 3.1 Conditions Precedent to Initial Borrowings and the Initial Letter of Credit. The obligations of each Lender to make the initial Advance and an initial Letter of Credit, shall be subject to the conditions precedent that:

 

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

 

(i) this Agreement and all attached Exhibits and Schedules and the Notes, if requested by the applicable Lenders, payable to the order of each applicable Lender;

 

(ii) the Guaranty executed by all Subsidiaries existing on the Closing Date, including Aly Operating, Austin Chalk Corp., and Aly Centrifuge;

 

(iii) the Security Agreement executed by each Credit Party, together with appropriate UCC-1 financing statements, if any, necessary or desirable for filing with the appropriate authorities and any other documents, agreements, or instruments as the Administrative Agent may request which are necessary to create, perfect or maintain an Acceptable Security Interest in the Collateral described in the Security Agreement;

 

(iv) certificates of insurance naming the Administrative Agent as loss payee or additional insured, as applicable, with respect to all insurance policies required by Section 5.3;

 

(v) a certificate from an authorized officer of the Borrower dated as of the Closing Date stating that as of such date (A) all representations and warranties of the Borrower set forth in this Agreement are true and correct, (B) no Default has occurred and is continuing; and (C) all conditions precedent set forth in this Section 3.1 have been met (with the assumption that, as to any conditions precedent that are subject to the satisfaction, or at the request of, the Administrative Agent or the Lenders, the Administrative Agent and the Lenders are satisfied and have made all necessary or desired requests);

 

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

 

(vii) certificates of good standing for each Credit Party in each state in which each such Person is organized or qualified to do business, which certificate shall be (A) dated a date not earlier than 30 days prior to Closing Date or (B) otherwise effective on the Closing Date;

 

(viii) a legal opinion of Hallett & Perrin, P.C. as outside counsel to the Credit Parties in form and substance reasonably acceptable to the Administrative Agent;

 

  

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(ix) copies, certified by a Responsible Officer of the Borrower, of the Centrifuge Acquisition Agreement and other Centrifuge Acquisition Documents, and all exhibits and schedules thereto, together with all amendments, modifications or waivers thereto in effect as of the date of this Agreement;

 

(x) the Assumption Agreement executed by the Borrower and the Existing Borrower; and

 

(xi) such other documents, governmental certificates, agreements, and lien searches as the Administrative Agent or any Lender may reasonably request.

 

(b) Consents; Authorization; Conflicts. The Borrower shall have received any consents, permits, licenses and approvals required to be obtained in accordance with applicable Legal Requirement, or in accordance with any document, agreement, instrument or arrangement to which any Credit Party is a party, in connection with the execution, delivery, performance, validity and enforceability of this Agreement and the other Credit Documents. In addition, the Credit Parties shall have all such material consents, licenses and approvals required in connection with their continued operation, and such approvals shall be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on this Agreement and the actions contemplated hereby.

 

(c) Representations and Warranties. The representations and warranties contained in Article 4 and in each other Credit Document shall be true and correct on and as of the Closing Date, after giving effect to the Transactions.

 

(d) Fee Letter; Payment of Fees. The Borrower shall have paid the fees and expenses required to be paid as of the Closing Date in the Fee Letter and such fees and expenses required to be paid as of the Closing Date pursuant to Sections 2.6(c) and 9.1 or any other provision of a Credit Document; provided that, as to legal expenses, to the extent the Borrower has received an invoice therefor at or before 12:00 p.m., Eastern time, one Business Day prior to the Closing Date.

 

(e) Other Proceedings. No action, suit, investigation or other proceeding (including without limitation, the enactment or promulgation of a statute or rule) by or before any arbitrator or any Governmental Authority shall be pending or, to the knowledge of the Borrower, threatened, and no preliminary or permanent injunction or order by a state or federal court shall have been entered (i) in connection with this Agreement, any other Credit Document, or any transaction contemplated hereby or thereby or (ii) which, in the judgment of the Administrative Agent, could reasonably be expected to result in a Material Adverse Change.

 

(f) Material Adverse Change. Since December 31, 2013, there shall not have occurred any event, development or circumstance that has or could reasonably be expected to result in a Material Adverse Change.

 

(g) No Default. No Default shall have occurred and be continuing.

 

  

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(h) Solvency. The Administrative Agent shall have received a certificate in form and substance reasonably satisfactory to the Administrative Agent from a senior financial officer or such other officer acceptable to the Administrative Agent of the Borrower and each Guarantor certifying that, before and after giving effect to the Transactions, (i) the Borrower is solvent on an individual basis, and (ii) that the Borrower and each such other Guarantor are solvent on a consolidated basis (assuming with respect to each Guarantor, that the fraudulent conveyance savings language contained in the Guaranty applicable to such Guarantor will be given full effect).

 

(i) Delivery of Financial Statements. The Administrative Agent shall have received true and correct copies of (i) the Financial Statements referred to in Section 4.4, including the certificates described therein, (ii) projections prepared by management of balance sheets, income statements and cash flow statements of the Borrower and its Subsidiaries, covering the first four full years after the Closing Date, such projections shall be quarterly for the first full year after the Closing Date and annually thereafter (and which projections shall not be inconsistent with information previously provided to the Lender) and (iii) a pro forma balance sheet of the Borrower and its consolidated Subsidiaries as of the Closing Date calculated giving pro forma effect to the Transactions.

 

(j) USA Patriot Act. The Administrative Agent shall have received all documentation and other information requested by it that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act.

 

(k) Capital Structure. The equity, capital and ownership structure and the equityholder arrangements of the Borrower and its Subsidiaries (and all agreements relating thereto) will be reasonably satisfactory to the Administrative Agent.

 

(l) Due Diligence. The Administrative Agent shall have completed and be satisfied in its sole discretion with the corporate (or other organizational), environmental and financial due diligence of the Credit Parties and their Affiliates.

 

(m) Landlord Agreements. The Administrative Agent shall have received lien waivers or subordination agreements in form and substance satisfactory to the Administrative Agent to the extent required by Section 6.20 (other than for the lease of Austin Chalk with B&L Storage located in San Angelo, Texas).

 

(n) Deposit Account. The Borrower (and any Subsidiary thereof listed on the schedules to any Security Document as being in existence on the Closing Date) shall open a deposit account with the Administrative Agent, which shall be its primary deposit account, and which account shall be maintained throughout the term of this Agreement.

 

(o) Certificates of Title. For each piece of Certificated Equipment (other than (i) the Certificated Equipment listed on Schedule 3.1(q) hereto and (ii) Excluded Certificated Equipment) owned by the Borrower or any Subsidiary, the Administrative Agent shall have received the original certificate of title to such equipment and such other documents, agreements or instruments as the Administrative Agent may request which are required in order to evidence the Administrative Agent’s first priority lien on the certificate of title for such Certificated Equipment.

 

  

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(p) Liens. The Administrative Agent shall have received evidence satisfactory to it that there are no Liens encumbering any of the Credit Parties’ respective Property other than Permitted Liens.

 

(q) Material Agreements. The Administrative Agent shall have received true and complete copies of the Material Agreements (and certified as such by the Borrower) and the Administrative Agent shall be satisfied with the terms thereof.

 

(r) Centrifuge Acquisition. All conditions to the consummation and effectiveness of the Centrifuge Acquisition (other than the payment of the purchase price) shall have been satisfied or waived. Furthermore, the Administrative Agent shall have received (i) payoff letters, if any, in form and substance reasonably satisfactory to the Administrative Agent covering all debt secured by liens (other than those which would constitute Permitted Liens hereunder) that encumber any of the properties being purchased by Borrower under the Centrifuge Acquisition and (ii) UCC financing statement terminations, deed of trust and mortgage lien releases and other evidence reasonably required by the Administrative Agent shall have been delivered to the Administrative Agent such that, subject only to appropriate filing or recording thereof, all liens (other than those which would constitute Permitted Liens hereunder) encumbering the Centrifuge Properties to be acquired by Borrower have been terminated or released.

 

(s) Preferred Equity Investments. The Administrative Agent shall have received evidence satisfactory to it that the Preferred Equity Investment was consummated on terms and subject to the conditions set forth in the Centrifuge Acquisition Agreement and that the Preferred Equity Investment was otherwise on terms reasonably acceptable to the Administrative Agent.

 

Section 3.2 Conditions Precedent to Each Borrowing and to Each Issuance, Extension or Renewal of a Letter of Credit. The obligation of each Lender to make an Advance on the occasion of each Borrowing (including the initial Borrowing), the obligation of each Issuing Lender to issue, increase, renew or extend a Letter of Credit (including the deemed issuance of Letters of Credit) and of any reallocation of Letter of Credit Exposure provided in Section 2.14, shall be subject to the further conditions precedent that on the date of such Borrowing or such issuance, increase, renewal or extension:

 

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

 

  

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(b) Event of Default. As of the date of the making of any Advance, the issuance, increase, renewal or extension of any Letter of Credit, or the reallocation of the Letter of Credit Exposure, as applicable, no Default or Event of Default shall exist, and the making of such Advance or issuance, increase, renewal or extension of such Letter of Credit, or the relocation of the Letter of Credit Exposure would not cause a Default or Event of Default. Each of: (i) the giving of the applicable Notice of Borrowing or Letter of Credit Application, (ii) the acceptance by the Borrower of the proceeds of such Borrowing, (iii) the issuance, increase, or extension of such Letter of Credit, and (iv) the reallocation of the Letter of Credit Exposure, shall constitute a representation and warranty by the Borrower that on the date of such Borrowing, such issuance, increase, or extension of such Letter of Credit or such reallocation, as applicable, that the foregoing condition precedent has been met.

 

Section 3.3 Conditions Precedent to Effectiveness of Revolving Facility. The obligation of each Lender to make the initial Advance under the Revolving Facility and an initial Letter of Credit, shall be subject to the further conditions precedent that:

 

(a) Borrowing Base Certificate. The Administrative Agent shall have received a completed Borrowing Base Certificate duly executed by a financial officer of the Borrower, setting forth the calculation of the initial Borrowing Base as of the last day of the month preceding the date of the initial Advance under the Revolving Facility or the initial Letter of Credit.

 

(b) Appraisal Report. The Administrative Agent shall have received a written appraisal conducted by an industry recognized third party appraiser acceptable to the Administrative Agent stating, among other things, a detailed NOLV for machinery, parts, equipment and other fixed assets, of the Credit Parties, together with a specified procedures letter from such appraiser satisfactory to the Administrative Agent in its sole discretion.

 

(c) Collateral Lists; Aging Reports; Miscellaneous Due Diligence. The Administrative Agent shall have received or completed, and be satisfied with the result of, (i) an aging report of the Credit Parties’ Receivables which are included in the initial Borrowing Base calculated under the Borrowing Base Certificate delivered pursuant to clause (k) above, (ii) an aging report of the Credit Parties’ accounts payable, (iii) a listing of the Credit Parties’ fixed assets, (iv) a completed Schedule 3.1 which shall list all real property owned or leased by the Credit Parties and including a notation as to all locations where any equipment or inventory of any Credit Party is kept, and (v) a list of the top ten customers of the Credit Parties.

 

Section 3.4 Determinations Under Sections 3.1, 3.2, and 3.3. For purposes of determining compliance with the conditions specified in Sections 3.1, 3.2, and 3.3 each Lender shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by the Credit Documents shall have received written notice from such Lender prior to the Borrowings hereunder specifying its objection thereto and such Lender shall not have made available to the Administrative Agent such Lender’s ratable portion of such Borrowings.

 

  

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ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES

 

Each Credit Party hereto represents and warrants as follows:

 

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

 

Section 4.2 Authorization. The execution, delivery, and performance by each Credit Party of each Credit Document to which such Credit Party is a party and the consummation of the transactions contemplated thereby (a) are within such Credit Party’s powers, (b) have been duly authorized by all necessary corporate, limited liability company or partnership action, (c) do not contravene such Credit Party’s articles or certificate of incorporation or bylaws, partnership or limited liability company agreement, (d) do not contravene any law or any contractual restriction applicable to such Credit Party, (e) do not result in or require the creation or imposition of any Lien on the Property of such Credit Party prohibited by this Agreement, and (f) do not require any authorization or approval or other action by, or any notice or filing with, any Governmental Authority other than those that have been obtained. At the time of each Advance or the issuance, renewal, extension or increase of each Letter of Credit, such Advance and the use of the proceeds of such Advance or the issuance, renewal, extension or increase of such Letter of Credit are within the Borrower’s corporate powers, have been duly authorized by all necessary action and do not contravene (i) the Borrower’s certificate of incorporation or bylaws, or (ii) any Legal Requirement or any contractual restriction binding on the Borrower, will not result in or require the creation or imposition of any Lien on the Property of the Borrower prohibited by this Agreement, and do not require any authorization or approval or other action by, or any notice or filing with, any Governmental Authority other than those that have been obtained or provided.

 

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

 

  

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Section 4.4 Financial Condition.

 

(a) The Borrower has delivered to the Administrative Agent (i) a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of the fiscal year ended December 31, 2013, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally or regionally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and such consolidating statements to be certified by the chief executive officer or chief financial officer of the Borrower, to the effect that (A) such statements fairly present, in all material respects, the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, and (B) there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, (ii) a copy of the management discussion and analysis with respect to such financial statements, and (iii) a duly completed Compliance Certificate signed by the chief financial officer, treasurer, controller, or manager of finance of the Borrower, setting forth the calculations of, among other things, the Leverage Ratio, the Fixed Charge Coverage Ratio, and Capital Expenditures, in each case, as of the fiscal year ended December 31, 2013.

 

(b) The Borrower has delivered to the Administrative Agent consolidated unaudited financial statements for United Centrifuge and its Subsidiaries for the fiscal year 2013. The financial statements referred to in the preceding sentence fairly present, in all material respects, the financial condition of United Centrifuge and its Subsidiaries on the date thereof and the results of their operations and cash flows for the periods then ended and have been prepared in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes. As of the date of the aforementioned financial statements, there were no material contingent obligations, liabilities for taxes, unusual forward or long term commitments, or unrealized or anticipated losses of the applicable Persons, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP.

 

(c) Since the Closing Date, after giving pro forma effect to the Transactions, no event or circumstance that could reasonably be expected to cause a Material Adverse Change has occurred.

 

Section 4.5 Ownership and Liens; Real Property. Each Credit Party (a) has good and marketable title to, or a valid and subsisting leasehold interest in, all of its real Property, and good title to all of its personal Property, used in its business, and (b) none of the Property owned by the Borrower or a Subsidiary of the Borrower is subject to any Lien except Permitted Liens. As of the Closing Date, the Borrower and its Subsidiaries neither own nor lease any real property other than that listed on Schedule 3.1 and all equipment (other than office equipment and equipment located on jobsites, in transit or off location for servicing, repairs or modifications) owned by the Borrower and its Subsidiaries is located at the fee owned or leased real property listed on Schedule 3.1.

 

  

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Section 4.6 True and Complete Disclosure. None of the written factual information (whether delivered before or after the date of this Agreement) prepared by or on behalf of the Borrower and its Subsidiaries and furnished to the Administrative Agent or the Lenders for purposes of or in connection with this Agreement, any other Credit Document or any transaction contemplated hereby or thereby (other than projections, estimates, and budgets) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein not misleading. There is no fact known to any Responsible Officer of any Credit Party on the date of this Agreement that has not been disclosed to the Administrative Agent that could reasonably be expected to result in a Material Adverse Change. All projections, estimates, budgets, and pro forma financial information furnished by the Borrower or any of its Subsidiaries (or on behalf of the Borrower or any such Subsidiary), were prepared on the basis of assumptions, data, information, tests, or conditions (including current and reasonably foreseeable business conditions) believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

 

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

 

Section 4.8 Compliance with Agreements.

 

(a) Neither the Borrower nor any of its Subsidiaries is a party to any indenture, loan or credit agreement or any lease or any other types of agreement or instrument or subject to any charter or corporate restriction or provision of applicable Legal Requirement the performance of or compliance with which could reasonably be expected to cause a Material Adverse Change. Neither the Borrower nor any of its Subsidiaries is in default under, or has received a notice of default under, any contract, agreement, lease or any other document or instrument to which the Borrower or its Subsidiaries is a party which is continuing and which, if not cured, could reasonably be expected to cause a Material Adverse Change.

 

  

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(b) No Default has occurred and is continuing.

 

Section 4.9 Pension Plans. (a) Except for matters that could not reasonably be expected to result in a Material Adverse Change, all Plans are in compliance with all applicable provisions of ERISA, (b) no Termination Event has occurred with respect to any Plan that would result in an Event of Default under Section 7.1(i), and, except for matters that could not reasonably be expected to result in a Material Adverse Change, each Plan has complied with and been administered in accordance with applicable provisions of ERISA and the Code, (c) no “accumulated funding deficiency” (as defined in Section 302 of ERISA) has occurred, and for plan years after December 31, 2007, no unpaid minimum required contribution exists, and there has been no excise tax imposed under Section 4971 of the Code, (d) to the knowledge of Credit Parties, no Reportable Event has occurred with respect to any Multiemployer Plan, and each Multiemployer Plan has complied with and been administered in accordance with applicable provisions of ERISA and the Code, (e) the present value of all benefits vested under each Plan (based on the assumptions used to fund such Plan) did not, as of the last annual valuation date applicable thereto, exceed the value of the assets of such Plan allocable to such vested benefits in an amount that could reasonably be expected to result in a Material Adverse Change, (f) neither the Borrower nor any member of the Controlled Group has had a complete or partial withdrawal from any Multiemployer Plan for which there is any unsatisfied withdrawal liability that could reasonably be expected to result in a Material Adverse Change or an Event of Default under Section 7.1(j), and (g) except for matters that could not reasonably result in a Material Adverse Change, as of the most recent valuation date applicable thereto, neither the Borrower nor any member of the Controlled Group would become subject to any liability under ERISA if the Borrower or any Subsidiary has received notice that any Multiemployer Plan is insolvent or in reorganization. Based upon GAAP existing as of the date of this Agreement and current factual circumstances, no Credit Party has any reason to believe that the annual cost during the term of this Agreement to the Borrower or any Subsidiary for post-retirement benefits to be provided to the current and former employees of the Borrower or any Subsidiary under Plans that are welfare benefit plans (as defined in Section 3(1) of ERISA) could, in the aggregate, reasonably be expected to cause a Material Adverse Change.

 

Section 4.10 Environmental Condition.

 

(a) Permits, Etc. Each Credit Party (i) has obtained all material Environmental Permits necessary for the ownership and operation of its Properties and the conduct of its businesses; (ii) has at all times been and is in material compliance with all terms and conditions of such Environmental Permits and with all other material requirements of applicable Environmental Laws; (iii) except as set forth in Schedule 4.10 has not received written notice of any material violation or alleged material violation of any Environmental Law or Environmental Permit; and (iv) is not subject to any actual or contingent Environmental Claim which could reasonably be expected to result in a Material Adverse Change.

 

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

 

  

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

 

Section 4.11 Subsidiaries. As of the Closing Date, the Borrower has no Subsidiaries other than those listed on Schedule 4.11.

 

Section 4.12 Investment Company Act. Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 4.13 Taxes. Proper and accurate (in all material respects), federal, state, local and foreign tax returns, reports and statements required to have been filed (after giving effect to any extension granted in the time for filing) by the Borrower and each Subsidiary or any member of the Affiliated Group as defined under Section 1504 of the Code (hereafter collectively called the “Tax Group”) have been filed with the appropriate Governmental Authorities, and all taxes (which are material in amount) and other impositions due and payable by any member of the Tax Group have been timely paid prior to the date on which any fine, penalty, interest, late charge or loss may be added thereto for non-payment thereof except where contested in good faith by appropriate proceeding and for which adequate reserves have been established in compliance with GAAP. None of the Property owned by the Borrower or any other member of the Tax Group is Property which the Borrower or any member of the Tax Group is required to treat as being owned by any other Person pursuant to the provisions of Section 168(f)(8) of the Code. Proper and accurate amounts have been withheld by the Borrower and all other members of the Tax Group from their employees for all periods to comply in all material respects with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law.

 

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

 

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

 

  

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Section 4.16 Condition of Property; Casualties. The material Properties used or to be used in the continuing operations of the Borrower and each Subsidiary, are in good working order and condition, normal wear and tear excepted. Neither the business nor the material Properties of the Borrower or any Subsidiary has been affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of such Property or cancellation of contracts, permits or concessions by a Governmental Authority, riot, activities of armed forces or acts of God or of any public enemy, which effect could reasonably be expected to cause a Material Adverse Change. After giving effect to the Centrifuge Acquisition, the Blockers own no Properties.

 

Section 4.17 Insurance. Each of the Borrower and its Subsidiaries carry insurance (which may be carried by the Borrower on a consolidated basis) with reputable insurers in respect of such of their respective Properties, in such amounts and against such risks as is customarily maintained by other Persons of similar size engaged in similar businesses.

 

Section 4.18 Security Interest. Each Credit Party has authorized the filing of financing statements sufficient when filed to perfect the Lien created by the Security Documents. When such financing statements are filed in the offices noted therein, the Administrative Agent will have a valid and perfected security interest in all Collateral that is capable of being perfected by filing financing statements.

 

Section 4.19 OFAC; Anti-Terrorism. Neither the Borrower nor any Subsidiary of the Borrower is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC. Neither the Borrower nor any Subsidiary of the Borrower (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds of any Advance will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

Section 4.20 Solvency. Before and after giving effect to the making of each Advance and the issuance, increase, or amendment of each Letter of Credit, the Credit Parties are, when taken as a whole, Solvent.

 

Section 4.21 Material Agreements. Other than the Credit Documents, Schedule 4.21 sets forth a complete and correct list of all material agreements in effect or to be in effect as of the Closing Date.

 

  

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ARTICLE 5

 

AFFIRMATIVE COVENANTS

 

So long as any Obligation shall remain unpaid, any Lender shall have any Commitment hereunder, or there shall exist any Letter of Credit Exposure, each Credit Party agrees to comply with the following covenants.

 

Section 5.1 Organization. Each Credit Party shall, and shall cause each of its respective Subsidiaries to, (i) preserve and maintain its (a) partnership, limited liability company or corporate existence and (b) material rights, franchises and privileges in the jurisdiction of its organization, and (ii) qualify and remain qualified as a foreign business entity in each jurisdiction in which qualification is necessary in view of its business and operations or the ownership of its Properties and where failure to qualify could reasonably be expected to cause a Material Adverse Change; provided, however, that nothing herein contained shall prevent any transaction permitted by Section 6.7 or Section 6.8.

 

Section 5.2 Reporting.

 

(a) Annual Financial Reports. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event on or before 90 days after the end of each fiscal year of the Borrower (commencing with the fiscal year ending December 31, 2014), (i) a consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income or operations, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, such consolidated statements to be audited and accompanied by a report and opinion of an independent certified public accountant of nationally or regionally recognized standing reasonably acceptable to the Administrative Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit, and such consolidating statements to be certified by the chief executive officer or chief financial officer of the Borrower, to the effect that (A) such statements fairly present, in all material respects, the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, and (B) there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, and (ii) a copy of the management discussion and analysis with respect to such financial statements;

 

  

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(b) Quarterly Financials. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower (commencing with the fiscal quarter ending March 31, 2014), (i) consolidated and consolidating balance sheet of the Borrower and its Subsidiaries as of the end of such fiscal quarter, and the related consolidated and consolidating statements of income or operations, shareholder’s equity and cash flows for such fiscal quarter and for the portion of the Borrower’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, such consolidated statements to be certified by the chief executive officer or the chief financial officer of the Borrower as (A) fairly presenting, in all material respects the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes, and (B) showing that there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries, except as disclosed therein and adequate reserves for such items have been made in accordance with GAAP, and (ii) a copy of the management discussion and analysis with respect to such financial statements;

 

(c) Monthly Financials. The Borrower shall provide, or shall cause to be provided, to the Administrative Agent, as soon as available, but in any event within 30 days after the end of each calendar month (commencing with March 31, 2014), the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such month, and the related consolidated statements of income or operations, shareholders’ equity and cash flows for such month and for the portion of the Borrower’s fiscal year then ended, all in reasonable detail, such consolidated statements to be certified by the chief executive officer or chief financial officer of the Borrower as (i) fairly presenting the financial condition, results of operations, shareholders’ equity and cash flows of the Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes and (ii) showing that there were no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower and its Subsidiaries and adequate reserves for such items have been made in accordance with GAAP;

 

(d) Compliance Certificate. Concurrently with the delivery of the financial statements referred to in Section 5.2(a) and (b) above, the Borrower shall provide to the Administrative Agent a duly completed Compliance Certificate signed by the chief executive officer or chief financial officer of the Borrower.

 

(e) Borrowing Base Certificate. As soon as available and in any event within 30 days after the end of each calendar month, the Borrower shall provide to the Administrative Agent, a certificate of chief executive officer or chief financial officer of the Borrower calculating the Borrowing Base in the form of the Borrowing Base Certificate then in effect as of the end of such calendar month, including therein, among other things, a monthly accounts receivable aging and accounts payables aging report of the Credit Parties.

 

  

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(f) Account Debtors. As soon as available and in any event within 30 days after the end of each fiscal year of the Borrower, the Borrower shall provide to the Administrative Agent a listing of all Account Debtors including physical addresses, contact names and phone numbers;

 

(g) Annual Budget. As soon as available and in any event within 60 days after the end of each fiscal year of the Borrower, the Borrower shall provide to the Administrative Agent an annual operating, capital and cash flow budget for the immediately following fiscal year and detailed on a monthly basis;

 

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

 

(i) Other Creditors. The Credit Parties shall provide to the Administrative Agent promptly after the giving or receipt thereof, copies of any default notices given or received by the Borrower or by any of its Subsidiaries pursuant to the terms of any indenture, loan agreement, credit agreement, or similar agreement;

 

(j) Material Agreements. The Credit Parties shall provide to the Administrative Agent promptly after the giving or receipt thereof, copies of any default notices, demand for payment, termination notices or other material notices given or received by the Borrower or by any of its Subsidiaries pursuant to the terms of any Material Agreement;

 

(k) Litigation. The Credit Parties shall provide to the Administrative Agent promptly after the commencement thereof, notice of all actions, suits, and proceedings before any Governmental Authority, affecting the Borrower or any of its Subsidiaries or any of their respective assets that has a claim for damages in excess of $100,000 or that could otherwise result in a cost, expense or loss to the Borrower or any of its Subsidiaries in excess of $100,000;

 

(l) Environmental Notices. Promptly upon, and in any event no later than 15 days after, the receipt thereof, or the acquisition of knowledge thereof, by any Credit Party, the Credit Parties shall provide the Administrative Agent with a copy of any form of request, claim, complaint, order, notice, summons or citation received from any Governmental Authority or any other Person, (i) concerning violations or alleged violations of Environmental Laws, which seeks to impose liability therefore in excess of $100,000, (ii) concerning any action or omission on the part of any of the Credit Parties or any of their former Subsidiaries in connection with Hazardous Waste or Hazardous Substances which could reasonably result in the imposition of liability in excess of $100,000 or requiring that action be taken to respond to or clean up a Release of Hazardous Substances or Hazardous Waste into the environment and such action or clean-up could reasonably be expected to exceed $100,000, including without limitation any information request related to, or notice of, potential responsibility under CERCLA, or (iii) concerning the filing of a Lien upon, against or in connection with the Borrower, any Subsidiary, or any of their respective former Subsidiaries, or any of their material leased or owned Property, wherever located;

 

  

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(m) Material Changes. The Credit Parties shall provide to the Administrative Agent prompt written notice of any event, development or circumstance that has given rise to or could reasonably be expected to give rise to a Material Adverse Change;

 

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

 

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

 

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

 

(q) Other Governmental Notices. Promptly and in any event within five Business Days after receipt thereof by any Credit Party, the Credit Parties shall provide to the Administrative Agent a copy of any notice, summons, citation, or proceeding seeking to modify in any material respect, revoke, or suspend any material contract, license, permit, or agreement with any Governmental Authority;

 

(r) Disputes; etc. The Credit Parties shall provide to the Administrative Agent prompt written notice of (i) any claims or disputes affecting any Credit Party, which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, or any material labor controversy of which any Credit Party has knowledge resulting in or reasonably considered to be likely to result in a strike against a Credit Party, (ii) to the knowledge of any Credit Party, any threatened claim, dispute, legal or arbitration proceedings, or proceedings before any Governmental Authority, which, if adversely determined, could reasonably be expected to cause a Material Adverse Change, and (iii) any claim, judgment, Lien or other encumbrance (other than a Permitted Lien) affecting any Property of a Credit Party, if the value of the claim, judgment, Lien, or other encumbrance affecting such Property shall exceed $100,000;

 

  

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(s) Management Letters; Other Accounting Reports. Promptly upon receipt thereof, a copy of each other report or letter submitted to any Credit Party by independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower and its Subsidiaries, and a copy of any response by the Borrower or any Subsidiary of the Borrower, or the board of directors or managers (or other applicable governing body) of the Borrower or any Subsidiary, to such letter; and

 

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

 

Section 5.3 Insurance.

 

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

 

(b) Upon request of the Administrative Agent, the Borrower shall deliver copies of all policies of insurance or certificates thereof covering the property or business of the Credit Parties, and endorsements and renewals thereof, to the Administrative Agent. All policies of property insurance with respect to the Collateral either shall have attached thereto a lender’s loss payable endorsement in favor of the Administrative Agent for its benefit and the ratable benefit of the Secured Parties or name the Administrative Agent as loss payee for its benefit and the ratable benefit of the Secured Parties, in either case, in form reasonably satisfactory to the Administrative Agent, and all policies of liability insurance shall name the Administrative Agent for its benefit and the ratable benefit of the Secured Parties as an additional insured and shall provide for a waiver of subrogation in favor of the Administrative Agent for its benefit and the ratable benefit of the Secured Parties. All policies or certificates of insurance shall set forth the coverage, the limits of liability, the name of the carrier, the policy number, and the period of coverage. All such policies shall contain a provision that notwithstanding any contrary agreements between the Borrower, its Subsidiaries, and the applicable insurance company, such policies will not be canceled or allowed to lapse without renewal without at least 30 days’ (or such shorter period as may be accepted by the Administrative Agent) prior written notice to the Administrative Agent.

 

(c) Each Credit Party, upon request of the Administrative Agent, shall provide the Administrative Agent with all information required by the Administrative Agent to procure a flood determination certificate issued by the appropriate Governmental Authority or third party indicating whether any real property constituting Collateral is located in an area designated as a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency) and, if such property is designated to be located in a “flood hazard area”, each applicable Credit Party shall provide the Administrative Agent with evidence of (i) flood insurance on such property obtained by such Credit Party in such total amount as required by Regulation H of the Federal Reserve Board, and (ii) all official rulings and interpretations thereunder or thereof, and otherwise in compliance with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time.

 

  

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(d) Notwithstanding Section 2.4(c)(vi) of this Agreement, after the occurrence and during the continuance of an Event of Default, all proceeds of insurance, including any casualty insurance proceeds, property insurance proceeds, proceeds from actions, and any other proceeds, shall be paid directly to the Administrative Agent and if necessary, assigned to the Administrative Agent, to be applied in accordance with Section 7.6 of this Agreement, whether or not the Secured Obligations are then due and payable.

 

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

 

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

 

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

 

Section 5.6 New Subsidiaries. The Borrower shall deliver to the Administrative Agent each of the items set forth in Part A of Schedule III attached hereto with respect to each Subsidiary of the Borrower created after the Closing Date and within the time requirements set forth in Schedule III.

 

Section 5.7 Security. Each Credit Party agrees that at all times before the termination of the Commitments, payment in full of the Obligations (other than contingent obligations), the expiration or termination of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made) and termination in full of the Commitments, the Administrative Agent shall have an Acceptable Security Interest in the Collateral to secure the performance and payment of the Secured Obligations. Each Credit Party shall, and shall cause each of its Subsidiaries to, grant to the Administrative Agent a Lien in any Property of such Credit Party or such Subsidiary now owned or hereafter acquired (other than leases of buildings or office space) promptly and to take such actions as may be required under the Security Documents to ensure that the Administrative Agent has an Acceptable Security Interest in such Property. Notwithstanding the foregoing, the Borrower shall, and shall cause each Subsidiary to take such actions, including execution and delivery of any Security Documents necessary to create, perfect and maintain an Acceptable Security Interest in favor of the Administrative Agent in the following Properties, whether now owned or hereafter acquired: (i) all Equity Interests issued by any Domestic Subsidiary and held by a Domestic Subsidiary or the Borrower; and (ii) 100% of Equity Interests issued by First Tier Foreign Subsidiaries which are owned by the Borrower or any Domestic Subsidiary but, in any event, no more than 66% of the outstanding Voting Securities issued by any First Tier Foreign Subsidiary.

 

  

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Section 5.8 Deposit Accounts. Each Credit Party shall, and shall cause each of its Subsidiaries to (a) maintain their principal operating accounts and other deposit accounts with Wells Fargo, and (b) deposit all proceeds of Eligible Receivables which were considered in calculating the then effective Borrowing Base into one or more of such deposit accounts; provided that, the requirements of this Section 5.8 shall not apply to deposit accounts that are designated solely as accounts for, and are used solely for (i) payroll funding or employee benefits or (ii) petty cash in an amount not to exceed $50,000 in the aggregate.

 

Section 5.9 Records; Inspection. Each Credit Party shall, and shall cause each of its Subsidiaries to maintain proper, complete and consistent books of record with respect to such Person’s operations, affairs, and financial condition. From time to time upon reasonable prior notice, each Credit Party shall, and shall cause each of its Subsidiaries to, permit any Lender, at such reasonable times and intervals and to a reasonable extent and under the reasonable guidance of officers of or employees delegated by officers of such Credit Party or such Subsidiary, to, subject to any applicable confidentiality considerations, examine and copy the books and records of such Credit Party or such Subsidiary, to visit and inspect the Property of such Credit Party or such Subsidiary, and to discuss the business operations and Property of such Credit Party or such Subsidiary with the officers and directors thereof.

 

Section 5.10 Maintenance and Operation of Property. Each Credit Party shall, and shall cause each of its Subsidiaries to, maintain its owned, leased, or operated Property in good condition and repair in accordance with prudent industry standards, normal wear and tear excepted; and shall abstain from, and cause each of its Subsidiaries to abstain from, knowingly or willfully permitting the commission of waste or other injury, destruction, or loss of natural resources, or the occurrence of pollution, contamination, or any other condition in, on or about the owned or operated Property involving the Environment that could reasonably be expected to result in Response activities and that could reasonably be expected to result in a Material Adverse Change.

 

Section 5.11 Certificates of Title. For each item of Certificated Equipment (other than Excluded Certificated Equipment) purchased by a Credit Party, the Borrower shall deliver, within 30 days after the purchase thereof, a certificate of title for such equipment naming a Credit Party as the owner and shall, promptly upon request therefor by the Administrative Agent, provide such additional documents as may be required in order to name the Administrative Agent as the holder of the first lien thereon.

 

Section 5.12 Appraisal Reports; Field Audits.

 

(a) Field Audits. The Borrower shall, and shall cause each of its Subsidiaries to, permit the Administrative Agent or a third party selected by the Administrative Agent to, at any reasonable time, and from time to time on a semiannual basis upon the prior written request by the Administrative Agent, perform, at the Borrower’s sole reasonable cost and expense, Field Audits; provided that, if no Default has occurred and is continuing, the Borrower shall bear the costs of only two such Field Audits per fiscal year

 

  

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(b) Appraisal of Fixed Assets. Within 30 days after each anniversary of the Closing Date, the Borrower shall, and shall cause each of its Subsidiaries to, permit the Administrative Agent or a third party selected by the Administrative Agent to perform, at the Borrower’s sole reasonable cost and expense, an appraisal of the machinery, parts, equipment and other fixed assets of the Credit Parties, stating, among other things, a detailed NOLV for such assets.

 

(c) Event of Default. If an Event of Default has occurred and is continuing, the Administrative Agent may perform any additional appraisals and audits, and all such appraisals and audits shall be performed at the Borrower’s sole cost and expense.

 

Section 5.13 Material Contracts. Each Credit Party shall, and shall cause each of its Subsidiaries to (a) perform and observe all the terms and provisions of each agreement listed on Schedule 4.21 to be performed or observed by it, (b) maintain each such agreement in full force and effect in accordance with its terms, (c) enforce each such agreement in accordance with its terms, and (d) upon request of the Administrative Agent, make to each other party to each such agreement such demands and requests for information and reports or for action as such Credit Party is entitled to make under such agreement, in each case to the extent that failure to do so would reasonably be expected to result in a Material Adverse Change. The Borrower shall provide notice to the Administrative Agent promptly, but in any event within five Business Days after the occurrence thereof, copies of any amendments, supplements or other modifications to such documents.

 

Section 5.14 Further Assurances; Cure of Title Defects. The Borrower shall, and shall cause each Subsidiary to, cure promptly any defects in the creation and issuance of the Notes and the execution and delivery of the Credit Documents and this Agreement. The Borrower and the Borrower hereby authorizes the Lenders or the Administrative Agent to file any financing statements without the signature of the Borrower or the Borrower to the extent permitted by applicable Legal Requirement in order to perfect or maintain the perfection of any security interest granted under any of the Credit Documents. The Borrower, at the Borrower’s expense, will, and will cause each Subsidiary to, promptly execute and deliver to the Administrative Agent upon reasonable request all such other documents, agreements and instruments to comply with or accomplish the covenants and agreements of the Borrower or any Subsidiary, as the case may be, in the Credit Documents and this Agreement, or to further evidence and more fully describe the collateral intended as security for the Notes, or to correct any omissions in the Security Documents, or to state more fully the security obligations set out herein or in any of the Security Documents, or to perfect, protect or preserve any Liens created pursuant to any of the Security Documents, or to make any recordings, to file any notices or obtain any consents, all as may be necessary or appropriate in connection therewith or to enable the Administrative Agent to exercise and enforce its rights and remedies with respect to any Collateral. Within 30 days (or such longer period as the Administrative Agent may determine in its sole discretion) after a request by the Administrative Agent to cure any title defects or exceptions which are not Permitted Liens raised by such information, the Borrower shall (i) cure such title defects or exceptions which are not Permitted Liens and (ii) deliver to the Administrative Agent satisfactory title evidence (including, to the extent requested, supplemental or new title opinions meeting the foregoing requirements) in form and substance acceptable to the Administrative Agent in its reasonable business judgment as to the Borrower’s and the Guarantors’ ownership of such Properties and the Administrative Agent’s Liens and security interests therein.

 

Section 5.15 Post-Closing.

 

(a) Certificates of Title. Within 30 days following the Closing Date (or such later date as the Administrative Agent may agree in its sole discretion), the Administrative Agent shall have received a certificate of title for each item of Certificated Equipment listed on Schedule 3.1(q) hereto.

 

(b) Blockers. On or before April 30, 2014, the Blockers shall be dissolved or terminated.

 

(c) Landlord Waivers. Within 30 days following the Closing Date (or such later date as the Administrative Agent may agree in its sole discretion), the Administrative Agent shall have received a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent for the lease of Austin Chalk with B&L Storage located in San Angelo, Texas.

 

  

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ARTICLE 6

 

NEGATIVE COVENANTS

 

So long as any Obligation shall remain unpaid, any Lender shall have any Commitment hereunder, or there shall exist any Letter of Credit Exposure, each Credit Party agrees to comply with the following covenants.

 

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

 

(a) the Obligations;

 

(b) intercompany Debt owed by any Credit Party to any other Credit Party; provided that, if applicable, such Debt as an investment is also permitted in Section 6.3;

 

(c) Debt in the form of accounts payable to trade creditors for goods or services and current operating liabilities (other than for borrowed money) which, in each case, is incurred in the ordinary course of business, as presently conducted and is not more than 90 days past due unless contested in good faith by appropriate proceedings and adequate reserves for such items have been made in accordance with GAAP regardless of whether such reserves are required thereunder;

 

(d) purchase money indebtedness or Capital Leases in an aggregate principal amount not to exceed $500,000 at any time; provided no Credit Party may enter into additional indebtedness of the type described in this clause (d) if a Default is continuing or incurring the additional indebtedness could reasonably be expected to cause a Default;

 

(e) Hedging Arrangements permitted under Section 6.15;

 

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

 

  

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(g) unsecured Funded Debt not otherwise permitted under the preceding provisions of this Section 6.1; provided that, the aggregate principal amount thereof shall not exceed $500,000 at any time;

 

(h) Debt arising from the financing of insurance premiums of any Credit Party, so long as (i) such Debt shall not be in excess of the amount of the unpaid cost of, and shall be incurred only to defer the cost of, such insurance for the underlying term of such insurance policy, (ii) any unpaid amount of such Debt is fully cancelled upon termination of the underlying insurance policy, and (iii) the aggregate principal amount of Debt at any time outstanding pursuant to this clause (h) shall not exceed $100,000; and

 

(i) unsecured Debt to the extent such unsecured Debt would be an Investment permitted by Section 6.3;

 

(j) guarantees of primary obligations of any other Person; provided that the primary obligations so guaranteed are permitted by this Agreement; and

 

(k) . Debt in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business obligations in an aggregate amount not to exceed $100,000.

 

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

 

(a) Liens created pursuant to any Credit Document;

 

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

 

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

 

  

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

 

(e) Liens securing purchase money debt or Capital Lease obligations permitted under Section 6.1(d); provided that each such Lien encumbers only the Property purchased in connection with the creation of any such purchase money debt or the subject of any such Capital Lease, and all proceeds thereof (including insurance proceeds), and the amount secured thereby is not increased;

 

(f) encumbrances consisting of minor easements, zoning restrictions, or other restrictions on the use of real property that do not (individually or in the aggregate) materially affect the value of the assets encumbered thereby or materially impair the ability of any Credit Party to use such assets in its business, and none of which is violated in any material aspect by existing or proposed structures or land use;

 

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

 

(h) Liens on cash or securities pledged to secure performance of tenders, surety and appeal bonds, government contracts, performance and return of money bonds, bids, trade contracts, leases, statutory obligations, regulatory obligations and other obligations of a like nature incurred in the ordinary course of business;

 

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

 

(j) Liens in favor a banking institution arising by operation of law encumbering deposits in accounts that are not subject to Account Control Agreements and that are not required to be subject to Account Control Agreements in accordance with the terms hereof held by such banking institution incurred in the ordinary course of business and which are within the general parameters customary in the banking industry;

 

(k) Liens in favor of insurers (or other Persons financing the payment of insurance premiums) securing Debt of the type described in and permitted under Section 6.1(h); provided that such Liens shall encumber only the insurance proceeds of the insurance financed thereby;

 

(l) any interest or title of a lessor, licensor, sublessor or sublicensor under any lease or license permitted by this Agreement retained in the Property being leased or licensed; and

 

(m) purported Liens evidenced by the filing of precautionary financing statements or similar filings relating solely to operating leases of personal property entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; provided that such Liens shall encumber only the personal property subject to such operating lease.

 

  

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Section 6.3 Investments. No Credit Party shall, nor shall it permit any of its Subsidiaries to, make or hold any direct or indirect investment in any Person, including capital contributions to the Person, investments in or the acquisition of the debt or equity securities of the Person, or any loans, guaranties, trade credit, or other extensions of credit to any Person, other than the following (collectively, the “Permitted Investments”):

 

(a) investments in the form of trade credit to customers of a Credit Party arising in the ordinary course of business and represented by accounts from such customers;

 

(b) Liquid Investments;

 

(c) loans, advances, or capital contributions to, or investments in, or purchases or commitments to purchase any stock or other securities or evidences of indebtedness of, or interests in, any Person existing on the Closing Date, in each case as specified in the attached Schedule 6.3 and made on or prior to the Closing Date; provided that, the respective amounts of such loans, advances, capital contributions, investments, purchases and commitments shall not be increased (other than appreciation);

 

(d) investments, loans, advances and equity contributions by a Credit Party in any other Credit Party;

 

(e) creation of any additional Subsidiaries domiciled in the U.S. in compliance with Section 5.6 and Schedule III;

 

(f) Capital Expenditures permitted under Section 6.18;

 

(g) guaranties permitted under Section 6.1;

 

(h) loans or advances to officers, directors and employees of Borrower and its Subsidiaries in the ordinary course of business up to a maximum of $150,000 in the aggregate at any one time outstanding;

 

(i)  investments received in settlement of amounts due to any Credit Party or any of their respective Subsidiaries effected in the ordinary course of business or owing to any Credit Party or any of their respective Subsidiaries as a result of insolvency proceedings involving an Account Debtor or upon the foreclosure, deed in lieu of foreclosure, or enforcement of any Lien in favor of a Credit Party or its Subsidiaries; and

 

(j) other investments, loans, advances and equity contributions in an aggregate amount not exceeding $100,000 at any time outstanding.

 

Section 6.4 Acquisitions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, make any Acquisition without the consent of the Majority Lenders.

 

  

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Section 6.5 Agreements Restricting Liens. No Credit Party shall, nor shall it permit any of its Subsidiaries to, create, incur, assume or permit to exist any contract, agreement or understanding (other than (i) the Credit Documents, (ii) agreements governing Debt permitted by Sections 6.1(d), (e) and (h) to the extent such restrictions govern only the asset (and the proceeds thereof) financed pursuant to such Debt, (iii) any prohibition or limitation that exists pursuant to applicable requirements of a Governmental Authority, (iv) any prohibition or limitation that restricts subletting or assignment of leasehold interests contained in any lease governing a leasehold interest of Borrower or its Subsidiaries and customary provisions in other contracts restricting assignment thereof, (v) agreements entered into in connection with the sale of assets permitted by Section 6.8 to the extent such restrictions govern only the assets being sold and (vi) any prohibition or limitation that exists in any contract to which a Credit Party is a party on the date hereof so long as (x) such prohibition or limitation is generally applicable and does not specifically address any of the Debt or the Liens granted under the Credit Documents, and (y) the noncompliance of such prohibition or limitation would not reasonably be expected to be adverse to the Administrative Agent or the Lenders) which in any way prohibits or restricts the granting, conveying, creation or imposition of any Lien on any of its Property, whether now owned or hereafter acquired, to secure the Secured Obligations or restricts any Subsidiary from paying Restricted Payments to the Borrower, or which requires the consent of or notice to other Persons in connection therewith.

 

Section 6.6 Use of Proceeds; Use of Letters of Credit. No Credit Party shall, nor shall it permit any of its Subsidiaries to: (a) use the proceeds of the Revolving Advances, the Swing Line Advances, or the Letters of Credit for any purposes other than (i) working capital purposes of any Credit Party, (ii) finance Capital Expenditures, (iii) other general corporate purposes of any Credit Party (including payment of fees and expenses in connection with this Agreement and the other Credit Documents); or (b) use the proceeds of the Term Advances for any purposes other than (i) to pay the purchase price for the Centrifuge Acquisition, (ii) finance Capital Expenditures, (iii) working capital purposes of any Credit Party, (iv) to refinance the Existing Credit Agreement or (v) for other general corporate purposes of any Credit Party, including the payment of fees and expenses related to the closing of the Centrifuge Acquisition or the entering into of this Agreement and the other Credit Documents;. No Credit Party shall, nor shall it permit any of its Subsidiaries to, use any part of the proceeds of Advances or Letters of Credit for any purpose which violates, or is inconsistent with, Regulations T, U, or X.

 

Section 6.7 Corporate Actions; Accounting Changes.

 

(a) No Credit Party shall, nor shall it permit any of its Subsidiaries to, merge or consolidate with or into any other Person, except that (i) any Credit Party may merge or be consolidated with or into any other Credit Party and (ii) a newly formed, wholly-owned Subsidiary of the Borrower may merge with another Person in order to consummate an Acquisition by merger permitted under Section 6.4 so long as such newly formed, wholly-owned Subsidiary is the surviving entity; provided that immediately after giving effect to any such proposed transaction no Default shall exist and, in the case of any such merger or consolidation involving the Borrower, the Borrower shall be the surviving entity.

 

(b) No Credit Party shall, nor shall it permit any of its Subsidiaries to, (i) without 30 days prior written notice to the Administrative Agent, change its name, change its state of incorporation, formation or organization, change its organizational identification number or reorganize in another jurisdiction, (ii) create or suffer to exist any Foreign Subsidiary , (iii) without prior written notice to, and prior consent of, the Administrative Agent, amend, supplement, modify or restate their articles or certificate of incorporation or formation, limited partnership agreement, bylaws, limited liability company agreements, or other equivalent organizational documents other than such amendment, supplement, modification or restatement which could not reasonably be expected to be adverse to the interests of the Administrative Agent and the Lenders in any material respect, (v) change its method of accounting employed in the preparation of the financial statements referred to in Section 4.4 or change the fiscal year end of the Borrower unless required to conform to GAAP or approved in writing by the Administrative Agent, or (vi) without prior written notice to the Administrative Agent, discontinue or change its address of its place of business, chief executive officer, or office where it keeps records concerning accounts, contract rights, and general intangibles.

 

  

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Section 6.8 Sale of Assets. No Credit Party shall, nor shall it permit any of its Subsidiaries to, sell, convey, or otherwise transfer any of its assets except that (a) any Credit Party may sell inventory in the ordinary course of business, (b) any Credit Party may sell equipment in the ordinary course of business and consistent with past practices, (c) any Credit Party may sell, convey, dispose or otherwise transfer any of its assets to any other Credit Party; provided that the receiving Credit Party shall ratify, grant and confirm the Liens on such assets (and any other related Collateral) that are real property pursuant to documentation satisfactory to the Administrative Agent; (d) any Credit Party may sell, convey, dispose or otherwise transfer equipment that is obsolete or in need of replacement to third parties if (i) such Credit Party receives fair market value for such equipment, and (ii) 100% of the consideration received for such equipment is cash; (e) the Borrower and its Subsidiaries may sell, convey, dispose or otherwise transfer any Properties not otherwise permitted under the preceding clauses (a) – (d); provided that, the aggregate amount of all such sales, conveyance, dispositions and transfers shall not exceed $250,000 in any fiscal year; and (f) the Blockers may be dissolved on or before April 30, 2014.

 

Section 6.9 Restricted Payments. No Credit Party shall make, nor shall it permit any of its Subsidiaries to make any Restricted Payments except that so long as no Default exists or would result from the making of such Restricted Payment any Credit Party may make Restricted Payments to any other Credit Party.

 

Section 6.10 Affiliate Transactions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into or permit to exist any transaction or series of transactions (including, but not limited to, the purchase, sale, lease or exchange of Property, the making of any investment, the giving of any guaranty, the assumption of any obligation or the rendering of any service) with any of their Affiliates which are not Credit Parties unless such transaction or series of transactions is on terms no less favorable to the Borrower or any Subsidiary, as applicable, than those that could be obtained in a comparable arm’s length transaction with a Person that is not such an affiliate except the restrictions in this Section 6.10 shall not apply to: (a) the Restricted Payments permitted under Section 6.9, (b) Investments by a Credit Party in the form of Equity Interests in another Credit Party, (c) reasonable and customary director, officer and employee compensation (including bonuses), indemnification and other benefits (including retirement, health, stock option and other benefit plans), (d) transactions solely between or among Credit Parties and (e) the transactions described on Schedule 6.10 hereto.

 

Section 6.11 Line of Business. No Credit Party shall, and shall not permit any of its Subsidiaries to, change the character of the Borrower’s and its Subsidiaries collective business as conducted on the Closing Date, or engage in any type of business not reasonably related to the Borrower’s and its Subsidiaries collective business as presently and normally conducted.

 

Section 6.12 Hazardous Materials. No Credit Party (a) shall, nor shall it permit any of its Subsidiaries to, create, handle, transport, use, or dispose of any Hazardous Substance or Hazardous Waste, except in the ordinary course of its business and except in compliance with Environmental Law other than to the extent that such non-compliance could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change or in any liability to the Lenders or the Administrative Agent, and (b) shall, nor shall it permit any of its Subsidiaries to, release any Hazardous Substance or Hazardous Waste into the environment and shall not permit any Credit Party’s or any Subsidiary’s Property to be subjected to any release of Hazardous Substance or Hazardous Waste, except in compliance with Environmental Law other than to the extent that such non-compliance could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change or in any liability on the Lenders or the Administrative Agent.

 

  

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Section 6.13 Compliance with ERISA. Except for matters that individually or in the aggregate could not reasonably be expected to cause a Material Adverse Change, no Credit Party shall, nor shall it permit any of its Subsidiaries to, directly or indirectly: (a) engage in any transaction in connection with which the Borrower or any Subsidiary of Borrower could be subjected to either a civil penalty assessed pursuant to Section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of Subtitle D of the Code; (b) terminate, or permit any member of the Controlled Group to terminate, any Plan in a manner, or take any other action with respect to any Plan, which could result in any liability to the Borrower, any Subsidiary or any member of the Controlled Group to the PBGC; (c) fail to make, or permit any member of the Controlled Group to fail to make, full payment when due of all amounts which, under the provisions of any Plan, agreement relating thereto or applicable Legal Requirement, the Borrower, a Subsidiary or member of the Controlled Group is required to pay as contributions thereto; (d) permit to exist, or allow any Subsidiary or any member of the Controlled Group to permit to exist, any accumulated funding deficiency (or unpaid minimum required contribution for plan years after December 31, 2007) within the meaning of Section 302 of ERISA or section 412 of the Code, whether or not waived, with respect to any Plan; (e) permit, or allow any member of the Controlled Group to permit, the actuarial present value of the benefit liabilities (as “actuarial present value of the benefit liabilities” shall have the meaning specified in section 4041 of ERISA) under any Plan that is regulated under Title IV of ERISA to exceed the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (f) contribute to or assume an obligation to contribute to, or permit any member of the Controlled Group to contribute to or assume an obligation to contribute to, any Multiemployer Plan; (g) acquire, or permit any member of the Controlled Group to acquire, an interest in any Person that causes such Person to become a member of the Controlled Group if such Person sponsors, maintains or contributes to, or at any time in the six-year period preceding such acquisition has sponsored, maintained, or contributed to, (1) any Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA under which the actuarial present value of the benefit liabilities under such Plan exceeds the current value of the assets (computed on a plan termination basis in accordance with Title IV of ERISA) of such Plan allocable to such benefit liabilities; (h) incur, or permit any member of the Controlled Group to incur, a liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201 or 4204 of ERISA; or (i) contribute to or assume an obligation to contribute to any employee welfare benefit plan, as defined in section 3(1) of ERISA, including, without limitation, any such plan maintained to provide benefits to former employees of such entities, that may not be terminated by such entities in their sole discretion at any time without any liability.

 

Section 6.14 Sale and Leaseback Transactions. No Credit Party shall, nor shall it permit any of its Subsidiaries to, sell or transfer to a Person any Property, whether now owned or hereafter acquired, if at the time or thereafter the Borrower or a Subsidiary shall lease as lessee such Property or any part thereof or other Property which the Borrower or a Subsidiary intends to use for substantially the same purpose as the Property sold or transferred.

 

Section 6.15 Limitation on Hedging. No Credit Party shall, nor shall it permit any of its Subsidiaries to, (a) purchase, assume, or hold a speculative position in any commodities market or futures market or enter into any Hedging Arrangement for speculative purposes; or (b) be party to or otherwise enter into any Hedging Arrangement which (i) is entered into for reasons other than as a part of its normal business operations as a risk management strategy and/or hedge against changes resulting from market conditions related to the Borrower’s or its Subsidiaries’ operations, or (ii) obligates the Borrower or any of its Subsidiaries to any margin call requirements or otherwise requires the Borrower or any of its Subsidiaries to put up money, assets or other security (other than (x) unsecured letters of credit and (y) cash collateral to the extent required under applicable Legal Requirement).

 

Section 6.16 Leverage Ratio. Borrower shall not permit the Leverage Ratio (a) as of the fiscal quarter ending on March 31, 2014 to be more than 3.00 to 1.00, (b) as of the fiscal quarter ending on June 30, 2014 to be more than 2.75 to 1.00, and (c) as of each fiscal quarter ending on or after September 30, 2014 to be more than 2.50 to 1.00. For the avoidance of doubt, the calculation of the Leverage Ratio for the fiscal year ending December 31, 2013 and the fiscal quarter ending March 31, 2014 shall not include any EBITDA or Funded Debt of United Centrifuge.

 

  

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Section 6.17 Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed Charge Coverage Ratio as of each fiscal quarter ending on or after March 31, 2014 to be less than 1.50 to 1.00. For the avoidance of doubt, the calculation of the Fixed Charge Coverage Ratio for the fiscal year ending December 31, 2013 and the fiscal quarter ending March 31, 2014 shall not include any EBITDA, taxes, Maintenance Capital Expenditures, Interest Expenses or Funded Debt of United Centrifuge.

 

Section 6.18 Capital Expenditures. Borrower shall not, nor shall it permit any of its Subsidiaries to, cause the aggregate Capital Expenditures (other than Debt Funded Capital Expenditures and Equity Funded Capital Expenditures) expended by the Borrower or any of its Subsidiaries in each fiscal year to exceed the CapEx Basket Amount.

 

Section 6.19 [Reserved].

 

Section 6.20 Landlord Agreements. No Credit Party shall, nor shall it permit any of its Subsidiaries to (a) hold, store or otherwise maintain any equipment or inventory that is intended to constitute Collateral pursuant to the Security Documents at premises within the U.S. which are not owned by a Credit Party unless (i) such equipment is located at the job site under which such equipment is then currently under contract, (ii) such equipment or inventory is located at premises within the U.S. that are leased by a Credit Party and which either (A) such premises are covered by a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent or (B) the value of equipment and inventory at such location is less than $100,000 in the aggregate amount, (iii) such equipment is office equipment, (iv) such equipment or inventory is in transit, or (v) such equipment is off location for servicing, repairs or modification, or (b) after the Closing Date, enter into any new verbal or written leases for premises with any Person who has not executed a lien waiver or subordination agreement in form and substance satisfactory to the Administrative Agent unless the equipment or inventory located on such premises would fall under any of the provisions in the foregoing clause (a).

 

Section 6.21 [Reserved].

 

Section 6.22 Operating Leases. No Credit Party shall, nor shall it permit any of its Subsidiaries to, enter into any lease that constitutes an operating lease under GAAP if the obligations of a Credit Party or such Subsidiary as lessee under such lease would cause its lease payments (excluding payments for taxes, insurance, and other non-rental expenses to the extent not included within the stated amount of the rental payments under such lease) in respect of all such leases entered into by the Borrower and its Subsidiaries to exceed $500,000 during any fiscal year of the Borrower.

 

Section 6.23 Prepayment of Certain Debt and Other Obligations. No Credit Party shall, nor shall it permit any of its Subsidiaries to, prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment in violation of the subordination terms of, any Debt, except (a) the prepayment of the Obligations in accordance with the terms of this Agreement, (b) regularly scheduled or required repayments or redemptions of Permitted Debt (other than subordinated debt) and refinancings and refundings of such Permitted Debt so long as such refinancings and refundings would otherwise comply with Section 6.1, (c) so long as no Event of Default exists or would result therefrom, other prepayments of Permitted Debt not described in the immediately preceding clauses (a) and (b), but specifically excluding any prepayments, redemptions, purchases, defeasance, or other satisfaction of subordinated debt.

 

Section 6.24 Material Agreements. No Credit Party shall terminate, amend, supplement or otherwise modify (a) any agreement listed on Schedule 4.21 without the prior written consent of the Administrative Agent, acting in its reasonable discretion, if such amendment, supplement or modification could reasonably be expected to be adverse in any material respect to the Administrative Agent or the Lenders, or (b) any Key Employment Agreement if the effect of such termination, amendment, supplement or modification would be to shorten the term of employment thereunder.

 

  

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ARTICLE 7

 

DEFAULT AND REMEDIES

 

Section 7.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement and any other Credit Document:

 

(a) Payment Failure. Any Credit Party (i) fails to pay any principal when due under this Agreement or (ii) fails to pay, within three Business Days of when due, interest or any other amount due under this Agreement or any other Credit Document, including payments of fees, reimbursements, indemnifications and any amounts due under Section 2.4(c);

 

(b) False Representation or Warranties. Any representation or warranty made or deemed to be made by any Credit Party in this Agreement, in any other Credit Document or in any certificate delivered in connection with this Agreement or any other Credit Document is incorrect, false or otherwise misleading in any material respect (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) at the time it was made or deemed made;

 

(c) Breach of Covenant. (i) Any breach by any Credit Party of any of the covenants in Section 5.2(d), Section 5.2(i), Section 5.3(a) regarding casualty insurance, or Article 6 of this Agreement or the corresponding covenants in any Guaranty or (ii) any breach by any Credit Party of any other covenant contained in this Agreement or any other Credit Document and such breach shall remain unremedied for a period of thirty days following the earlier of (A) the date on which Administrative Agent gave notice of such failure to the Borrower and (B) the date any officer of the Borrower or any Subsidiary acquires knowledge of such failure (such grace period to be applicable only in the event such Default can be remedied by corrective action of the Borrower or any Subsidiary);

 

(d) Guaranties. Any provisions in the Guaranties shall at any time (before its expiration according to its terms) and for any reason cease to be in full force and effect and valid and binding in accordance with their terms on the Guarantors party thereto or shall be contested by any Guarantor party thereto or any Guarantor shall deny it has any liability or obligation under such Guaranties; or any Credit Party shall cease to exist other than as expressly permitted by the terms of this Agreement;

 

(e) Security Documents. Any Security Document shall at any time and for any reason cease to create an Acceptable Security Interest in the Property purported to be subject to such agreement in accordance with the terms of such agreement (except to the extent caused by any intentional action or inaction of the Administrative Agent) or any material provisions thereof shall cease to be in full force and effect and valid and binding on the Credit Party that is a party thereto or any such Credit Party shall so state in writing (unless released or terminated pursuant to the terms of such Security Document

 

(f) Cross-Default. (i) The Borrower or any Subsidiary shall fail to pay any principal of or premium or interest on its Debt which is outstanding in a principal amount of at least $500,000 individually or when aggregated with all such Debt of the Borrower and the Subsidiaries so in default (but excluding Debt evidenced by the Notes) when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to Debt which is outstanding in a principal amount of at least $500,000 individually or when aggregated with all such Debt of the Borrower and the Subsidiaries so in default (other than Debt evidenced by the Notes), and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt prior to the stated maturity thereof; or (iii) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment); provided that, for purposes of this paragraph (f), the “principal amount” of the obligations in respect of Hedging Arrangements at any time shall be Swap Termination Value that would be required to be paid by a Borrower or Subsidiary if such Hedging Arrangements were terminated at such time;

 

  

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(g) Bankruptcy and Insolvency. Any Credit Party (A) admits in writing its inability to pay its debts generally as they become due; makes an assignment for the benefit of its creditors; consents to or acquiesces in the appointment of a receiver, liquidator, fiscal agent, or trustee of itself or any of its Property; files a petition under bankruptcy or other laws for the relief of debtors; or consents to any reorganization, arrangement, workout, liquidation, dissolution, or similar relief under bankruptcy or other laws for the relief of debtors or (B) shall have had, without its consent: any court enter an order appointing a receiver, liquidator, fiscal agent, or trustee of itself or any of its Property; any petition filed against it seeking reorganization, arrangement, workout, liquidation, dissolution or similar relief under bankruptcy or other laws for the relief of debtors and such petition shall not be dismissed, stayed, or set aside for an aggregate of 60 days, whether or not consecutive;

 

(h) Settlements; Adverse Judgment. The Borrower or any of its Subsidiaries enters into a settlement of any claim against any of them when a suit has been filed or suffers final judgments against any of them since the date of this Agreement in an aggregate amount, less any insurance proceeds covering such settlements or judgments which are received or as to which the insurance carriers admit liability, greater than $500,000 and, in the case of final judgments, either (i) enforcement proceedings shall have been commenced by any creditor upon such judgments or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgments, by reason of a pending appeal or otherwise, shall not be in effect;

 

(i) Termination Events. Any Termination Event with respect to a Plan shall have occurred, and, 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent, such Termination Event shall not have been corrected and shall have created and caused to be continuing a material risk of Plan termination or liability for withdrawal from the Plan as a “substantial employer” (as defined in Section 4001(a)(2) of ERISA), which termination could reasonably be expect to result in a liability of, or liability for withdrawal could reasonably be expected to be, greater than $500,000;

 

(j) Plan Withdrawals. The Borrower or any other member of the Controlled Group as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and such withdrawing employer shall have incurred a withdrawal liability in an annual amount exceeding $500,000;

 

(k) Credit Documents. Any material provision of any Credit Document shall for any reason (other than in accordance with its terms) cease to be valid and binding on any Credit Party or any such Person shall so state in writing;

 

(l) Change in Control. The occurrence of a Change in Control; or

 

(m) Casualty. The occurrence of any loss, theft, substantial damage or destruction of Collateral the fair market value of which not fully covered by insurance (except for deductibles and allowing for the depreciated value of such Collateral) and/or cash collateral deposited by the Borrower in connection therewith, exceeds $500,000.

 

Section 7.2 Optional Acceleration of Maturity. If any Event of Default shall have occurred and be continuing, then, and in any such event,

 

  

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(a) the Administrative Agent (i) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare that the obligation of each Lender to make Advances and the obligation of the Issuing Lender to issue Letters of Credit shall be terminated, whereupon the same shall forthwith terminate, and (ii) shall at the request, or may with the consent, of the Majority Lenders, by notice to the Borrower, declare the Notes, all interest thereon, and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Notes, all such interest, and all such amounts shall become and be forthwith due and payable in full, without presentment, demand, protest or further notice of any kind (including, without limitation, any notice of intent to accelerate or notice of acceleration), all of which are hereby expressly waived by each of the Credit Parties,

 

(b) the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Majority Lenders, Cash Collateralize an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Secured Obligations to the extent the Letter of Credit Exposure is not otherwise paid or Cash Collateralized at such time, and

 

(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security Documents, the Guaranties, or any other Credit Document for the ratable benefit of the Secured Parties by appropriate proceedings.

 

Section 7.3 Automatic Acceleration of Maturity. If any Event of Default pursuant to Section 7.1(g) shall occur,

 

(a) the obligation of each Lender to make Advances and the obligation of the Issuing Lender to issue Letters of Credit shall immediately and automatically be terminated and the Notes, all interest on the Notes, and all other amounts payable under this Agreement shall immediately and automatically become and be due and payable in full, without presentment, demand, protest or any notice of any kind (including, without limitation, any notice of intent to accelerate or notice of acceleration), all of which are hereby expressly waived by each of the Credit Parties,

 

(b) the Borrower shall, on demand of the Administrative Agent at the request or with the consent of the Majority Lenders, Cash Collateralize an amount of cash equal to the outstanding Letter of Credit Exposure as security for the Secured Obligations to the extent the Letter of Credit Exposure is not otherwise paid or Cash Collateralized at such time, and

 

(c) the Administrative Agent shall at the request of, or may with the consent of, the Majority Lenders proceed to enforce its rights and remedies under the Security Documents, the Guaranties, or any other Credit Document for the ratable benefit of the Secured Parties by appropriate proceedings.

 

Section 7.4 Set-off. If an Event of Default shall have occurred and be continuing, the Administrative Agent, each Lender, the Issuing Lender, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable Legal Requirement, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Administrative Agent, such Lender, the Issuing Lender or any such Affiliate to or for the credit or the account of any Credit Party against any and all of the obligations of such Credit Party now or hereafter existing under this Agreement or any other Credit Document to the Administrative Agent, such Lender or the Issuing Lender, irrespective of whether or not the Administrative Agent, such Lender or the Issuing Lender shall have made any demand under this Agreement or any other Credit Document and although such obligations of any Credit Party may be contingent or unmatured or are owed to a branch or office of the Administrative Agent, such Lender or such Issuing Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.14 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lender, the Swing Line Lender and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender Party and its Affiliates under this Section 7.4 are in addition to other rights and remedies (including other rights of setoff) that such Lender or Affiliates may have. Each Lender Party agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application, provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

  

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Section 7.5 Remedies Cumulative, No Waiver. No right, power, or remedy conferred to any Lender in this Agreement or the Credit Documents, or now or hereafter existing at law, in equity, by statute, or otherwise shall be exclusive, and each such right, power, or remedy shall to the full extent permitted by law be cumulative and in addition to every other such right, power or remedy. No course of dealing and no delay in exercising any right, power, or remedy conferred to any Lender in this Agreement and the Credit Documents or now or hereafter existing at law, in equity, by statute, or otherwise shall operate as a waiver of or otherwise prejudice any such right, power, or remedy. Any Lender may cure any Event of Default without waiving the Event of Default. No notice to or demand upon the Borrower or any other Credit Party shall entitle the Borrower or any other Credit Party to similar notices or demands in the future.

 

Section 7.6 Application of Payments. Prior to an Event of Default, all payments made hereunder shall be applied by the Administrative Agent as directed by the Borrower, but subject to the terms of this Agreement, including the application of prepayments according to Section 2.4(e) and Section 2.11. During the existence of an Event of Default, and subject to Section 2.14, all payments and collections received by the Administrative Agent (other than as a result of the exercise of remedies against Collateral or against the Borrower or any Subsidiary) shall be applied to the Secured Obligations in accordance with Section 2.11 and otherwise in the following order:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent (in its capacity as such hereunder or under any other Credit Document) in connection with this Agreement or any of the Secured Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent as secured party hereunder or under any other Credit Document on behalf of any Credit Party and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Credit Document, in each case, to the extent required to be paid or reimbursed by a Lender, the Borrower or any other Credit Party pursuant to the terms of this Agreement or any other Credit Document;

 

SECOND, to the payment of all accrued interest constituting part of the Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the amounts of the Obligations owed to them on the date of any such distribution);

 

THIRD, to the payment of any then due and owing principal constituting part of the Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the principal amounts of the Obligations owed to them on the date of any such distribution);

 

FOURTH, to the payment of all accrued interest constituting part of the Secured Obligations (other than the Obligations), the amounts so applied to be distributed ratably among the Secured Parties that are owed such obligations in accordance with the amounts of such Secured Obligations owed to them on the date of any such distribution;

 

FIFTH, to the payment of any then due and owing principal constituting part of the Secured Obligations (other than the Obligations), the amounts so applied to be distributed ratably among the Secured Parties that are owed such obligations in accordance with the principal amounts of such Secured Obligations owed to them on the date of any such distribution;

 

  

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SIXTH, to the payment of any then due and owing other amounts (including fees and expenses) constituting part of the Secured Obligations, the amounts so applied to be distributed ratably among the Secured Parties in accordance with such amounts owed to them on the date of any such distribution; and

 

SEVENTH, to the Credit Parties, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or its assets, but appropriate adjustments shall be made with respect to payments from other Credit Parties to preserve the allocation to Secured Obligations otherwise set forth above in this Section.

 

Notwithstanding the foregoing, during the existence of an Event of Default, all payments and collections received by the Administrative Agent resulting from the exercise of remedies against Collateral or against the Borrower or any Subsidiary shall be applied to the Secured Obligations in accordance with Section 2.11 and otherwise in the following order:

 

FIRST, to the payment of all costs and expenses incurred by the Administrative Agent (in its capacity as such hereunder or under any other Credit Document) in connection with this Agreement or any of the Secured Obligations, including all court costs and the fees and expenses of its agents and legal counsel, the repayment of all advances made by the Administrative Agent as secured party hereunder or under any other Credit Document on behalf of any Credit Party and any other costs or expenses incurred in connection with the exercise of any right or remedy hereunder or under any other Credit Document, in each case, to the extent required to be paid or reimbursed by a Lender, the Borrower or any other Credit Party pursuant to the terms of this Agreement or any other Credit Document;

 

SECOND, to the payment of all accrued interest constituting part of the Secured Obligations (the amounts so applied to be distributed ratably among the Secured Parties in accordance with the amounts of the Secured Obligations owed to them on the date of any such distribution);

 

THIRD, to the payment of any then due and owing principal constituting part of the Secured Obligations (the amounts so applied to be distributed ratably among the Secured Parties (including, to the extent applicable to any termination payments owing under Hedging Arrangements, the Swap Counterparties and to the extent applicable to Banking Services Obligations, the Lenders or their Affiliates that is owed such obligations) pro rata in accordance with the principal amounts of the Secured Obligations owed to them on the date of any such distribution), and when applied to make distributions by the Administrative Agent to pay the principal amount of the outstanding Borrowings, pro rata to the Lenders; provided that, the “principal amount” of the obligations in respect of Hedging Arrangements under this clause shall be the Swap Termination Value then due and owing by the Borrower Entities and the “principal amount” of the Banking Services Obligations shall mean all contractually obligated amount then due and owing by the Borrower Entities other than interest or fees

 

FOURTH, to the payment of any then due and owing other amounts (including fees and expenses) constituting part of the Secured Obligations, the amounts so applied to be distributed ratably among the Secured Parties in accordance with such amounts owed to them on the date of any such distribution; and

 

FIFTH, to the Credit Parties, their successors or assigns, or as a court of competent jurisdiction may otherwise direct.

 

Excluded Swap Obligations with respect to any Guarantor shall not be paid with amounts received from such Guarantor or its assets, but appropriate adjustments shall be made with respect to payments from other Credit Parties to preserve the allocation to Secured Obligations otherwise set forth above in this Section.

 

  

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ARTICLE 8

 

THE ADMINISTRATIVE AGENT AND ISSUING LENDER

 

Section 8.1 Appointment and Authority. Each Lender, the Swing Line Lender and the Issuing Lender hereby irrevocably (a) appoints Wells Fargo to act on its behalf as the Administrative Agent hereunder and under the other Credit Documents, and (b) authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. The provisions of this Article 8 are solely for the benefit of the Lender Parties, and neither the Borrower nor any other Credit Party shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Credit Document (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Legal Requirement. Instead such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

 

Section 8.2 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any other Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. Wells Fargo (and any successor acting as Administrative Agent) and its Affiliates may accept fees and other consideration from the Borrower or any Affiliate of the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders or the Issuing Lender.

 

Section 8.3 Exculpatory Provisions. The Administrative Agent (which term as used in this Section 8.3 shall include its Related Parties) shall not have any duties or obligations except those expressly set forth herein and in the other Credit Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:

 

(a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Credit Documents that the Administrative Agent is required to exercise as directed in writing by the Majority Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Credit Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Credit Document or applicable Legal Requirement, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and

 

  

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(c) shall not, except as expressly set forth herein and in the other Credit Documents, have any duty to disclose, nor shall it be liable for the failure to disclose, any information relating to the Borrower, any other Credit Party or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

 

The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Majority Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 7.1 and 9.3) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall not be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Administrative Agent in writing by the Borrower, a Lender, the Swing Line Lender or the Issuing Lender. In the event that the Administrative Agent receives such a notice of the occurrence of a Default, the Administrative Agent shall (subject to Section 9.3) take such action with respect to such Default or Event of Default as shall reasonably be directed by the Majority Lenders, provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action) with respect to such Default as it shall deem advisable in the best interest of the Lender Parties.

 

The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any recital, statement, warranty or representation (whether written or oral) made in or in connection with this Agreement or any other Credit Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the value, validity, enforceability, effectiveness, enforceability, sufficiency or genuineness of this Agreement, any other Credit Document or any other agreement, instrument or document, (v) the inspection of, or to inspect, the Property (including the books and records) of any Credit Party or any Subsidiary or Affiliate thereof, (vi) the satisfaction of any condition set forth in Article 3 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent, or (vii) any litigation or collection proceedings (or to initiate or conduct any such litigation or proceedings) under any Credit Document unless requested by the Majority Lenders in writing and its receives indemnification satisfactory to it from the Lenders.

 

Section 8.4 Reliance by Administrative Agent, Swing Line Lender and Issuing Lender. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document, writing or other communication (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Credit Extension or any Conversion or continuance of an Advance that by its terms must be fulfilled to the satisfaction of a Lender, the Swing Line Lender or the Issuing Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender, the Swing Line Lender or Issuing Lender unless the Administrative Agent shall have received notice to the contrary from such Lender, the Swing Line Lender or Issuing Lender prior to the making of such Credit Extension or Conversion or continuance of an Advance. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

 

  

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Section 8.5 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Credit Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article 8 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.

 

Section 8.6 Resignation of Administrative Agent or Issuing Lender.

 

(a) The Administrative Agent and the Issuing Lender may at any time give notice of its resignation to the other Lender Parties and the Borrower. Upon receipt of any such notice of resignation, (i) the Majority Lenders shall have the right, with the prior written consent of the Borrower (which consent is not required if an Event of Default has occurred and is continuing and which consent shall not be unreasonably withheld or delayed), to appoint, as applicable, a successor Administrative Agent or a successor Issuing Lender, which shall be a Lender. If no such successor Administrative Agent or Issuing Lender shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent or Issuing Lender gives notice of its resignation (or such earlier day as shall be agreed by the applicable Majority Lenders and, if no Event of Default exists, the Borrower) (the “Resignation Effective Date”), then the retiring Administrative Agent or the Issuing Lender, as applicable, may on behalf of the Lenders and the Issuing Lender, appoint a successor agent or issuing lender meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation by the Administrative Agent or the Issuing Lender shall become effective in accordance with such notice on the Resignation Effective Date.

 

(b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Majority Lenders may, to the extent permitted by applicable Legal Requirement, by notice in writing to the Borrower and such Person remove such Person as Administrative Agent and, in consultation with the Borrower, appoint a successor. If no such successor shall have been so appointed by applicable Majority Lenders and shall have accepted such appointment within 30 days after such notice of removal is given (or such earlier day as shall be agreed by the applicable Majority Lenders and, if no Event of Default exists, the Borrower) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date.

 

(c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from its duties and obligations as Administrative Agent and Issuing Lender hereunder and under the other Credit Documents (except that (y) in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the Issuing Lender under any of the Credit Documents, the retiring or removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed and (z) the retiring Issuing Lender shall remain the Issuing Lender with respect to any Letters of Credit outstanding on the effective date of its resignation and the provisions affecting the Issuing Lender with respect to such Letters of Credit shall inure to the benefit of the retiring Issuing Lender until the termination of all such Letters of Credit) and (ii) all payments, communications and determinations provided to be made by, to or through the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall instead be made by or to each applicable class of Lenders, until such time as the Majority Lenders appoint a successor Administrative Agent or Issuing Lender as provided for above in this paragraph. Upon the acceptance of a successor’s appointment as Administrative Agent or Issuing Lender hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Issuing Lender, as applicable, and the retiring or removed Administrative Agent or Issuing Lender, as applicable, shall be discharged from all of its duties and obligations hereunder or under the other Credit Documents. The fees payable by the Borrower to a successor Administrative Agent or Issuing Lender, as applicable shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s or Issuing Lender’s resignation or removal hereunder and under the other Credit Documents, the provisions of this Article 8 and Section 2.2(g), Section 8.9 and Sections 9.2(a) and (b) shall continue in effect for the benefit of such retiring or removed Administrative Agent and Issuing Lender, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent or Issuing Lender, as applicable, was acting as Administrative Agent or Issuing Lender.

 

  

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(d) The Swing Line Lender may resign at any time by giving 30 days’ prior notice to the Administrative Agent, the Lenders and the Borrower. After the resignation of the Swing Line Lender hereunder, the retiring Swing Line Lender shall remain a party hereto and shall continue to have all the rights and obligations of the Swing Line Lender under this Agreement and the other Credit Documents with respect to Swing Line Advances made by it prior to such resignation, but shall not be required to make any additional Swing Line Advances. Upon such notice of resignation, the Borrower shall have the right to designate any other Lender as the Swing Line Lender with the consent of such Lender so long as operational matters related to the funding of Advances have been adequately addressed to the reasonable satisfaction of such new Swing Line Lender and the Administrative Agent (if such new Swing Line Lender and the Administrative Agent are not the same Person).

 

Section 8.7 Non-Reliance on Administrative Agent and Other Lenders. Each Lender Party acknowledges and agrees that it has, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender Party also acknowledges and agrees that it will, independently and without reliance upon the Administrative Agent or any other Lender Party or any of their Related Parties, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Credit Document or any related agreement or any document furnished hereunder or thereunder. Except for notices, reports, and other documents and information expressly required to be furnished to the Lenders or the Issuing Lender by the Administrative Agent hereunder and for other information in the Administrative Agent’s possession which has been requested by a Lender and for which such Lender pays the Administrative Agent’s expenses in connection therewith, the Administrative Agent shall not have any duty or responsibility to provide any Lender or any Issuing Lender with any credit or other information concerning the affairs, financial condition, or business of any Credit Party or any of its Subsidiaries or Affiliates that may come into the possession of the Administrative Agent or any of its Affiliates.

 

Section 8.8 No Other Duties, etc. Anything herein to the contrary notwithstanding, none of the Joint Bookrunners, Co-Lead Arrangers, Syndication Agent and Co-Documentation Agents, as applicable, listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Credit Documents, except in its capacity, as applicable, as the Administrative Agent, a Lender or the Issuing Lender hereunder.

 

Section 8.9 Indemnification.

 

(a) INDEMNITY OF ADMINISTRATIVE AGENT. THE LENDERS SEVERALLY AGREE TO INDEMNIFY THE ADMINISTRATIVE AGENT AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE ADVANCES THEN HELD BY EACH OF THEM (OR IF NO PRINCIPAL OF THE ADVANCES IS AT THE TIME OUTSTANDING, RATABLY ACCORDING TO THE RESPECTIVE COMMITMENTS HELD BY EACH OF THEM IMMEDIATELY PRIOR TO THE TERMINATION, EXPIRATION OR FULL REDUCTION OF EACH SUCH COMMITMENT), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE ADMINISTRATIVE AGENT), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE ADMINISTRATIVE AGENT’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE AGENT PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE (DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE ADMINISTRATIVE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, TO THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

 

  

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(b) THE REVOLVING LENDERS SEVERALLY AGREE TO INDEMNIFY THE ISSUING LENDER AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS (TO THE EXTENT NOT REIMBURSED BY THE BORROWER), RATABLY ACCORDING TO THE RESPECTIVE PRINCIPAL AMOUNTS OF THE REVOLVING ADVANCES THEN HELD BY EACH OF THEM (OR IF NO PRINCIPAL OF THE REVOLVING ADVANCES IS AT THE TIME OUTSTANDING, RATABLY ACCORDING TO THE RESPECTIVE AMOUNTS OF THE REVOLVING COMMITMENTS THEN HELD BY EACH OF THEM, OR, IF NO SUCH PRINCIPAL AMOUNTS ARE THEN OUTSTANDING AND NO REVOLVING COMMITMENTS ARE THEN EXISTING, RATABLY ACCORDING TO THE REVOLVING COMMITMENTS HELD BY EACH OF THEM IMMEDIATELY PRIOR TO THE TERMINATION OR EXPIRATION THEREOF), FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE ISSUING LENDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT OR ANY ACTION TAKEN OR OMITTED BY THE ISSUING LENDER UNDER THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT (IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE ISSUING LENDER), AND INCLUDING, WITHOUT LIMITATION, ENVIRONMENTAL LIABILITIES, PROVIDED THAT NO REVOLVING LENDER SHALL BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES, OR DISBURSEMENTS RESULTING FROM THE ISSUING LENDER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, EACH REVOLVING LENDER AGREES TO REIMBURSE THE ISSUING LENDER PROMPTLY UPON DEMAND FOR ITS RATABLE SHARE (DETERMINED AS SET FORTH ABOVE IN THIS PARAGRAPH) OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES) INCURRED BY THE ISSUING LENDER IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION, MODIFICATION, AMENDMENT, OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, TO THE EXTENT THAT THE ISSUING LENDER IS NOT REIMBURSED FOR SUCH BY THE BORROWER.

 

Section 8.10 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Credit Party, the Administrative Agent (irrespective of whether the principal of any Advance or Letter of Credit Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

 

(a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Advances, Letter of Credit Exposure and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Lender and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Lender and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Lender and the Administrative Agent under Section 2.2) allowed in such judicial proceeding; and

 

(b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Lender, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.6.

 

  

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Section 8.11 Collateral and Guaranty Matters.

 

(a) The Administrative Agent is authorized on behalf of the Secured Parties, without the necessity of any notice to or further consent from such Secured Parties, from time to time, to take any actions with respect to any Collateral or Security Documents which may be necessary to perfect and maintain the Liens upon the Collateral granted pursuant to the Security Documents. The Administrative Agent is further authorized (but not obligated) on behalf of the Secured Parties, without the necessity of any notice to or further consent from the Secured Parties, from time to time, to take any action in exigent circumstances as may be reasonably necessary to preserve any rights or privileges of the Secured Parties under the Credit Documents or applicable Legal Requirements. By accepting the benefit of the Liens granted pursuant to the Security Documents, each Secured Party hereby agrees to the terms of this paragraph (a).

 

(b) The Lenders hereby, and any other Secured Party by accepting the benefit of the Liens granted pursuant to the Security Documents, irrevocably authorize the Administrative Agent to (i) release any Lien granted to or held by the Administrative Agent upon any Collateral (a) upon termination of the Commitments, termination of all Hedging Arrangements with Swap Counterparties (other than Hedging Agreements as to which arrangements satisfactory to the applicable counterparty in its sole discretion have been made), termination or expiration of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made), and the payment in full of all outstanding Advances, Letter of Credit Obligations and all other Secured Obligations payable under this Agreement and under any other Credit Document (other than contingent indemnification obligations); (b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted under this Agreement or any other Credit Document; (c) constituting property in which no Credit Party owned an interest at the time the Lien was granted or at any time thereafter; or (d) constituting property leased to any Credit Party under a lease which has expired or has been terminated in a transaction permitted under this Agreement or is about to expire and which has not been, and is not intended by such Credit Party to be, renewed or extended; and (ii) release a Guarantor from its obligations under a Guaranty and any other applicable Credit Document if such Person ceases to be a Subsidiary as a result of a transaction permitted under this Agreement. Upon the request of the Administrative Agent at any time, the Secured Parties will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 8.11.

 

(c) Notwithstanding anything contained in any of the Credit Documents to the contrary, the Credit Parties, the Administrative Agent, and each Secured Party hereby agree that no Secured Party shall have any right individually to realize upon any of the Collateral or to enforce the Guaranties, it being understood and agreed that all powers, rights and remedies hereunder and under the Security Documents may be exercised solely by Administrative Agent on behalf of the Secured Parties in accordance with the terms hereof and the other Credit Documents. By accepting the benefit of the Liens granted pursuant to the Security Documents, each Secured Party not party hereto hereby agrees to the terms of this paragraph (c).

 

  

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ARTICLE 9

 

MISCELLANEOUS

 

Section 9.1 Costs and Expenses. The Borrower agrees to pay on demand:

 

(a) all reasonable out-of-pocket costs and expenses of the Administrative Agent (but not of other Lenders) in connection with the preparation, execution, delivery, administration, modification, and amendment of this Agreement, the Notes, and the other Credit Documents including costs associated with field examinations, appraisals subject to Section 5.12, and the reasonable fees, charges and disbursements of outside counsel for Administrative Agent (but not of other Lenders), with respect to advising the Administrative Agent as to its rights and responsibilities under this Agreement, and

 

(b) all out-of-pocket costs and expenses, if any, of the Administrative Agent and each Lender (including outside counsel fees, charges and disbursements of each Lender) in connection with the enforcement (whether through negotiations, legal proceedings, or otherwise) of this Agreement, the Notes, and the other Credit Documents.

 

Section 9.2 Indemnification; Waiver of Damages.

 

(a) INDEMNIFICATION. EACH CREDIT PARTY HERETO AGREES TO, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ISSUING LENDER AND EACH LENDER AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN “INDEMNITEE”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNITEE, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THE CREDIT DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE ADVANCES, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE APPLICABLE INDEMNITEE, EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 9.2 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY ANY CREDIT PARTY, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNITEE OR ANY OTHER PERSON OR ANY INDEMNITEE IS OTHERWISE A PARTY THERETO. No Credit Party shall, without the prior written consent of each Indemnitee affected thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give rise to the right of any Indemnitee to claim indemnification hereunder unless such settlement (x) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnitee and (y) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnitee.

 

  

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(b) Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Legal Requirement, no Credit Party shall assert, agrees not to assert, and hereby waives, any claim against any Indemnitee on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. To the fullest extent permitted by applicable Legal Requirement, no Lender Party shall assert, agrees not to assert, and hereby waives, any claim against any Credit Party on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Credit Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Advance or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to in subsection (a) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Credit Documents or the transactions contemplated hereby or thereby other than for direct or actual damages resulting from the gross negligence or willful misconduct of such Indemnitee as determined by a final and nonappealable judgment of a court of competent jurisdiction.

 

(c) Payments. All payments required to be made under this Section 9.2 shall be made within 10 days of demand therefor.

 

(d) Survival. Without prejudice to the survival of any other agreement of the Credit Parties hereunder, the agreements and obligations of the Credit Parties contained in this Section 9.2 shall survive the termination of this Agreement, the termination of all Commitments, and the payment in full of the Advances and all other amounts payable under this Agreement.

 

Section 9.3 Waivers and Amendments. No amendment or waiver of any provision of this Agreement, the Notes, or any other Credit Document (other than the Fee Letter or any Autoborrow Agreement), nor consent to any departure by the Borrower or any Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Lenders and the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that (subject to Section 2.14 with respect to any Defaulting Lender):

 

(a) no amendment, waiver, or consent shall, unless in writing and signed by all the Term Lenders and the Borrower, do any of the following: (i) reduce the principal of, or interest on, the Term Notes, (ii) postpone or extend any date fixed for any payment of principal of, or interest on, the Term Notes, including, without limitation, the Term Maturity Date, or (iii) change the number of Term Lenders which shall be required for the Term Lenders to take any action hereunder or under any other Credit Document;

 

(b) no amendment, waiver, or consent shall, unless in writing and signed by all the Revolving Lenders and the Borrower, do any of the following: (i) reduce the principal of, or interest on, the Revolving Notes, (ii) postpone or extend any date fixed for any payment of principal of, or interest on, the Revolving Notes, including, without limitation, the Revolving Maturity Date, or (iii) change the number of Revolving Lenders which shall be required for the Revolving Lenders to take any action hereunder or under any other Credit Document;

 

  

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(c) no amendment, waiver, or consent shall, unless in writing and signed by all the Lenders and the Borrower, do any of the following: (i) waive any of the conditions specified in Section 3.1 or Section 3.2, (ii) reduce any fees or other amounts payable hereunder or under any other Credit Document (other than those specifically addressed above in this Section 9.3), (iii) increase the aggregate Commitments, (iv) postpone or extend any date fixed for any payment of any fees or other amounts payable hereunder (other than those otherwise specifically addressed in this Section 9.3), (v) other than as a result of acceleration pursuant to Article 7, change the Term Maturity Date to a date that is earlier than one day after the then effective Revolving Maturity Date, amend the amortization schedule thereof to increase the principal prepayment amounts, or otherwise change any provision hereof which would have the effect of increasing the aggregate amount of Term Advances that are required to be paid in any given year, (vi) amend Section 2.11(e), Section 7.6, this Section 9.3 or any other provision in any Credit Document which expressly requires the consent of, or action or waiver by, all of the Lenders, (vii) except as specifically provided in the Credit Documents and as a result of transactions permitted by the terms of this Agreement, release any Guarantor from its obligation under any Guaranty or release all or a material portion of the Collateral except as permitted under Section 8.11(b); (viii) amend the definitions of “Majority Lenders”, “Majority Revolving Lenders”, “Majority Term Lenders”, or “Maximum Exposure Amount”; or (ix) amend the definitions of “Secured Parties”, “Secured Obligations” or “Collateral” in a manner adverse to any Secured Party;

 

(d) no Commitment of a Lender or any obligations of a Lender may be increased without such Lender’s written consent;

 

(e) no amendment, waiver, or consent shall, unless in writing and signed by the Majority Revolving Lenders and the Majority Term Lenders adversely affect the interests, rights or obligations of the Revolving Lenders in a manner substantially different from the effect of such amendment, waiver or consent on the Term Lenders, it being understood that, if the excess of the Revolving Outstandings is greater than $0, any amendment, waiver or consent that has the effect of curing or waiving any Default shall require the consent of the Majority Revolving Lenders in addition to all other consents required hereunder;

 

(f) no amendment, waiver, or consent shall, unless in writing and signed by the Majority Revolving Lenders and the Majority Term Lenders, adversely affect the interests, rights or obligations of the Term Lenders in a manner substantially different from the effect of such amendment, waiver or consent on the Revolving Lenders;

 

(g) no amendment, waiver, or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any other Credit Document;

 

(h) no amendment, waiver or consent shall, unless in writing and signed by the Issuing Lender in addition to the Lenders required above to take such action, affect the rights or duties of such Issuing Lender under this Agreement or any other Credit Document; and

 

(i) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above to take such action, affect the rights or duties of the Swing Line Lender under this Agreement or any other Credit Document.

 

Section 9.4 Severability. In case one or more provisions of this Agreement or the other Credit Documents shall be invalid, illegal or unenforceable in any respect under any applicable Legal Requirement, the validity, legality, and enforceability of the remaining provisions contained herein or therein shall not be affected or impaired thereby.

 

  

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Section 9.5 Survival of Representations and Obligations. All representations and warranties contained in this Agreement or made in writing by or on behalf of the Credit Parties in connection herewith shall survive the execution and delivery of this Agreement and the other Credit Documents, the making of the Advances or the issuance of any Letters of Credit and any investigation made by or on behalf of the Lenders, none of which investigations shall diminish any Lender’s right to rely on such representations and warranties. All obligations of the Borrower or any other Credit Party provided for in Sections 2.9, 2.10, 2.12(c), 9.1 and 9.2 and all of the obligations of the Lenders in Section 8.5 shall survive any termination of this Agreement and repayment in full of the Obligations.

 

Section 9.6 Binding Effect. This Agreement shall become effective when it shall have been executed by the Borrower and the Administrative Agent, and when the Administrative Agent shall have, as to each Lender, either received a counterpart hereof executed by such Lender or been notified by such Lender that such Lender has executed it and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent, and each Lender and their respective successors and assigns, except that neither the Borrower nor any other Credit Party shall have the right to assign its rights or delegate its duties under this Agreement or any interest in this Agreement without the prior written consent of each Lender.

 

Section 9.7 Successors and Assigns.

 

(a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Borrower nor any other Credit Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender, and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b) Assignment by Lenders. Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Advances at the time owing to it); provided that (in each case with respect to any Facility) any such assignment shall be subject to the following conditions:

 

(i) Minimum Amounts.

 

(A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and/or the Advances at the time owing to it (in each case with respect to any Facility) or contemporaneous assignments to related Approved Funds that equal at least the amount specified in paragraph (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and

 

  

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(B) in any case not described in paragraph (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Advances outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Advances of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Acceptance, as of the Trade Date) shall not be less than $5,000,000, unless each of the Administrative Agent and, so long as no as no Default or Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).

 

(ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Advance or the Commitment assigned, and, for the avoidance of doubt, no Lender shall assign all or any portion of its rights and obligations among separate Facilities on a non-pro rata basis.

 

(iii) Required Consents. No consent shall be required for any assignment except to the extent required by paragraph (b)(i)(B) of this Section and, in addition:

 

(A) the consent of the Borrower (such consent not to be unreasonably withheld or delayed) shall be required unless (x) an Event of Default has occurred and is continuing at the time of such assignment, or (y) such assignment is to a Lender or an Affiliate of a Lender; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within 10 Business Days after having received notice thereof;

 

(B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required for assignments in respect of (i) the Revolving Facility if such assignment is to a Person that is not a Lender with a Commitment in respect of such Facility, or (ii) any Term Advance to a Person who is not a Lender or an Affiliate of a Lender; and

 

(C) the consent of each Issuing Lender and Swing Line Lender shall be required for any assignment in respect of the Revolving Facility.

 

(iv) Assignment and Acceptance. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance, together with a processing and recordation fee of $3,500; provided that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire.

 

(v) No Assignment to Certain Persons. No such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates or Subsidiaries or (B) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B).

 

(vi) No Assignment to Natural Persons. No such assignment shall be made to a natural Person.

 

  

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(vii) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Advances previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent, the Issuing Lender, the Swing Line Lender and each other Lender hereunder (and interest accrued thereon), and (y) acquire (and fund as appropriate) its full pro rata share of all Advances and participations in Letters of Credit and Swing Line Advances in accordance with its Revolving Pro Rata Share. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Legal Requirement without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

 

Subject to acceptance and recording thereof by the Administrative Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 2.10, 9.1, 9.2 and 9.3 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

 

(c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at its address referred to in Section 9.9 a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Advances owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice. The Borrower hereby agrees that the Administrative Agent acting as its agent solely for the purpose set forth above in this clause (c), shall not subject the Administrative Agent to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.

 

(d) Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than a natural Person or the Borrower or any of the Borrower’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Advances owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, and (iii) the Borrower, the Administrative Agent, the Issuing Lender and Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 9.2(a) with respect to any payments made by such Lender to its Participant(s).

 

  

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Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in clauses (a), (b), (c) or (d) of this Section 9.7 (that adversely affects such Participant). The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.9, 2.10 and 2.12 (subject to the requirements and limitations therein, including the requirements under Section 2.12(g) (it being understood that the documentation required under Section 2.12(g) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to be subject to the provisions of Section 2.13 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Sections 2.10 or 2.12, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.13 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 7.4 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.11(e) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Credit Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Credit Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register. The Borrower hereby agrees that each Lender acting as its agent solely for the purpose set forth above in this clause (d), shall not subject such Lender to any fiduciary or other implied duties, all of which are hereby waived by the Borrower.

 

(e) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

Section 9.8 Confidentiality. The Administrative Agent, the Swing Line Lender, each Issuing Lender, and each Lender (each a “Lender Party”) agree to keep confidential any Specified Information furnished or made available to it by any Credit Party pursuant to this Agreement (including, without limitation, all such information in connection with the transactions contemplated hereby made available prior to the execution of this Agreement); provided that nothing herein shall prevent any Lender Party from disclosing such information (a) to any other Lender Party or any Affiliate of any Lender Party, or any officer, director, employee, agent, or advisor of any Lender Party or Affiliate of any Lender Party for purposes of administering, negotiating, considering, processing, implementing, syndicating, assigning, or evaluating the credit facilities provided herein and the transactions contemplated hereby (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Specified Information and instructed to keep such Specified Information confidential), (b) as required by any Legal Requirement, (d) upon the order of any court or administrative agency, (e) upon the request or demand of any regulatory agency or authority, (f) that is or becomes available to the public or that is or becomes available to any Lender Party other than as a result of a disclosure by any other Lender Party prohibited by this Agreement, (g) in connection with any litigation relating to this Agreement or any other Credit Document to which such Lender Party or any of its Affiliates may be a party, (h) to the extent necessary in connection with the exercise of any right or remedy under this Agreement or any other Credit Document, and (i) to any actual or proposed participant or assignee, in each case, subject to provisions similar to those contained in this Section 9.8. “Specified Information” means all written information concerning the Borrower or any of its Subsidiaries or Affiliates that has been made available to the Lender Parties by the Borrower or any of its Subsidiaries or Affiliates (excluding (i) any such information that is available to such Lender Party on a non-confidential basis but including any information from a source which, to such Lender Party’s actual knowledge, has been disclosed by such source in violation of a duty of confidentiality to the Borrower or any of its Subsidiaries or Affiliates and (ii) any information that is or becomes generally available to the public other than as a result of disclosure by any other Lender Party prohibited by this Agreement). NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, nothing in this Agreement shall (a) restrict any Lender Party from providing information to any bank or other regulatory or governmental authorities, including the Federal Reserve Board and its supervisory staff; (b) require or permit any Lender Party to disclose to any Credit Party that any information will be or was provided to the Federal Reserve Board or any of its supervisory staff; or (c) require or permit any Lender Party to inform any Credit Party of a current or upcoming Federal Reserve Board examination or any nonpublic Federal Reserve Board supervisory initiative or action.

 

  

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Section 9.9 Notices, Etc.

 

(a) All notices and other communications (other than Notices of Borrowing and Notices of Continuation or Conversion, which are governed by Article 2 of this Agreement) shall be in writing and hand delivered with written receipt, telecopied, sent by facsimile (with a hard copy sent as otherwise permitted in this Section 9.9), sent by a nationally recognized overnight courier, or sent by certified mail, return receipt requested as follows: if to a Credit Party, as specified on Schedule II, if to the Swing Line Lender, the Administrative Agent or the Issuing Lender, at its credit contact specified under its name on Schedule II, and if to any Lender at its credit contact specified in its Administrative Questionnaire. Each party may change its notice address by written notification to the other parties. All such notices and communications shall be effective when delivered, except that notices and communications to any Lender, the Swing Line Lender or the Issuing Lender pursuant to Article 2 shall not be effective until received and, in the case of facsimile, such receipt is confirmed by the Swing Line Lender, such Lender or Issuing Lender, as applicable, verbally or in writing.

 

(b) Platform.

 

(i) Each Credit Party agrees that the Administrative Agent may, but shall not be obligated to, make the Communications (as defined below) available to the Issuing Lender and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak or a substantially similar electronic transmission system (the “Platform”).

 

(ii) The Platform is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of the Platform and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or the Platform. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower or the other Credit Parties, any Lender or any other Person or entity for damages of any kind, including, without limitation, direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Credit Party’s or the Administrative Agent’s transmission of communications through the Platform. “Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Credit Party pursuant to any Credit Document or the transactions contemplated therein which is distributed to the Administrative Agent, any Lender or any Issuing Lender by means of electronic communications pursuant to this Section, including through the Platform.

 

Section 9.10 Usury Not Intended. It is the intent of each Credit Party and each Lender in the execution and performance of this Agreement and the other Credit Documents to contract in strict compliance with applicable usury laws, including conflicts of law concepts, governing the Advances of each Lender including such applicable Legal Requirements of the State of New York, if any, and the United States of America from time to time in effect. In furtherance thereof, the Lenders and the Credit Parties stipulate and agree that none of the terms and provisions contained in this Agreement or the other Credit Documents shall ever be construed to create a contract to pay, as consideration for the use, forbearance or detention of money, interest at a rate in excess of the Maximum Rate and that for purposes of this Agreement “interest” shall include the aggregate of all charges which constitute interest under such laws that are contracted for, charged or received under this Agreement; and in the event that, notwithstanding the foregoing, under any circumstances the aggregate amounts taken, reserved, charged, received or paid on the Advances, include amounts which by applicable Legal Requirement are deemed interest which would exceed the Maximum Rate, then such excess shall be deemed to be a mistake and each Lender receiving same shall credit the same on the principal of its Notes (or if such Notes shall have been paid in full, refund said excess to the Borrower). In the event that the maturity of the Notes are accelerated by reason of any election of the holder thereof resulting from any Event of Default under this Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest may never include more than the Maximum Rate, and excess interest, if any, provided for in this Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited on the applicable Notes (or, if the applicable Notes shall have been paid in full, refunded to the Borrower of such interest). In determining whether or not the interest paid or payable under any specific contingencies exceeds the Maximum Rate, the Credit Parties and the Lenders shall to the maximum extent permitted under applicable Legal Requirement amortize, prorate, allocate and spread in equal parts during the period of the full stated term of the Notes all amounts considered to be interest under applicable Legal Requirement at any time contracted for, charged, received or reserved in connection with the Obligations. The provisions of this Section shall control over all other provisions of this Agreement or the other Credit Documents which may be in apparent conflict herewith.

 

  

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Section 9.11 Usury Recapture. In the event the rate of interest chargeable under this Agreement at any time is greater than the Maximum Rate, the unpaid principal amount of the Advances shall bear interest at the Maximum Rate until the total amount of interest paid or accrued on the Advances equals the amount of interest which would have been paid or accrued on the Advances if the stated rates of interest set forth in this Agreement had at all times been in effect. In the event, upon payment in full of the Advances, the total amount of interest paid or accrued under the terms of this Agreement and the Advances is less than the total amount of interest which would have been paid or accrued if the rates of interest set forth in this Agreement had, at all times, been in effect, then the Borrower shall, to the extent permitted by applicable Legal Requirement, pay the Administrative Agent for the account of the Lenders an amount equal to the difference between (i) the lesser of (A) the amount of interest which would have been charged on its Advances if the Maximum Rate had, at all times, been in effect and (B) the amount of interest which would have accrued on its Advances if the rates of interest set forth in this Agreement had at all times been in effect and (ii) the amount of interest actually paid under this Agreement on its Advances. In the event the Lenders ever receive, collect or apply as interest any sum in excess of the Maximum Rate, such excess amount shall, to the extent permitted by law, be applied to the reduction of the principal balance of the Advances, and if no such principal is then outstanding, such excess or part thereof remaining shall be paid to the Borrower.

 

Section 9.12 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Lender Party, or any Lender Party exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by any Lender Party in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender Party severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate in effect from time to time, in the applicable currency of such recovery or payment. The obligations of the Lenders, the Swing Line Lender and the Issuing Lender under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.

 

Section 9.13 Governing Law; Service of Process. This Agreement, the Notes and the other Credit Documents (unless otherwise expressly provided therein) shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). Each Letter of Credit shall be governed by either (i) the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, or (ii) the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, in either case, including any subsequent revisions thereof approved by a Congress of the International Chamber of Commerce and adhered to by the Issuing Lender. The Borrower hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to the Borrower at the address set forth for the Borrower in this Agreement. Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against the Borrower or its Property in the courts of any other jurisdiction.

 

  

120

  

 

Section 9.14 Submission to Jurisdiction. The parties hereto hereby agree that any suit or proceeding arising in respect of this Agreement or any other Credit Document, or any of the matters contemplated hereby or thereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Legal Requirement. The parties hereto hereby agree that service of any process, summons, notice or document by registered mail addressed to the applicable parties will be effective service of process against such party for any action or proceeding relating to any such dispute. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in this Section 9.14. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Agreement and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

 

Section 9.15 Electronic Execution of Assignments. Electronic Execution of Assignments. The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Acceptance shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

Section 9.16 Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

Section 9.17 Waiver of Jury. THE BORROWER, THE LENDERS, THE ISSUING LENDER, AND THE ADMINISTRATIVE AGENT HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

Section 9.18 USA Patriot Act. Each Lender that is subject to the Patriot Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Credit Party that pursuant to the requirements of the Patriot Act it is required to obtain, verify and record information that identifies such Credit Party, which information includes the name and address of such Credit Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Credit Party in accordance with the Patriot Act.

 

Section 9.19 Confirmation of Flood Policies and Procedures. Wells Fargo has adopted internal policies and procedures that address requirements placed on federally regulated lenders under the National Flood Insurance Reform Act of 1994 and related legislation (the “Flood Laws”). Wells Fargo, as administrative agent, will post on the applicable electronic platform (or otherwise distribute to each Lender) documents that it receives in connection with the Flood Laws; however, Wells Fargo reminds each Lender and Participant in the Facilities that, pursuant to the Flood Laws, each federally regulated Lender (whether acting as a Lender or Participant in the facilities) is responsible for assuring its own compliance with the flood insurance requirements.

 

  

121

  

 

Section 9.20 Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 9.20 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 9.20, or otherwise under this Agreement, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the termination of all Commitments and payment in full of all Secured Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and the Issuing Lender have been made). Each Qualified ECP Guarantor intends that this Section 9.20 constitute, and this Section 9.20 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

Section 9.21 Amendment and Restatement. This Agreement amends and restates in its entirety the Existing Credit Agreement, and from and after the date hereof, the terms and provisions of the Existing Credit Agreement shall be superseded by the terms and provisions of this Agreement. The Borrower and the Lenders hereby agree that (i) the Existing Indebtedness, all accrued and unpaid interest thereon, and all accrued and unpaid fees under the Existing Credit Documents shall be deemed to be Debt of the Borrower (and not of the "Borrower" under the Existing Credit Agreement) outstanding under and governed by this Agreement and, subject to the terms hereof, all outstanding Advances thereunder will be continued as Term Advances of the same type and interest period hereunder, and (ii) to the extent permitted by applicable law, all Liens securing the Existing Indebtedness shall continue in full force and effect to secure the Obligations. In connection with the restatement of the Existing Credit Agreement and the other Existing Credit Documents, each Lender that is also an Existing Lender hereby authorizes the Administrative Agent to execute and deliver the Assumption Agreement and such other documents necessary in the Administrative Agent’s discretion to effect the amendment and restatement of the Existing Credit Agreement and the Existing Credit Documents.

 

Section 9.22 Integration. THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS AGREEMENT AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

IN EXECUTING THIS AGREEMENT, EACH CREDIT PARTY HERETO HEREBY WARRANTS AND REPRESENTS IT IS NOT RELYING ON ANY STATEMENT OR REPRESENTATION OTHER THAN THOSE IN THIS AGREEMENT AND IS RELYING UPON ITS OWN JUDGMENT AND ADVICE OF ITS ATTORNEYS.

 

[Remainder of this page intentionally left blank. Signature pages follow.]

 

  

122

  

 

EXECUTED as of the date first above written.

 

	 	
BORROWER:

	 
	 	 	 
	 	
ALY ENERGY SERVICES, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Munawar H. Hidayatallah	 
	 	 	Munawar H. Hidayatallah	 
	 	 	
Chairman of the Board and Chief Executive Officer

	 
	 	 	 	 

 

  

Signature page to Credit Agreement

(Aly Energy Services, Inc.)

  

 

	 	
ADMINISTRATIVE AGENT/LENDERS:

	 
	 	 	 
	 	
WELLS FARGO BANK, NATIONAL 

ASSOCIATION, as Administrative Agent, Issuing 

Lender, a Revolving Lender, Swing Line Lender, and a Term Lender

	 
	 	 	 	 
	
 

	
By: 

	/s/ Donald W. Herrick	 
	 	Name:	Donald W. Herrick	 

 

  

Signature page to Credit Agreement

(Aly Energy Services, Inc.)

  

 

SCHEDULE I

Pricing Schedule

 

The Applicable Margin with respect to the Commitment Fee, Revolving Advances, Swing Line Advances (if applicable), and the Term Advances shall be determined in accordance with the following table based on the Borrower’s Leverage Ratio as reflected in the Compliance Certificate delivered in connection with the Financial Statements most recently delivered pursuant to Section 5.2. Adjustments, if any, to such Applicable Margin shall be effective on the date the Administrative Agent receives the applicable Financial Statements and corresponding Compliance Certificate as required by the terms of this Agreement. If the Borrower fails to deliver the Financial Statements and corresponding Compliance Certificate to the Administrative Agent at the time required pursuant to Section 5.2, then effective as of the date such Financial Statements and Compliance Certificate were required to the delivered pursuant to Section 5.2, the Applicable Margin with respect to the Commitment Fee, Revolving Advances, Swing Line Advances (if applicable) and Term Advances shall be determined at Level I and shall remain at such level until the date such Financial Statements and corresponding Compliance Certificate are so delivered by the Borrower. Notwithstanding the foregoing, the Borrower shall be deemed to be at Level I until delivery of its Financial Statements and corresponding Compliance Certificate for the fiscal quarter ending June 30, 2014. Notwithstanding anything to the contrary contained herein, the determination of the Applicable Margin for any period shall be subject to the provisions of Section 2.7(d). For the avoidance of doubt, the levels on the pricing grid set forth below are set forth from highest (Level I) to the lowest (Level III).

 

	
Applicable 

Margin

	 	
Leverage Ratio

	 	
Eurodollar

Advances

	 	 	
Base Rate

Advances

	 	 	
Commitment

 Fee

	 
	
Level I

	 	
Is greater than or equal to 2.50

	 	 	4.50	%	 	 	3.50	%	 	 	0.55	%
	
Level II

	 	
Is greater than or equal to 1.50 but less than 2.50

	 	 	4.00	%	 	 	3.00	%	 	 	0.50	%
	
Level III

	 	
Is less than 1.50

	 	 	3.50	%	 	 	2.50	%	 	 	0.45	%

 

  

Schedule I

Page 1 of 1

  

 

SCHEDULE II

Commitments, Contact Information

 

	
ADMINISTRATIVE AGENT/ISSUING LENDER/SWING LINE LENDER

	 
	
Wells Fargo Bank, National Association

	
Address: 

	
1000 Louisiana Street 

9th Floor

Houston, Texas 77002

 

	
Attn: 

	
Don Herrick

 

	
Telephone: 

	
(713) 319-1372

 

	
Facsimile: 

	(713) 739-1087
	 
	
CREDIT PARTIES

	 
	
Borrower/Guarantors (other than Austin Chalk)

Austin Chalk

	
Address: 

	3 Riverway, Suite 920 

Houston, Texas 77056

 

	
Attn: 

	
Munawar H. Hidayatallah

 

	
Telephone: 

	
(832) 454-7394

 

	
Facsimile: 

	
(713) 333-4004

 

	
Address: 

	
1080 Private Road 7703 

P.O. Box 1110

Giddings, Texas 78942

 

	
Attn: 

	
Kurt Chew, Division President

 

	
Telephone: 

	
(979) 542-3500

 

	
Facsimile: 

	(979) 542-3520

 

  

Schedule II

Page 1 of 1

  

 

	
Lender

	 	
Revolving Commitment

	 	 	
Term Commitment

	 	 	
Total

	 
	
Wells Fargo Bank, National Association

	 	$	5,000,000.00	 	 	$	25,000,000.00	 	 	$	30,000,000.00	 
	
Total:

	 	$	5,000,000.00	 	 	$	25,000,000.00	 	 	$	30,000,000.00	 

 

Schedule III

Additional Conditions and Requirements for New Subsidiaries

 

Within 14 days of creating a new Subsidiary or acquiring a new Subsidiary (or such longer period of time as the Administrative Agent may agree in its sole discretion), the Administrative Agent shall have received each of the following:

 

(a) Guaranty. If such Subsidiary is a Domestic Subsidiary, a joinder and supplement to the Guaranty executed by such Subsidiary;

 

(b) Security Agreement. If such Subsidiary is a Domestic Subsidiary, a joinder and supplement to the Security Agreement executed by such Subsidiary, in any event, together with stock certificates, stock powers executed in blank, UCC-1 financing statements, and any other documents, agreements, or instruments as the Administrative Agent shall request that are necessary to create and perfect an Acceptable Security Interest in the Collateral described in the Security Agreement, as so supplemented;

 

(c) Mortgages. If such Subsidiary is a Domestic Subsidiary, if such Subsidiary owns any real property and if and as requested by the Administrative Agent, a fully executed Mortgage covering such real properties, together with (i) a flood determination certificate issued by the appropriate Governmental Authority or third party indicating whether such property is located in an area designated as a “flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency) and (ii) if such property is located in an area designated to be in a “flood hazard area”, evidence of flood insurance on such property obtained by the applicable Credit Party in such total amount as required by Regulation H of the Federal Reserve Board, and all official rulings and interpretations thereunder or thereof, and otherwise in compliance with the National Flood Insurance Program as set forth in the Flood Disaster Protection Act of 1973, as it may be amended from time to time, and (iii) such evidence of corporate authority to enter into such Guaranty, Security Agreement, and Mortgage as the Administrative Agent may reasonably request;

 

(d) Pledges. A pledge agreement executed by the equity holders of such Subsidiary pledging (subject to Section 5.7(a) of this Agreement) 100% of the Equity Interest owned by such equity holder of such Subsidiary and such evidence of corporate, limited liability company or partnership authority to enter into such pledge agreement as the Administrative Agent may reasonably request, along with share certificates pledged thereby and appropriately executed stock powers in blank, if applicable;

 

(e) Real Estate. If such Subsidiary is a Domestic Subsidiary, (i) if and as requested by the Administrative Agent, an Responsible Officer’s certificate from such new Subsidiary certifying a complete listing of all real property owned or leased by such new Subsidiary and including a notation as to all locations where any equipment of such new Subsidiary is kept, and (ii) if and as requested by the Administrative Agent, lien waivers or subordination agreements in form and substance satisfactory to the Administrative Agent and executed by the landlords or lessors identified in, and covering each of the leased real properties listed on such officer’s certificate;

 

(f) Corporate Documents. A secretary’s certificate from such new Subsidiary certifying such Subsidiary’s (i) Responsible Officer’s incumbency, (ii) authorizing resolutions, (iii) organizational documents, (iv) necessary governmental approvals, and (v) certificate of good standing in such Subsidiary’s state of organization dated a date not earlier than 30 days prior to date of delivery or otherwise in effect on the date of delivery;

 

(g) Patriot Act. All documentation and other information that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act; and

 

(h) Opinion of Counsel. If requested by the Administrative Agent, an opinion of counsel in form and substance reasonably acceptable to the Administrative Agent related to such new Subsidiary and substantially similar to the legal opinion delivered at the Closing Date with respect to the other Subsidiaries in existence on the Closing Date.

 

  

Schedule III

Page 1 of 2

  

 

SCHEDULE 3.1

Owned and Leased Real Properties

 

Owned Real Property

 

None.

 

Leased Real Property

 

	
Lessee

	 	
Lessor

	 	
Address

	 	
Equipment/Inventory

 Kept on Property

	
Austin Chalk Corp.

	 	
Kurt Chew, LLC

	 	
1080 Private Road 7703, Giddings, Texas 78942

	 	
Yes

	
Austin Chalk Corp.

	 	
B&L Storage

	 	
202 East 43rd, San Angelo, Texas 76903

	 	
Yes

	
Austin Chalk Corp.

	 	
Cled White, LLC

	 	
State Hwy 85 West/CR 4715, Dilley, Texas 78017

	 	
No

	
Aly Energy Services, Inc.

	 	
DAR 3 Riverway, LP, Rivercan LP, Overland 3 Riverway, LP and CFT3 Riverway, as tenants in common

	 	
3 Riverway, Suite 920, Houston, Texas 77056

	 	
No

	
Aly Centrifuge (successor to United Centrifuge USA, LLC)

	 	
JLC Holdings, LLC

	 	
6126 PR 902, Celina, Texas 75009

	 	
Yes

	
Aly Centrifuge (successor to United Centrifuge USA, LLC)

	 	
Rachel L. Olson

	 	
102 Johnston Road, Bentleyville, Pennsylvania 15314

	 	
No

	
Aly Centrifuge (successor to United Centrifuge USA, LLC)

	 	
Merritt Mobile Home & RV Park

	 	
11345 N. 1970 Road, Lot #69A, Elk City, Oklahoma 73644

	 	
No

	
Aly Centrifuge (successor to United Centrifuge USA, LLC)

	 	
Hoppe’s Construction, LLC

	 	
Merritt Mobile Home Park, Merritt, Oklahoma

	 	
No

	
Aly Centrifuge (successor to United Centrifuge USA, LLC)

	 	
Providence Place

	 	
6001 SW 12th, Apt. 1328, Oklahoma City, Oklahoma 73128

	 	
No

 

 

Schedule 3.1

 

 

SCHEDULE 3.1(q)

Certificates of Title to be Delivered Post-Closing

 

	
Truck #

	 	
Plate

	 	
Year

	 	
Make

	 	
VIN

	 	
Date acquired

	832	 	
CA84343

	 	2013	 	
Silverado

	 	
1GC1KXC85DF128715

	 	
12/31/12

	833	 	
CA84341

	 	2013	 	
Silverado

	 	
1GC1KXC8XDF104488

	 	
12/31/12

	834	 	
CA84342

	 	2013	 	
Silverado

	 	
1GC1KXC88DF140339

	 	
12/31/12

	835	 	
BSR4512

	 	2013	 	
Silverado

	 	
1GB4KZC88DF149278

	 	
02/22/13

	836	 	
BYT4951

	 	2013	 	
Silverado

	 	
1GB4KZC85DF198714

	 	
04/19/13

	837	 	
BYT4950

	 	2013	 	
Silverado

	 	
1GB4KZC84DF198722

	 	
04/19/13

	838	 	
BYT4959

	 	2013	 	
Silverado

	 	
1GB4KZC86DF207355

	 	
04/30/13

	839	 	
CDD2606

	 	2013	 	
Silverado

	 	
1GC1KXC80DF170743

	 	
06/21/13

	840	 	
CFK7926

	 	2013	 	
Silverado

	 	
1GC4K1C83DF207357

	 	
07/23/13

	841	 	
CTT-6564

	 	2014	 	
Silverado

	 	
1GC1KXC83EF173900

	 	
01/02/14

	842 (a)	 	
CDZ7093

	 	2014	 	
Silverado

	 	
1GC4KZC84EF176443

	 	
02/05/14

	843 (a)	 	
CDZ7094

	 	2014	 	
Silverado

	 	
1GC1KVC82EF186450

	 	
02/25/14

	844 (a)	 	
CDZ7096

	 	2014	 	
Silverado

	 	
1GC1KVC8XEF185045

	 	
02/25/14

	845 (a)	 	
CDZ7095

	 	2014	 	
Silverado

	 	
1GC1KVC89EF184694

	 	
02/28/14

	W300	 	
BYT4952

	 	2013	 	
Silverado

	 	
1GC1KXC81DF103603

	 	
04/15/13

	W301	 	
BZK8871

	 	2013	 	
Silverado

	 	
1GB4KZC87DF231762

	 	
05/22/13

	W302	 	
CVG0589

	 	2014	 	
Silverado

	 	
1GB4K0C80EF164077

	 	
12/31/13

	719 (a)	 	1E53347	 	2014	 	
Kenworth

	 	
1XKDDP9X3EJ385560

	 	
07/23/13

	720 (a)	 	1E53367	 	2014	 	
Kenworth

	 	
1XKDDP9X5EJ385561

	 	
08/15/13 

	721	 	1E53262	 	2013	 	
Kenworth

	 	
1XKDDP9X9DJ385562

	 	
04/09/13

	722 (a)	 	1E53368	 	2013	 	
Kenworth

	 	
1XKDDP9X0DJ385563

	 	
08/15/13

	723	 	1E53258	 	2013	 	
Kenworth

	 	
1XKDDP9X2DJ385564

	 	
03/20/13

	724	 	1E53261	 	2013	 	
Kenworth

	 	
1XKDDP9X4DJ385565

	 	
02/22/13

	725	 	1E53259	 	2013	 	
Kenworth

	 	
1XKDDP9X6DJ385566

	 	
02/26/13

	728 (a)	 	1E53346	 	2014	 	
Kenworth

	 	
1XKDDP9XXEJ385569

	 	
07/23/13

	W400	 	1E53263	 	2013	 	
Kenworth

	 	
1XKDDP9X8DJ385567

	 	
05/02/13

	W401 (a)	 	1E53366	 	2013	 	
Kenworth

	 	
1XKDDP9XXDJ385568

	 	  

 

	
(a)

	
Leased vehicle through Wells TRAC program; title retained by lessor

 

  

Schedule 3.1(q)

  

 

SCHEDULE 4.1

ORGANIZATIONAL INFORMATION

 

	
Borrower

	 
	 	 
	
Legal Name:

	
Aly Energy Services Inc.

	
Type of Legal Entity:

	
Corporation

	
State of Organization:

	
Delaware

	 	 
	
Austin Chalk Corp.

	 
	 	 
	
Legal Name:

	
Austin Chalk Petroleum Services Corp.

	
Type of Legal Entity:

	
Corporation

	
State of Organization:

	
Texas

	 	 
	
Aly Operating

	 
	 	 
	
Legal Name:

	
Aly Operating, Inc.

	
Type of Legal Entity:

	
Corporation

	
State of Organization:

	
Delaware

	 	 
	
Aly Centrifuge

	 
	 	 
	
Legal Name:

	
Aly Centrifuge Inc.

	
Type of Legal Entity:

	Corporation
	
State of Organization:

	
Delaware

 

  

Schedule 4.1

  

 

SCHEDULE 4.7

Litigation

 

None.

 

 

 

 

 

  

Schedule 4.7

  

 

SCHEDULE 4.10

Environmental Matters

 

 

None.

 

 

 

  

Schedule 4.10

  

 

SCHEDULE 4.11

Subsidiaries

 

Aly Operating, Inc., a Delaware corporation

Austin Chalk Petroleum Services Corp., a Texas corporation

Aly Centrifuge Inc., a Delaware corporation

 

 

 

 

  

Schedule 4.11

  

 

SCHEDULE 4.21

Material Agreements

 

	
1.

	
Share Exchange Agreement, dated May 14, 2013, by and among Preferred Voice, Inc., Aly Energy Services, Inc. and the stockholders of Aly Energy Services, Inc.

 

	
2.

	
Stock Purchase Agreement, dated as of September 27, 2012, by and between Aly Energy Services, Inc. and Kurt Chew

 

	
3.

	
Employment Agreement, dated February 13, 2013, by and between Aly Energy Services, Inc. and Munawar Hidayatallah

 

	
4.

	
Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Mark Patterson

 

	
5.

	
Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Alya Hidayatallah

 

	
6.

	
Employment Agreement, dated February 12, 2013, by and between Aly Energy Services, Inc. and Kurt Chew

 

	
7.

	
Asset Purchase Agreement, Stock Purchase Agreement and Merger Agreement between Aly Energy Services, Aly Centrifuge, United Centrifuge, and the sellers named therein, dated April 11, 2014

 

  

Schedule 4.21

  

 

SCHEDULE 6.3

Investments

 

None.

 

 

 

 

  

Schedule 6.3

  

 

SCHEDULE 6.10

Affiliate Transactions

 

	
1.

	
Amended and Restated Lease Agreement dated October 25, 2012 between Kurt Chew, LLC, as lessor, and Austin Chalk Petroleum Services Corp., as lessee.

 

	
2.

	
Stock Purchase Agreement, dated as of September 27, 2012, by and between Aly Energy Services, Inc. and Kurt Chew

 

 

 

  

Schedule 6.10 

  

 

EXHIBIT D

 

AMENDED AND RESTATED GUARANTY AGREEMENT

 

This Amended and Restated Guaranty Agreement dated as of April 15, 2014 (as amended, supplemented, amended and restated or otherwise modified from time to time, this “Guaranty”) is executed by each of the undersigned (individually a “Guarantor” and collectively, the “Guarantors”), in favor of Wells Fargo Bank, National Association, as Administrative Agent (as defined below) for the ratable benefit of the Secured Parties.

 

INTRODUCTION

 

A. Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.) (the “Existing Borrower”) has previously entered into the Credit Agreement dated as of October 26, 2012 (as heretofore amended, supplemented, restated or otherwise modified from time to time, the “Existing Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, issuing bank and swing line lender and the lenders party thereto, including certain of the Lenders (the “Existing Lenders”).

 

B. In order to secure full and punctual payment and performance of the obligations under the Existing Credit Agreement and the other Credit Documents (as defined in the Existing Credit Agreement), certain Guarantors executed and delivered to the Administrative Agent the Guaranty Agreement dated as of October 26, 2012 (as heretofore amended, supplemented, restated or otherwise modified from time to time, the “Existing Guaranty”).

 

C. Aly Energy Services, Inc., a Delaware corporation (the “Borrower”) has assumed the obligations of the Existing Borrower under the Existing Credit Agreement, and the parties to the Existing Credit Agreement have agreed to amend and restate the Existing Credit Agreement in its entirety pursuant to that certain Amended and Restated Credit Agreement dated as of April 15, 2014 (as it may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time, (the “Lenders”) and Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, as the issuing lender (in such capacity, the “Issuing Lender”) and as the swing line lender (in such capacity, the “Swing Line Lender”).

 

D. Each Guarantor (other than the Borrower) is a Subsidiary (as defined in the Credit Agreement) of the Borrower and (i) the transactions contemplated by the Credit Agreement and the other Credit Documents, (ii) the Hedging Arrangements entered into by the Borrower or any Guarantor with a Swap Counterparty, and (iii) the Banking Services provided by any Banking Services Provider to the Borrower or any Guarantor, each are (a) in furtherance of such Subsidiary’s corporate, limited liability company or partnership purposes, (b) necessary or convenient to the conduct, promotion or attainment of such Subsidiary’s business, and (c) for such Subsidiary’s direct or indirect benefit.

 

E. Each Guarantor is executing and delivering this Guaranty (i) to induce the Lenders to provide and to continue to provide Advances under the Credit Agreement, (ii) to induce the Issuing Lender to provide and to continue to provide Letters of Credit under the Credit Agreement, and (iii) intending it to be a legal, valid, binding, enforceable and continuing obligation of such Guarantor.

 

NOW, THEREFORE, in consideration of the premises, each Guarantor hereby agrees as follows:

 

Section 1. Definitions. All capitalized terms not otherwise defined in this Guaranty, including those in the preamble and recitals above, that are defined in the Credit Agreement shall have the meanings assigned to such terms by the Credit Agreement.

 

  

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Section 2. Guaranty.

 

(a) Each Guarantor hereby absolutely, unconditionally and irrevocably guarantees the punctual payment and performance, when due, whether at stated maturity, by acceleration or otherwise, of all Secured Obligations, whether absolute or contingent and whether for principal, interest (including, without limitation, interest that but for the existence of a bankruptcy, reorganization or similar proceeding would accrue), fees, amounts owing in respect of Letter of Credit Obligations, amounts required to be provided as collateral, indemnities, expenses or otherwise (collectively, the “Guaranteed Obligations”) provided, however that “Guaranteed Obligations” shall not include the Excluded Swap Obligations. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrower or any Subsidiary of the Borrower to the Administrative Agent, the Issuing Lender or any Lender under the Credit Documents and by the Borrower or any Subsidiary of the Borrower to the Swap Counterparty but for the fact that they are unenforceable or not allowable due to insolvency or the existence of a bankruptcy, reorganization or similar proceeding involving the Borrower or any Subsidiary of the Borrower.

 

(b) In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree that in the event a payment shall be made on any date under this Guaranty by any Guarantor (the “Funding Guarantor”), each other Guarantor (each a “Contributing Guarantor”) shall indemnify the Funding Guarantor in an amount equal to the amount of such payment, in each case multiplied by a fraction the numerator of which shall be the net worth of the Contributing Guarantor as of such date and the denominator of which shall be the aggregate net worth of all the Contributing Guarantors together with the net worth of the Funding Guarantor as of such date. Any Contributing Guarantor making any payment to a Funding Guarantor pursuant to this Section 2(b) shall be subrogated to the rights of such Funding Guarantor to the extent of such payment.

 

(c) Anything contained in this Guaranty to the contrary notwithstanding, the obligations of each Guarantor under this Guaranty on any date shall be limited to a maximum aggregate amount equal to the largest amount that would not, on such date, render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code of the United States or any applicable provisions of comparable laws relating to bankruptcy, insolvency, or reorganization, or relief of debtors (collectively, the “Fraudulent Transfer Laws”), but only to the extent that any Fraudulent Transfer Law has been found in a final non-appealable judgment of a court of competent jurisdiction to be applicable to such obligations as of such date, in each case:

 

(i) after giving effect to all liabilities of such Guarantor, contingent or otherwise, that are relevant under the Fraudulent Transfer Laws, but specifically excluding:

 

(A) any liabilities of such Guarantor in respect of intercompany indebtedness to the Borrower or other Affiliates of the Borrower to the extent that such indebtedness would be discharged in an amount equal to the amount paid by such Guarantor hereunder;

 

(B) any liabilities of such Guarantor under this Guaranty; and

 

(C) any liabilities of such Guarantor under each of its other guaranties of and joint and several co-borrowings of Debt, in each case entered into on the date this Guaranty becomes effective, which contain a limitation as to maximum amount substantially similar to that set forth in this Section 2(c) (each such other guaranty and joint and several co-borrowing entered into on the date this Guaranty becomes effective, a “Competing Guaranty”) to the extent such Guarantor’s liabilities under such Competing Guaranty exceed an amount equal to (1) the aggregate principal amount of such Guarantor’s obligations under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 2(c)), multiplied by (2) a fraction (i) the numerator of which is the aggregate principal amount of such Guarantor’s obligations under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 2(c)), and (ii) the denominator of which is the sum of (x) the aggregate principal amount of the obligations of such Guarantor under all other Competing Guaranties (notwithstanding the operation of those limitations contained in such other Competing Guaranties that are substantially similar to this Section 2(c)), (y) the aggregate principal amount of the obligations of such Guarantor under this Guaranty (notwithstanding the operation of this Section 2(c)), and (z) the aggregate principal amount of the obligations of such Guarantor under such Competing Guaranty (notwithstanding the operation of that limitation contained in such Competing Guaranty that is substantially similar to this Section 2(c)); and

 

  

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(ii)           after giving effect as assets to the value (as determined under the applicable provisions of the Fraudulent Transfer Laws) of any rights to subrogation, reimbursement, indemnification or contribution of such Guarantor pursuant to applicable law or pursuant to the terms of any agreement (including any such right of contribution under Section 2(b)).

 

Section 3. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Credit Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Secured Party with respect thereto but subject to Section 2(c) above. The obligations of each Guarantor under this Guaranty are independent of the Guaranteed Obligations or any other obligations of any other Person under the Credit Documents or under any Hedging Arrangement, and a separate action or actions may be brought and prosecuted against a Guarantor to enforce this Guaranty, irrespective of whether any action is brought against the Borrower, any other Guarantor or any other Person or whether the Borrower, any other Guarantor or any other Person is joined in any such action or actions. The liability of each Guarantor under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives, to the extent not prohibited by applicable law, any defenses it may now or hereafter have in any way relating to, any or all of the following:

 

(a) any lack of validity or enforceability of any Credit Document or any agreement or instrument relating thereto or any part of the Guaranteed Obligations being irrecoverable;

 

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of any Person under the Credit Documents or any agreement or instrument relating to Hedging Arrangements with a Swap Counterparty, or any other amendment or waiver of or any consent to departure from any Credit Document or any agreement or instrument relating to Hedging Arrangements with a Swap Counterparty, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrower or otherwise;

 

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Guaranteed Obligations;

 

(d) any manner of application of collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other obligations of any other Person under the Credit Documents or any other assets of the Borrower or any Guarantor;

 

(e) any change, restructuring or termination of the corporate structure or existence of the Borrower or any Guarantor;

 

(f) any failure of any Secured Party to disclose to the Borrower or any Guarantor any information relating to the business, condition (financial or otherwise), operations, properties or prospects of any Person now or in the future known to the Administrative Agent, the Issuing Lender, the Swing Line Lender, any Lender or any other Secured Party (and each Guarantor hereby irrevocably waives any duty on the part of any Secured Party to disclose such information);

 

  

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(g) any signature of any officer of the Borrower or any Guarantor being mechanically reproduced in facsimile or otherwise; or

 

(h) any other circumstance or any existence of or reliance on any representation by any Secured Party that might otherwise constitute a defense available to, or a discharge of, the Borrower, any Guarantor or any other guarantor, surety or other Person.

 

Section 4. Continuation and Reinstatement, Etc. Each Guarantor agrees that, to the extent that payments of any of the Guaranteed Obligations are made, or any Secured Party receives any proceeds of collateral, and such payments or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, or otherwise required to be repaid, then to the extent of such repayment the Guaranteed Obligations shall be reinstated and continued in full force and effect as of the date such initial payment or collection of proceeds occurred. EACH GUARANTOR SHALL DEFEND AND INDEMNIFY EACH SECURED PARTY FROM AND AGAINST ANY CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE UNDER THIS SECTION 4 (INCLUDING REASONABLE ATTORNEYS’ FEES AND EXPENSES) IN THE DEFENSE OF ANY SUCH ACTION OR SUIT, INCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE ARISING, IN WHOLE OR IN PART, AS A RESULT OF THE INDEMNIFIED SECURED PARTY’S OWN COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE BUT EXCLUDING SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE THAT IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED SECURED PARTY’S GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.

 

Section 5. Waivers and Acknowledgments.

 

(a) Each Guarantor, to the extent not prohibited by applicable law, hereby waives promptness, diligence, presentment, notice of acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Secured Party protect, secure, perfect or insure any Lien or any property or exhaust any right or take any action against the Borrower or any other Person or any collateral.

 

(b) Each Guarantor, to the extent not prohibited by applicable law, hereby irrevocably waives any right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

 

(c) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from (i) the financing arrangements involving the Borrower or any Guarantor contemplated by the Credit Documents, (ii) the Hedging Arrangements with a Swap Counterparty, and (iii) the Banking Services provided to the Borrower or any Guarantor by any Secured Party, and that the waivers set forth in this Guaranty are knowingly made in contemplation of such benefits.

 

  

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Section 6. Subrogation and Subordination.

 

(a) No Guarantor will exercise any rights that it may now have or hereafter acquire against the Borrower or any other Person to the extent that such rights arise from the existence, payment, performance or enforcement of such Guarantor’s obligations under this Guaranty or any other Credit Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Secured Party against the Borrower or any other Person, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Borrower or any other Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until the occurrence of the Termination Date (as defined below). If any amount shall be paid to a Guarantor in violation of the preceding sentence at any time prior to or on the Termination Date, such amount shall be held in trust for the benefit of the Secured Parties and shall forthwith be paid to the Administrative Agent to be credited and applied to the Guaranteed Obligations and any and all other amounts payable by the Guarantors under this Guaranty, whether matured or unmatured, in accordance with the terms of the Credit Documents. For purposes of this Guaranty, “Termination Date” means the date on or prior to which each of the following shall have occurred: (i) the termination of the Commitments, (ii) the termination of all Hedging Agreements with such Swap Counterparties (other than Hedging Agreements as to which arrangements satisfactory to the applicable counterparty in its sole discretion have been made), (iii) the termination or expiration of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made), and (iv) the payment in full of all outstanding Advances, Letter of Credit Obligations and all other Secured Obligations (other than indemnity obligations and other similar obligations that survive the termination of this Guaranty for which no notice of claim has been received by any Guarantor).

 

(b) Each Guarantor agrees that, until after the Termination Date, all Subordinated Guarantor Obligations (as hereinafter defined) are and shall be subordinate and inferior in rank, preference and priority to all obligations of such Guarantor in respect of the Guaranteed Obligations hereunder, and such Guarantor shall, if requested by the Administrative Agent, execute a subordination agreement reasonably satisfactory to the Administrative Agent to more fully set out the terms of such subordination. Each Guarantor agrees that none of the Subordinated Guarantor Obligations shall be secured by a lien or security interest on any assets of such Guarantor or any ownership interests in any Subsidiary of such Guarantor. “Subordinated Guarantor Obligations” means any and all obligations and liabilities of a Guarantor owing to the Borrower or any other Guarantor, direct or contingent, due or to become due, now existing or hereafter arising, including, without limitation, all future advances, with interest, attorneys’ fees, expenses of collection and costs.

 

Section 7. Representations and Warranties. Each Guarantor hereby represents and warrants as follows:

 

(a) There are no conditions precedent to the effectiveness of this Guaranty. Such Guarantor benefits from executing this Guaranty.

 

  

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(b) Such Guarantor has, independently and without reliance upon the Administrative Agent or any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty, and such Guarantor has established adequate means of obtaining from the Borrower and each other relevant Person on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial and otherwise), operations, properties and prospects of the Borrower and each other relevant Person.

 

(c) The obligations of such Guarantor under this Guaranty are the valid, binding and legally enforceable obligations of such Guarantor, (except as limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time in effect affecting the rights of creditors generally and (ii) general principles of equity whether applied by a court of law or equity), and the execution and delivery of this Guaranty by such Guarantor has been duly and validly authorized in all respects by all requisite corporate, limited liability company or partnership actions on the part of such Guarantor, and the Person who is executing and delivering this Guaranty on behalf of such Guarantor has full power, authority and legal right to so do, and each Guarantor has full power, authority and legal right to observe and perform all of the terms and conditions of this Guaranty on such Guarantor’s part to be observed or performed.

 

Section 8. Right of Set-Off. Upon the occurrence and during the continuance of any Event of Default, any Lender or the Administrative Agent, the Issuing Lender, the Swing Line Lender and any other Secured Party is hereby authorized at any time, to the fullest extent permitted by law, to set-off and apply any deposits (general or special, time or demand, provisional or final) and other indebtedness owing by such Secured Party to the account of each Guarantor against any and all of the obligations of the Guarantors under this Guaranty, irrespective of whether or not such Secured Party shall have made any demand under this Guaranty and although such obligations may be contingent and unmatured. Such Secured Party shall promptly notify the affected Guarantor after any such set-off and application is made, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Secured Parties under this Section 8 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which any Secured Party may have.

 

Section 9. Amendments, Etc. No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the affected Guarantor and the Administrative Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

Section 10. Notices, Etc. All notices and other communications provided for hereunder shall be sent in the manner provided for in Section 9.9 of the Credit Agreement, if to a Guarantor, at its address for notices specified in Schedule II to the Security Agreement, and if to any Secured Party, at its address specified in or pursuant to the Credit Agreement. All such notices and communications shall be effective when delivered.

 

Section 11. No Waiver: Remedies. No failure on the part of the Administrative Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

  

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Section 12. Continuing Guaranty: Assignments under the Credit Agreement. This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the Termination Date, (b) be binding upon each Guarantor and its successors and assigns, (c) inure to the benefit of and be enforceable by the Administrative Agent, each Lender, the Swing Line Lender and the Issuing Lender and their respective successors, and, in the case of transfers and assignments made in accordance with the Credit Agreement, transferees and assigns, and (d) inure to the benefit of and be enforceable by a Swap Counterparty and each of its successors, transferees and assigns to the extent such successor, transferee or assign is a Lender or an Affiliate of a Lender. Without limiting the generality of the foregoing clause (c), subject to Section 9.7 of the Credit Agreement, any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Advances owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, in all respects to the provisions of the Credit Agreement. Each Guarantor acknowledges that upon any Person becoming a Lender, the Administrative Agent, the Swing Line Lender or the Issuing Lender in accordance with the Credit Agreement, such Person shall be entitled to the benefits hereof.

 

Section 13. Governing Law; Service of Process. This Guaranty shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). Each Guarantor hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to such Guarantor at the address set forth for such Guarantor in Schedule II to the Security Agreement. Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against any Guarantor or its Property in the courts of any other jurisdiction.

 

Section 14. Submission to Jurisdiction. The parties hereto hereby agree that any suit or proceeding arising in respect of this Guaranty, or any of the matters contemplated hereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in this Section 14. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Guaranty and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

 

  

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Section 15. Waiver of Jury. THE GUARANTORS HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 16. INDEMNIFICATION. EACH GUARANTOR AGREES TO, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ISSUING LENDER AND EACH SECURED PARTY AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN “INDEMNITEE”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNITEE, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THIS GUARANTY, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE APPLICABLE INDEMNITEE, EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR MATERIAL BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS GUARANTY. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 16 APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY ANY GUARANTOR, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNITEE OR ANY OTHER PERSON OR ANY INDEMNITEE IS OTHERWISE A PARTY THERETO. No Guarantor shall, without the prior written consent of each Indemnitee affected thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give rise to the right of any Indemnitee to claim indemnification hereunder unless such settlement (x) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnitee and (y) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnitee.

 

  

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Section 17. Additional Guarantors. Pursuant to Section 5.6 of the Credit Agreement, each Subsidiary of the Borrower that was not in existence on the date of the Credit Agreement is required to enter into this Guaranty as a Guarantor upon becoming a Subsidiary. Upon execution and delivery after the date hereof by the Administrative Agent and such Subsidiary of an instrument in the form of Annex 1, such Subsidiary shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any instrument adding an additional Guarantor as a party to this Guaranty shall not require the consent of any other Guarantor hereunder. The rights and obligations of each Guarantor hereunder shall remain in full force and effect notwithstanding the addition of any new Guarantor as a party to this Guaranty.

 

Section 18. Amendment and Restatement. This Guaranty is an amendment and restatement of the Existing Guaranty and supersedes the Existing Guaranty in its entirety; provided, however, that the execution and delivery of this Guaranty shall not effect a novation of the Existing Guaranty but shall be, to the fullest extent applicable, in modification, renewal, confirmation and extension of such Existing Guaranty.

 

Section 19. USA Patriot Act. Each Secured Party that is subject to the Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any other Secured Party) hereby notifies each Guarantor that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001))(the “Act”), it is required to obtain, verify and record information that identifies such Guarantor, which information includes the name and address of such Guarantor and other information that will allow such Secured Party or the Administrative Agent, as applicable, to identify such Guarantor in accordance with the Act. Following a request by any Secured Party, each Guarantor shall promptly furnish all documentation and other information that such Secured Party reasonably requests in order to comply with its ongoing obligations under the applicable “know your customer” and anti-money laundering rules and regulations, including the Act.

 

THIS GUARANTY AND THE OTHER CREDIT DOCUMENTS (AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS GUARANTY) REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

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Each Guarantor has caused this Guaranty to be duly executed as of the date first above written.

 

	 	
GUARANTORS:

 

ALY ENERGY SERVICES, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Munawar H. Hidayatallah	 
	 	 	Munawar H. Hidayatallah	 
	 	 	
Chairman of the Board and Chief Executive Officer

	 
	 	 	 	 
	 	ALY OPERATING, INC.	 
	 	 	 	 
	 	By: 	
/s/ Munawar H. Hidayatallah

	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 
	 	 	 	 
	 	AUSTIN CHALK PETROLEUM SERVICES CORP.	 
	 	 	 	 
	 	By: Aly Operating, Inc., its sole shareholder	 
	 	 	 	 
	 	By: 	
/s/ Munawar H. Hidayatallah

	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 
	 	 	 	 
	 	ALY CENTRIFUGE INC.	 
	 	 	 	 
	 	By:  	/s/ Munawar H. Hidayatallah	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 

 

  

Signature Page to Amended and Restated Guaranty Agreement

  

Annex 1 to the Amended and Restated Guaranty Agreement

 

SUPPLEMENT NO. ____ dated as of ______________(the “Supplement”), to the Amended and Restated Guaranty Agreement dated as of April 15, 2014 (as amended, supplemented or otherwise modified from time to time, the “Guaranty Agreement”), executed by [________________________] (each a “Guarantor” and collectively, the “Guarantors”), and Wells Fargo Bank, National Association, as Administrative Agent (in such capacity, the “Administrative Agent”) for the benefit of the Secured Parties (as defined in the Credit Agreement referred to herein).

 

A. Reference is made to the Amended and Restated Credit Agreement dated as of April 15, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Aly Energy Services, Inc., a Delaware corporation (the “Borrower”), the lenders from time to time party thereto (the “Lenders”), the Administrative Agent, Wells Fargo Bank, National Association, as the issuing lender (the “Issuing Lender”) and as the swing line lender.

 

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Guaranty Agreement and the Credit Agreement.

 

C. The Guarantors have entered into the Guaranty Agreement in order to induce the Lenders to make Advances and the Issuing Lender to issue Letters of Credit. Section 17 of the Guaranty Agreement provides that additional Subsidiaries of the Borrower may become Guarantors under the Guaranty Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the “New Guarantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guaranty Agreement in order to induce the Lenders to make additional Advances and the Issuing Lender to issue additional Letters of Credit and as consideration for Advances previously made and Letters of Credit previously issued.

 

Accordingly, the Administrative Agent and the New Guarantor agree as follows:

 

SECTION 1. In accordance with Section 17 of the Guaranty Agreement, the New Guarantor by its signature below becomes a Guarantor under the Guaranty Agreement with the same force and effect as if originally named therein as a Guarantor and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guaranty Agreement applicable to it as a Guarantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor thereunder are true and correct in all material respects on and as of the date hereof. Each reference to a “Guarantor” in the Guaranty Agreement shall be deemed to include the New Guarantor. The terms and conditions of the Guaranty Agreement are hereby incorporated herein by reference.

 

  

Annex 1 to Amended and Restated Guaranty Agreement

  

 

SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it by all requisite corporate, limited liability company or partnership action and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

 

SECTION 3. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the New Guarantor and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile or other electronic transmission shall be as effective as delivery of a manually executed counterpart of this Supplement.

 

SECTION 4. Except as expressly supplemented hereby, the Guaranty Agreement shall remain in full force and effect.

 

SECTION 5. This Supplement shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). The New Guarantor hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to the New Guarantor at the address set forth on the signature page to this Supplement. Nothing in this Section shall affect the rights of any Lender to serve legal process in any other manner permitted by the law or affect the right of any Lender to bring any action or proceeding against the New Guarantor or its Property in the courts of any other jurisdiction.

 

  

Annex 1 to Amended and Restated Guaranty Agreement

  

 

SECTION 6. The parties hereto hereby agree that any suit or proceeding arising in respect of this Supplement, or any of the matters contemplated hereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Supplement in any court referred to in this Section 6. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Supplement and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

 

SECTION 7. THE NEW GUARANTOR HEREBY ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED BY AND HAS CONSULTED WITH COUNSEL OF ITS CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 8. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guaranty Agreement shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision hereof in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 9. All communications and notices hereunder shall be in writing and given as provided in Section 10 of the Guaranty Agreement.

 

THIS SUPPLEMENT, THE GUARANTY AGREEMENT AND THE OTHER CREDIT DOCUMENTS (AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT) REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

[Remainder of this page intentionally left blank.]

 

  

Annex 1 to Amended and Restated Guaranty Agreement

  

 

IN WITNESS WHEREOF, the New Guarantor and the Administrative Agent have duly executed this Supplement to the Guaranty Agreement as of the day and year first above written.

 

	 	[Name of New Guarantor]	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 	 
	 	Title: 	 	 
	 	 	 	 
	 	Address for New Guarantor:	 
	 	 	 	 
	 	_____________________	 
	 	_____________________	 
	 	 	 	 
	 	WELLS FARGO BANK, 

NATIONAL ASSOCIATION,

as Administrative Agent

	 
	 	 	 	 
	 	By:	 	 
	 	Name: 	 	 
	 	Title:	 	 

 

  

Annex 1 to Amended and Restated Guaranty Agreement

  

EXHIBIT G

 

 AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

 

This Amended and Restated Pledge and Security Agreement, dated as of April 15, 2014 (as amended, supplemented, amended and restated or otherwise modified from time to time, this “Security Agreement”), is by and among Aly Energy Services, Inc., a Delaware corporation (the “Borrower”), certain subsidiaries of the Borrower party hereto from time to time (collectively with the Borrower, the “Grantors” and individually, a “Grantor”), and Wells Fargo Bank, National Association, as administrative agent (in such capacity, the “Administrative Agent”) for the ratable benefit of the Secured Parties.

 

W I T N E S S E T H:

 

A. Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.) (the “Existing Borrower”) has previously entered into the Credit Agreement dated as of October 26, 2012 (as heretofore amended, supplemented, restated or otherwise modified from time to time, the “Existing Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent, issuing bank and swing line lender and the lenders party thereto, including certain of the Lenders (the “Existing Lenders”).

 

B. In order to secure full and punctual payment and performance of the obligations under the Existing Credit Agreement and the other Credit Documents (as defined in the Existing Credit Agreement), certain Grantors executed and delivered to the Administrative Agent the Pledge and Security Agreement dated as of October 26, 2012 (as heretofore amended, supplemented, restated or otherwise modified from time to time, the “Existing Security Agreement”).

 

C. The Borrower has assumed the obligations of the Existing Borrower under the Existing Credit Agreement, and the parties to the Existing Credit Agreement have agreed to amend and restate the Existing Credit Agreement in its entirety pursuant to that certain Amended and Restated Credit Agreement dated as of April 15, 2014 (as it may be amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time, (the “Lenders”) and Wells Fargo Bank, National Association, as the administrative agent (in such capacity, the “Administrative Agent”) for the Lenders, as the issuing lender (in such capacity, the “Issuing Lender”) and as the swing line lender (in such capacity, the “Swing Line Lender”).

 

D. Each Grantor (other than the Borrower) is a Subsidiary (as defined in the Credit Agreement) of the Borrower and (i) the transactions contemplated by the Credit Agreement and the other Credit Documents, (ii) the Hedging Arrangements entered into by the Borrower or any other Grantor with a Swap Counterparty, and (iii) the Banking Services provided by any Banking Services Provider to the Borrower or any other Grantor, each are (a) in furtherance of such Subsidiary’s corporate, limited liability company or partnership purposes, (b) necessary or convenient to the conduct, promotion or attainment of such Subsidiary’s business, and (c) for such Subsidiary’s direct or indirect benefit.

 

E. Each Grantor is executing and delivering this Security Agreement (i) to induce the Lenders to provide and to continue to provide Advances under the Credit Agreement, (ii) to induce the Issuing Lender to provide and to continue to provide Letters of Credit under the Credit Agreement, and (iii) intending it to be a legal, valid, binding, enforceable and continuing obligation of such Grantor.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Grantor agrees, for the benefit of each Secured Party, as follows:

 

  

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ARTICLE I

DEFINITIONS

 

SECTION 1.1. Certain Terms. The following terms (whether or not underscored) when used in this Security Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

 

“Administrative Agent” has the meaning set forth in the preamble.

 

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

 

“Collateral” has the meaning set forth in Section 2.1.

 

“Collateral Account” has the meaning set forth in Section 4.3(b).

 

“Computer Hardware and Software Collateral” means (a) all computer and other electronic data processing hardware, integrated computer systems, central processing units, memory units, display terminals, printers, features, computer elements, card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators, power equalizers, accessories and all peripheral devices and other related computer hardware, including all operating system software, utilities and application programs in whatsoever form, (b) software programs (including both source code, object code and all related applications and data files), designed for use on the computers and electronic data processing hardware described in clause (a) above, (c) all firmware associated therewith, (d) all documentation (including flow charts, logic diagrams, manuals, guides, specifications, training materials, charts and pseudo codes) with respect to such hardware, software and firmware described in the preceding clauses (a) through (c), and (e) all rights with respect to all of the foregoing, including copyrights, licenses, options, warranties, service contracts, program services, test rights, maintenance rights, support rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, improvements, error corrections, updates, additions or model conversions of any of the foregoing.

 

“Control Agreement” means an agreement in form and substance reasonably satisfactory to the Administrative Agent, that provides for the Administrative Agent (for the ratable benefit of the Secured Parties) to have “control” (as defined in the UCC) over certain Collateral.

 

“Copyright Collateral” means all copyrights of any Grantor, registered or unregistered and whether published or unpublished, now or hereafter in force throughout the world including all of such Grantor’s rights, titles and interests in and to all copyrights registered in the United States Copyright Office or anywhere else in the world, including without limitation those copyrights referred to in Item C of Schedule III hereto, and registrations and recordings thereof and all applications for registration thereof, whether pending or in preparation, all copyright licenses, the right to sue for past, present and future infringements of any of the foregoing, all rights corresponding thereto, all extensions and renewals of any thereof and all proceeds of the foregoing, including licenses, royalties, income, payments, claims, damages and Proceeds of suit, which are owned or licensed by such Grantor.

 

  

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“Credit Agreement” has the meaning set forth in the first recital.

 

“Distributions” means all cash, cash dividends, stock dividends, other distributions, liquidating dividends, shares of stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, and all other distributions or payments (whether similar or dissimilar to the foregoing) on or with respect to, or on account of, any Pledged Share or Pledged Interest or other rights or interests constituting Collateral.

 

“Equipment” has the meaning set forth in Section 2.1(a).

 

“Excluded Collateral” has the meaning set forth in Section 2.1.

 

“General Intangibles” means all “general intangibles” and all “payment intangibles”, each as defined in the UCC, and shall include all interest rate or currency protection or Hedging Arrangements, all tax refunds, all licenses, permits, concessions and authorizations and all Intellectual Property Collateral (in each case, regardless of whether characterized as general intangibles under the UCC).

 

“Governmental Approval” has the meaning set forth in Section 2.1(f).

 

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

 

“Indemnitees” has the meaning set forth in Section 6.3(a).

 

“Intellectual Property Collateral” means, collectively, the Copyright Collateral, the Patent Collateral, the Trademark Collateral and the Trade Secrets Collateral.

 

“Inventory” has the meaning set forth in Section 2.1(b).

 

“Lenders” has the meaning set forth in the first recital.

 

“Patent Collateral” means (a) all inventions and discoveries, whether patentable or not, all letters patent and applications for letters patent throughout the world, including without limitation those patents referred to in Item A of Schedule III hereto, and any patent applications in preparation for filing, (b) all reissues, divisions, continuations, continuations-in-part, extensions, renewals and reexaminations of any of the items described in clause (a), (c) all patent licenses, and other agreements providing any Grantor with the right to use any items of the type referred to in clauses (a) and (b) above, and (d) all proceeds of, and rights associated with, the foregoing (including licenses, royalties income, payments, claims, damages and proceeds of infringement suits), the right to sue third parties for past, present or future infringements of any patent or patent application, and for breach or enforcement of any patent license.

 

“Pledged Interests” means all Equity Interests or other ownership interests of any Pledged Interests Issuer described in Item A of Schedule I hereto and all Equity Interests or other ownership interests of any Pledged Interests Issuer hereafter acquired by, or otherwise issued to, each Grantor, including those described in Item A of Schedule I hereto; all certificates representing any such interests; all options and other rights (including, without limitation, all options and rights under or pursuant to any registrations, articles, by-laws, regulations, limited liability company agreements or constitutive agreements governing or representing any such interests), contractual or otherwise, at any time existing with respect to such interests, as such interests are amended, modified, or supplemented from time to time, and together with any interests in any Pledged Interests Issuer taken in extension or renewal thereof or substitution therefor.

 

  

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“Pledged Interests Issuer” means each Person identified in Item A of Schedule I hereto as the issuer of the Pledged Shares or the Pledged Interests identified opposite the name of such Person.

 

“Pledged Note Issuer” means each Person identified in Item B of Schedule I hereto as the issuer of the Pledged Notes identified opposite the name of such Person.

 

“Pledged Notes” means all promissory notes of any Pledged Note Issuer evidencing Debt incurred pursuant to Section 6.1(b) of the Credit Agreement in form and substance reasonably satisfactory to the Administrative Agent delivered by any Grantor to the Administrative Agent as Pledged Property hereunder, as such promissory notes are amended, modified or supplemented from time to time and together with any promissory note of any Pledged Note Issuer taken in extension or renewal thereof or substitution therefor.

 

“Pledged Property” means all Pledged Notes, Pledged Interests, Pledged Shares, all assignments of any amounts due or to become due with respect to the Pledged Interests or the Pledged Shares, all other instruments which are now being delivered by any Grantor to the Administrative Agent or may from time to time hereafter be delivered by any Grantor to the Administrative Agent for the purpose of pledging under this Security Agreement or any other Credit Document, and all proceeds of any of the foregoing.

 

“Pledged Shares” means all shares of stock of any Pledged Interests Issuer identified under Item A of Schedule I in the table titled “Common Stock.”

 

“Receivables” has the meaning set forth in Section 2.1(c).

 

“Related Contracts” has the meaning set forth in Section 2.1(c).

 

“Security Agreement” has the meaning set forth in the preamble.

 

“Termination Date” means the date on or prior to which each of the following shall have occurred: (a) the termination of the Commitments, (b) the termination of all Hedging Agreements with such Swap Counterparties (other than Hedging Agreements as to which arrangements satisfactory to the applicable counterparty in its sole discretion have been made), (c) the termination of all Letters of Credit (other than Letters of Credit as to which arrangements satisfactory to the Issuing Lender in its sole discretion have been made), and (d) the payment in full of all outstanding Advances, Letter of Credit Obligations and all other Secured Obligations (other than contingent indemnification obligations).

 

“Trademark Collateral” means (a) (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos and other source or business identifiers, and all goodwill of the business associated therewith, now existing or hereafter adopted or acquired, including without limitation those trademarks referred to in Item B of Schedule III hereto, whether currently in use or not, all registrations and recordings thereof and all applications in connection therewith, whether pending or in preparation for filing, including registrations, recordings and applications in the United States Patent and Trademark Office or in any office or agency of the United States of America, or any State thereof or any other country or political subdivision thereof or otherwise, and all common-law rights relating to the foregoing, and (ii) the right to obtain all reissues, extensions or renewals of the foregoing (collectively referred to as the “Trademark”), (b) all trademark licenses for the grant by or to any Grantor of any right to use any trademark, (c) all of the goodwill of the business connected with the use of, and symbolized by the items described in, clause (a), and to the extent applicable clause (b), (d) the right to sue third parties for past, present and future infringements of any Trademark Collateral described in clause (a) and, to the extent applicable, clause (b), and (e) all Proceeds of, and rights associated with, the foregoing, including any claim by any Grantor against third parties for past, present or future infringement or dilution of any Trademark, Trademark registration or Trademark license, or for any injury to the goodwill associated with the use of any such Trademark or for breach or enforcement of any Trademark license and all rights corresponding thereto throughout the world.

 

  

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“Trade Secrets Collateral” means all common law and statutory trade secrets and all other confidential, proprietary or useful information and all know-how obtained by or used in or contemplated at any time for use in the business of any Grantor, (all of the foregoing being collectively called a “Trade Secret”), including all Documents and things embodying, incorporating or referring in any way to such Trade Secret, all Trade Secret licenses, and including the right to sue for and to enjoin and to collect damages for the actual or threatened misappropriation of any Trade Secret and for the breach or enforcement of any such Trade Secret license.

 

“UCC” means the Uniform Commercial Code, as in effect in the State of New York, as the same may be amended from time to time.

 

SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, defined terms used in this Security Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement.

 

SECTION 1.3. UCC Definitions. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the UCC are used in this Security Agreement, including its preamble and recitals, with such meanings.

 

SECTION 1.4. Miscellaneous. Article, Section, Schedule, and Exhibit references are to Articles and Sections of and Schedules and Exhibits to this Security Agreement, unless otherwise specified. All references to instruments, documents, contracts, and agreements (including this Security Agreement) are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified and shall include all schedules and exhibits thereto unless otherwise specified. The words “hereof”, “herein”, and “hereunder” and words of similar import when used in this Security Agreement shall refer to this Security Agreement as a whole and not to any particular provision of this Security Agreement. The term “including” means “including, without limitation,”. Paragraph headings have been inserted in this Security Agreement as a matter of convenience for reference only and it is agreed that such paragraph headings are not a part of this Security Agreement and shall not be used in the interpretation of any provision of this Security Agreement.

 

  

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ARTICLE II

SECURITY INTEREST

 

SECTION 2.1. Grant of Security Interest. Each Grantor hereby pledges, hypothecates, assigns, charges, mortgages, delivers, and transfers to the Administrative Agent, for the ratable benefit of each Secured Party, and hereby grants to the Administrative Agent, for the ratable benefit of each Secured Party, a continuing security interest in all of such Grantor’s right, title and interest in, to and under, all of the following, whether now owned or hereafter acquired by such Grantor, and wherever located and whether now owned or hereafter existing or arising (collectively, the “Collateral”):

 

(a) all equipment in all of its forms (including, but not limited to, all remotely operated vehicles, trenchers and other equipment used by any Grantor, vehicles, motor vehicles, rolling stock, vessels, aircraft) of such Grantor, wherever located, and all surface or subsurface machinery, equipment, facilities, supplies, or other tangible personal property, including tubing, rods, pumps, pumping units and engines, pipe, pipelines, meters, apparatus, boilers, compressors, liquid extractors, connectors, valves, fittings, power plants, poles, lines, cables, wires, transformers, starters and controllers, machine shops, tools, machinery and parts, storage yards and equipment stored therein, buildings and camps, telegraph, telephone, and other communication systems, loading docks, loading racks, and shipping facilities, and any manuals, instructions, blueprints, computer software (including software that is imbedded in and part of the equipment), and similar items which relate to the above, and any and all additions, substitutions and replacements of any of the foregoing, wherever located together with all improvements thereon and all attachments, components, parts, equipment and accessories installed thereon or affixed thereto (any and all of the foregoing being the “Equipment”);

 

(b) all inventory in all of its forms of such Grantor, wherever located, including (i) all raw materials and work in process therefore, finished goods thereof, and materials used or consumed in the manufacture or production thereof, (ii) all documents of title covering any inventory, including, without limitation, work in process, materials used or consumed in any Grantor’s business, now owned or hereafter acquired or manufactured by any Grantor and held for sale in the ordinary course of its business (iii) all goods in which such Grantor has an interest en masse or a joint or other interest or right of any kind (including goods in which such Grantor has an interest or right as consignee), (iv) all goods which are returned to or repossessed by such Grantor, and all accessions thereto, products thereof and documents therefore, and (v) any other item constituting “inventory” under the UCC (any and all such inventory, materials, goods, accessions, products and documents being the “Inventory”);

 

  

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(c) all accounts, money, payment intangibles, contracts, contract rights, all rights constituting a right to the payment of money, Chattel Paper, documents, documents of title, instruments, letters of credit, letter of credit rights and General Intangibles of such Grantor, whether or not earned by performance or arising out of or in connection with the sale or lease of goods or the rendering of services, including all moneys due or to become due in repayment of any loans or advances, and all rights of such Grantor now or hereafter existing in and to all security agreements, guaranties, leases, agreements and other contracts securing or otherwise relating to any such accounts, money, payment intangibles, contracts, contract rights, rights to the payment of money, Chattel Paper, documents, documents of title, instruments, letters of credit, letter of credit rights and General Intangibles (any and all such accounts, money, payment intangibles, contracts, contract rights, rights to the payment of money, Chattel Paper, documents, documents of title, instruments, letters of credit, letter of credit rights and General Intangibles being the “Receivables”, and any and all such security agreements, guaranties, leases, agreements and other contracts being the “Related Contracts”);

 

(d) all Intellectual Property Collateral of such Grantor;

 

(e) all books, correspondence, credit files, records, invoices, tapes, cards, computer runs, writings, data bases, information in all forms, paper and documents and other property relating to, used or useful in connection with, evidencing, embodying, incorporating or referring to, any of the foregoing in this Section 2.1;

 

(f) all governmental approvals, permits, licenses, authorizations, consents, rulings, tariffs, rates, certifications, waivers, exemptions, filings, claims, orders, judgments and decrees (each a “Governmental Approval”), to the extent a security interest may be granted therein; provided that any Governmental Approval that by its terms or by operation of law would be void, voidable, terminable or revocable if mortgaged, pledged, assigned or otherwise encumbered hereunder is expressly excepted and excluded from the Liens and terms of this Security Agreement, including the grant of security interest in this Section 2.1;;

 

(g) all interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, and all other agreements or arrangements designed to protect such Grantor against fluctuations in interest rates or currency exchange rates and all commodity hedge, commodity swap, exchange, forward, future, floor, collar or cap agreements, fixed price agreements and all other agreements or arrangements designed to protect such Grantor against fluctuations in commodity prices (including, without limitation, any Hedging Arrangement);

 

(h) all deposit accounts (including the Collateral Accounts and all amounts on deposit therein and all cash equivalent investments carried therein and all proceeds thereof), and, to the extent not included in the foregoing, all bank accounts, investment property, fixtures, supporting obligations and goods;

 

(i) all Pledged Interests, Pledged Notes, Pledged Shares and any other Pledged Property whether now or hereafter delivered to the Administrative Agent in connection with this Security Agreement and all Distributions, interest, and other payments and rights with respect to such Pledged Property;

 

(j) (i) all policies of insurance now or hereafter held by or on behalf of such Grantor, including casualty, liability, key man life insurance, business interruption, foreign credit insurance, and any title insurance, (ii) all proceeds of insurance, and (iii) all rights, now or hereafter held by such Grantor to any warranties of any manufacturer or contractor of any other Person;

 

  

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(k) all accessions, substitutions, replacements, products, offspring, rents, issues, profits, returns, income and proceeds of and from any and all of the foregoing Collateral (including proceeds which constitute property of the types described in clauses (a), (b), (c), (d), (e), (f), (g), (h), (i) and (j) and proceeds deposited from time to time in any lock boxes of such Grantor, and, to the extent not otherwise included, all payments and proceeds under insurance (whether or not the Administrative Agent is the loss payee thereof), or any condemnation award, indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the Collateral);

 

(l) any and all Liens and security interests (together with the documents evidencing such security interests) granted to such Grantor by an obligor to secure such obligor’s obligations owing under any Instrument, Chattel Paper, or contract that is pledged hereunder or with respect to which a security interest in such Grantor’s rights in such Instrument, Chattel Paper, or contract is granted hereunder;

 

(m) any and all guaranties given by any Person for the benefit of such Grantor which guarantees the obligations of an obligor under any Instrument, Chattel Paper, or contract, which are pledged hereunder; and

 

(n) all of such Grantor’s right, title and interest in, to and under any “Accounts”, “Certificated Securities”, “Chattel Paper”, “Commercial Tort Claims”, “Commodity Accounts”, “Commodity Contracts”, “Deposit Accounts”, “Documents”, “Equipment”, “Fixtures”, “General Intangibles”, “Goods”, “Instruments”, “Inventory”, “Investment Property”, “Letter of Credit Rights”, “Letters of Credit”, “Money”, “Payment Intangibles”, “Proceeds”, “Securities”, “Securities Account”, “Security Entitlements”, “Supporting Obligations” and “Uncertificated Securities” as each such terms are defined in the UCC; provided that, notwithstanding anything to the contrary contained in this Section 2.1 and other than to the extent set forth in this Section 2(b), any General Intangibles, Contracts, Contract Documents or other documents (and any Contract Rights arising thereunder) to which any of the Grantors is a party shall be excluded from the lien and security interest granted hereunder (and shall, as applicable, not be included as "Collateral", "Contracts", "Contract Rights", "Contract Documents", "General Intangibles", "Investment Property", "Legal Requirements", "Insurance Contracts", "Instruments", "Pledged Equity" or "Chattel Paper" for the purposes hereof) to the extent (but only to the extent) that a Grantor is prohibited from granting a security interest in, pledge of, or charge, mortgage or lien upon any such Property by reason of (i) an existing and enforceable negative pledge or anti-assignment provision or (ii) applicable law or regulation to which such Grantor is subject (all such General Intangibles, Contracts, Contract Documents and other documents being the "Excluded Contracts"); provided, however, that (A) the exclusion from the lien and security interest granted by such Grantor hereunder of any Contract Rights of any of the Grantors under one or more of the Excluded Contracts shall not limit, restrict or impair the grant by such Grantor of the lien and security interest in any Accounts or receivables arising under any such Excluded Contract or any payments due or to become due thereunder, (B) any Excluded Contract shall automatically cease to be excluded from this Section 2.1 (and shall automatically be subject to the lien and security interest granted hereby and to the terms and provisions of this Security Agreement as "Collateral"), to the extent that (1) either of the prohibitions discussed in clause (i) and (ii) above is ineffective or subsequently rendered ineffective under Sections 9-406, 9-407, 9-408 or 9-409 of the UCC or under any other Legal Requirement or is otherwise no longer in effect, or (2) the applicable Grantor has obtained the consent of the other parties to such Excluded Contract to the creation of a lien and security interest in, such Excluded Contract (which consent, upon the reasonable request of the Secured Party, such Grantor will use its commercial reasonable efforts to obtain), and (C) any proceeds received by any Grantor from the sale, transfer or other disposition of Excluded Contracts shall constitute Collateral unless any assets or property constituting such proceeds are themselves subject to the exclusions set forth in this Section 2.1. In addition, the following property shall be excluded from the lien and security interest granted hereunder (and shall, as applicable, not be included as "Collateral", "Contracts", "Contract Rights", "Contract Documents", "General Intangibles", "Investment Property", "Legal Requirements", "Insurance Contracts", "Instruments", "Pledged Equity" or "Chattel Paper" for the purposes hereof): (x) any deposit accounts or other bank accounts of any Grantor used solely for payroll funding or employee benefits purposes, and (y) any property of a Grantor that is now or hereafter subject to a Lien securing Debt to the extent that (A) such Lien is permitted by Section 6.2(e) of the Credit Agreement and such Debt is permitted by Section 6.1(d) of the Credit Agreement and (B) the documents evidencing such Debt prohibit the granting of a Lien in the property securing such Debt (the properties described in clauses (x) and (y) hereof, together with the Excluded Contracts being the “Excluded Collateral”).

 

  

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SECTION 2.2. Security for Obligations.

 

(a) This Security Agreement, and the Collateral in which the Administrative Agent for the benefit of the Secured Parties is granted a security interest hereunder by each Grantor, secures the prompt and indefeasible payment in full in cash and performance of all Secured Obligations.

 

(b) Notwithstanding anything contained herein to the contrary, it is the intention of each Grantor, the Administrative Agent and the other Secured Parties that the amount of the Secured Obligations secured by each Grantor’s interests in any of its Property shall be in, but not in excess of, the maximum amount permitted by fraudulent conveyance, fraudulent transfer and other similar law, rule or regulation of any Governmental Authority applicable to such Grantor. Accordingly, notwithstanding anything to the contrary contained in this Security Agreement or in any other agreement or instrument executed in connection with the payment of any of the Secured Obligations, the amount of the Secured Obligations secured by each Grantor’s interests in any of its Property pursuant to this Security Agreement shall be limited to an aggregate amount equal to the largest amount that would not render such Grantor’s obligations hereunder or the Liens and security interest granted to the Administrative Agent hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provision of any other applicable law.

 

SECTION 2.3. Continuing Security Interest; Transfer of Advances; Reinstatement. This Security Agreement shall create continuing security interests in the Collateral and shall (a) remain in full force and effect until the Termination Date, (b) be binding upon each Grantor and its successors, transferees and assigns, and (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent and each other Secured Party and its respective successors, transferees and assigns, subject to the limitations as set forth in the Credit Agreement. Without limiting the generality of the foregoing clause (c), any Lender may assign or otherwise transfer (in whole or in part) any Note, Advance or Commitment held by it as provided in Section 9.7 of the Credit Agreement, and any successor or assignee thereof shall thereupon become vested with all the rights and benefits in respect thereof granted to such Secured Party under any Credit Document (including this Security Agreement), or otherwise, subject, however, to any contrary provisions in such assignment or transfer, and as applicable to the provisions of Section 9.7 and Article 8 of the Credit Agreement. If at any time all or any part of any payment theretofore applied by the Administrative Agent or any other Secured Party to any of the Secured Obligations is or must be rescinded or returned by the Administrative Agent or any such Secured Party for any reason whatsoever (including, without limitation, the insolvency, bankruptcy, reorganization or other similar proceeding of any Grantor or any other Person), such Secured Obligations shall, for purposes of this Security Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued to be in existence, notwithstanding any application by the Administrative Agent or such Secured Party or any termination agreement or release provided to any Grantor, and this Security Agreement shall continue to be effective or reinstated, as the case may be, as to such Secured Obligations, all as though such application by the Administrative Agent or such Secured Party had not been made.

 

  

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SECTION 2.4. Grantors Remain Liable. Anything herein to the contrary notwithstanding, (a) each Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein, and will perform all of its duties and obligations under such contracts and agreements to the same extent as if this Security Agreement had not been executed, (b) the exercise by the Administrative Agent of any of its rights hereunder shall not release any Grantor from any of its duties or obligations under any such contracts or agreements included in the Collateral, and (c) neither the Administrative Agent nor any other Secured Party shall have any obligation or liability under any contracts or agreements included in the Collateral by reason of this Security Agreement, nor shall the Administrative Agent nor any Secured Party be obligated to perform any of the obligations or duties of any Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

SECTION 2.5. [Reserved].

 

SECTION 2.6. Distributions on Pledged Shares. In the event that any Distribution with respect to any Pledged Shares or Pledged Interests pledged hereunder is permitted to be paid (in accordance with Section 6.9 of the Credit Agreement), such Distribution or payment may be paid directly to the applicable Grantor. If any Distribution is made in contravention of Section 6.9 of the Credit Agreement, the applicable Grantor shall hold the same segregated and in trust for the Administrative Agent until paid to the Administrative Agent in accordance with Section 4.1(e).

 

SECTION 2.7. Security Interest Absolute, etc. This Security Agreement shall in all respects be a continuing, absolute, unconditional and irrevocable grant of security interest, and shall remain in full force and effect until the Termination Date. All rights of the Secured Parties and the security interests granted to the Administrative Agent (for its benefit and the ratable benefit of each other Secured Party) hereunder, and all obligations of each Grantor hereunder, shall, in each case, be absolute, unconditional and irrevocable irrespective of (a) any lack of validity, legality or enforceability of any Credit Document, (b) the failure of any Secured Party (i) to assert any claim or demand or to enforce any right or remedy against any Grantor or any other Person under the provisions of any Credit Document or otherwise, or (ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any Secured Obligations, (c) any change in the time, manner or place of payment of, or in any other term of, all or any part of the Secured Obligations, or any other extension, compromise or renewal of any Secured Obligations, (d) any reduction, limitation, impairment or termination of any Secured Obligations (except in the case of the occurrence of the Termination Date) for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Grantor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, any Secured Obligations or otherwise, (e) any amendment to, rescission, waiver, or other modification of, or any consent to or departure from, any of the terms of any Credit Document, (f) any addition, exchange or release of any Collateral securing the Secured Obligations, or any surrender or non-perfection of any collateral, or any amendment to or waiver or release or addition to, or consent to or departure from, any other guaranty held by any Secured Party securing any of the Secured Obligations, or (g) any other circumstance which might otherwise constitute a defense available to, or a legal or equitable discharge of, any Grantor, any surety or any guarantor.

 

  

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SECTION 2.8. Waiver of Subrogation. Until the Termination Date, each Grantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against any other Grantor that arise from the existence, payment, performance or enforcement of such Grantor’s obligations under this Security Agreement or any other Credit Document, including any right of subrogation, reimbursement, exoneration or indemnification, any right to participate in any claim or remedy of any Secured Party against any other Grantor or any collateral which any Secured Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from any other Grantor, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Grantor in violation of the preceding sentence and the Termination Date shall not have occurred, then such amount shall be deemed to have been paid to such Grantor for the benefit of, and held in trust for, the Administrative Agent (on behalf of the Secured Parties), and shall forthwith be paid to the Administrative Agent to be credited and applied upon the Secured Obligations, whether matured or unmatured. Each Grantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section 2.8 is knowingly made in contemplation of such benefits.

 

SECTION 2.9. Election of Remedies. Except as otherwise provided in the Credit Agreement, if any Secured Party may, under applicable law, proceed to exercise its remedies under any of this Security Agreement or the other Credit Documents giving any Secured Party a Lien upon any Collateral, either by judicial foreclosure or by non-judicial sale or enforcement, such Secured Party may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Security Agreement. If, in the exercise of any of its rights and remedies, any Secured Party shall forfeit any of its rights or remedies, including its right to enter a deficiency judgment against any Grantor or any other Person, whether because of any applicable laws pertaining to “election of remedies” or the like, each Grantor, to the extent permitted by applicable law, hereby consents to such action by such Secured Party and waives any claim based upon such action, even if such action by such Secured Party shall result in a full or partial loss of any rights of subrogation that such Grantor might otherwise have had but for such action by such Secured Party.

 

  

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Secured Parties to enter into the Credit Agreement and make Advances thereunder and for the Issuing Lender to issue Letters of Credit thereunder, and to induce the Secured Parties to enter into Hedging Arrangements and provide Banking Services, each Grantor represents and warrants unto each Secured Party as set forth in this Article III.

 

SECTION 3.1. Validity, etc. This Security Agreement and the other Credit Documents to which such Grantor is a party constitute the legal, valid and binding obligations of such Grantor, enforceable against such Grantor in accordance with their respective terms (except, in any case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by principles of equity).

 

SECTION 3.2. Ownership, No Liens, etc. Such Grantor is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge, grant and assign) the Collateral, free and clear of all Liens, except for any Lien that is a Permitted Lien. No effective UCC financing statement or other filing similar in effect covering all or any part of the Collateral is on file in any recording office, except those filed in favor of the Administrative Agent relating to this Security Agreement, Permitted Liens or as to which a duly authorized termination statement relating to such UCC financing statement or other instrument has been delivered to the Administrative Agent on the Closing Date. This Security Agreement creates a valid security interest in the Collateral, securing the payment of the Secured Obligations, and, except for (i) the proper filing of the applicable financing statements with the filing offices located in each Grantor’s location, as listed on Item A-1 of Schedule II attached hereto and (ii) such other actions which are not required pursuant to the terms hereof or for which arrangements have been made to be completed at a later date, all filings and other actions necessary to perfect such security interest in the Collateral (other than, as to perfection, Excluded Certificated Equipment) have been duly taken and such security interest shall be a first priority security interest (subject to Permitted Liens).

 

SECTION 3.3. As to Equity Interests of the Subsidiaries, Investment Property.

 

(a) With respect to the Pledged Shares, all such Pledged Shares are represented by a certificate, except to the extent otherwise indicated on Schedule I, and are duly authorized and validly issued, fully paid and non-assessable.

 

(b) With respect to the Pledged Interests (other than Pledged Interests issued by a corporation, business trust, joint stock company or similar Person), no such Pledged Interests (i) are dealt in or traded on securities exchanges or in securities markets, (ii) expressly provide that such Pledged Interests are securities governed by Article 8 of the UCC, or (iii) are held in a Securities Account, except, with respect to this clause (b), Pledged Interests (A) for which the Administrative Agent is the registered owner or (B) with respect to which the Pledged Interests Issuer has agreed in an authenticated record with such Grantor and the Administrative Agent to comply with any instructions of the Administrative Agent without the consent of such Grantor.

 

(c) Such Grantor has delivered all Certificated Securities constituting Collateral held by such Grantor on the Closing Date to the Administrative Agent, together with duly executed undated blank stock powers, or other equivalent instruments of transfer reasonably acceptable to the Administrative Agent.

 

  

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(d) To the extent required by Section 4.1(b), with respect to Uncertificated Securities constituting Collateral owned by such Grantor, such Grantor has caused the Pledged Interests Issuer or other issuer thereof either (i) to register the Administrative Agent as the registered owner of such security, or (ii) to agree in an authenticated record with such Grantor and the Administrative Agent that such Pledged Interests Issuer or other issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Grantor.

 

(e) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified, the percentage of the issued and outstanding Pledged Shares and Pledged Interests of each Pledged Interests Issuer pledged by such Grantor hereunder is as set forth on Schedule I and the percentage of the total membership, partnership and/or other Equity Interests in the Pledged Interest Issuer is indicated on Schedule I. All of the Pledged Shares and Pledged Interests constitute one hundred percent (100%) of such Grantor’s interest in the applicable Pledged Interests Issuer, except in the case of outstanding Voting Securities that are issued by First Tier Foreign Subsidiaries with respect to which such Grantor has pledged up to sixty-six percent (66%) of such outstanding Voting Securities issued by such First Tier Foreign Subsidiaries as indicated on Schedule I.

 

(f) There are no outstanding rights, rights to subscribe, options, warrants or convertible securities outstanding or any other rights outstanding whereby any Person would be entitled to acquire shares, member interests or units of any Pledged Interest Issuer.

 

(g) In the case of each Pledged Note made by a Subsidiary of the Borrower, all of such Pledged Notes have been duly authorized, executed, endorsed, issued and delivered, and are the legal, valid and binding obligation of the issuers thereof, and are not in default.

 

SECTION 3.4. Grantor’s Name, Location, etc.

 

(a) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified , other than as otherwise permitted pursuant to any Credit Document,, (i) the jurisdiction in which such Grantor is located for purposes of Sections 9-301 and 9-307 of the UCC is set forth in Item A-1 of Schedule II hereto, (ii) the place of business of such Grantor or, if such Grantor has more than one place of business, the chief executive office of such Grantor and the office where such Grantor keeps its records concerning the Receivables, and all originals of all Chattel Paper which evidence Receivables, is set forth in Item A-2 of Schedule II hereto, and (iii) such Grantor’s federal taxpayer identification number is set forth in Item A-3 of Schedule II hereto.

 

(b) Within the five-year period prior to the Closing Date, no such Grantor has been known by any legal name different from the one set forth on the signature page hereto, nor has such Grantor been the subject of any merger or other corporate reorganization, except as set forth in Item B of Schedule II hereto.

 

(c) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified , other than as otherwise permitted pursuant to any Credit Document, such Grantor does not maintain any Deposit Accounts, Securities Accounts or Commodity Accounts with any Person, in each case, except as set forth on Item C of Schedule II.

 

(d) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified , other than as otherwise permitted pursuant to any Credit Document, such Grantor is not the beneficiary of any Letters of Credit, except as set forth on Item D of Schedule II hereto (as such schedule may be amended or supplemented from time to time).

 

  

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(e) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified , other than as otherwise permitted pursuant to any Credit Document, such Grantor does not have Commercial Tort Claims (i) in which a suit has been filed by such Grantor, and (ii) where the amount of damages reasonably expected to be claimed exceeds $250,000, except as set forth on Item E of Schedule II.

 

(f) As of the Closing Date or the date on which the schedules to this Security Agreement are amended, supplemented or otherwise modified , other than as otherwise permitted pursuant to any Credit Document, the name set forth on Schedule II attached hereto is the true and correct legal name (as defined in the UCC) of such Grantor.

 

(g) Such Grantor has not consented to, and is otherwise unaware of, any Person (other than the Administrative Agent pursuant hereto) having control (within the meaning of Section 9-104 or Section 8-106 of the UCC) over any Collateral, or any other interest in any of such Grantor’s rights in respect thereof.

 

SECTION 3.5. Possession of Inventory, Control; etc. Such Grantor (a) has exclusive possession and control, subject to Permitted Liens, of the Equipment and Inventory except as permitted under the Credit Agreement, and (b) is the sole entitlement holder of its Accounts and no other Person (other than the Administrative Agent pursuant to (i) this Security Agreement with respect to any Accounts maintained with the Administrative Agent or (ii) a Control Agreement with respect to any Accounts maintained with a bank other than the Administrative Agent) has “control” or “possession” of any of its Accounts or any other securities or property credited thereto except as permitted pursuant to this Security Agreement.

 

SECTION 3.6. Negotiable Documents, Instruments and Chattel Paper. Such Grantor has, contemporaneously herewith, delivered to the Administrative Agent possession of originals of (i) each of the Pledged Notes and (ii) each of the Documents, Instruments, promissory notes, and tangible Chattel Paper in an amount or stated amount in excess of $250,000, in the case of either (i) or (ii), owned or held by such Grantor as of the Closing Date (duly endorsed, in blank, if requested by the Administrative Agent).

 

SECTION 3.7. Intellectual Property Collateral. Such Grantor represents that except for any Patent Collateral, Trademark Collateral, and Copyright Collateral specified in Item A, Item B and Item C, respectively, of Schedule III hereto, and any and all Trade Secrets Collateral, such Grantor does not own and has no interests in any other Intellectual Property Collateral as of the Closing Date. Such Grantor further represents and warrants that, with respect to all Intellectual Property Collateral, (a) such Intellectual Property Collateral is valid, subsisting, unexpired and enforceable and has not been abandoned or adjudged invalid or unenforceable, in whole or in part, (b) such Grantor is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to such Intellectual Property Collateral, subject to Permitted Liens, and no claim has been made that the use of such Intellectual Property Collateral does or may, conflict with, infringe, misappropriate, dilute, misuse or otherwise violate any of the rights of any third party in any material respects, (c) such Grantor has taken all reasonable steps to safeguard its Trade Secrets and to its knowledge none of the Trade Secrets of such Grantor has been used, divulged, disclosed or appropriated for the benefit of any other Person other than such Grantor, (d) to such Grantor’s knowledge, no third party is infringing upon any material Intellectual Property Collateral owned or used by such Grantor in any material respect, or any of its respective licensees, (e) no settlement or consents, covenants not to sue, nonassertion assurances, or releases have been entered into by such Grantor or to which such Grantor is bound that adversely affects its rights to own or use any Intellectual Property, (f) such Grantor has not made a previous assignment, sale, transfer or agreement constituting a present or future assignment, sale or transfer of any Intellectual Property for purposes of granting a security interest or as Collateral that has not been terminated or released, (g) such Grantor uses adequate standards of quality in the manufacture, distribution, and sale of all products sold and in the provision of all services rendered under or in connection with any Trademarks and has taken all commercially reasonable action necessary to insure that any licensees of any Trademarks owned by such Grantor use such adequate standards of quality, (h) the consummation of the transactions contemplated by the Credit Agreement and this Security Agreement will not result in the termination or material impairment of any material portion of the Intellectual Property Collateral, and (i) such Grantor owns directly or is entitled to use by license or otherwise, any patents, trademarks, tradenames, Trade Secrets, copyrights, mask works, licenses, technology, know-how, processes and rights with respect to any of the foregoing used in, and necessary for the conduct of such Grantor’s business in any material respect.

 

  

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SECTION 3.8. Authorization, Approval, etc. Except as have been obtained or made and are in full force and effect, no Governmental Approval, authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or any other third party is required either (a) for the grant by such Grantor of the security interest granted hereby or for the execution, delivery and performance of this Security Agreement by such Grantor, (b) for the perfection (except with respect to Excluded Certificated Equipment) or maintenance of the security interests hereunder including the first-priority (subject to Permitted Liens) nature of such security interest (except with respect to the financing statements or, with respect to Intellectual Property Collateral, the recordation of any agreements with the U.S. Patent and Trademark Office or the U.S. Copyright Office) or the exercise by the Administrative Agent of its rights and remedies hereunder, or (c) for the exercise by the Administrative Agent of the voting or other rights provided for in this Security Agreement, except (i) with respect to any Pledged Shares or Pledged Interests, as may be required in connection with a disposition of such Pledged Shares or Pledged Interests by laws affecting the offering and sale of securities generally, the remedies in respect of the Collateral pursuant to this Security Agreement and (ii) any “change of control” or similar filings required by state licensing agencies.

 

SECTION 3.9. Best Interests. It is in the best interests of each Grantor to execute this Security Agreement in as much as such Grantor will, as a result of being the Borrower or an Affiliate of the Borrower, derive substantial direct and indirect benefits from (a) the Advances and other extensions of credit (including Letters of Credit) made from time to time to the Borrower by the Lenders and the Issuing Lender pursuant to the Credit Agreement, (b) the Hedging Arrangements entered into with the Swap Counterparties, and (c) the Banking Services provided by the Banking Services Providers, and each Grantor agrees that the Secured Parties are relying on this representation in agreeing to make such Advances and other extensions of credit pursuant to the Credit Agreement to the Borrower. Furthermore, such extensions of credit, Hedging Arrangements and Banking Services are (i) in furtherance of each Grantor’s corporate, limited liability company or limited partnership purposes, and (ii) necessary or convenient to the conduct, promotion or attainment of each Grantor’s business.

 

SECTION 3.10. Reaffirmation of Representations and Warranties. All of the representations and warranties made by the Borrower or any other Grantor regarding any Grantor in the Credit Agreement or in any other Credit Document are true and correct in all respects as if such representations and warranties were incorporated herein in their entirety and made by such Grantor.

 

  

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ARTICLE IV

COVENANTS

 

Each Grantor covenants and agrees that, until the Termination Date, it will perform, comply with and be bound by the obligations set forth below.

 

SECTION 4.1. As to Investment Property, etc.

 

(a) Equity Interests of Subsidiaries. No Grantor shall allow or permit any of its Subsidiaries (i) that is a corporation, business trust, joint stock company or similar Person, to issue Uncertificated Securities, unless such Person promptly takes the actions set forth in Section 4.1(b)(ii)(B) with respect to any such Uncertificated Securities, (ii) that is a partnership or limited liability company, to (A) issue Equity Interests that are to be dealt in or traded on securities exchanges or in securities markets, (B) expressly provide in its organizational documents that its Equity Interests are securities governed by Article 8 of the UCC, or (C) place such Subsidiary’s Equity Interests in a Securities Account, unless such Person promptly takes the actions set forth in Section 4.1(b)(i)(A) with respect to any such Equity Interests, and (iii) to issue Equity Interests in addition to or in substitution for the Pledged Property or any other Equity Interests pledged hereunder, except for additional Equity Interests issued to such Grantor; provided that (A) such Equity Interests are immediately pledged hereunder, and within 10 Business Day delivered to the Administrative Agent, and (B) such Grantor delivers a supplement to Schedule I to the Administrative Agent identifying such new Equity Interests as Pledged Property, in each case pursuant to the terms of this Security Agreement. No Grantor shall permit any of its Subsidiaries to issue any warrants, options, contracts or other commitments or other securities that are convertible to any of the foregoing or that entitle any Person to purchase any of the foregoing, and except for this Security Agreement and the other Credit Documents and shall not, and shall not permit any of its Subsidiaries to, enter into any agreement creating any restriction or condition upon the transfer, voting or control of any Pledged Property.

 

(b) Investment Property (other than Certificated Securities).

 

(i) With respect to any Deposit Accounts, Securities Accounts, Commodity Accounts, Commodity Contracts or Security Entitlements constituting Investment Property owned or held by any Grantor, such Grantor will, unless otherwise permitted under the Credit Agreement, upon the Administrative Agent’s request either (A) cause the intermediary maintaining such Investment Property to execute a Control Agreement relating to such Investment Property pursuant to which such intermediary agrees to comply with the Administrative Agent’s instructions with respect to such Investment Property without further consent by such Grantor, or (B) transfer such Investment Property to intermediaries that have or will agree to execute such Control Agreements.

 

(ii) With respect to any Uncertificated Securities (other than Uncertificated Securities credited to a Securities Account) constituting Investment Property owned or held by any Grantor, such Grantor will cause the Pledged Interests Issuer or other issuer of such securities to either (A) register the Administrative Agent as the registered owner thereof on the books and records of the issuer, or (B) agree in an authenticated record with such Grantor and the Administrative Agent that such Pledged Interests Issuer or other issuer will comply with instructions with respect to such security originated by the Administrative Agent without further consent of such Grantor.

 

  

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(c) Certificated Securities (Stock Powers). Each Grantor agrees that all Pledged Shares that are Certificated Securities (and all other certificated shares of Equity Interests constituting Collateral) delivered by such Grantor pursuant to this Security Agreement shall be in suitable form for transfer by delivery and shall be accompanied by duly endorsed undated blank stock powers, or other equivalent instruments of transfer acceptable to the Administrative Agent. All Pledged Notes delivered pursuant to this Security Agreement shall be endorsed to the order of the Administrative Agent and shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary endorsements or instruments of transfer or assignment, duly executed in blank. Each Grantor will, from time to time upon the request of the Administrative Agent during the continuance of any Event of Default, promptly transfer any Pledged Shares, Pledged Interests or other shares of Equity Interests constituting Collateral into the name of any nominee designated by the Administrative Agent.

 

(d) Continuous Pledge. Each Grantor will (subject to the terms of the Credit Agreement and this Security Agreement) at all times keep pledged to the Administrative Agent pursuant hereto, on a first-priority (subject to Permitted Liens) and perfected basis all (i) Pledged Property, (ii) Investment Property, (iii) all Dividends and Distributions with respect thereto, (iv) all Payment Intangibles to the extent they are evidenced by a Document, Instrument, promissory note or Chattel Paper with a value in excess of $250,000, and (v) all interest and principal with respect to such Payment Intangibles, and all Proceeds and rights from time to time received by or distributable to such Grantor in respect of any of the foregoing Collateral. Each Grantor agrees that it will, promptly (but in any event no later than ten (10) Business Days) following receipt thereof, deliver to the Administrative Agent possession of all originals of all (i) Pledged Notes, (ii) certificates representing Pledged Interests, Pledged Shares, and any other Pledged Property (including, without limitation, the Certificated Securities), and (iii) Documents, Instruments, promissory notes and Chattel Paper with a value in excess of $250,000, in each case, that it acquires following the Closing Date and shall deliver to the Administrative Agent a supplement to Schedule I identifying any such new Pledged Interests, Pledged Shares, Pledged Notes or other Pledged Property.

 

(e) Voting Rights; Dividends, etc. Each Grantor agrees:

 

(i) that promptly upon receipt of notice of the occurrence and during the continuance of an Event of Default from the Administrative Agent and without any request therefor by the Administrative Agent, so long as such Event of Default shall continue, to deliver (properly endorsed where required hereby or requested by the Administrative Agent) to the Administrative Agent all Distributions with respect to Investment Property, all interest principal and other cash payments on Payment Intangibles, the Pledged Property and all Proceeds of the Pledged Property or any other Collateral, in case thereafter received by such Grantor, all of which shall be held by the Administrative Agent as additional Collateral; and

 

(ii) if an Event of Default shall have occurred and be continuing and the Administrative Agent has notified such Grantor of the Administrative Agent’s intention to exercise its voting power under this Section 4.1(e)(ii),

 

(A) the Administrative Agent may exercise (to the exclusion of such Grantor) the voting power and all other incidental rights of ownership with respect to any Pledged Shares, Investment Property or other Equity Interests constituting Collateral. EACH GRANTOR HEREBY GRANTS THE ADMINISTRATIVE AGENT AN IRREVOCABLE PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT UNTIL SUCH EVENT OF DEFAULT SHALL HAVE BEEN CURED OR WAIVED) EXERCISABLE UNDER SUCH CIRCUMSTANCES, TO VOTE THE PLEDGED SHARES, PLEDGED INTERESTS, INVESTMENT PROPERTY AND SUCH OTHER COLLATERAL; AND

 

  

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(B) promptly to deliver to the Administrative Agent such additional proxies and other documents as may be necessary to allow the Administrative Agent to exercise such voting power.

 

All Distributions, interest, principal, cash payments, Payment Intangibles and Proceeds that may at any time and from time to time be held by any Grantor but which such Grantor is then obligated to deliver to the Administrative Agent, shall, until delivery to the Administrative Agent, be held by such Grantor separate and apart from its other property in trust for the Administrative Agent. Notwithstanding the foregoing, the Administrative Agent agrees that unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given the notice referred to in Section 4.1(e), each Grantor shall have the exclusive voting power, and is granted a proxy, with respect to any Equity Interests (including any of the Pledged Shares) constituting Collateral. Administrative Agent shall, upon the written request of any Grantor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by such Grantor which are necessary to allow such Grantor to exercise that voting power with respect to any such Equity Interests (including any of the Pledged Shares) constituting Collateral; provided, however, that no vote shall be cast, or consent, waiver, or ratification given, or action taken by such Grantor that would violate any provision of the Credit Agreement or any other Credit Document (including this Security Agreement).

 

SECTION 4.2. Organizational Documents; Change of Name, etc. Each Grantor shall, in connection with any change in its state of incorporation, formation or organization or its name, identity, organizational identification number or corporate structure permitted by Section 6.7(b) of the Credit Agreement, take all actions necessary or as requested by the Administrative Agent to ensure that the Liens on the Collateral granted in favor of the Administrative Agent for the benefit of the Secured Parties remain perfected, first-priority Liens (subject to Permitted Liens and other than, as to perfection, Excluded Certificated Equipment) subject to the terms hereof.

 

SECTION 4.3. As to Accounts.

 

(a) Each Grantor shall have the right to collect all Accounts so long as no Event of Default shall have occurred and be continuing.

 

(b) Upon (i) the occurrence and continuance of an Event of Default and (ii) the delivery of notice by the Administrative Agent to each Grantor, all Proceeds of Collateral received by any Grantor shall be delivered in kind to the Administrative Agent for deposit in a Deposit Account of such Grantor (A) maintained with the Administrative Agent or (B) maintained at a depositary bank other than the Administrative Agent to which such Grantor, the Administrative Agent and the depositary bank have entered into a Control Agreement in form and substance acceptable to the Administrative Agent in its sole discretion providing that the depositary bank will comply with the instructions originated by the Administrative Agent directing disposition of the funds in the account without further consent by such Grantor (any such Deposit Accounts, together with any other Accounts pursuant to which any portion of the Collateral is deposited with the Administrative Agent, a “Collateral Account,” and collectively, the “Collateral Accounts”), and such Grantor shall not commingle any such Proceeds, and shall hold separate and apart from all other property, all such Proceeds in express trust for the benefit of the Administrative Agent until delivery thereof is made to the Administrative Agent.

 

(c) Following the delivery of notice pursuant to clause (b)(ii) of this Section 4.3, the Administrative Agent shall have the right to apply any amount in the Collateral Account to the payment of any Secured Obligations which are due and payable or in accordance with the Credit Documents.

 

(d) With respect to each of the Collateral Accounts, it is hereby confirmed and agreed that (i) deposits in such Collateral Account are subject to a security interest as contemplated hereby, (ii) such Collateral Account shall be under the control of the Administrative Agent, provided that the Administrative Agent shall have entered into a Control Agreement with respect to any Accounts that are maintained with a bank other than the Administrative Agent and (iii) the Administrative Agent shall have the sole right of withdrawal over such Collateral Account; provided that withdrawals shall only be made during the existence of an Event of Default.

 

  

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(e) No Grantor shall adjust, settle, or compromise the amount or payment of any Receivable, nor release wholly or partly any account debtor or obligor thereof, nor allow any credit or discount thereon; provided that, a Grantor may make such adjustments, settlements or compromises and release wholly or partly any account debtor or obligor thereof and allow any credit or discounts thereon so long as (i) no Event of Default has occurred and is continuing, (ii) such action is taken in the ordinary course of business and consistent with past practices, (iii) such action is, in such Grantor’s good-faith business judgment, commercially reasonable, and (iv) at the time such action is taken, there shall be no Borrowing Base Deficiency.

 

SECTION 4.4. As to Grantor’s Use of Collateral.

 

(a) Subject to clause (b), each Grantor (i) may in the ordinary course of its business, at its own expense, sell, lease or furnish under the contracts of service any of the Inventory normally held by such Grantor for such purpose, and use and consume, in the ordinary course of its business, any raw materials, work in process or materials normally held by such Grantor for such purpose, (ii) shall, at its own expense, endeavor to collect, as and when due, all amounts due with respect to any of the Collateral, including the taking of such action with respect to such collection as the Administrative Agent may request following the occurrence and during the continuance of an Event of Default or, in the absence of such request, as such Grantor may deem advisable, and (iii) may grant, in the ordinary course of business, to any party obligated on any of the Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Collateral.

 

(b) At any time following the occurrence and during the continuance of an Event of Default, whether before or after the maturity of any of the Secured Obligations, the Administrative Agent may (i) revoke any or all of the rights of any Grantor set forth in clause (a) of this Section 4.4, (ii) notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder, and (iii) enforce collection of any of the Collateral by suit or otherwise and surrender, release, or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby.

 

(c) Upon request of the Administrative Agent following the occurrence and during the continuance of an Event of Default, each Grantor will, at its own expense, notify any parties obligated on any of the Collateral to make payment to the Administrative Agent of any amounts due or to become due thereunder.

 

(d) At any time following the occurrence and during the continuation of a Default, the Administrative Agent may endorse, in the name of the applicable Grantor, any item, howsoever received by the Administrative Agent, representing any payment on or other Proceeds of any of the Collateral.

 

  

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SECTION 4.5. [Reserved].

 

SECTION 4.6. As to Intellectual Property Collateral. Each Grantor covenants and agrees to comply with the following provisions as such provisions with respect to any Intellectual Property Collateral material to the operations or business of such Grantor:

 

(a) such Grantor will not (i) do or fail to perform any act whereby any material Patent Collateral may lapse or become abandoned or dedicated to the public or unenforceable, (ii) permit any of its licensees to (A) fail to maintain all of the Trademark Collateral in full force, free from any claim of abandonment for non-use, (B) fail to maintain as in the past the quality of products and services offered under all of the Trademark Collateral, (C) fail to employ all of the Trademark Collateral registered with any federal or state or foreign authority with an appropriate notice of such registration, (D) adopt or use any other Trademark which is confusingly similar or a colorable imitation of any of the Trademark Collateral, (E) use any of the Trademark Collateral registered with any federal, state or foreign authority except for the uses for which registration or application for registration of all of the Trademark Collateral has been made, or (F) do or permit any act or knowingly omit to do any act whereby any of the Trademark Collateral may lapse or become invalid or unenforceable, or (iii) do or permit any act or knowingly omit to do any act whereby any of the Copyright Collateral or any of the Trade Secrets Collateral may lapse or become invalid or unenforceable or placed in the public domain except upon expiration of the end of an unrenewable term of a registration thereof, unless, in the case of any of the foregoing requirements in clauses (i), (ii) and (iii), such Grantor shall reasonably and in good faith determine that any of such Intellectual Property Collateral is of negligible economic value to such Grantor;

 

(b) such Grantor shall promptly notify the Administrative Agent if it knows that any application or registration relating to any material item of the Intellectual Property Collateral may become abandoned or dedicated to the public or placed in the public domain or invalid or unenforceable, or of any adverse determination or development (including the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any foreign counterpart thereof or any court) regarding such Grantor’s ownership of any of the Intellectual Property Collateral, its right to register the same or to keep and maintain and enforce the same;

 

(c) in no event will such Grantor or any of its agents, employees, designees or licensees file an application for the registration of any material Intellectual Property Collateral with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, unless it promptly informs the Administrative Agent, and upon request of the Administrative Agent (subject to the terms of the Credit Agreement), executes and delivers all agreements, instruments and documents as the Administrative Agent may reasonably request to evidence the Administrative Agent’s security interest in such Intellectual Property Collateral;

 

(d) such Grantor will take all necessary steps, including in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or (subject to the terms of the Credit Agreement) any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue any application (and to obtain the relevant registration) filed with respect to, and to maintain any registration of, each material Intellectual Property Collateral, including the filing of applications for renewal, affidavits of use, affidavits of incontestability and opposition, interference and cancellation proceedings and the payment of fees and taxes (except to the extent that dedication, abandonment or invalidation is permitted under the foregoing clause (a) or (b));

 

  

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(e) upon obtaining an interest in any material Intellectual Property by such Grantor, such Grantor shall deliver a supplement to Schedule II identifying such new Intellectual Property; and

 

(f) upon obtaining an interest in any material Intellectual Property by such Grantor or, and following the occurrence and during the continuance of an Event of Default, upon the request of the Administrative Agent, such Grantor shall deliver all agreements, instruments and documents the Administrative Agent may reasonably request to evidence the Administrative Agent’s security interest in such Intellectual Property Collateral and as may otherwise be required to acknowledge or register or perfect the Administrative Agent’s interest in any part of such item of Intellectual Property Collateral unless such Grantor shall determine in good faith (with the consent of the Administrative Agent) that any Intellectual Property Collateral is of negligible economic value to such Grantor.

 

SECTION 4.7. As to Letter of Credit Rights.

 

(a) Each Grantor, by granting a security interest in its Letter of Credit Rights to the Administrative Agent, intends to (and hereby does) collaterally assign to the Administrative Agent its rights (including its contingent rights ) to the Proceeds of all Letter of Credit Rights of which it is or hereafter becomes a beneficiary or assignee. Promptly following the date on which any Grantor obtains any Letter of Credit Rights after the date hereof, such Grantor shall (i) deliver a supplement to Schedule II identifying such new Letter of Credit Right and (ii) with respect to Letter of Credit Rights in excess of $250,000, or which are included in determining the Borrowing Base, use commercially reasonable efforts to cause the issuer of each Letter of Credit and each nominated person (if any) with respect thereto to consent to such assignment of the Proceeds thereof in a consent agreement in form and substance reasonably satisfactory to the Administrative Agent and deliver written evidence of such consent to the Administrative Agent.

 

(b) During the existence of an Event of Default, each Grantor will, promptly upon request by the Administrative Agent, (i) notify (and each Grantor hereby authorizes the Administrative Agent to notify) the issuer and each nominated person with respect to each of the Letters of Credit that the Proceeds thereof have been assigned to the Administrative Agent hereunder and that any payments due or to become due in respect thereof are to be made directly to the Administrative Agent and (ii) arrange for the Administrative Agent to become the transferee beneficiary of each Letter of Credit.

 

SECTION 4.8. As to Commercial Tort Claims. Each Grantor covenants and agrees that, until the Termination Date, with respect to any Commercial Tort Claim in excess of $250,000 individually or in the aggregate hereafter arising, it shall deliver to the Administrative Agent a supplement to Schedule II in form and substance reasonably satisfactory to the Administrative Agent, identifying such new Commercial Tort Claims.

 

  

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SECTION 4.9. As to Electronic Chattel Paper and Transferable Records. If any Grantor at any time holds or acquires an interest in any electronic Chattel Paper or any “transferable record,” as that term is defined in Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the U.S. Uniform Electronic Transactions Act as in effect in any relevant jurisdiction, with a value in excess of $250,000, such Grantor shall promptly notify the Administrative Agent thereof and, at the request of the Administrative Agent, shall take such action as the Administrative Agent may request to vest in the Administrative Agent control (for the ratable benefit of Secured Parties) under Section 9-105 of the UCC of such electronic Chattel Paper or control under Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. The Administrative Agent agrees with each Grantor that the Administrative Agent will arrange, pursuant to procedures reasonably satisfactory to the Administrative Agent and so long as such procedures will not result in the Administrative Agent’s loss of control, for such Grantor to make alterations to the electronic Chattel Paper or transferable record permitted under Section 9-105 of the UCC or, as the case may be, Section 201 of the U.S. Federal Electronic Signatures in Global and National Commerce Act or Section 16 of the U.S. Uniform Electronic Transactions Act for a party in control to allow without loss of control, unless an Event of Default has occurred and is continuing or would occur after taking into account any action by such Grantor with respect to such electronic Chattel Paper or transferable record.

 

SECTION 4.10. [Reserved].

 

SECTION 4.11. [Reserved].

 

SECTION 4.12. [Reserved].

 

SECTION 4.13. Further Assurances, etc. Each Grantor shall warrant and defend the right and title herein granted unto the Administrative Agent in and to the Collateral (and all right, title and interest represented by the Collateral) against the claims and demands of all Persons whomsoever, subject to Permitted Liens. Each Grantor agrees that, from time to time at its own expense, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or that the Administrative Agent may reasonably request, in order to perfect, preserve and protect any security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral (other than, as to perfection, Excluded Certificated Equipment) subject to the terms hereof. Each Grantor agrees that, upon the acquisition after the date hereof by such Grantor of any Collateral, with respect to which the security interest granted hereunder is not perfected automatically upon such acquisition, to take such actions with respect to such Collateral (other than, as to perfection, Excluded Certificated Equipment) or any part thereof as required by the Credit Documents. Without limiting the generality of the foregoing, each Grantor will:

 

(a) from time to time upon the request of the Administrative Agent, after the occurrence and during the continuance of any Event of Default, if any Collateral shall be evidenced by an Instrument, negotiable Document, promissory note or tangible Chattel Paper, deliver and pledge to the Administrative Agent hereunder such Instrument, negotiable Document, promissory note, Pledged Note or tangible Chattel Paper duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance satisfactory to the Administrative Agent;

 

(b) hereby authorizes the Administrative Agent to file such filing statements or continuation statements, or amendments thereto, and such other instruments or notices (including any assignment of claim form under or pursuant to the federal assignment of claims statute, 31 U.S.C. § 3726, any successor or amended version thereof or any regulation promulgated under or pursuant to any version thereof), as may be necessary or that the Administrative Agent may request in order to perfect and preserve the security interests and other rights granted or purported to be granted to the Administrative Agent hereby. The authorization contained in this Section 4.13 shall be irrevocable and continuing until the Termination Date;

 

(c) not create any tangible Chattel Paper which evidences Receivables which are included in the Borrowing Base without placing a legend on such tangible Chattel Paper reasonably acceptable to the Administrative Agent indicating that the Administrative Agent has a security interest in such Chattel Paper;

 

(d) furnish to the Administrative Agent, from time to time at the Administrative Agent’s request, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as the Administrative Agent may reasonably request, all in reasonable detail; and

 

(e) do all things reasonably requested by the Administrative Agent in accordance with this Security Agreement in order to enable the Administrative Agent to have and maintain control over the Collateral consisting of Investment Property, Deposit Accounts, Letter of Credit Rights with a value in excess of $250,000 and Electronic Chattel Paper with a value in excess of $250,000.

 

Each Grantor agrees that a carbon, photographic or other reproduction of this Security Agreement or any UCC financing statement covering the Collateral or any part thereof shall be sufficient as a UCC financing statement where and to the extent permitted by law. Each Grantor hereby authorizes the Administrative Agent to file financing statements describing as the collateral covered thereby “all of the debtor’s personal property or assets” or words to that effect, notwithstanding that such wording may be broader in scope than the Collateral described in this Security Agreement.

 

  

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ARTICLE V

THE ADMINISTRATIVE AGENT

 

SECTION 5.1. Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby irrevocably appoints the Administrative Agent its attorney-in-fact, with full authority in the place and stead of such Grantor and in the name of such Grantor or otherwise, from time to time in the Administrative Agent’s discretion, following the occurrence and during the continuance of an Event of Default, to take any action and to execute any instrument which the Administrative Agent may deem necessary or advisable to accomplish the purposes of this Security Agreement, including (a) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral, (b) to receive, endorse, and collect any drafts or other Instruments, Documents and Chattel Paper, in connection with clause (a) above, (c) to file any claims or take any action or institute any proceedings which the Administrative Agent may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Administrative Agent with respect to any of the Collateral, and (d) to perform the affirmative obligations of such Grantor hereunder. EACH GRANTOR HEREBY ACKNOWLEDGES, CONSENTS AND AGREES THAT THE POWER OF ATTORNEY GRANTED PURSUANT TO THIS SECTION 5.1 IS IRREVOCABLE AND COUPLED WITH AN INTEREST AND SHALL BE EFFECTIVE UNTIL THE TERMINATION DATE.

 

SECTION 5.2. Administrative Agent May Perform. If any Grantor fails to perform any agreement contained herein the Administrative Agent may itself perform, or cause performance of, such agreement, and the expenses of the Administrative Agent incurred in connection therewith shall be payable by such Grantor pursuant to Section 6.3 hereof and Section 9.1 of the Credit Agreement and the Administrative Agent may from time to time take any other action which the Administrative Agent reasonably deems necessary for the maintenance, preservation or protection of any of the Collateral or of its security interest therein.

 

SECTION 5.3. Administrative Agent Has No Duty. The powers conferred on the Administrative Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers. Except for reasonable care of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral or responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Investment Property and any other Pledged Property, whether or not the Administrative Agent has or is deemed to have knowledge of such matters, or (b) taking any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral.

 

SECTION 5.4. Reasonable Care. The Administrative Agent is required to exercise reasonable care in the custody and preservation of any of the Collateral in its possession; provided, that the Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral (a) if such Collateral is accorded treatment substantially equal to that which the Administrative Agent accords its own personal property, or (b) if the Administrative Agent takes such action for that purpose as any Grantor reasonably requests in writing at times other than upon the occurrence and during the continuance of an Event of Default; provided, further, that failure of the Administrative Agent to comply with any such request at any time shall not in itself be deemed a failure to exercise reasonable care.

 

  

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ARTICLE VI

REMEDIES

 

SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and be continuing:

 

(a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the UCC (whether or not the UCC applies to the affected Collateral) and also may (i) take possession of any Collateral not already in its possession without demand and without legal process, (ii) require any Grantor to, and each Grantor hereby agrees that it will, at its expense and upon request of the Administrative Agent forthwith, assemble all or part of the Collateral as directed by the Administrative Agent and make it available to the Administrative Agent at a place to be designated by the Administrative Agent that is reasonably convenient to both parties, (iii) subject to applicable law or agreements with landlords, enter onto the property where any Collateral is located and take possession thereof without demand and without legal process, and (iv) without notice except as specified below, lease, license, sell or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Administrative Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Administrative Agent may deem commercially reasonable. Each Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ prior notice to the applicable Grantor of the time and place of any public sale or the time of any private sale is to be made shall constitute reasonable notification; provided, however, that with respect to Collateral that is (x) perishable or threatens to decline speedily in value, or (y) is of a type customarily sold on a recognized market (including but not limited to, Investment Property), no notice of sale or disposition need be given. For purposes of this Article VI, notice of any intended sale or disposition of any Collateral may be given by first-class mail, hand-delivery (through a delivery service or otherwise), facsimile or email, and shall be deemed to have been “sent” upon deposit in the U.S. Mails with adequate postage properly affixed, upon delivery to an express delivery service or upon electronic submission through telephonic or internet services, as applicable. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

 

(b) Each Grantor that is or may become a fee estate owner of property where any Collateral is located agrees and acknowledges that (i) Administrative Agent may remove the Collateral or any part thereof from such property in accordance with statutory law appertaining thereto without objection, delay, hindrance or interference by such Grantor and in such case such Grantor will make no claim or demand whatsoever against the Collateral, (ii) it will (x) cooperate with Administrative Agent in its efforts to assemble and/or remove all of the Collateral located on the such property; (y) permit Administrative Agent and its agents to enter upon such property and occupy the property at any or all times to conduct an auction or sale, and/or to inspect, audit, examine, safeguard, assemble, appraise, display, remove, maintain, prepare for sale or lease, repair, lease, transfer, auction and/or sell the Collateral; and (z) not hinder Administrative Agent’s actions in enforcing its security interest in the Collateral.

 

  

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(c) Each Grantor agrees and acknowledges that a commercially reasonable disposition of Inventory, Equipment, Goods, Computer Hardware and Software Collateral, or Intellectual Property may be by lease or license of, in addition to the sale of, such Collateral. Each Grantor further agrees and acknowledges that the following shall be deemed a reasonable commercial disposition: (i) a disposition made in the usual manner on any recognized market, (ii) a disposition at the price current in any recognized market at the time of disposition, and (iii) a disposition in conformity with reasonable commercial practices among dealers in the type of property subject to the disposition.

 

(d) All cash Proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral shall be applied by the Administrative Agent against, all or any part of the Secured Obligations as set forth in Section 7.6 of the Credit Agreement. The Administrative Agent shall not be obligated to apply or pay over for application noncash proceeds of collection or enforcement unless (i) the failure to do so would be commercially unreasonable, and (ii) the affected party has provided the Administrative Agent with a written demand to apply or pay over such noncash proceeds on such basis.

 

(e) The Administrative Agent may do any or all of the following: (i) transfer all or any part of the Collateral into the name of the Administrative Agent or its nominee, with or without disclosing that such Collateral is subject to the Lien hereunder, (ii) notify the parties obligated on any of the Collateral to make payment to the Administrative Agent of any amount due or to become due thereunder, (iii) withdraw, or cause or direct the withdrawal, of all funds with respect to the Collateral Account, (iv) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any party with respect thereto, (v) endorse any checks, drafts, or other writings in the applicable Grantor’s name to allow collection of the Collateral, (vi) take control of any Proceeds of the Collateral, or (vii) execute (in the name, place and stead of the applicable Grantor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral.

 

SECTION 6.2. Compliance with Restrictions. Each Grantor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Administrative Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any Governmental Authority or official, and each Grantor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Administrative Agent be liable nor accountable to such Grantor for any discount allowed by the reason of the fact that such Collateral is sold in compliance with any such limitation or restriction.

 

  

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SECTION 6.3. Indemnity and Expenses.

 

(a) EACH GRANTOR HERETO AGREES TO, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS THE ADMINISTRATIVE AGENT, THE ISSUING LENDER AND EACH SECURED PARTY AND EACH OF THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, AND ADVISORS (EACH, AN “INDEMNITEE”) FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS’ FEES) THAT MAY BE INCURRED BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNITEE, IN EACH CASE ARISING OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF DEFENSE IN CONNECTION THEREWITH) THIS SECURITY AGREEMENT, IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF THE COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF THE APPLICABLE INDEMNITEE, EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNITEE’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT OR MATERIAL BREACH IN BAD FAITH OF SUCH INDEMNITEE’S OBLIGATIONS UNDER THIS SECURITY AGREEMENT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 6.3(A) APPLIES, SUCH INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR PROCEEDING IS BROUGHT BY ANY GRANTOR, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS OR AN INDEMNITEE OR ANY OTHER PERSON OR ANY INDEMNITEE IS OTHERWISE A PARTY THERETO. No Grantor shall, without the prior written consent of each Indemnitee affected thereby (which consent will not be unreasonably withheld), settle any threatened or pending claim or action that would give rise to the right of any Indemnitee to claim indemnification hereunder unless such settlement (x) includes a full and unconditional release of all liabilities arising out of such claim or action against such Indemnitee and (y) does not include any statement as to or an admission of fault, culpability or failure to act by or on behalf of any Indemnitee.

 

(b) Other than as set forth in clause (c) below, each Grantor will upon demand pay to the Administrative Agent and any legal counsel the amount of any and all expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Administrative Agent and any legal counsel may incur in connection herewith, including without limitation in connection with the administration of this Security Agreement and the custody, preservation, use or operation of, any of the Collateral.

 

(c) Each Grantor will upon demand pay to the Administrative Agent and any legal counsel the amount of any and all expenses, including the fees and disbursements of its counsel and of any experts and agents, which the Administrative Agent and any legal counsel may incur in connection (i) the sale of, collection from, or other realization upon, any of the Collateral, (ii) the exercise or enforcement of any of the rights of the Administrative Agent and any legal counsel or any of the Secured Parties hereunder, or (iii) the failure by any Grantor to perform or observe any of the provisions hereof.

 

SECTION 6.4. Warranties. The Administrative Agent may sell the Collateral without giving any warranties or representations as to the Collateral. The Administrative Agent may disclaim any warranties of title or the like. Each Grantor agrees that this procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

 

  

Page 26

  

 

ARTICLE VII

MISCELLANEOUS PROVISIONS

 

SECTION 7.1. Credit Document. This Security Agreement is a Credit Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof, including Article 9 thereof.

 

SECTION 7.2. Binding on Successors, Transferees and Assigns; Assignment. This Security Agreement shall remain in full force and effect until the Termination Date has occurred, shall be binding upon each Grantor and its successors, transferees and assigns and, subject to the limitations set forth in the Credit Agreement, shall inure to the benefit of and be enforceable by each Secured Party and its successors, transferees and assigns; provided that, no Grantor shall assign any of its obligations hereunder (unless otherwise permitted under the terms of the Credit Agreement or this Security Agreement).

 

SECTION 7.3. Amendments, etc. No amendment to or waiver of any provision of this Security Agreement, nor consent to any departure by any Grantor from its obligations under this Security Agreement, shall in any event be effective unless the same shall be in writing and signed by the Administrative Agent (on behalf of the Lenders or the Majority Lenders, as the case may be, pursuant to Section 9.3 of the Credit Agreement) and such Grantor and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

SECTION 7.4. Notices. Except as otherwise provided in this Security Agreement, all notices and other communications provided for hereunder shall be in writing and hand delivered with written receipt, telecopied, sent by facsimile (with a hard copy sent as otherwise permitted pursuant to the Credit Agreement), sent by a nationally recognized overnight courier, or sent by certified mail, return receipt requested to the appropriate party at the address or facsimile number of such party specified in the Credit Agreement, on the signature pages of this Security Agreement or at such other address or facsimile number as may be designated by such party in a notice to the other party. Except as otherwise provided in this Security Agreement, all such notices and communications shall be effective when delivered.

 

SECTION 7.5. No Waiver; Remedies. In addition to, and not in limitation of Section 2.7, no failure on the part of any Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

 

SECTION 7.6. Headings. The various headings of this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provisions thereof.

 

SECTION 7.7. Severability. Any provision of this Security Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Security Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

  

Page 27

  

 

SECTION 7.8. Counterparts. This Security Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature page to this Security Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Security Agreement.

 

SECTION 7.9. Consent as Holder of Equity and as Pledged Interest Issuer. Each Grantor hereby (a) consents to the execution by each other Grantor of this Security Agreement and grant by each other Grantor of a security interest, encumbrance, pledge and hypothecation in all Pledged Interests and other Collateral of such other Grantor to the Administrative Agent pursuant hereto, (b) without limiting the generality of the foregoing, consents to the transfer of any Pledged Interest to the Administrative Agent or its nominee following an Event of Default and to the substitution of the Administrative Agent or its nominee as a partner under the limited partnership agreement or as a member under the limited liability company agreement, in any case, as heretofore and hereafter amended, and (c) to the extent such Grantor is also a Pledged Interest Issuer, agrees to comply with instructions with respect to the applicable Pledged Interests originated by the Administrative Agent without further consent of any other Grantor without further consent of any other Grantor if a Default has occurred and is continuing. Furthermore, each Grantor as the holder of any Equity Interests in a Pledged Interests Issuer, hereby (i) waives all rights of first refusal, rights to purchase, and rights to consent to transfer (to any Secured Party or to any purchaser resulting from the exercise of a Secured Party’s remedy provided hereunder or under applicable law) and (ii) if required by the organizational documents of such Pledged Interests Issuer, agrees to cause such Pledged Interests Issuer to register the Lien granted hereunder and encumbering such Equity Interests in the registry books of such Pledged Interests Issuer.

 

SECTION 7.10. Additional Grantors. Additional Affiliates of Borrower may from time to time enter into this Security Agreement as a Grantor. Upon execution and delivery after the date hereof by the Administrative Agent and such Affiliate of an instrument in the form of Annex 1, such Affiliate shall become a Grantor hereunder with the same force and effect as if originally named as a Grantor herein. The execution and delivery of any instrument adding an additional Grantor as a party to this Security Agreement shall not require the consent of any other Grantor hereunder. The rights and obligations of each Grantor hereunder shall remain in full force and effect notwithstanding the addition of any new Grantor as a party to this Security Agreement.

 

SECTION 7.11. Conflicts with Credit Agreement. To the fullest extent possible, the terms and provisions of the Credit Agreement shall be read together with the terms and provisions of this Security Agreement so that the terms and provisions of this Security Agreement do not conflict with the terms and provisions of the Credit Agreement; provided, however, notwithstanding the foregoing, in the event that any of the terms or provisions of this Security Agreement conflict with any terms or provisions of the Credit Agreement, the terms or provisions of the Credit Agreement shall govern and control for all purposes; provided that the inclusion in this Security Agreement of terms and provisions, supplemental rights or remedies in favor of the Administrative Agent not addressed in the Credit Agreement shall not be deemed to be in conflict with the Credit Agreement and all such additional terms, provisions, supplemental rights or remedies contained herein shall be given full force and effect.

 

  

Page 28

  

 

SECTION 7.12. Governing Law; Service of Process This Security Agreement shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). Each Grantor hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to such Grantor at its address set forth in this Security Agreement. Nothing in this Section shall affect the rights of any Secured Party to serve legal process in any other manner permitted by the law or affect the right of any Secured Party to bring any action or proceeding against any Grantor or its Property in the courts of any other jurisdiction.

 

SECTION 7.13. Submission to Jurisdiction. The parties hereto hereby agree that any suit or proceeding arising in respect of this Security Agreement, or any of the matters contemplated hereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. The parties hereto hereby agree that service of any process, summons, notice or document by registered mail addressed to the applicable parties will be effective service of process against such party for any action or proceeding relating to any such dispute. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Security Agreement in any court referred to in this Section 7.13. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Security Agreement and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

 

SECTION 7.14. Waiver of Jury. THE GRANTORS HEREBY ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

SECTION 7.15. Amendment and Restatement. This Security Agreement is an amendment and restatement of the Existing Security Agreement and supersedes the Existing Security Agreement in its entirety; provided, however, that the execution and delivery of this Security Agreement shall not effect a novation of the Existing Security Agreement but shall be, to the fullest extent applicable, in modification, renewal, confirmation and extension of such Existing Security Agreement.

 

THIS SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SECURITY AGREEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS SECURITY AGREEMENT AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

[Remainder of this page intentionally left blank. Signature pages to follow.]

 

  

Page 29

  

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Security Agreement to be duly executed and delivered by its Responsible Officer as of the date first above written.

 

	 	
GRANTORS:

 

ALY ENERGY SERVICES, INC.

	 
	 	 	 	 
	
  

	
By: 

	/s/ Munawar H. Hidayatallah	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 
	 	 	 	 
	 	ALY OPERATING, INC.	 
	 	 	 	 
	 	By:	
/s/ Munawar H. Hidayatallah

	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	
Chairman of the Board and Chief Executive Officer

	 
	 	 	 	 
	 	
AUSTIN CHALK PETROLEUM SERVICES CORP.

	 
	 	 	 	 
	 	
By:      Aly Operating, Inc., its sole shareholder

	 
	 	 	 	 
	 	By:	
/s/ Munawar H. Hidayatallah

	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 
	 	 	 	 
	 	ALY CENTRIFUGE INC.	 
	 	 	 	 
	 	By: 	
/s/ Munawar H. Hidayatallah

	 
	 	 	
Munawar H. Hidayatallah

	 
	 	 	Chairman of the Board and Chief Executive Officer	 
	 	 	 	 
	 	ADMINISTRATIVE AGENT:	 
	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

 

  

Signature Page to Amended and Restated Pledge and Security Agreement

  

 

SCHEDULE I

to Amended and Restated Pledge and Security

Agreement

 

ITEM A – PLEDGED INTERESTS

	
Common Stock

	 
	
Pledged Interests Issuer (corporate)

	 	
 

Cert. #

	 	 	
# of

Shares

	 	 	
Authorized

 Shares

	 	 	
% of Common Shares Pledged

	 
	
Austin Chalk Petroleum Corp.

	 	 	1	 	 	 	1,000	 	 	 	1,000	 	 	 	100	%
	
Aly Operating, Inc.

	 	 	1	A	 	 	100	 	 	 	100	 	 	 	100	%
	
Aly Centrifuge Inc.

	 	 	1	 	 	 	10,000	 	 	 	10,000	 	 	 	100	%

 

	
Limited Liability Company Interests

	 
	
Pledgor

	 	
Pledged Interests

Issuer

(limited liability company)

	 	
%

of Limited Liability

Company Interests Owned

	 	
%

of Limited Liability

Company Interests Pledged

	 	
Type of Limited Liability

Company Interests Pledged

	 
	
None

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

	
Partnership Interests

	 
	
Pledgor

	 	
Pledged Interests Issuer (partnership)

	 	 	
%

of Partnership

Interests Owned

	 	 	
%

of Partner-ship

Interests Pledged

	 	 	
Type of

Partnership Interests Pledged

	 
	
None

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

  

Schedule I to Amended and Restated Pledge and Security Agreement

  

 

ITEM B – PLEDGED NOTES

 

1. Pledged Note Issuer Description:

 

None

 

SCHEDULE II

to Amended and Restated Pledge and Security

Agreement

 

Item A-1. Location of Grantor for purposes of UCC.

 

	
Grantor

	 	
Location

	
Aly Energy Services, Inc.

	 	
Delaware

	
Austin Chalk Petroleum Services Corp.

	 	
Texas

	
Aly Operating, Inc.

	 	
Delaware

	
Aly Centrifuge Inc.

	 	
Delaware

 

Item A-2. Grantor’s place of business or principal office.

 

	
Grantor

	 	
Principal Office

	
Aly Energy Services, Inc.

	 	
3 Riverway, Suite 920, Houston, Texas 77056

	
Austin Chalk Petroleum Services Corp.

	 	
1080 Private Road 7703, Giddings, Texas 78942

	
Aly Operating, Inc.

	 	
3 Riverway, Suite 920, Houston, Texas 77056

	
Aly Centrifuge Inc.

	 	
3 Riverway, Suite 920, Houston, Texas 77056

 

Item A-3. Taxpayer ID number.

 

	
Grantor

	 	
Taxpayer ID Number

	
Aly Energy Services, Inc.

	 	
75-2440201

	
Austin Chalk Petroleum Services Corp.

	 	
74-2995251

	
Aly Operating, Inc.

	 	
46-0607614

	
Aly Centrifuge Inc.

	 	
[applied for]

 

Item B. Merger or other corporate reorganization.

 

n/a

 

  

Schedule II to Amended and Restated Pledge and Security Agreement

  

 

Item C. Deposit Accounts and Securities Accounts.

 

Aly Operating, Inc.

 

1. Account #9090753163 with Wells Fargo Advisors

 

2. Account #4945734630 with Wells Fargo Bank, National Association

Aly Energy Services, Inc.

1. Account #410-4093620 with Wells Fargo Bank, National Association

Austin Chalk Petroleum Services Corp.

 

1. Checking Account #880605409765 with JPMorgan Chase Bank, 7600 Burnet Road, Suite 200, Austin, Texas 78759

 

2. Savings Account #880605411865 with JPMorgan Chase Bank, 7600 Burnet Road, Suite 200, Austin, Texas 789759

 

3. Account #4945734648 with Wells Fargo Bank, National Association

Item D. Letter of Credit Rights.

None

Item E. Commercial Tort Claims.

 

None

 

  

Schedule II to Amended and Restated Pledge and Security Agreement

  

 

SCHEDULE III – A

to Amended and Restated Pledge and Security

Agreement

 

INTELLECTUAL PROPERTY COLLATERAL

 

Item A. Patent Collateral.

 

Issued Patents

 

	
Country

	 	
Serial No.

	 	 	
Issued Date

	 	 	
Inventor(s)

	 	 	
Title

	 
	
None

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Pending Patent Applications

 

	
Country

	 	
Serial No.

	 	 	
Filing Date

	 	 	
Inventor(s)

	 	 	
Title

	 
	
None

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

Patent Applications in Preparation

None

 

  

Schedule III to Amended and Restated Pledge and Security Agreement

  

SCHEDULE III – B

to Amended and Restated Pledge and Security

Agreement

 

Item B. Trademark Collateral

 

	
Trademarks, Service Marks, Trademark Licenses

	
None

 

  

Schedule III to Amended and Restated Pledge and Security Agreement

  

 

SCHEDULE III – C

to Amended and Restated Pledge and Security

Agreement

Item C. Copyright Collateral.

 

None

 

  

Schedule III to Amended and Restated Pledge and Security Agreement

  

 

Annex 1 to Amended and Restated Pledge and Security

Agreement

SUPPLEMENT NO. _______ dated as of ______________, 20___ (the “Supplement”), to the Amended and Restated Pledge and Security Agreement dated as of April 15, 2014 (as amended, supplemented, restated, or otherwise modified from time to time, the “Security Agreement”), among ALY ENERGY SERVICES, INC., a Delaware corporation (the “Borrower”) and each subsidiary of the Borrower party thereto from time to time (collectively with the Borrower, the “Grantors” and individually, a “Grantor”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells Fargo”), as administrative agent (in such capacity, the “Administrative Agent”) for the ratable benefit of the Secured Parties (as defined in the Credit Agreement referred to herein).

 

A. Reference is made to that certain Amended and Restated Credit Agreement, dated as of April 15, 2014 (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time, the Administrative Agent, Wells Fargo Bank, National Association, as the issuing lender and the swing line lender.

 

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Security Agreement and the Credit Agreement.

 

C. Section 7.10 of the Security Agreement provides that additional Subsidiaries of the Borrower may become Grantors under the Security Agreement by execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary of the Borrower (the “New Grantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Grantor under the Security Agreement.

 

D. [Furthermore, pursuant to Section 5.6 of the Credit Agreement, the equity holder of each Subsidiary of the Borrower that was not in existence on the date of the Credit Agreement is required to enter into the Security Agreement as a Grantor, or supplement its Collateral (as defined in the Security Agreement), to pledge the equity of such new Subsidiary. [Equity holder of new Subsidiary] (the “Existing Grantor”; and together with the New Grantor, each a “Specific Grantor” and, collectively, the “Specific Grantors”), is executing this Supplement in accordance with the requirements of the Credit Agreement to supplement its Collateral under the Security Agreement.]

 

Accordingly, the Administrative Agent and the [New Grantor][Specific Grantors] agree as follows:

 

SECTION 1. [The Existing Grantor by its signature below (i) hereby agrees that, except as supplemented and renewed hereby, all of the terms, obligations, rights and conditions of the Security Agreement have not been amended in any way and are and will remain binding upon, and enforceable against the Existing Grantor (ii) reaffirms all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (iii) after giving effect to this Supplement, represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof in all material respects.]

 

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

 

SECTION 2. [The Existing Grantor agrees that the terms “Pledged Property”, “Pledged Interests”, and “Pledged Shares” as used in the Security Agreement are hereby supplemented to include, and the Existing Grantor hereby pledges to the Administrative Agent, and grants to the Administrative Agent, for the benefit of the Secured Parties, a continuing security interest in and lien on all of the Existing Grantor’s right, title and interest in and to, all of its Equity Interests (as defined in the Security Agreement) or any other ownership interest described in, and set forth on, Schedule I, attached hereto and incorporated herein.]

 

SECTION 3. In accordance with Section 7.10 of the Security Agreement, the New Grantor by its signature below becomes a Grantor under the Security Agreement with the same force and effect as if originally named therein as a Grantor and the New Grantor hereby agrees (a) to all the terms and provisions of the Security Agreement applicable to it as a Grantor thereunder and (b) represents and warrants that the representations and warranties made by it as a Grantor thereunder are true and correct on and as of the date hereof. In furtherance of the foregoing, the New Grantor, as security for the payment and performance in full of the Secured Obligations (as defined in the Security Agreement), does hereby create and grant to the Administrative Agent, its successors and assigns, for the benefit of the Secured Parties, their successors and assigns as provided in the Security Agreement, a continuing security interest in and Lien on all of the New Grantor’s right, title and interest in and to the Collateral (as defined in the Security Agreement) of the New Grantor. Each reference to a “Grantor” in the Security Agreement shall be deemed to include the New Grantor. The Security Agreement is hereby incorporated herein by reference.

 

SECTION 4. [The New Grantor][Each Specific Grantor] represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

 

SECTION 5. This Supplement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of the [New Grantor][Specific Grantors] and the Administrative Agent. Delivery of an executed signature page to this Supplement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed counterpart of this Supplement.

 

SECTION 6. [The New Grantor][Each Specific Grantor] hereby agrees that the schedules attached to the Security Agreement are hereby supplemented by the corresponding schedules attached to this Supplement. [The New Grantor][Each Specific Grantor] hereby represents and warrants that the information provided in the schedules attached hereto are true and correct as of the date hereof.

 

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

 

SECTION 7. [The New Grantor][Each Specific Grantor] hereby expressly acknowledges and agrees to the terms of Section 6.3. (Indemnity and Expenses) of the Security Agreement and expressly acknowledges the irrevocable proxy provided in Section 4.1(e) of the Security Agreement. In furtherance thereof, [NEW GRANTOR][EACH SPECIFIC GRANTOR] HEREBY GRANTS THE ADMINISTRATIVE AGENT AN IRREVOCABLE PROXY (WHICH IRREVOCABLE PROXY SHALL CONTINUE IN EFFECT UNTIL THE TERMINATION DATE) EXERCISABLE UNDER THE CIRCUMSTANCES PROVIDED IN SECTION 4.1 OF THE SECURITY AGREEMENT, TO VOTE THE PLEDGED SHARES, PLEDGED INTERESTS, INVESTMENT PROPERTY AND SUCH OTHER COLLATERAL.

 

SECTION 8. Except as expressly supplemented hereby, the Security Agreement shall remain in full force and effect.

 

SECTION 9. This Supplement shall be deemed a contract under, and shall be governed by, and construed and enforced in accordance with, the laws of the State of New York without regard to conflicts of laws principles (other than Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York). The New Grantor hereby agrees that service of copies of the summons and complaint and any other process which may be served in any such action or proceeding may be made by mailing or delivering a copy of such process to the New Grantor at its address set forth in this Supplement. Nothing in this Section shall affect the rights of any Secured Party to serve legal process in any other manner permitted by the law or affect the right of any Secured Party to bring any action or proceeding against the New Grantor or its Property in the courts of any other jurisdiction.

 

SECTION 10. The parties hereto hereby agree that any suit or proceeding arising in respect of this Supplement or the Security Agreement, or any of the matters contemplated hereby or thereby will be tried exclusively in the U.S. District Court for the Southern District of New York or, if such court does not have subject matter jurisdiction, in any state court located in the City and County of New York, and the parties hereto hereby agree to submit to the exclusive jurisdiction of, and venue in, such court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. The parties hereto hereby agree that service of any process, summons, notice or document by registered mail addressed to the applicable parties will be effective service of process against such party for any action or proceeding relating to any such dispute. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent permitted by applicable Legal Requirement, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Supplement or the Security Agreement in any court referred to in this Section 10. Each of the parties hereto hereby agrees that Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York shall apply to this Supplement and irrevocably waives, to the fullest extent permitted by applicable Legal Requirement, the defense of any inconvenient forum to the maintenance of such action or proceeding in any such court.

 

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

 

SECTION 11. THE NEW GRANTOR HEREBY ACKNOWLEDGES THAT THEY HAVE BEEN REPRESENTED BY AND HAVE CONSULTED WITH COUNSEL OF THEIR CHOICE, AND HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENT OR THE SECURITY AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

SECTION 12. In case any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, neither party hereto shall be required to comply with such provision for so long as such provision is held to be invalid, illegal or unenforceable, but the validity, legality and enforceability of the remaining provisions contained herein and in the Security Agreement shall not in any way be affected or impaired. The parties hereto shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

SECTION 13. All communications and notices hereunder shall be in writing and given as provided in the Security Agreement. All communications and notices hereunder to the New Grantor shall be given to it at the address set forth under its signature hereto.

 

SECTION 14. [The New Grantor][Each Specific Grantor] agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, other charges and disbursements of counsel for the Administrative Agent.

 

THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE OTHER CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT REFERRED TO IN THIS SUPPLEMENT, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS SUPPLEMENT, THE SECURITY AGREEMENT AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

[Remainder of this page intentionally left blank. Signature pages to follow.]

 

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

 

IN WITNESS WHEREOF, the [New Grantor][Specific Grantors] and the Administrative Agent have duly executed this Supplement to the Security Agreement as of the day and year first above written.

 

	 	
[Name of New Grantor],

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	 	 
	 	Title:	 	 
	 	 	 	 
	 	Address:	 	 
	 	 	 
	 	 	 
	 	 	 	 
	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent	 
	 	 	 	 
	 	By:	 	 
	 	Name:	 	 
	 	Title:	 	 

                                                                                                                       

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

 

 

 

 

 

 

SCHEDULES TO SUPPLEMENT NO. 1

[AS APPROPRIATE]

 

 

 

 

 

 

 

  

Annex 1 to Amended and Restated Pledge and Security Agreement

  

EXHIBIT H1

 

REVOLVING NOTE

 

	$5,000,000.00	April 15, 2014

                                       

For value received, the undersigned ALY ENERGY SERVICES, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of Wells Fargo Bank, National Association (“Payee”) the principal amount of Five Million and No/100 Dollars ($5,000,000.00) or, if less, the aggregate outstanding principal amount of the Revolving Advances (as defined in the Credit Agreement referred to below) made by the Payee (or predecessor in interest) to the Borrower, together with interest on the unpaid principal amount of the Revolving Advances from the date of such Revolving Advances until such principal amount is paid in full, at such interest rates, and at such times, as are specified in the Credit Agreement (as hereunder defined). The Borrower may make prepayments on this Revolving Note in accordance with the terms of the Credit Agreement.

This Revolving Note is one of the Revolving Notes referred to in, and is entitled to the benefits of, and is subject to the terms of, the Amended and Restated Credit Agreement dated as of April 15, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) for the Lenders, as issuing lender and as swing line lender. Capitalized terms used in this Revolving Note that are defined in the Credit Agreement and not otherwise defined in this Revolving Note have the meanings assigned to such terms in the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of the Revolving Advances by the Payee to the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Revolving Advance being evidenced by this Revolving Note, and (b) contains provisions for acceleration of the maturity of this Revolving Note upon the happening of certain events stated in the Credit Agreement and for optional and mandatory prepayments of principal prior to the maturity of this Revolving Note upon the terms and conditions specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of America to the Administrative Agent at the location or address specified by the Administrative Agent to the Borrower in same day funds. The Payee shall record payments of principal made under this Revolving Note, but no failure of the Payee to make such recordings shall affect the Borrower’s repayment obligations under this Revolving Note.

This Revolving Note is secured by the Security Documents and guaranteed pursuant to the terms of the Guaranty.

This Revolving Note is made expressly subject to the terms of Section 9.10 and Section 9.11 of the Credit Agreement.

This Revolving Note is given in replacement, but not in discharge or novation, of that certain Revolving Note dated October 26, 2012, in the original face amount of $5,000,000.00 made by the Borrower (as successor by assumption to Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.)) payable to the order of the Bank.

 

Except as specifically provided in the Credit Agreement and the other Credit Documents, the Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration, and any other notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder of this Revolving Note shall operate as a waiver of such rights.

 

  

1

  

 

THIS REVOLVING NOTE SHALL BE DEEMED A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

THIS REVOLVING NOTE AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS REVOLVING NOTE AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

	 	ALY ENERGY SERVICES, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	 	 
	 	Title :	 	 

 

  

2

  

  

EXHIBIT H2

TERM NOTE

 

	$25,000,000.00	April 15, 2014

 

For value received, the undersigned ALY ENERGY SERVICES, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of Wells Fargo Bank, National Association (“Payee”) the principal amount of Twenty-Five Million and No/100 Dollars ($25,000,000.00) or, if less, the aggregate outstanding principal amount of the Term Advances (as defined in the Credit Agreement referred to below) made by the Payee (or predecessor in interest) to the Borrower, together with interest on the unpaid principal amount of the Term Advances from the date of such Term Advances until such principal amount is paid in full, at such interest rates, and at such times, as are specified in the Credit Agreement (as hereunder defined). The Borrower may make prepayments on this Term Note in accordance with the terms of the Credit Agreement.

This Term Note is one of the Term Notes referred to in, and is entitled to the benefits of, and is subject to the terms of, the Amended and Restated Credit Agreement dated as of April 15, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) for the Lenders, as issuing lender and as swing line lender. Capitalized terms used in this Term Note that are defined in the Credit Agreement and not otherwise defined in this Term Note have the meanings assigned to such terms in the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of the Term Advances by the Payee to the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Term Advance being evidenced by this Term Note, and (b) contains provisions for acceleration of the maturity of this Term Note upon the happening of certain events stated in the Credit Agreement and for optional and mandatory prepayments of principal prior to the maturity of this Term Note upon the terms and conditions specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of America to the Administrative Agent at the location or address specified by the Administrative Agent to the Borrower in same day funds. The Payee shall record payments of principal made under this Term Note, but no failure of the Payee to make such recordings shall affect the Borrower’s repayment obligations under this Term Note.

This Term Note is secured by the Security Documents and guaranteed pursuant to the terms of the Guaranty.

This Term Note is made expressly subject to the terms of Section 9.10 and Section 9.11 of the Credit Agreement.

This Term Note is given in replacement, but not in discharge or novation, of that certain Term Note dated October 26, 2012, in the original face amount of $8,250,000.00 made by the Borrower (as successor by assumption to Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.)) payable to the order of the Bank.

 

Except as specifically provided in the Credit Agreement and the other Credit Documents, the Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration, and any other notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder of this Term Note shall operate as a waiver of such rights.

 

  

1

  

 

THIS TERM NOTE SHALL BE DEEMED A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

THIS TERM NOTE AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS TERM NOTE AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

	 	ALY ENERGY SERVICES, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	 	 
	 	Title;	 	 

 

  

2

  

 

EXHIBIT H3

 

SWING LINE NOTE

 

	$1,000,000.00	April 15, 2014

         

For value received, the undersigned ALY ENERGY SERVICES, INC., a Delaware corporation (“Borrower”), hereby promises to pay to the order of Wells Fargo Bank, National Association (“Payee”) the principal amount of One Million and No/100 Dollars ($1,000,000.00) or, if less, the aggregate outstanding principal amount of the Swing Line Advances (as defined in the Credit Agreement referred to below) made by the Payee (or predecessor in interest) to the Borrower, together with interest on the unpaid principal amount of the Swing Line Advances from the date of such Swing Line Advances until such principal amount is paid in full, at such interest rates, and at such times, as are specified in the Credit Agreement (as hereunder defined). The Borrower may make prepayments on this Swing Line Note in accordance with the terms of the Credit Agreement.

This Swing Line Note is one of the Swing Line Notes referred to in, and is entitled to the benefits of, and is subject to the terms of, the Amended and Restated Credit Agreement dated as of April 15, 2014 (as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent (the “Administrative Agent”) for the Lenders, as issuing lender and as swing line lender. Capitalized terms used in this Swing Line Note that are defined in the Credit Agreement and not otherwise defined in this Swing Line Note have the meanings assigned to such terms in the Credit Agreement. The Credit Agreement, among other things, (a) provides for the making of the Swing Line Advances by the Payee to the Borrower in an aggregate amount not to exceed at any time outstanding the Dollar amount first above mentioned, the indebtedness of the Borrower resulting from each such Swing Line Advance being evidenced by this Swing Line Note, and (b) contains provisions for acceleration of the maturity of this Swing Line Note upon the happening of certain events stated in the Credit Agreement and for optional and mandatory prepayments of principal prior to the maturity of this Swing Line Note upon the terms and conditions specified in the Credit Agreement.

Both principal and interest are payable in lawful money of the United States of America to the Administrative Agent at the location or address specified by the Administrative Agent to the Borrower in same day funds. The Payee shall record payments of principal made under this Swing Line Note, but no failure of the Payee to make such recordings shall affect the Borrower’s repayment obligations under this Swing Line Note.

This Swing Line Note is secured by the Security Documents and guaranteed pursuant to the terms of the Guaranty.

This Swing Line Note is made expressly subject to the terms of Section 9.10 and Section 9.11 of the Credit Agreement.

This Swing Line Note is given in replacement, but not in discharge or novation, of that certain Swing Line Note dated October 26, 2014, in the original face amount of $1,000,000.00 made by the Borrower (as successor by assumption to Aly Operating, Inc., a Delaware corporation (f/k/a Aly Energy Services Inc.)) payable to the order of the Bank.

Except as specifically provided in the Credit Agreement and the other Credit Documents, the Borrower hereby waives presentment, demand, protest, notice of intent to accelerate, notice of acceleration, and any other notice of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder of this Swing Line Note shall operate as a waiver of such rights.

 

  

1

  

 

THIS SWING LINE NOTE SHALL BE DEEMED A CONTRACT UNDER, AND SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

THIS SWING LINE NOTE AND THE OTHER CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND SUPERSEDE ALL PRIOR UNDERSTANDINGS AND AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATING TO THE TRANSACTIONS PROVIDED FOR HEREIN AND THEREIN. ADDITIONALLY, THIS SWING LINE NOTE AND THE CREDIT DOCUMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

	 	ALY ENERGY SERVICES, INC.	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name: 	 	 
	 	Title:	 	 

 

 

 

 

2alye_ex101.htm

EXHIBIT 10.1

 

 

 

 

 

 

 

 

ASSET PURCHASE AGREEMENT, STOCK PURCHASE AGREEMENT,

 

AND MERGER AGREEMENT

 

DATED APRIL 11, 2014

 

 

 

 

 

 

 

  

  

  

 

TABLE OF CONTENTS

 

	
ARTICLE I DEFINITIONS

	 	 	 
	
Section 1.01

	
Certain Defined Terms.

	 	 	2	 
	
Section 1.02

	
Definitions.

	 	 	7	 
	
Section 1.03

	
Interpretation and Rules of Construction.

	 	 	9	 
	 	 	 	 	 	 
	
ARTICLE II PURCHASE AND SALE; MERGER

	 	 	 	 
	
Section 2.01

	
Asset and Stock Purchase.

	 	 	9	 
	
Section 2.02

	
Merger.

	 	 	10	 
	
Section 2.03

	
Requirement of Merger and Purchase.

	 	 	11	 
	
Section 2.04

	
Consideration.

	 	 	11	 
	
Section 2.05

	
Cash Consideration.

	 	 	12	 
	
Section 2.06

	
Preferred Shares.

	 	 	12	 
	
Section 2.07

	
Additional Contingent Consideration.

	 	 	12	 
	
Section 2.08

	
Holdback.

	 	 	13	 
	
Section 2.09

	
Adjustment for Working Capital and Indebtedness.

	 	 	13	 
	
Section 2.10

	
Sellers’ Representative.

	 	 	15	 
	 	 	 	 	 	 
	
ARTICLE III CLOSING

	 	 	 	 
	
Section 3.01

	
Date, Time and Place of Closing.

	 	 	16	 
	
Section 3.02

	
Closing Deliveries of Sellers.

	 	 	16	 
	
Section 3.03

	
Closing Deliveries of Purchaser.

	 	 	18	 
	
Section 3.04

	
Allocation of Consideration.

	 	 	18	 
	 	 	 	 	 	 
	
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLERS

	 	 	 	 
	
Section 4.01

	
Authority of the Sellers.

	 	 	19	 
	
Section 4.01A

	
Authority of Rivera.

	 	 	19	 
	
Section 4.02

	
Organization, Authority and Qualification.

	 	 	19	 
	
Section 4.03

	
Capitalization.

	 	 	20	 
	
Section 4.04

	
Subsidiaries; Joint Ventures.

	 	 	20	 
	
Section 4.05

	
Title to United Common Stock.

	 	 	20	 
	
Section 4.05A

	
Rivera Title to United Common Stock.

	 	 	20	 
	
Section 4.06

	
Title to Assets and Disclaimer.

	 	 	20	 
	
Section 4.07

	
No Conflict with Organizational Documents and Contracts.

	 	 	21	 
	
Section 4.08

	
Governmental Consents and Approvals.

	 	 	21	 
	
Section 4.09

	
Financial Information; Books and Records.

	 	 	21	 
	
Section 4.10

	
Absence of Undisclosed Liabilities.

	 	 	22	 
	
Section 4.11

	
Receivables.

	 	 	22	 
	
Section 4.12

	
Inventories.

	 	 	22	 
	
Section 4.13

	
Indebtedness.

	 	 	22	 
	
Section 4.14

	
Conduct in the Ordinary Course; Absence of Certain Changes.

	 	 	22	 
	
Section 4.15

	
Litigation.

	 	 	24	 
	
Section 4.16

	
Compliance with Laws.

	 	 	24	 
	
Section 4.17

	
Environmental Matters.

	 	 	25	 
	
Section 4.18

	
Material Contracts.

	 	 	26	 

 

  

i

  

 

	
Section 4.19

	
Intellectual Property.

	 	 	28	 
	
Section 4.20

	
Real Property.

	 	 	28	 
	
Section 4.21

	
Tangible Personal Property.

	 	 	30	 
	
Section 4.22

	
Title to, and Sufficiency of, Properties.

	 	 	30	 
	
Section 4.23

	
Customers.

	 	 	30	 
	
Section 4.24

	
Suppliers.

	 	 	31	 
	
Section 4.25

	
Employee Benefit Matters.

	 	 	31	 
	
Section 4.26

	
Labor Matters.

	 	 	32	 
	
Section 4.27

	
Employees.

	 	 	33	 
	
Section 4.28

	
Certain Interests.

	 	 	33	 
	
Section 4.29

	
Taxes.

	 	 	34	 
	
Section 4.30

	
Insurance

	 	 	36	 
	
Section 4.31

	
Warranties.

	 	 	36	 
	
Section 4.32

	
Inappropriate Payments.

	 	 	36	 
	
Section 4.33

	
Full Disclosure.

	 	 	36	 
	
Section 4.34

	
Brokers.

	 	 	36	 
	
Section 4.35

	
Preferred Shares.

	 	 	36	 
	 	 	 	 	 	 
	
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB

	 	 	 	 
	
Section 5.01

	
Authority.

	 	 	38	 
	
Section 5.02

	
Organization, Authority and Qualification.

	 	 	38	 
	
Section 5.03

	
Capitalization.

	 	 	38	 
	
Section 5.04

	
No Conflict.

	 	 	38	 
	
Section 5.05

	
Governmental Consents and Approvals.

	 	 	38	 
	
Section 5.06

	
Litigation.

	 	 	39	 
	
Section 5.07

	
Brokers.

	 	 	39	 
	
Section 5.08

	
Compliance with SEC Reporting Requirements.

	 	 	39	 
	
Section 5.09

	
Financial Statements.

	 	 	39	 
	 	 	 	 	 	 
	
ARTICLE VI CONDITIONS TO OBLIGATIONS TO CLOSE

	 	 	 	 
	
Section 6.01

	
Purchaser’s Obligations to Close.

	 	 	39	 
	
Section 6.02

	
Sellers’ Obligations to Close.

	 	 	41	 
	 	 	 	 	 	 
	
ARTICLE VII ADDITIONAL AGREEMENTS

	 	 	 	 
	
Section 7.01

	
Further Assurances.

	 	 	41	 
	
Section 7.02

	
Regulatory and Other Authorizations; Notices and Consents.

	 	 	42	 
	
Section 7.03

	
Conversion.

	 	 	42	 
	
Section 7.04

	
Conduct of Business Prior to the Closing.

	 	 	42	 
	
Section 7.05

	
Access to Information.

	 	 	42	 
	
Section 7.06

	
Notice of Developments.

	 	 	43	 
	
Section 7.07

	
No Solicitation or Negotiation.

	 	 	43	 
	
Section 7.08

	
Financing; Financial Information.

	 	 	43	 
	
Section 7.09

	
Transaction Costs; Certain Taxes.

	 	 	44	 
	
Section 7.10

	
Confidentiality.

	 	 	44	 
	
Section 7.11

	
Restrictive Covenants.

	 	 	45	 
	
Section 7.12

	
Release.

	 	 	46	 
	
Section 7.13

	
Tax Matters.

	 	 	46	 

 

  

ii

  

 

	
ARTICLE VIII INDEMNIFICATION

	 	 	 	 
	
Section 8.01

	
Survival of Representations and Warranties.

	 	 	48	 
	
Section 8.02

	
Indemnification by the Principals.

	 	 	48	 
	
Section 8.03

	
Indemnification by Purchaser.

	 	 	48	 
	
Section 8.04

	
Indemnification Process.

	 	 	49	 
	
Section 8.05

	
Third Party Claims.

	 	 	49	 
	
Section 8.06

	
Limits on Indemnification.

	 	 	50	 
	
Section 8.07

	
Offset Against Additional Contingent Consideration.

	 	 	50	 
	
Section 8.08

	
Exclusive Remedies.

	 	 	50	 
	
Section 8.09

	
Insurance.

	 	 	50	 
	 	 	 	 	 	 
	
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER

	 	 	 	 
	
Section 9.01

	
Termination.

	 	 	51	 
	
Section 9.02

	
Effect of Termination.

	 	 	51	 
	
Section 9.03

	
Amendment.

	 	 	51	 
	
Section 9.04

	
Waiver.

	 	 	51	 
	 	 	 	 	 	 
	
ARTICLE X GENERAL PROVISIONS

	 	 	 	 
	
Section 10.01

	
Expenses.

	 	 	52	 
	
Section 10.02

	
Notices.

	 	 	52	 
	
Section 10.03

	
Public Announcements.

	 	 	53	 
	
Section 10.04

	
Severability.

	 	 	54	 
	
Section 10.05

	
Entire Agreement.

	 	 	54	 
	
Section 10.06

	
Assignment.

	 	 	54	 
	
Section 10.07

	
No Third Party Beneficiaries.

	 	 	54	 
	
Section 10.08

	
Governing Law.

	 	 	54	 
	
Section 10.09

	
Counterparts.

	 	 	54	 

 

Exhibits

Exhibit A – Plan of Conversion of United Centrifuge USA, LLC

Exhibit B – Preferred Stock Terms

Exhibit C – Form of Employment Agreements

Exhibit D – Form of Registration Rights Agreement

Exhibit E – Form of Supply Agreement

 

Schedules

Schedule 1.01(a)

Schedule 1.01(b)

Schedule 2.01(a)

Schedule 2.01(b)

Schedule 3.04

Schedule 3.05

Schedule 4.03

Schedule 4.04

Schedule 4.07

 

  

iii

  

 

Schedule 4.08(a)

Schedule 4.08(b)

Schedule 4.09

Schedule 4.10

Schedule 4.11

Schedule 4.14

Schedule 4.17(a)

Schedule 4.17(b)

Schedule 4.17(e)

Schedule 4.17(f)

Schedule 4.18

Schedule 4.19

Schedule 4.20

Schedule 4.21(a)

Schedule 4.21(b)

Schedule 4.23

Schedule 4.24

Schedule 4.25

Schedule 4.27

Schedule 4.28

Schedule 4.29(a)

Schedule 4.29(b)

Schedule 4.30

Schedule 5.03

 

  

iv

  

 

ASSET PURCHASE AGREEMENT, STOCK PURCHASE AGREEMENT,

AND MERGER AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT, STOCK PURCHASE AGREEMENT, and MERGER AGREEMENT (this “Agreement”) is made and entered into as of April 11, 2014, by and among Aly Energy Services, Inc., a Delaware corporation (“Purchaser”), Aly Centrifuge Inc., a Delaware corporation (“Merger Sub”), United Centrifuge USA, LLC, a Texas limited liability company (“United”), United Oilfield, Inc., an Alberta Limited Corporation (“UOI”), Canadian Nitrogen Services Ltd., an Alberta Limited Corporation (“CNS”), 1211296 Alberta Inc., an Alberta Limited Corporation (“1211296”), Tim Pirie, 610B McCool Street, Crossfield, Alberta, Canada T0M 0S0 (“Pirie”), Ed Lantz, 3 East Lake Circle NE, Airdrie Alberta, Canada T4A 2J9 (“Lantz”), Jorge Rivera, Av. Javier Prado Este, 5812, La Molina, Lima, Peru (“Rivera”), and Myles Bowman, 2561 Stoneybrook Drive, Prosper, TX, USA 75078 (“Bowman”).

 

RECITALS

 

WHEREAS, United is engaged in the solids control and fluids management sectors of the oilfield services and rental equipment industry (the “Business”); and

 

WHEREAS, United utilizes certain fixed assets in the Business which are owned by either UOI or CNS; and

 

WHEREAS, CNS and 1211296 (collectively the “Blocker Shareholders”) each own 100% of the equity ownership (collectively the “Blocker Shares”) of Canadian Nitrogen Services USA, Inc. and United Centrifuge, Inc. (USA), respectively (the “Blocker Corps”); and

 

WHEREAS, the Blocker Corps have been formed to acquire and hold equity ownership interests in United and conduct no other material activities; and

 

WHEREAS, Purchaser desires to acquire the Business upon the terms and conditions set forth herein; and

 

WHEREAS, Purchaser desires to purchase certain fixed assets utilized in the Business from UOI and CNS upon the terms and conditions set forth herein; and

 

WHEREAS, in order to facilitate the transactions contemplated hereby, United intends to convert from a Texas limited liability company to a Texas corporation pursuant to the Plan of Conversion, substantially in the form of Exhibit A hereto (the “Plan of Conversion”); and

 

WHEREAS, after the sale of the Blocker Corps, the Merging Parties will legally and beneficially own all of the equity interest of United and will own all of the common stock of United together with the Merger Sub (“United Common Stock”) after giving effect to the transactions contemplated herein and such conversion;

 

  

1

  

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, the respective representations, warranties, covenants, agreements and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.01 Certain Defined Terms. 

 

For purposes of this Agreement:

 

“Action” means any Claim, action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority, arbitrator or mediator.

 

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

 

“Ancillary Agreements” means the other agreements, documents and certificates to be executed and delivered in connection with the transactions contemplated by this Agreement.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended through the Closing Date.

 

“CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability System database maintained by the U.S. Environmental Protection Agency.

 

“Claims” means any and all administrative, regulatory or judicial Actions, suits, petitions, appeals, demands, demand letters, claims, liens, notices of noncompliance or violation, investigations, proceedings, consent orders or consent agreements.

 

“Closing Date Indebtedness” means all Indebtedness of United as of the Closing Date.

 

“Closing Net Working Capital” means, as of March 31, 2014, (i) United’s total current assets, minus (ii) United’s total current liabilities, in each case computed in accordance with GAAP, but after giving pro forma effect for (X) the assumed ownership of the Purchased Assets, (Y) the elimination of certain intercompany and related party transactions and (Z) certain other adjustments, all as set forth on Schedule 1.01(a).

 

“Code” means the Internal Revenue Code of 1986, as amended through the date hereof.

 

“Control” (including the terms “Controlled by” and “under common Control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly or as trustee, personal representative or executor, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, as trustee, personal representative or executor, by contract, credit arrangement or otherwise.

 

  

2

  

 

“EBITDA” means an amount equal to (a) net income determined in accordance with GAAP plus (b) the sum of the following to the extent deducted in the calculation of net income; (i) interest expense; (ii) income taxes; (iii) depreciation; (iv) amortization; (v) extraordinary losses which are acceptable to be deemed such to Purchaser in its reasonable discretion; and (vi) other non-recurring expenses reducing such net income which do not represent a cash item in such period or any future period and which are acceptable to Purchaser in its reasonable discretion; minus (c) the sum of the following to the extent included in the calculation of net income; (i) income tax credits of; (ii) extraordinary gains which are acceptable to be deemed such to the principals; and (iii) all non-recurring, non-cash items increasing net income, in all cases determined in accordance with GAAP, but after giving pro forma effect for (X) the assumed ownership of the Purchased Assets, (Y) the elimination of certain intercompany and related party transactions and (Z) certain other adjustments, all as set forth on Schedule 1.01(b).

 

“Encumbrance” means any security interest, pledge, hypothecation, mortgage, lien (including, without limitation, environmental and tax liens), violation, charge, lease, license, encumbrance, easement, adverse claim, reversion, reverter, preferential arrangement, restrictive covenant, condition or restriction of any kind, including, without limitation, any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership.

 

“Environmental Claim” means any Action, Governmental Order, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Person alleging liability of whatever kind or nature (including liability or responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from the presence, Release of, or exposure to, any Hazardous Materials, or any actual or alleged non-compliance with any Environmental Law or term or condition of any Environmental Permit.

 

“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (i) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (ii) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials.

 

“Environmental Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit.

 

“Environmental Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other action required under or issued, granted, given, authorized by or made pursuant to Environmental Law.

 

“GAAP” means United States generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved and for entities formed in Canada, Canadian generally accepted accounting principles and practices in effect from time to time applied consistently throughout the periods involved.

 

  

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“Governmental Authority” means any United States or non-United States federal, national, supranational, state, provincial, local, or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal, or judicial or arbitral body.

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

“Hazardous Materials” means: (i) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (ii) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

“Indebtedness” means, with respect to any Person, (i) all indebtedness of such Person, whether or not contingent, for borrowed money, (ii) all obligations of such Person for the deferred purchase price of property or services, (iii) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (iv) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the lender under such agreement in the event of default are limited to repossession or sale of such property), (v) all obligations of such Person as lessee under leases that have been or should be, in accordance with GAAP, recorded as capital leases, (vi) all obligations, contingent or otherwise, of such Person under acceptance, letter of credit or similar facilities, (vii) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any warrants, rights or options to acquire such capital stock, valued, in the case of redeemable preferred stock, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends, (viii) all Indebtedness of others referred to in clauses (i) through (vii) above guaranteed directly or indirectly in any manner by such Person, and (ix) all Indebtedness referred to in clauses (i) through (viii) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Encumbrance on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness.

 

“Indemnified Party” means a Purchaser Indemnified Party or a Seller Indemnified Party, as the case may be.

 

“Indemnifying Party” means each Seller pursuant to Section 8.02 or Purchaser pursuant to Section 8.03, as the case may be.

 

“Independent Auditor” means a nationally or regionally recognizable accounting firm mutually agreed upon by Sellers’ Representative and Purchaser.

 

  

4

  

 

“Intellectual Property” means (i) patents, patent applications, and statutory invention registrations, (ii) trademarks, service marks, domain names, trade dress, logos, trade names, corporate names, and other identifiers of source or goodwill, including registrations and applications for registration thereof, (iii) mask works and copyrights, including copyrights in computer software, and registrations and applications for registration thereof, and (iv) material confidential and proprietary information, including trade secrets, know-how and invention rights.

 

“Inventories” means all inventory, merchandise, goods, raw materials, work-in-process, packaging, labels, supplies and other personal property maintained, held or stored by or for United on the Closing Date, and any prepaid deposits for any of the same.

 

“IP Agreements” means (i) licenses of Intellectual Property by United to any third party, (ii) licenses of Intellectual Property by any third party to United (excluding commercially available off-the-shelf computer software licensed pursuant to shrink-wrap or click wrap licenses), (iii) agreements between United and any third party relating to the development or use of Intellectual Property, the development or transmission of data, or the use, modification, framing, linking, advertisement, or other practices with respect to Internet web sites, and (iv) consents, settlements, decrees, orders, injunctions, judgments or rulings governing the use, validity or enforceability of the Owned Intellectual Property.

 

“IRS” means the Internal Revenue Service of the United States.

 

“Knowledge” means the knowledge of Pirie, Lantz or Bowman of a particular fact or other matter if such Person has, or at any time had, knowledge of that fact or other matter because such Person is or was actually aware of that fact or matter, or such Person should have been aware of that fact or matter after engaging in a reasonable inquiry.

 

“Law” means any United States or non-United States federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including, without limitation, common law).

 

“Liabilities” means any and all debts, liabilities and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured or determined or determinable, including, without limitation, those arising under any Law (including, without limitation, any Environmental Law), Action or Governmental Order and those arising under any contract, agreement, arrangement, commitment or undertaking.

 

“Licensed Intellectual Property” means Intellectual Property licensed to United pursuant to IP Agreements.

 

“Material Adverse Effect” means any circumstance, change in or effect on United or the Business that, individually or in the aggregate with all other circumstances, changes in or effects on United or the Business: (i) is materially adverse to the Business, operations, assets or Liabilities, employee relationships, customer or supplier relationships, prospects, results of operations or the condition (financial or otherwise) of United or (ii) is reasonably likely to materially adversely affect the ability of Purchaser or United to operate or conduct the Business in the manner in which it is currently, or contemplated to be, operated or conducted by United.

 

  

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“Merging Parties” means Bowman and Rivera.

 

“Organizational Documents” means, in the case of a corporation, its certificate of incorporation and bylaws.

 

“Owned Intellectual Property” means all Intellectual Property owned by United.

 

“Pay-Off Letters” means one or more customary pay-off letters executed by the lenders of any Indebtedness, in form and substance reasonably satisfactory to Purchaser, setting forth all amounts necessary to be paid in order to pay off fully each such Indebtedness and any other amounts owing under such Indebtedness on the Closing Date.

 

“Permitted Encumbrances” means such of the following as to which no enforcement, collection, execution, levy or foreclosure proceeding shall have been commenced and as to which United is not otherwise subject to civil or criminal liability due to its existence: (i) liens for Taxes, assessments and governmental charges or levies not yet due and payable; (ii) pledges or deposits to secure obligations under workers’ compensation Laws or similar legislation or to secure public or statutory obligations; (iii) statutory landlord liens for Real Property or (iv) minor survey exceptions, reciprocal easement agreements and other customary Encumbrances on title to Real Property that (a) were not incurred in connection with any Indebtedness, (b) do not render title to the property encumbered thereby unmarketable and (c) do not, individually or in the aggregate, materially adversely affect the value of or the use of such property for its current and anticipated purposes.

 

“Person” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a person under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

“Principals” means Pirie, Lantz and Bowman.

 

“Real Property” means the real property owned by United or leased by United as tenant, together with all buildings and other structures, facilities or improvements currently or hereafter located thereon, all fixtures, systems, equipment and items of personal property of United attached or appurtenant thereto and all easements, licenses, rights and appurtenances relating to the foregoing.

 

“Receivables” means any and all accounts receivable, notes and other amounts receivable from third parties, including, without limitation, customers and employees, arising from the conduct of the Business before the Closing Date, whether or not in the ordinary course, together with any unpaid financing charges accrued thereon.

 

“Reference Balance Sheet Date” means December 31, 2013.

 

“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including, without limitation, ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).

 

  

6

  

 

“Sellers” means, collectively, the Merging Parties, 1211296, UOI and CNS. Each of the Sellers is a “Seller.”

 

“Survival Date” means the 18 month anniversary of the Closing Date.

 

“Tax” or “Taxes” means any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Authority, including, without limitation, taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers’ compensation, unemployment compensation, or net worth; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes; license, registration and documentation fees; and customs’ duties, tariffs, and similar charges.

 

“Tax Return” means any return, report, election, document, estimated tax filing, declaration, claim for refund, property tax rendition, information returns, or other filing relating to Taxes, including any schedules or attachments thereto and any amendment thereof.

 

“United Common Stock” means the membership units of United.

 

“Unlimited Representations” means the representations and warranties made pursuant to Sections 4.01, 4.01A, 4.02, 4.03, 4.05, 4.05A, 4.06, 4.17, 4.29, 5.01, 5.02 and 5.03.

 

Section 1.02 Definitions. 

 

The following terms have the meanings set forth in the Sections set forth below:

 

	
Definition

	
Location

	
“1211296”

	
Preamble

	
“Adjustment Report”

	
2.09(b)

	
“Agreement”

	
Preamble

	
“Asset Cash Consideration”

	
2.04

	
“Blocker Corps”

	
Recitals

	
“Blocker Shareholders”

	
Recitals

	
“Blocker Shares”

	
Recitals

	
“Bowman”

	
Preamble

	
“Business”

	
Recitals

	
“Cash Consideration”

	
2.04(a)

	
“Claimed Amount”

	
8.04

	
“Closing”

	
3.01

	
“Closing Balance Sheet”

	
2.09(b)

	
“Closing Date”

	
3.01

	
“Closing Date Payment”

	
2.05

	
“CNS”

	
Preamble

 

  

7

  

 

	
“CNS Purchased Assets”

	
2.01

	
“CNS USA”

	
Recitals

	
“CNS USA Common Stock”

	
Recitals

	
“Company Released Party”

	
7.12

	
“Consideration”

	
2.04

	
“DGCL”

	
2.02

	
“Employee Benefit Plans”

	
4.25(a)

	
“Employment Agreements”

	
3.02(e)

	
“ERISA”

	
4.25(a)

	
“Estimated Closing Net Working Capital”

	
2.09(a)

	
“Financial Statements”

	
4.09(a)

	
“Holdback Shares”

	
2.08

	
“Lantz”

	
Preamble

	
“Loss”

	
7.02(a)

	
“Material Contracts”

	
4.18(a)

	
“Merger”

	
2.02

	
“Multiemployer Plan”

	
4.25(b)

	
“Multiple Employer Plan”

	
4.25(b)

	
“Pass-Through Returns”

	
7.13(b)

	
“Pirie”

	
Preamble

	
“Plan of Conversion”

	
Recitals

	
“Pre Closing Tax Period”

	
7.13(a)

	
“Preferred Shares”

	
2.04(c)

	
“Property Taxes”

	
7.13(a)

	
“Purchased Assets”

	
2.01

	
“Purchaser”

	
Preamble

	
“Purchaser Indemnified Party”

	
8.02

	
“Purchaser SEC Reports”

	
5.08

	
“Purchaser’s Financing Commitments”

	
7.08

	
“Registration Rights Agreement”

	
3.02(f)

	
“Restricted Period”

	
7.11

	
“Rivera”

	
Preamble

	
“Securities Act”

	
4.35(a)

	
“Securities Laws”

	
4.35(a)

	
“Seller Indemnified Party”

	
8.03

	
“Sellers’ Representative”

	
2.10(a)

	
“Straddle Period”

	
7.13(a)

	
“Surviving Corporation”

	
2.02

	
“Tangible Personal Property”

	
4.21(a)

	
“Tax Claim”

	
7.13(c)

	
“Tax Contest”

	
7.13(d)

	
“TBOC”

	
2.02

	
“Third Party Claims”

	
8.05

	
“UCI”

	
Recitals

	
“UCI Common Stock”

	
Recitals

	
"Unit Cash Consideration"

	
2.04

 

  

8

  

 

	
“UOI”

	
Preamble

	
“UOI Purchased Assets”

	
2.01

	
“United”

	
Recitals

	
“United Common Stock”

	
Recitals

	
“United Personal Property”

	
4.21(a)

 

Section 1.03 Interpretation and Rules of Construction. In this Agreement, except to the extent that the context otherwise requires:

 

(a) when a reference is made in this Agreement to an Article, Section, exhibit or Schedule, such reference is to an Article or Section of, or an exhibit or Schedule to, this Agreement unless otherwise indicated;

 

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

 

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;

 

(d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(e) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;

 

(f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms;

 

(g) any Law defined or referred to herein or in any agreement or instrument that is referred to herein means such Law or statute as from time to time amended, modified or supplemented, including by succession of comparable successor Laws;

 

(h) references to a Person are also to its permitted successors and assigns; and

 

(i) the use of “or” is not intended to be exclusive unless expressly indicated otherwise.

 

ARTICLE II

PURCHASE AND SALE; MERGER

 

Section 2.01 Asset and Stock Purchase.

 

(a) At Closing, subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties and agreements herein contained, (i) UOI shall sell, convey, assign, transfer and deliver to Merger Sub, and Purchaser shall cause Merger Sub to purchase, acquire and accept from UOI, all of the assets set forth on Schedule 2.01(a) (the “UOI Purchased Assets”) and (ii) CNS shall sell, convey, assign, transfer and deliver to Merger Sub, and Purchaser shall cause Merger Sub to purchase, acquire and accept from CNS, all of the assets set forth on Schedule 2.01(b) (the “CNS Purchased Assets” and together with the UOI Purchased Assets, the “Purchased Assets”).

 

  

9

  

 

(b) Immediately after the purchase of the Purchased Assets, subject to the terms and conditions of this Agreement, and on the basis of the representations, warranties and agreements herein contained, the Blocker Shareholders shall sell, convey, assign, transfer and deliver to Merger Sub, and Purchaser shall cause Merger Sub to purchase, acquire and accept from the Blocker Shareholders, all of the Blocker Shares.

 

Section 2.02 Merger. Upon the terms and subject to the conditions of this Agreement, on the Closing Date, immediately after the transactions described in Section 2.01, United will merge with and into Merger Sub (the “Merger”) in accordance with the applicable provisions of the Texas Business Organizations Code (“TBOC”) and Delaware General Corporation Law (“DGCL”). Following the Merger, Merger Sub shall continue as the surviving corporation (the “Surviving Corporation”) and shall continue to be governed by the laws of the State of Delaware. The relevant terms of the Merger shall be as follows:

 

(a) The Merger shall become effective upon the filing of the Articles of Merger with the Secretary of State of the State of Texas pursuant to the provisions of the TBOC and DGCL. The date and time when the Merger shall become effective is hereinafter referred to as the “Effective Date” and shall be concurrent with the time of the Closing.

 

(b) Except as may otherwise be set forth herein, the corporate existence and identity of Merger Sub, with all its purposes, powers, franchises, privileges, rights and immunities, shall continue unaffected and unimpaired by the Merger, and the corporate existence and identity of United, with all its purposes, powers, franchises, privileges, rights and immunities, at the Effective Date shall be merged with and into that of Merger Sub, and the Surviving Corporation shall be vested fully therewith and the separate corporate existence and identity of United shall thereafter cease except to the extent continued by the TBOC or DGCL.

 

(c) The certificate of formation of Merger Sub, as in effect on the Effective Date, shall continue in full force and effect and shall be the certificate of formation of the Surviving Corporation. The bylaws of Merger Sub, as in effect as of the Effective Date, shall continue in full force and effect and shall be the bylaws of the Surviving Corporation. The members of the Board of Directors of the Surviving Corporation shall be the Persons constituting the Board of Directors of Merger Sub as of the Effective Date. The officers of the Surviving Corporation shall be the Persons holding such offices in Merger Sub as of the Effective Date.

 

(d) The Merger shall have the effects on the rights and obligations of the Surviving Corporation as set forth in the applicable provisions of the TBOC and DGCL.

 

  

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(e) At the Effective Date, by virtue of the Merger and without any action on the part of the holder thereof:

 

(i) the shares of United Common Stock owned by Merger Sub, shall by virtue of the Merger and without any action on the part of the holder thereof, be canceled;

 

(ii) the remaining shares of United Common Stock, shall by virtue of the Merger and without any action on the part of the holder thereof, be converted into and (subject to the Escrow Agreement) represent the right to receive in the aggregate the consideration described in Section 2.04(c); and

 

(iii) each share of common stock of Merger Sub which shall be outstanding immediately prior to the Effective Date shall at the Effective Date, by virtue of the Merger and without any action on the part of the holder thereof, continue to be outstanding and remain as a share of common stock of the Surviving Corporation.

 

(f) Each of the holders of shares of United Common Stock hereby waives any appraisal or similar rights under the TBOC or DGCL in respect of the Merger.

 

Section 2.03 Requirement of Merger and Purchase. Purchaser shall not be required to effect the Merger or to purchase any of the Blocker Shares or Purchased Assets under this Agreement unless Purchaser (or Merger Sub) shall acquire ownership of all of the capital stock of United and all of the Purchased Assets at Closing.

 

Section 2.04 Consideration. 

 

(a) At Closing, subject to the terms and conditions of this Agreement and in consideration of the aforesaid sale, conveyance, assignment, transfer and delivery, the consideration for Purchaser's acquisition of the United Common Stock in the Merger and the purchase of the Purchased Assets and Blocker Shares (the "Consideration") shall consist of the following components:

(i) a cash payment equal to US$12,486,740, subject to adjustment as provided in this Agreement (the "Asset Cash Consideration"), distributed as follows:

	
UOI

	
$3,649,505.00

	
CNS

	
$8,837,235.00

 

  

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(ii) a cash payment equal to US$3,166,860, subject to adjustment as provided in this Agreement (the "Units Cash Consideration," with the Asset Cash Consideration and Units Cash Consideration, collectively, being the “Cash Consideration”), distributed according to the following proportions:

	
CNS

	
35.295%

	
1211296

	
35.295%

	
Rivera

	
17.65%

	
Bowman

	
11.76%

(iii) Sellers' right to receive any additional contingent consideration that may become payable as provided in Section 2.07, subject to adjustment as provided in this Agreement, distributed as follows (or in accordance with these proportions if the contingent consideration is less than $5,000,000):

	
UOI

	
$635,495 (12.70%)

	
CNS

	
$2,753,389.32 (55.07%)

	
1211296

	
$878,824.32 (17.58%)

	
Rivera

	
$439,474.41 (8.79%)

	
Bowman

	
$292,816.94 (5.86%)

 

(iv) 5,000 shares of preferred stock of Merger Sub (the "Preferred Shares") distributed as follows (or in accordance with these proportions):

	
1211296

	
1,765 (35.30%)

	
CNS

	
1,765 (35.30%)

	
Rivera

	
880 (17.6%)

	
Bowman

	
590 (11.8%)

Section 2.05 Cash Consideration. The Cash Consideration payable at the Closing (the “Closing Date Payment”) shall be equal to the sum of: (a) the Cash Consideration, plus (b) the amount by which Estimated Closing Net Working Capital exceeds US$540,000, if any; less (c) the amount by which US$540,000 exceeds Estimated Closing Net Working Capital, if any, less (d) the Closing Date Indebtedness. The Closing Date Payment shall also be increased by up to US$25,000 for expenditures incurred by United after January 1, 2014 for the setting up of the repair facility at United’s Celina, Texas location.

 

Section 2.06 Preferred Shares. The Preferred Shares shall be exchangeable for common stock of the Purchaser and shall have the other terms and conditions set forth on Exhibit B hereto.

 

Section 2.07 Additional Contingent Consideration. Sellers shall be entitled to additional contingent consideration as follows: Purchaser shall pay Sellers an amount equal to the 5% of gross revenues resulting from the Business and operations of United, determined in accordance with GAAP consistently applied, for each of the 12 month periods ending on March 31, 2015, 2016 and 2017; provided, however, that the additional consideration to which Sellers may be entitled under this Section shall be capped at US$5,000,000.00 in the aggregate. All calculations shall be based on the financial statements of United for the applicable 12 month period and any additional contingent consideration to which Sellers are entitled shall be paid by May 31 each year.

 

  

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Section 2.08 Holdback. At Closing, Purchaser will withhold from the Preferred Shares delivered to the Sellers in connection with the transactions contemplated hereby 2,000 of the Preferred Shares (the “Holdback Shares”) until the Survival Date (unless earlier released in accordance with this Agreement). The Purchaser shall have the right to use the Holdback Shares to offset any Losses (at the rate of US$1,000 per each Holdback Share) arising from an indemnification claim under Section 8.02. Access to and distributions of the Holdback Shares to satisfy any Claims shall be governed by the provisions of Article VIII. Upon the conclusion of the working capital adjustment contemplated by Section 2.09 and Section 2.10, 500 Holdback Shares, less the number of Holdback Shares (if any) necessary to balance the net working capital adjustment, as may be agreed between Purchaser and Sellers’ Representative, shall be released and delivered to Sellers. Upon the six month anniversary of the Closing Date, 500 additional Holdback Shares less the number of Holdback Shares necessary for the satisfaction of any Claims pending as of that date, as may be agreed between Purchaser and Sellers’ Representative, shall be released and delivered to Sellers. Upon the twelfth month anniversary of the Closing Date, an additional 500 Holdback Shares less the number of Holdback Shares necessary for the satisfaction of any Claims pending as of that date, as may be agreed between Purchaser and Sellers’ Representative, shall be released and delivered to Sellers. On the Survival Date, any remaining Holdback Shares, less the number of Holdback Shares necessary for the satisfaction of any Claims pending as of the Survival Date, as may be agreed between Purchaser and Sellers’ Representative, shall be released and delivered to Sellers.

 

Section 2.09 Adjustment for Working Capital and Indebtedness.

 

(a) No later than three business days prior to the Closing Date, the Sellers’ Representative shall deliver to Purchaser a written statement setting forth (i) United’s good faith estimate of the amount of the Closing Net Working Capital (the “Estimated Closing Net Working Capital”), (ii) the aggregate amount of the Closing Date Indebtedness (which shall be the same as the amount thereof specified in the Pay-Off Letters), together with a copy of each Pay-Off Letter and a listing of the individual accounts, their payees, amounts due to each and the wiring instruction for each payee, and (iii) based on the foregoing, the calculation of the Closing Date Payment and a listing of each Seller’s account information and wiring instructions.

 

(b) Promptly following the Closing Date, but in no event later than 90 days after the Closing Date, Purchaser shall prepare and deliver to the Sellers’ Representative: (i) a balance sheet of United as of March 31, 2014 (after giving pro forma effect for (X) the assumed ownership of the Purchased Assets, (Y) the elimination of certain intercompany and related party transactions and (Z) certain other adjustments, all as set forth on Schedule 1.01(a)) (the “Closing Balance Sheet”), which shall be prepared in accordance with GAAP, and (ii) Purchaser’s computation of Closing Net Working Capital. Upon request of the Sellers’ Representative, Purchaser shall make available to the Sellers’ Representative and its accountants all work papers and other pertinent information used in connection with the preparation of the Closing Balance Sheet. The Sellers’ Representative shall have reasonable access to the relevant books, records, properties and personnel of Purchaser for purposes of verifying the Closing Balance Sheet.

 

  

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(c) Within 30 days after the Closing Balance Sheet is delivered to the Sellers’ Representative pursuant to subsection (b) above, the Sellers’ Representative shall complete its examination thereof and shall deliver to Purchaser either (i) a written acknowledgement accepting the Closing Balance Sheet and Purchaser’s computation of Closing Net Working Capital, or (ii) a written report setting forth in reasonable detail any proposed adjustments to the Closing Balance Sheet and Purchaser’s computation of Closing Net Working Capital (“Adjustment Report”). A failure by the Sellers’ Representative to deliver the Adjustment Report within the required 30-day period shall constitute the Sellers’ acceptance of the Closing Balance Sheet and Purchaser’s computation of Closing Net Working Capital.

 

(d) During a period of 30 days following the receipt by Purchaser of the Adjustment Report, the Sellers’ Representative and Purchaser shall attempt to resolve any difference they may have with respect to the matters raised in the Adjustment Report. In the event Purchaser and the Sellers’ Representative fail to agree on the Closing Balance Sheet and the Closing Net Working Capital within such 30 day period, then the Sellers’ Representative and Purchaser mutually agree that the Independent Auditor shall make the final determination with respect to the correctness of the proposed adjustments in the Adjustment Report in light of the terms and provisions of this Agreement. The parties shall use reasonable efforts to cause the Independent Auditor to render its decision as soon as practicable (within 60 days after submission to the Independent Auditor), including by promptly complying with all reasonable requests by the Independent Auditor for information, books, records and similar items. The Independent Auditor shall make a determination as to each of the items in dispute (and each item affected thereby), which determination shall be in writing and furnished to the Sellers’ Representative and Purchaser as promptly as practicable after the items in dispute have been referred to the Independent Auditor (within 60 days thereafter). The Independent Auditor shall follow the procedures specified in the engagement letter of the Independent Auditor, unless otherwise agreed in writing between Purchaser and the Sellers’ Representative. The decision of the Independent Auditor shall be final and binding on the Sellers and Purchaser, and may be used in a court of law by either Sellers or Purchaser for the purpose of enforcing such decision.

 

(e) After the earlier of (i) the acceptance by the Sellers’ Representative of the Closing Balance Sheet and Purchaser’s computation of Closing Net Working Capital, (ii) the failure of the Sellers’ Representative to deliver an Adjustment Report within the 30-day period referenced in subsection (c), or (iii), if the Sellers’ Representative delivers an Adjustment Report, upon the resolution of the matters raised in such Adjustment Report, the Closing Date Payment shall be recomputed using the Closing Net Working Capital, as accepted or resolved. The Sellers shall, within 10 days of such recomputation, pay to Purchaser in cash any decrease in the Closing Date Payment resulting from the recomputation. Purchaser shall, within 10 days of such recomputation, pay to the Sellers in cash any increase in the Closing Date Payment resulting from the recomputation.

 

  

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(f) The costs and expenses of the Independent Auditor pursuant to this Section shall be borne by the Sellers, on the one hand, and Purchaser, on the other hand, pro rata in an amount inversely proportional to the dollar value of the disputed items determined in each party’s favor. By way of example, if Purchaser had taken the position that the Closing Net Working Capital was $100, the Sellers had taken the position that the Closing Net Working Capital was $200, and the Independent Auditor determines the Closing Net Working Capital to be $130, then Purchaser would pay 30% of the Independent Auditor’s fees and expenses and the Sellers would pay 70%.

 

Section 2.10 Sellers’ Representative. 

 

(a) Each of the Sellers hereby appoints, authorizes, and directs Pirie as its sole and exclusive agent, attorney in fact and representative for and on behalf of the Sellers (the “Sellers’ Representative”), with full power of substitution with respect to all matters under this Agreement, including without limitation, the right to give and receive notices and communications hereunder, to negotiate and agree to the Closing Net Working Capital, to administer any claim against the Holdback Shares, to negotiate, agree to and enter into settlements and compromises related hereto, to receive, calculate and distribute any amounts required hereunder, to engage and employ agents and representatives, to comply with orders of courts with respect to such claims, and to take all other actions that (i) are either necessary or appropriate in the sole judgment of the Sellers’ Representative for the accomplishment of the foregoing, or (ii) are, in the sole judgment of the Sellers’ Representative, specifically mandated or contemplated by the terms of this Agreement, and to incur such other expenses as Sellers’ Representative shall deem necessary or prudent in connection with the foregoing. Notwithstanding the foregoing, the Sellers’ Representative shall not have any authority to enter into amendments of this Agreement or, except in the case of a breach of a representation or warranty by a particular Seller, to take any action which adversely affects a Seller disproportionately to any other Seller. No bond shall be required of the Sellers’ Representative and the Sellers’ Representative shall not receive compensation for its services. Notices or communications to or from the Sellers’ Representative shall constitute notice to or from the Sellers. The appointment of the Sellers’ Representative as each Seller’s attorney in fact revokes as of the date of this Agreement any power of attorney heretofore granted that authorized any other person or persons to represent such Seller with regard to this Agreement.

 

(b) The appointment of Sellers’ Representative as attorney in fact pursuant hereto is coupled with an interest and is irrevocable. The obligations of each Seller pursuant to this Agreement (i) will not be terminated by operation of Law, death, mental or physical incapacity, liquidation, dissolution, bankruptcy, insolvency or similar event with respect to such Seller or any proceeding in connection therewith, or in the case of a trust, by the death of any trustee or trustees or the termination of such trust, or any other event, and (ii) shall survive the delivery of an assignment by any Seller of the whole or any fraction of its interest in any payment due to it under this Agreement.

 

  

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(c) The Sellers’ Representative hereby accepts the foregoing appointment and agrees to serve as Sellers’ Representative, subject to the provisions hereof, for the period of time from and after the date hereof without compensation except for the reimbursement from the Sellers of fees and expenses incurred by Sellers’ Representative in its capacity as such.

 

(d) The Sellers’ Representative shall act for the Sellers on all of the matters set forth in this Agreement in the manner the Sellers’ Representative believes to be in the best interest of the Sellers and is authorized to act on behalf of the Sellers notwithstanding any dispute or disagreement among the Sellers. The Sellers’ Representative shall not be liable for any act done or omitted hereunder as the Sellers’ Representative while acting in good faith and in the exercise of reasonable judgment. The Sellers shall indemnify and hold the Sellers’ Representative harmless from and against any loss, liability or expense incurred without negligence or bad faith on the part of the Sellers’ Representative and arising out of or in connection with the acceptance or administration of the Sellers’ Representative’s duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Sellers’ Representative.

 

(e) Subject to subsection (a) above, a decision, act, consent or instruction of the Sellers’ Representative pursuant to this Agreement shall constitute a decision of the Sellers and shall be final, binding and conclusive upon the Sellers, and Purchaser Indemnified Parties may rely upon any such decision, act, consent or instruction of the Sellers’ Representative as being the decision, act, consent or instruction of the Sellers. Purchaser Indemnified Parties are hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Sellers’ Representative. The rights, powers and benefits of the Sellers’ Representative under this Agreement shall survive any termination of this Agreement.

 

ARTICLE III

CLOSING

 

Section 3.01 Date, Time and Place of Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur electronically, with the parties exchanging all signature pages to the documents specified herein (to the extent not previously delivered in escrow to counsel for the parties) via email delivery (with the originals to follow by overnight delivery) at 10:00 a.m., local Dallas, Texas time on the later of (i) April 15, 2014 or (ii) the fifth business day after the satisfaction or waiver of the conditions to Closing set forth in Article VI hereunder, or such other time and date as may be mutually agreed to by the parties. All proceedings to take place at the Closing shall take place simultaneously, and no delivery shall be considered to have been made until all such proceedings have been completed (the time and date of such Closing is referred to herein as the “Closing Date”).

 

Section 3.02 Closing Deliveries of Sellers. At the Closing, the Sellers shall deliver or cause to be delivered to Purchaser all of the following:

 

  

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(a) a file-stamped certificate of conversion from the Texas Secretary of State reflecting the conversion of United from a Texas limited liability company to a Texas corporation pursuant to the Plan of Conversion;

 

(b) if the shares of capital stock of the companies are certificated, stock certificates evidencing all issued and outstanding shares of United Common Stock and of the Blocker Corps (together with stock powers duly executed by the Blocker Shareholders); if not certificated, then transfer documents reasonably acceptable to Purchaser;

 

(c) bills of sale for the Purchased Assets, duly executed by each of UOI and CNS;

 

(d) the Pay-Off Letters;

 

(e) employment agreements, in substantially the form attached hereto as Exhibits C-1 through C-5 , duly executed by Bowman, Ben Hangartner, John Otgen, Doug Kudro and Brian Stanley (collectively the “Employment Agreements”);

 

(f) a registration rights agreement, the form of which is attached hereto as Exhibit D (the “Registration Rights Agreement”), duly executed by the applicable Sellers;

 

(g) a Supply Agreement, the form of which is attached hereto as Exhibit E (the “Supply Agreement”), duly executed by UOI;

 

(h) for each of United, UOI and CNS, a duly executed secretary’s certificate, dated as of the Closing Date, in form and substance reasonably satisfactory to Purchaser, certifying as to (i) the resolutions adopted by the governing body of such Seller authorizing and approving the execution, delivery and performance of this Agreement and each Ancillary Agreement to which such Seller is a party, and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (which resolutions shall be attached to such certificate), (ii) the incumbency and signatures of the officers of such Seller authorized to execute and deliver this Agreement and each Ancillary Agreement to which such Seller is a party; (iii) the fulfillment of all of the conditions set forth in Article VI;

 

(i) for each Seller who is an individual, a certificate certifying as to the fulfillment of all of the conditions set forth in Article VI, duly executed by such Seller;

 

(j) certificates of good standing for United, UOI and CNS issued no more than ten (10) days prior to the Closing Date by the appropriate Governmental Authority in the state or jurisdiction of formation, showing each entity to be in good standing;

 

(k) the books and records of United, including its Organizational Documents, duly certified by the secretary of United as being the current and authentic Organizational Documents of United;

 

  

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(l) all consents, waivers and approval obtained by Sellers with respect to the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, including the consents, waivers and approvals identified in Schedule 4.07 and 4.08(a); and

 

(m) such other documents and other instruments of transfer and conveyance as may reasonably be requested by Purchaser, each in form and substance reasonably satisfactory to Purchaser and its counsel, each duly executed.

 

Section 3.03 Closing Deliveries of Purchaser. At the Closing, Purchaser shall deliver or cause to be delivered to the Sellers all of the following:

 

(a) the Closing Date Payment;

 

(b) the Closing Date Indebtedness, to be delivered to the payees as contemplated by Section 2.05(d);

 

(c) the Preferred Shares;

 

(d) the Employment Agreements, duly executed by United;

 

(e) the Registration Rights Agreement, duly executed by Purchaser;

 

(f) the Supply Agreement, duly executed by the Purchaser;

 

(g) a duly executed secretary’s certificate, dated as of the Closing Date, in form and substance reasonably satisfactory to Sellers’ Representative, for Purchaser, certifying as to (i) the resolutions adopted by Purchaser’s board of directors authorizing and approving the execution, delivery and performance of this Agreement and each Ancillary Agreement to which Purchaser is a party, and the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements (which resolutions shall be attached to such certificate), (ii) the incumbency and signatures of the officers of Purchaser authorized to execute and deliver this Agreement and each Ancillary Agreement to which Purchaser is a party, and (iii) certifying as to the fulfillment of all of the conditions set forth in Article VI;

 

(h) certificates of good standing for Purchaser issued no more than ten (10) days prior to the Closing Date by the Delaware Secretary of State, showing Purchaser to be in good standing; and

 

(i) such other documents and other instruments of transfer and conveyance as may reasonably be requested by Purchaser, each in form and substance reasonably satisfactory to Purchaser and its counsel, each duly executed.

 

Section 3.04 Allocation of Consideration. The parties agree the allocation of the Consideration described in Article II hereofshall be controlling for tax purposes and shall be utilized by the parties (to the extent applicable) in preparing IRS Form 8594 pursuant to Section 1060(b) of the Code and the Treasury Regulations issued thereunder. The parties shall take no position in any conference with representatives of the IRS or on any income tax return, report or filing inconsistent with such allocation of the Consideration. Notwithstanding any such allocation of the Consideration, Purchaser shall be entitled to recover the full amount of any damages incurred from any breach of the covenants set forth in Section 7.11 without reference to the amount allocated thereto.

 

  

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

 

As an inducement to Purchaser to enter into this Agreement, each of the Sellers, jointly and severally, hereby represents and warrants as of the date of this Agreement and as of the Closing Date to Purchaser as follows (provided, however, that Rivera’s representations and warranties shall be limited solely to Sections 4.01A and 4.05A):

 

Section 4.01 Authority of the Sellers. Each Seller has all necessary power and authority (or capacity, as the case may be) to enter into this Agreement and the Ancillary Agreements, to carry out his or its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action required on the part of the Sellers. No other acts or proceedings on the part of any Seller are necessary to authorize this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. This Agreement has been, and upon their execution the Ancillary Agreements shall have been, duly executed and delivered by Sellers. Assuming due authorization, execution and delivery by Purchaser, this Agreement constitutes, and upon their execution the Ancillary Agreements shall constitute, legal, valid and binding obligations of the Sellers, enforceable against the Sellers in accordance with their respective terms.

 

Section 4.01A  Authority of Rivera. Rivera has all necessary power and authority (or capacity, as the case may be) to enter into this Agreement and the Ancillary Agreements, to carry out his obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action required on his part. No other acts or proceedings on the part of him are necessary to authorize this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. This Agreement has been, and upon their execution the Ancillary Agreements shall have been, duly executed and delivered by him. Assuming due authorization, execution and delivery by Purchaser, this Agreement constitutes, and upon their execution the Ancillary Agreements shall constitute, legal, valid and binding obligations of Rivera, enforceable against Rivera in accordance with their respective terms.

 

Section 4.02 Organization, Authority and Qualification. United has been duly formed and is validly existing and in good standing under the Laws of Texas and has all necessary company power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the its business as it has been and is currently being conducted. Each of UOI, CNS and the Blocker Corps is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of formation and has all necessary company power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on its business as it has been and is currently being conducted. United is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business requires such licensing or qualification. True and correct copies of the Organizational Documents of United and the Blocker Corps, as in effect on the date hereof, have been delivered to Purchaser.

 

  

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Section 4.03 Capitalization. Schedule 4.03 sets forth a complete and accurate list of the equity holders and equity interests outstanding of United and each of the Blocker Corps. Upon the conversion of United pursuant to the Plan of Conversion, the authorized capital stock of United will consist solely of 100,000 shares of common stock, par value $.01 per share, of which 85,000 shares will be issued and outstanding as of the Closing. All such outstanding shares have been duly authorized and validly issued and are fully paid and nonassessable. There are no outstanding options, warrants, rights, subscriptions, claims of any character, agreements, obligations, convertible or exchangeable securities or other commitments, contingent or otherwise, relating to the capital stock of United, pursuant to which United is or may become obligated to issue or exchange any share of capital stock. There are no outstanding contractual obligations of United to repurchase, redeem or otherwise acquire any capital stock or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any other Person. There are no voting trusts, voting agreements, restrictive agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any United Common Stock or any agreement relating to the issuance, sale, redemption, transfer or other disposition of the United Common Stock.

 

Section 4.04 Subsidiaries; Joint Ventures. United has no subsidiaries and does not own any shares of capital stock or equity interest of any other Person and is not a participant in any joint venture or similar arrangement. Except as set forth on Schedule 4.04, neither of the Blocker Corps has, or has ever had, any assets or Liabilities of any kind or nature, except for its equity interest in United, but all Assets and Liabilities (except their equity interest in United) will be removed or transferred prior to Closing.

 

Section 4.05 Title to United Common Stock. As of the time of Closing, each of the Blocker Shareholders will have, and will convey to Merger Sub, good and marketable title to the Blocker Shares owned by such holder. As of the time of the Merger, each of the holders of United Common Stock will have good and marketable title to the shares of United Common Stock owned by such holder and, immediately upon the consummation of the Merger, Purchaser shall beneficially own, directly or indirectly, 100% of the outstanding capital stock of United.

 

Section 4.05A Rivera Title to United Common Stock. Rivera has good and marketable title to the shares of United Common Stock by him and, immediately upon the consummation of the Merger, Purchaser shall beneficially own, directly or indirectly, 100% of the outstanding capital stock of United.

 

Section 4.06 Title to Assets and Disclaimer. Each of UOI and CNS has good and indefeasible title to the Purchased Assets to be transferred by it hereunder. No representation not expressly set forth regarding the condition of the Purchased Assets is made and the Purchased Assets are transferred on an AS-IS, WHERE-IS basis with all implied warranties as to condition or fitness for use expressly disclaimed. The Purchased Assets are owned by UOI and CNS, as applicable, free and clear of all Encumbrances, except for those Encumbrances to be released at Closing.

 

  

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Section 4.07 No Conflict with Organizational Documents and Contracts. The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Sellers do not and will not (a) violate, conflict with or result in the breach of any provision of the Organizational Documents of United, UOI or CNS; or (b) except as set forth in Schedule 4.07, conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, or result in the creation of any Encumbrance on any of the United Common Stock or Purchased Assets pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which any United, UOI or CNS is a party or by which any of the United Common Stock or Purchased Assets are bound or affected.

 

Section 4.08 Governmental Consents and Approvals.

 

(a) The execution, delivery and performance of this Agreement and the Ancillary Agreements by the Sellers do not and will not (i) except as described in Schedule 4.08(a), require any consent, approval, authorization or other order of, action by, filing with or notification to, any Governmental Authority, or (ii) conflict with or violate (or cause an event which could have a Material Adverse Effect as a result of such conflict or violation) any Law or Governmental Order applicable to United or the Purchased Assets.

 

(b) Schedule 4.08(b) contains a true and correct list of all Licenses of any Governmental Authority which are held by United as of the date hereof. All such Licenses are valid and existing and in full force and effect. United is not in default (or with the giving of notice or lapse of time or both, would be in default) under any such Licenses in any material respect. There are no proceedings pending or threatened in writing that seek the revocation, cancellation, suspension or adverse modification thereof. Such Licenses constitute all of the material licenses, approvals, consents, franchises and permits necessary to permit United to own, operate, use and maintain its assets in all material respects in the manner in which it is now operated and maintained and to conduct in all material respects the Business as currently conducted. All required filings with respect to such Licenses have been timely made and all required applications for renewal thereof have been timely filed.

 

Section 4.09 Financial Information; Books and Records.

 

(a) True and complete copies of the unaudited balance sheet of United and its subsidiaries at December 31, 2012 and 2013, and the related unaudited statements of income for the years then ended (collectively, the “Financial Statements”), have been delivered by United to Purchaser.

 

  

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(b) The Financial Statements (i) were prepared in accordance with the books of account and other financial records of United, (ii) present fairly the financial condition and results of operations of United as of the dates thereof or for the periods covered thereby, (iii) except as set forth in Schedule 4.09, have been prepared in accordance with GAAP, and (iv) include all adjustments (consisting only of normal recurring accruals) that are necessary for a fair presentation of the financial condition of United and the results of the operations of United as of the dates thereof or for the periods covered thereby.

 

(c) The books of account and other financial records of United: (i) reflect all items of income and expense and all assets and Liabilities required to be reflected therein in accordance with GAAP applied on a basis consistent with the Financial Statements, (ii) are in all material respects complete and correct, and do not contain or reflect any material inaccuracies or discrepancies and (iii) have been maintained in accordance with good business and accounting practices.

 

Section 4.10 Absence of Undisclosed Liabilities. There are no material Liabilities of United other than Liabilities: (i) set forth in Schedule 4.10, or (ii) incurred since the Reference Balance Sheet Date in the ordinary course of business, consistent with past practice, that are normal and usual in amount and that do not directly or indirectly result from, arise out of or relate to any breach of contract or violation of Law. To the extent required by GAAP, reserves are reflected on the Financial Statements against all Liabilities of United, in amounts that have been established on a basis in accordance with GAAP.

 

Section 4.11 Receivables. All of the Receivables reflected as assets of United in the Financial Statements or acquired since that date are legal, valid and binding obligations of the obligors, and, to the Knowledge of the Sellers, there is no fact or circumstance impairing the collectability of such Receivables in accordance with their terms. Schedule 4.11 sets forth a true, complete and correct list of all Receivables at March 31, 2014, together with an aging of such Receivables. All Receivables are reflected properly on United’s books and records, and represent valid obligations arising from sales actually made or services actually performed by United in the ordinary course of business. All such Receivables (net of any reserves, then-available, as of the Closing Date) will be collected during the 90 day period after the Closing Date.

 

Section 4.12 Inventories. All Inventories used in the conduct of the operations of the Business reflected in the Financial Statements or acquired since the date thereof, were acquired and has been maintained in the ordinary course of business and consists substantially of good and merchantable quality. All Inventories have been acquired, maintained, stored and accounted for in accordance with all applicable regulatory requirements.

 

Section 4.13 Indebtedness.  Except as set forth in the Pay-Off Letters or on Schedule 4.13, United has no Indebtedness.

 

Section 4.14 Conduct in the Ordinary Course; Absence of Certain Changes. Since Reference Balance Sheet Date, the Business has been conducted in the ordinary course and consistent with past practice. As amplification and not limitation of the foregoing, since December 31, 2013, except as set forth in Schedule 4.14, United has not:

 

  

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(a) permitted or allowed any of its assets to be subjected to any Encumbrance, other than Permitted Encumbrances;

 

(b) written down or written up (or failed to write down or write up in accordance with GAAP consistent with past practice) the value of any Inventories or Receivables or revalued any of its assets;

 

(c) made any change in any method of accounting or accounting practice or policy (including its method of estimating costs for revenue recognition under the percentage of completion method);

 

(d) amended, terminated, cancelled or compromised any material Claims or waived any other rights of substantial value;

 

(e) sold, transferred, leased, subleased, licensed or otherwise disposed of any of its assets or failed to maintain levels of working capital and fixed assets consistent with past practice and adequate to conduct its operations in the ordinary course;

 

(f) issued or sold any capital stock or equity interests, or any option, bond, note, warrant or other right to acquire the same;

 

(g) redeemed any capital stock or equity interests or declared, made or paid any dividends or distributions (whether in cash, securities or other property) to its equity holders;

 

(h) merged with, entered into a consolidation with or acquired an interest in any Person or acquired any portion of the assets or business of any Person or any division or line of business thereof, or otherwise acquired any material assets;

 

(i) except as disclosed in this Agreement or the Schedules hereto made any capital expenditure or commitment for any capital expenditure in excess of US$100,000­­­­­­­­ individually or in the aggregate;

 

(j) except as disclosed in this Agreement or the Schedules hereto issued any purchase orders or otherwise agreed to make any purchases involving exchanges in value in excess of US$100,000 individually;

 

(k) made any express or deemed election or settled or compromised any liability with respect to its Taxes; changed (nor has there been a request to any Governmental Authority or Tax authority or agency for any change) to any accounting or auditing principles or practice or Tax reporting principles or practice; or entered into any closing agreement with respect to, any claim or damages relating to Taxes; agreed to any adjustment of any Tax attribute; filed any claim for a refund of Taxes; consented to any extension or waiver of the limitation period applicable to any Tax claim or assessment; or surrendered any right to claim a Tax Refund; or filed any amended Tax Return;

 

(l) incurred any Indebtedness;

 

  

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(m) made any loan to, guaranteed any Indebtedness of or otherwise incurred any Indebtedness on behalf of any Person;

 

(n) failed to pay any creditor any amount owed to such creditor when due except to the extent that its believes there is a bona fide defense or offset right to such payment and adequate reserves have been created therefor;

 

(o) granted any increase, or announced any increase, in the wages, salaries, compensation, bonuses, incentives, pension or other benefits payable by it to any of its employees (except in the ordinary course of business for employee anniversary increases or increases attendant to promotions in duties and responsibilities), except as required by Law;

 

(p) suffered any casualty loss or damage with respect to any of its assets which in the aggregate have a replacement cost of more than US$10,000, whether or not such loss or damage shall have been covered by insurance;

 

(q) amended, modified or consented to the termination of any Material Contract or its rights thereunder, the amendment, modification or termination of which would be adverse to its financial condition, results of operations or prospects;

 

(r) suffered any Material Adverse Effect or any event, which with the passage of time, would reasonably be expected to have a Material Adverse Effect;

 

(s) entered into any transaction which is required to be set forth on Schedule 4.28; or

 

(t) agreed, whether in writing or otherwise, to take any of the actions specified in this Section or granted any options to purchase, rights of first refusal, rights of first offer or any other similar rights or commitments with respect to any of the actions specified in this Section, except as expressly contemplated by this Agreement and the Ancillary Agreements.

 

Section 4.15 Litigation. There is no Action pending or threatened by or against United. United has not received any written or oral Claim, complaint, incident, report, threat or notice of any such proceeding relating to its assets or operations or the Business. There are no outstanding orders, writs, judgments, injunctions or decrees of any court, Governmental Authority or arbitration tribunal against, involving or affecting the Sellers, United or the Purchased Assets, and there are no facts or circumstances which may result in the institution of any such Action against, involving or affecting United, the Purchased Assets or the transactions contemplated by this Agreement and the Ancillary Agreements. United is not in default with respect to any order, writ, injunction or decree known to or served upon it from any court or any Governmental Authority.

 

Section 4.16 Compliance with Laws. United is, and at all times has been, in all material respects in compliance with all Laws and Governmental Orders applicable to it or any of its properties or assets. United is not in violation of any such Law or Governmental Order in any material respect. United has not received any notice or other communication (whether oral or written) from any Person regarding any actual, alleged, possible or potential violation of, or failure to comply with, any Law or Governmental Order.

 

  

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Section 4.17 Environmental Matters.

 

(a) United is currently and has been in compliance in all material respects with all Environmental Laws and has not has received from any Person any (i) Environmental Notice or Environmental Claim or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements. Schedule 4.17(a) sets forth a general description of any material past events that occurred on the Real Property as well as current activities conducted on the Real Property by United or any entity which is an Affiliate of any Seller that could reasonably be expected to have a material impact on Purchaser’s assessment of the environmental condition of the Real Property.

 

(b) All of Environmental Permits related to the Business are set forth on Schedule 4.17(b). United has obtained and is in material compliance with all Environmental Permits necessary for the ownership, lease, operation or use of its assets, the Purchased Assets and the Business, and all such Environmental Permits are in full force and effect and shall be maintained in full force and effect through the Closing Date in accordance with Environmental Law. There is no condition, event or circumstance that might prevent or impede, after the Closing Date, the ownership, lease, operation or use by Purchaser of the assets or Business as currently carried out or the Purchased Assets. With respect to any such Environmental Permits, United has undertaken, or will undertake prior to the Closing Date, all measures necessary to facilitate transferability of the same, and there is no condition, event or circumstance that might prevent or impede the transferability of the same, nor has United received any Environmental Notice or written communication regarding any material adverse change in the status or terms and conditions of the same.

 

(c) No Real Property currently or formerly owned, operated or leased by United is listed on, or, to the Knowledge of the Sellers, has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.

 

(d) There has been no Release of Hazardous Materials by United or its agents or representatives in contravention of Environmental Law with respect to the Business or the Purchased Assets or any Real Property currently or formerly owned, operated or leased by United. United has not received an Environmental Notice that any Real Property currently or formerly owned, operated or leased in connection with the Business (including soils, groundwater, surface water, buildings and other structure located on any such Real Property) has been contaminated with any Hazardous Material which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit.

 

(e) Schedule 4.17(e) contains a complete and accurate list of all off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by the Business and any predecessors as to which United may retain liability, and none of these facilities or locations has been placed or proposed for placement on the National Priorities List (or CERCLIS) under CERCLA, or any similar state list, and United has not received any Environmental Notice regarding potential Liabilities with respect to such off-site Hazardous Materials treatment, storage, or disposal facilities or locations used by the Business.

 

  

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(f) United has provided or otherwise made available to Purchaser and listed on Schedule 4.17(f): (i) any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the Business or assets of United, the Purchased Assets or any currently or formerly owned, operated or Real Property which are in the possession or control of United related to compliance with Environmental Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Materials; and (ii) any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including, without limitation, costs of remediation, pollution control equipment and operational changes).

 

(g) To the Knowledge of the Sellers, there is no condition, event or circumstance concerning the Release or regulation of Hazardous Materials that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation, performance or use by Purchaser of the Business as currently carried out, the assets of United or the Purchased Assets.

 

Section 4.18 Material Contracts. 

 

(a) Schedule 4.18 lists each of the following contracts and agreements (including, without limitation, summaries of any oral agreements) of United (such contracts and agreements being collectively referred to herein as “Material Contracts”):

 

(i) all contracts or agreements which involve consideration paid to United in excess of US$100,000 or which cannot be cancelled by United without penalty or further payment on 30 days’ notice or less;

 

(ii) all contracts or agreements which involve consideration paid by United in excess of US$100,000 in any 12 month period or which cannot be cancelled by United without penalty or further payment and without more than 30 days’ notice;

 

(iii) all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, market research, marketing, consulting and advertising contracts and agreements to which United is a party;

 

(iv) all management contracts and contracts with independent contractors or consultants (or similar arrangements) to which United is a party and which are not cancellable without penalty or further payment and without more than 30 days’ notice;

 

  

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(i) all contracts relating to Indebtedness of United;

 

(v) all leases of real or personal property;

 

(vi) all contracts that limit or purport to limit the ability of United to compete in any line of business or with any Person or in any geographic area or during any period of time;

 

(ii) all contracts relating to joint ventures or partnerships;

 

(iii) all contracts relating to the acquisition or disposition by United of any operating business, product line or assets (with respect to assets, other than in the ordinary course of business of United), or the acquisition by United of capital stock of any other Person;

 

(iv) all employment agreements and commitments, severance agreements, indemnification agreements and other contracts with any current or former officer, director or employee of United;

 

(v) all collective bargaining agreements with any labor union or association representing employees;

 

(vi) all contracts pursuant to which United is licensed or otherwise permitted to use or hold for use Intellectual Property, and excluding licenses for commercial “off-the-shelf” or “shrink wrap” software that has not been modified or customized for United;

 

(vii) all contracts and agreements between or among United, on one hand, and the Sellers or any Affiliate of the Sellers (other than United), on the other hand; and

 

(viii) all other contracts and agreements, whether or not made in the ordinary course of business, which are material to United or the conduct of the Business, or the absence of which would have a Material Adverse Effect.

 

(b) Each Material Contract: (i) is valid and binding on United and, to the Knowledge of the Sellers, on the other parties thereto and is in full force and effect and (ii) upon consummation of the transactions contemplated by this Agreement, except to the extent that any consents set forth in Schedule 4.07 are not obtained, shall continue in full force and effect as contracts with Purchaser without penalty or other adverse consequence. United is not in breach of, or default under, any Material Contract. The assets and liabilities resulting from each Material Contract (including without limitation, any liabilities resulting from the use of the percentage of completion method of accounting) have been properly accounted for on United’s balance sheet at the Reference Balance Sheet Date.

 

  

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(c) United has not received any notice of termination, cancellation, breach or default under any Material Contract nor, to the Knowledge of the Sellers, is any Material Contract at risk of cancellation.

 

(d) United has delivered to Purchaser true and complete copies of all Material Contracts.

 

Section 4.19 Intellectual Property.

 

(a) Schedule 4.19 sets forth a true and complete list of (i) all Owned Intellectual Property, and (ii) all Licensed Intellectual Property and IP Agreements, other than commercially available off-the-shelf computer software licensed pursuant to shrink-wrap or click wrap licenses that is not material to the Business.

 

(b) United is the exclusive owner of the entire right, title and interest in and to the Owned Intellectual Property, and has a valid license to use the Licensed Intellectual Property in connection with the Business. United is entitled to use all Owned Intellectual Property and Licensed Intellectual Property in the continued operation of the Business without limitation, subject only to the terms of IP Agreements. The Owned Intellectual Property and the Licensed Intellectual Property have not been adjudged invalid or unenforceable in whole or in part, and are valid and enforceable.

 

(c) The conduct of the Business as currently conducted does not infringe or misappropriate the Intellectual Property of any third party, and no Action alleging any of the foregoing is pending, and no Claim has been threatened or asserted against United alleging any of the foregoing. To the Knowledge of the Sellers, no person is engaging in any activity that infringes the Owned Intellectual Property.

 

(d) No Owned Intellectual Property is subject to any outstanding decree, order, injunction, judgment or ruling restricting the use of such Intellectual Property or that would impair the validity or enforceability of such Intellectual Property.

 

Section 4.20 Real Property. 

 

(a) United owns no real property. Schedule 4.20 lists the street address and legal description of each parcel of Real Property leased by United specifying, for each parcel: (i) the street address, (ii) the identity of any lessor, lessee or current occupant of, (iii) the terms, including applicable renewal periods, pertaining to, and (iv) the current use of each such parcel. Copies of such leases have previously been provided to Purchaser.

 

(b) There is no material violation of any Law (including, without limitation, any building, planning or zoning Law) relating to the Real Property. United has made available to Purchaser, to the extent in the possession of United, the title insurance policies, title reports, surveys, certificates of occupancy, environmental reports and audits, appraisals, permits, other Encumbrances, title documents and other documents relating to or otherwise affecting the Real Property, the operations of United thereon or any other uses thereof. United is in peaceful and undisturbed possession of each parcel of Real Property, and there are no contractual or legal restrictions that preclude or restrict the ability to use the Real Property for the purposes for which it is currently being used. All existing water, sewer, steam, gas, electricity, telephone, cable, fiber optic cable, internet access and other utilities required for the construction, use, occupancy, operation and maintenance of the Real Property are adequate for the conduct of the Business as it has been and currently is conducted. The Real Property and the facilities, buildings, structures, improvements, fixtures, fixed assets and personality of a permanent nature annexed, affixed or attached to, located on or forming part of the Real Property are presently in good operating condition ordinary wear and tear excepted. United has not subleased any parcel or any portion of any parcel of Real Property to any other Person and no other Person has any rights to the use, occupancy or enjoyment thereof pursuant to any lease, sublease, license, occupancy or other agreement.

 

  

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(c) There are no condemnation proceedings or eminent domain proceedings of any kind pending or, to the Knowledge of the Sellers, threatened against the Real Property.

 

(d) All the Real Property is occupied under a valid and current certificate of occupancy or similar permit, the transactions contemplated by this Agreement will not require the issuance of any new or amended certificate of occupancy and, to the Knowledge of the Sellers, there are no facts that would prevent the Real Property from being occupied by United or Purchaser after the Closing in the same manner as occupied by United immediately prior to the Closing.

 

(e) All improvements on the Real Property constructed by or on behalf of United or, to the Knowledge of the Sellers, constructed by or on behalf of any other Person, were constructed in compliance with all applicable Laws (including, but not limited to, any building, planning or zoning Laws) affecting such Real Property.

 

(f) No improvements on the Real Property and none of the current uses and conditions thereof violate any Encumbrance, applicable deed restrictions or other applicable covenants, restrictions, agreements, existing site plan approvals, zoning or subdivision regulations or urban redevelopment plans as modified by any duly issued variances, and no permits, licenses or certificates pertaining to the ownership or operation of all improvements on the Real Property, other than those which are transferable with the Real Property, are required by any Governmental Authority having jurisdiction over the Real Property.

 

(g) To the Knowledge of the Sellers, all improvements on any Real Property are wholly within the lot limits of such Real Property and do not encroach on any adjoining premises or Encumbrance benefiting such Real Property, and there are no encroachments on any Real Property or any easement or property right or benefit appurtenant thereto by any improvements located on any adjoining premises.

 

  

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Section 4.21 Tangible Personal Property. 

 

(a) Schedule 4.21(a) (i) lists each item, or (with respect to individual items other than vehicles having a value of less than US$5,000) distinct group of items, of machinery, equipment, tools, supplies, furniture, fixtures, vehicles, rolling stock and other tangible personal property owned by United used in the Business or owned or leased by United (the “United Personal Property,” and together with the Purchased Assets, the “Tangible Personal Property”). Such listing includes, where applicable, the vehicle registration number or other registration number for each item.

 

(b) Schedule 4.21(b) sets forth a true and complete list of all leases and subleases for Tangible Personal Property and any and all material ancillary documents pertaining thereto (including, but not limited to, all amendments, consents and evidence of commencement dates and expiration dates).

 

(c) United has the full right to exercise any renewal options contained in the leases and subleases pertaining to the Tangible Personal Property on the terms and conditions contained therein and upon due exercise would be entitled to enjoy the use of each item of leased Tangible Personal Property for the full term of such renewal options.

 

(d) Each item of Tangible Personal Property (i) is in good operating condition and repair, ordinary wear and tear excepted, (ii) is suitable for the purposes for which it is presently being used, (iii) is located on the Real Property, (iv) is structurally sound and free of any material defect or deficiency, and (v) has been maintained in accordance with good business practice.

 

Section 4.22 Title to, and Sufficiency of, Properties. United owns, leases or has the legal right to use all the properties and assets, tangible and intangible, used or intended to be used in the conduct of the Business as it has been and is currently being conducted, or otherwise owned, leased or used by United. With respect to contract rights, United is a party to and enjoys the right to the benefits of all contracts, agreements and other arrangements used or intended to be used by United or in or relating to the conduct of the Business as it has been and is currently being conducted. United has good and marketable title to all of its material assets, free and clear of all Encumbrances, except Permitted Encumbrances. No Seller owns or has any rights in the assets or personal properties of United or in the Purchased Assets. The assets owned or leased by United and the Purchased Assets include all of the assets necessary to operate the Business as it is has been and is currently being conducted.

 

Section 4.23 Customers. Listed in Schedule 4.23 are the names and addresses of the 20 most significant customers (by revenue) of United for the two years ended December 31, 2012 and 2013, and the amount for which each such customer was invoiced during such period. No significant customer has ceased to use the products, equipment, goods or services of United. United has not received any notice that any significant customer has or intends to, and, to the Knowledge of the Sellers, there is no fact or circumstance that would cause any such customer to, cease using or substantially reduce its use of the products, equipment, goods or services of United at any time after the Closing Date.

 

  

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Section 4.24 Suppliers. Listed in Schedule 4.24 are the names and addresses of each of the ten most significant suppliers (by revenue) of raw materials, supplies, merchandise and other goods for United for the years ended December 31, 2012 and 2013, and the aggregate amount for which United was invoiced by each such supplier. No significant supplier has ceased to sell raw materials, supplies, merchandise and other goods to United, or has substantially reduced the amount of raw materials, supplies, merchandise and other goods it sells to United. United has not received any notice that any significant supplier has or intends to, and, to the Knowledge of the Sellers, there is no fact or circumstance that would cause any such supplier to, cease to sell raw materials, supplies, merchandise and other goods to United at any time after the Closing Date on terms and conditions substantially similar to those used in its current sales to United, subject only to general and customary price increases. None of the raw materials, supplies, merchandise or other goods supplied to United are such that they are not generally available in the market from more than one source.

 

Section 4.25 Employee Benefit Matters. 

 

(a) Schedule 4.25 lists (i) all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) and all bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other benefit plans, programs or arrangements, and all employment, termination, severance or other contracts or agreements, whether legally enforceable or not, to which United is a party, with respect to which United has any obligation or which are maintained, contributed to or sponsored by United for the benefit of any current or former employee, officer or director of United, (ii) each employee benefit plan for which United could incur liability under Section 4069 of ERISA in the event such plan has been or were to be terminated, (iii) any plan in respect of which United could incur liability under Section 4212(c) of ERISA, and (iv) any contracts, arrangements or understandings between the Sellers or any of its Affiliates and any employee of United, including, without limitation, any contracts, arrangements or understandings relating to the sale of United (collectively, the “Employee Benefit Plans”). With respect to each Employee Benefit Plan, United has furnished to Purchaser true and complete copies of the following, to the extent applicable: (A) the plan document (or to the extent no plan document exists, a description), (B) any related trust agreement, (C) the most recent IRS determination letter, (D) the most recent summary plan description, and (E) for the most recent plan year the Form 5500 and attached schedules and audited financial statements. United has no express or implied commitment, whether legally enforceable or not, to (x) create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (y) to enter into any contract or agreement to provide compensation or benefits to any individual, or (z) to modify, change or terminate any Employee Benefit Plan, other than with respect to a modification, change or termination required by ERISA or the Code.

 

(b) None of the Employee Benefit Plans is a multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a “Multiemployer Plan”) or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which United could incur liability under Section 4063 or 4064 of ERISA (a “Multiple Employer Plan”). At no time in the last six (6) years has United or any other entity which, together with United would be treated as a single employer under Section 414 of the Code, maintained, sponsored, contributed to, incurred an obligation to contribute to or otherwise incurred any liability (contingent or otherwise) with respect to any Multiemployer Plan, Multiple Employer Plan or other employee benefit plan (within the meaning of Section 3(3) of ERISA) that is or was subject to Title IV of ERISA, or Sections 412 of the Code or 302 of ERISA.

 

  

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(c) Except as mandated by applicable law, none of the Employee Benefit Plans provides for the payment of separation, severance, termination or similar-type benefits to any Person or obligates United to pay separation, severance, termination or similar-type benefits solely as a result of any transaction contemplated by this Agreement or as a result of a “change in control”, within the meaning of such term under Section 280G of the Code. None of the Employee Benefit Plans provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of United. Each of the Employee Benefit Plans is subject only to the laws of the United States or a political subdivision thereof.

 

(d) Each Employee Benefit Plan is now and always has been operated in all material respects in accordance with the requirements of all applicable Law, including, without limitation, ERISA and the Code. No legal action, suit or claim is pending or, to the Knowledge of the Sellers, threatened with respect to any Employee Benefit Plan (other than claims for benefits in the ordinary course).

 

(e) Each Employee Benefit Plan which is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has received a favorable determination letter from the IRS that it is so qualified, and each trust established in connection with any Employee Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code has received a determination letter from the IRS that it is so exempt, and no fact or event has occurred since the date of such determination letter from the IRS to adversely affect the qualified status of any such Employee Benefit Plan or the exempt status of any such trust.

 

(f) All contributions, premiums or payments required to be made with respect to any Employee Benefit Plan have been made on or before their due dates. All such contributions have been fully deducted for income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority.

 

Section 4.26 Labor Matters.

 

(a) United is not a party to any collective bargaining agreement or other labor union contract applicable to persons employed by United, and currently there are no organizational campaigns, petitions or other unionization activities seeking recognition of a collective bargaining unit which could affect United.

 

(b) There are no controversies, strikes, slowdowns or work stoppages pending or, to the Knowledge of the Sellers, threatened between United and any of its employees.

 

(c) United is currently in compliance with all applicable Laws relating to the employment of labor, including those related to wages, hours and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and has withheld and paid to the appropriate Governmental Authority or is holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of United and is not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing.

 

  

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(d) United has paid in full to all its respective employees or, prior to the Closing will have adequately accrued for in accordance with GAAP, all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees. Each independent contractor or consultant performing services for United qualifies as an independent contractor in relation to United for purposes of all applicable Laws, including those relating to Taxes, insurance, and employee benefits.

 

(e) There is no Claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or, to the Knowledge of the Sellers, threatened before any Governmental Authority with respect to any Persons currently or formerly employed by United.

 

(f) There is no charge or proceeding with respect to a violation of any occupational safety or health standard that has been asserted or is now pending or, to the Knowledge of the Sellers, threatened with respect to United.

 

(g) There is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted or is now pending or, to the Knowledge of the Sellers, threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which United has employed or currently employs any Person.

 

Section 4.27 Employees. Schedule 4.27 lists each employee or independent contractor of United and includes, for each employee or independent contractor, such person’s: (i) name, (ii) place of employment, (iii) date of employment, (iv) a description of the position and job function, (v) annual salary, (vi) hourly salary rate, (vii) bonuses, (viii) total compensation, (ix) deferred or contingent compensation, and (x) pension, “golden parachute” and other like benefits, in each case paid or payable (in cash or otherwise) in 2012 and 2013.

 

Section 4.28 Certain Interests. 

 

(a) Except as set forth on Schedule 4.28, no manager, member or employee of United and no relative or spouse (or relative of such spouse) of any such manager, member or employee:

 

(i) has any direct or indirect financial interest in any competitor, supplier or customer of United; provided, however, that the ownership of securities representing no more than one percent of the outstanding voting power of any competitor, supplier or customer, and which are also listed on any national securities exchange, shall not be deemed to be a “financial interest” so long as the Person owning such securities has no other connection or relationship with such competitor, supplier or customer;

 

  

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(ii) owns, directly or indirectly, in whole or in part, or has any other interest in any tangible or intangible property which United uses or has used in the conduct of the Business or otherwise other than the Excluded Assets; or

 

(iii) has outstanding any Indebtedness owed to or by United.

 

(b) United has no Liability or any other obligation of any nature whatsoever to any manager, member or employee of United or to any relative or spouse (or relative of such spouse) of any such manager, member or employee.

 

Section 4.29 Taxes.

 

(a) Except as set forth on Schedule 4.29(a):

 

(i) all Tax Returns required to be filed with respect to United or the Blocker Corps have been timely filed;

 

(ii) all Taxes required to be shown on such Tax Returns or otherwise due have been timely paid;

 

(iii) all such Tax Returns are true, correct and complete in all material respects;

 

(iv) no adjustment relating to such Tax Returns has been proposed formally or informally by any Tax authority and, to the Knowledge of the Sellers, no basis exists for any such adjustment;

 

(v) there are no pending or, to the Knowledge of the Sellers, threatened actions or proceedings for the assessment or collection of Taxes against United, the Blocker Corps or any corporation that was included in the filing of a Tax Return with United or the Blocker Corps on a consolidated or combined basis;

 

(vi) none of United nor its Affiliates is a party to any agreement or arrangement that would result, separately or in the aggregate, in the actual or deemed payment by United of any “excess parachute payments” within the meaning of section 280G of the Code (without regard to Section 280G(b)(4) of the Code);

 

(vii) no acceleration of the vesting schedule for any property that is substantially unvested within the meaning of the regulations under Section 83 will occur in connection with the transactions contemplated by this Agreement;

 

(viii) Neither United nor the Blocker Corps has been at any time a member of any partnership or joint venture or the holder of a beneficial interest in any trust for any period for which the statute of limitations for any Tax has not expired;

 

  

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(ix) Neither United nor the Blocker Corps is subject to any accumulated earnings tax, personal holding company tax or similar tax;

 

(x) there are no outstanding waivers or agreements extending the statute of limitations for any period with respect to any Tax to which United or the Blocker Corps may be subject;

 

(xi) there are no proposed reassessments of any property owned by United or other proposals that could increase the amount of any Tax to which United would be subject;

 

(xii) Neither United nor the Blocker Corps has granted any Person a power of attorney that is currently in force with respect to any matter relating to Taxes;

 

(xiii) United has been treated as a partnership for all relevant income Tax purposes and the Blocker Corps have been treated as a C corporation for all relevant income tax purposes; and

 

(xiv) United does not have any (A) income reportable for a period ending after the Closing Date but attributable to a transaction (e.g., an installment sale) occurring in or a change in accounting method made for a period ending on or prior to the Closing Date that resulted in a deferred reporting of income from such transaction or from such change in accounting method (other than a deferred intercompany transaction), or (B) deferred gain or loss arising out of any deferred intercompany transaction.

 

(b) Schedule 4.29(b) sets forth a list of all jurisdictions in which United or the Blocker Corps has filed or has been required to file a Tax Return (and the accompanying taxable period for each such Tax Return). No claim has ever been made by a Governmental Authority in a jurisdiction where United or the Blocker Corps has not filed Tax Returns that it is or may be subject to taxation by that jurisdiction.

 

(c) Any Taxes required to have been withheld or collected by United in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party have been duly withheld and collected; and (to the extent required) each such Tax has been paid to the appropriate Governmental Authority.

 

(d) Neither United nor the Blocker Corps is or has ever been a party to or bound by any tax indemnity agreement, tax sharing agreement, tax allocation agreement or similar contract.

 

(e) United has not engaged in a “reportable transaction” within the meaning of Section 6707A(c) of the Code.

 

  

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Section 4.30 Insurance. Schedule 4.30 contains a list of all material insurance policies issued to United which are currently in effect and/or which provide coverage to or for the benefit of or with respect to United or any director or employee of United in his or her capacity as such, indicating in each case the type of coverage, the named insured, the insurer, the premium, the policy period of each policy and the limits of liability. Such insurance policies, collectively, provide full and adequate coverage for all normal risks incident to the Business as conducted to the date hereof and to the Closing Date. United has delivered to the Purchaser true and complete copies of all such insurance policies. Schedule 4.30 also describes any self-insurance or co-insurance arrangements by or involving United, including any reserves established thereunder. Each insurance policy is in full force and effect and shall remain in full force and effect in accordance with its terms following the Closing. No notices of any pending or threatened terminations with respect to any insurance policy have been received by United or any Seller and neither United nor any Seller has received notice from an insurer that United is in default with respect to its obligations under any insurance policy, or that United is otherwise, disqualified from coverage. United is current in all premiums or other payments due under the Insurance Policies.

 

Section 4.31 Warranties. To the Knowledge of Sellers, each service provided by United is in conformity in all material respects with all applicable contractual terms, express and implied warranties, and all other Laws. There are no warranty claims pending or threatened against United and United has not received any written or oral Claim, complaint, incident, report, threat or notice of any such warranty claim.

 

Section 4.32 Inappropriate Payments. Neither United nor, to the Knowledge of the Sellers, any of its employees, agents or representatives has, directly or indirectly, made any bribes, kickbacks, illegal payments or illegal political contributions using United’s funds or made any illegal payments from United’s funds to obtain or retain business.

 

Section 4.33 Full Disclosure. The Sellers are not aware of any facts pertaining to United, the Blocker Corps or the Purchased Assets which could reasonably be expected to have a Material Adverse Effect and which have not been disclosed in this Agreement, the Disclosure Schedule or the Financial Statements. No representation or warranty of the Sellers in this Agreement, nor any statement or certificate furnished or to be furnished to Purchaser pursuant to this Agreement, or in connection with the transactions contemplated by this Agreement, contains or will contain any untrue statement of a material fact, or omits or will omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

Section 4.34 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Sellers, United and their respective Affiliates.

 

Section 4.35 Preferred Shares. 

 

(a) Each Seller acknowledges that the Preferred Shares to be issued pursuant to this Agreement will not be registered under the Securities Act of 1933, as amended (the “Securities Act”), or any applicable state securities Laws (collectively, the “Securities Laws“), and therefore may not be resold without compliance with the Securities Laws. The Preferred Shares are being or will be acquired by each Seller solely for his own account, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of them in connection with a distribution. No Seller will, directly or indirectly, offer, sell, assign, pledge, hypothecate, transfer or otherwise dispose of any of the Preferred Shares except after full compliance with all Securities Laws. Certificates representing the Preferred Shares shall bear the following legend:

 

  

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“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR PURSUANT TO AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED WITH RESPECT TO THESE SECURITIES UNLESS IN COMPLIANCE WITH SAID ACT.”

 

(b) Each Seller is able to bear the economic risk of an investment in the Preferred Shares and can afford to sustain a total loss of such investment. Each Seller has such knowledge and experience in financial and business matters such that Seller is capable of evaluating the merits and risks of the proposed investment and therefore has the capacity to protect such Seller’s own interests in connection with the acquisition of the Preferred Shares. Each Seller represents that such Seller and its representatives have had an adequate opportunity to ask questions and receive answers from the officers of Purchaser concerning, among other matters, Purchaser, its management, its plans for the operation of its businesses and potential additional acquisitions.

 

(c) Each Seller acknowledges that the Preferred Shares will be subject to certain transfer restrictions and that the certificates representing the Preferred Shares shall bear the following legend, which shall reflect such transfer restrictions, in addition to the legend under subsection (a) above:

 

“THESE SECURITIES ARE SUBJECT TO A CONTRACTUAL RESTRICTION ON TRANSFER AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO SUCH CONTRACTUAL RESTRICTIONS OR WITH THE PRIOR WRITTEN CONSENT OF ALY ENERGY SERVICES, INC.”

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND MERGER SUB

 

As an inducement to the Sellers to enter into this Agreement, each of Purchaser and Merger Sub, jointly and severally, represents and warrants to the Sellers as follows:

 

  

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Section 5.01 Authority. Each of Purchaser and Merger Sub has all necessary power and authority to enter into this Agreement and the Ancillary Agreements, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action required on the part of Purchaser and Merger Sub. No other acts or proceedings on the part of Purchaser or Merger Sub are necessary to authorize this Agreement, the Ancillary Agreements or the transactions contemplated hereby or thereby. This Agreement has been, and upon their execution the Ancillary Agreements shall have been, duly executed and delivered by Purchaser and Merger Sub. Assuming due authorization, execution and delivery by the other parties hereto, this Agreement constitutes, and upon their execution the Ancillary Agreements shall constitute, legal, valid and binding obligations of Purchaser and Merger Sub, enforceable against them in accordance with their respective terms.

 

Section 5.02 Organization, Authority and Qualification. Purchaser is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware; Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware; and each has all necessary company power and authority to own, operate or lease the properties and assets now owned, operated or leased by it and to carry on the its business as it has been and is currently being conducted. Purchaser is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business requires such licensing or qualification. Merger Sub has been organized for the sole purpose of consummating the Merger and has not conducted any business activities.

 

Section 5.03 Capitalization. Except as set forth on Schedule 5.03, the authorized and outstanding capital stock of the Purchaser is as set forth on its Consolidated Balance Sheet included in Purchaser’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. All of the issued and outstanding shares of common stock, par value $0.001, of Purchaser have been duly authorized and validly issued, are fully paid, nonassessable and free of preemptive rights.

 

Section 5.04 No Conflict. The execution, delivery and performance of this Agreement and the Ancillary Agreements by Purchaser and Merger Sub do not and will not (a) violate, conflict with or result in the breach of any provision of the Organizational Documents of Purchaser or Merger Sub; or (b) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent under, give to others any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any note, bond, mortgage or indenture, contract, agreement, lease, sublease, license, permit, franchise or other instrument or arrangement to which Purchaser or Merger Sub is a party, which would adversely affect the ability of Purchaser or Merger Sub to carry out its respective obligations under, and to consummate the transactions contemplated by, this Agreement or the Ancillary Agreements.

 

Section 5.05 Governmental Consents and Approvals. The execution, delivery and performance by Purchaser and Merger Sub of this Agreement and the Ancillary Agreements do not and will not require any consent, approval, authorization or other order of, action by, filing with, or notification to any Governmental Authority, except for any filings required pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

 

  

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Section 5.06 Litigation. No Action by or against Purchaser is pending or, to the best knowledge of Purchaser after due inquiry, threatened, which could affect the legality, validity or enforceability of this Agreement, the Ancillary Agreements or the consummation of the transactions contemplated by this Agreement or thereby.

 

Section 5.07 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by Purchaser and its Affiliates.

 

Section 5.08 Compliance with SEC Reporting Requirements. Purchaser has duly filed with the Securities and Exchange Commission the following: (a) a Current Report on Form 8-K dated July 31, 2013, and (b) Quarterly Reports on Form 10-Q for the quarters ended June 30, 2013 and September 30, 2013 (collectively, the “Purchaser SEC Reports”). As of their respective dates, the Purchaser SEC Reports did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

Section 5.09 Financial Statements. The financial statements (including the related notes thereto) set forth in the Purchaser SEC Reports: (a) have been prepared from and are in accordance with, the books and records of Purchaser, (b) comply in all material respects with applicable accounting requirements and with the published rules and regulations of the Securities and Exchange Commission with respect thereto, (c) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and (d) fairly present the consolidated financial position and the consolidated results of operations and cash flows (and changes in financial position, if any) of Purchaser as of the dates thereof and for the periods presented therein (subject, in the case of unaudited statements, to normal year-end audit adjustments which were not and are not expected, individually or in the aggregate, to be material in amount).

 

ARTICLE VI

CONDITIONS TO OBLIGATIONS TO CLOSE

 

Section 6.01 Purchaser’s Obligations to Close. The obligations of Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

 

(a) The parties have received evidence from the Texas Secretary of State that United has been converted from a Texas limited liability company to a Texas corporation pursuant to the Plan of Conversion.

 

(b) The parties shall have received pre-clearance from the Texas Secretary of State and Delaware Secretary of State for the articles of merger reflecting the Merger in accordance with the terms of this Agreement.

 

  

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(c) United will have furnished to Purchaser the balance sheet of United and subsidiaries as of December 31, 2012 and 2013, and the related statements of income and cash flows for the years then ended, accompanied by the audit report of UHY, LLP thereon; and such financial statements will have evidenced that (i) United has achieved at least US$5,250,000 in EBITDA for the 12 month period ending December 31, 2013 (after giving effect to the pro forma adjustments described on Schedule 1.01(b)) and (ii) the net book value of United’s fixed assets at December 31, 2013 were at least US$2.85 million

 

(d) Purchaser shall have received an independent appraisal of the Purchased Assets indicating that the replacement value of the Purchased Assets is at least US$14,320,200

 

(e) For the period between December 31, 2013 and the Closing Date, United shall not have incurred any Material Adverse Effect.

 

(f) CNS shall have entered into an agreement with the Purchaser pursuant to which CNS will provide transition services for the 90 days after the Closing.

 

(g) The representations and warranties of the Sellers contained in this Agreement were true and correct when made and are true and correct as of the Closing Date, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date, in each case, with the same force and effect as if made as of the Closing Date.

 

(h) The covenants and agreements contained in this Agreement to be complied with by the Sellers or United on or before the Closing Date have been complied with, and Purchaser has received a certificate of the Sellers to such effect signed by such Sellers.

 

(i) Purchaser shall have received financing proceeds necessary to consummate the transactions contemplated hereby upon terms consistent with Purchaser’s Financing Commitments or otherwise satisfactory to Purchaser.

 

(j) There shall not be in effect any Governmental Order restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement.

 

(k) No Action shall be pending or threatened by or before any Governmental Authority against any of United or Sellers, on the one hand, or Purchaser, on the other, seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of Purchaser, is likely to render it undesirable, impossible or unlawful to consummate such transactions.

 

(l) The Closing Date Indebtedness shall have been paid in full at the Closing, the Sellers shall have obtained releases of all Encumbrances (other than Permitted Encumbrances) and Purchaser shall have received written evidence satisfactory to it to such effect, including the Pay-Off Letters.

 

  

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(m) At or prior to the Closing, the Sellers shall execute a termination agreement, in form and substance reasonably satisfactory to Purchaser, pursuant to which certain of the intercompany arrangements that are disclosed (or should have been disclosed) in Schedule 4.28, except as set forth in this Agreement, shall be terminated in full or otherwise amended to exclude United as a party thereto and without any liability to United following the Closing

 

(n) Sellers shall have executed, acknowledged (where appropriate) and delivered, or have caused to be executed, acknowledged (where appropriate) and delivered, all documents, certificates and instruments required hereunder to be delivered by them by or at Closing, including the documents, certificates, instruments and consents identified in Section 3.02.

 

Section 6.02 Sellers’ Obligations to Close. The obligations of the Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver, at or prior to the Closing, of each of the following conditions:

 

(a) The representations and warranties of Purchaser contained in this Agreement were true and correct when made and are true and correct in all material respects as of the Closing, except to the extent such representations and warranties are as of another date, in which case, such representations and warranties shall be true and correct as of that date, in each case, with the same force and effect as if made as of the Closing Date.

 

(b) The covenants and agreements contained in this Agreement to be complied with by Purchaser on or before the Closing Date have been complied with, and the Sellers have received a certificate from Purchaser to such effect signed by a duly authorized officer thereof.

 

(c) No Action shall have been commenced by or before any Governmental Authority against any of United or Sellers, on the one hand, and Purchaser, on the other, seeking to restrain or materially and adversely alter the transaction contemplated by this Agreement which, in the reasonably good faith determination of the Sellers, is likely to render it impossible or unlawful to consummate such transaction.

 

(d) The Purchaser shall have executed, acknowledged (where appropriate) and delivered all documents, certificates and instruments required hereunder to be delivered by it at Closing.

 

(e) The Purchaser shall have transferred via wire transfer the Closing Date Payment in accordance with Article II.

 

ARTICLE VII

ADDITIONAL AGREEMENTS

 

Section 7.01 Further Assurances. Each party shall use all reasonable efforts to take, or cause to be taken, all appropriate action, to do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated by this Agreement.

 

  

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Section 7.02 Regulatory and Other Authorizations; Notices and Consents. The Sellers and Purchaser agree that, in the event that any consent, approval or authorization necessary or desirable to preserve for United any right or benefit under any lease, License, contract, commitment or other agreement or arrangement to which United is a party is not obtained prior to the Closing, the Sellers will, subsequent to the Closing, cooperate with Purchaser in attempting to obtain such consent, approval or authorization as promptly thereafter as practicable. If such consent, approval or authorization cannot be obtained, the Sellers shall use their best efforts to provide Purchaser with the rights and benefits of the affected lease, License, contract, commitment or other agreement or arrangement to the extent permitted under applicable Laws for the term of such lease, License, contract or other agreement or arrangement. If such rights and benefits are so provided, Purchaser shall assume the obligations and burdens thereunder.

 

Section 7.03 Conversion. Prior to the Closing, the Sellers shall take all necessary steps to effect the conversion of United from a Texas limited liability company to a Texas corporation in accordance with applicable Law and the Plan of Conversion.

 

Section 7.04 Conduct of Business Prior to the Closing. United covenants and agrees that, between the date hereof and the Closing Date, it will conduct its business only in the ordinary and regular course and consistent with prior practice. Without limiting the generality of the foregoing, United will (a) preserve intact its business organization and assets, (b) keep available to Purchaser the services of its employees, (c) continue in full force and effect without material modification all existing policies or binders of insurance currently maintained in respect of its Business, (d) preserve its current relationships with its customers, suppliers and other persons with which it has had regular business relationships, (e) exercise, but only after notice to Purchaser and receipt of Purchaser's prior written approval, any rights of renewal pursuant to the terms of any of the Material Contracts which by their terms would otherwise expire; (f) not engage in any practice, take any action, fail to take any action or enter into any transaction which could cause any representation or warranty of United to be untrue or result in a breach of any covenant made by any Seller or United in this Agreement; (g) timely file all Tax Returns required to be filed by it and pay all Taxes shown due thereon; (h) not make or declare any dividend or other distribution to its equity holders; and (i) not take or omit to be taken any action, that is listed or described in Section 4.14 or that would or would be reasonably expected to result in the occurrence of any of the changes or events listed or described in Section 4.14.

 

Section 7.05 Access to Information. From the date hereof until the Closing, upon reasonable notice, United, UOI or CNS, as applicable, shall: (a) afford the officers, employees, agents, accountants, counsel, financing sources and representatives of Purchaser reasonable access, during normal business hours and with reasonable prior notice, to all employees, offices, properties, plants, other facilities, books and records of United and the Purchased Assets, and (b) furnish to the officers, employees, agents, accountants, counsel, financing sources and representatives of Purchaser such additional financial and operating data and other information regarding the assets, properties, key employees, suppliers, liabilities and goodwill of United (or legible copies thereof) or the Purchased Assets as Purchaser may from time to time reasonably request.

 

  

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Section 7.06 Notice of Developments. Prior to the Closing, United, UOI or CNS (as applicable) shall promptly notify Purchaser in writing of: (a) all events, circumstances, facts, conditions or occurrences arising subsequent to the date of this Agreement which could result in any breach of a representation or warranty or covenant of any Seller or United in this Agreement or which could have the effect of making any representation or warranty of any Seller or United in this Agreement untrue or incorrect in any material respect and (b) all other material developments affecting the assets, Liabilities, business, financial condition, operations, results of operations, customer or supplier relations, employee relations or prospects of any Seller or United; provided, however, that neither the delivery of any notice pursuant to this Section nor obtaining any information or knowledge in any investigation or otherwise shall cure any breach of, or non-compliance with, any representation or covenant.

 

Section 7.07 No Solicitation or Negotiation. Between the date of this Agreement and the earlier of (a) the Closing and (b) the termination of this Agreement, none of the Sellers nor their respective Affiliates, officers, directors, representatives or agents will, directly or indirectly, (i) solicit, initiate, consider, encourage, facilitate or accept any proposals, inquiries or offers from any Person (A) relating to any acquisition or purchase of all or any portion of the capital stock of or material assets of United or the Purchased Assets, (B) to enter into any merger, consolidation or other business combination with United, or (C) to enter into a recapitalization, reorganization or any other extraordinary business transaction involving or otherwise relating to United, or (ii) knowingly participate in any discussions, conversations, negotiations and other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing. Sellers immediately shall, and shall cause United to, cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect to any of the foregoing and, upon the execution of this Agreement will promptly request the return or destruction of any nonpublic information (and terminate any “data room” access provided to any Person (other than the parties hereto and their respective attorneys and advisors)). Sellers shall not, and shall cause United not to, release any Person from, or waive any provision of, any confidentiality or standstill agreement to which any of the Sellers or United is a party, without the prior written consent of Purchaser.

 

Section 7.08 Financing; Financial Information. Purchaser will use its commercially reasonable efforts to obtain, as promptly as practicable, term sheets or similar evidence of commitments from financing sources ("Purchaser’s Financing Commitments"), pursuant to which the financing parties thereto will have proposed, subject to the terms and conditions set forth therein, to provide and/or to place the debt and equity financing to Purchaser at the Closing to fund the payment of the Purchase Price hereunder. Purchaser shall keep Sellers reasonably informed as to status of Purchaser’s Financing Commitments, including furnishing to Sellers any material changes thereto. In connection with the foregoing activities, each Seller shall, and shall cause United and its representatives to, use their reasonable best efforts to cooperate with Purchaser and its authorized representatives in connection with the arrangement of Purchaser’s financing for the transaction, including (a) entering into such agreements as may reasonably be requested by Purchaser’s lenders in connection with any financing, (b) participating on reasonable advance notice, in a reasonable number of meetings and at reasonable locations, (c) furnishing Purchaser and its financing sources with such financial and other information as may be reasonably requested by Purchaser, and (d) providing assistance in respect of the preparation of any materials, pledge and security documents and other financing documents. From the date of this Agreement until the earlier of (i) the Closing Date and (ii) the termination of this Agreement, Sellers will or will cause United to furnish to Purchaser, within 30 days after the end of each calendar month, unaudited financial statements for United that are consistent with the format and scope of the Financial Statements.

 

  

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Section 7.09 Transaction Costs; Certain Taxes.

 

(a) Except as otherwise expressly provided herein, (i) Purchaser shall pay its own fees, costs and expenses incurred in connection with this Agreement and the transaction contemplated hereby, including, without limitation, the fees, costs and expenses of its financial advisors, accountants and counsel and (ii) the Sellers shall pay, or cause to be paid, from available cash of United or the Consideration all of the fees, costs and expenses of the Sellers and United incurred in connection with this Agreement, the Ancillary Agreements and the transactions contemplated hereby or thereby, including, without limitation, the fees, costs and expenses of their financial advisors, accountants and counsel.

 

(b) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with the transactions contemplated by this Agreement shall be paid by Sellers when due.

 

Section 7.10 Confidentiality. From and after the Closing Date, each Seller and their respective Affiliates shall not disclose or use in any manner detrimental to United or the Purchased Assets any confidential information relating to United or the Purchased Assets that remains in or comes into such party’s possession in any form, except as required by applicable Law. If a party is requested or required (by oral questions, interrogatories, requests for information or documents in legal, administrative, arbitration or other formal proceedings, subpoena, civil investigative demand or other similar process) to disclose any such confidential information, such party shall promptly notify the other parties of any such request or requirement so that such other parties may seek a protective order or other appropriate remedy and waive compliance with the provisions of this Section. If, in the absence of a protective order or other remedy or the receipt of a waiver by the other parties, a party is required to disclose such information, such party, without liability hereunder, may disclose only that portion of such information that such party is legally required to disclose. Notwithstanding anything contained in this Section to the contrary, Purchaser (and its Affiliates and financing sources) may use confidential information relating to United or the Purchased Assets in any manner desired by Purchaser from and after the Closing.

 

  

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Section 7.11 Restrictive Covenants. 

 

(a) Principals acknowledge and agree that, as beneficial owners of the United Common Stock, they will benefit from the transactions contemplated by this Agreement. As a material inducement to Purchaser to complete the transactions contemplated by this Agreement, each Principal agrees that, for the five-year period from and after the Closing (the “Restricted Period”), it shall not, directly or indirectly, through an Affiliate or otherwise, either for its own benefit or for the benefit of any other Person, without the prior written consent of Purchaser, which consent may be withheld by Purchaser in its sole discretion, own an interest in, or manage, operate, Control, lend money or render financial or other assistance to or participate in or be connected with, as an officer, employee, partner, manager, member, stockholder, consultant or otherwise, any Person that is engaged in the United States in any oilfield services or equipment rental business using centrifuges, shakers or any other required support equipment used in closed loop or surface systems. Each Principal hereby acknowledges that the geographic boundaries, scope of prohibited activities and the time duration of the provisions of this Section are reasonable and are no broader than are necessary to protect the legitimate business interests of Purchaser including, without limitation, the ability of Purchaser to realize the benefit of its bargain and enjoy the goodwill of United. Notwithstanding the foregoing, ownership by any Principal of less than 2% of the outstanding shares or other equity interests of capital stock of any corporation or other entity listed on a national securities exchange or publicly traded on any nationally recognized over-the-counter market, held as a passive investment, shall not constitute a breach of this Section.

 

(b) Each Seller and Principal further agrees that during the Restricted Period it will not, directly or indirectly, assist or encourage any other Person in carrying out, directly or indirectly, any activity that would be prohibited by the provisions of subsection (a) above if such activity were carried out by Sellers or Principals, either directly or indirectly. In particular, each Seller and Principal agrees that it will not, during the Restricted Period, directly or indirectly, induce any employee of Purchaser, or of any of its Affiliates, to carry out, directly or indirectly, any such activity.

 

(c) During the Restricted Period, Principals shall not, without the prior written consent of Purchaser, (i) hire, or directly or indirectly attempt to hire away any then-current employee of the Purchaser or any of its Affiliates or to persuade any such employee to leave employment with Purchaser or any of its Affiliates or (ii) directly or indirectly solicit, divert, or take away, or attempt to solicit, divert or take away, the business of any Person with whom United, Purchaser or any of their respective Affiliates has established or is actively seeking to establish a business or customer relationship to the extent such business relates to the business conducted by United, Purchaser or their respective Affiliates.

 

(d) Each Principal acknowledges that it would be difficult to fully compensate Purchaser or any of its Affiliates for damages resulting from any breach by them of the provisions of this Section. Accordingly, in the event of any actual or threatened breach of such provisions, Purchaser and its Affiliates shall (in addition to any other remedies which it may have) be entitled to temporary and/or permanent injunctive relief to enforce such provisions and recover attorneys’ fees and costs for same, and such relief may be granted without the necessity of proving actual damages or the inadequacy of money damages, or posting bond. Each Principal further acknowledges that this Section constitutes a material inducement to Purchaser to complete the transactions contemplated by this Agreement and Purchaser will be relying on the enforceability of this Section in completing such transactions contemplated by this Agreement.

 

  

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Section 7.12 Release. In exchange for receipt of the Consideration and effective as of the Closing, each Seller hereby irrevocably and unconditionally releases, acquits and forever discharges, without any additional consideration or the need for additional documentation, United and each of its respective partners, members, managers, officers, directors, employees, counsel, agents, contractors, successors, assigns, heirs and legal and personal representatives (collectively, the “Company Released Parties”) from any and all charges, complaints, claims, suits, judgments, demands, actions, obligations or liabilities, damages, causes of action, rights, costs, loans, debts and expenses (including attorneys’ fees and costs actually incurred), of any nature whatsoever, known, unknown or presently unknowable, contingent or absolute, whether asserted or not, now existing or which may subsequently accrue to them in the future, emanating from, in connection with, related to or arising out of the ownership, management or operation of the business of United or the Blocker Corps prior to the Closing except those set forth in Schedule 4.10. In exchange for receipt of the Consideration and effective as of the Closing, each Seller hereby agrees that it shall not institute, pursue, solicit, encourage or assist any proceedings (at Law or in equity), suits, or claims in state or federal court against or adverse to the Company Released Parties arising from or attributable to the business of United or the Blocker Corps in connection with the foregoing.

 

Section 7.13 Tax Matters. 

 

(a) Sellers shall be responsible for any and all Taxes imposed on United or the Blocker Corps or their respective operations with respect to any Tax period (or portion of a Straddle Period) ending on or before the Closing Date (a “Pre Closing Tax Period”), including any Taxes arising as a result of the conversion of United pursuant to the Plan of Conversion or arising from the Merger, except to the extent that such Tax liability has been included in Closing Net Working Capital. In the case of any taxable period that includes (but does not end on) the Closing Date (each, a “Straddle Period”), (i) the real, personal and intangible property Taxes (“Property Taxes”) imposed upon United, the Blocker Corps or their respective operations that are allocable to the Pre Closing Tax Period shall be equal to the amount of such Property Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre Closing Tax Period and the denominator of which is the total number of days in the Straddle Period and (ii) the Taxes (other than Property Taxes) imposed upon United that are allocable to the Pre Closing Tax Period shall be computed as if such taxable period ended on the Closing Date, provided that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions), other than with respect to property placed in service after the Closing, shall be allocated between the period ending on the Closing Date and the period after the Closing Date in proportion to the number of days in each period. To the extent the Sellers are obligated to pay a Tax under this Section (or as a result of a breach of a representation or warranty), the Sellers shall pay such Tax at least three days prior to the date such Tax is due or 10 days after receipt of written demand for payment, whichever is later. To the extent that United or any of the Blocker Corps receives a refund for Taxes for a Pre-Closing Tax Period (other than refunds resulting from the carrying back of any net operating loss or other Tax attribute or Tax credit incurred in a period (or a portion of a Straddle Period) beginning on or after the Closing Date), Purchaser shall pay the amount of such refund (net of any Taxes incurred connection with the receipt of such refund and any out of pocket expenses incurred to obtain such refund) to the Sellers’ Representative for distribution to the appropriate Sellers. All amounts paid with respect to a Tax refund shall be paid within 10 days of receipt of such refund from the applicable Governmental Authority.

 

  

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(b) Sellers shall be responsible for the preparation and filing of any Tax Return of or with respect to United, the Blocker Corps or their respective operations that is required to be filed with respect to 2013 and prior years and for any short period from January 1, 2014 through the Closing Date. The Sellers shall also be responsible for preparing and timely filing the IRS Form 1065 and the IRS Form 1120 for United (and any analogous forms for state or local Tax purposes) for any period ending on or before the Closing Date (collectively, “Pass-Through Returns”). Each such Tax Return to be prepared by the Sellers (including all Pass-Through Returns) shall be true and correct and completed in accordance with applicable law and consistent with past practice, procedures and accounting methods in all material respects. At least 30 days prior to the due date for filing (including extensions), the Sellers’ Representative shall provide each such Tax Return (including Pass-Through Returns) to Purchaser for review, and each such Tax Return shall be revised to reflect Purchaser’s reasonable comments that are received at least five days prior to the due date for filing (including extensions).

 

(c) If any Governmental Authority issues to United or any Blocker Corp (i) a written notice of its intent to audit, conduct another proceeding with respect to Taxes or Tax Returns for a Pre-Closing Tax Period, or (ii) a written notice of deficiency, assessment, proposed adjustment, claim or other demand concerning Taxes or Tax Returns (a “Tax Claim”) for a Pre-Closing Tax Period, Purchaser shall notify the Sellers’ Representative of its receipt of such communication within 30 business days of receipt. No failure or delay of Purchaser in the performance of the foregoing shall reduce or otherwise affect the obligations or Liabilities of Sellers pursuant to this Agreement, except to the extent that such failure or delay shall preclude United or any of the Blocker Corps from defending against any Liability or Claim for Taxes that the Sellers are obligated to pay hereunder.

 

(d) The Purchaser shall control the conduct of any audit or other proceeding regarding any Tax Claim (a “Tax Contest”); provided, that (i) the Sellers’ Representative shall, at the sole cost and expense of the Sellers, have the right to participate in any such Tax Contest to the extent it relates to a Taxes for a Pre-Closing Tax Period, and (ii) Purchaser shall not settle or otherwise resolve any Tax Contest (or any issue raised in such Tax Contest), or allow United or any of the Blocker Corps to settle or otherwise resolve, if such settlement or other resolution relates to Taxes for which the Sellers are liable under this Agreement without the permission of the Sellers’ Representative (which will not be unreasonably withheld or delayed or conditioned).

 

(e) Any Tax sharing, indemnification or allocation agreement or arrangement to which United or the Blocker Corps is a party or by which it is bound shall be terminated effective as of the Closing, and neither United nor the Blocker Corps shall have any liability pursuant to any such agreement.

 

  

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(f) Notwithstanding anything to the contrary in this Agreement, in addition to any other remedy provided by this Agreement, the Purchaser Indemnified Parties (including, after the Closing, United and the Blocker Corps) shall be indemnified and held harmless by the Sellers against any and all Liability, obligation or commitment, whether or not accrued, assessed or currently due and payable, as well as related Loss, for any and all Taxes imposed on United, the Blocker Corps or their operations with respect to a Pre-Closing Tax Period.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.01 Survival of Representations and Warranties. The representations and warranties contained in this Agreement shall survive the Closing until the Survival Date; provided, however, that insofar as any Claim is made for the breach of any Unlimited Representation, such representations and warranties shall, for purposes of such Claim, survive the Closing for the period of the relevant statute of limitations in respect thereof. Neither the period of survival nor the liability of the Indemnifying Party with respect to its representations and warranties shall be reduced by any investigation made at any time by or on behalf of Indemnified Party. If written notice of a Claim has been given prior to the expiration of the applicable representations and warranties by an Indemnified Party to an Indemnifying Party, then the relevant representations and warranties shall survive as to such Claim, until such Claim has been finally resolved.

 

Section 8.02 Indemnification by the Principals. Purchaser and its Affiliates, managers, members, employees, agents, successors and assigns (each a “Purchaser Indemnified Party”) shall be indemnified and held harmless by the Principals, jointly and severally, for and against any and all Liabilities, losses, diminution in value, damages, Claims, costs and expenses, interest, awards, judgments and penalties, including without limitation, reasonable attorneys’ and consultants’ fees and expenses (hereinafter a “Loss”) actually suffered or incurred by them (including, without limitation, any Action brought or otherwise initiated by any of them), arising out of or resulting from: (a) the breach of any representation or warranty made by the Sellers contained in this Agreement, or (b) the breach of any covenant or agreement by the Sellers contained in this Agreement. To the extent that the Principals’ undertakings set forth in this Section may be unenforceable, the Principals shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Losses incurred by Purchaser Indemnified Parties.

 

Section 8.03 Indemnification by Purchaser. The Sellers and their respective Affiliates, partners, managers, members, employees, agents, successors and assigns (each a “Seller Indemnified Party”) shall be indemnified and held harmless by Purchaser for and against any and all Losses, arising out of or resulting from: (a) the breach of any representation or warranty made by Purchaser contained in this Agreement, or (b) the breach of any covenant or agreement by Purchaser contained in this Agreement. To the extent that Purchaser’s undertakings set forth in this Section may be unenforceable, Purchaser shall contribute the maximum amount that it is permitted to contribute under applicable Law to the payment and satisfaction of all Losses incurred by the Sellers Indemnified Parties.

 

  

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Section 8.04 Indemnification Process. An Indemnified Party shall give each Indemnifying Party written notice of any matter that such Indemnified Party has determined has given rise to or could give rise to a right of indemnification under this Agreement, within 60 days of such determination, stating the amount of the Loss, if known (the “Claimed Amount”), and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed or arises. Within 15 days after delivery of such written notice, the Indemnifying Party shall deliver to the Indemnified Party a written response in which the Indemnifying Party shall (a) agree that the Indemnified Party is entitled to receive part or all of the Claimed Amount, in which case the portion of such Claimed Amount which is not in dispute shall be paid or offset in accordance with this Article, or (b) contest that the Indemnified Party is entitled to receive any of the Claimed Amount. If the Indemnifying Party contests the payment of all or part of the Claimed Amount, the Indemnifying Party and the Indemnified Party shall use good faith efforts to resolve such dispute as promptly as practicable. If such dispute is not resolved within 30 days following the delivery by the Indemnifying Party of such response, the Indemnified Party and the Indemnifying Party shall each have the right to submit such dispute to a court of competent jurisdiction in accordance with the provisions of this Agreement. If the Sellers’ Representative and Purchaser have mutually agreed that the Sellers are obligated to indemnify Purchaser Indemnified Parties for all or a portion of a Claimed Amount, the Purchaser shall have the right to redeem and retain the number of Holdback Shares having a value equal to the dollar amount of the Claimed Amount, using a price per share of US$1,000 to calculate the value of each Holdback Share. If a final judgment from which no appeal is taken has been rendered by the court of competent jurisdiction to which the dispute submitted, Purchaser shall have the right to redeem and retain the number of Holdback Shares having a value equal to the dollar amount of the amount determined to be owed to Purchaser, using a price per share of US$1,000 to calculate the value of each Holdback Share. To the extent the value of the Holdback Shares remaining is insufficient to pay the amount determined to be owed to Purchaser, the Sellers shall promptly pay to the Purchase the amount of such deficiency, subject to Purchaser’s right to offset in accordance with Section 8.07.

 

Section 8.05 Third Party Claims. If an Indemnified Party shall receive notice of any Claims of any third party which are subject to the indemnification provided for in this Article (“Third Party Claims”), the Indemnified Party shall give each Indemnifying Party written notice of such Third Party Claim within 30 days of the receipt by such Indemnified Party of such notice; provided, however, that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations under this Article except to the extent the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or Liability that it may have to any Indemnified Party otherwise than under this Article. The obligations and Liabilities of the Indemnifying Party under this Article with respect to Losses arising from Third Party Claims shall be governed by and be contingent upon the following additional terms and conditions: If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party hereunder against any Losses that may result from such Third Party Claim, then the Indemnifying Party shall be entitled to assume and control the defense of such Third Party Claim at its expense and through counsel of its choice if it gives notice of its intention to do so to such Indemnified Party within ten days of the receipt of such notice from the Indemnified Party; provided, however, that if there exists or is reasonably likely to exist a conflict of interest that would make it inappropriate in the judgment of such Indemnified Party in its sole and absolute discretion, for the same counsel to represent both the Indemnified Party and the Indemnifying Party, then the Indemnified Party shall be entitled to retain its own counsel, in each jurisdiction for which the Indemnified Party determines counsel is required, at the expense of the Indemnifying Party. In the event that the Indemnifying Party exercises the right to undertake any such defense against any such Third Party Claim as provided above, the Indemnified Party shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. Similarly, in the event the Indemnified Party is, directly or indirectly, conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnified Party in such defense and make available to the Indemnified Party, at the Indemnifying Party’s expense, all such witnesses, records, materials and information in the Indemnifying Party’s possession or under the Indemnifying Party’s control relating thereto as is reasonably required by the Indemnified Party. No such Third Party Claim may be settled by the Indemnifying Party without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld, conditioned or delayed.

 

  

49

  

 

Section 8.06 Limits on Indemnification. Notwithstanding anything to the contrary contained in this Agreement:

 

(a) An Indemnifying Party shall not be liable for any claim for indemnification pursuant to Section 8.02 or 8.03, unless and until the cumulative aggregate amount of indemnifiable Losses which may be recovered from the Indemnifying Party equals or exceeds US$100,000, after which point the Indemnifying Party shall be liable for all indemnifiable Losses incurred by the Indemnified Party (including the first US$100,000).

 

(b) Except for any claim for indemnification related to an Unlimited Representation or based on fraud, no Seller shall be liable for cumulative aggregate claims for indemnification pursuant to Section 8.02(a) or 8.03(a) in excess of 50% of the Consideration actually received by that Seller.

 

Section 8.07 Offset Against Additional Contingent Consideration. Indemnified Losses owed to Purchaser shall first be satisfied, to the extent available, by Holdback Shares and in accordance with the procedures set forth in this Article. Thereafter, Purchaser shall be entitled to offset the amount of any unreimbursed Loss against the payment of any additional contingent consideration to which the Sellers may be entitled.

 

Section 8.08 Exclusive Remedies. After Closing, the rights and remedies provided by this Article VIII and Section 2.09 shall be the exclusive remedies for each party hereto with respect to this Agreement.

 

Section 8.09 Insurance. Notwithstanding anything to the contrary set forth herein, the amount of any Loss for which a party shall be entitled to indemnification pursuant to this Article VIII shall be reduced, on a dollar for dollar basis, by the amount of any insurance proceeds actually received by an Indemnified Party related to the Loss.

 

  

50

  

 

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

 

Section 9.01 Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a) by mutual consent of the Sellers’ Representative and Purchaser;

 

(b) by Purchaser, if (i) there has been a material misrepresentation, inaccuracy or breach of warranty in the representations and warranties of any Seller or United set forth herein or if there has been any material failure on the part of Sellers or United to perform any covenant or agreement made by any of Sellers or United; and (ii) such, breach, failure, inaccuracy or misrepresentation is not cured to Purchaser’s reasonable satisfaction within 10 business day after Purchaser gives Sellers’ Representative written notice identifying such breach, failure or misrepresentation;

 

(c) by Sellers’ Representative (on behalf of Sellers), if (i) there has been a material misrepresentation, inaccuracy or breach of warranty in the representations and warranties of Purchaser set forth herein or if there has been any material failure on the part of Purchaser to perform any covenant or agreement made by Purchaser; and (ii) such breach, failure, inaccuracy or misrepresentation is not cured to Sellers’ reasonable satisfaction within 10 business days after Sellers’ Representative gives Purchaser written notice identifying such breach, failure or misrepresentation;

 

(d) by either the Sellers’ Representative (on behalf of Sellers) or Purchaser if the Closing shall not have occurred by May 31, 2014; or

 

(e) by either Purchaser or the Sellers’ Representative (on behalf of Sellers) in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable.

 

Section 9.02 Effect of Termination. In the event of termination of this Agreement as provided in Section 9.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except that this Article IX and Article X hereof shall survive any such termination; provided, however, that nothing herein shall relieve any party for liability from any knowing and material breach of this Agreement.

 

Section 9.03 Amendment. This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Sellers and Purchaser or (b) by a waiver in accordance with Section 9.04.

 

Section 9.04 Waiver. Either Purchaser or, in the case of the Sellers, Sellers’ Representative may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant hereto, or (c) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any of such rights.

 

  

51

  

 

ARTICLE X

GENERAL PROVISIONS

 

Section 10.01 Expenses. Sellers will be liable for the costs and expenses incurred by United and the Sellers in negotiating and consummating the transactions contemplated hereby, and Purchaser will be solely responsible for the costs and expenses incurred by it in negotiating and consummating the transactions contemplated hereby. UOI and CNS, as applicable, will bear any sales, transfer and use taxes and related fees due on the sale of the Purchased Assets hereunder.

 

Section 10.02 Notices. All notices, requests, Claims, demands and other communications required hereunder (other than routine operational communications) shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon actual receipt) by delivery in person, by an internationally recognized overnight courier service, or registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section):

 

(a) if to the Sellers:

Tim Pirie

610B McCool Street

Crossfield, Alberta, Canada T0M 0S0

Ed Lantz

3 East Lake Circle NE

Airdrie Alberta, Canada T4A 2J9

Myles Bowman

2561 Stoneybrook Drive

Prosper, Texas USA 75078

Jorge Rivera

Av. Javier Prado Este 5812

La Molina, Lima, Peru

121129 Alberta Inc.

3 East Lake Circle NE

Airdrie, AB T4A 2J96

 

  

52

  

Canadian Nitrogen Services, Ltd.

Box 1909

610B McCool Street

Crossfield, AB T0M 0S0

United Oilfield, Inc.

3 East Lake Circle NE

Airdrie, AB T4A 2J9

and

Davis, Gerald & Cremer

Attn: David H. Smith

400 West Illinois, Suite 1400

Midland, Texas 79701

Fax no: (432) 686-5133

ATTORNEY FOR CANADIAN NITROGEN SERVICES, LTD.

(b) if to Purchaser:

 

Aly Energy Services, Inc.

Attn: Alya Hidayatallah, Chief Financial Officer

3 Riverway, Suite 920

Houston, Texas 77056

Fax no: (713) 333-4004

and

 

Hallett & Perrin

Attn: Bruce H. Hallett

1445 Ross Avenue, Suite 2400

Dallas, Texas 75202

Fax no: (214) 922-4142

If the notice is rejected, or if the party to whom notice is sent refuses to accept a notice, then the notice is effective upon the occurrence of the rejection or refusal.

 

Section 10.03 Public Announcements. None of the Sellers shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement or otherwise communicate with any news media without the prior written consent of Purchaser, which shall not be unreasonably withheld.

 

  

53

  

 

Section 10.04 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.

 

Section 10.05 Entire Agreement. This Agreement and the exhibits and schedules attached hereto constitute the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the Sellers and Purchaser with respect to the subject matter hereof and thereof.

 

Section 10.06 Assignment. This Agreement may not be assigned by operation of Law or otherwise without the express written consent of the Sellers’ Representative and Purchaser (which consent may be granted or withheld in the sole discretion of the Sellers’ Representative or Purchaser); provided, however, that Purchaser may assign this Agreement or any of its rights and obligations hereunder to one or more Affiliates of Purchaser without the consent of the Sellers.

 

Section 10.07 No Third Party Beneficiaries. Except for the provisions of Article VIII relating to indemnified parties, this Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person, including, without limitation, any union or any employee or former employee of United, any legal or equitable right, benefit or remedy of any nature whatsoever, including, without limitation, any rights of employment for any specified period, under or by reason of this Agreement.

 

Section 10.08 Governing Law. This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Texas applicable to contracts executed in and to be performed in that State.

 

Section 10.09 Counterparts. This Agreement may be executed and delivered (including by facsimile or e-mail transmission) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.

 

(Signature Pages Follow.)

 

  

54

  

IN WITNESS WHEREOF, the Sellers and Purchaser have caused this Agreement to be executed as of the date first written above.

 

	 	
Aly Energy Services, Inc., a Delaware corporation

	 
	 	 	 	 
	
 

	
By: 

	/s/ Munawar H. Hidayatallah	 
	 	Name:	Munawar H. Hidayatallah	 
	 	Title:	Chairman and Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	Aly Centrifuge Inc., a Delaware corporation	 
	 	 	 	 
	 	
By: 

	/s/ Munawar H. Hidayatallah	 
	 	Name:	Munawar H. Hidayatallah	 
	 	Title:	Chairman and Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	United Centrifuge USA, LLC, a Texas limited liability company	 
	 	 	 	 
	 	
By: 

	/s/ Timothy J. Pirie	 
	 	Name:	Timothy J. Pirie	 
	 	Title:	President	 
	 	 	 	 
	 	 	 	 
	 	1211296 Alberta, Inc., an Alberta Limited Corporation	 
	 	 	 	 
	 	
By: 

	/s/ Ed Lantz	 
	 	Name:	Ed Lantz	 
	 	Title:	President	 
	 	 	 	 
	 	 	 	 
	 	Canadian Nitrogen Services, Ltd., an Alberta Limited Corporation	 
	 	 	 	 
	 	
By: 

	/s/ Timothy J. Pirie 	 
	 	Name:	Timothy J. Pirie	 
	 	Title:	President	 

 

  

55

  

 

	 	United Oilfield, Inc., an Alberta Limited Corporation	 
	 	 	 	 
	 	
By: 

	/s/ Ed Lantz	 
	 	Name:	Ed Lantz	 
	 	Title:	President	 

 

	 	 	/s/ Timothy J. Pirie	 
	 	 	Tim Pirie, a resident of Canada	 
	 	 	 	 
	 	 	/s/ Ed Lantz	 
	 	 	Ed Lantz, a resident of Canada	 
	 	 	 	 
	 	 	/s/ Myles Bowman	 
	 	 	Myles Bowman, a resident of Texas	 
	 	 	 	 
	 	 	/s/ Jorge Rivera	 
	 	 	Jorge Rivera, a resident of Peru	 

 

  

56

  

EXHIBIT A

AGREEMENT AND PLAN OF CONVERSION

 

 

 

 

 

 

 

 

 

  

A-1

  

 

AGREEMENT AND PLAN OF CONVERSION

This Agreement and Plan of Conversion (the "Agreement") is executed as of April 14, 2014, by the converting entity, United Centrifuge USA, LLC (the "Company"), and its members listed on the signature page hereto (the "Members").

WHEREAS, the Members of the Company deem it to be desirable and in the best interest of the Company that (i) the Company be converted from a Texas limited liability company to a Texas corporation (the "Conversion"), (ii) the Corporation into which the Company will convert be known as United Centrifuge USA, Inc., a Texas corporation (the "Corporation"), and shall be formed pursuant to the Certificate of Formation attached as Exhibit "A", (iii) the Conversion be effective for all purposes as of the date hereof, and (iv) thereafter, the Company operate for state law purposes as a Texas corporation and continue as a corporation for federal tax law purposes; and

WHEREAS, following the consummation of the Conversion, the Corporation's equity interests will be owned as set forth in Section 3.1 of this Agreement;

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual agreements and covenants contained in this Agreement, the Company and the Members agree as follows:

 

ARTICLE I

Section 1.1. The name of the converting entity is United Centrifuge USA, LLC, a Texas limited liability company. The name of the converted entity is United Centrifuge USA, Inc., a Texas corporation.

 

Section 1.2 The Company shall continue its existence in the organizational form of the Corporation, a Texas corporation.

 

Section 1.3 In accordance with the provisions of the Texas Business Organizations Code, at the Effective Time (defined below) of the Conversion, the Company shall be converted into a Texas corporation. Following the Conversion, the Company will be the Corporation and shall be governed by the laws of the State of Texas pursuant to the Texas Business Organizations Code.

Section 1.4. The Conversion shall be effective as of 12:01 a.m. on the date hereof (the "Effective Time"). The actions described above shall be conclusive evidence, for all purposes of this Agreement, of compliance with all conditions precedent.

Section 1.5. Except as may otherwise be set forth herein, at the Effective Time, the Corporation will come into existence, with all its purposes, powers, franchises, privileges, rights and immunities and shall be governed under the laws of the State of Texas, unaffected and unimpaired by the Conversion, and the limited liability existence and identity of the Company, with all its purposes, powers, franchises, privileges, rights, and immunities shall be converted into the Corporation and the Corporation shall be vested fully therewith, and the separate limited liability existence and identity of the Company shall thereafter cease, except to the extent continued by applicable law. At the Effective Time, the Corporation shall have the following rights and obligations:

 

  

A-2

  

	
  

	
(a)

	
The Corporation shall have all the rights, privileges, immunities and powers, and shall be subject to all of the duties and liabilities, of a corporation organized under the laws of the State of Texas.

	
  

	
(b)

	
The Corporation shall succeed to, without transfer, and shall possess and enjoy, all of the rights, privileges, immunities, powers, purposes and franchises, of both a public and private nature, of the Company and all property, real, personal and mixed, and all debts due to the Company on whatever account and all other choices of action, and every other interest of or belonging to the Company shall be deemed to be transferred to and vested in the Corporation without further act or deed, and shall thereafter be the property of the Corporation as they were of the Company, and the title to any real estate vested by deed or otherwise in the Company shall not revert or be in any way impaired by reason of the Conversion.

	
  

	
(c)

	
The Corporation shall thenceforth be responsible and liable for all debts, liabilities, obligations and duties of the Company, and any claim existing or action or proceeding pending by or against the Company may be prosecuted as if the Conversion had not occurred, or the Corporation may be substituted in its place. Neither the rights of creditors nor any liens upon the property of the Company shall be impaired by the Conversion.

Section 1.7. If at any time the Corporation shall deem or be advised that any further transfers, assignments, conveyances, assurances in law or other acts or things are necessary or desirable to vest or confirm in the Corporation the title to any property or assets of the Company, the Company and its proper officers and Members shall execute and deliver any and all such proper transfers, assignments, conveyances and assurances in law, and shall do all other acts and things as are necessary or proper to vest or confirm title to such property and assets in the Corporation to otherwise carry out the purposes and intent of this Agreement.

Section 1.8 The Corporation will be responsible for the payment of all fees and franchise taxes of the Company, and the Corporation will be obligated to pay such fees and franchise taxes if the same are not timely paid.

ARTICLE II

Section 2.1. A Certificate of Formation shall be filed with the Secretary of State of Texas. The board of directors of the Corporation (consisting of Myles Bowman) shall govern the Corporation in accordance with the terms of its organizational documents, as amended.

 

  

A-3

  

ARTICLE III

Section 3.1. At the Effective Time, the manner of exchanging the outstanding securities of the Company shall be as set forth below. The Members agree to convert all of their interests in the Company in exchange for the following equity interests in the Corporation:

 

	  	 	
No. of Shares of

	 
	
Name

	 	
Common Stock

	 
	  	 	 	 
	
United Centrifuge, Inc. (USA)

	 	 	3,000	 
	
Canadian Nitrogen Services USA, Inc.

	 	 	3,000	 
	
Myles Bowman

	 	 	1,000	 
	
Jorge Rivera

	 	 	1,500	 

ARTICLE IV

Section 4.1. This Agreement may be executed by the parties in counterparts, each of which when so executed and delivered shall be an original, but all of which shall constitute one instrument.

Section 4.2. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of the parties at any time prior to the Effective Time.

Section 4.3. This Agreement may be terminated and abandoned by action of the Members of the Company at any time prior to the Effective Time by mutual agreement of the parties hereto.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

  

A-4

  

 

 

	 	THE COMPANY:	 
	 	 	 	 
	 	United Centrifuge USA, LLC	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	 	 
	 	THE MEMBERS:	 
	 	 	 	 
	 	United Centrifuge, Inc. (USA)	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	 	 
	 	Canadian Nitrogen Services USA, Inc.	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	 	 
	 	 	 
	 	Myles Bowman	 
	 	 	 
	 	 	 
	 	Jorge Rivera	 

 

  

A-5

  

 

Exhibit A

CERTIFICATE OF FORMATION

FOR

United Centrifuge USA, Inc.

 

The undersigned, being a natural person of the age of eighteen (18) years or more, acting as the incorporator of a corporation under the Texas Business Organizations Code hereby adopts the following Certificate of Formation for such corporation:

ARTICLE ONE

 

The name of the corporation is United Centrifuge USA, Inc. (the “Corporation”).

ARTICLE TWO

 

The Corporation is organized for the purpose of engaging in the transaction of any and all lawful activity and/or business for which corporations may be organized under the Texas Business Organizations Code, as amended (the “Code”).

ARTICLE THREE

 

The total number of shares of stock which the Corporation shall have authority to issue is Ten Thousand (10,000) shares, all of which shall be designated as Common Stock, and which shall have a par value of $.01 per share (the “Common Stock”).

ARTICLE FOUR

 

A. The number of directors constituting the initial Board of Directors are one (1), and the name and address of the individual(s) who is/are to serve as the initial director(s) until the first annual meeting of shareholders, or until his/their successors are elected and qualified, are as follows:

 

	Name	 	Address
	 	 	 
	Myles Bowman	 	3050 Post Oak Boulevard 

Suite 550

Houston, Texas 77056

 

B. Elections of directors need not be done by written ballot unless the Bylaws of the Corporation shall otherwise provide.

 

C. The Board of Directors is expressly authorized to adopt, alter, amend or repeal the Bylaws of the Corporation. In addition to the powers and authority expressly conferred upon them by this Certificate of Formation or by statute, the directors are empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject to the provisions of the Code, this Certificate of Formation, and any Bylaws adopted by the shareholders. However, notwithstanding any provision in this Certificate of Formation to the contrary, the shareholders may not adopt, repeal or amend the Bylaws of the Corporation without the affirmative vote of a majority of the votes entitled to be cast by the holders of the Corporation's outstanding capital stock. Additionally, no Bylaws hereafter adopted by the shareholders shall invalidate any prior act of the directors which would have been valid if such Bylaws had not been adopted.

 

  

A-6

  

ARTICLE FIVE

 

Nothing contained in this Certificate of Formation shall prohibit or impair the Corporation’s power and authority to contractually grant preferential rights to purchase or subscribe for shares of any class of stock of the Corporation or any notes, debentures, bonds or securities convertible into or carrying options, warrants or rights to purchase shares of any class, as the Board of Directors, at its discretion, from time to time may grant and at such price as the Board of Directors, at its discretion, may fix.

 

ARTICLE SIX

 

The Corporation shall indemnify each person who is or was a director of the Corporation to the fullest extent permissible under applicable Texas law and any successor statutes under the Code. The Board of Directors of the Corporation, in its sole discretion, shall have the power, on behalf of the Corporation, to indemnify such other persons for whom indemnification is permitted by such provisions of the Code, to the fullest extent permissible thereunder, and may purchase such liability indemnification and/or other similar insurance as the Board of Directors from time to time shall deem necessary or appropriate, in its sole discretion.

The Corporation may purchase and maintain liability, indemnification and/or similar insurance on behalf of itself, and/or for any person who is or was a director, officer, employee or agent of the Corporation or who is or was serving at the request of the Corporation as a director, officer, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, against any liability asserted against and/or incurred by the Corporation or person serving in such a capacity or arising out of his/her/its status as such a person or entity, whether or not the Corporation would otherwise have the power to indemnify such person against that liability.

 

The power to indemnify and/or obtain insurance provided in this Article Six shall be cumulative of any other power of the Board of Directors and/or any rights to which such a person or entity may be entitled by law, this Certificate of Formation and/or Bylaws of the Corporation, contract, other agreement, vote or otherwise.

ARTICLE SEVEN

 

The street address of the initial registered office of the Corporation is 3050 Post Oak Boulevard, Suite 550, Houston, Texas 77056, and the name of its initial registered agent at such address is Myles Bowman.

 

  

A-7

  

 

ARTICLE EIGHT

 

No contract or other transaction between the Corporation and any person, firm, association or corporation and no act of the Corporation, shall, in the absence of fraud, be invalidated or in any way affected by the fact that any of the directors of the Corporation is pecuniary or otherwise interested, directly or indirectly, in such contract, transaction or act, or is related to or interested in such person, firm, association or corporation as a director, shareholder, officer, employee, member or otherwise. Any director so interested or related who is present at any meeting of the Board of Directors or committee of directors at which action on any such contract, transaction or act is taken may be counted in determining the presence of a quorum at such meeting and the vote at such meeting of any such director may be counted in determining the approval of any such contract, transaction or act. No director so interested or related shall, because of such interest or relationship, be disqualified from holding his office or be liable to the Corporation or to any shareholder or creditor thereof for any loss incurred by the Corporation under or by reason of such contract, transaction or act, or be accountable for any gains or profits he may have realized therein.

 

ARTICLE NINE

 

No member of the Board of Directors of the Corporation shall be liable, personally or otherwise, in any way to the Corporation or its shareholders for monetary damages caused in any way by an act or omission occurring in the director’s capacity as a director of the Corporation, except as otherwise expressly provided by applicable Texas law.

ARTICLE TEN

 

The Corporation is being formed under a plan of conversion. The Corporation is the converted entity. The name, address, date of formation, prior form of organization and jurisdiction of formation of United Centrifuge USA, LLC, the entity that is converting into the Corporation, are as follows:

 

	  	 	  	 	
Prior Form of

	 	
Formation

	
Name and Address

	 	
Formation Date

	 	
Organization

	 	
Jurisdiction

	
United Centrifuge USA, LLC 

	 	2-28-2012	 	
LLC

	 	
Texas

	
3050 Post Oak Boulevard

	 	  	 	  	 	  
	
Suite 550

	 	  	 	  	 	  
	
Houston, Texas 77056

	 	  	 	  	 	  

 

ARTICLE ELEVEN

 

The name and address of the incorporator is Myles Bowman, 3050 Post Oak Boulevard Suite 550, Houston, Texas 77056.

 

  

A-8

  

 

IN WITNESS WHEREOF, the Incorporator has executed this Certificate of Formation this April 14, 2014.

 

 

	 	 	 
	 	Myles Bowman	 

 

  

A-9

  

 

EXHIBIT B

ALY CENTRIFUGE INC.

PREFERRED STOCK TERMS

 

The total number of shares of stock which the Corporation shall have authority to issue is Seventeen Thousand Five Hundred (17,500) shares, of which Seven Thousand Five Hundred (7,500) shares, designated as Preferred Stock, shall have a par value of $.01 per share (the “Preferred Stock”), and Ten Thousand (10,000) shares, designated as Common Stock, shall have a par value of $.01 per share (the “Common Stock”). A statement of the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of stock of the Corporation is as follows:

Common Stock:

 

(a) Dividends. Subject to the preferred rights of the holders of shares of any class or series of Preferred Stock as provided by the Board of Directors with respect to any such class or series of Preferred Stock, the holders of the Common Stock shall be entitled to receive, as and when declared by the Board of Directors out of the funds of the Corporation legally available therefor, such dividends (payable in cash, stock or otherwise) as the Board of Directors may from time to time determine, payable to stockholders of record on such dates, not exceeding sixty (60) days preceding the dividend payment dates, as shall be fixed for such purpose by the Board of Directors in advance of payment of each particular dividend.

 

(b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after the distribution or payment to the holders of shares of any class or series of Preferred Stock as provided by the Board of Directors with respect to any such class or series of Preferred Stock, the remaining assets of the Corporation available for distribution to stockholders shall be distributed among and paid to the holders of Common Stock ratably in proportion to the number of shares of Common Stock held by them respectively.

 

(c) Voting Rights. Except as otherwise required by law, the entire voting power and all voting rights shall be vested exclusively in the Common Stock. Each holder of shares of Common Stock shall be entitled to one vote for each share standing in his name on the books of the Corporation.

Preferred Stock:

(a) Definitions. As used herein with respect to the Preferred Stock:

“Board of Directors” shall mean the board of directors of the Corporation.

“Bylaws” shall mean the bylaws of the Corporation in effect on the date hereof, as they may be amended from time to time.

 

  

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“Business Day” shall mean a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York, New York generally are authorized or obligated by law, regulation or executive order to close.

“Dividend Payment Date” shall mean each quarter of each year, commencing on June 30, 2014; provided that if any such Dividend Payment Date would otherwise occur on a day that is not a Business Day, such Dividend Payment Date shall instead be (and any dividend payable on Preferred Stock on such Dividend Payment Date shall instead be payable on) the immediately succeeding Business Day.

“Dividend Period” shall mean the period commencing on and include a Dividend Payment Date (other than the initial Dividend Period, which shall commence on and include the Original Issue Date of the Preferred Stock) and shall end on and include the calendar day next preceding the next Dividend Payment Date.

“Exchange Rate” shall mean 1,428.57, subject to adjustment as set forth in paragraph (f).

“Junior Stock” shall mean the Common Stock and any other class or series of stock of the Corporation that ranks junior to the Preferred Stock (1) as to the payment of dividends or (2) as to the distribution of assets on any liquidation, dissolution or winding up of the Corporation, or both.

“Liquidation Preference” shall mean $1,000 per share of Preferred Stock.

“Original Issue Date” shall mean the first date on which shares of Preferred Stock have been issued.

“Parent” shall mean Aly Energy Services, Inc., the sole owner of the Common Stock.

“Parent Stock” shall mean the common stock, $.001 par value, of the Parent.

“Person” shall mean any individual, company, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity.

(b) Dividends.

 

(i) Each holder of a share of Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds of the Corporation legally available therefor, if applicable, dividends at the annual rate set forth herein. Dividends will be at the annual rate of $50 per share of Preferred Stock and payable-in-kind through the issuance of additional shares of Preferred Stock. Such dividends shall be cumulative and shall accrue (whether or not earned or declared, whether or not there are funds legally available for the payment thereof and whether or not restricted by the terms of any of the Corporation’s indebtedness outstanding at any time) from the date such shares are issued by the Corporation and shall be payable in quarterly installments in arrears on each Dividend Payment Date. No interest will be payable in respect of any dividend payment on the Preferred Stock which may be in arrears. The Preferred Stock paid as dividends hereunder shall have all rights granted hereunder, including the payment of dividends thereon.

 

  

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(ii) The dividend payment period for any dividend payable on a Dividend Payment Date shall be the period beginning on the immediately preceding Dividend Payment Date (or on the issue date in the case of the first dividend payment period) and ending on the day preceding such later Dividend Payment Date. If any date on which a payment of a dividend or any other amount is due in respect of Preferred Stock is not a Business Day, such payment shall be made on the next day that is a Business Day.

 

(iii) The amount of dividends payable per share of Preferred Stock for each quarterly dividend payment period will be computed by dividing the annual dividend amount by four; provided, however, that the amount of dividends payable for the first dividend payment period and for any dividend payment period shorter than a full quarterly dividend period will be computed on the basis of a 360-day year of twelve 30-day months. No fractional shares of Preferred Stock will be issued, so that the number of shares to be paid as a dividend shall be rounded to the nearest whole number of shares. All dividends paid in additional whole or fractional shares of Preferred Stock shall be deemed issued on the applicable Dividend Payment Date and will thereupon be duly authorized, validly issued, fully paid and nonassessable and free and clear of all liens, charges and other encumbrances.

 

(iv) Dividends payable on any Dividend Payment Date shall be payable to the holders of record of the Preferred Stock as they appear on the stock transfer books of the Corporation at the close of business on the fifteenth day of the calendar month immediately preceding the calendar month in which the related Dividend Payment Date falls, or such other date that the Board of Directors designates that is not more than 30 nor less than 10 days prior to the Dividend Payment Date.

 

(v) No dividends (other than dividends payable solely in Junior Stock) shall be paid or declared and set apart for payment on any Junior Stock, and no payment shall be made on account of the purchase, redemption, retirement, or other acquisition of Junior Stock (other than acquisitions thereof pursuant to employee or director incentive or benefit plans or arrangements, or in exchange solely for Junior Stock), at any time that the Preferred Stock is outstanding.

 

(vi) The Corporation shall take all action necessary to ensure that sufficient shares of Preferred Stock are available for issuance as payment-in-kind dividends.

 

  

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(c) Liquidation Rights.

 

(i) Voluntary or Involuntary Liquidation. In the event of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, holders of the Preferred Stock shall be entitled to receive for each share of Preferred Stock, out of the assets of the Corporation or proceeds thereof (whether capital or surplus) available for distribution to stockholders of the Corporation, and after satisfaction of all liabilities and obligations to creditors of the Corporation, before any distribution of such assets or proceeds is made to or set aside for the holders of Junior Stock, an amount equal to the sum of (A) the Liquidation Preference per share of the Preferred Stock plus (B) an amount per share equal to accrued but unpaid dividends not previously added to the Liquidation Preference from and including the immediately preceding Dividend Payment Date to but excluding the date fixed for such liquidation, dissolution or winding up of the Corporation. To the extent such amount is paid in full to all holders of Preferred Stock, the holders of the Common Stock of the Corporation shall be entitled to receive all remaining assets of the Corporation (or proceeds thereof) according to their respective rights and preferences.

 

(ii) Partial Payment. If in connection with any distribution described in paragraph (c)(i) above the assets of the Corporation or proceeds thereof are not sufficient to pay the Liquidation Preferences in full to all holders of Preferred Stock, the amounts paid to the holders of Preferred Stock shall be paid pro rata in accordance with the respective aggregate Liquidation Preferences of the holders of Preferred Stock.

 

(iii) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this paragraph (c), the merger or consolidation of the Corporation with any other corporation or other entity, including a merger or consolidation in which the holders of Preferred Stock receive cash, securities or other property for their shares, or the sale, lease or exchange (for cash, securities or other property) of all or substantially all of the assets of the Corporation, shall not constitute a liquidation, dissolution or winding up of the Corporation.

(d) Redemption.

 

(i) Optional Redemption. The Preferred Stock may be redeemed, in whole or in part, at any time after December 31, 2016, at the option of the Corporation, upon giving notice of redemption pursuant to paragraph (d)(iii) below, at a redemption price per share equal to the sum of (X) the Liquidation Preference per share of the Preferred Stock plus (Y) an amount per share equal to accrued but unpaid dividends not previously added to the Liquidation Preference on such share of Preferred Stock from and including the immediately preceding Dividend Payment Date to but excluding the date of redemption.

 

(ii) Redemption at the Option of the Holder. On and at any time after December 31, 2016, each holder of the Preferred Stock shall have the right, by providing written notice to the Corporation to require the Corporation to repurchase all or any part of such holder’s Preferred Stock at a purchase price per share equal to the sum of (X) the Liquidation Preference per share of the Preferred Stock plus (Y) an amount equal to accrued but unpaid dividends not previously added to the Liquidation Preference per share on such share of Preferred Stock from and including the immediately preceding Dividend Payment Date to but excluding the date of redemption.

 

  

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(iii) Notice of Redemption at the Option of the Corporation. Notice of every redemption of shares of Preferred Stock pursuant to paragraph (d)(i) shall be given by first class mail, postage prepaid, addressed to the holders of record of the shares to be redeemed at their respective last addresses appearing on the books of the Corporation. Such mailing shall be at least 30 days and not more than 60 days before the date fixed for redemption. Any notice mailed as provided in this paragraph (d)(iii) shall be conclusively presumed to have been duly given, whether or not the holder receives such notice, but failure duly to give such notice by mail, or any defect in such notice or in the mailing thereof, to any holder of shares of Preferred Stock designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Preferred Stock. Each notice of redemption given to a holder shall state: (1) the redemption date; (2) the number of shares of the Preferred Stock to be redeemed and, if less than all the shares held by such holder are to be redeemed, the number of such shares to be redeemed from such holder; (3) the redemption price; and (4) the place or places where certificates for such shares are to be surrendered for payment of the redemption price.

 

(iv) Partial Redemption. In case of any redemption of part of the shares of Preferred Stock at the time outstanding, the shares to be redeemed shall be selected pro rata. Subject to the provisions hereof, the Corporation shall have full power and authority to prescribe the terms and conditions upon which shares of Preferred Stock shall be redeemed from time to time. If fewer than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without charge to the holder thereof.

 

(v) Effectiveness of Redemption. If notice of redemption has been duly given and if on or before the redemption date specified in the notice all funds necessary for the redemption have been deposited by the Corporation, in trust for the pro rata benefit of the holders of the shares called for redemption, with a bank or trust company doing business in the Borough of Manhattan, The City of New York, and having a capital and surplus of at least $500 million and selected by the Board of Directors, so as to be and continue to be available solely therefor, then, notwithstanding that any certificate for any share so called for redemption has not been surrendered for cancellation, on and after the redemption date dividends shall cease to accrue on all shares so called for redemption, all shares so called for redemption shall no longer be deemed outstanding and all rights with respect to such shares shall forthwith on such redemption date cease and terminate, except only the right of the holders thereof to receive the amount payable on such redemption from such bank or trust company, without interest. Any funds unclaimed at the end of three years from the redemption date shall, to the extent permitted by law, be released to the Corporation, after which time the holders of the shares so called for redemption shall look only to the Corporation for payment of the redemption price of such shares.

 

  

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(e) Exchange Rights.

 

(i) Optional Exchange Right. Each share of Preferred Stock may be exchanged on any date, from time to time, at the option of the holder thereof, into the number of shares of Parent Stock equal to the quotient of (i) the sum of (A) the Liquidation Preference plus (B) an amount per share equal to accrued but unpaid dividends not previously added to the Liquidation Preference on such share of Preferred Stock from and including the immediately preceding Dividend Payment Date to but excluding the exchange date, divided by (ii) 1,000, multiplied by the Exchange Rate in effect at such time. The right of exchange attaching to any shares of Preferred Stock may be exercised by the holders thereof by delivering the shares to be exchanged to the office of the Corporation, accompanied by a duly signed and completed notice of exchange in form reasonably satisfactory to the Corporation. The exchange date shall be the date on which the shares of Preferred Stock and the duly signed and completed notice of exchange are received by the Corporation. The Person entitled to receive the Parent Stock issuable upon such exchange shall be treated for all purposes as the record holder or holders of such Parent Stock as of such exchange date, and such Person or Persons shall cease to be a record holder of the Preferred Stock on that date. As promptly as practicable on or after the exchange date, the Corporation shall deliver the number of whole shares of Parent Stock issuable upon exchange, with any fractional shares (after aggregating all Preferred Stock being exchanged on such date) rounded down to whole shares. Such delivery shall be made, at the option of the applicable holder, in certificated form or by book-entry. Any such certificate or certificates shall be delivered by the Corporation to the appropriate holder on a book-entry basis or by mailing certificates evidencing the shares to the holders at their respective addresses as set forth in the exchange notice.

 

(ii) Reservation of Common Stock. The Parent has duly reserved out of its authorized and unissued Parent Stock, solely for issuance upon the exchange of the Preferred Stock at the instruction of the Corporation, such number of shares of Parent Stock as shall from time to time be issuable upon the exchange of all of the shares of Preferred Stock then outstanding. Any shares of Parent Stock issued upon exchange of Preferred Stock shall be (i) duly authorized, validly issued and fully paid and nonassessable, (ii) shall rank pari passu with the other shares of Parent Stock outstanding from time to time and (iii) shall be approved for listing on the principal securities exchange on which the Parent Stock is listed or admitted to trading.

 

(iii) Transfer Taxes. The Corporation shall pay any and all taxes that may be payable in respect of the issue or delivery of shares of Parent Stock on exchange of Preferred Stock. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Parent Stock in a name other than that in which the Preferred Stock so exchanged were registered, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Corporation the amount of any such tax, or has established to the satisfaction of the Corporation that such tax has been paid.

 

  

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(f) Dilution Adjustments. In the event the outstanding shares of Parent Stock shall be subdivided by stock split, stock dividend, reclassification or otherwise, into a greater number of shares of Common Stock or the Parent declares a dividend payable in any right to acquire Common Stock for no consideration, the Exchange Rate immediately prior to such event shall, concurrently with the effectiveness of such subdivision, be proportionately decreased. In the event the outstanding shares of Parent Stock shall be combined or consolidated by reclassification or otherwise into a lesser number of shares of Parent Stock, the Exchange Rate then in effect shall, concurrently with the effectiveness of such combination or consolidation, be proportionately increased. Upon the occurrence of each adjustment or readjustment of the Exchange Rate pursuant to this paragraph (f), the Corporation, at its expense, shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (as well as the corresponding adjustment in the Exchange Rate) and showing in detail the facts upon which such adjustment or readjustment is based.

(g) Voting and Approval Rights.

 

(i) Voting. Except as otherwise required by law, the holders of shares of Preferred Stock are not entitled to vote with respect to matters submitted to a vote of the stockholders of the Corporation. With respect to any matter submitted to a vote of the holders of Preferred Stock, each share of Preferred Stock shall be entitled to one vote.

 

(ii) Approval Rights. So long as any shares of Preferred Stock are outstanding, in addition to any other vote or consent of stockholders required by law, the vote or consent of the holders of at least a majority of the shares of Preferred Stock then outstanding and entitled to vote thereon, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for effecting or validating any amendment, alteration or repeal of any provision of the Certificate of Incorporation or By-laws so as to adversely affect the relative rights, preferences, privileges or powers of the Preferred Stock. No vote or consent of the holders of Preferred Stock if, at or prior to the time when any such vote or consent would otherwise be required, all outstanding shares of Preferred Stock shall have been redeemed, or shall have been called for redemption upon proper notice and sufficient funds shall have been deposited in trust for such redemption, in each case pursuant to paragraph (d) above.

(h) Reorganization Events.

 

(i) In the event of:

 

(X) any consolidation or merger of the Parent with or into another Person or of another Person with or into the Parent;

 

(Y) any sale, transfer, lease or conveyance to another Person of the property of the Parent as an entirety or substantially as an entirety; or

 

(Z) any statutory share exchange of the Parent with another Person (other than in connection with a merger or acquisition),

 

  

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in each case in which holders of Parent Stock would be entitled to receive cash, securities or other property for their shares of Parent Stock (any such event specified in this paragraph (h)(i) a “Reorganization Event”), each share of Preferred Stock outstanding immediately prior to such Reorganization Event shall, without the consent of the holder thereof, become convertible into the cash, securities and other property receivable in such Reorganization Event by a holder of Parent Stock that was not the counterparty to the Reorganization Event or an affiliate of such other party (such cash, securities and other property, the “Exchange Property”).

 

(ii) In the event that holders of the shares of the Parent Stock have the opportunity to elect the form of consideration to be received in such transaction, the “Exchange Property” that holders of the Preferred Stock shall be entitled to receive shall be determined by the holders of a majority of the outstanding shares of Preferred Stock. The number of units of Exchange Property for each share of Preferred Stock exchanged following the effective date of such Reorganization Event shall be determined from among the choices made available to the holders of the Parent Stock based on the Exchange Rate then in effect on the applicable exchange date, determined as if the references to a “shares of Parent Stock” in this certificate were to “units of Exchange Property.”

 

(iii) The above provisions of this paragraph (h) shall similarly apply to successive Reorganization Events. The Corporation shall ensure that the Parent will not enter into any agreement that would effectuate a Reorganization Event that does not provide that the Preferred Stock shall be outstanding as a class of preferred stock of the surviving company after giving effect to any such Reorganization Event (but, in any event, convertible into Exchange Property in the manner described in this paragraph (h)).

 

(iv) The Corporation shall, within 20 days of the occurrence of any Reorganization Event, provide written notice to the holders of the Preferred Stock of the occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this paragraph (h) or the validity of any Reorganization Event.

 

(i) Record Holders. To the fullest extent permitted by applicable law, the Corporation may deem and treat the record holder of any share of the Preferred Stock as the true and lawful owner thereof for all purposes, and the Corporation shall not be affected by any notice to the contrary.

 

(j) Replacement Certificates. The Corporation shall replace any mutilated certificate at the holder’s expense upon surrender of that certificate to the Corporation. The Corporation shall replace certificates that become destroyed, stolen or lost at the holder’s expense upon delivery to the Corporation of reasonably satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Corporation.

 

  

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EXHIBIT C

FORM OF EMPLOYMENT AGREEMENTS

 

 

 

 

 

 

  

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EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into this 15th day of April, 2014, by and between Aly Centrifuge Inc., a Delaware corporation (the “Company”), and )____________ (the “Employee”).

Concurrently with the execution and delivery of this Agreement, the equity interests of the Company and certain fixed assets used by the Company are being acquired by Aly Energy Services Inc., a Delaware corporation (the “Purchaser”), under that certain Asset Purchase, Stock Purchase and Merger Agreement, dated April 11, 2014, governing that transaction (the “Purchase Agreement”). Therefore, the Company agrees to employ Employee, and Employee accepts employment with the Company, on the following terms and conditions:

ARTICLE I

DEFINITIONS 

 

In addition to the terms defined in the body of this Agreement, for purposes of this Agreement, the following capitalized words shall have the meanings indicated below. Capitalized terms not otherwise defined in this Agreement shall have the meanings given to them in the Purchase Agreement.

1.1 “Board” shall mean the Board of Directors of the Purchaser.

 

1.2 “Cause” shall mean that Employee (a) has engaged in gross negligence, gross incompetence or willful misconduct in the performance of Employee’s duties with respect to the Company or any of its affiliates, (b) has refused without proper legal reason to perform Employee’s duties and responsibilities to the Company or any of its affiliates, (c) has breached any provision of Article VIII or any other provision of this Agreement, (d) has materially breached any provision of any written agreement or corporate policy or code of conduct established by the Company or any of its affiliates (and as amended from time to time), (e) has engaged in conduct that is materially injurious to the Company or any of its affiliates, (f) has disclosed without specific authorization from the Company confidential information of the Company or any of its affiliates that is injurious to any such entity, (g) has committed an act of theft, fraud, embezzlement, misappropriation or breach of a fiduciary duty to the Company or any of its affiliates or (h) has been convicted of (or pleaded no contest to) a crime involving fraud, dishonesty or moral turpitude or any felony.

 

1.3 “CEO” shall mean the Chief Executive Officer of the Purchaser.

 

1.4 “COO” shall mean the Chief Operating Officer of the Purchaser.

 

1.5 “Code” shall mean the Internal Revenue Code of 1986, as amended.

 

1.6 “Date of Termination” shall mean the date specified in the Notice of Termination relating to termination of Employee’s employment with the Company, subject to adjustment as provided in Section 3.3.

 

  

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1.7 “Good Reason” shall mean without the prior consent of Employee: (a) a relocation of Employee or the Company principal executives to a location outside the _____, Texas metropolitan area, (b) there is a material reduction by the Company in Employee’s responsibilities, duties, authority, title, or reporting relationship or (c) the Company acts in any way that would reduce Employee’s Base Salary or if the Company adversely affects Employee’s participation in or materially reduces Employee’s benefit under any benefit plan of the Company in which Employee is participating.

 

1.8 “Notice of Termination” shall mean a written notice delivered by the Company or Employee to the other party indicating the specific termination provision in this Agreement relied upon for termination of Employee’s employment and the Date of Termination that sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated.

 

ARTICLE II

EMPLOYMENT AND DUTIES

 

2.1 Employment; Effective Date. The Company agrees to employ Employee, and Employee agrees to be employed by the Company, pursuant to the terms of this Agreement beginning as of the Closing Date (the “Effective Date”) and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement. Notwithstanding the foregoing, if the Purchase Agreement is terminated, this Agreement shall be void ab initio and Employee and Company shall have no rights under this Agreement.

 

2.2 Position. From and after the Effective Date, Employee shall serve in the position of __________ of the Company or in such other position or positions as the parties mutually may agree and shall report to _______________________.

 

2.3 Duties and Services. Employee agrees to serve in the position referred to in Section 2.2 hereof and to perform diligently and to the best of Employee’s abilities the usual and customary duties and services appertaining to such positions, as well as such additional duties and services appropriate to such positions which the Company and Employee mutually may agree upon from time to time. Employee’s employment shall also be subject to the policies maintained and established by the Company that are of general applicability to the Company’s employees, as such policies may be amended from time to time.

 

2.4 Other Interests. Employee agrees, during the Term, to devote his full time and attention to the business and affairs of the Company and its affiliates. Notwithstanding the foregoing, the parties acknowledge and agree that Employee may (a) engage in and manage Employee’s passive personal investments, (b) engage in charitable and civic activities, and (c) engage in such other activities that the Company and Employee mutually agree to; provided, however, that such activities shall be permitted so long as such activities do not conflict with the business and affairs of the Company or materially interfere with the performance of Employee’s duties hereunder.

 

2.5 Duty of Loyalty. Employee acknowledges and agrees that Employee owes a fiduciary duty of loyalty, fidelity and allegiance to act in the best interests of the Company and to do no act that would materially injure the business, interests, or reputation of the Company or any of its affiliates. In keeping with these duties, Employee shall make full disclosure to the Company of all business opportunities pertaining to the Business (as defined below) and shall not appropriate for Employee’s own benefit business opportunities concerning the subject matter of the fiduciary relationship.

 

  

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ARTICLE III

TERM AND TERMINATION OF EMPLOYMENT 

 

3.1 Term. Subject to the remaining terms of this Article III, this Agreement shall be for a term that begins on the Effective Date and continues in effect through the third anniversary of the Effective Date (the “Term”). Subject to Section 9.13, this Agreement shall terminate at the end of the Term and Employee shall continue as an at-will employee of the Company.

 

3.2 Company’s Right to Terminate. Notwithstanding the provisions of Section 3.1, the Company may terminate Employee’s employment under this Agreement at any time for any of the following reasons by providing Employee with a Notice of Termination:

 

(a) for Cause; or

 

(b) for any other reason whatsoever or for no reason at all, in the sole discretion of the Company.

 

3.3 Employee’s Right to Terminate. Notwithstanding the provisions of Section 3.1:

 

(a) Employee shall have the right to terminate Employee’s employment under this Agreement for Good Reason by providing the Company with a Notice of Termination, provided, however, that termination for Good Reason by the Employee shall not be permitted unless (x) Employee has given the Company at least thirty (30) days’ prior written notice that he has a basis for a termination for Good Reason, which notice shall specify the facts and circumstances constituting a basis for termination for Good Reason and (y) the Company has not remedied such facts and circumstances constituting a basis for termination for Good Reason within such 30-day period.

 

(b) Employee shall have the right to terminate Employee’s employment under this Agreement for any reason other than Good Reason, in the sole discretion of Employee, by providing the Company with a Notice of Termination. In the case of a termination of employment by Employee pursuant to this Section 3.3(b), the Date of Termination specified in the Notice of Termination shall not be less than fifteen (15) nor more than sixty (60) days, from the date such Notice of Termination is given, and the Company may require a Date of Termination earlier than that specified in the Notice of Termination (and, if such earlier Date of Termination is so required, it shall not change the basis for Employee’s termination nor be construed or interpreted as a termination of employment pursuant to Section 3.1 or Section 3.2).

 

3.4 Deemed Resignations. Unless otherwise agreed to in writing by the Company and Employee prior to the termination of Employee’s employment, any termination of Employee’s employment shall constitute an automatic resignation of Employee as an officer of the Company and each affiliate of the Company, and an automatic resignation of Employee from the Board and the board of directors of the Company (if applicable), from the board of directors or similar governing body of any affiliate of the Company and from the board of directors or similar governing body of any corporation, limited liability entity or other entity in which the Company or any affiliate holds an equity interest and with respect to which board or similar governing body Employee serves as the Company’s or such affiliate’s designee or other representative.

 

  

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3.5 Meaning of Termination of Employment. For all purposes of this Agreement, Employee shall be considered to have terminated employment with the Company when Employee incurs a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.

 

ARTICLE IV

COMPENSATION AND BENEFITS 

 

4.1 Base Salary. During the Term, Employee shall receive a minimum, annualized base salary of $__________ (the “Base Salary”). Employee’s Base Salary shall be paid in equal installments in accordance with the Company’s standard policy regarding payment of compensation to employees but no less frequently than monthly.

 

Bonuses. Employee shall be eligible to receive an annual, calendar-year bonus based on criteria determined by the Board (the “Annual Bonus”). Any Annual Bonus payable pursuant to this Section 4.2 will be paid to Employee no later than March 15 of the calendar year following the calendar year to which the Annual Bonus relates, provided Employee is employed by the Company on such date of payment.

4.2 Benefits. During the Term, Employee shall be entitled to participate in such group life, health, accident, disability or hospitalization insurance plans and retirement plans as the Company may make available to its other similarly situated executive employees as a group, subject to the terms and conditions of any such plans. Employee’s participation in all such plans shall be at a level, and on terms and conditions, that are commensurate with his positions and responsibilities at the Company. Additionally, Employee will be entitled to a vehicle allowance of $______ per month, plus use of a Company-paid gasoline credit card.

 

4.3 Vacation and Leave. Employee shall be entitled to paid vacation in accordance with the Company’s vacation policy (two weeks during year one and two of employment; three weeks during years three through eight of employment; four weeks during years nine through 19 of employment; and five weeks thereafter; in each case giving credit for Employee’s tenure of service for the Company’s predecessor) but Employee will not take more than two (2) weeks consecutive vacation. Employee shall also be entitled to all paid holidays given by the Company to its employees generally.

 

4.4 Expenses. The Company shall promptly reimburse Employee for all reasonable business expenses incurred by Employee in performing services hereunder, including all expenses of travel and living expenses while away from home on business or at the request of and in the service of the Company; provided, in each case, that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company. Any such reimbursement of expenses shall be made by the Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to the Company (but in any event not later than the close of Employee’s taxable year following the taxable year in which the expense is incurred by Employee). In no event shall any reimbursement be made to Employee for such fees and expenses incurred after the date that is one year after the date of Employee’s termination of employment with the Company.

 

  

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ARTICLE V

PROTECTION OF INFORMATION 

 

5.1 Disclosure to and Property of the Company. For purposes of this Article V, the term “the Company” shall include the Company and any of its affiliates, and any reference to “employment” or similar terms shall include a director, manager and/or consulting relationship. All information, trade secrets, designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that are conceived, made, developed or acquired by Employee, individually or in conjunction with others, during the period of Employee’s employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) that relate to the Company’s business, trade secrets, products or services (including, without limitation, all such information relating to corporate opportunities, product specification, compositions, manufacturing and distribution methods and processes, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer’s organizations or within the organization of acquisition prospects, or production, marketing and merchandising techniques, prospective names and marks) and all writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression (collectively, “Confidential Information”) shall be retained for and, to the extent practicable, disclosed to the Company and are and shall be the sole and exclusive property of the Company. Moreover, all documents, videotapes, written presentations, brochures, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, architectural renditions and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, inventions and other similar forms of expression that are conceived, made, developed or acquired by Employee individually or in conjunction with others during the period of Employee’s employment by the Company (whether during business hours or otherwise and whether on the Company’s premises or otherwise) that relate to the Company’s business, trade secrets, products or services (collectively, “Work Product”) are and shall be the sole and exclusive property of the Company. Employee agrees to perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Upon termination of Employee’s employment by the Company, for any reason, Employee promptly shall deliver such Confidential Information and Work Product, and all copies thereof, to the Company.

 

5.2 Disclosure to Employee. The Company shall disclose to Employee, or place Employee in a position to have access to or develop, Confidential Information and Work Product of the Company; and shall entrust Employee with business opportunities of the Company; and shall place Employee in a position to develop business good will on behalf of the Company.

 

  

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5.3 No Unauthorized Use or Disclosure. Employee agrees to use reasonable efforts to preserve and protect the confidentiality of all Confidential Information and of all Work Product containing Confidential Information of the Company and its affiliates. Employee agrees that Employee will not, at any time during or after Employee’s employment with the Company, make any unauthorized disclosure of, and Employee shall not remove from the Company premises, Confidential Information or Work Product of the Company or its affiliates, or make any use thereof, except, in each case, in the carrying out of Employee’s responsibilities hereunder. Employee shall use all reasonable efforts to obligate all persons or entities to whom any Confidential Information shall be disclosed by Employee hereunder to preserve and protect the confidentiality of such Confidential Information. Employee shall have no obligation hereunder to keep confidential any Confidential Information if and to the extent (a) such Confidential Information has become publicly available other than as a result of a breach of this Agreement by Employee or (b) disclosure thereof is specifically required by law; provided, however, that in the event disclosure is required by applicable law, Employee shall provide the Company with prompt notice of such requirement prior to making any such disclosure, so that the Company may seek an appropriate protective order. At the request of the Company at any time, Employee agrees to deliver to the Company all Confidential Information that Employee may possess or control. Employee agrees that all Confidential Information of the Company (whether now or hereafter existing) conceived, discovered or made by Employee during the period of Employee’s employment by the Company exclusively belongs to the Company (and not to Employee), and upon request by the Company for specified Confidential Information, Employee will promptly disclose such Confidential Information to the Company and perform all actions reasonably requested by the Company to establish and confirm such exclusive ownership. Affiliates of the Company shall be third party beneficiaries of Employee’s obligations under this Article V. As a result of Employee’s employment by the Company, Employee may also from time to time have access to, or knowledge of, confidential information or work product of third parties, such as customers, suppliers, partners, joint venturers, and the like, of the Company and its affiliates. Employee also agrees to use reasonable efforts to preserve and protect the confidentiality of such third party Confidential Information and Work Product.

 

5.4 Ownership by the Company. If, during Employee’s employment by the Company, Employee creates any work of authorship fixed in any tangible medium of expression that is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to the Company’s business, products, or services, whether such work is created solely by Employee or jointly with others (whether during business hours or otherwise and whether on the Company’s premises or otherwise), including any Work Product, the Company shall be deemed the author of such work if the work is prepared by Employee in the scope of Employee’s employment; or, if the work relating to the Company’s business, products, or services is not prepared by Employee within the scope of Employee’s employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and the Company shall be the author of the work. If the work relating to the Company’s business, products, or services is neither prepared by Employee within the scope of Employee’s employment nor a work specially ordered that is deemed to be a work made for hire during Employee’s employment by the Company, then Employee hereby agrees to assign, and by these presents does assign, to the Company all of Employee’s worldwide right, title, and interest in and to such work and all rights of copyright therein.

 

  

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5.5 Assistance by Employee. During the period of Employee’s employment by the Company, Employee shall assist the Company and its nominee, at any time, in the protection of the Company’s or its affiliates’ worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries. After Employee’s employment with the Company terminates, at the request from time to time and expense of the Company or its affiliates, Employee shall reasonably assist the Company and its nominee, at reasonable times and for reasonable periods and for reasonable compensation, in the protection of the Company’s or its affiliates’ worldwide right, title and interest in and to Confidential Information and Work Product and the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.

 

5.6 Remedies. Employee acknowledges that money damages would not be a sufficient remedy for any breach of this Article V by Employee, and the Company shall be entitled to enforce the provisions of this Article V by specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article V but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Employee and Employee’s agents.

 

ARTICLE VI

STATEMENTS CONCERNING THE COMPANY

 

6.1 Statements. Each of the Employer and Employee will refrain, both during the period of Employee’s employment by the Company and after the termination thereof, from publishing any oral or written statements about the other party, any of its affiliates or any of the Company’s or such affiliates’ investors, stockholders, partners, directors, managers, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose Confidential Information (other than Confidential Information that has become publicly available other than as a result of a breach of this Agreement by Employee) of the Company, any of its affiliates or any of the Company’s or any such affiliates’ business affairs, investors, stockholders, partners, directors, managers, officers, employees, consultants, agents or representatives, or (c) place the other party, any of the Company’s affiliates, or any of the Company’s or any such affiliates’ directors, managers, officers, employees, consultants, agents or representatives in a false light before the public. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the parties hereby under this provision are in addition to any and all rights and remedies otherwise afforded by law. The foregoing notwithstanding, nothing shall prevent any party from testifying in any legal proceeding pursuant to a subpoena or other legal process.

 

  

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ARTICLE VII

EFFECT OF TERMINATION OF EMPLOYMENT ON COMPENSATION 

 

7.1 Effect of Termination of Employment on Compensation. 

 

(a) Benefit Obligation and Accrued Obligation Defined. For purposes of this Agreement, payment of the “Benefit Obligation” shall mean payment by the Company to Employee (or his designated beneficiary or legal representative, as applicable), in accordance with the terms of the applicable plan document, of all vested benefits to which Employee is entitled under the terms of the employee benefit plans and compensation arrangements in which Employee is a participant as of the Date of Termination. “Accrued Obligation” means the sum of (1) Employee’s Base Salary through the Date of Termination, (2) any accrued vacation pay earned by Employee, and (3) any incurred but unreimbursed expenses for which Employee is entitled to reimbursement in accordance with Section 4.5, in each case, to the extent not theretofore paid.

 

(b) Termination of Employee for Cause. If during the Term Employee’s employment is terminated for Cause, the Company shall pay to Employee the Accrued Obligation within thirty (30) days following the Date of Termination. Following such payment, the Company shall have no further obligations to Employee other than as may be required by law or the terms of an employee benefit plan of the Company. The Company shall pay Employee the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements.

 

(c) Termination of Employee by the Company Without Cause or by Employee with Good Reason. If during the Term Employee’s employment is terminated by the Company without Cause or by Employee with Good Reason, then Employee shall receive the following benefits and compensation from the Company:

 

(i) the Company shall pay Employee the Accrued Obligation within thirty (30) days following the date of Employee’s Date of Termination;

 

(ii) the Company shall pay to Employee an amount equal to Employee’s Base Salary for 12 months, with such amount payable in 12 equal monthly installments commencing on the 60th day following Employee’s Date of Termination;

 

(iii) the Company shall pay Employee the Benefit Obligation at the times specified in and in accordance with the terms of the applicable employee benefit plans and compensation arrangements.

 

Notwithstanding the foregoing, neither Employee, nor his estate, shall be permitted to specify the taxable year in which a payment described in this Section 7.1(c) shall be paid.

(d) General Release of Claims. Payments to Employee under this Article VII (other than Accrued Obligations and Benefit Obligations) are contingent upon Employee’s execution of a release, substantially in the form attached hereto as Exhibit A, within fifty (50) days of Employee’s Date of Termination that is not revoked by Employee during any applicable revocation period provided in such release (which shall release and discharge the Company and its affiliates, and their officers, directors, managers, employees and agents from any and all claims or causes of action of any kind or character, including but not limited to all claims or causes of action arising out of Employee’s employment with the Company or its affiliates or the termination of such employment). Nothing in this Section 7.1(d) shall be construed to require Employee to execute a release in any form if Employee does not accept payments described in this Section 7.1 other than the Accrued Obligations and Benefit Obligations.

 

  

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ARTICLE VIII

COVENANTS AGAINST COMPETITION

 

8.1 Definitions. As used in this Article VIII, the following terms shall have the following meanings:

 

(a) “Business” means (i) the manufacture, lease or sale of any oilfield services equipment or products, and (ii) the provision of products or services provided by the Company or any of its affiliates during the three (3) year period prior to the Date of Termination. In the event Employee proposes to invest in an entity that would meet the definition of Business only because of the activities of an affiliate of the Company, Employee may request a waiver of the provisions of this Article VIII in writing and the Company many not unreasonably withhold its consent to such waivers if Employee had only immaterial access to the market analyses, marketing practices, technology, clients and prospective clients of the affiliate, and other confidential information, goodwill and trade secrets that are among the assets of the affiliate.

 

(b) “Governmental Authority” means any governmental, quasi-governmental, state, county, city or other political subdivision of the United States or any other country, or any agency, court or instrumentality, foreign or domestic, or statutory or regulatory body thereof.

 

(c) “Legal Requirement” means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization, or other directional requirement (including, without limitation, any of the foregoing that relates to environmental standards or controls, energy regulations and occupational, safety and health standards or controls including those arising under environmental laws) of any Governmental Authority.

 

(d) “Prohibited Period” means the period during which Employee is employed by the Company hereunder and a period of 12 months following Employee’s Date of Termination.

 

(e) “Restricted Area” means the United States of America and any other jurisdiction in which the Company has performed services or otherwise engaged in activities for the purpose of performing services during the three (3) year period prior to the Closing Date and any country or subdivision thereof in which the Company or its affiliates engages in the Business during the Prohibited Period. With respect to the Business of an affiliate of Company, the term “Restricted Area” means the trade area of the affiliate existing on the date of termination of Employee’s employment with the Company.

 

8.2 Non-Competition and Non-Solicitation. Employee presently has specialized knowledge of the market analyses, marketing practices, technology, clients and prospective clients of the Company, and other confidential information, goodwill and trade secrets that were among the assets of the Company prior to the closing of the Purchase Agreement. Employee acknowledges his expertise and specialized knowledge of research and development, and other Confidential Information of the Company. Employee will continue to obtain and develop specialized knowledge of Confidential Information of the Company and its affiliates and the business of the Company through his continued involvement in the business of the Company, including his employment under this Agreement. The Company’s promise to provide Employee with this Confidential Information is an essential part of the Company’s agreement to employ Employee pursuant to this Agreement.

 

  

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To induce the Purchaser to carry out the Purchase Agreement, and in consideration of the Company’s promises and undertakings in this Agreement, including the promise to provide specialized training and knowledge, the promise to provide Employee access to and control of Confidential Information that the Company and its affiliates will continue to develop and/or receive and that Employee will have access to through the Term, and to ensure the protection of the Company’s and its affiliates’ Confidential Information during Employee’s employment and thereafter, the Company and Employee agree and covenant that during the Prohibited Period:

(a) Employee shall not, for whatever reason and with or without cause, either individually or in partnership or jointly or in conjunction with any Person or Persons as principal, agent, employee, stockholder, owner, investor, partner or in any other manner whatsoever (other than a holding of shares listed on a United States stock exchange or automated quotation system that does not exceed one percent of the outstanding shares so listed), owner, investor, partner or in any other manner whatsoever, directly or indirectly, (A) engage in the Business or otherwise compete with the Company or any of its affiliates in the Business in the Restricted Area, (B) solicit business from, or provide services to, any of the customers or accounts of the Company or any of its affiliates in the Business for the Restricted Area, or (C) become the employee of, or otherwise render services to or on behalf of, any enterprise where the division or department in which Employee works competes with such Business of the Company or any of its affiliates; and

 

(b) Employee shall not, directly or indirectly, either for himself or any other person, (A) induce or attempt to induce any employee of the Company or any of its affiliates to leave the employ of the Company or any of its affiliates, (B) in any way interfere with the relationship between the Company or any of its affiliates and any employee of the Company or any of its affiliates, (C) employ, or otherwise engage as an employee, independent contractor or otherwise, any employee of the Company or any of its affiliates, or (D) induce or attempt to induce any customer, supplier, licensee or business relation of the Company or any of its affiliates to cease doing business with the Company or any of its affiliates or in any way interfere with the relationship between any customer, supplier, licensee or business relation of the Company or any of its affiliates.

 

8.3 Relief. Employee and the Company agree and acknowledge that the limitations as to time, geographical area and scope of activity to be restrained as set forth in Section 8.2 hereof are reasonable and do not impose any greater restraint than is necessary to protect the legitimate business interests of the Company. Employee and the Company also acknowledge that money damages would not be sufficient remedy for any breach of this Article VIII by Employee, and the Company or its affiliates shall be entitled to enforce the provisions of this Article VIII by terminating payments then owing to Employee under this Agreement or otherwise and to seek in a court of competent jurisdiction specific performance and injunctive relief as remedies for such breach or any threatened breach; provided, however, that such termination of payments owing to Executive under this Agreement or otherwise may not occur in the absence of a breach of this Article VIII by Employee. Such remedies shall not be deemed the exclusive remedies for a breach of this Article VIII but shall be in addition to all remedies available at law or in equity, including the recovery of damages from Employee and Employee’s agents.

 

  

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8.4 Reasonableness; Enforcement. Employee hereby represents to the Company that Employee has read and understands, and agrees to be bound by, the terms of this Article VIII. Employee acknowledges that the duration of the covenants contained in this Article VIII are the result of arm’s-length bargaining and are fair and reasonable in light of (a) the nature of the operations of the Company’s Business, (b) Employee’s level of control over and contact with the Company’s Business in all jurisdictions in which it is conducted, and (c) the amount of compensation, trade secrets and Confidential Information that Employee is receiving in connection with the performance of Employee’s duties hereunder. It is the desire and intent of the parties that the provisions of this Article VIII be enforced to the fullest extent permitted under applicable Legal Requirements, whether now or hereafter in effect and therefore, to the extent permitted by applicable Legal Requirements, Employee and the Company hereby waive any provision of applicable Legal Requirements that would render any provision of this Article VIII invalid or unenforceable. It is specifically agreed that the period specified in Section 8.2 shall be computed by excluding from that computation any time during which Employee is in violation of any provision of Section 8.2.

 

8.5 Reformation. The Company and Employee agree that the foregoing restrictions are reasonable under the circumstances and that any breach of the covenants contained in this Article VIII would cause irreparable injury to the Company. Employee expressly represents that enforcement of the restrictive covenants set forth in this Article VIII will not impose an undue hardship upon Employee or any person or entity affiliated with Employee. Nevertheless, if any of the aforesaid restrictions are found by a court of competent jurisdiction to be unreasonable, or overly broad as to time, or otherwise unenforceable, the parties intend for the restrictions herein set forth to be modified by the court making such determination so as to be reasonable and enforceable and, as so modified, to be fully enforced. By agreeing to this contractual modification prospectively at this time, the Company and Employee intend to make this provision enforceable under the law or laws of all applicable jurisdictions so that the entire agreement not to compete and this Agreement as prospectively modified shall remain in full force and effect and shall not be rendered void or illegal. Such modification shall not affect the payments made to Employee under this Agreement.

 

ARTICLE IX

MISCELLANEOUS 

 

9.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (a) when received if delivered personally or by courier, (b) on the date receipt is acknowledged if delivered by certified mail, postage prepaid, return receipt requested or (c) one day after transmission if sent by facsimile transmission with confirmation of transmission, as follows:

 

  

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	 	If to Employee, addressed to:	[Name]
	 	 	[Address]
	 	 	 
	 	If to the Company, addressed to:	
c/o Aly Energy Services, Inc.

Attn: Chief Executive Officer

3 Riverway, Suite 920

Houston, Texas 77056

Facsimile: (713) 333-4004

                                     

or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.

 

9.2 Applicable Law; Submission to Jurisdiction.

 

(a) This Agreement is entered into under, and shall be governed for all purposes by, the laws of the State of Texas, without regard to conflicts of laws principles thereof.

 

(b) With respect to any claim or dispute related to or arising under this Agreement, the parties hereto hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in the State of Texas.

 

9.3 Litigation. Employee agrees to cooperate, in a reasonable and appropriate manner, with the Company and its attorneys, both during and after the termination of his employment, in connection with any litigation or other proceeding arising out of or relating to matters in which Employee was involved prior to the termination of his employment to the extent the Company pays all expenses Employee incurs in connection with such cooperation and to the extent such cooperation does not unduly interfere (as determined by Employee in good faith) with Employee’s personal or professional schedule.

 

9.4 Dispute Resolution. Except as provided otherwise in Sections 5.6, 6.1 and 8.3, all claims, demands, causes of action, disputes, controversies or other matters in question (“Claims”) arising out of this Agreement or Employee’s service (or termination from service) with the Company, whether arising in contract, tort or otherwise and whether provided by statute, equity or common law, that the Company may have against Employee or that Employee may have against the Company, or its parents or subsidiaries, or against each of the foregoing entities’ respective officers, directors, employees or agents in their capacity as such or otherwise, shall be settled in accordance with the procedures described in Section 9.4(a) and (b). Claims covered by this Section 9.4 include, without limitation, claims by Employee for breach of this Agreement, wrongful termination, discrimination (based on age, race, sex, disability, national origin, sexual orientation, or any other factor), harassment and retaliation.

 

(a) Agreement to Negotiate. First, the parties shall attempt in good faith to resolve any Claims promptly by negotiations between Employee and executives or directors of the Company or its affiliates who have authority to settle the Claims. Either party may give the other disputing party written notice of any Claim not resolved in the normal course of business. Within five days after the effective date of that notice, Employee and such executives or directors of the Company shall agree upon a mutually acceptable time and place to meet and shall meet at that time and place, and thereafter as often as they reasonably deem necessary, to exchange relevant information and to attempt to resolve the Claim. The first of those meetings shall take place within 30 days of the date of the disputing party’s notice. If the Claim has not been resolved within 60 days of the date of the disputing party’s notice, or if the parties fail to agree on a time and place for an initial meeting within five days of that notice, either party may elect to undertake arbitration in accordance with Section 9.4(b).

 

  

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(b) Agreement to Arbitrate. If a Claim is not resolved by negotiation pursuant to Section 9.4(a), such Claim must be resolved through arbitration regardless of whether the Claim involves claims that the Agreement is unlawful, unenforceable, void, or voidable or involves claims under statutory, civil or common law. Any arbitration shall be conducted in accordance with the then-current Employment Arbitration Rules of the American Arbitration Association (“AAA”). If a party refuses to honor its obligations under this Section 9.4(b), the other party may compel arbitration any federal or state court of competent jurisdiction. The arbitrator shall apply the substantive law of Texas (excluding choice-of-law principles that might call for the application of some other jurisdiction’s law) or federal law, or both as applicable to the Claims asserted. The arbitrator shall have exclusive authority to resolve any dispute relating to the interpretation, applicability or enforceability or formation of this Agreement (including this Section 9.4), including any claim that all or part of the Agreement is void or voidable and any Claim that an issue is not subject to arbitration. The results of arbitration will be binding and conclusive on the parties hereto. Any arbitrator’s award or finding or any judgment or verdict thereon will be final and unappealable. The seat of arbitration shall be in Harris County in the State of Texas, and unless agreed otherwise by the parties, all hearings shall take place at the seat. Any and all of the arbitrator’s orders, decisions and awards may be enforceable in, and judgment upon any award rendered by the arbitrator may be confirmed and entered by any federal or state court having jurisdiction. All evidentiary privileges under applicable state and federal law, including attorney-client, work product and party communication privileges, shall be preserved and protected. The decision of the arbitrator will be binding on all parties. Arbitrations will be conducted in such a manner that the final decision of the arbitrator will be made and provided to Employee and the Company no later than 120 days after a matter is submitted to arbitration. All proceedings conducted pursuant to this agreement to arbitrate, including any order, decision or award of the arbitrators, shall be kept confidential by all parties. Each party shall pay its own attorneys fees and disbursements and other costs of arbitration. The arbitrator’s fees shall be borne by the nonprevailing party or by such party or parties as the arbitrator shall determine. EMPLOYEE ACKNOWLEDGES THAT, BY SIGNING THIS AGREEMENT, EMPLOYEE IS WAIVING ANY RIGHT THAT EMPLOYEE MAY HAVE TO A JURY TRIAL OR A COURT TRIAL OF ANY SERVICE RELATED CLAIM ALLEGED BY EMPLOYEE.

 

9.5 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

 

9.6 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.

 

9.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.

 

9.8 Withholding of Taxes and Other Employee Deductions. The Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city and other applicable taxes and withholdings as may be required pursuant to any law or governmental regulation or ruling and all other customary deductions made with respect to the Company’s employees generally.

 

9.9 Headings. The Section headings have been inserted for purposes of convenience and shall not be used for interpretive purposes.

 

  

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9.10 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.

 

9.11 Affiliate. As used in this Agreement, the term “affiliate” as used with respect to a particular person or entity shall mean any other person or entity which owns or controls, is owned or controlled by, or is under common ownership or control with, such particular person or entity.

 

9.12 Successors. This Agreement shall be binding upon and inure to the benefit of the Company and any successor of the Company. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit or obligation of either party hereto, shall be subject to voluntary or involuntary assignment, alienation or transfer, whether by operation of law or otherwise, without the prior written consent of the other party. In addition, any payment owed to Employee hereunder after the date of Employee’s death shall be paid to Employee’s estate.

 

9.13 Term. Termination of this Agreement shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V, VI, VII, VIII and IX shall survive any termination of the employment relationship and/or of this Agreement.

 

9.14 Entire Agreement. Except as provided in any signed written agreement contemporaneously or hereafter executed by the Company and Executive, this Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties and agreements between the parties with respect to employment of Executive by the Company. Without limiting the scope of the preceding sentence, all understandings and agreements preceding the date of execution of this Agreement and relating to the subject matter hereof are hereby null and void and of no further force and effect.

 

9.15 Modification; Waiver. Any modification to or waiver of this Agreement shall be effective only if it is in writing and signed by the parties to this Agreement; provided that the Company may, with prospective or retroactive effect, amend this Agreement at any time (to the extent Employee is not adversely affected by such amendment), if determined to be reasonably necessary to comply with administrative guidance issued under Section 409A of the Code or to comply with the provisions of Section 409A of the Code.

 

9.16 Compliance with Section 409A of the Code. Each payment under this Agreement, including each payment in a series of installment payments, is intended to be a separate payment for purposes of Treas. Reg. § 1.409A-2(b), and is intended to be: (i) exempt from Section 409A of the Code, the regulations and other binding guidance promulgated thereunder (“Section 409A”), including, but not limited to, by compliance with the short-term deferral exemption as specified in Treas. Reg. § 1.409A-1(b)(4) and the involuntary separation pay exception within the meaning of Treas. Reg. § 1.409A-1(b)(9)(iii), or (ii) in compliance with Section 409A, including, but not limited to, being paid pursuant to a fixed schedule or specified date pursuant to Treas. Reg. § 1.409A-3(a) and the provisions of this Agreement will be administered, interpreted and construed accordingly. Notwithstanding the foregoing provisions of this Agreement, if the payment of any severance compensation or severance benefits under Article VII would be subject to additional taxes and interest under Section 409A because the timing of such payment is not delayed as provided in Section 409A(a)(2)(B)(i) of the Code, and Employee constitutes a specified employee within the meaning of Section 409A(a)(2)(B)(i) of the Code, then any such payments that Employee would otherwise be entitled to during the first six months following Employee’s separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Code shall be accumulated and paid on the date that is six months after Employee’s separation from service (or if such payment date does not fall on a business day of the Company, the next following business day of the Company), or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes and interest.

 

  

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

 

 

	 	ALY CENTRIFUGE INC.	 
	 	 	 	 
	
Date

	
By: 

	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

 

  

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Exhibit A

 

Form of Waiver and Release Agreement

 

Aly Centrifuge Inc. has offered to pay me certain benefits (the “Benefits”) pursuant to Section 7.1(c) of my employment agreement with Aly Centrifuge Inc., dated as of April 15, 2014 (the “Employment Agreement”), which were offered to me in exchange for my agreement, among other things, to waive all of my claims against and release Aly Centrifuge Inc. and its predecessors, successors and assigns (collectively referred to as the “Company”), all of the affiliates (including parents and subsidiaries) of the Company (collectively referred to as the “Affiliates”) and the Company’s and Affiliates’ directors and officers, employees and agents, insurers, employee benefit plans and the fiduciaries and agents of said plans (collectively, with the Company and Affiliates, referred to as the “Corporate Group”) from any and all claims, demands, actions, liabilities and damages arising out of or relating in any way to my employment with or separation from the Company or the Affiliates; provided, however, that this Waiver and Release shall not apply to (1) any existing right I have to indemnification, contribution and a defense, (2) any directors and officers and general liability insurance coverage, (3) any rights I may have as a shareholder of the Company, (4) any rights I have to the Benefits, and (5) any rights which cannot be waived or released as a matter of law.

I understand that signing this Waiver and Release is an important legal act. I acknowledge that the Company has advised me in writing to consult an attorney before signing this Waiver and Release and has given me at least 21 days from the day I received a copy of this Waiver and Release to sign it.

In exchange for the payment to me of Benefits, I, among other things, (1) agree not to sue in any local, state and/or federal court regarding or relating in any way to my employment with or separation from the Company or the Affiliates, (2) knowingly and voluntarily waive all claims and release the Corporate Group from any and all claims, demands, actions, liabilities, and damages, whether known or unknown, arising out of or relating in any way to my employment with or separation from the Company or the Affiliates and (3) waive any rights that I may have under any of the Company’s involuntary severance benefit plans, except to the extent that my rights are vested under the terms of employee benefit plans sponsored by the Company or the Affiliates and except with respect to such rights or claims as may arise after the date this Waiver and Release is executed. This Waiver and Release includes, but is not limited to, claims and causes of action under: Title VII of the Civil Rights Act of 1964, as amended (“Title VII”); the Age Discrimination in Employment Act of 1967, as amended, including the Older Workers Benefit Protection Act of 1990 (“ADEA”); the Civil Rights Act of 1866, as amended; the Civil Rights Act of 1991; the Americans with Disabilities Act of 1990 (“ADA”); the Energy Reorganization Act, as amended, 42 U.S.C. §§ 5851; the Workers Adjustment and Retraining Notification Act of 1988; the Sarbanes-Oxley Act of 2002; the Employee Retirement Income Security Act of 1974, as amended; the Family and Medical Leave Act of 1993; the Fair Labor Standards Act; the Occupational Safety and Health Act; claims in connection with workers’ compensation or “whistle blower” statutes; and/or contract, tort, defamation, slander, wrongful termination or any other state or federal regulatory, statutory or common law. Further, I expressly represent that no promise or agreement which is not expressed in the Employment Agreement has been made to me in executing this Waiver and Release, and that I am relying on my own judgment in executing this Waiver and Release, and that I am not relying on any statement or representation of the Company, any of the Affiliates or any other member of the Corporate Group or any of their agents. I agree that this Waiver and Release is valid, fair, adequate and reasonable, is entered into with my full knowledge and consent, was not procured through fraud, duress or mistake and has not had the effect of misleading, misinforming or failing to inform me.

  

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Notwithstanding the foregoing, nothing contained in this Waiver and Release is intended to prohibit or restrict me in any way from (1) bringing a lawsuit against the Company to enforce the Company’s obligations under the Employment Agreement; (2) making any disclosure of information required by law; (3) providing information to, or testifying or otherwise assisting in any investigation or proceeding brought by, any federal regulatory or law enforcement agency or legislative body, any self-regulatory organization, or the Company’s legal, compliance or human resources officers; (4) testifying or participating in or otherwise assisting in a proceeding relating to an alleged violation of any federal, state or municipal law relating to fraud or any rule or regulation of the Securities and Exchange Commission or any self-regulatory organization; or (5) filing any claims that are not permitted to be waived or released under applicable law (although my ability to recover damages or other relief is still waived and released to the extent permitted by law).

Should any of the provisions set forth in this Waiver and Release be determined to be invalid by a court, agency or other tribunal of competent jurisdiction, it is agreed that such determination shall not affect the enforceability of other provisions of this Waiver and Release. I acknowledge that this Waiver and Release and the Employment Agreement set forth the entire understanding and agreement between me and the Company or any other member of the Corporate Group concerning the subject matter of this Waiver and Release and supersede any prior or contemporaneous oral and/or written agreements or representations, if any, between me and the Company or any other member of the Corporate Group. I understand that for a period of 7 calendar days following the date that I sign this Waiver and Release, I may revoke my acceptance of the offer, provided that my written statement of revocation is received on or before that seventh day by Chief Financial Officer, Aly Centrifuge Inc. c/o Aly Energy Services, Inc., 3 Riverway, Suite 920, Houston, Texas 77506, facsimile number: (713) 333-4004, in which case the Waiver and Release will not become effective. In the event I revoke my acceptance of this offer, the Company shall have no obligation to provide me Benefits. I understand that failure to revoke my acceptance of the offer within 7 calendar days from the date I sign this Waiver and Release will result in this Waiver and Release being permanent and irrevocable.

I acknowledge that I have read this Waiver and Release, have had an opportunity to ask questions and have it explained to me and that I understand that this Waiver and Release will have the effect of knowingly and voluntarily waiving any action I might pursue, including breach of contract, personal injury, retaliation, discrimination on the basis of race, age, sex, national origin, or disability and any other claims arising prior to the date of this Waiver and Release. By execution of this document, I do not waive or release or otherwise relinquish any legal rights I may have which are attributable to or arise out of acts, omissions, or events of the Company or any other member of the Corporate Group which occur after the date of the execution of this Waiver and Release.

 

	 	 	 
	Employee’s Printed Name	 	Company Representative
	 	 	 
	 	 	 
	Employee’s Signature 	 	Company’s Execution Date
	 	 	 
	 	 	 
	Employee’s Signature Date 	 	Employee’s Social Security Number

 

  

C-18

  

EXHIBIT D

FORM OF REGISTRATION RIGHTS AGREEMENT

 

 

 

 

 

 

 

  

D-1

  

 

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made and entered into as of April 15, 2014, by and among Aly Centrifuge Inc., a Delaware corporation (the “Company”), Aly Energy Services, Inc., a Delaware corporation (the “Parent”), and the holders listed on Schedule I hereto (the “Holders”).

WHEREAS, the Company has, pursuant to that certain Asset Purchase Agreement, Stock Purchase Agreement and Merger Agreement, dated as of April 11, 2014, to which the Parent, the Company and the Holders are parties (the “Purchase Agreement”), issued shares of the Company’s Preferred Stock, par value $.01 per share (such shares, together with additional shares to be issued as payment-in-kind dividends thereon, being collectively referred to herein as the “Preferred Stock”); and

WHEREAS, the shares of Preferred Stock are exchangeable for shares of the Parent’s Common Stock, par value $.001 per share (the “Parent Stock”); and

WHEREAS, it is a condition to the closing (the “Closing”) of the transactions contemplated by the Purchase Agreement that the Parent, the Company and the Holders enter into this Agreement at or prior to the Closing in order to grant the Holders certain registration rights as set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company, the Parent and the Holders agree as follows:

1. Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement. As used in this Agreement, the following terms shall have the respective meanings set forth in this Section 1:

“Affiliate” of any Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any Person has the meaning specified in Rule 12b-2 under the Exchange Act; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Business Day” means a day that is a Monday, Tuesday, Wednesday, Thursday or Friday and is not a day on which banking institutions in New York, New York generally are authorized or obligated by law, regulation or executive order to close.

“Commission” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

  

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“Electing Holders” means (i) the Holders (if such Holders then hold Registrable Securities) and (ii) the Holder or Holders (as applicable) of no less than a majority of the then outstanding Registrable Securities.

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

“Freely Tradable” means, with respect to any security, a security (a) that is eligible to be sold by the Holder thereof without any volume or manner of sale restrictions under the Securities Act pursuant to Rule 144, (b) which bears no legends restricting the transfer thereof and (c) bears an unrestricted CUSIP number (if held in global form).

“Holder” or “Holders” means the holder or holders, as the case may be, from time to time of Registrable Securities.

“Indemnified Party” shall have the meaning set forth in Section 5(c).

“Indemnifying Party” shall have the meaning set forth in Section 5(c).

“Losses” shall have the meaning set forth in Section 5(a).

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or known to the Parent to be threatened.

“Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means (i) the Parent Stock issuable or issued by Parent upon exchange of the Preferred Stock and (ii) any securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend, stock split, recapitalization or other distribution with respect to, or in exchange for, or in replacement of, the foregoing; provided, however, that the term “Registrable Securities” shall exclude in all cases any securities (i) sold or exchanged by a Person pursuant to an effective registration statement under the Act or in compliance with Rule 144 of the Act or (ii) that are Freely Tradable (it being understood that, for purposes of determining eligibility for resale under clause (ii) of this proviso, no securities held by any Holders shall be considered Freely Tradable to the extent such Holders reasonably determines that it is an “affiliate” (as defined under Rule 144) of the Parent).

  

D-3

  

 

“Registration Statement” means a registration statement which is required to register the resale of the Registrable Securities, and including the Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“Rule 433” means Rule 433 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“Securities Act” means the Securities Act of 1933, as amended.

“Trading Day” means a day during which trading in the Common Stock generally occurs.

“Trading Market” means the principal national securities exchange on which the Common Stock is listed.

2. Piggyback Registration.

(a) In the event that Parent decides at any time to register any of the Parent’s securities either for the Parent’s own account or the account of a security holder or holders, other than a registration on Form S-8 relating solely to employee benefit plans, the offer and sale of debt securities, or a corporate reorganization or other transaction on Form S-4 (or any successor form), then the Parent will:

 

(i) promptly give to each Holder written notice thereof; and

 

(ii) use its best efforts to include in such registration (and any related qualification under blue sky securities laws or other compliance) and include in any underwriting involved therein all the Registrable Securities specified in a written request or requests made by any Holder and received by the Parent within 30 days after written notice is delivered by the Parent. Such request by a Holder may specify all or a part of such Holder’s Registrable Securities. If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Parent, then such Holder shall nevertheless continue to have the right to include any of its Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Parent with respect to offerings of its securities, all upon the terms and conditions set forth herein.

 

  

D-4

  

 

(b) If the registration for which the Parent gives notice is for a registered public offering involving an underwriting, then the Parent will so advise the Holders. In such event, any Holder’s right to registration pursuant to this Section 2 will be conditioned upon such Holder’s participation in such underwriting and each Holder participating shall complete and execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting will (together with the Parent and the other holders of Parent securities with registration rights to participate therein) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected by the Parent and reasonably acceptable to a majority in interest of the Holders’ Registrable Securities included in such underwriting.

 

(c) Notwithstanding any other provision of this Section 2, if the underwriters’ representative advises the Parent in writing that marketing factors require a limitation on the number of shares to be underwritten, then the underwriters’ representative may (subject to the limitations set forth below) limit the number of Registrable Securities to be included in, the registration and underwriting, but in no event shall the amount of securities of the selling Holders included in the offering be reduced unless the securities of any other selling stockholders included in the offering are first excluded. The Parent will so advise all Holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the registration and underwriting will, subject to the immediately preceding sentence, be allocated first to the Parent for securities being sold for the Parent’s own account and thereafter to the Holders. If any Person does not agree to the terms of any such underwriting, then such Person will be excluded from the underwriting by written notice from the Parent or the underwriter. Any Registrable Securities or other securities excluded or withdrawn from such underwriting will be withdrawn from such registration. To facilitate the allocation of shares in accordance with the foregoing provisions, the Parent or the underwriter(s) may round the number of shares allocated to any Holder to the nearest 100 shares.

 

(d) The piggyback registration rights granted under this Section 2 shall automatically terminate as of the date and time at which all of the Registrable Securities are Freely Tradable. 

 

3. Registration Procedures. In connection with the Parent’s registration obligations hereunder, the Parent shall:

  

D-5

  

 

(a) Not less than five Trading Days prior to the filing of a Registration Statement or any related Prospectus or any amendment or supplement thereto, the Parent shall furnish to the Holders copies of all such documents proposed to be filed, which documents (other than those incorporated by reference) will be subject to the review of such Holders. Except as required by law, the Parent shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Electing Holders shall reasonably object in good faith.

 

(b) Use commercially reasonable efforts to (i) prepare and file with the Commission such amendments, including post-effective amendments, to each Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement continuously effective as to the applicable Registrable Securities and prepare and file with the Commission such additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424; and (iii) respond as promptly as reasonably possible, and in any event within ten Trading Days, to any comments received from the Commission with respect to each Registration Statement or any amendment thereto and, as promptly as reasonably possible provide the Holders true and complete copies of all correspondence from and to the Commission relating to such Registration Statement that pertains to the Holders as Selling Stockholders but not any comments that would result in the disclosure to the Holders of material and non-public information concerning the Parent or its subsidiaries.

 

(c) Comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the Registration Statements and the disposition of all Registrable Securities covered by each Registration Statement.

 

(d) Notify the Holders as promptly as reasonably possible (and, in the case of (i)(A) below, not less than three Trading Days prior to such filing) and (if requested by any such Person) confirm such notice in writing no later than one Trading Day following the day: (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed; (B) when the Commission notifies the Parent whether there will be a “review” of such Registration Statement and whenever the Commission comments in writing on such Registration Statement (in which case the Parent shall provide true and complete copies thereof and all written responses thereto to each of the Holders that pertain to the Holders as a Selling Stockholder or to the Plan of Distribution, but not information which the Parent believes would constitute material and non-public information); and (C) with respect to each Registration Statement or any post-effective amendment, when the same has been declared effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information that pertains to the Holders as Selling Stockholders or the Plan of Distribution; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Parent of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; and (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in such Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to such Registration Statement, Prospectus or other documents so that, in the case of such Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

  

D-6

  

 

(e) Use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i) any order suspending the effectiveness of a Registration Statement, or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, at the earliest practicable moment.

 

(f) Furnish to each Holder, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such Person (including those incorporated by reference) promptly after the filing of such documents with the Commission; provided, that the Parent shall have no obligation to provide any document pursuant to this clause that is available on the EDGAR system.

 

(g) Promptly deliver to each Holder, without charge, as many copies of each Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as such Persons may reasonably request. The Parent hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

 

(h) Prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of those jurisdictions within the United States as any Holder reasonably requests in writing to keep each such registration or qualification (or exemption therefrom) effective and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statements; provided, that the Parent shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or subject the Parent to any material tax in any such jurisdiction where it is not then so subject.

 

  

D-7

  

 

(i) Cooperate with the Holders to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be delivered to a transferee pursuant to the Registration Statements, which certificates shall be free, to the extent permitted by the Purchase Agreement, of all restrictive legends, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders may request. In connection therewith, if required by the Parent’s transfer agent, the Parent shall promptly after the effectiveness of the Registration Statement cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with its transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without legend upon sale by the holder of such shares of Registrable Securities under the Registration Statement.

 

(j) As promptly as reasonably possible, prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statements or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, no Registration Statement nor any Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(k) In connection with filing any Registration Statement, the Parent may require each selling Holder to furnish to the Parent a certified statement as to the securities of the Parent (including shares of Common Stock and Preferred Stock) beneficially owned by such Holder and any Affiliate thereof.

 

(l) In the event the Holders seek to complete an underwritten offering, for a reasonable period prior to the filing of any Registration Statement and throughout the period during which Registrable Securities are sold thereunder, make available upon reasonable notice at the Parent’s principal place of business or such other reasonable place for inspection by the Holders (and the managing underwriter or underwriters selected in accordance with Section 3(m)), such financial and other information and books and records of the Parent, and cause the officers, employees, counsel and independent certified public accountants of the Parent to respond to such inquiries, as shall be reasonably necessary (and in the case of counsel, not violate an attorney-client privilege, in such counsel’s reasonable belief), in the judgment of legal counsel to the Holders (and legal counsel for such managing underwriter or underwriters), to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering on behalf of the Holders (and any managing underwriter or underwriters) shall be conducted by legal counsel to the Holders (and legal counsel to such managing underwriter or underwriters); and provided further that each such party shall be required to maintain in confidence and not to disclose to any other Person any information or records reasonably designated by the Parent as being confidential, until such time as (A) such information becomes a matter of public record (whether by virtue of its inclusion in the Registration Statement or in any other manner other than through the release of such information by any Person afforded access to such information pursuant hereto), or (B) such Person shall be required so to disclose such information pursuant to a subpoena or order of any court or other governmental agency or body having jurisdiction over the matter (subject to the requirements of such order, and only after such Person shall have given the Parent prompt prior written notice of such requirement).

 

  

D-8

  

 

(m) The Holders may distribute the Registrable Securities by means of an underwritten offering; provided that (i) the Electing Holders provide written notice to the Parent of their intention to distribute Registrable Securities by means of an underwritten offering, (ii) the managing underwriter or underwriters thereof shall be designated by the Electing Holders (provided, however, that such designated managing underwriter or underwriters shall be reasonably acceptable to the Parent), (iii) each Holder participating in such underwritten offering agrees to sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the persons entitled selecting the managing underwriter or underwriters hereunder and (iv) each Holder participating in such underwritten offering completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. The Parent hereby agrees with each Holder that, in connection with any underwritten offering in accordance with the terms hereof, it will negotiate in good faith and execute all indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements, including using all commercially reasonable efforts to procure customary legal opinions and auditor “comfort” letters.

 

4. Registration Expenses. All fees and expenses incident to the Parent’s performance of or compliance with its obligations under this Agreement (excluding any underwriting discounts and selling commissions, but including all legal fees and expenses of one legal counsel to the Holders) shall be borne by the Parent whether or not any Registrable Securities are sold pursuant to a Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with the Trading Market, and (B) in compliance with applicable state securities or Blue Sky laws), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is reasonably requested by the holders of a majority of the Registrable Securities included in the Registration Statement), (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Parent, (v) Securities Act liability insurance, if the Parent so desires such insurance, and (vi) fees and expenses of all other Persons retained by the Parent in connection with the consummation of the transactions contemplated by this Agreement. In addition, the Parent shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit and the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange as required hereunder.

 

  

D-9

  

 

5. Indemnification.

 

(a) Indemnification by the Parent. The Parent shall, notwithstanding any termination of this Agreement, indemnify and hold harmless each Holder and each underwriter, broker-dealer or selling agent, if any, which facilitates the disposition of Registrable Securities, the officers, directors, agents, partners, members, stockholders and employees of each of them, each Person who controls any such Holder, underwriter, broker-dealer or selling agent (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, reasonable costs of preparation and reasonable attorneys’ fees) and expenses (collectively, “Losses”), as incurred, arising out of or relating to any untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus (including, without limitation, any “issuer free writing prospectus” as defined in Rule 433) or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus (including, without limitation, any “issuer free writing prospectus” as defined in Rule 433) or supplement thereto, in light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements, alleged untrue statements, omissions or alleged omissions are based solely upon information regarding such Holder, underwriter, broker-dealer or selling agent furnished in writing to the Parent by such Person expressly for use therein pursuant to Section 3(k). The Parent shall notify the Holders promptly of the institution, threat or assertion of any Proceeding of which the Parent is aware in connection with the transactions contemplated by this Agreement.

 

(b) Indemnification by Holders. Each Holder shall, notwithstanding any termination of this Agreement, severally and not jointly, indemnify and hold harmless the Parent, its directors, officers, agents and employees, each Person who controls the Parent (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents or employees of such controlling Persons, to the fullest extent permitted by applicable law, from and against all Losses, as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus (including, without limitation, any “issuer free writing prospectus” as defined in Rule 433), or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus, or any form of prospectus (including, without limitation, any “issuer free writing prospectus” as defined in Rule 433) or supplement thereto, in light of the circumstances under which they were made) not misleading to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding such Holder furnished in writing to the Parent by such Holder expressly for use therein. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation.

 

  

D-10

  

 

(c) Conduct of Indemnification Proceedings. If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly notify the Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party. An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party); provided that the Indemnifying Party shall not be liable for the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties. The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending Proceeding in respect of which any Indemnified Party is a party, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding. All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, promptly upon receipt of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided that the Indemnifying Party may require such Indemnified Party to undertake to reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

 

  

D-11

  

 

(d) Contribution. If a claim for indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5(c), any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 5(d), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the proceeds actually received by such Holder from the sale of the Registrable Securities subject to the Proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

 

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties and are not in diminution or limitation of the indemnification provisions under the Purchase Agreement.

 

6. Facilitation of Sales Pursuant to Rule 144. To the extent it shall be required to do so under the Exchange Act, the Parent shall timely file the reports required to be filed by it under the Exchange Act or the Securities Act (including the reports under Sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144), and shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable the Holders to sell Registrable Securities without registration under the Securities Act within the limitations of the exemption provided by Rule 144. Upon the request of any Holder in connection with that holder’s sale pursuant to Rule 144, the Parent shall deliver to such Holder a written statement as to whether it has complied with such requirements.

 

  

D-12

  

 

7. Market Stand-Off. Each Holder hereby agrees that, if requested in writing by the managing underwriter, it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to registration by the Parent for its own behalf of shares of its Common Stock or any other equity securities under the Securities Act and ending on the date specified by the Parent and the managing underwriter (such period not to exceed 180 days) (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly)for Common Stock (whether such shares or any such securities are then owned by the Holder or are thereafter acquired) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 7 shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers, directors, and stockholders individually owning more than five percent (5%) of the Parent’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to the same restrictions. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 7 or that are necessary to give further effect thereto.

 

8. Miscellaneous

(a) Remedies. In the event of a breach by the Parent or by a Holder, of any of their obligations under this Agreement, each Holder or the Parent, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Parent and each Holder agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

 

(b) Compliance. Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of Registrable Securities pursuant to the Registration Statement.

 

(c) Discontinued Disposition. Each Holder agrees by its acquisition of such Registrable Securities that, upon receipt of a notice from the Parent of the occurrence of any event of the kind described in Section 4(d), such Holder shall forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement or until it is advised in writing by the Parent that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement. The Parent may provide appropriate stop orders to enforce the provisions of this paragraph.

 

  

D-13

  

 

(d) Amendments and Waivers. No provision of this Agreement may be waived or amended except in a written instrument signed by the Parent and the Electing Holders. The Parent shall provide prior notice to all Holders of any proposed waiver or amendment. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

 

(e) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Section prior to 5:00 p.m. (New York time) on a Business Day, (ii) the Business Day after the date of transmission, if such notice or communication is delivered via facsimile or electronic mail as specified in this Agreement later than 5:00 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on such date, (iii) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The address of the Parent or the Holders for such notices and communications shall be as set forth in the Purchase Agreement. With respect to any Holder not a party to the Purchase Agreement, the address for notice and communications shall be as set forth in the stock books and records of the Parent.

 

(f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder. The Parent may not assign its rights or obligations hereunder without the prior written consent of the Electing Holders.

 

(g) Execution and Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement. In the event that any signature is delivered by facsimile or electronic mail transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such signature delivered by facsimile or electronic mail transmission were the original thereof.

 

(h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.

 

  

D-14

  

 

(i) Submission to Jurisdiction. The Parent and the Holders each irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the courts of the State of Texas, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for the recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such Texas State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

 

(j) Waiver of Venue. The parties hereto each irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, (i) any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in Section 8(i) and (ii) the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(k) Cumulative Remedies. The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

 

(l) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

(m) Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and supersedes all other prior agreements and understandings, both written and oral, between the parties, with respect to the subject matter hereof.

 

(n) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

  

D-15

  

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

	 	Aly Centrifuge Inc.	 
	 	 	 	 
	
  

	
By: 

	 	 
	 	 	Munawar H. Hidayatallah	 
	 	 	Chairman and CEO	 
	 	 	 	 
	 	Aly Energy Services, Inc.	 
	 	 	 	 
	 	By:	 	 
	 	 	Munawar H. Hidayatallah	 
	 	 	Chairman and CEO	 
	 	 	 	 
	 	1211296 Alberta, Inc.	 
	 	 	 	 
	 	By:	 	 
	 	 	 	 
	 	Canadian Nitrogen Services, Ltd.	 
	 	 	 	 
	 	By: 	 	 
	 	 	 	 
	 	 	 	 
	 	 	Myles Bowman	 
	 	 	 	 
	 	 	 	 
	 	 	Jorge Rivera	 

 

  

D-16

  

 

Schedule I

Name and notice address of Holders

 

	Canadian Nitrogen Services Ltd. 	
610B McCool Street

Crossfield, Alberta

Canada T0M 0S0

Attn: Tim Pirie

	 	 
	1211296 Alberta Inc.	
3 East Lake Circle NE

Airdrie Alberta

Canada T4A 2J9

Attn: Ed Lantz

	 	 
	Jorge Rivera 	
Av. Javier Prado Este

5812, La Molina, Lima, Peru

	 	 
	Myles Bowman 	
2561 Stoneybrook Drive

Prosper, TX, USA 75078

 

  

D-17

  

 

Exhibit E

Supply Agreement

 

 

 

 

 

 

 

 

 

  

E-1

  

THIS AGREEMENT Dated this______________day of______________20_____

BETWEEN:

 

	 	United Oilfield Inc.	OF THE FIRST PART
	-and-	 	 
	 	 	 
	 	Aly Energy Services, Inc.	OF THE SECOND PART

WHEREAS:

	
I.  

	
United is in the business of designing, manufacturing, marketing and renting centrifuges and other solids control equipment (“the Equipment”) to the Global oil and gas industry;

NOW THEREFORE THIS AGREEMENT WITNESSETH that is consideration of the mutual covenants and agreements herein contained, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties agree to follows:

	
1.  

	
The term of this Agreement shall commence on April 4th, 2014 and shall continue thereafter until April 4th, 2018 (“the Term”) unless earlier terminated in accordance with this Agreement.

	
2.  

	
United hereby agrees not to sell, lease or market the Equipment into the USA oil and gas market. Bare-in mind centrifuges that have already been sold to competitors may end up in the USA; this United has no control over. United may sell centrifuges to Aly Energy competitors with assurances from competitors that the centrifuges will not be purchased for the USA market.

	
3.  

	
Aly Energy will not directly do any business in the Canadian oil and gas market that competes with United.

	
4.  

	
For a period of April 4th, 2014 to April 4th, 2018 (4 years) after the effective date of this Agreement, United/Aly Energy will not directly or indirectly solicit business from, or attempt to sell, license or provide the same or similar products or services as are now provided to, any customer or client of Aly Energy/United. Further, for a period of April 4th, 2014 to April 4th, 2018 (4 years) after effective date of this Agreement, United/Aly Energy will not directly or indirectly solicit, induce or attempt to any employee of Aly Energy/United to terminate his or her employment with Aly Energy/United.

	
5.  

	
The price of the Equipment to be purchased by Aly Energy from United during the Term of this Agreement shall be as follows:

	
a.  

	
During the first twenty four (24) months of the Term commencing on the date of the Agreement, the purchase price of the Equipment shall be calculated in accordance with this formula set out in Schedule “A”, Price List attached.

	
b.  

	
From and including the 25th month through to the end of the 48th month of the Agreement, the purchase price of the Equipment shall be calculated in accordance with this formula set out in Schedule “A”, Price List attached.

  

E-2

  

 

In addition to the Formula Price, Aly Energy shall pay all customs duties, excise taxes and other duties, taxes or charges of a similar nature arising in relation to purchase of the Equipment (collectively referred to as “the Purchase Price”)

	
6.  

	
The term for the payment of the Purchase Price shall be a follows:

	
a.  

	
Upon placing an order to United for the Equipment, Aly Energy shall pay to United one half (1/2) of the Purchase Price; and

	
b.  

	
Upon completion of the Equipment to Aly Energy, which shall be FOB Calgary, Aly Energy shall pay to United the balance of the Purchase Price, as defined in Schedule “B” attached.

	
7.  

	
Aly Energy hereby agrees that upon execution of this Agreement, it shall present a plan to purchase further units of the Equipment.

	
8.  

	
Title of the Equipment ordered by Aly Energy shall pass from United to Aly Energy upon delivery.

	
9.  

	
United hereby agrees to promptly fill all orders for Equipment placed by Aly Energy and warrants that the Equipment shall be free from defects.

	
10.  

	
Aly Energy agrees to immediately advise United upon becoming aware of any defects in the Equipment and United agrees that is shall repair or replace the same without cost to Aly Energy in accordance with United’s standard warranty program. Aly Energy may, but is not obliged to, utilize the repair and maintenance service offered by United for the purpose of repairing and/or maintaining the Equipment, whether such Equipment is under warranty or not, as defined in Schedule “C” attached.

 

	
11.  

	
This Agreement shall be terminated upon the happening of any of the following events:

	
a.  

	
either party being adjudged bankrupt

	
b.  

	
if Aly Energy ceases or threatens to cease to carry on its business

	
c.  

	
if Aly Energy suspends business;

	
d.  

	
by the mutual agreement of the parties; or

	
e.  

	
by either party giving the other party ninety (90) days written notice of its intention to terminate this Agreement.

	
12.  

	
Aly Energy acknowledges and agrees that:

	
a.  

	
all data, information and material of a confidential nature provided or disclosed to the Aly Energy by or on behalf of United.

	
b.  

	
all data, information and material of a confidential nature concerning the Equipment, including but not limited to systems, operations, processes, technology, trade practices, products, services, marketing or other strategic plans, suppliers or customers which is obtained by Aly Energy in the performance of it obligations under this Agreement; and

	
c.  

	
any and all information or material provided to Aly Energy by or on behalf of United which is marked “CONFIDENTIAL”;

  

E-3

  

 

and all copies thereof (hereinafter collectively call the “Confidential Information”) are confidential and constitute valuable and proprietary information and materials of United and shall be kept strictly confidential, both during and after the Term, and shall only be used for the purpose set out in this Agreement. In that regard, such Confidential Information may only be disclosed by Aly Energy to those of its officers, employees, agents or contractors who have a need to know such information for the purposes of this Agreement and Aly Energy shall take appropriate steps, whether by instruction, agreement or otherwise to ensure that such officers, employees, agents and contractors keep such information strictly confidential and otherwise comply with the provisions of this section. No Confidential Information shall be copied or provided or disclosed to any other party without the prior written consent of Aly Energy. Aly Energy acknowledges that is has no interest in the Confidential Information and shall surrender all Confidential Information in its possession or control (including all copies thereof) to United immediately upon termination or expiration of the Agreement or at any earlier time upon the request of United, and shall thereafter cease all use of the Confidential Information.

	
13.  

	
United shall have no obligation to disclose to Aly Energy any particular data, information or material which is considered by United to be sensitive or confidential except to the extent that such data, information or material materially affects the requirement of Aly Energy for the purposes of this Agreement. All data, information or material which is provided to Aly Energy by United shall be and remain the sole property of United, and shall be returned to United immediately upon termination or expiration of this Agreement or at any earlier time upon United’s request.

	
14.  

	
The parties agree that improper disclosure of use of the Confidential Information will cause irreparable harm to United, which harm may not be adequately compensated by damages. As a result, the parties agree that, in addition to all other remedies United may have and not in derogation thereof, United may seek and obtain from any court of competent jurisdiction injunctive relief in respect of any actual or threatened disclosure of use contrary to the provisions of this Agreement.

	
15.  

	
Upon termination or expiration of this Agreement, Aly Energy shall forthwith return to United all Confidential Information in written form within its possession or control, together with all copies thereof or, at United’s written direction, destroy all such Confidential Information and provide United with certificate confirming such destruction.

	
16.  

	
Notwithstanding the expiration or termination of this Agreement, the provisions of this Agreement which are expressly or impliedly intended to survive shall survive any such expiration or termination and shall remain in force for a period of two (2) years thereafter.

  

E-4

  

 

	
17.  

	
The term “force majeure” shall mean acts of God, strikes, lockouts or other industrial disturbances, acts of the Queen’s enemies, wars, blockades, insurrections, riots epidemics, landslides, lightning, earthquakes, fires, storms, floods, washouts, arrests and restraints of rulers and peoples, civil disturbances, explosions, inability with reasonable diligence to obtain materials and any other cause not within the control of the party claiming a suspension, which, by the exercise of due diligence, such party shall not have been able to avoid or overcome; provided however, the term “ force majeure” does not include a lack of financial resources or available funds or similar financial predicament or economic circumstances or any other event, the occurrence or existence of which is due the financial inability of a party to pay any amount that a prudent and financially sound entity in similar circumstances would reasonably be expected to pay to avoid or discontinue such event.

In the event that either party is rendered unable wholly, or in part, by force majeure to carry out its obligations under this Agreement, other than its obligations to make payments of money due hereunder, such party shall give written notice to the other party stating full particulars of such force majeure.

	
18.  

	
The Schedules attached hereto shall form part of this Agreement and are incorporated herein by reference.

	
19.  

	
Aly Energy shall not assign, transfer, pledge or hypothecate this Agreement or any interest herein without the prior written consent of United. Any such assignment, transfer, pledge or hypothecation consented to by United shall not operate to relieve Aly Energy from the performance of any and all of its obligations hereunder.

	
20.  

	
Nothing in this Agreement, nor in any acts of United and Aly Energy pursuant to this Agreement, shall be construed, implied or deemed to create an agency, partnership, joint venture or employer and employee relationship between United and Aly Energy, and neither party has the authority to bind the other to any obligation of any kind.

	
21.  

	
Any notice provided for or permitted to be given pursuant to this Agreement shall be in writing and shall, except in the event of an interruption in postal service during which time of all notices must be delivered or faxed, be sufficiently given if delivered or sent by prepaid registered mail addressed to the party for whom the same is intended to the office of record for such parties with Corporate Registries:

Any notice delivered shall be deemed to be received when left during normal business hours at the office set forth above, any notice sent by prepaid registered mail shall be deemed to have been received on the third normal delivery day following the posting thereof and any notice sent by fax shall be deemed to be received on the day after the transmitting fax machine confirms receipt of the fax. Either party shall be entitled to change its address or fax number for notice by notice in writing to the other. The word “notice” in this provision includes any request, statement, report, demand, order or other writing in this Agreement provided or permitted to be given by United to Aly Energy or by Aly Energy to United.

	
22.  

	
The provisions of this Agreement constitute the entire agreement between the parties relating to the provision of Services and supersedes any prior agreements, letters of intent or understanding, whether written or oral, between the parties with respect to the matters contemplated herein. No terms, conditions, warranties, promises or undertakings of any nature whatsoever, express or implied, exist between the parties with respect to this Agreement except as herein set forth. This Agreement may be amended, changed or modified only by further written agreement between the parties.

  

E-5

  

 

	
23.  

	
If any term, condition or provision of this Agreement or the application thereof to any party or circumstance shall to any extent be invalid or unenforceable, the remainder of this Agreement or the applications of such term, condition or provision to such party circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each term, condition or provision shall be separately valid and enforceable to the fullest extent permitted by law.

	
24.  

	
Time shall be of the essence of this Agreement.

	
25.  

	
Each of the parties to this Agreement shall at the request of the other party hereto, execute and deliver any further documents and do all acts and things as that party may reasonably require to carry out the full intent and meaning of this Agreement.

	
26.  

	
This Agreement shall be governed by the laws in force in the Province of Alberta.

	
27.  

	
Words importing the singular number only shall include the plural and vice versa and words importing the masculine gender shall include the feminine and neuter gender and words importing persons shall also mean firms, corporations and partnerships and vice versa.

	
28.  

	
In the event of any disputed hereunder, the same shall be determined by arbitration in accordance with the provisions of the Arbitration Act (Alberta) and all amendments thereto.

	
29.  

	
This Agreement shall enure to the benefit of and be binding upon the successors and permitted assigns of Aly Energy and the successors and assigns of United.

IN WITNESS WHEREOF the parties hereto have executed this Agreement.

 

	 	
United Oilfield Inc.

	 
	 	 	 	 
	 	Per:	 	 
	 	 	 	 
	 	 	 	 
	 	Aly Energy Services, Inc.	 
	 	 	 	 
	 	Per:	 	 

 

  

E-6

  

 

Schedule “A”

Purchase Price of the Equipment

Purchase price of Equipment (in US Dollars) for 48 months ending April 4th, 2018

This MC formula is as follows:

Purchase price of Equipment (MC) for the first 24 months;

A = Cost of material X 1.175

B = Number of labor hours X 83.50 per hour

C = Miscellaneous (i.e. freight) cost X 1.07

MC = (A+B+C)

 

Purchase price of Equipment (MC) for the first 25th – 48th months;

A = Cost of material X 1.225

B = Number of labor hours X 88.50 per hour

C = Miscellaneous (i.e. freight) cost X 1.07

MC = (A+B+C)

 

  

E-7

  

 

SCHEDULE “B”

Completion of Equipment – Definition

 

Completion of Equipment is defined as follows:

The completion date is estimated at 120 days from the date United Oilfield Inc. receives 50% for the order.

Final payment upon completion of order.

Once an order is place and purchase order received; if the order is cancelled Aly Energy will be responsible to pay the cost of material and mark-up. This material will be kept in inventory for Aly Energy to be completed at a later date; as requested.

  

E-8

  

 

SCHEDULE “B”

Warranty - Definition

Conditions of Sale

 

WARRANTY: All statuary warranties are waived by Buyer and the following warranty is made instead. Products manufactured by United Oilfield Inc. are guaranteed against defects in workmanship and material for a period of one year after delivery. Products that are repaired or refurbished will be guaranteed against defects in workmanship and material for a period of six months after delivery. We will replace without charge, any such products that our examination discloses to be thus defective, provided return or reflection of such product is made within such period. Product failures due to misuse, wear, corrosion, corrosion fatigue, or stress corrosion cracking are specifically excluded from this warranty. We will not be responsible for the selection of material to resist wear, corrosion, corrosion fatigue, stress corrosion, cracking or other corrosion oriented failures. We shall in no event be responsible for (a) the cost of any work done by Buyer or any other party on products furnished hereunder (unless specifically authorized in each instance by us in writing); or (b) any consequential damages, or (c) any transportation or other costs in effecting the return of such products to us. We make no other warranty of any kind, express or implied, except that the products sold hereunder shall meet the description on the face hereof. WE DO NOT WARRANT THAT SAID PRODUCTS ARE FIT FOR ANY PARTICULAR PURPOSE.

 

Products manufactured by others and resold by us will be guaranteed by that manufacturer’s own warranty. Terms of that warranty are available on request.

LIMITATION OF SELLER’S LIABILITY: Seller’s liability on account of defective goods shall in no event exceed the replacement cost thereof, Seller shall in no event be liable to Purchaser for expenses incurred on or for loss, damage or injury (including death), direct or indirect, special or consequential, to persons or property, tangible or intangible (including loss of business) (a) occasioned by or growing out of the construction, maintenance, use, non-use, repair, replacement or delay in delivery of, or any defects in the goods, or (b) arising in connection with any method or process for which the goods may be employed.

CLAIMS FOR DEFECTS: All claims for alleged corrections and defects shall be made in writing and delivered to Seller within 10 days of discovery of any such defect within the applicable warranty period, or these rights are waived. Purchaser shall afford Seller prompt and reasonable opportunity to inspect goods as to which any claim is made as above stated. Seller reserves the right, in its sole discretion, to remedy in any manner any defect in the goods or to substitute other goods therefore.

CHANGE ORDER: No alterations or modifications shall be binding unless in writing and signed by United Oilfield Inc. in acceptance.

 

  

E-9

  

 

SCHEDULES TO

ASSET PURCHASE AGREEMENT,

STOCK PURCHASE AGREEMENT, AND MERGER AGREEMENT

 

THE DISCLOSURE OF ANY MATTER IN ANY SECTION OF THESE SCHEDULES (THE “DISCLOSURE SCHEDULES”), SHALL BE DEEMED TO BE A DISCLOSURE FOR PURPOSES OF ALL OTHER SECTIONS OF THE DISCLOSURE SCHEDULES SO DELIVERED TO THE EXTENT IT IS READILY APPARENT FROM THE FACE OF SUCH DISCLOSURE THAT SUCH MATTER IS PERTINENT, BUT SHALL EXPRESSLY NOT BE DEEMED TO CONSTITUTE AN ADMISSION BY SELLERS, OR TO OTHERWISE IMPLY, THAT ANY SUCH MATTER IS MATERIAL FOR THE PURPOSES OF THIS AGREEMENT OR OTHERWISE.

 

 

 

 

 

 

  

S-1

  

 

Schedule 1.01(a)

Closing Net Working Capital

The "certain other adjustments" defined in the Closing Net Working Capital calculation is represented by the "Long term debt, net of current portion" as disclosed on the audited financial statements for the year ended December 31, 2013.

Closing Net Working Capital was calculated as follows:

 

 

  

S-2

  

 

Schedule 1.01(b)

EBITDA

The adjustment to EBITDA for the "pro forma effect for (X) the assumed ownership of the Purchased Assets, (Y) the elimination of certain intercompany and related party transactions" is represented by the elimination of cost of sales incurred with the previous owners of the Purchased Assets for cost sharing purposes. Because these cost sharing amounts will not be incurred in the future, they are removed from the EBITDA calculation.

EBITDA was calculated as follows:

 

United Centrifuge USA, LLC Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) for the year ended December 31, 2013

	  	 	
Audited financial statement information for the year ended December 31,

2013

	 
	
Net earnings for the year

	 	 	1,707,334	 
	  	 	 	 	 
	
Add:

	 	 	 	 
	
Interest expense

	 	 	24,159	 
	
State taxes

	 	 	3,037	 
	
Depreciation included in cost of sales

	 	 	99,326	 
	  	 	 	 	 
	
Preliminary Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

	 	 	1,833,856	 
	  	 	 	 	 
	
Adjustments for pro forma effect for ownership of the Purchased Assets

	 	 	3,793,145	 
	  	 	 	 	 
	
Adjusted EBITDA

	 	 	5,627,001	 

 

  

S-3

  

United Centrifuge USA, LLC

 

	
Cost sharing account balances included in Cost of Services of the audited financial statements for the year ended Dec 31, 2013

	 	
Cost of sales to eliminate in the EBITDA

calculation

	 
	
CENTRIFUGE COSTS:010 - Travel Expenses:10B - Airline Costs

	 	 	114,865	 
	
CENTRIFUGE COSTS:010 - Travel Expenses:10C - Apartment

	 	 	50,774	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:Mud Processing Tank

	 	 	12,300	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:V-Bottom Tank

	 	 	2,490	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:Extra VFD

	 	 	2,160	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:Polymer Tank

	 	 	139,020	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:Pump for Barite Recovery

	 	 	134,559	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Extra Equipment:Torpedo Tank, Pan & Parts

	 	 	148,095	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-12 - Sub-Rental 60%

	 	 	14,160	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-4 - Sub-Rental 60%

	 	 	56,880	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-5 - Sub Rental 60%

	 	 	70,800	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-8 - Sub Rental 60%

	 	 	61,920	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-9 - Sub Rental 60%

	 	 	46,320	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U828-13 - Sub Rental 60%

	 	 	16,800	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:800 Sub-Rentals:U85-135 - Sub Rental 60%

	 	 	32,760	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:1000 Centrifuges:UI-125 - 60% CNS

	 	 	43,380	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:1000 Centrifuges:UI-126 - 60% CNS

	 	 	720	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:1000 Centrifuges:UI-127 - 60% CNS

	 	 	52,080	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:1000 Centrifuges:UI-128 - 60% CNS

	 	 	52,080	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:PES:PES-01 - 60% PES

	 	 	92,494	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:PES:U27-27 - 60% PES

	 	 	88,140	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:1056528 Alberta Ltd.:TP-01 - 60% 1056528

	 	 	2,100	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:1056528 Alberta Ltd.:TP-02 - 60% 1056528

	 	 	52,816	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:1056528 Alberta Ltd.:TP-03 - 60% 1056528

	 	 	92,378	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:1056528 Alberta Ltd.:U27-20 - 60% 1056528

	 	 	90,690	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-03 - 60% CNS

	 	 	153,600	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-04 - 60% CNS

	 	 	74,340	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-05 - 60% CNS

	 	 	129,330	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-07 - 60% CNS

	 	 	104,760	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-08 - 60% CNS

	 	 	60,270	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-09 - 60% CNS

	 	 	112,680	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-11 - 60% CNS

	 	 	70,740	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-12 - 60% CNS

	 	 	72,402	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-13 - 60% CNS

	 	 	121,470	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-14 - 60% CNS

	 	 	143,940	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-17 - 60% CNS

	 	 	132,210	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-18 - 60% CNS

	 	 	88,151	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-20 - 60% CNS

	 	 	38,520	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-22 - 60% CNS

	 	 	109,080	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-23 - 60% CNS

	 	 	24,360	 

 

  

S-4

  

 

	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UI-24 - 60% CNS

	 	 	122,640	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UIP-216 - 60% CNS

	 	 	95,820	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:2000 Centrifuges:UIP-221 - 60% CNS

	 	 	107,940	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-08

	 	 	2,400	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT20-01

	 	 	4,425	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT20-02

	 	 	215	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT20-03

	 	 	10,880	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-01

	 	 	3,375	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-02

	 	 	3,780	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-03

	 	 	2,550	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-04

	 	 	2,025	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-05

	 	 	9,855	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-06

	 	 	14,925	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Dryer Tanks:DT30-07

	 	 	4,700	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-32

	 	 	6,000	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-31

	 	 	6,000	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-02

	 	 	3,480	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-03

	 	 	3,030	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-04

	 	 	7,140	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-05

	 	 	4,320	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-06

	 	 	4,320	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-07

	 	 	4,320	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-09

	 	 	3,780	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-10

	 	 	7,388	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-11

	 	 	11,168	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-12

	 	 	8,900	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-13

	 	 	8,900	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-14

	 	 	32,250	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-15

	 	 	32,250	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-16

	 	 	17,450	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-17

	 	 	25,230	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-18

	 	 	720	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-21

	 	 	13,025	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-22

	 	 	13,025	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-23

	 	 	13,025	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-24

	 	 	17,625	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-25

	 	 	17,625	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-26

	 	 	17,625	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-27

	 	 	11,750	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-28

	 	 	13,850	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-29

	 	 	9,650	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:Shaker Units:USD-30

	 	 	675	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:LHF Sub-Rentals:LHF-101

	 	 	72,390	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:LHF Sub-Rentals:LHF-102

	 	 	34,080	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:LHF Sub-Rentals:LHF-103

	 	 	85,320	 
	
CENTRIFUGE COSTS:15 - Sub-Rentals:LHF Sub-Rentals:LHF-105

	 	 	33,600	 
	
INTER-COMPANY COSTS:Canadian Nitrogen USA Inc.:Admin

	 	 	123,679	 
	
INTER-COMPANY COSTS:Canadian Nitrogen Service CDN:Admin

	 	 	197,170	 
	
INTER-COMPANY COSTS:Canadian Nitrogen Service CDN:Personnel

	 	 	4,500	 
	
INTER-COMPANY COSTS:Canadian Nitrogen Service CDN:Travel / Accommodation

	 	 	393	 
	
Accumulated audit adjustments affecting the above accounts in total

	 	 	-364,672	 
	  	 	 	3,793,145	 

  

S-5

  

Schedule 2.01(a)

UOI Purchased Assets

 

	
Serial #

	
Description

	 	 
	CENTRIFUGES	 
	
LHF-101

	
MS1000 Centrifuge

	
LHF-102

	
MS1000 Centrifuge

	
LHF-103

	
MS1000 Centrifuge

	
LHF-105

	
MS1000 Centrifuge

	
U85-135

	
MS1000 Centrifuge

	
U85-136

	
MS1000 Centrifuge

	
U828-4

	
SS800 Centrifuge

	
U828-5

	
SS800 Centrifuge

	
U828-8

	
SS800 Centrifuge

	
U828-9

	
SS800 Centrifuge

	
U828-12

	
SS800 Centrifuge

	
U828-13

	
SS800 Centrifuge

	  	  
	TRANSFER PUMPING UNITS	 
	
VU20-101

	
20 HP Pumping Unit

	
VU20-102

	
20 HP Pumping Unit

	
VU20-103

	
20 HP Pumping Unit

	
VU20-104

	
20 HP Pumping Unit

	
VU20-105

	
20 HP Pumping Unit

	
VU20-106

	
20 HP Pumping Unit

	
VU20-107

	
20 HP Pumping Unit

	
VU20-108

	
20 HP Pumping Unit

	
VU20-109

	
20 HP Pumping Unit

	
VU20-110

	
20 HP Pumping Unit

	
BD-UC-14

	
60 HP VFD

	
FPU-229

	
40 HP Pumping Unit with Starter

	
FPU-2205

	
40 HP Pumping Unit with Starter

	
VU40-101

	
40 HP Pumping Unit

	
VU60-101

	
60 HP Pumping Unit

 

  

S-6

  

 

	
TORPEDO TANKS

	  
	
UTT-01

	
Torpedo Tanks

	
UTT-02

	
Torpedo Tanks

	
UTT-03

	
Torpedo Tanks

	
UTT-04

	
Torpedo Tanks

	
UTT-05

	
Torpedo Tanks

	
UTT-06

	
Torpedo Tanks

	
UTT-07

	
Torpedo Tanks

	
UTT-08

	
Torpedo Tanks

	
UTT-09

	
Torpedo Tanks

	
UTT-10

	
Torpedo Tanks

	
UTT-11

	
Torpedo Tanks

	
UTT-12

	
Torpedo Tanks

	
UTT-13

	
Torpedo Tanks

	
UTT-14

	
Torpedo Tanks

	
UTT-15

	
Torpedo Tanks

	 	 
	
BARITE PANS

	  
	
UBP-01

	
800 Barite Pan

	
UBP-02

	
800 Barite Pan

	
UBP-03

	
1000 Barite Pan

	
UBP-04

	
1000 Barite Pan

	
UBP-05

	
2000 Barite Pan

	
UBP-06

	
2000 Barite Pan

	
UBP-07

	
2000 Barite Pan

	
UBP-08

	
2000 Barite Pan

	
UBP-09

	
2000 Barite Pan

	
UBP-10

	
1000 Barite Pan

	
UBP-11

	
1000 Barite Pan

 

  

S-7

  

 

	
POLYMER INJECTION TANKS

	 
	
PT06-B

	
Polymer Injection Tank

	
PT11-Z

	
Polymer Injection Tank

	
PT-13

	
Polymer Injection Tank

	
UPT-17

	
Polymer Injection Tank

	
UPT-19

	
Polymer Injection Tank

	
UPT-22

	
Polymer Injection Tank

	
UPT-24

	
Polymer Injection Tank

	
UPT-25

	
Polymer Injection Tank

	
UPT-26

	
Polymer Injection Tank

	 	 
	
PROCESSING TANKS

	 
	
UCT-02

	
Processing Tank

	
CST-1008/PU-1005

	
Processing Tank

  

S-8

  

 

Schedule 2.01(b)

CNS Purchased Assets

	
Serial #

	
Description

	 	 
	
CENTRIFUGES

	 
	
UI-125

	
SS 1000 Centrifuges

	
UI-126

	
SS 1000 Centrifuges

	
UI-127

	
SS 1000 Centrifuges

	
UI-128

	
SS 1000 Centrifuges

 

	
PES-01

	
SS 2000 Centrifuges

	
TP-01

	
SS 2000 Centrifuges

	
TP-02

	
SS 2000 Centrifuges

	
TP-03

	
SS 2000 Centrifuges

	
U27-20

	
SS 2000 Centrifuges

	
U27-27

	
SS 2000 Centrifuges

	
UI-03

	
SS 2000 Centrifuges

	
UI-04

	
SS 2000 Centrifuges

	
UI-05

	
SS 2000 Centrifuges

	
UI-07

	
SS 2000 Centrifuges

	
UI-08

	
SS 2000 Centrifuges

	
UI-09

	
SS 2000 Centrifuges

	
UI-11

	
SS 2000 Centrifuges

	
UI-12

	
SS 2000 Centrifuges

	
UI-13

	
SS 2000 Centrifuges

	
UI-14

	
SS 2000 Centrifuges

	
UI-17

	
SS 2000 Centrifuges

	
UI-18

	
SS 2000 Centrifuges

	
UI-20

	
SS 2000 Centrifuges

	
UI-22

	
SS 2000 Centrifuges

	
UI-23

	
SS 2000 Centrifuges

	
UI-24

	
SS 2000 Centrifuges

	
UIP-216

	
SS 2000 Centrifuges

	
UIP-221

	
SS 2000 Centrifuges

  

S-9

  

 

Schedule 4.03

Capitalization

Equity Holders and Equity Interests Outstanding of United and Blocker Corps.

United

There are currently 85,000 issued and outstanding units of United, held by the following Persons:

	
Person

	 	
Units

	 	 	
Ownership Interest

	 
	
United Centrifuge, Inc.

	 	 	30,000	 	 	 	35.295	%
	
Canadian Nitrogen Services USA, Inc.

	 	 	30,000	 	 	 	35.295	%
	
Jorge Rivera

	 	 	15,000	 	 	 	17.650	%
	
Myles Bowman

	 	 	10,000	 	 	 	11.760	%
	
TOTAL

	 	 	85,000	 	 	 	100.000	%

 

United Centrifuge, Inc. ("UCI")

There are currently 100 issued and outstanding shares of UCI, held by the following Person:

	
Person

	 	
Units

	 	 	
Ownership Interest

	 
	
1211296 Alberta, Inc.

	 	 	100	 	 	 	100	%
	
TOTAL

	 	 	100	 	 	 	100	%

 

Canadian Nitrogen Services USA, Inc. ("CNS USA")

There are currently 1,000 issued and outstanding shares of CNS USA held by the following Person:

	
Person

	 	
Units

	 	 	
Ownership Interest

	 
	
Canadian Nitrogen Services, Ltd.

	 	 	1,000	 	 	 	100	%
	
TOTAL

	 	 	1,000	 	 	 	100	%

  

S-10

  

 

Schedule 4.04

Blocker Corps' Assets or Liabilities

United Centrifuge, Inc. ("UCI") has or had the following assets and liabilities, all of which, excepting the United stock, have been removed from the Corporation:

Assets

	
1.

	
30,000 Units of United Common Stock.

	
2.

	
Two vehicles (VIN 3GCPKSE35BG215167 and VIN 1GNSKJE70CR189335).

	
3.

	
Checking account with Amegy Bank.

	
4.

	
United States work visas.

Liabilities

 

	
1.

	
Two vehicle leases with Ally Bank.

	
2.

	
State Farm Contract.

 

Canadian Nitrogen Services USA, Inc. has or had the following assets and liabilities, all of which, excepting the United stock, have been removed from the Corporation:

Assets

	
1. 

	
30,000 Units of United Common Stock.

	
2. 

	
WellsFargo Bank Account.

	
3. 

	
RBC Bank Account.

	
4. 

	
Sterling Plaza Office Lease.

	
5.

	
Three service trucks (VIN 1FT7X2B65EEA983586, VIN 1FT7X2B68EEA20451 and VIN 1FT7X2B6XEFA83213).

	
6.

	
CAT Financial Account.

Liabilities

	
1.

	
Three vehicle leases with New Concept.

	
2.

	
Sterling Plaza Office Lease.

	
3. 

	
Verizon Wireless contract.

	
4. 

	
Master Service Agreement with Greens Energy.

	
5. 

	
Master Service Agreement with Halliburton Energy Services.

	
6. 

	
Veriforce Contract

	
7. 

	
BKI Risk Management Contract.

	
8. 

	
Berkley Insurance Contract.

	
9. 

	
Hill International Trucks Contract.

	
10. 

	
ISN Software Corporation Contract.

  

S-11

  

 

Schedule 4.07

Consents, waivers and approvals obtained by Sellers

None.

 

 

 

 

 

 

 

 

  

S-12

  

 

Schedule 4.08(a)

 

None.

 

 

 

 

 

 

 

 

 

  

S-13

  

 

Schedule 4.08(b)

Licenses

 

United is conducting business in the following states:

Pennsylvania

Texas

West Virginia

Ohio

North Dakota

Oklahoma

United is authorized and licensed to do business in the following states:

Pennsylvania

Texas

West Virginia

Ohio

United has registered to do business in the following states, as a foreign limited liability company, but is still waiting for its filed certificate from the following states:

North Dakota (sent on March 26, 2014)

Oklahoma (sent on March 26, 2014)

  

S-14

  

 

Schedule 4.09

Financial Information; Books and Records

None.

 

 

 

 

 

 

 

 

  

S-15

  

 

Schedule 4.10

Liabilities

 

	
1.

	
Master Finance Lease Agreement, by and between New Concept Leasing, Inc., which incorporates and includes Lease H-15624, Lease H-15625, Lease H-15626, Lease H-15627, Lease H-15628, Lease H-15629, Lease H-15630, Lease H-15631, Lease H-15632, dated November 22, 2013, and concerns nine (9) vehicles.

 

	
2.

	
Lease Agreement, by and between United and LEAF Capital Funding, LLC, dated January 20, 2014, concerning office equipment.

 

	
3.

	
Promissory Note (Term Loan Facility) made by United in favor of GreenBank, N.A., dated August 6, 2013.

 

	
4.

	
Invesco Stable Asset Trust Omnibus Participation Agreement and Schedules, by and between United, State Street Bank & Trust Co., Invesco National Trust Company, and ADP, Inc., dated December 6, 2013.

 

	
5.

	
Residential Lease, by and between United and Rachel L. Olson, dated January 12, 2014, concerning real property in Bentleyville, PA.

 

	
6.

	
Bunkhouse Lot Rental Agreement, by and between United and Ben Hungartner, dated November 1, 2013, concerning real property in Elk City, OK.

 

	
7.

	
Basic Lease Agreement, by and between United and Hoppe's Construction, LLC, dated February 14, 2014, concerning real property in Merritt, OK.

 

	
8.

	
Apartment Lease Contract, by and between United and Providence Place, dated July 2, 2013, concerning real property in Oklahoma City, OK.

 

	
9.

	
Certain and ongoing accounts payable owed to United Oilfield, Inc., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $679,439.85.

 

	
10.

	
Certain and ongoing accounts payable owed to Canadian Nitrogen Services, Ltd., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $506,681.14.

 

	
11.

	
All other Liabilities disclosed on the balance sheet of United, if any.

 

See Material Contracts listed in Schedule 4.18, which are incorporated herein.

 

  

S-16

  

 

Schedule 4.11

Receivables

 

  

S-17

  

Schedule 4.13

Indebtedness

 

	
1.

	
Master Finance Lease Agreement, by and between New Concept Leasing, Inc., which incorporates and includes Lease H-15624, Lease H-15625, Lease H-15626, Lease H-15627, Lease H-15628, Lease H-15629, Lease H-15630, Lease H-15631, Lease H-15632, dated November 22, 2013, and concerns nine (9) vehicles.

 

	
2.

	
Lease Agreement, by and between United and LEAF Capital Funding, LLC, dated January 20, 2014, concerning office equipment.

 

	
3.

	
Promissory Note (Term Loan Facility) made by United in favor of GreenBank, N.A., dated August 6, 2013.

 

	
4.

	
Invesco Stable Asset Trust Omnibus Participation Agreement and Schedules, by and between United, State Street Bank & Trust Co., Invesco National Trust Company, and ADP, Inc., dated December 6, 2013.

 

	
5.

	
Residential Lease, by and between United and Rachel L. Olson, dated January 12, 2014, concerning real property in Bentleyville, PA.

 

	
6.

	
Bunkhouse Lot Rental Agreement, by and between United and Ben Hungartner, dated November 1, 2013, concerning real property in Elk City, OK.

 

	
7.

	
Basic Lease Agreement, by and between United and Hoppe's Construction, LLC, dated February 14, 2014, concerning real property in Merritt, OK.

 

	
8.

	
Apartment Lease Contract, by and between United and Providence Place, dated July 2, 2013, concerning real property in Oklahoma City, OK.

 

	
9.

	
Certain and ongoing accounts payable owed to United Oilfield, Inc., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $679,439.85.

 

	
10.

	
Certain and ongoing accounts payable owed to Canadian Nitrogen Services, Ltd., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $506,681.14.

 

	
11.

	
All other Indebtedness disclosed on the balance sheet of United, if any.

 

See Material Contracts listed in Schedule 4.18, which are incorporated herein.

 

  

S-18

  

 

Schedule 4.14

Conduct in the Ordinary Course; Absence of Certain Changes

 

	
1.

	
United made changes in its method of accounting or accounting practice or policy at the direction of Purchaser's auditor, UHY International.

 

 

 

 

 

 

 

 

 

  

S-19

  

 

Schedule 4.17(a)

Environmental Matters

None.

 

 

 

 

 

 

 

 

  

S-20

  

 

Schedule 4.17(b)

Environmental Permits

None.

 

 

 

 

 

 

 

 

 

 

 

 

  

S-21

  

 

Schedule 4.17(e)

Hazardous Materials

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

S-22

  

 

Schedule 4.17(f)

Environmental Reports

 

None.

 

 

 

 

 

 

 

 

 

 

 

 

 

  

S-23

  

 

Schedule 4.18

Material Contracts

 

	
1.

	
Master Finance Lease Agreement, by and between New Concept Leasing, Inc., which incorporates and includes Lease H-15624, Lease H-15625, Lease H-15626, Lease H-15627, Lease H-15628, Lease H-15629, Lease H-15630, Lease H-15631, Lease H-15632, dated November 22, 2013, and concerns nine (9) vehicles.

 

	
2.

	
Residential Lease, by and between United and Rachel L. Olson, dated January 12, 2014, concerning real property in Bentleyville, PA.

 

	
3.

	
Bunkhouse Lot Rental Agreement, by and between United and Ben Hungartner, dated November 1, 2013, concerning real property in Elk City, OK.

 

	
4.

	
Basic Lease Agreement, by and between United and Hoppe's Construction, LLC, dated February 14, 2014, concerning real property in Merritt, OK.

 

	
5.

	
Apartment Lease Contract, by and between United and Providence Place, dated July 2, 2013, concerning real property in Oklahoma City, OK.

 

	
6.

	
Independent Contractor Master Services Agreement, by and between ARP Oklahoma, LLC and United, dated August 5, 2013.

 

	
7.

	
Master Service Contract, by and between Cabot Oil & Gas Corporation and United, dated December 5, 2012.

 

	
8.

	
Master Service Agreement, by and between Chesapeake Operating, Inc. and United, dated December 3, 2012.

 

	
9.

	
Master Service Agreement, by and between Chief Oil & Gas, LLC and United, dated June 4, 2012.

 

	
10.

	
Master Service Contract, by and between Continental Resources, Inc. and United, dated December 27, 2013.

 

	
11.

	
Master Service and Supply Agreement, by and between Devon Energy Production Company, LP, et al. and United, dated January 3, 2013.

 

	
12.

	
Master Service Agreement, by and between EdgeMarc Energy Holdings, LLC and United, dated June 11, 2013.

 

	
13.

	
Master Service and Supply Agreement, by and between EXCO Resources (PA), LLC and United, dated February 10, 2012.

 

	
14.

	
Master Service Agreement, by and between Gulfport Energy Corporation and United, dated October 28, 2013.

 

	
15.

	
Master Service Contract, by and between Mountaineer Keystone, LLC and United, dated August 23, 2013.

 

  

S-24

  

 

	
16.

	
Master Service Agreement, by and between PDC Mountaineer, LLC and United, dated August 21, 2013.

 

	
17.

	
Master Service Agreement, by and between Range Resources – Appalachia, LLC and United, dated March 1, 2013.

 

	
18.

	
Commercial Oilfield Services Agreement, by and between Southwestern Energy Production Company and United, dated October 1, 2013.

 

	
19.

	
Lease Agreement, by and between United and LEAF Capital Funding, LLC, dated February 7, 2014, concerning office equipment.

 

	
20

	
Commercial Lease, by and between United and JSC Holdings, LLC, dated August 1, 2013, concerning real property in Celina, TX.

 

	
21.

	
Promissory Note (Term Loan Facility) made by United in favor of GreenBank, N.A., dated August 6, 2013.

 

	
22.

	
Commercial Account Authorization and Agreement, by and between United and Wells Fargo Bank West, NA, dated April 24, 2013.

 

	
23.

	
Adoption Agreement, ADP Compensation and Fee Disclosure Statement, Agent of Record Letter, ADP Investment Fund Expense and Compensation Disclosure, IPS Direct Investment Option Agreement, ADP Prototype 401(k) Plan Application, and Connectivity and Service Agreement, all executed by and between United and (or in favor of) ADP, Inc. and dated December 5, 2013 or December 6, 2013, concerning Prototype 401(k) and Profit Sharing Plan.

 

	
24.

	
Guide Choice Investment Advisory Services Agreement, by and between United and Guide Choice Asset Management, Inc., dated December 6, 2013.

 

	
25.

	
Invesco Stable Asset Trust Omnibus Participation Agreement and Schedules, by and between United, State Street Bank & Trust Co., Invesco National Trust Company, and ADP, Inc., dated December 6, 2013.

 

	
26.

	
Trust Agreement and Form of Joinder Agreement, both by and between United and State Street Bank & Trust Co., and dated December 6, 2013.

 

	
27.

	
Certain and ongoing accounts payable owed to United Oilfield, Inc., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $679,439.85.

 

	
28.

	
Certain and ongoing accounts payable owed to Canadian Nitrogen Services, Ltd., incurred in the ordinary course of business, which as of April 4, 2014 amounted to $506,681.14.

 

	
29.

	
Subscription to Blue Cross Blue Shield of Texas health insurance for employees.

 

	
30.

	
Verbal lease for equipment storage with 5J Trucking

 

  

S-25

  

 

Schedule 4.19

Intellectual Property

None.

 

 

 

 

 

 

 

 

 

 

  

S-26

  

 

Schedule 4.20

Real Property

 

	
1.

	
Residential Lease, by and between United and Rachel L. Olson, dated January 20, 2014, concerning real property in Bentleyville, PA.

 

	
2.

	
Basic Lease Agreement, by and between United and Hoppe's Construction, LLC, dated February 14, 2014, concerning real property in Merritt, OK.

 

	
3.

	
Bunkhouse Lot Rental Agreement, by and between United and Ben Hungartner, dated November 1, 2013, concerning real property in Elk City, OK.

 

	
4.

	
Apartment Lease Contract, by and between United and Providence Place, dated July 2, 2013, concerning real property in Oklahoma City, OK.

 

	
5

	
Commercial Lease, by and between United and JSC Holdings, LLC, dated August 1, 2013, concerning real property in Celina, TX.

 

	
6.

	
Verbal lease for equipment storage with 5J Trucking.

  

S-27

  

 

Schedule 4.21(a)

Tangible Personal Property

 

	
Items

	 	
Qty

	 	 	
Unit Price

	 	 	
Total

	 
	  	 	 	 	 	 	 	 	 	 
	
Operational Tools, Materials & Equipment

	 	 	 	 	 	 	 	 	 
	
50 mil Retort Machines

	 	 	3	 	 	$	2,100.00	 	 	$	6,300.00	 
	
Rig Tool Sets

	 	 	9	 	 	$	1,250.00	 	 	$	11,250.00	 
	
Truck Tool Sets

	 	 	6	 	 	$	1,000.00	 	 	$	6,000.00	 
	
Assortment of Rig Materials

	 	 	20	 	 	$	6,500.00	 	 	$	130,000.00	 
	
Assortment of OKC Yard Materials

	 	 	1	 	 	$	20,000.00	 	 	$	20,000.00	 
	
OKC Storage Container

	 	 	1	 	 	$	2,000.00	 	 	$	2,000.00	 
	
Assortment of NE PA Yard/Storage Spare Parts / Materials

	 	 	1	 	 	$	55,000.00	 	 	$	55,000.00	 
	
NE PA Storage Container

	 	 	1	 	 	$	2,500.00	 	 	$	2,500.00	 
	
Assortment of SW PA Yard Materials

	 	 	1	 	 	$	5,000.00	 	 	$	5,000.00	 
	
PJ Trailer

	 	 	1	 	 	$	4,000.00	 	 	$	4,000.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Office Equipment

	 	 	 	 	 	 	 	 	 	 	 	 
	
Dell E5439 Laptops

	 	 	11	 	 	$	772.00	 	 	$	8,492.00	 
	
Dell Laptops

	 	 	3	 	 	$	500.00	 	 	$	1,500.00	 
	
Toshiba Laptops

	 	 	3	 	 	$	500.00	 	 	$	1,500.00	 
	
Dell E6540 Laptop

	 	 	1	 	 	$	1,329.00	 	 	$	1,329.00	 
	
Dell Monitors

	 	 	4	 	 	$	300.00	 	 	$	1,200.00	 
	
Samsung Monitors

	 	 	4	 	 	$	62.50	 	 	$	250.00	 
	
Dell docking stations

	 	 	3	 	 	$	200.00	 	 	$	600.00	 
	
Panasonic Projector

	 	 	1	 	 	$	836.00	 	 	$	836.00	 
	
HP deskjet printer/scanner

	 	 	20	 	 	$	40.00	 	 	$	800.00	 
	
File Server

	 	 	1	 	 	$	1,500.00	 	 	$	1,500.00	 
	
Digital Scale

	 	 	1	 	 	$	150.00	 	 	$	150.00	 
	
Office Supplies

	 	 	1	 	 	$	500.00	 	 	$	500.00	 
	
Polycom Phone

	 	 	1	 	 	$	225.00	 	 	$	225.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Wireless Handsets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Samsung Galaxy S III 16GB

	 	 	3	 	 	$	100.00	 	 	$	300.00	 
	
Apple 5c

	 	 	4	 	 	$	100.00	 	 	$	400.00	 
	
Apple iPhone 5

	 	 	2	 	 	$	200.00	 	 	$	400.00	 
	
Apple iPhone 4

	 	 	4	 	 	$	200.00	 	 	$	800.00	 
	
Hotspots

	 	 	3	 	 	$	100.00	 	 	$	300.00	 

 

  

S-28

  

 

	
Celina Office Furniture

	 	 	 	 	 	 	 	 	 	 	 	 
	
Desk

	 	 	4	 	 	$	625.00	 	 	$	2,500.00	 
	
Credenza

	 	 	1	 	 	$	625.00	 	 	$	625.00	 
	
Bookshelf

	 	 	1	 	 	$	75.00	 	 	$	75.00	 
	
Deskchairs

	 	 	3	 	 	$	100.00	 	 	$	300.00	 
	
Side chair

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	
Storage cabinet

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	
Filing cabinet

	 	 	2	 	 	$	150.00	 	 	$	300.00	 
	
Shelf system

	 	 	1	 	 	$	60.00	 	 	$	60.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Celina Apartment

	 	 	 	 	 	 	 	 	 	 	 	 
	
Misc Dishes

	 	 	1	 	 	$	500.00	 	 	$	500.00	 
	
Dining table w chairs

	 	 	1	 	 	$	500.00	 	 	$	500.00	 
	
Twin Beds

	 	 	2	 	 	$	450.00	 	 	$	900.00	 
	
Lamps

	 	 	4	 	 	$	50.00	 	 	$	200.00	 
	
Side tables

	 	 	2	 	 	$	50.00	 	 	$	100.00	 
	
Buffet table

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	
Flat Screen Tv

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
SW PA Rental House

	 	 	 	 	 	 	 	 	 	 	 	 
	
Bedding

	 	 	2	 	 	$	100.00	 	 	$	200.00	 
	
Queen beds

	 	 	2	 	 	$	450.00	 	 	$	900.00	 
	
Towels

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	
Flat screen TV

	 	 	1	 	 	$	300.00	 	 	$	300.00	 
	
Wireless router

	 	 	1	 	 	$	50.00	 	 	$	50.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
NE PA Apartments

	 	 	 	 	 	 	 	 	 	 	 	 
	
PA Apartment Washing Machine

	 	 	1	 	 	$	500.00	 	 	$	500.00	 
	
PA Apartment Dryer

	 	 	1	 	 	$	500.00	 	 	$	500.00	 
	
Bedding

	 	 	4	 	 	$	100.00	 	 	$	400.00	 
	
Towels

	 	 	1	 	 	$	100.00	 	 	$	100.00	 
	
Wireless router

	 	 	1	 	 	$	50.00	 	 	$	50.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
OKC Apartment

	 	 	 	 	 	 	 	 	 	 	 	 
	
Wireless router

	 	 	1	 	 	$	50.00	 	 	$	50.00	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	$	272,742.00	 

  

S-29

  

 

Schedule 4.21(b)

Leases and subleases for Tangible Personal Property

 

	
1.

	
Lease Agreement, by and between United and LEAF Capital Funding, LLC, dated February 7, 2014, concerning office equipment.

	
2.

	
Master Finance Lease Agreement, by and between New Concept Leasing, Inc., which incorporates and includes Lease H-15624, Lease H-15625, Lease H-15626, Lease H-15627, Lease H-15628, Lease H-15629, Lease H-15630, Lease H-15631, Lease H-15632, dated November 22, 2013, and concerns nine (9) vehicles.

 

 

 

 

 

 

  

S-30

  

 

Schedule 4.23

Customers

 

 

 

  

S-31

  

 

Schedule 4.24

Section 10.10 Suppliers

 

 

 

  

S-32

  

 

Schedule 4.25

Employee Benefit Matters

 

	
1.

	
Automatic Data Processing Prototype 401(k) and Profit Sharing Plan.

See the Material Contracts relating to this plan listed in Schedule 4.18, which are incorporated herein.

 

 

 

 

 

 

  

S-33

  

 

Schedule 4.27

Employees

 

 

  

S-34

  

 

 

 

 

 

 

  

S-35

  

 

Schedule 4.28

Certain Interests

Tim Pirie owns an interest in Canadian Nitrogen Services, Ltd., which supplies equipment used in the Business.

Ed Lantz owns United Oilfield, Inc., which supplies equipment used in the Business.

 

 

 

  

S-36

  

 

Schedule 4.29(a)

Taxes

 

None.

 

 

 

 

 

 

 

  

S-37

  

 

Schedule 4.29(b)

Jurisdictions

United

In 2012, the states in which United operated and filed corporate income tax returns for the year ended 2012 include the following: Ohio, Oklahoma, Pennsylvania, and Texas.

In 2013, the states in which United operated in and will file corporate income tax returns for the year ended 2013 include the following: Ohio, Oklahoma, Pennsylvania, Texas, West Virginia, and North Dakota.

 

 

 

  

S-38

  

 

Schedule 4.30

Insurance

	
1.

	
Commercial Auto Coverage – Insurer: Berkley Regional Insurance Company; Policy No. ECA 3114227-10; Insured: United Centrifuge USA, LLC; Policy Period 12/21/2013 to 11/11/2014; Premium $36,627.00.

	
2.

	
General Liability Coverage – Insurer: Berkley National Insurance Co.; Policy No. EGL000706010; Insured: United Centrifuge USA, LLC; Policy Period 11/11/2013 to 11/11/2014; Premium $65,316.00.

	
3.

	
Umbrella Liability Coverage - Insurer: Berkley National Insurance Co.; Policy No. EUL000706110; Insured: United Centrifuge USA, LLC; Policy Period 11/11/2013 to 11/11/2014; Premium $81,221.00.

	
4.

	
Workers Compensation and Employers' Liability Coverage; Insurer: Tri State Insurance Co. of Minnesota; Policy No. EWC311423610; Insured: United Centrifuge USA, LLC; Policy Period 11/11/2013 to 11/11/2014; Premium $167,967.00.

	
5.

	
Commercial Inland Marine Coverage - Insurer: Berkley National Insurance Co.; Policy No. EIM3114320-10; Insured: United Centrifuge USA, LLC; Policy Period 11/11/2013 to 11/11/2014; Premium $9,550.00.

Applicable limits for policies Nos. 1-4 are as follows:

  

 

  

S-39

  

 

Applicable limits for policy No. 5 are as follows:

 

 

  

S-40

  

 

Schedule 5.03

Capitalization Changes subsequent to 12/31/13 10-K

	
1.

	
In January 2014, Aly Energy Services agreed that the shares of preferred stock issued by its subsidiary Aly Operating Co. would be eligible for potential exchange into shares of Aly Energy Services common stock (previously they were convertible into shares of Aly Operating Co. common stock), and has reserved shares of common stock for potential issuance upon such exchange. The preferred stock had a liquidation value of approximately $4.036 million at 12/31/13; conversion price is currently not known and depends upon the price at which a public equity offering is ultimately consummated.

	
2.

	
Aly Energy Services is in the process of issuing approximately 12,400,000 shares of common stock to foreign investors at the price of $.55 per share.

 

 

 

 

 

 

S-41

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