Document:

EXHIBIT 10.35

 

$300,000,000

 

INTERLINE BRANDS, INC.

 

7.00% SENIOR SUBORDINATED NOTES DUE 2018

 

PURCHASE AGREEMENT

 

November 4, 2010

 

BARCLAYS CAPITAL INC. 
 As Representative of the several
    Initial Purchasers named in Schedule I hereto,
 c/o Barclays Capital Inc.
 745 Seventh Avenue
 New York, New York 10019

 

Ladies and Gentlemen:

 

Interline Brands, Inc., a New Jersey corporation (the “Company”), a wholly-owned subsidiary of Interline Brands, Inc., a Delaware corporation (the “Parent Guarantor”), proposes, upon the terms and conditions set forth in this agreement (this “Agreement”), to issue and sell to the initial purchasers named in Schedule I hereto (the “Initial Purchasers”), acting severally and not jointly, the respective amounts set forth in such Schedule I of its 7.00% Senior Subordinated Notes due 2018 (the “Notes”).  Barclays Capital Inc. (“Barclays”) has agreed to act as the representative of the several Initial Purchasers (the “Representative”) in connection with the offering and sale of the Notes.

 

The Notes (i) will have terms and provisions that are summarized in the Pricing Disclosure Package and the Offering Memorandum (each as defined below), and (ii) are to be issued pursuant to an indenture (the “Indenture”) to be entered into among the Company, the Guarantors (as defined below) and Wells Fargo Bank, National Association, as trustee (the “Trustee”).  The Company’s obligations under the Notes, including the due and punctual payment of interest on the Notes, will be fully, irrevocably and unconditionally guaranteed on an unsecured senior subordinated basis, jointly and severally (the “Guarantees”), by (i) the Parent Guarantor and (ii) each entity listed in Schedule II hereto (the “Subsidiary Guarantors” and, together with the Parent Guarantor, the “Guarantors”). As used herein, the term “Notes” shall include the Guarantees, unless the context otherwise requires. This Agreement is to confirm the agreement concerning the purchase of the Notes from the Company by the Initial Purchasers.

 

Concurrently with the consummation of the offering (a) the Company will replace its Credit Agreement dated as of June 23, 2006 (the “Existing Credit Facility”) with a new asset-based revolving credit facility that will provide up to $225,000,000 of revolving commitments, subject to borrowing base limitations (the “New ABL Facility” and, together with any other documents, agreements or instruments delivered in connection therewith, the “ABL Facility Documentation”), as more fully described in the Pricing Disclosure Package and the Offering Memorandum; and (b) pursuant to an Offer to Purchase and Consent Solicitation Statement

 

 

dated as of November 1, 2010 (collectively with any related documents, statements or information, the “Offer Material”), the Company is conducting a cash tender offer (the “Tender Offer”) for any and all of its outstanding 81/8% Senior Subordinated Notes due 2014 (the “Existing Notes”) and soliciting consents (the “Consent Solicitation”) for proposed amendments and waivers to that certain indenture, dated as of June 23, 2006 (as amended and supplemented, “Existing Indenture”), among the Company, the guarantors party thereto and The Bank of New York Mellon, N.A. (as successor in interest to The Bank of New York Trust Company, N.A.) as trustee (the “Existing Trustee”), pursuant to which the Existing Notes were issued.

 

For purposes of this Agreement, the term “Transactions” is used in the same way as such term is used in the Pricing Disclosure Package and the Offering Memorandum and means, collectively, (i) the issuance and sale of the Notes, (ii) the execution and delivery of the ABL Facility Documentation, (iii) the consummation of the Tender Offer and Consent Solicitation, (iv) the execution of the supplemental indenture to the Existing Indenture (the “Supplemental Indenture”) by the Company, the guarantors party thereto and the Existing Trustee and (v) the payment of all fees and expenses related to the foregoing.

 

The term “Transaction Agreements” refers to, collectively, (i)  any agreements constituting Offer Materials, (ii) that certain dealer manager and consent solicitation agreement by and among Barclays and the Company pursuant to which the Company has engaged Barclays as dealer manager in respect of the Tender Offer and solicitation agent in respect of the Consent Solicitation and (iii) any agreements constituting ABL Facility Documentation.

 

1.             Purchase and Resale of the Notes.  The Notes will be offered and sold to the Initial Purchasers without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on an exemption pursuant to Section 4(2) under the Securities Act.  The Company and the Guarantors have prepared a preliminary offering memorandum, dated November 1, 2010 (the “Preliminary Offering Memorandum”), a pricing term sheet substantially in the form attached hereto as Schedule III (the “Pricing Term Sheet”) setting forth the terms of the Notes omitted from the Preliminary Offering Memorandum and certain other information and an offering memorandum, dated November 4, 2010 (the “Offering Memorandum”), setting forth information regarding the Company, the Guarantors, the Notes, the Exchange Notes (as defined herein), the Guarantees and the Exchange Guarantees (as defined herein).  The Preliminary Offering Memorandum, as supplemented and amended as of the Applicable Time (as defined below), together with the Pricing Term Sheet and any of the documents listed on Schedule IV(A) hereto are collectively referred to as the “Pricing Disclosure Package.”  The Company and the Guarantors hereby confirm that they  have authorized the use of the Pricing Disclosure Package and the Offering Memorandum in connection with the offering and resale of the Notes by the Initial Purchasers. “Applicable Time” means 12 p.m. (New York City time) on the date of this Agreement.

 

Any reference to the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum shall be deemed to refer to and include the Parent Guarantor’s most recent Annual Report on Form 10-K (the “Form 10-K”) and all documents filed by the Company or the Parent Guarantor with the United States Securities and Exchange Commission (the “Commission”) with respect to a date or period subsequent to the period covered by the

 

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Form 10-K pursuant to Section 13(a), 13(c) or 15(d) of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”) (excluding any such filings that were or are deemed to be furnished to the Commission), on or prior to the date of the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, as the case may be.  Any reference to the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, as amended or supplemented, as of any specified date, shall be deemed to include any documents filed with the Commission pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act (excluding any such filings that were or are deemed to be furnished to the Commission) after the date of the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, and prior to such specified date.  All documents filed under the Exchange Act (excluding any such filings that were or are deemed to be furnished to the Commission) and so deemed to be included in the Preliminary Offering Memorandum, Pricing Disclosure Package or the Offering Memorandum, as the case may be, or any amendment or supplement thereto are hereinafter called the “Exchange Act Reports.”

 

You have advised the Company that you will offer and resell (the “Exempt Resales”) the Notes purchased by you hereunder in private sales exempt from registration under the Securities Act on the terms set forth in each of the Pricing Disclosure Package and the Offering Memorandum, as amended or supplemented, solely to (i) persons whom you reasonably believe to be “qualified institutional buyers,” as defined in Rule 144A under the Securities Act (“QIBs”), in accordance with Rule 144A under the Securities Act, and (ii) outside the United States to certain persons who are not U.S. Persons (as defined in Regulation S under the Securities Act (“Regulation S”)) (such persons, “Non-U.S. Persons”) in offshore transactions in reliance on Regulation S.  As used herein, the terms “offshore transaction” and “United States” have the meanings assigned to them in Regulation S.  Those persons specified in clauses (i) and (ii) are referred to herein as “Eligible Purchasers.”

 

Holders (including subsequent transferees) of the Notes will have the registration rights set forth in a registration rights agreement, to be dated as of November 16, 2010 (the “Registration Rights Agreement”) among the Company, the Guarantors and the Initial Purchasers to be dated the Closing Date (as defined herein), for so long as such Notes constitute “Transfer Restricted Securities” (as defined in the Registration Rights Agreement). Pursuant to the Registration Rights Agreement, the Company and the Guarantors will agree to file with the  Commission under the circumstances set forth therein, a registration statement under the Securities Act relating to the Company’s 7.00% Senior Subordinated Notes due 2018 (the “Exchange Notes”) and the Guarantees thereof (the “Exchange Guarantees”) to be offered in exchange for the Notes and the Guarantees (the “Exchange Offer”).

 

2.             Representations, Warranties and Agreements of the Company and the Guarantors.  The Company and each of the Guarantors, jointly and severally, represent, warrant and agree as follows:

 

(a)           When the Notes and Guarantees are issued and delivered pursuant to this Agreement, such Notes and Guarantees will not be of the same class (within the meaning of Rule 144A under the Securities Act) as securities of the Company or the Guarantors that are listed on

 

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a national securities exchange registered under Section 6 of the Exchange Act or that are quoted in a United States automated inter-dealer quotation system.

 

(b)           Assuming the accuracy of your representations and warranties in Section 3(b), the purchase and initial resale of the Notes pursuant to and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Offering Memorandum (including pursuant to the Exempt Resales) are exempt from the registration requirements of the Securities Act.

 

(c)           No form of general solicitation or general advertising within the meaning of Regulation D (including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) was used by the Company, the Guarantors, any of their respective affiliates or any of their respective representatives (other than you and your affiliates, as to whom the Company and the Guarantors make no representation) in connection with the offer and sale of the Notes.

 

(d)           No directed selling efforts within the meaning of Rule 902 under the Securities Act were used by the Company, the Guarantors or any of their respective affiliates or any of their respective representatives (other than you and your affiliates, as to whom the Company and the Guarantors make no representation) with respect to Notes sold outside the United States to Non-U.S. Persons, and the Company, the Guarantors or any of their respective affiliates or any of their respective representatives and any person acting on its or their behalf (other than you and your affiliates, as to whom the Company and the Guarantors make no representation) has complied with and will implement the “offering restrictions” required by Rule 902 under the Securities Act.

 

(e)           Each of the Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering Memorandum, each as of its respective date, contains all the information specified in, and meeting the requirements of, Rule 144A(d)(4) under the Securities Act.

 

(f)            Neither the Company, any Guarantor, any of their respective affiliates or any of their respective representatives nor any other person acting on behalf of the Company or any Guarantor (other than you and your affiliates, as to whom the Company and the Guarantors make no representation) has sold or issued any securities that would be integrated with the offering of the Notes contemplated by this Agreement pursuant to the Securities Act, the rules and regulations thereunder or the interpretations thereof by the Commission.

 

(g)           The Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering Memorandum have been prepared by the Company and the Guarantors for use by the Initial Purchasers in connection with the Exempt Resales.  No order or decree preventing the use of the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, or any order asserting that the transactions contemplated by this Agreement are subject to the registration requirements of the Securities Act has been issued, and

 

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no proceeding for that purpose has commenced or is pending or, to the knowledge of the Company or any of the Guarantors is contemplated.

 

(h)           The Offering Memorandum will not, as of its date or as of the Closing Date, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Offering Memorandum in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Initial Purchaser specifically for inclusion therein, which information is specified in Section 8(e).

 

(i)            The Pricing Disclosure Package did not, as of the Applicable Time, and will not, as of the Closing Date, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Initial Purchaser specifically for inclusion therein, which information is specified in Section 8(e).

 

(j)            The Company has not made any offer to sell or solicitation of an offer to buy the Notes that would constitute a “free writing prospectus” (if the offering of the Notes was made pursuant to a registered offering under the Securities Act), as defined in Rule 405 under the Securities Act (a “Free Writing Offering Document”), without the prior consent of the Representative; any such Free Writing Offering Document, the use of which has been previously consented to by the Initial Purchasers, is listed on Schedule IV.

 

(k)           Each Free Writing Offering Document listed in Schedule IV(B) hereto when taken together with the Pricing Disclosure Package, did not, as of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from any Free Writing Offering Document listed in Schedule IV(B) hereto in reliance upon and in conformity with written information furnished to the Company through the Representative by or on behalf of any Initial Purchaser specifically for inclusion therein, which information is specified in Section 8(e).

 

(l)            The Exchange Act Reports, when they were or are filed with the Commission, conformed or will conform in all material respects to the applicable requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder.  The Exchange Act Reports did not and will not, when filed with the Commission, contain an untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

(m)          Each of the Company, the Guarantors and their respective subsidiaries (i) has been duly organized, is validly existing and in good standing as a corporation or other

 

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business entity under the laws of its jurisdiction of organization and (ii) is duly qualified to do business and in good standing as a foreign corporation or other business entity in each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, except (A) in the case of clause (i) with regard to any subsidiaries of the Company that are not Guarantors, where the failure to be so duly organized, validly existing or in good standing, could not, in the aggregate, and (B) in the case of clause (ii), where the failure to be so qualified or in good standing as a foreign corporation or other business entity could not, in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), results of operations, stockholders’ equity, properties or business of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).  Each of the Company, the Guarantors and their respective subsidiaries has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged.  The Parent Guarantor does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21.1 to the Form 10-K.  None of the subsidiaries of the Parent Guarantor (other than the Company) is a “significant subsidiary” (as defined in Rule 405 under the Securities Act).

 

(n)           The Parent Guarantor has an authorized capitalization as set forth in each of the Pricing Disclosure Package and the Offering Memorandum.  All of the issued shares of capital stock of each subsidiary of the Parent Guarantor have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Parent Guarantor, free and clear of all liens, encumbrances, equities or claims, except for such liens, encumbrances, equities or claims as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o)           The Company and each Guarantor has all requisite corporate, partnership or limited liability company power and authority, as applicable, to execute, deliver and perform its obligations under the Indenture.  The Indenture has been duly and validly authorized by the Company and the Guarantors, and upon its execution and delivery and, assuming due authorization, execution and delivery by the Trustee, will constitute the valid and binding agreement of the Company and the Guarantors, enforceable against the Company and the Guarantors in accordance with its terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).  Assuming the accuracy of your representations and warranties in Section 3(b) and your compliance with your agreements set forth in this Agreement, no qualification of the Indenture under the Trust Indenture Act of 1939 (the “Trust Indenture Act”) is required in connection with the offer and sale of the Notes contemplated hereby or in connection with the Exempt Resales.  The Indenture will conform in all material respects to the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

 

(p)           The Company has all requisite corporate power and authority to execute, issue, sell and perform its obligations under the Notes.  The Notes have been duly authorized by the Company and, when duly executed by the Company in accordance with the terms of the Indenture, assuming due authentication of the Notes by the Trustee, upon delivery to the Initial

 

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Purchasers against payment therefor in accordance with the terms hereof, will be validly issued and delivered and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).  The Notes will conform in all material respects to the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

 

(q)           The Company has all requisite corporate power and authority to execute, issue and perform its obligations under the Exchange Notes.  The Exchange Notes have been duly and validly authorized by the Company and if and when issued and authenticated in accordance with the terms of the Indenture and delivered in accordance with the Exchange Offer provided for in the Registration Rights Agreement, will be validly issued and delivered and will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture, enforceable against the Company in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(r)            Each Guarantor has all requisite corporate, partnership or limited liability company power and authority, as applicable, to execute, issue and perform its obligations under the Guarantees.  The Guarantees have been duly and validly authorized by the Guarantors and when the Indenture is duly executed and delivered by the Guarantors in accordance with its terms and upon the due execution, authentication and delivery of the Notes in accordance with the Indenture and the issuance of the Notes in the sale to the Initial Purchasers contemplated by this Agreement, will constitute valid and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).  The Guarantees will conform in all material respects to the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

 

(s)           Each Guarantor has all requisite corporate, partnership or limited liability company power and authority, as applicable, to execute, issue and perform its obligations under the Exchange Guarantees.  The Exchange Guarantees have been duly and validly authorized by the Guarantors and if and when executed and delivered by the Guarantors in accordance with the terms of the Indenture and upon the due execution and authentication of the Exchange Notes in accordance with the Indenture and the issuance and delivery of the Exchange Notes in the Exchange Offer contemplated by the Registration Rights Agreement, will be validly issued and delivered and will constitute valid and binding obligations of the Guarantors entitled to the benefits of the Indenture, enforceable against the Guarantors in accordance with their terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and

 

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by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

(t)            The Company and each Guarantor has all requisite corporate, partnership or limited liability company power and authority, as applicable, to execute, deliver and perform its obligations under the Registration Rights Agreement.  The Registration Rights Agreement has been duly authorized by the Company and each Guarantor and, when executed and delivered by the Company and each Guarantor in accordance with the terms hereof and thereof, will be validly executed and delivered and (assuming the due authorization, execution and delivery thereof by you) will be the legally valid and binding obligation of the Company and each Guarantor in accordance with the terms thereof, enforceable against the Company and each Guarantor in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and, as to rights of indemnification and contribution, by principles of public policy.  The Registration Rights Agreement will conform in all material respects to the description thereof in each of the Pricing Disclosure Package and the Offering Memorandum.

 

(u)           The Company and the Guarantors, as applicable, have all requisite corporate power and authority to consummate the Transactions and to enter into and perform its obligations under the Transaction Agreements (to the extent a party thereto).

 

(v)           Each of the Transaction Agreements has been duly and validly authorized, executed and delivered by the Company and the Guarantors (to the extent a party thereto) and, assuming due authorization, execution and delivery by the other parties thereto, constitute the valid and binding agreement of the Company and its subsidiaries (to the extent a party thereto) enforceable against the Company and its subsidiaries (to the extent a party thereto) in accordance with its terms, except as such enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and other laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and, as to rights of indemnification and contribution, by principles of public policy.

 

(w)          The Company and each Guarantor has all requisite corporate power to execute, deliver and perform its obligations under this Agreement.  This Agreement has been duly and validly authorized, executed and delivered by the Company and each of the Guarantors.

 

(x)            Assuming the accuracy of, and the Initial Purchasers’ compliance with, the representations, warranties and agreements of the Initial Purchasers set forth in Section 3, the issue and sale of the Notes and the Guarantees, the execution, delivery and performance by the Company and the Guarantors of the Notes, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Indenture, the Registration Rights Agreement, this Agreement and the Transaction Agreements, the application of the proceeds from the sale of the Notes as described under “Use of Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum and the consummation of the transactions contemplated hereby and thereby, will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose

 

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any lien, charge or encumbrance upon any property or assets of the Company or any of the Guarantors, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company or any of the Guarantors is a party or by which the Company or any of the Guarantors is bound or to which any of the property or assets of the Company or any of the Guarantors is subject (other than the Existing Indenture, the Existing Notes and the Credit Agreement, dated June 23, 2006, among the Company, the Parent Guarantor and the lenders and agents party thereto), (ii) result in any violation of the provisions of the charter or by-laws (or similar organizational documents) of the Company or any of the Guarantors, or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company, the Guarantors or any of their respective subsidiaries or any of their properties or assets, except, with respect to clauses (i) and (iii), conflicts or violations that would not reasonably be expected to have a Material Adverse Effect.

 

(y)           Assuming the accuracy of the representations and warranties of the Initial Purchasers contained herein and the compliance by the Initial Purchasers with their agreements contained herein, no consent, approval, authorization or order of, or filing, registration or qualification with any court or governmental agency or body having jurisdiction over the Company, the Guarantors or any of their respective subsidiaries or any of their properties or assets is required for the issue and sale of the Notes and the Guarantees, the execution, delivery and performance by the Company and the Guarantors of the Notes, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Indenture, the Registration Rights Agreement, this Agreement and the Transaction Agreements, the application of the proceeds from the sale of the Notes as described under “Use of Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum and the consummation of the transactions contemplated hereby and thereby, except (i) such as have been or will be obtained or made on or prior to the Closing Date, (ii) consents, approvals, authorizations, orders, filings registrations or qualifications permitted to be obtained, made or completed after the Closing Date pursuant to the terms of the ABL Facility Documentation, (iii) for the filing of a registration statement by the Company with the Commission pursuant to the Securities Act and the qualification of the Indenture under the Trust Indenture Act in connection with the transactions contemplated by the Registration Rights Agreement, and (iv) such consents, approvals, authorizations, orders, filings, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Notes by the Initial Purchasers.

 

(z)            The historical financial statements (including the related notes and supporting schedules) included or incorporated by reference in the Pricing Disclosure Package and the Offering Memorandum present fairly in all material respects the financial condition, results of operations and cash flows of the entities purported to be shown thereby, at the dates and for the periods indicated, and have been prepared in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved (except as disclosed therein).

 

(aa)         Deloitte & Touche LLP (the “Independent Public Accountants”), who have certified certain financial statements of the Parent Guarantor, whose report appears in the Pricing Disclosure Package and the Offering Memorandum or is incorporated by reference

 

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therein and who have delivered the initial letter referred to in Section 8(e) hereof, are independent registered public accountants as required by the Securities Act and the rules and regulations thereunder and the rules and regulations of the Public Company Accounting Oversight Board.

 

(bb)         The Parent Guarantor maintains a system of internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) that complies in all material respects with the requirements of the Exchange Act and that has been designed by, or under the supervision of, the Parent Guarantor’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.  The Parent Guarantor maintains internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of the Parent Guarantor’s financial statements in conformity with accounting principles generally accepted in the United States and to maintain accountability for its assets, (iii) access to the Parent Guarantor’s assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for the Parent Guarantor’s assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  As of the date of the most recent balance sheet of the Parent Guarantor and its consolidated subsidiaries reviewed or audited by the Independent Public Accountants, there were no significant deficiencies or material weaknesses in the Parent Guarantor’s internal controls.

 

(cc)         (i) The Parent Guarantor maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), (ii) such disclosure controls and procedures are designed to ensure that the information required to be disclosed by the Parent Guarantor in the reports it files or submits under the Exchange Act is accumulated and communicated to management of the Parent Guarantor, including its respective principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure to be made; and (iii) as of November 1, 2010, such disclosure controls and procedures were effective in all material respects to perform the functions for which they were established.

 

(dd)         There is and has been no failure on the part of the Parent Guarantor and any of the Parent Guarantor’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

 

(ee)         Since the date of the latest audited financial statements included or incorporated by reference in the Pricing Disclosure Package and the Offering Memorandum, neither the Company, the Guarantors nor any of their respective subsidiaries has (i) (A) sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or court or governmental action, order or decree, (B) issued or granted any securities, (C) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (D) entered into any material transaction not in the ordinary course

 

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of business or (E) declared or paid any dividend on its capital stock, in each case other than as could not reasonably be expected to have a Material Adverse Effect and (ii) since such date, there has not been any change in the capital stock, partnership or limited liability interests, as applicable, or long-term debt, net current assets, stockholders’ equity, net sales, operating profit or net earnings of the Company, the Guarantors or any of their respective subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management or business of the Company and its subsidiaries, taken as a whole, in each case except as could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(ff)           Except as would not have a Material Adverse Effect, the Company, the Guarantors and each of their respective subsidiaries has good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects, except such liens, encumbrances and defects as are described in the Pricing Disclosure Package and the Offering Memorandum and such as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company, the Guarantors or any of their respective subsidiaries.  Except as would not have a Material Adverse Effect, all assets held under lease by the Company, the Guarantors or any of their respective subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as do not materially interfere with the use made and proposed to be made of such assets by the Company, the Guarantors or any of their respective subsidiaries.

 

(gg)         The Parent Guarantor and each of its subsidiaries have such permits, licenses, patents, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the Pricing Disclosure Package and the Offering Memorandum, except for any of the foregoing that could not, in the aggregate, reasonably be expected to have a Material Adverse Effect or except as described in the Pricing Disclosure Package and the Offering Memorandum.  The Parent Guarantor and each of its subsidiaries have fulfilled and performed all of its obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that could not reasonably be expected to have a Material Adverse Effect or except as described in the Pricing Disclosure Package and the Offering Memorandum.  Neither the Parent Guarantor nor any of its subsidiaries has received notice of any revocation or modification of any such Permits, except for any notice that could not reasonably be expected to have a Material Adverse Effect.

 

(hh)         Except as could not reasonably be expected to have a Material Adverse Effect, the Parent Guarantor and each of its subsidiaries own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses and have no reason to believe that the conduct of their respective businesses will conflict with, and

 

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have not received any notice of any claim of infringement or other violation of, any such rights of others.

 

(ii)           There are no legal or governmental proceedings pending to which the Parent Guarantor or any of its subsidiaries is a party or of which any property or assets of the Parent Guarantor or any of its subsidiaries is the subject that could, in the aggregate, reasonably be expected to have a Material Adverse Effect or could, in the aggregate, reasonably be expected to have a material adverse effect on the performance by the Company and the Guarantors of the performance of the Transaction Agreements, this Agreement, the Indenture, the Notes, the Guarantees or the consummation of any of the transactions contemplated hereby.  To the Company’s and each Guarantor’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.

 

(jj)           The Company, the Guarantors and each of their respective subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries, except where the failure to maintain such insurance could not, individually or in the aggregate, have a Material Adverse Effect.  All policies of insurance of the Company, the Guarantors and their respective subsidiaries are in full force and effect; the Company, the Guarantors and each of their respective subsidiaries are in compliance with the terms of such policies; neither the Company, the Guarantors nor any of their respective subsidiaries has received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance; there are no claims by the Company, the Guarantors or any of their respective subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company, the Guarantors nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business, in each case other than as could not reasonably be expected to have a Material Adverse Effect.

 

(kk)         Except as described in the Pricing Disclosure Package and the Offering Memorandum, no labor disturbance by or dispute with the employees of the Parent Guarantor or any of its subsidiaries exists or, to the knowledge of any officer of the Company or any Guarantor, is imminent that could reasonably be expected to have a Material Adverse Effect.

 

(ll)           Neither the Parent Guarantor nor any of its subsidiaries (i) is in violation of its charter or by-laws (or similar organizational documents), (ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement, license or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, or (iii) is in violation of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or its property or assets or has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to

 

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the ownership of its property or to the conduct of its business, except in the case of clauses (ii) and (iii), to the extent any such conflict, breach, violation, failure or default could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(mm)       The Parent Guarantor and each of its subsidiaries (i) are, and at all times prior hereto were, in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, foreign, national, state, provincial, regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or natural resources, or to use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release or threat of release of Regulated Materials (“Environmental Laws”) applicable to such entity, which compliance includes, without limitation, obtaining, maintaining and complying with all permits and authorizations and approvals required by Environmental Laws to conduct their respective businesses, and (ii) have not received notice or otherwise have knowledge of any actual or alleged violation of Environmental Laws, or of any actual or potential liability for or other obligation concerning the presence, disposal or release or threat of release of Regulated Materials, except in the case of clause (i) or (ii) where such non-compliance, violation, liability, or other obligation could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.  Except as described in the Pricing Disclosure Package and the Offering Memorandum, (x) there are no proceedings that are pending, or known to be threatened, against the Company or any of its subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed and (y) the Company, the Guarantors and their respective subsidiaries are not aware of any issues regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning Regulated Materials, in each case that could reasonably be expected to have a Material Adverse Effect.  For purposes of this Agreement, “Regulated Materials” means any substance, material, pollutant, contaminant, chemical, waste, compound or constituent, in any form, including without limitation, petroleum and petroleum products, subject to regulation or which can give rise to liability under any Environmental Law.

 

(nn)         Except in each case as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (i) the Company, the Guarantors and each of their respective subsidiaries has filed all federal, state, local and foreign tax returns required to be filed through the date hereof, subject to permitted extensions, and has paid all taxes (including taxes payable in the capacity of a withholding agent), including any related penalties, additions to tax and interest, that are due and payable (whether or not shown on a tax return), other than those being contested in good faith and by appropriate proceedings and for which adequate reserves have been provided in accordance with generally accepted accounting principles in the United States of America (“GAAP”); (ii) the Company, the Guarantors and each of their respective subsidiaries have made adequate accruals and provided adequate reserves in accordance with GAAP for all taxes (and any related penalties, additions to tax and interest) not yet due and payable and (iii) there is no tax deficiency, assessment or other claim that has been, or would reasonably be expected to be, asserted against the Company, the Guarantors or any of their respective subsidiaries.

 

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(oo)         Except in each case as could not reasonably be expected to have a Material Adverse Effect, (i) Each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as amended (“ERISA”)) for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions effected pursuant to a statutory or administrative exemption; (iii) no Plan is subject to Title IV of ERISA; and (iv) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or is in the form of a prototype plan with respect to which the IRS has issued a favorable opinion letter, in each case to the effect that the Plan satisfies the requirements of Section 401(a) of the Code and that its related trust is exempt from tax under Section 501(a) of the Code and nothing has occurred, whether by action or by failure to act, which would be reasonably expected to cause the loss of such qualification.

 

(pp)         Except as permitted by the Indenture, no subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in the Pricing Disclosure Package and the Offering Memorandum.

 

(qq)         The statistical and market-related data included or incorporated by reference in the Pricing Disclosure Package and the Offering Memorandum and the consolidated financial statements of the Parent Guarantor and its subsidiaries included or incorporated by reference in the Pricing Disclosure Package and the Offering Memorandum are based on or derived from sources that the Company believes to be reliable in all material respects.

 

(rr)           Neither the Company nor any Guarantor is, and after giving effect to the offer and sale of the Notes and the application of the proceeds therefrom as described under “Use of Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum will be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder.

 

(ss)         The Company and each Guarantor is and, immediately after the consummation of the Transactions, will be Solvent.  As used in this paragraph, the term “Solvent” means, with respect to a particular date, that on such date (i) the present fair market value (or present fair saleable value) of the assets of the Company and each Guarantor is not less than the total amount required to pay the probable liabilities of the Company and such Guarantor on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured, (ii) the Company and each Guarantor is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and commitments as they mature and become due in the normal course of business, (iii) assuming the sale of the Notes as contemplated by this

 

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Agreement, the Pricing Disclosure Package and the Offering Memorandum, the Company and the Guarantors are not incurring debts or liabilities beyond their respective ability to pay as such debts and liabilities mature, (iv) neither the Company nor any Guarantor is engaged in any business or transaction, and is not about to engage in any business or transaction, for which its property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which the Company and such Guarantor is engaged, and (v) neither the Company nor any Guarantor is a defendant in any civil action that would result in a judgment that the Company or such Guarantor is or would become unable to satisfy. In computing the amount of such contingent liabilities at any time, it is intended that such liabilities will be computed at the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

 

(tt)           The statements set forth in each of the Pricing Disclosure Package and the Offering Memorandum under the caption “Description of the Notes” and “Exchange Offer; Registration Rights,” insofar as they purport to constitute a summary of the terms of the Notes and the Guarantees, and under the captions “Certain U.S. Federal Income Tax Considerations” and “Description of Certain Other Indebtedness,” insofar as they purport to summarize the provisions of the laws, contracts and documents referred to therein, are accurate summaries in all material respects.

 

(uu)         There are no contracts, agreements or understandings between the Company, any Guarantor and any person granting such person the right to require the Company or any Guarantor to file a registration statement under the Securities Act with respect to any securities of the Company or any Guarantor (other than the Registration Rights Agreement) owned or to be owned by such person or to require the Company or any Guarantor to include such securities in the securities registered pursuant to the Registration Rights Agreement or in any securities being registered pursuant to any other registration statement filed by the Company or any Guarantor under the Securities Act.

 

(vv)         Neither the Parent Guarantor nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that could reasonably be expected to give rise to a valid claim against any of them or the Initial Purchasers for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Notes.

 

(ww)       None of the transactions contemplated by this Agreement (including, without limitation, the use of the proceeds from the sale of the Notes), will violate or result in a violation of Section 7 of the Exchange Act, or any regulation promulgated thereunder, including, without limitation, Regulations T, U and X of the Board of Governors of the Federal Reserve System.

 

(xx)          The Parent Guarantor and its affiliates have not taken, directly or indirectly, any action designed to or that has constituted or that could reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company or the Guarantors in connection with the offering of the Notes.

 

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(yy)         Neither the Parent Guarantor nor any of its subsidiaries, nor, to the knowledge of the Company and the Guarantors, any director, officer, agent, employee or other person associated with or acting on behalf of the Company, the Guarantors or any of their respective subsidiaries, has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.

 

(zz)          The operations of the Parent Guarantor and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Parent Guarantor or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Parent Guarantor, threatened.

 

(aaa)       Neither the Parent Guarantor nor any of its subsidiaries nor, to the knowledge of the Parent Guarantor or the Company, any director, officer, agent, employee or affiliate of the Parent Guarantor or any of its subsidiaries is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and neither the Parent Guarantor nor any of its subsidiaries will directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(bbb)      The financial data for CleanSource, Inc., a California corporation (“CleanSource”) for the twelve months ended September 30, 2010 included in the Pricing Disclosure Package (exclusive of any amendment or supplement thereto) and the Offering Memorandum (exclusive of any amendment or supplement thereto) under the heading “Summary—Recent Developments” (i) was derived from the internal accounting records of CleanSource (as those records were maintained at the date of the Preliminary Offering Memorandum), (ii) while unaudited, was prepared on a fair and reasonable basis and (iii) is accurate in all material respects.

 

Any certificate signed by any officer of the Company or any Guarantor and delivered to the Representative or counsel for the Initial Purchasers in connection with the offering of the Notes shall be deemed a representation and warranty by the Company or such Guarantor, jointly and severally, as to matters covered thereby, to each Initial Purchaser.

 

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3.             Purchase of the Notes by the Initial Purchasers, Agreements to Sell, Purchase and Resell.

 

(a)           The Company hereby agrees, on the basis of the representations, warranties, covenants and agreements of the Initial Purchasers contained herein and subject to all the terms and conditions set forth herein, to issue and sell to the Initial Purchasers and, upon the basis of the representations, warranties and agreements of the Company and the Guarantors herein contained and subject to all the terms and conditions set forth herein, each Initial Purchaser agrees, severally and not jointly, to purchase from the Company, at a purchase price of 98.0% of the principal amount thereof, the principal amount of Notes set forth opposite the name of such Initial Purchaser in Schedule I hereto.  The Company shall not be obligated to deliver any of the securities to be delivered hereunder except upon payment for all of the securities to be purchased as provided herein.

 

(b)           Each of the Initial Purchasers, severally and not jointly, hereby represents and warrants to the Company that it will offer the Notes for sale upon the terms and conditions set forth in this Agreement and in the Pricing Disclosure Package.  Each of the Initial Purchasers, severally and not jointly, hereby represents and warrants to, and agrees with, the Company, on the basis of the representations, warranties and agreements of the Company and the Guarantors, that such Initial Purchaser: (i) is a QIB with such knowledge and experience in financial and business matters as are necessary in order to evaluate the merits and risks of an investment in the Notes; (ii) is purchasing the Notes pursuant to a private sale exempt from registration under the Securities Act; (iii) in connection with the Exempt Resales, will solicit offers to buy the Notes only from, and will offer to sell the Notes only to, the Eligible Purchasers in accordance with this Agreement and on the terms contemplated by the Pricing Disclosure Package; (iv) will not offer or sell the Notes, nor has it offered or sold the Notes by, or otherwise engaged in, any form of general solicitation or general advertising (within the meaning of Regulation D, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or similar medium or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising) and will not engage in any directed selling efforts within the meaning of Rule 902 under the Securities Act, in connection with the offering of the Notes; and (v) has not offered the Notes and will not offer and sell the Notes in the United States or to, or for the benefit or account of, a U.S. Person (other than a distribution), in each case, as defined in Rule 902 of Regulation S, (A) as part of its distribution at any time and (B) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, other than in accordance with Regulation S or another exemption from the registration requirements of the Securities Act.  The Initial Purchasers have advised the Company that they will offer the Notes to Eligible Purchasers at a price initially equal to 100.0% of the principal amount thereof, plus accrued interest, if any, from the date of issuance of the Notes.  Such price may be changed by the Initial Purchasers at any time without notice.

 

(c)           The Initial Purchasers have not nor, prior to the later to occur of (A) the Closing Date and (B) completion of the distribution of the Notes, will not, use, authorize use of, refer to or distribute any material in connection with the offering and sale of the Notes other than (i) the Preliminary Offering Memorandum, the Pricing Disclosure Package, the Offering

 

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Memorandum, (ii) any written communication that contains no “issuer information” (as defined in Rule 433(h)(2) under the Act) that was not included (including through incorporation by reference) in the Preliminary Offering Memorandum or any Free Writing Offering Document listed on Schedule IV hereto, (iii) the Free Writing Offering Documents listed on Schedule IV hereto, (iv) any written communication prepared by such Initial Purchaser and approved by the Company in writing, or (v) any written communication that contains the terms of the Notes and/or other information that was included (including through incorporation by reference) in the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum.

 

(d)           Each of the Initial Purchasers hereby acknowledges that upon original issuance thereof, and until such time as the same is no longer required under the applicable requirements of the Securities Act, the Notes (and all securities issued in exchange therefore or in substitution thereof) shall bear legends substantially in the forms as set forth in the “Transfer Restrictions” section of the Pricing Disclosure Package and Offering Memorandum (along with such other legends as the Company and its counsel deem necessary).

 

Each of the Initial Purchasers understands that the Company and, for purposes of the opinions to be delivered to the Initial Purchasers pursuant to Sections 7(c) and 7(e) hereof, counsel to the Company and counsel to the Initial Purchasers will rely upon the accuracy and truth of the foregoing representations, warranties and agreements, and the Initial Purchasers hereby consent to such reliance.

 

4.             Delivery of the Notes and Payment Therefor.  Delivery to the Initial Purchasers of and payment for the Notes shall be made at the office of Cahill Gordon & Reindel LLP, at 10:00 A.M., New York City time, on November 16, 2010 (the “Closing Date”).  The place of closing for the Notes and the Closing Date may be varied by agreement between the Initial Purchasers and the Company.

 

The Notes will be delivered to the Initial Purchasers, or the Trustee as custodian for The Depository Trust Company (“DTC”), against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer in immediately available funds, by causing DTC to credit the Notes to the account of the Initial Purchasers at DTC.  The Notes will be evidenced by one or more global securities in definitive form (the “Global Notes”) and will be registered in the name of Cede & Co. as nominee of DTC.  The Notes to be delivered to the Initial Purchasers shall be made available to the Initial Purchasers in New York City for inspection and packaging not later than 10:00 A.M., New York City time, on the business day next preceding the Closing Date.

 

5.             Agreements of the Company and the Guarantors.  The Company and the Guarantors, jointly and severally, agree with each of the Initial Purchasers as follows:

 

(a)           The Company and the Guarantors will furnish to the Initial Purchasers, without charge, within two business days of the date of the Offering Memorandum, such number of copies of the Offering Memorandum as may then be amended or supplemented as they may reasonably request.

 

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(b)           The Company and the Guarantors will prepare the Offering Memorandum in a form approved by the Initial Purchasers and will not make any amendment or supplement to the Pricing Disclosure Package or to the Offering Memorandum of which the Initial Purchasers shall not previously have been advised or to which they shall reasonably object in a timely manner after being so advised.

 

(c)           Subject to the proviso in Section 5(f), the Company and each of the Guarantors consents to the use of the Pricing Disclosure Package and the Offering Memorandum in accordance with the securities or Blue Sky laws of the jurisdictions in which the Notes are offered by the Initial Purchasers and by all dealers to whom Notes may be sold, in connection with the offering and sale of the Notes.

 

(d)           If, at any time prior to completion of the distribution of the Notes by the Initial Purchasers to Eligible Purchasers, any event occurs or information becomes known that, in the judgment of the Company or any of the Guarantors or in the reasonable opinion of counsel for the Initial Purchasers, should be set forth in the Pricing Disclosure Package or the Offering Memorandum so that the Pricing Disclosure Package or the Offering Memorandum, as then amended or supplemented, does not include any untrue statement of material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary to supplement or amend the Pricing Disclosure Package or the Offering Memorandum in order to comply with any law, the Company and the Guarantors will, subject to Section 5(b) hereof, forthwith prepare an appropriate supplement or amendment thereto, and will expeditiously furnish to the Initial Purchasers and dealers a reasonable number of copies thereof.

 

(e)           Neither the Company nor any Guarantor will make any offer to sell or solicitation of an offer to buy the Notes that would constitute a Free Writing Offering Document without the prior consent of the Representative, which consent shall not be unreasonably withheld or delayed.  If at any time following issuance of a Free Writing Offering Document any event occurred or occurs as a result of which such Free Writing Offering Document conflicts with the information in the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum or, when taken together with the information in the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, includes an untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances then prevailing, not misleading, as promptly as practicable after becoming aware thereof, the Company will give notice thereof to the Initial Purchasers through the Representative and, if requested by the Representative, will prepare and furnish without charge to each Initial Purchaser a Free Writing Offering Document or other document which will correct such conflict, statement or omission.

 

(f)            The Company and the Guarantors will, promptly from time to time, take such action as the Initial Purchasers may reasonably request to qualify the Notes for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Initial Purchasers may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Notes; provided that in connection therewith the Company shall not be required to (i) qualify as a

 

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foreign corporation in any jurisdiction in which it would not otherwise be required to so qualify, (ii) file a general consent to service of process in any such jurisdiction, or (iii) subject itself to taxation in any jurisdiction in which it would not otherwise be subject.

 

(g)           For a period commencing on the date hereof and ending on the 90th day after the date of the Offering Memorandum, the Company and the Guarantors agree not to, directly or indirectly, (i) offer for sale, sell, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any debt securities of the Company or any Guarantor substantially similar to the Notes or securities convertible into or exchangeable for such debt securities of the Company or any Guarantor, or sell or grant options, rights or warrants with respect to such debt securities of the Company or any Guarantor or securities convertible into or exchangeable for such debt securities of the Company or any Guarantor, (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such debt securities of the Company or any Guarantor, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of debt securities of the Company or any Guarantor or other securities, in cash or otherwise, (iii) file or cause to be filed a registration statement, including any amendments, with respect to the registration of debt securities of the Company or any Guarantor substantially similar to the Notes or securities convertible, exercisable or exchangeable into debt securities of the Company or any Guarantor, or (iv) publicly announce an offering of any debt securities of the Company or any Guarantor substantially similar to the Notes or securities convertible or exchangeable into such debt securities, in each case without the prior written consent of Barclays Capital Inc., on behalf of the Initial Purchasers, except in respect of the exchange for the Exchange Notes and the Exchange Guarantees in connection with the Exchange Offer and the offer or sale of Notes or Guarantees in connection with the filing of any registration statement required to be filed , in each case, pursuant to the Registration Rights Agreement and any filings with the Commission related thereto.

 

(h)           If at any time there are Notes outstanding and the Parent Guarantor or the Company are so required pursuant to the Indenture, then the Company and the Guarantors will furnish at their expense to the Initial Purchasers and, upon request, to holders and beneficial owners of the Notes and prospective purchasers of the Notes the information required by Rule 144A(d)(4) under the Securities Act (if any) in order to permit compliance with Rule 144A in connection with resales of the Notes by the Initial Purchasers, such holders or such beneficial owners.

 

(i)            The Company and the Guarantors will apply the net proceeds from the sale of the Notes to be sold by them hereunder substantially in accordance with the description set forth in the Pricing Disclosure Package and the Offering Memorandum under the caption “Use of Proceeds.”

 

(j)            The Company, the Guarantors and their respective affiliates will not take, directly or indirectly, any action designed to or that has constituted or that reasonably could be expected to cause or result in the stabilization or manipulation of the price of any security of the Company or the Guarantors in connection with the offering of the Notes.

 

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(k)           The Company and the Guarantors will use their reasonable best efforts to permit the Notes to be eligible for clearance and settlement through DTC.

 

(l)            For a period of one year (calculated in accordance with paragraph (d) of Rule 144 under the Securities Act) from the Closing Date, the Company and the Guarantors will not, and will not permit any of their respective affiliates (as defined in Rule 144 under the Securities Act) to, resell any of the Notes that have been acquired by any of them, except for Notes that are sold in a transaction registered under the Securities Act.

 

(m)          The Company will not and will not permit any of its affiliates or any other person acting on its behalf (other than the Initial Purchasers and their respective affiliates, as to which no covenant is given) to (i) solicit offers for, or offer or sell, the Notes by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D or in any manner involving a public offering within the meaning of Section 4(2) of the Securities Act or (ii) engage in any directed selling efforts with respect to the Notes within the meaning of Regulation S, and the Company will and will cause all such persons to comply with the offering restrictions requirement of Regulation S with respect to the Notes.

 

(n)           The Company and the Guarantors agree not to sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Securities Act) that would be integrated with the sale of the Notes in a manner that would require the registration under the Securities Act of the sale to the Initial Purchasers or the Eligible Purchasers of the Notes.  The Company and the Guarantors will take reasonable precautions designed to insure that any offer or sale, direct or indirect, in the United States or to any U.S. person (as defined in Rule 902 under the Securities Act), of any Notes or any substantially similar security issued by the Company or any Guarantor, within six months subsequent to the date on which the distribution of the Notes has been completed (as notified to the Company by the Initial Purchasers), is made under restrictions and other circumstances reasonably designed not to affect the status of the offer and sale of the Notes in the United States and to U.S. persons contemplated by this Agreement as transactions exempt from the registration provisions of the Securities Act, including any sales pursuant to Rule 144A under, or Regulations D or S of, the Securities Act.

 

(o)           The Company and the Guarantors agree to (i) use commercially reasonable efforts to comply with all the terms and conditions of the Registration Rights Agreement and (ii) comply with all agreements set forth in the representation letter of the Company and the Guarantors to DTC relating to the approval of the Notes by DTC for “book entry” transfer.

 

(p)           The Company and the Guarantors will do and perform all things required or necessary to be done and performed under this Agreement by them prior to the Closing Date, and to satisfy all conditions precedent to the Initial Purchasers’ obligations hereunder to purchase the Notes.

 

6.             Expenses.  Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company and the Guarantors, jointly and severally, agree, to pay all expenses, costs, fees and taxes incident to and in connection with: (a) the preparation, printing, filing and distribution of the Preliminary Offering Memorandum, the

 

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Pricing Disclosure Package and the Offering Memorandum (including, without limitation, financial statements and exhibits) and all amendments and supplements thereto (including the fees, disbursements and expenses of the Company’s and the Guarantors’ accountants and counsel, but not, however, legal fees and expenses of the Initial Purchasers’ counsel incurred in connection therewith); (b) the preparation, printing (including, without limitation, word processing and duplication costs) and delivery of this Agreement, the Indenture, the Registration Rights Agreement, all Blue Sky memoranda and all other agreements, memoranda, correspondence and other documents printed and delivered in connection therewith and with the Exempt Resales (but not, however, legal fees and expenses of the Initial Purchasers’ counsel incurred in connection with any of the foregoing other than fees of such counsel plus reasonable disbursements incurred in connection with the preparation, printing and delivery of such Blue Sky memoranda); (c) the issuance and delivery by the Company of the Notes and by the Guarantors of the Guarantees and any taxes payable in connection therewith; (d) the qualification of the Notes and Exchange Notes for offer and sale under the securities or Blue Sky laws of the several states and any foreign jurisdictions as the Initial Purchasers may designate (including, without limitation, the reasonable and documented out-of-pocket fees and disbursements of the Initial Purchasers’ counsel relating to such registration or qualification); (e) the furnishing of such copies of the Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering Memorandum, and all amendments and supplements thereto, as may be reasonably requested for use in connection with the Exempt Resales; (f) the preparation of certificates for the Notes (including, without limitation, printing and engraving thereof); (g) the approval of the Notes by DTC for “book-entry” transfer; (h) the rating of the Notes and the Exchange Notes; (i) the obligations of the Trustee, any agent of the Trustee and the counsel for the Trustee in connection with the Indenture, the Notes, the Guarantees, the Exchange Notes and the Exchange Guarantees; and (j) the performance by the Company and the Guarantors of their other obligations under this Agreement. It is understood, however, that except as provided in this Section 6 and in Sections 8 and 11, the Initial Purchasers will pay all of their own costs and expenses, including the fees and expenses of their counsel, the cost of any aircraft chartered in connection with any road show (electronic or otherwise) and transfer taxes on the resale of any of the Notes by them.

 

7.             Conditions to Initial Purchasers’ Obligations.  The respective obligations of the Initial Purchasers hereunder are subject to the accuracy, when made and on and as of the Closing Date, of the representations and warranties of the Company and the Guarantors contained herein, to the performance by the Company and the Guarantors of their respective obligations hereunder, and to each of the following additional terms and conditions:

 

(a)           All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Notes, the Guarantees, the Exchange Notes, the Exchange Guarantees, the Registration Rights Agreement, the Indenture, the Transaction Agreements, the Pricing Disclosure Package and the Offering Memorandum, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Initial Purchasers, and the Company and the Guarantors shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

 

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(b)           Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to the Company and the Guarantors, shall have furnished to the Initial Purchasers its written opinion and negative assurance letter, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form of Exhibit B-1 and B-2 hereto.

 

(c)           Dechert LLP, New Jersey counsel to the Parent Guarantor and the Company, shall have furnished to the Initial Purchasers its written opinion, addressed to the Initial Purchasers and dated the Closing Date, in form and substance reasonably satisfactory to the Initial Purchasers, substantially in the form of Exhibit C hereto.

 

(d)           The Initial Purchasers shall have received from Cahill Gordon & Reindel LLP, counsel for the Initial Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Notes, the Pricing Disclosure Package, the Offering Memorandum and other related matters as the Initial Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents and information as such counsel reasonably requests for the purpose of enabling them to pass upon such matters.

 

(e)           At the time of execution of this Agreement, the Initial Purchasers shall have received from Deloitte & Touche LLP a “comfort letter,” in form and substance reasonably satisfactory to the Initial Purchasers, addressed to the Initial Purchasers and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Pricing Disclosure Package, as of a date not more than three days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and (iii) covering such other matters as are ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings.

 

(f)            With respect to the “comfort letter” of Deloitte & Touche LLP referred to in the preceding paragraph and delivered to the Initial Purchasers concurrently with the execution of this Agreement (the “initial letter”), Deloitte & Touche LLP shall have furnished to the Initial Purchasers a “bring-down letter,” addressed to the Initial Purchasers and dated the Closing Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the Closing Date (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in each of the Pricing Disclosure Package or the Offering Memorandum, as of a date not more than three days prior to the Closing Date), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter, and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter.

 

(g)           (i) Neither the Company, any Guarantor nor any of their respective subsidiaries shall have sustained, since the date of the latest audited financial statements included

 

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or incorporated by reference in the Pricing Disclosure Package and the Offering Memorandum, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, or (ii) since such date, there shall not have been any change in the capital stock or long-term debt of the Company, any Guarantor or any of their respective subsidiaries or any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management, business or prospects of the Company, the Guarantors and their respective subsidiaries, taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is, individually or in the aggregate, in the reasonable judgment of the Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the offering, sale or the delivery of the Notes being delivered on the Closing Date on the terms and in the manner contemplated in the Pricing Disclosure Package and the Offering Memorandum.

 

(h)           The Company and each Guarantor shall have furnished or caused to be furnished to the Initial Purchasers dated as of the Closing Date a certificate of the Chief Financial Officer of the Company and each Guarantor, or other officer reasonably satisfactory to the Initial Purchasers, as to such matters as the Representative may reasonably request, including, without limitation, the matters set forth in Sections 7(g) and 7(i) hereof and a statement that the representations, warranties and agreements of the Company and the Guarantors in Section 2 are true and correct on and as of the Closing Date, and the Company has complied with all its agreements contained herein and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date.

 

(i)            Subsequent to the earlier of the Applicable Time and the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company’s or the Parent Guarantor’s debt securities by any “nationally recognized statistical rating organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Securities Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s or the Parent Guarantor’s debt securities.

 

(j)            The Notes shall be eligible for clearance and settlement through DTC.

 

(k)           The Company and the Guarantors shall have executed and delivered the Registration Rights Agreement in form and substance reasonably satisfactory to the Initial Purchasers and the Company, and the Initial Purchasers shall have received an electronic copy thereof, duly executed by the Company and the Guarantors.

 

(l)            The Company, the Guarantors and the Trustee shall have executed and delivered the Indenture, and the Initial Purchasers shall have received an electronic copy thereof, duly executed by the Company, the Guarantors and the Trustee.

 

(m)          Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following:  (i) trading in securities generally on the New York Stock Exchange or the Nasdaq stock market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or materially limited or

 

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the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a general moratorium on commercial banking activities shall have been declared by federal or New York or Delaware authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions, including, without limitation, as a result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such), or there shall have occurred any calamity or crisis as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the offering, sale or delivery of the Notes being delivered on the Closing Date on the terms and in the manner contemplated in the Pricing Disclosure Package and the Offering Memorandum or that, in the judgment of the Representative, could materially and adversely affect the financial markets or the markets for the Notes and other debt securities.

 

(n)           Concurrently with or prior to the issue and sale of the Notes by the Company, the Company shall have entered into the ABL Facility Documentation, in form and substance reasonably satisfactory to the Representative; the Representative shall have received conformed counterparts thereof and all other documents and agreements entered into and received thereunder in connection with the closing of the New ABL Facility in form and substance reasonably satisfactory to the Representative.

 

(o)           Substantially concurrent with the closing of the offering of the Notes, the New ABL Facility shall have closed.

 

(p)           On or before the Closing Date, the Initial Settlement Date (as defined in the Offer Material) shall have occurred with respect to the Tender Offer, and the requisite consents from the holders of the Existing Notes necessary to consummate the Consent Solicitation and execute the Supplemental Indenture shall have been received, and the Supplemental Indenture shall have been executed by the Company, the guarantors party thereto and the Existing Trustee.

 

(q)           There shall exist at and as of the Closing Date no condition that would constitute a default (or an event that with notice or the lapse of time, or both, would constitute a default) under the Indenture or the ABL Facility Documentation or a material breach under any other Transaction Agreement as in effect at the Closing Date (or an event that with notice or lapse of time, or both, would constitute such a default or material breach). On the Closing Date, the ABL Facility Documentation shall be in full force and effect, shall conform in all material respects to the description thereof contained in the Pricing Disclosure Package and the Offering Memorandum and shall not have been modified.

 

(r)            On or prior to the Closing Date, the Company and the Guarantors shall have furnished to the Initial Purchasers such further certificates and documents as the Initial Purchasers may reasonably request.

 

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All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Initial Purchasers.

 

8.             Indemnification and Contribution.

 

(a)           The Company and each Guarantor, hereby agree, jointly and severally, to indemnify and hold harmless each Initial Purchaser, its affiliates, directors, officers and employees and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Notes), to which that Initial Purchaser, affiliate, director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Free Writing Offering Document, the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum or in any amendment or supplement thereto or (B) in any materials or information provided to investors by, or with the approval of, the Company or any Guarantor in connection with the marketing of the offering of the Notes (“Marketing Materials”), including any road show or investor presentations made to investors by the Company (whether in person or electronically), or (ii) the omission or alleged omission to state in any Free Writing Offering Document, the Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, or in any amendment or supplement thereto, or in any Marketing Materials, any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and shall reimburse each Initial Purchaser and each such affiliate, director, officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by that Initial Purchaser, affiliate, director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Free Writing Offering Document, Preliminary Offering Memorandum, the Pricing Disclosure Package or Offering Memorandum, or in any such amendment or supplement thereto, or in any Marketing Materials, in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company through the Representative by or on behalf of any Initial Purchaser specifically for inclusion therein, which information consists solely of the information specified in Section 8(e).  The foregoing indemnity agreement is in addition to any liability that the Company or the Guarantors may otherwise have to any Initial Purchaser or to any affiliate, director, officer, employee or controlling person of that Initial Purchaser.

 

(b)           Each Initial Purchaser, severally and not jointly, hereby agrees to indemnify and hold harmless the Company, each Guarantor, their respective officers and employees, each of their respective directors, and each person, if any, who controls the Company

 

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or any Guarantor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company, any Guarantor or any such director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained (A) in any Free Writing Offering Document, Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum or in any amendment or supplement thereto or (B) in any Marketing Materials, or (ii) the omission or alleged omission to state in any Free Writing Offering Document, Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum, or in any amendment or supplement thereto or in any Marketing Materials any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser furnished to the Company through the Representative by or on behalf of that Initial Purchaser specifically for inclusion therein, which information is limited to the information set forth in Section 8(e). The foregoing indemnity agreement is in addition to any liability that any Initial Purchaser may otherwise have to the Company, any Guarantor or any such director, officer, employee or controlling person.

 

(c)           Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have under paragraph (a) or (b) of this Section 8 except to the extent it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure and; provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability that it may have to an indemnified party otherwise than under paragraph (a) or (b) of this Section 8.  If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent jointly it and its affiliates, directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the indemnified party against the Company or any Guarantor under this Section 8, if (i) the indemnifying party shall have agreed otherwise; (ii) the indemnifying party have failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party and its affiliates, directors, officers, employees and controlling persons shall have reasonably concluded, based on the advice of counsel, that there may be legal

 

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defenses available to it that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Initial Purchasers or their respective affiliates, directors, officers, employees or controlling persons, on the one hand, and the Company and the Guarantors, on the other hand, and representation of both sets of parties by the same counsel would present a conflict due to actual or potential differing interests between them, and in any such event the fees and expenses of such separate counsel shall be paid by the Company and the Guarantors.  It is understood and agreed that the indemnifying parties shall not be liable for the reasonable fees and expenses of more than one counsel (in addition to any local counsel) at any time for all indemnified parties in connection with any one action or separate but related actions arising in the same jurisdiction out of the same general allegations or circumstances.  No indemnifying party shall (x) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to, or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, or (y) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment.

 

(d)           If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, from the offering of the Notes, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations.  The relative benefits received by the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes purchased under this Agreement (before deducting expenses) received by the Company and the Guarantors, on the one hand, and the total discounts and commissions received by the Initial Purchasers with respect to the Notes purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Notes under this Agreement as set forth on the cover page of the Offering Memorandum.  The relative fault shall be determined by reference to whether the

 

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untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Guarantors, or the Initial Purchasers, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission.  For purposes of the preceding two sentences, the net proceeds deemed to be received by the Company shall be deemed to be also for the benefit of the Guarantors, and information supplied by the Company shall also be deemed to have been supplied by the Guarantors.  The Company, the Guarantors, and the Initial Purchasers agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein.  The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the net proceeds from the sale to Eligible Purchasers of the Notes initially purchased by it exceeds the amount of any damages that such Initial Purchaser has otherwise paid or become liable to pay by reason of any 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 Initial Purchasers’ obligations to contribute as provided in this Section 8(d) are several in proportion to their respective purchase obligations and not joint.

 

(e)           The Initial Purchasers severally confirm and the Company and the Guarantors acknowledge and agree that the statements with respect to the offering of the Notes by the Initial Purchasers set forth under the heading “Stabilization and Short Positions” and the fourth and fifth sentences of the first paragraph under the heading “Rule 144A and Regulation S” of the section entitled “Plan of Distribution” in the Pricing Disclosure Package and the Offering Memorandum are correct and constitute the only information concerning such Initial Purchasers furnished in writing to the Company or any Guarantor by or on behalf of the Initial Purchasers specifically for inclusion in the Preliminary Offering Memorandum, the Pricing Disclosure Package and the Offering Memorandum or in any amendment or supplement thereto.

 

9.             Defaulting Initial Purchasers.

 

(a)           If, on the Closing Date, any Initial Purchaser defaults in its obligations to purchase the Notes that it has agreed to purchase under this Agreement, the remaining non-defaulting Initial Purchasers may in their discretion arrange for the purchase of such Notes by the non-defaulting Initial Purchasers or other persons satisfactory to the Company on the terms contained in this Agreement.  If, within 36 hours after any such default by any Initial Purchaser, the non-defaulting Initial Purchasers do not arrange for the purchase of such Notes, then the Company shall be entitled to a further period of 36 hours within which to procure other persons reasonably satisfactory to the non-defaulting Initial Purchasers to purchase such Notes on such terms.  In the event that within the respective prescribed periods, the non-defaulting Initial Purchasers notify the Company that they have so arranged for the purchase of such Notes, or the

 

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Company notifies the non-defaulting Initial Purchasers that it has so arranged for the purchase of such Notes, either the non-defaulting Initial Purchasers or the Company may postpone the Closing Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in the Pricing Disclosure Package, the Offering Memorandum or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Pricing Disclosure Package or the Offering Memorandum that effects any such changes. As used in this Agreement, the term “Initial Purchaser” includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto that, pursuant to this Section 9, purchases Notes that a defaulting Initial Purchaser agreed but failed to purchase.

 

(b)           If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the Company as provided in paragraph (a) above, the aggregate principal amount of such Notes that remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the Notes, then the Company shall have the right to require each non-defaulting Initial Purchaser to purchase the principal amount of Notes that such Initial Purchaser agreed to purchase hereunder plus such Initial Purchaser’s pro rata share (based on the principal amount of Notes that such Initial Purchaser agreed to purchase hereunder) of the Notes of such defaulting Initial Purchaser or Initial Purchasers for which such arrangements have not been made; provided that the non-defaulting Initial Purchasers shall not be obligated to purchase more than 110% of the aggregate principal amount of Notes that it agreed to purchase on the Closing Date pursuant to the terms of Section 3.

 

(c)           If, after giving effect to any arrangements for the purchase of the Notes of a defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the Company as provided in paragraph (a) above, the aggregate principal amount of such Notes that remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Notes, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers.  Any termination of this Agreement pursuant to this Section 9 shall be without liability on the part of the Company or the Guarantors, except that the Company and each of the Guarantors will continue to be liable for the payment of expenses as set forth in Sections 6 and 11 and except that the provisions of Section 8 shall not terminate and shall remain in effect.

 

(d)           Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it may have to the Company, the Guarantors or any non-defaulting Initial Purchaser for damages caused by its default.

 

10.           Termination.  The obligations of the Initial Purchasers hereunder may be terminated by the Initial Purchasers by notice given to and received by the Company prior to delivery of and payment for the Notes if, prior to that time, any of the events described in Section 7(g), (i) or (m) shall have occurred or if the Initial Purchasers shall decline to purchase the Notes for any reason permitted under this Agreement.

 

11.           Reimbursement of Initial Purchasers’ Expenses.  If (a) the Company for any reason fails to tender the Notes for delivery to the Initial Purchasers, or (b) the Initial Purchasers

 

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shall decline to purchase the Notes for any reason permitted under this Agreement, the Company and the Guarantors shall reimburse the Initial Purchasers for all reasonable and documented out-of-pocket expenses (including fees and disbursements of one firm of outside counsel (in addition to any local counsel)) for the Initial Purchasers) incurred by the Initial Purchasers in connection with this Agreement and the proposed purchase of the Notes, and upon demand the Company and the Guarantors shall pay the full amount thereof to the Initial Purchasers.  If this Agreement is terminated pursuant to Section 9 by reason of the default of one or more Initial Purchasers, the Company and the Guarantors shall not be obligated to reimburse any defaulting Initial Purchaser on account of those expenses.

 

12.           Notices, etc.  All statements, requests, notices and agreements hereunder shall be in writing, and:

 

(a)           if to any Initial Purchaser, shall be delivered or sent by hand delivery, mail, telex, overnight courier or facsimile transmission to Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration with a copy to Cahill Gordon & Reindel LLP, 80 Pine St., New York, New York 10005, Attention: Jonathan A. Schaffzin (Fax: (212) 269-5420), and with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Barclays Capital Inc., 745 Seventh Ave., New York, New York 10019; and

 

(b)           if to the Company or any Guarantor, shall be delivered or sent by mail, telex, overnight courier or facsimile transmission to Interline Brands, Inc., 701 San Marco Blvd., Jacksonville, FL 32207, Attention: John A. Ebner (Fax: (856) 533-3443), with a copy to Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019-6064, Attention: John C. Kennedy (Fax: (212) 492-0052);

 

provided, however, that any notice to an Initial Purchaser pursuant to Section 8(c) shall be delivered or sent by hand delivery, mail, telex or facsimile or electronic transmission to such Initial Purchaser at its address set forth in its acceptance telex to Barclays, which address will be supplied to any other party hereto by Barclays upon request.  Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof.  The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Initial Purchasers by Barclays.

 

13.           Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of and be binding upon the Initial Purchasers, the Company, the Guarantors and their respective successors.  This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that the representations, warranties, indemnities and agreements of the Company and the Guarantors contained in this Agreement shall also be deemed to be for the benefit of directors, officers and employees of the Initial Purchasers and each person or persons, if any, controlling any Initial Purchaser within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

 

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14.           Authority of the Representative.  Any action by the Initial Purchasers hereunder may be taken by Barclays on behalf of the Initial Purchasers, and any such action taken by Barclays shall be binding upon the Initial Purchasers.

 

15.           Survival.  The respective indemnities, rights of contribution, representations, warranties and agreements of the Company, the Guarantors and the Initial Purchasers contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Notes and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of any of them or any person controlling any of them.

 

16.           Definition of the Terms “Business Day,” “Affiliate” and “Subsidiary.” For purposes of this Agreement, (a) “business day” means any day on which the New York Stock Exchange, Inc. is open for trading, and (b) “affiliate” and “subsidiary” have the meanings set forth in Rule 405 under the Securities Act.

 

17.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

 

18.           Waiver of Jury Trial.  The Company and each of the Initial Purchasers hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

 

19.           No Fiduciary Duty.  The Company and the Guarantors acknowledge and agree that in connection with this offering, or any other services the Initial Purchasers may be deemed to be providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Initial Purchasers: (a) no fiduciary or agency relationship between the Company, any Guarantor and any other person, on the one hand, and the Initial Purchasers, on the other, exists; (b) the Initial Purchasers are not acting as advisors, expert or otherwise, to the Company or the Guarantors, including, without limitation, with respect to the determination of the purchase price of the Notes, and such relationship between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other, is entirely and solely commercial, based on arms-length negotiations; (c) any duties and obligations that the Initial Purchasers may have to the Company and the Guarantors shall be limited to those duties and obligations specifically stated herein; (d) the Initial Purchasers and their respective affiliates may have interests that differ from those of the Company and the Guarantors; and (e) the Company and the Guarantors have consulted their own legal and financial advisors to the extent they deemed appropriate.  The Company and the Guarantors hereby waive any claims that the Company and the Guarantors may have against the Initial Purchasers with respect to any breach of fiduciary duty in connection with the Notes.

 

20.           Counterparts; Facsimile Signatures.  This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.  Facsimile or other electronically scanned and transmitted signatures shall be deemed originals for all purposes of this Agreement.

 

32

 

21.           Headings.  The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

[Signature Pages Follow]

 

33

 

If the foregoing correctly sets forth the agreement among the Company, the Guarantors and the Initial Purchasers, please indicate your acceptance in the space provided for that purpose below.

 

	
 
  	
Very truly yours,
  
	
 
  	
 
  
	
 
  	
INTERLINE BRANDS, INC.,
  
	
 
  	
     a New Jersey corporation
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
 
  	
/s/ Michael Agliata
  
	
 
  	
 
  	
Name:
  	
Michael Agliata
  
	
 
  	
 
  	
Title:
  	
VP, General Counsel & Secretary
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
INTERLINE BRANDS, INC.,
  
	
 
  	
     a Delaware corporation
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
 
  	
/s/ Michael Agliata
  
	
 
  	
 
  	
Name:
  	
Michael Agliata
  
	
 
  	
 
  	
Title:
  	
VP, General Counsel & Secretary
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
WILMAR HOLDINGS, INC.,
  
	
 
  	
     a Delaware corporation
  
	
 
  	
WILMAR FINANCIAL, INC.,
  
	
 
  	
     a Delaware corporation
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
 
  	
/s/ David C. Serrano
  
	
 
  	
 
  	
Name:
  	
David C. Serrano
  
	
 
  	
 
  	
Title:
  	
VP, Finance and Controller
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
GLENWOOD ACQUISITION LLC,
  
	
 
  	
     a Delaware limited liability company
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
Interline Brands, Inc., its sole member
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
 
  
	
 
  	
By:
  	
 
  	
/s/ Michael Agliata
  
	
 
  	
 
  	
Name:
  	
Michael Agliata
  
	
 
  	
 
  	
Title:
  	
VP, General Counsel & Secretary
  

 

34

 

Accepted:

 

BARCLAYS CAPITAL INC.
 J.P. MORGAN SECURITIES LLC
 BB&T CAPITAL MARKETS, A DIVISION OF SCOTT & STRINGFELLOW, LLC
 GOLDMAN, SACHS & CO.
 LAZARD CAPITAL MARKETS LLC
 SUNTRUST ROBINSON HUMPHREY, INC.
 U.S. BANCORP INVESTMENTS, INC.
 By BARCLAYS CAPITAL INC.

as Authorized Representative

 

 

	
By:
  	
 
  	
/s/ Thomas M. Blouin
  	
 
  
	
Name:
  	
 
  	
Thomas M. Blouin
  
	
Title:
  	
 
  	
Director
  

 

 

SCHEDULE I

 

	
 
  	
 
  	
Principal
  	
 
  
	
 
  	
 
  	
Amount of
  	
 
  
	
 
  	
 
  	
Notes
  	
 
  
	
 
  	
 
  	
to Be
  	
 
  
	
Initial Purchasers
  	
 
  	
Purchased
  	
 
  
	
Barclays Capital Inc.
  	
 
  	
$
  	
120,000,000
  	
 
  
	
J.P. Morgan Securities LLC
  	
 
  	
$
  	
120,000,000
  	
 
  
	
BB&T Capital Markets, a division of Scott & Stringfellow, LLC
  	
 
  	
$
  	
15,000,000
  	
 
  
	
SunTrust Robinson Humphrey, Inc.
  	
 
  	
$
  	
12,000,000
  	
 
  
	
U.S. Bancorp Investments, Inc.
  	
 
  	
$
  	
12,000,000
  	
 
  
	
Goldman, Sachs & Co.
  	
 
  	
$
  	
10,500,000
  	
 
  
	
Lazard Capital Markets LLC
  	
 
  	
$
  	
10,500,000
  	
 
  
	
Total
  	
 
  	
$
  	
300,000,000
  	
 
  

 

 

SCHEDULE II

 

LIST OF GUARANTORS

 

	
Guarantor
  	
 
  	
Jurisdiction of Organization
  
	
Wilmar Holdings, Inc.
  	
 
  	
Delaware
  
	
Wilmar Financial, Inc.
  	
 
  	
Delaware
  
	
Glenwood Acquisition LLC
  	
 
  	
Delaware
  

 

 

SCHEDULE III

 

INTERLINE BRANDS, INC.
 PRICING TERM SHEET

 

 

Interline Brands, Inc.

 

$300,000,000 7.00% Senior Subordinated Notes due 2018

 

November 4, 2010

 

Pricing Supplement

 

Pricing Supplement dated November 4, 2010 to the Preliminary Offering Memorandum dated November 1, 2010 of Interline Brands, Inc.  This Pricing Supplement is qualified in its entirety by reference to the Preliminary Offering Memorandum.  The information in this Pricing Supplement supplements the Preliminary Offering Memorandum and supersedes the information in the Preliminary Offering Memorandum to the extent it is inconsistent with the information in the Preliminary Offering Memorandum.  Capitalized terms used in this Pricing Supplement but not defined have the meanings given them in the Preliminary Offering Memorandum.

 

	
Issuer
  	
 
  	
Interline Brands, Inc., a New Jersey corporation
  
	
 
  	
 
  	
 
  
	
Guarantors
  	
 
  	
Existing and future domestic subsidiaries that guarantee the ABL Facility and Interline Brands, Inc., a Delaware corporation
  
	
 
  	
 
  	
 
  
	
Title of Securities
  	
 
  	
7.00% Senior Subordinated Notes due 2018 (the “Notes”)
  
	
 
  	
 
  	
 
  
	
Aggregate Principal Amount
  	
 
  	
$300,000,000, which represents an increase of $25,000,000 from the amount offered under the Preliminary Offering Memorandum dated November 1, 2010.
  
	
 
  	
 
  	
 
  
	
Gross Proceeds
  	
 
  	
$300,000,000
  
	
 
  	
 
  	
 
  
	
Distribution
  	
 
  	
144A/Regulation S with Registration Rights
  
	
 
  	
 
  	
 
  
	
Maturity Date
  	
 
  	
November 15, 2018
  
	
 
  	
 
  	
 
  
	
Issue Price
  	
 
  	
100%
  
	
 
  	
 
  	
 
  
	
Coupon
  	
 
  	
7.00%
  
	
 
  	
 
  	
 
  
	
Yield to Maturity
  	
 
  	
7.00%
  
	
 
  	
 
  	
 
  
	
Spread to Benchmark Treasury
  	
 
  	
503 basis points
  
	
 
  	
 
  	
 
  
	
Benchmark Treasury
  	
 
  	
3.75% due November 15, 2018
  
	
 
  	
 
  	
 
  
	
Interest Payment Dates
  	
 
  	
May 15 and November 15 of each year, beginning on May 15, 2011
  
	
 
  	
 
  	
 
  
	
Record Dates
  	
 
  	
May 1 and November 1 of each year
  
	
 
  	
 
  	
 
  
	
Trade Date
  	
 
  	
November 4, 2010
  
	
 
  	
 
  	
 
  
	
Settlement Date
  	
 
  	
November 16, 2010 (T+7)
  
	
 
  	
 
  	
 
  
	
 
  	
 
  	
We expect that delivery of the Notes will be made against payment therefor on or about the seventh business day following the date of confirmation of orders with respect to the Notes (this settlement cycle being referred to as “T+7”). Under Rule 15c6-1 of the Commission under the Exchange Act, trades in the secondary market generally are required to settle in three 
  

 

 

	
 
  	
 
  	
business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes before the Notes are delivered will be required, by virtue of the fact that the Notes initially will settle in T+7, to specify an alternative settlement cycle at the time of any such trade to prevent a failed settlement. Purchasers of the Notes who wish to trade the Notes before their delivery should consult their own advisor.
  
	
 
  	
 
  	
 
  
	
Make-Whole Redemption
  	
 
  	
Make-whole redemption at Treasury Rate + 50 basis points prior to November 15, 2013
  
	
 
  	
 
  	
 
  
	
Optional Redemption
  	
 
  	
On or after November 15, 2013, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest, if any, on the Notes redeemed during the twelve-month period indicated beginning on November 15 of the years indicated below:
  
	
 
  	
 
  	
 
  	
 
  	
 
  	
 
  
	
 
  	
 
  	
Year
  	
 
  	
Price
  	
 
  
	
 
  	
 
  	
2013
  	
 
  	
105.250
  	
%
  
	
 
  	
 
  	
2014
  	
 
  	
103.500
  	
%
  
	
 
  	
 
  	
2015
  	
 
  	
101.750
  	
%
  
	
 
  	
 
  	
2016 and thereafter
  	
 
  	
100.000
  	
%
  
	
 
  	
 
  	
 
  
	
Equity Clawback
  	
 
  	
Up to 35% at 107.000% prior to November 15, 2013
  
	
 
  	
 
  	
 
  
	
Change of Control
  	
 
  	
101% plus accrued and unpaid interest
  
	
 
  	
 
  	
 
  
	
Joint Book-Running Managers
  	
 
  	
Barclays Capital Inc.

J.P. Morgan Securities LLC
  
	
 
  	
 
  	
 
  
	
Co-Managers
  	
 
  	
BB&T Capital Markets, a division of Scott & Stringfellow, LLC

Goldman, Sachs & Co.

Lazard Capital Markets LLC

SunTrust Robinson Humphrey, Inc.

U.S. Bancorp Investments, Inc.
  
	
 
  	
 
  	
 
  
	
CUSIP Numbers
  	
 
  	
Rule 144A:  45874QAA8

Regulation S:  U4586GAA3
  
	
 
  	
 
  	
 
  
	
ISIN Numbers
  	
 
  	
Rule 144A:  US45874QAA85

Regulation S:  USU4586GAA32
  
	
 
  	
 
  	
 
  
	
Denominations
  	
 
  	
Minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof
  

 

 

Additional Change to the Preliminary Offering Memorandum:

 

In addition to the pricing information set forth above, the Preliminary Offering Memorandum will be updated to reflect the following change to the “Description of the Notes” contained in the Preliminary Offering Memorandum:

 

Under the heading “Description of the Notes—Change of Control”, the following language is added below the first full paragraph on page 41 of the Preliminary Offering Memorandum:

 

2

 

Notwithstanding the foregoing, the occurrence of a transaction that would be considered a Change of Control but for the operation of clause (i) of the immediately preceding paragraph shall be considered a Change of Control to the extent such transaction is accompanied by a Ratings Decline.

 

“Ratings Decline” means the occurrence of a decrease in the rating of the notes by one or more gradations by either Moody’s Investors Service, Inc., or any successor thereto (“Moody’s”), or Standard & Poor’s Ratings Group, Inc., or any successor thereto (“S&P”) (including gradations within the rating categories, as well as between categories), within 90 days before or after the earlier of (x) the transaction giving rise to such potential Change of Control, (y) the date of public notice of the occurrence of the transaction giving rise to such potential Change of Control or (z) public notice of the intention of Company to effect such transaction giving rise to such potential Change of Control (which 90-day period shall be extended so long as the rating of the notes is under publicly announced consideration for possible downgrade by either Moody’s or S&P).

 

 

This material is strictly confidential and has been prepared by the Issuer solely for use in connection with the proposed offering of the securities described in the Preliminary Offering Memorandum.  This material is personal to each offeree and does not constitute an offer to any other person or the public generally to subscribe for or otherwise acquire the securities.  Please refer to the Preliminary Offering Memorandum for a complete description.

 

The securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and are being offered only to (1) “qualified institutional buyers” as defined in Rule 144A under the Securities Act and (2) outside the United States to non-U.S. persons in compliance with Regulation S under the Securities Act, and this communication is only being distributed to such persons.

 

This communication is not an offer to sell the securities and it is not a solicitation of an offer to buy the securities in any jurisdiction to any person to whom it is unlawful to make such offer or soliciation in such jurisdiction.

 

3

 

SCHEDULE IV

 

None.

 

 

Exhibit B-1

 

Company Counsel Opinion

 

212-373-3000

 

212-757-3990

 

November [ ], 2010

 

Barclays Capital Inc.
 J.P. Morgan Securities LLC 
 c/o Barclays Capital Inc. 
 745 Seventh Avenue
 New York, New York 10019

 

Ladies and Gentlemen:

 

We have acted as special counsel to Interline Brands, Inc., a New Jersey corporation (the “Company”), Interline Brands, Inc., a Delaware corporation (the “Parent Guarantor”), and the guarantors listed on Schedule I hereto (each a “Subsidiary Guarantor” and collectively with the Parent Guarantor, the “Guarantors”) in connection with the Purchase Agreement (the “Purchase Agreement”), dated November 4, 2010, among the Initial Purchasers named on Schedule 1 thereof (the “Initial Purchasers”), the Guarantors and the Company, relating to the purchase today by the Initial Purchasers of the Company’s 7.00% Senior Subordinated Notes due 2018 (the “Notes”).  The Notes are

 

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.

 

 

to be issued under the Indenture, dated as of November [  ], 2010 (the “Indenture”), among the Company, the Guarantors and Wells Fargo Bank National Association, as Trustee (the “Trustee”). This opinion is being furnished at the request of the Company as contemplated by Section 7(c) of the Purchase Agreement.  Capitalized terms used and not otherwise defined in this letter have the respective meanings given those terms in the Purchase Agreement.

 

In connection with the furnishing of this opinion, we have examined originals, or copies certified or otherwise identified to our satisfaction, of the following documents:

 

1.             the Purchase Agreement;

 

2.             the Indenture (including the guarantees of the Notes set forth therein (the “Guarantees”));

 

3.             the Registration Rights Agreement, dated [as of] November [ ], 2010 (the “Registration Rights Agreement”), among the Company, the Guarantors and the Initial Purchasers;

 

4.             the Notes issued on the date of this letter;

 

5.             the form of the Exchange Notes (the “Exchange Notes”) attached as an exhibit to the Indenture (including the guarantees of the Exchange Notes set forth in the Indenture (the “Exchange Guarantees”));

 

6.             the Preliminary Offering Memorandum, dated November 1, 2010 (the “Preliminary Offering Memorandum”);

 

7.             the Pricing Term Sheet, dated November 4, 2010 (the “Pricing Term Sheet” and together with the Preliminary Offering Memorandum, the “Pricing Disclosure Package”);

 

8.             the Offering Memorandum regarding the Notes, dated November [4], 2010 (the “Final Memorandum”);

 

9.             the ABL Facility Documentation listed on Schedule II hereto;

 

10.           the Offer Materials;

 

2

 

11.           the Dealer Manager and Consent Solicitation Agreement, dated November 1, 2010, between the Company and Barclays Capital Inc. (the “Dealer Manager Agreement” and together with the ABL Facility Documentation, the “Transaction Agreements”); and

 

12.           those documents incorporated by reference into the Pricing Disclosure Package and Final Memorandum as set forth on Schedule III.

 

In addition, we have examined: (i) such corporate and limited liability company records of the Guarantors that we have considered appropriate, including a copy of the certificate of incorporation or certificate of formation, as applicable and in each case as amended, and by-laws or limited liability company agreement, as applicable and in each case as amended, of each Guarantor certified by the Guarantors as in effect on the date of this letter (collectively, the “Guarantor Charter Documents”) and copies of resolutions of the board of directors, the Offering Committee of the Parent Guarantor or the members, as applicable, of each Guarantor relating to the issuance of the Notes and the Guarantees, each certified by the Guarantors; and (ii) such other certificates, agreements and documents as we deemed relevant and necessary as a basis for the opinions and beliefs expressed below.  We have also relied upon oral and written statements of officers and representatives of the Company and the Guarantors, the factual matters contained in the representations and warranties of the Company and the Guarantors made in the Purchase Agreement and upon certificates of public officials and the officers of the Company and the Guarantors.

 

In our examination of the documents referred to above, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any of the documents reviewed by us, the authenticity of all documents submitted to us as originals, the conformity to the originals of all

 

3

 

documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements or other documents, the authenticity of the latter documents and that the statements regarding matters of fact in the certificates, records, agreements, instruments and documents that we have examined are accurate and complete.  We have also assumed, without independent investigation, that (i) the Company is validly existing and in good standing under the laws of its jurisdiction of organization, (ii) the Company has all necessary corporate power and authority to execute, deliver and perform its obligations under the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes and the Transaction Agreements, (iii) the execution, delivery and performance of the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes and the Transaction Agreements have been duly authorized by all necessary corporate action and do not violate the Company’s charter documents or the Company’s other organizational documents or the laws of its jurisdiction of organization and (iv) the due execution and delivery of the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes and the Transaction Agreements by the Company, under the laws of its jurisdiction of organization.  We have also assumed that you have complied with all of your obligations and agreements arising under the Registration Rights Agreement and that this agreement represents a valid and legally binding obligation of yours, that the Indenture has been duly authorized and executed by, and represents a valid and legally binding obligation of, the Trustee and the due authentication of the Notes by the Trustee in the manner described in the certificate of the Trustee delivered to you today.

 

4

 

Whenever we indicate that our opinion is based upon our knowledge or words of similar import, our opinion is based solely on the actual knowledge of the attorneys in this firm who are representing the Company in connection with the Purchase Agreement or are otherwise responsible for the representation of the Company and without any independent verification.

 

Based upon the above, and subject to the stated assumptions, exceptions and qualifications, we are of the opinion that:

 

1.             Each of the Parent Guarantor, Wilmar Holdings, Inc. and Wilmar Financial, Inc. has been duly incorporated and is validly existing and in good standing under the laws of the State of Delaware.

 

2.             Glenwood Acquisition LLC has been duly formed and is validly existing and in good standing under the laws of the State of Delaware.

 

3.             Each Guarantor has all necessary corporate power or limited liability company power, as applicable, and authority to execute, deliver and perform its obligations under the Purchase Agreement, the Registration Rights Agreement, the Indenture and the Transaction Agreements and to own and hold its properties and conduct its business as described in the Pricing Disclosure Package and the Final Memorandum.

 

4.             The Notes, when duly executed, issued and delivered by the Company against payment as provided in the Purchase Agreement, will constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except that the enforceability of the Notes may be subject to bankruptcy, insolvency, reorganization,

 

5

 

fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law); and the Notes, when issued and delivered, will conform in all material respects to the description contained in the Pricing Disclosure Package and the Final Memorandum under the caption “Description of the Notes.”

 

5.             The Indenture has been duly authorized, executed and delivered by each Guarantor.  The Indenture is a valid and legally binding obligation of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, except that the enforceability of the Indenture may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law); and the Indenture conforms in all material respects to its description contained in the Pricing Disclosure Package and the Final Memorandum under the caption “Description of the Notes.”  The Indenture conforms in all material respects with the requirements of the Trust Indenture Act and the rules and regulations of the Commission applicable to an indenture which is qualified under that Act.

 

6.             The Purchase Agreement has been duly authorized, executed and delivered by each Guarantor.

 

7.             The Registration Rights Agreement has been duly authorized, executed and delivered by each Guarantor.  The Registration Rights Agreement is a valid and legally binding obligation of the Company and each Guarantor, enforceable against

 

6

 

the Company and each Guarantor in accordance with its terms, except that the enforceability of the Registration Rights Agreement may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law) and except to the extent that the indemnification and contribution provisions of the Registration Rights Agreement may be unenforceable.

 

8.             Each Guarantor has duly authorized, executed and delivered its Guarantee.  When the Notes are duly issued and delivered by the Company against payment as provided in the Purchase Agreement, the Guarantee of each Guarantor will be a valid and legally binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms, except that the enforceability of each Guarantee may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

 

9.             When the Exchange Notes are duly executed, issued and delivered by the Company against payment as provided in the Indenture and the Registration Rights Agreement, the Exchange Guarantee of each Guarantor will be a valid and legally binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms, except that the enforceability of each Exchange Guarantee may be subject to bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and subject to

 

7

 

general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

 

10.           The statements in the Final Memorandum under the heading “Certain United States Federal Income Tax Considerations,” to the extent that they constitute summaries of United States federal law or regulation or legal conclusions, have been reviewed by us and fairly summarize the matters described under that heading in all material respects.

 

11.           Based upon the representations, warranties and agreements of the Company and the Guarantors in Section 5, 2(b) and 2(y) of the Purchase Agreement and of the Initial Purchasers in Section 3(b) of the Purchase Agreement, it is not necessary in connection with the offer, sale and delivery of the Notes (including the Guarantees) to the Initial Purchasers under the Purchase Agreement or in connection with the initial resale of the Notes (including the Guarantees) by the Initial Purchasers in accordance with Section 3(b) of the Purchase Agreement to register the Notes or the Guarantees under the Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended, it being understood that we express no opinion as to any subsequent resale of the Notes.

 

12.           The issuance and sale of the Notes by the Company, the issuance of the Guarantees by the Guarantors, the compliance by the Company and each Guarantor with all of the provisions of the Purchase Agreement, the Registration Rights Agreement, the Indenture, the Notes, the Guarantees and the Transaction Agreements (other than the Offer Materials) and the performance of their obligations thereunder, and the consummation of the Tender Offer and the Consent Solicitation as contemplated by the Offer Materials will not (i) violate the Guarantor Charter Documents, (ii) breach or result

 

8

 

in a default under any agreement, indenture or instrument listed on Schedule IV to this opinion or (iii) violate Applicable Law or any judgment, order or decree of any court or arbitrator known to us, except, in the case of clauses (ii) and (iii) above, where the breach, default or violation could not reasonably be expected to have a material adverse effect on the Company and its subsidiaries, taken as a whole.  For purposes of this letter, the term “Applicable Law” means the General Corporation Law of the State of Delaware (the “GCL”), the Limited Liability Company Act of the State of Delaware (the “LLC Act”) and those laws, rules and regulations of the United States of America and the State of New York, in each case which in our experience are normally applicable to the transactions of the type contemplated by the Purchase Agreement (other than the United States federal securities laws, any state securities or Blue Sky laws of the various states, anti-fraud laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc.) but without us having made any special investigation as to the applicability of any specific rule or regulation.

 

13.           No consent, approval, authorization or order of, or filing, registration or qualification with, any Governmental Authority, which has not been obtained, taken or made is required by the Company and the Guarantors under any Applicable Law or under any judgment, order or decree of any court or arbitrator known to us for the issuance, authentication or sale of the Notes or the performance by the Company and the Guarantors of their obligations under the Purchase Agreement, the Registration Rights Agreement, the Notes, the Guarantees and the Indenture, or the consummation of the Tender Offer and the Consent Solicitation as contemplated by the Offer Materials, except (i) filings that are necessary to perfect the security interests

 

9

 

granted under the ABL Facility Documentation and (ii) any other consents, approvals, authorizations, orders, filings, registrations or qualifications as are provided for in the ABL Facility Documentation.  For purposes of this opinion, the term “Governmental Authority” means any executive, legislative, judicial, administrative or regulatory body of the State of New York, the State of Delaware or the United States of America.

 

14.           Each of the Company and the Parent Guarantor is not and, after giving effect to the offering and sale of the Notes and the application of their proceeds as described in the Pricing Disclosure Package and the Final Memorandum under the heading “Use of Proceeds,” will not be required to be registered as an investment company under the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission promulgated thereunder.

 

15.           To our knowledge, there are no legal proceedings pending or overtly threatened against the Parent Guarantor or any of its subsidiaries which could reasonably be expected to have a material adverse effect on the Parent Guarantor and its subsidiaries, taken as a whole.

 

The opinions expressed above are limited to the laws of the State of New York, the GCL, the LLC Act of the State of Delaware and the federal laws of the United States of America.  Our opinions are rendered only with respect to the laws, and the rules, regulations and orders under those laws, that are currently in effect.

 

10

 

This letter is furnished by us solely for your benefit in connection with the transactions referred to in the Purchase Agreement and may not be circulated to, or relied upon by, any other person without our prior written consent.

 

	
 
  	
Very truly yours,
  
	
 
  	
 
  
	
 
  	
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
  

 

11

 

Schedule I

 

Subsidiary Guarantors

 

1.     Wilmar Holdings, Inc., a Delaware corporation

 

2.     Wilmar Financial, Inc., a Delaware corporation

 

3.     Glenwood Acquisition LLC, a Delaware limited liability company

 

 

Schedule II

 

ABL Facility Documentation

 

[To Come]

 

 

Schedule III

 

List documents incorporated by reference

 

1.     The Parent Guarantor’s Annual Report on Form 10-K for the year ended December 25, 2009 (filed with the SEC on February 23, 2010).

 

2.     The Parent Guarantor’s Definitive Proxy Statement on Schedule 14A (filed with the SEC on March 25, 2010).

 

3.     The Parent Guarantor’s Quarterly Reports on Form 10-Q for the quarterly periods ended March 26, 2010, June 25, 2010 and September 24, 2010 (filed with the SEC on May 3, 2010, August 2, 2010 and November 1, 2010, respectively).

 

4.     The Parent Guarantor’s Current Reports on Form 8-K filed with the SEC on January 11, 2010, January 14, 2010, March 18, 2010, May 11, 2010 and May 17, 2010.

 

 

Schedule IV

 

Documents Examined

 

1.     Credit Agreement, dated as of June 23, 2006, among the Parent Guarantor, the Company, as borrower, the lenders party therein, JPMorgan Chase Bank, N.A., as administrative agent, Lehman Commercial Paper Inc., as syndication agent, Credit Suisse, Bank of America, N.A., Wachovia Bank, National Association and SunTrust Bank, each as a co-documentation agent and J.P. Morgan Securities Inc. and Lehman Brothers Inc. as joint bookrunners and joint-lead arrangers.

 

2.     Guarantee and Collateral Agreement, dated as of June 23, 2006, among the Parent Guarantor, the Company, certain subsidiaries of the Company and JPMorgan Chase Bank, N.A., as collateral agent.

 

3.     Supplement No.1, dated as of July 3, 2006, to the Guarantee and Collateral Agreement, dated June 23, 2006, between AmSan, LLC and JPMorgan Chase Bank, N.A., as collateral agent

 

4.     Supplement No. 2, dated as of September 25, 2009, to the Guarantee and Collateral Agreement, dated June 23, 2006, between Eagle Maintenance Supply, Inc. and JPMorgan Chase Bank, N.A., as collateral agent.

 

5.     Subordinated Debt Indenture, dated as of June 23, 2006, among the Company, the Parent Guarantor, as guarantor, certain subsidiaries of the Parent Guarantor and The Bank of New York Trust Company, N.A., as trustee.

 

6.     First Supplemental Indenture, dated as of June 23, 2006, among the Company, the Parent Guarantor, as guarantor, certain subsidiaries of the Parent Guarantor and The Bank of New York Trust Company, N.A., as trustee.

 

7.     Second Supplemental Indenture, dated as of July 3, 2006, by and among the Company, the Parent Guarantor, AmSan, LLC, as a subsidiary guarantor, certain other subsidiaries of the Parent Guarantor and The Bank of New York Trust Company, N.A., as trustee.

 

8.     Third Supplemental Indenture, dated as of September 29, 2009, by and among the Company, the Parent Guarantor, Eagle Maintenance Supply, Inc. as a subsidiary guarantor, certain other subsidiaries of the Parent Guarantor and The Bank of New York Mellon Trust Company, N.A., as trustee.

 

 

Exhibit B-2

 

Company Counsel Negative Assurance Letter

 

212-373-3000

 

212-757-3990

 

November [ ], 2010

 

Barclays Capital Inc.
 J.P. Morgan Securities LLC 
 c/o Barclays Capital Inc. 
 745 Seventh Avenue
 New York, NY 10019

 

Ladies and Gentlemen:

 

We have acted as special counsel to Interline Brands, Inc., a New Jersey corporation (the “Company”), Interline Brands, Inc., a Delaware corporation (the “Parent Guarantor”) and the guarantors listed on Schedule I hereto (each a “Subsidiary Guarantor” and collectively with the Parent Guarantor, the “Guarantors”) in connection with the Purchase Agreement (the “Purchase Agreement”), dated November [  ], 2010, among the Initial Purchasers named on Schedule 1 thereof (the “Initial Purchasers”), the

 

IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this document.

 

 

Guarantors and the Company, relating to the purchase today by the Initial Purchasers of the Company’s [  ]% Senior Subordinated Notes due 2020 (the “Notes”).  This letter is being furnished at the request of the Company in connection with the delivery of our opinion to you of even date herewith (the “Opinion”) under the Purchase Agreement.  Capitalized terms used and not otherwise defined in this letter have the respective meanings given those terms in the Purchase Agreement.

 

The primary purpose of our professional engagement was not to establish factual matters or financial, accounting or statistical information.  In addition, many determinations involved in the preparation of the Preliminary Offering Memorandum regarding the Notes, dated November [  ], 2010 (together with the documents incorporated by reference therein, the “Preliminary Memorandum”) and the Offering Memorandum regarding the Notes, dated November [  ], 2010 (together with the documents incorporated by reference therein, the “Final Memorandum”) are of a wholly or partially non-legal character or relate to legal matters outside the scope of the Opinion.  Furthermore, the limitations inherent in the independent verification of factual matters and in the role of outside counsel are such that we have not undertaken to independently verify, and cannot and do not assume responsibility for the accuracy, completeness or fairness of, the statements contained in the Preliminary Memorandum, or the Final Memorandum or the documents incorporated by reference therein (other than as explicitly stated in paragraph 4, 5 and 10 of the Opinion).

 

In the course of acting as special counsel to the Company in connection with the offering of the Notes, we have participated in conferences and telephone conversations with officers and other representatives of the Company and the

 

2

 

independent registered public accountants for the Company during which conferences and conversations the contents of the Preliminary Memorandum, the Final Memorandum and related matters were discussed. Based upon such participation (and relying as to factual matters on officers, employees and other representatives of the Company), our understanding of the U.S. federal securities laws and the experience we have gained in our practice thereunder, we hereby advise you that our work in connection with this matter did not disclose any information that gave us reason to believe that (i) as of the Applicable Time, the Preliminary Memorandum, when taken together with the Pricing Information (as defined below) (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference therein or omitted therefrom or from those documents incorporated by reference, or included in or omitted from the Pricing Information, in each case, as to which we express no such belief), included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (ii) the Final Memorandum, as of its date or at the Closing Date (except for the financial statements, financial statement schedules and other financial data included or incorporated by reference therein or omitted therefrom or from those documents incorporated by reference, as to which we express no such belief), included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  For purposes of this letter, the term “Pricing Information” means the information set forth in the Pricing Term Sheet dated November [  ], 2010.

 

3

 

This letter is furnished by us solely for your benefit in connection with the transactions referred to in the Purchase Agreement and may not be circulated to, or relied upon by, any other person without our prior written consent.

 

	
 
  	
Very truly yours,
  
	
 
  	
 
  
	
 
  	
PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP
  

 

 

Schedule I

 

Subsidiary Guarantors

 

1.               Wilmar Holdings, Inc., a Delaware corporation

 

2.               Wilmar Financial, Inc., a Delaware corporation

 

3.               Glenwood Acquisition LLC, a Delaware limited liability company

 

 

Exhibit C

 

Local Counsel Opinion

 

November [    ], 2010

 

Barclays Capital Inc.,

as Representatives of the Initial Purchasers named
 in Schedule I to the Purchase Agreement referred
 to below

 

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

 

Re:          Interline Brands, Inc.

 

Ladies and Gentlemen:

 

We have acted as special New Jersey counsel to Interline Brands, Inc., a New Jersey corporation (the “Company”), in connection with the issuance and sale by the Company of $300,000,000 aggregate principal amount of its [      ]% Senior Subordinated Notes due 2020 (the “Notes”) to the several initial purchasers (the “Initial Purchasers”) named in the Purchase Agreement, dated November [    ], 2010 (the (“Purchase Agreement”), by and among the Company, Interline Brands, Inc., a Delaware corporation, the subsidiary guarantors named therein and the Initial Purchasers.  This opinion is delivered to you pursuant to Section 7(c) of the Purchase Agreement.  Capitalized terms used in this opinion letter and not otherwise defined herein shall have the meanings specified in the Purchase Agreement.

 

In rendering the opinions expressed below, we have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary, including the following documents (collectively, the “Documents”):

 

(1)                                  the Company’s Preliminary Offering Memorandum, dated November [    ], 2010 (as supplemented and amended as of the Applicable Time, the “Preliminary Offering Memorandum”);

 

(2)                                  the Company’s pricing term sheet, attached as Schedule III to the Purchase Agreement (the “Pricing Term Sheet” and collectively with the Preliminary Offering Memorandum and any of the written communications listed on Schedule IV(A) to the Purchase Agreement, the “Pricing Disclosure Package”);

 

(3)                                  the Company’s Offering Memorandum, dated November [      ], 2010 (the “Offering Memorandum”);

 

(4)                                  the Company’s Offer to Purchase and Consent Solicitation Statement and related Letter of Transmittal dated as of November 1, 2010 (collectively with any related documents, statements or information , the “Offer Material”), pursuant to which the 

 

James J. Marino . Resident Managing Partner

 

 

Company is conducting a cash tender offer (the “Tender Offer”) for any and all of its outstanding 8.125% Senior Subordinated Notes due 2014 and soliciting consents (the “Consent Solicitation”) for proposed amendments and waivers to that certain indenture, dated as of June 23, 2006, among the Company, the guarantors party thereto and The Bank of New York Mellon, N.A. (as successor in interest to The Bank of New York Trust Company, N.A.) as trustee, pursuant to which such existing notes were issued;

 

(5)                                  the ABL Facility Documentation, relating to the Company’s replacement of its Credit Agreement, dated as of June 23, 2006, with a new asset-based revolving credit facility that will provide up to $[200,000,000] of revolving commitments, subject to borrowing base limitations;

 

(6)                                  the Dealer Manager and Consent Solicitation Agreement, dated November [    ], 2010 (the “Dealer Manager Agreement” and together with the Offer Material and the ABL Facility Documentation, the “Transaction Agreements”), by and between Barclays Capital Inc. (“Barclays”) and the Company pursuant to which the Company has engaged Barclays as dealer manager in respect of the Tender Offer and solicitation agent in respect of the Consent Solicitation;

 

(7)                                  the Registration Rights Agreement, dated November [    ], 2010 (the (“Registration Rights Agreement”), by and among the Company, the Guarantors and the Initial Purchasers;

 

(8)                                  the Notes;

 

(9)                                  the form of Exchange Notes;

 

(10)                            the Indenture, dated November [    ], 2010 (the (“Indenture”), by and among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee (the “Trustee”); and

 

(11)                           the Purchase Agreement.

 

For the purposes of this opinion letter, the Transaction Agreements together with the Registration Rights Agreement, the Indenture and the Purchase Agreement are collectively hereinafter referred to as the “Operative Documents.”

 

In addition, we have examined (i) such corporate records of the Company that we have considered appropriate, including a copy of the certificate of incorporation and by-laws of the Company (each as amended, as applicable), certified by the Company, as in effect on the date of this letter (collectively, the “Charter Documents”), and copies of resolutions of the board of directors of the Company relating to the issuance and sale of the Notes and the Exchange Notes, certified by the Company, and (ii) such other certificates, agreements and documents that we deemed relevant and necessary as a basis for the opinions expressed below.  With respect to certain factual matters, we have also relied upon the representations

 

2

 

and warranties of the Company made in the Documents and upon certificates or comparable documents of public officials, including a certificate from the Department of Treasury of the State of New Jersey as to the Company’s existence and good standing in New Jersey, and the officers of the Company and we have not been requested to conduct, nor have we undertaken, any independent investigation into the accuracy and completeness of such representations and certificates.

 

In our examination of the documents referred to above, we have assumed, without independent investigation, the genuineness of all signatures, the legal capacity of all individuals who have executed any of the documents reviewed by us, the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as certified, photostatic, reproduced or conformed copies of valid existing agreements or other documents, the authenticity of all the latter documents and that the statements regarding matters of fact in the certificates, records, agreements, instruments and documents that we have examined are accurate and complete.

 

In rendering the opinions set forth below, we have also assumed that (a) each of the parties to the Documents (other than the Company) has duly and validly authorized the Documents; (b) each of the parties to the Documents (other than the Company) has duly and validly executed and delivered the Documents; (c) each of the parties to the Documents (other than the Company) is validly existing and in good standing under the laws of the jurisdiction of its organization or formation; (d) each of the parties to the Documents (other than the Company) has the requisite corporate, limited liability company or limited partnership power and authority, as applicable, and has taken the corporate, limited liability company or limited partnership action, as applicable, necessary to authorize the execution and delivery of the Documents and to consummate the transactions contemplated thereby; and (e) the Documents constitute the valid and binding obligations of each party thereto, enforceable against such party in accordance with their respective terms.

 

On the basis of the foregoing and such examination of law as we have deemed necessary, and subject to the assumptions and qualifications set forth in this letter, we are of the opinion that:

 

1.                                       The Company is a validly existing corporation in good standing under the laws of the State of New Jersey.

 

2.                                       The Company has the necessary corporate power and corporate authority (i) to own its properties and conduct its business as described in each of the Pricing Disclosure Package and the Offering Memorandum, except where the failure to have such power or authority would not, individually or in the aggregate, have a Material Adverse Effect, and (ii) to authorize, issue and sell the Notes as contemplated by the Indenture and the Purchase Agreement.

 

3.                                       Each of the Purchase Agreement, the Indenture, the Notes, the Registration Rights Agreement and each Transaction Agreement to which the Company

 

3

 

is a party has been duly authorized, executed and delivered by the Company, and the Exchange Notes have been duly authorized for issuance by the Company.

 

4.                                       Assuming the accuracy of the representations and warranties of the parties to each of the Operative Documents, the compliance by such parties with their agreements contained in the Operative Documents, the accuracy of, and compliance with, the representations, warranties and agreements deemed made in accordance with the Operative Documents, the Pricing Disclosure Package and the Offering Memorandum by purchasers to whom the Initial Purchasers initially resell the Notes and the Exchange Notes, no consent, approval, authorization, registration or qualification of or filing with or order of any New Jersey court or governmental agency or body having jurisdiction over the Company is required in connection with the execution, delivery and performance by the Company of the Operative Documents or the consummation of the transactions contemplated thereby to be consummated by the Company, or with the Company’s execution, issuance and sale of the Notes and the Exchange Notes, except (i) as set forth in the Pricing Disclosure Package and the Offering Memorandum; (ii) such as have been made or obtained; (iii) in the case of compliance with the terms of the Registration Rights Agreement, such as will be obtained or made under the Securities Act and the Trust Indenture Act; (iv) such as may be required under the blue sky or securities laws of the State of New Jersey in connection with the purchase and distribution of the Notes and/or the Exchange Notes (and related guarantees) by the Initial Purchasers in the manner contemplated in the Purchase Agreement, the Pricing Disclosure Package, the Offering Memorandum and the Registration Rights Agreement, as to which we express no opinion; (v) those that may be needed in connection with the exercise of certain remedies under the Documents; and (vi) where the failure to make or obtain such consent, approval, authorization, order or filing would not have a Material Adverse Effect.

 

5.                                       The execution and delivery by the Company of each of the Operative Documents and the performance of its obligations thereunder, and the Company’s issuance and sale of the Notes and the Exchange Notes, will not (i) result in a violation of the Charter Documents or (ii) violate any applicable provision of New Jersey law, rule or regulation known to us to be applicable to the Company (other than blue sky or New Jersey securities laws, anti-fraud laws and fraudulent transfer laws and bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights, as to which we express no opinion).

 

The foregoing opinions are subject to the following qualifications:

 

4

 

a.               Without limiting the generality of the foregoing, the opinions set forth in this letter relate only to the laws of the State of New Jersey and we express no opinion with respect to the laws of any other jurisdiction.

 

b.              No opinion is rendered as to any federal, state or local laws, rules, or regulations of (1) antitrust or unfair competition; (2) the Trust Indenture Act of 1939, as amended, or any state securities or “blue sky” laws; (3) environmental matters; (4) tax matters; (5) ERISA laws, rules and regulations; (6) zoning, subdivision, land use or other matters affecting the use, occupancy or operation of property; (7) cities, townships, municipalities or other special local non-state governmental authorities; or (8) insurance, banking or financial institutions.  In addition, no opinion is rendered herein as to applicability to or effect on any of the matters covered herein of the laws or regulations that apply specifically to the type of business conducted by the Company or the regulatory status of any party to the Documents.

 

c.               In giving our opinion set forth in paragraph 4, we express no opinion with respect to any action, consent, approval, filing or registration such as may be required as a result of the regulatory status or other facts or circumstances specifically relating to the Trustee, the Representative or any Initial Purchaser.

 

Our opinion is rendered only with respect to the laws, and the rules, regulations and orders under those laws, that are currently in effect.  We have no obligation to advise the addressees (or any third party) of any changes in the law or facts that may occur after the date of this opinion.

 

The opinions expressed herein are limited to the matters expressly stated herein and are given solely for your benefit and may not be relied upon by, or assigned to, any other person for any purpose, and may not be circulated, quoted, filed with or furnished to any governmental agency or other person or entity, or otherwise referred to (with or without specific reference to our firm), in whole or in part, without our prior written consent in each instance.

 

Very truly yours,

 

/s/ Dechert LLP

 

5exhibit10-1.htm

CREDIT AGREEMENT

This Credit Agreement ("Agreement") is made as of December 10, 2010, by and between NATURAL GAS SERVICES GROUP, INC., a Colorado corporation ("Borrower"), and JPMORGAN CHASE BANK, N.A., a national banking association ("Lender"). Borrower has requested that Lender make loans to Borrower in the following manner and subject to the following terms and conditions:

ARTICLE I

Definitions

Section 1.01    Certain Definitions.                                                                Unless a particular word or phrase is otherwise defined or the context otherwise requires, capitalized words and phrases used in this Agreement shall have the following meanings (all definitions that are defined in this Agreement in the singular to have the same meanings when used in the plural and vice versa):

 

Account shall have the meaning set forth in Article 9 of the UCC.

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

Adjusted LIBOR Rate means, with respect to any LIBOR Borrowing for any Interest Period or for any CBFR Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate

Adjusted One Month LIBOR Rate means, for any day, an interest rate per annum equal to the sum of (i) 2.50% per annum plus (ii) the Adjusted LIBOR Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day); provided that, for the avoidance of doubt, the Adjusted LIBOR Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding).

Affiliate means any Person controlling, controlled by or under common control with any other Person.  For purposes of this definition, "control" (including "controlled by" and "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 such Person, whether through the own­ership of any indicia of equity rights (whether issued and outstanding capital stock, partnership interests or otherwise) or by any other means.

Agreement means this Credit Agreement, as it may from time to time be amended, modified, restated or supplemented.

Annual Audited Financial Statements means, with respect to each fiscal year of the Borrower, (a) the Borrower’s 10-K Report filed with the Securities Exchange Commission for such fiscal year, prepared in conformity with GAAP and accompanied by a report and opinion of independent certified public accountants with an accounting firm of standing and reputation acceptable to the Lender, which shall state that such financial statements, in the opinion of such accountants, present fairly, in all material respects, the financial position of the Borrower and its Subsidiaries, on a consolidated basis, as of the date thereof and the results of its operations and cash flows for the period covered thereby in conformity with GAAP, and (b) the annual consolidating financial statements of the Borrower and its Subsidiaries, containing a balance sheet as of the end of such fiscal year and an income statement, retained earnings statements and a statement of cash flows for such fiscal year, all prepared in reasonable detail and certified as true and correct by an authorized officer of Borrower acceptable to Lender on behalf of Borrower, with the parties recognizing that such consolidating statements will be prepared in accordance with GAAP only to the extent normal and customary and shall not be required until the end of the first full fiscal quarter of Borrower occurring after the creation or acquisition by Borrower of its first Subsidiary, if any.

Applicable Margin means, for any day, the applicable rate per annum set forth below based upon the Borrower’s Leverage Ratio as of the most recent determination date, provided that until the delivery to the Lender, pursuant to Section 5.02(b) below, of the Borrower's Quarterly Financial Statements for the Borrower's fiscal quarter ending December 31, 2010, the "Applicable Margin" shall be the applicable rate per annum set forth below in Category 3:

 

  

  

  

	
 

Leverage Ratio

 

	
 

Applicable Margin for

CBFR Borrowings

 

	
 

Applicable Margin for

LIBOR Borrowings

 

	
 

       Category 1

       > 2.00x

 

	
 

-0.50%

 

	
 

+2.25%

 

	
 

Category 2 

       > 1.00x

 

	
 

-0.75%

	
 

+2.00%

	
 

Category 3

       > 1.00x

 

	
 

-1.00%

 

	
 

+1.75%

 

For purposes of the foregoing, (a) the Applicable Margin shall be determined as of the end of each fiscal quarter of the Borrower (commencing with the fiscal quarter ending December 31, 2010) based upon the Borrower’s Annual Financial Statements or Quarterly Financial Statements, as applicable, together with the related Compliance Certificates, delivered pursuant to Sections 5.02(a), 5.02(b) and 5.02(c) hereof, and (b) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective during the period commencing ten (10) days after the date of delivery to the Lender of such financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that the Leverage Ratio shall be deemed to be in Category 1 at the option of the Lender if the Borrower fails to deliver the Annual Audited Financial Statements or Quarterly Financial Statements, as applicable, together with the related Compliance Certificates, required to be delivered pursuant to Sections 5.02(a), 5.02(b) and 5.02(c) hereof during the period from the expiration of the time for delivery thereof until such financial statements are delivered.

Applicable Lending Office shall mean Lender's Domestic Lending Office in the case of a CBFR Borrowing and Lender's LIBOR Lending Office in the case of a LIBOR Borrowing.

Applications means all applications and agreements for Letters of Credit, or similar instruments or agreements, in Proper Form, now or hereafter executed by Borrower in favor of Lender in connection with any Letter of Credit now or hereafter issued or to be issued under the terms of Section 2.08 at the request of Borrower.

Availability means, as at any date, an amount equal to (a) the lesser of (i) the Commitment or (ii) the Borrowing Base, minus (b) the aggregate amount of the Loans then outstanding, minus (c) the aggregate amount of the Letter of Credit Liabilities then outstanding, minus (c) all Rent Reserves, all at said date.

Bankruptcy Code means the United States Bankruptcy Code, as amended, and any successor statute.

Board means the Board of Governors of the Federal Reserve System of the United States of America and any successor entity performing similar functions.

Book Value means the depreciated book value of the applicable Equipment Inventory or General Inventory, as the case may be, as shown on the Borrower’s financial records, so long as the applicable depreciation schedule utilized (i) is in accordance with GAAP for depreciating the applicable type of Inventory and (ii) is consistently applied at all times during the term of this Agreement.

 

  

  

  

             Borrowing Authorization means (i) with respect to a corporation, a certificate, in Proper Form, of the Secretary or an Assistant Secretary of a corporation as to the resolutions of the Board of Directors of such corporation authorizing the execution, delivery and performance of the Credit Documents to be executed by such corporation; the incumbency and signature of the officer of such corporation executing such documents on behalf of such corporation, and the Organizational Documents of such corporation, and (ii) with respect to a partnership, limited liability company, joint venture or other non-individual Person, such written instruments as shall be required by Lender, each in Proper Form, authorizing the execution, delivery and performance of the Credit Documents to be executed by such Person; the incumbency and signature of the representative of such Person executing such documents on behalf of such Person, and the Organizational Documents of such Person.

 

Borrowing Base means, as at any date, the amount of the Borrowing Base shown on the Borrowing Base Certificate then most recently delivered pursuant to Paragraph 5.02(c) hereof, determined by calculating the amount equal to the sum of the following:

	
(a)  

	
80% of the Eligible Receivables of Borrower and its Domestic Subsidiaries at said date; plus

	
  

	
(b)

	
50% of the Book Value of the Eligible General Inventory of Borrower at said date; provided, however, that the amount of the Borrowing Base attributable to the Eligible General Inventory component described in this subparagraph on any date shall never exceed 50% of the aggregate amount of the Commitment as of such date; plus

	
  

	
(c)

	
75% of the Book Value of the Eligible Equipment Inventory of Borrower at said date.

 

 

In the absence of a current Borrowing Base Certificate, Lender may determine the Borrowing Base from time to time in its reasonable discretion, taking into account all information reasonably available to it, and the Borrowing Base from time to time so determined shall be the Borrowing Base for all purposes of this Agreement until a current Borrowing Base Certificate, in Proper Form, is furnished to and accepted by Lender.  Notwithstanding any provision to the contrary in this Agreement or in any other Credit Document, if any collateral audit or field exam of Borrower’s and its Subsidiaries’ operations and Collateral by Lender after the date hereof (i) discloses any material deviations for the applicable Borrowing Base components reported under the most recently delivered Borrowing Base Certificate, then the applicable Borrowing Base components for which such deviations are discovered may be adjusted accordingly at Lender’s reasonable discretion, or (ii) results in material negative adjustments when compared to the results from the collateral audit or field exam of Borrower’s operations and Collateral conducted by Lender prior to the date of this Agreement, then the Borrowing Base components and features (i.e., eligibility criteria and/or Borrowing Base advance rates) may be adjusted accordingly at Lender’s reasonable discretion.

            Borrowing Base Certificate means a certificate, duly executed by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower, appropriately completed and in substantially the form of Exhibit C hereto.  Each Borrowing Base Certificate shall be effective only as accepted by Lender (and with such revisions, if any, as Lender may reasonably require as a condition to such acceptance).

             Business Day means a day (other than a Saturday or Sunday) on which banks generally are open in Austin, Chicago and Dallas for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system; provided, however, that with respect to LIBOR Borrowings and the Adjusted One Month LIBOR Rate, Business Day shall also mean a day on which transactions in dollar deposits between lenders may be carried on in the London eurodollar interbank market.

Capital Expenditures means, as to any Person, without duplication, any expenditure or commitment to expend money for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a balance sheet of such Person prepared in accordance with GAAP.

             Capital Lease Obligations means, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal Property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board, as amended) and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP (including such Statement No. 13).

CBFR Borrowing shall mean, as of any date, that portion of the principal balance of the Loans bearing interest at the CB Floating Rate as of such date.

             CB Floating Rate means, on any day, the Prime Rate for such day; provided that the CB Floating Rate shall never be less than the Adjusted One Month LIBOR Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day).  Any change in the CB Floating Rate due to a change in the Prime Rate or the Adjusted One Month LIBOR Rate shall be effective from and including the effective date of such change in the Prime Rate or the Adjusted One Month LIBOR Rate, respectively.

Ceiling Rate means, on any day, the maximum nonusuri­ous rate of interest permitted for that day by whichever of applicable federal or Texas laws permits the higher interest rate, stated as a rate per annum.  On each day, if any, that the Texas Finance Code establish­es the Ceiling Rate, the Ceiling Rate shall be the "weekly ceiling" (as defined in the Texas Finance Code) for that day.  Lender may from time to time, as to current and future balances, implement any other ceiling under the Texas Finance Code by notice to Borrower, if and to the extent permit­ted by the Texas Finance Code.  Without notice to Borrower or any other person or entity, the Ceiling Rate shall automatically fluctuate upward and downward as and in the amount by which such maximum nonusurious rate of interest permitted by applicable law fluctu­ates.

           Change in Law means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by Lender (or, for purposes of Section 2.06(a), by any lending office of Lender or by Lender’s holding company) with any binding request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.  Notwithstanding anything herein to the contrary, the Dodd Frank Wall Street Reform and Consumer Protection Act, and all requests, rules, guidelines and directives promulgated thereunder shall be deemed to be “Changes in law”, regardless of the date enacted or adopted.

 

  

  

  

Chattel Paper shall have the meaning set forth in Article 9 of the UCC.

             Code means the Internal Revenue Code of 1986, as amended, as now or hereafter in effect, together with all regula­tions, rulings and interpretations thereof or thereunder by the Internal Revenue Service.

             Collateral means (a) all Accounts now or hereafter owned by Borrower and/or any of its Domestic Subsidiaries, (b) all leases and other Chattel Paper covering all or any portion of any rental compressor Inventory of Borrower and/or any of its Domestic Subsidiaries (including any Equipment Inventory), including without limitation, all rights to payments now or hereafter due and owing thereunder, (c) all General Inventory now or hereafter owned by Borrower and/or any of its Domestic Subsidiaries, (d) all Equipment Inventory now or hereafter designated by Borrower in accordance with the other terms of this Agreement, together with all leases of any Equipment Inventory and other Chattel Paper covering or otherwise related to any Equipment Inventory, now or hereafter owned by Borrower and/or any of its Domestic Subsidiaries, (e) 100% of all Equity Interests hereafter owned by Borrower and/or any of its Domestic Subsidiaries (i) in all Domestic Subsidiaries of the Borrower hereafter created or acquired and (ii) in any other non-Subsidiary entity in which Borrower and/or any of its Domestic Subsidiaries hereafter acquires any Equity Interest, (f) 65% of all Equity Interests in all non-Domestic Subsidiaries of the Borrower hereafter existing, and (g) all products and proceeds of any of the foregoing.

 

            Collateral Access Agreement means any landlord waiver, subordination or other agreement, in form and substance satisfactory to Lender, between Lender and any third party (including any licensor, bailee, consignee, customs broker, or other similar Person) in possession of any Collateral or any landlord of Borrower or any of its Domestic Subsidiaries for any leased real property where any Collateral is located, as such landlord waiver, subordination or other agreement may be amended, restated, or otherwise modified from time to time.

Commitment means the obligation of Lender to make Loans to the Borrower in an aggregate principal amount at any one time outstanding up to (but not exceeding) $20,000,000.00, as the same may hereafter be reduced by Borrower in accordance with the terms of Section 2.01(b) hereof or increased in accordance with the terms of Section 2.01(c) hereof.

Commitment Coverage Ratio means, on any day, the ratio of (a) the amount of the Borrowing Base as of such date to (b) the amount of the Commitment as of such date.

            Compliance Certificate shall have the meaning given to it in Section 5.02(c) hereof.

            Consequential Loss shall mean, any amounts payable under Section 2.05(d).

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

            Cover means, on any day, an amount equal to 105% of the aggregate Letter of Credit Liabilities then outstanding on such day, such amount to be paid in immediately available funds and collaterally assigned by Borrower to Lender and held by Lender as security for the Obligations using documentation satisfactory to Lender.  Such amount shall be retained by Lender in a collateral account until such time as the applicable Letters of Credit for which such Cover has been paid shall have expired and the Letter of Credit Liabilities, if any, with respect thereto shall have been fully satisfied; provided, however, that at such time if a Default or Event of Default has occurred and is continuing, Lender shall not be required to release such amount in such collateral account.

Credit Documents means any and all papers now or hereafter governing, evidencing, guaranteeing or securing or otherwise relating to all or any part of the Obligations, including the Note, this Agreement, Borrowing Authorizations with respect to all such Persons as Lender may require, the Security Documents, the Letter of Credit Documents, all instruments, certificates and agreements now or hereafter executed or delivered to Lender pursuant to any of the foregoing or in connection with the Loans or any commitment regarding the Loans, including without limitation, any International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement or any similar or other agreement with respect to any Rate Management Transaction, and all amendments, modifications, renewals, extensions, increases and rearrangements of, and substitutions for, any of the foregoing.

Default means an Event of Default or an event which with notice or lapse of time or both would, unless cured or waived, become an Event of Default.

Default Rate means, on any day, a rate per annum equal to the lesser of (a) the Ceiling Rate for that day, or (b) a rate per annum equal to five percent (5.00%) in excess of (i) the CB Floating Rate minus (ii) the Applicable Margin for CBFR Borrowings.

Distributions means all dividends and other distributions made by a Person to holders of Equity Interests in such Person or to the officers or directors of such Person, as the case may be, other than salary, bonuses, stock grants, restricted stock awards, option grants and other compensation for services expended or rendered.

Dollars or $ refers to lawful money of the United States of America.

Domestic Lending Office shall mean the office of Lender specified in the address portion on the signature pages hereof, or such other office of Lender as Lender may from time to time specify to the Borrower as its "Domestic Lending Office."

Domestic Subsidiary shall mean any Subsidiary that is organized and domiciled in the Unites States of America.

  

  

  

 

           EBITDA means for any Person for any period, (a) Net Income, plus (b) the sum of (i) income tax expense, (ii) Interest Expense, (iii) depreciation, depletion, obsolescence and amortization expense, (iv) non-cash stock compensation expense, (v) unrealized losses on derivatives and investments in Equity Interests, (vi) extraordinary expenses (including, but not limited to, impairment of goodwill and other intangibles), (vii) non-recurring, non-cash expenses, and (viii) losses attributable to minority ownership interests in Equity Interests, minus (c) the sum of (i) unrealized gains on derivatives and investments in Equity Interests, (ii) extraordinary income, (iii) non-recurring, non-cash income, (iv) gains attributable to minority ownership interests in Equity Interests, in each case of such Person for such period, with each component of EBITDA to be computed and calculated, all without duplication, on a consolidated basis and in accordance with GAAP.

 

Eligible Receivables means, as at any date of determination thereof, each Receivable which at such date is payable and owing to Borrower or any of its Domestic Subsidiaries and which complies with all of the following requirements:

 

 

	
  

	
(a)

	
all payments due on the Receivable have been billed and invoiced in a timely fashion and in the normal course of business;

	
  

	
(b)

	
no payment on the Receivable is more than 90 days past the date of invoice or 60 days past due;

	
  

	
(c)

	
the Receivable has been created by Borrower or its applicable Domestic Subsidiary in the ordinary course of business from a completed, outright and lawful sale of goods, to which such goods have been shipped and title has passed to the applicable account debtor on an absolute sales basis, or from the rendering of services by or on behalf of Borrower or such Domestic Subsidiary and is deemed “earned” under the applicable service contract or other agreement between the applicable account debtor and Borrower or such Domestic Subsidiary; provided, however, that notwithstanding the foregoing and except as expressly excluded in the immediately following proviso, Receivables arising under leases of rental Inventory owned by Borrower or its applicable Domestic Subsidiary may be billed for up to thirty (30) days in advance in accordance with the terms of the applicable rental Inventory lease; provided further, however, that one-half (1/2) of the difference between (i) the aggregate amount of all Receivables shown on the most recent listing and aging of Receivables furnished to Lender and (ii) the actual amount of such Receivables permitted to be included as an asset on the consolidated balance sheet of the Borrower in accordance with GAAP (as determined by Lender based upon Lender’s review of (A) the most recent Annual Audited Financial Statements or Quarterly Financial Statements of Borrower, as applicable, furnished by Borrower to Lender, or (B) if applicable, the supporting schedules accompanying the most recent Borrowing Base Certificate furnished by Borrower to Lender with respect to any calendar month-end not coinciding with the end of any fiscal quarter of Borrower) shall be expressly excluded from Eligible Receivables;

	
  

	
(d)

	
the Receivable is Collateral hereunder and is subject to a first priority perfected Lien in favor of Lender which is free and clear of all other Liens of any nature whatsoever (except for Liens permitted under Section 6.02);

	
  

	
(e)

	
less than twenty percent (20%) of all billed Receivables owing by the applicable account debtor to Borrower and its Domestic Subsidiaries are more than 60 days past due;

	
  

	
(f)

	
the Receivable, together with all other Receivables owing from the applicable debtor and its Affiliates to Borrower and its Domestic Subsidiaries, is not in excess of twenty percent (20%) of the aggregate amount of all Receivables then owing to Borrower and its Domestic Subsidiaries by all account debtors (it being agreed that for purposes of this subparagraph, only the aggregate amount of such Receivables owing from the applicable debtor and its Affiliates in excess of such 20% concentration threshold shall be excluded from Eligible Receivables);

	
  

	
(g)

	
the Receivable does not arise out of a bill-and-hold, guaranteed sale, sale-and-return, consignment, sale-on-approval, progress billing, promotional (including samples), C.O.D. or cash in advance arrangement;

	
  

	
(h)

	
the Receivable is not subject to any setoff, contra, offset, deduction, dispute, charge back, credit, counterclaim or other defense arising out of the transactions represented by the Receivable or independently thereof (but in each case regarding an undisputed liquidated sum, only to the extent of such undisputed sum, and in each case regarding a disputed sum or claim, only to the extent of the sum or amount claimed by the party adverse to Borrower or its applicable Domestic Subsidiary);

	
  

	
(i)

	
the applicable account debtor has finally accepted the goods or services from the sale out of which the Receivable arose and has not (1) objected to such account debtor's liability thereon, (2) rejected any of such services or goods, or (3) returned or repossessed any of such goods, except for goods returned in the ordinary course of business for which, in the case of goods returned, goods of equal or greater value have been shipped in return;

	
  

	
(j)

	
the applicable account debtor is not any Governmental Authority;

	
  

	
(k)

	
the applicable account debtor is not a director, officer, employee or any Affiliate of Borrower or any of its Subsidiaries;

	
  

	
(l)

	
the applicable account debtor must not be a natural Person, must be organized under the laws of any state, and must have its principal place of business located within the United States;

	
  

	
(m)

	
the Receivable is not evidenced by a promissory note or other instrument (other than by Chattel Paper constituting any lease of any rental compressor Inventory of Debtor);

  

  

  

	
  

	
(n)

	
the Receivable complies with all material Legal Requirements (including without limitation, all usury laws, fair credit reporting and billing laws, fair debt collection practices and rules, and regulations relating to truth in lending and other similar matters);

	
  

	
(o)

	
the Receivable is in full force and effect and constitutes a legal, valid and binding obligation of the applicable account debtor enforceable in accordance with the terms thereof;

	
  

	
(p)

	
the Receivable is denominated in and provides for payment by the applicable account debtor in U.S. dollars;

	
  

	
(s)

	
the Receivable has not been and is not required to be charged or written off as uncollectible in accordance with GAAP; and

	
  

	
(q)

	
the credit standing of the applicable account debtor in relation to the amount of credit extended has not become unsatisfactory to Lender in its reasonable discretion.

 

 

 

Additionally, in calculating Eligible Receivables, each of the following shall be excluded (to the extent the same are otherwise included in Eligible Receivables): (i) unpaid sales, excise or similar taxes owed by Borrower and/or any of its Domestic Subsidiaries; and (ii) returns, discounts, claims, credits and allowances of any nature asserted or taken by account debtors of Borrower and/or any of its Domestic Subsidiaries.  In the event of any dispute under the foregoing criteria about whether a Receivable is or has ceased to be an Eligible Receivable, the decision of Lender shall be conclusive and binding, absent manifest error.  Nothing in this definition of "Eligible Receivables" shall be construed to limit or release any right of Lender to any Collateral.

Eligible Equipment Inventory means, as at any date of determination thereof, any Equipment Inventory of Borrower or any of its Domestic Subsidiaries which complies with the following requirements:

	
  

	
(a)

	
good title to such Equipment Inventory is owned by and recorded on the books and records of Borrower or its applicable Domestic Subsidiary in the ordinary course of business;

	
(b)  

	
such Equipment Inventory shall not include or be permanently attached to vehicles, trailers or other transportation equipment covered by any certificate of title;

	
(c)  

	
the Book Value of such Equipment Inventory is determined in accordance with GAAP on an average cost basis;

	
(d)  

	
such Equipment Inventory is Collateral hereunder and is subject to a first priority perfected Lien in favor of the Lender and is free and clear of all other Liens of any nature whatsoever (except for Liens permitted under Section 6.02);

	
(e)  

	
to the extent such Equipment Inventory is not in the possession of the third-party lessee pursuant to the terms of any lease covering the same, such Equipment Inventory must not be in transit and must be housed or stored in the United States at a real Property location either owned or leased by Borrower or any of its Domestic Subsidiaries, so long as (i) such leased facility is covered by a Collateral Access Agreement delivered to the Lender by the lessor thereof or (ii) a Rent Reserve for such leased facility has been established and is then applicable, provided, that notwithstanding the foregoing, no such Rent Reserve will be required during the first 60 days after the date of this Agreement with respect to any leased facility not covered by a Collateral Access Agreement;

	
(f)  

	
such Equipment Inventory meets all applicable laws and standards imposed by any Governmental Authority having regulatory authority over it;

	
(g)  

	
such Equipment Inventory must be adequately insured to the reasonable satisfaction of the Lender pursuant to insurance coverage required by this Agreement and the Security Documents;

	
(h)  

	
such Equipment Inventory is not obsolete, slow moving, unmerchantable, defective, unfit for lease, not leasing at reasonable prices in the ordinary course of business or unacceptable due to age, type, category and/or quantity;

	
(i)  

	
which contains or bears any intellectual property rights licensed to Borrower or its applicable Domestic Subsidiary unless the Lender is satisfied that it may sell, lease or otherwise dispose of such Equipment Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of any royalties to such licensor; and

	
(j)  

	
the Lender has not deemed such Equipment Inventory ineligible because the Lender considers such Equipment Inventory in its reasonable discretion to be unmarketable or the value thereof to be impaired or its ability to realize such value to be insecure in any material respect.

In the event of any dispute under the foregoing criteria about whether any Equipment Inventory is or has ceased to be an Eligible Equipment Inventory, the decision of Lender shall be conclusive and binding, absent manifest error.  Nothing in this definition of "Eligible Equipment Inventory" shall be construed to limit or release any right of Lender to any Collateral.

  

  

  

Eligible General Inventory means, as at any date of determination thereof, any General Inventory of Borrower or any of its Domestic Subsidiaries (excluding compressors and any and all accessions thereto) which complies with the following requirements:

	
  

	
(a)

	
good title to such General Inventory is owned by and recorded on the books and records of Borrower or its applicable Domestic Subsidiary in the ordinary course of business;

	
  

	
(b)

	
such General Inventory is only raw materials or finished goods and is not work-in-progress Inventory, is not scrap or remnants Inventory and is not display items or manufacturing, replacement, packaging or shipping supplies or materials;

	
  

	
(c)

	
the Book Value of such General Inventory is valued in accordance with GAAP on a average cost basis;

	
  

	
(d)

	
such General Inventory is Collateral hereunder and is subject to a first priority perfected Lien in favor of the Lender and is free and clear of all other Liens of any nature whatsoever (except for Liens permitted under Section 6.02);

	
  

	
(e)

	
such General Inventory meets all applicable laws and standards imposed by any Governmental Authority having regulatory authority over it;

	
  

	
(f)

	
such General Inventory must not be in transit and must be housed or stored in the United States at a real Property location either owned or leased by Borrower or any of its Domestic Subsidiaries, so long as (i) such leased facility is covered by a Collateral Access Agreement delivered to the Lender by the lessor thereof or (ii) a Rent Reserve for such leased facility has been established and is then applicable, provided, that notwithstanding the foregoing, no such Rent Reserve will be required during the first 60 days after the date of this Agreement with respect to any leased facility not covered by a Collateral Access Agreement;

	
  

	
(g)

	
such General Inventory must be adequately insured to the reasonable satisfaction of the Lender pursuant to insurance coverage required by this Agreement and the Security Documents;

	
  

	
(h)

	
such General Inventory has not been sold and must not be on consignment;

	
  

	
(i)

	
such General Inventory is not obsolete or slow moving (with the amount of such obsolete or slow moving General Inventory as of any date to never be less than the Obsolescence Reserve on such date), unmerchantable, defective, unfit for sale, not salable at prices approximating at least the cost of such General Inventory in the ordinary course of business or unacceptable due to age, type, category and/or quantity;

	
  

	
(j)

	
which contains or bears any intellectual property rights licensed to Borrower or its applicable Domestic Subsidiary unless the Lender is satisfied that it may sell or otherwise dispose of such General Inventory without (i) infringing the rights of such licensor, (ii) violating any contract with such licensor, or (iii) incurring any liability with respect to payment of any royalties to such licensor; and

	
  

	
(k)

	
the Lender has not deemed such Inventory ineligible because the Lender considers such General Inventory in its reasonable discretion to be unmarketable or the value thereof to be impaired or its ability to realize such value to be insecure in any material respect.

In the event of any dispute under the foregoing criteria about whether any Inventory is or has ceased to be a Eligible General Inventory, the decision of Lender shall be conclusive and binding, absent manifest error. Nothing in this definition of "Eligible General Inventory" shall be construed to limit or release any right of Lender to any Collateral.

Environmental Claim means any third party (including Governmental Authorities and employees) action, lawsuit, claim or proceeding (including claims or pro­ceedings at common law or under the Occupational Safety and Health Act or similar laws relating to safety of employees) which seeks to impose liability for (i) noise; (ii) pollu­tion or contamination of the air, surface water, ground water or land or the clean-up of such pollution or contamin­a­tion; (iii) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation; (iv) exposure to Hazardous Substances; (v) the safety or health of employees or (vi) the manufacture, processing, distribu­tion in commerce or use of Hazardous Substances.  An "Environmental Claim" includes a common law action, as well as a proceeding to issue, modify or terminate an Environmental Permit, or to adopt or amend a regulation to the extent that such a proceeding attempts to redress violations of an applicable permit, license, or regulation as alleged by any Governmental Authority.

Environmental Liabilities includes all liabilities arising from any Environmental Claim, Environmental Permit or Requirement of Environmental Law under any theory of recovery, at law or in equity, and whether based on negli­gence, strict liability or otherwise, including remedial, removal, response, abatement, restoration (including natural resources), investigative, monitoring, personal injury and damage to Property or natural resources or injuries to persons, and any other related costs, expenses, losses, damages, penalties, fines, liabil­ities and obligations, and all costs and expenses necessary to cause the issuance, reissuance or renewal of any Environmental Permit, including reasonable attorneys' fees and court costs.

Environmental Matters means matters relating to pollution or protection of the environment, including emissions, dischar­ges, releases or threatened releases of Hazardous Substances into the environment (including ambient air, surface water or ground water, or land surface or sub­surface), or otherwise relating to the manufacture, process­ing, distribution, use, treatment, storage, disposal, tran­sport or handling of Hazardous Substances.

Environmental Permit means any permit, license, approval or other authorization under any applicable Legal Requirement relat­ing to pollution or protection of health or the environ­ment, including laws, regulations or other requirements relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous substances or toxic materials or wastes into ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contami­nants or Hazardous Substances.

  

  

  

Equipment shall have the meaning set forth in Article 9 of the UCC.

Equipment Inventory means the specific rental compressor Inventory, together with any and all accessions thereto, now or hereafter owned by Borrower or any of its Domestic Subsidiaries, if any, for purposes of rental or leasing of the same to customers to the extent, but only to the extent, such compressors have been properly identified and designated by the Borrower as “Equipment Inventory” for purposes hereof in accordance with the requirements of Section  5.11.

Equity Interests means shares of the capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, or any warrants, options or other rights to acquire such interests.

ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules, regula­tions, rulings and interpretations adopted by the Internal Revenue Service or the U.S. Department of Labor thereunder.

           Event of Default shall have the meaning assigned to it in Section 7.01 hereof.

           Financing Statements means all such Uniform Commercial Code financing statements as Lender shall require, in Proper Form, naming Lender, as secured party, and naming Borrower or its applicable Domestic Subsidiary, as applicable, as debtor, in order to give notice of and to perfect or continue perfection of Lender's Liens in all Collateral.

Funded Indebtedness means, as to a particular Person at any particular time, without duplication, the sum of all Indebtedness (whether matured or unmatured, liquidated or unliquidated, direct or indirect, absolute or contingent, or joint or several) of such Person  for or in respect of (a) borrowed money, (b) amounts raised under or liabilities in respect of any note purchase or acceptance credit facility, (iii) reimbursement obligations (contingent or otherwise) under any letter of credit agreement or facility, (iv) obligations under any Rate Management Transaction or any other currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management devices, (v) any other transaction (including forward sale or purchase agreements, Capital Lease Obligations (other than the interest component of such obligations) or conditional sales agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements (but not including trade payables and accrued expenses incurred in the ordinary course of business which are not represented by a promissory note or other evidence of Indebtedness and which are not more than thirty (30) days past due), (vi) all guarantees and other surety obligations by such Person of Indebtedness of others for borrowed money, and (vii) all Indebtedness for borrowed money Indebtedness of others secured by any Lien existing on any interest of the Person with respect to which Funded Indebtedness is being determined in Property owned subject to such Lien whether or not the Indebtedness secured thereby shall have been assumed by or such Person is otherwise liable therefor; provided, that such term shall not mean or include any Indebtedness in respect of which monies sufficient to pay and discharge the same in full (either on the expressed date of maturity thereof or on such earlier date as such Indebtedness may be duly called for redemption and payment) shall be deposited with a depository, agency or trustee acceptable to Lender in trust for the payment thereof

GAAP means, as to a particular Person, such accounting practice as, in the opinion of the independent certified public accountants of recognized national standing regu­larly retained by such Person and acceptable to Lender, conforms at the time to generally accepted accounting principles, consistently applied.  GAAP means those principles and practices (a) which are recognized as such by the Financial Accounting Standards Board, (b) which are applied for all periods after the date hereof in a manner con­sistent with the manner in which such principles and practices were applied to the most recent audited financial statements of the relevant Person furnished to Lender, and (c) which are consistently applied for all periods after the date hereof so as to reflect properly the financial condition, and results of operations and changes in financial position, of such Person.  If any change in any accounting principle or practice is required by the Financial Accounting Standards Board in order for such prin­ciple or practice to continue as a GAAP or practice, all reports and financial statements required hereunder may be prepared in accordance with such change only after written notice of such change is given to Lender.

General Intangibles shall have the meaning set forth in Article 9 of the UCC.

General Inventory means any Inventory of Borrower or any of its Domestic Subsidiaries (excluding compressors held for lease to third parties and any and all accessions thereto), now or hereafter owned by Borrower or any of its Domestic Subsidiaries.

Governmental Authority means any foreign governmental authority, the United States of America, any State of the United States and any political subdivision of any of the fore­going, and any central bank, agency, department, commission, board, bureau, court or other tribunal having jurisdiction over Lender, Borrower, any other Obligor or their respec­tive Property.

Guarantor means each Domestic Subsidiary of the Borrower, if any, hereafter becoming a guarantor of the Obligations in accordance with the other terms of this Agreement.

Guaranty means each and every guaranty of the Obligations, if any, from time to time executed and delivered to Lender after the date hereof by any Guarantor, as each of the same may be amended, supplemented, modified and/or restated from time to time.

Hazardous Substance means petroleum products and any hazardous or toxic waste or substance defined or regulated as a hazardous substance from time to time by any law, rule, regu­lation or order described in the definition of "Requirements of Environmental Law".

Indebtedness means, as to a particular Person at any particular time, without duplication, the sum of (a) all Funded Indebtedness of such Person and (b) all Off-Balance Sheet Liabilities of such Person.

Interest Expense means, for any Person during any applicable period, the total interest expense accruing on Indebtedness of such Person and/or its Subsidiaries, on a consolidated basis, during such period (including interest expense attributable to Capitalized Lease Obligations and amounts, both positive and negative, attributable to interest expense incurred under any Rate Management Transaction), computed and calculated, without duplication, in accordance with GAAP.

  

  

  

Interest Option shall have the meaning specified in Section 2.04(a) hereof.

Interest Payment Date means (a) with respect to any CBFR Borrowing, the first day of each calendar month and the Maturity Date, and (b) with respect to any LIBOR Borrowing, the last day of the Interest Period applicable to such Borrowing and the Maturity Date.

Interest Period means the period commencing on the date of the applicable LIBOR Borrowing and ending on the numerically corresponding day in the calendar month that is one, two or three months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) no Interest Period shall end later than the Maturity Date, and (iv) interest shall accrue from and including the first day of an Interest Period to, but excluding, the last day of such Interest Period.

Inventory shall have the meaning set forth in Article 9 of the UCC.

           Investment means the purchase or other acquisition of any securities or Indebtedness of, or the making of any loan, advance, extension of credit or capital contribution to, or the incurring of any liability, contingently or otherwise, in respect of the Indebtedness of, any Person.

Joinder Agreement shall mean any agreement, in Proper Form, executed by a Domestic Subsidiary of Borrower from time to time after the date hereof in accordance with Section 6.08 hereof, pursuant to which such Subsidiary joins in the execution and delivery of a Guaranty and the applicable Security Documents.

Legal Requirement means any law, statute, ordinance, decree, requirement, order, judgment, rule, or regulation (or inter­pretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority, whether presently existing or arising in the future.  The term "Legal Requirement" includes Requirements of Environmental Law.

Letter of Credit Advances means all sums which may from time to time be paid by Lender pursuant to any and all of the Letters of Credit, together with all other sums, fees, reimbursements or other obligations which may be due to Lender pursuant to or in connection with any of the Letters of Credit.

Letter of Credit Documents means the Letters of Credit and the Applications.

Letter of Credit Liabilities means at any time the sum of (i) the aggregate undrawn amount of all Letters of Credit outstanding at such time plus (ii) the aggregate amount of all Letter of Credit Advances for which Lender has not been reimbursed and which remain unpaid at such time (it being agreed that any Letter of Credit Advances satisfied by proceeds of a Loan hereunder shall be deemed to have been reimbursed and paid for purposes of this definition).

Letters of Credit means all standby letters of credit issued by Lender for the account or liability of Borrower pursuant to the terms of Section 2.08 hereof.  Letter of Credit means any one of the Letters of Credit.

Leverage Ratio means the ratio, determined as of the end of each fiscal quarter of Borrower  for the most-recently ended four (4) fiscal quarters, of (a) all Funded Indebtedness to (b) EBITDA, all computed and calculated, without duplication, for Borrower, on a consolidated basis, and in accordance with GAAP.

LIBOR Borrowing shall mean, as of any date, that portion of the principal balance of the Loans bearing interest at the Adjusted LIBOR Rate as of such date.

LIBOR Lending Office shall mean the office of Lender specified in the address portion on the signature pages hereof, or such other office of Lender as Lender may from time to time specify in writing to the Borrower as its LIBOR Lending Office.

LIBOR Rate means, with respect to any LIBOR Borrowing for any Interest Period, the rate appearing on Reuters Screen LIBOR01 Page (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Lender from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period.  In the event that such rate is not available at such time for any reason, then the LIBOR Rate with respect to such LIBOR Borrowing for such Interest Period shall be the rate at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered by the principal London office of the Lender in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

Lien means any mortgage, pledge, charge, encumbrance, security interest, collateral assignment or other lien or restriction of any kind, whether based on common law, constitutional provision, statute or contract, and shall include reservations, exceptions, encroach­ments, easements, rights of way, covenants, conditions, restrictions, leases and other title exceptions.

Loan means a loan described in and provided for by Section 2.01, and Loans means all of such Loans.

  

  

  

Material Adverse Effect means a material adverse effect on (a) the business, assets, property, or condition (financial or otherwise) of Borrower and its Subsidiaries, if any, taken as a whole, which in Lender's judgment, impairs or could reasonably be expected to impair Lender's ability in any material respect to collect the Obligations when due, or (b) the validity or enforceability of Lender’s Lien on any material portion of the Collateral or the priority of such Lien.

Maturity Date means the earlier to occur of (a) December 31, 2011, (b) any date that the Commitment is terminated in full by Borrower pursuant to Section 2.01(b) hereof, and (c) any date the Maturity Date is accelerated or the Commitment is terminated by Lender pursuant to Section 7.02 hereof.

Net Income means gross revenues and other proper income credits, less all proper income charges (including taxes on income), all determined in accordance with GAAP; provided, that there shall not be included in such revenues (a) any gains resulting from the write-up of assets, (b) any proceeds of any life insurance policy, or (c) any gain which is classified as "extraordinary" in accord­ance with GAAP; and provided further, that capital gains may be included in revenues only to the extent of capital losses.  Net Income shall be determined on a consolidated basis.

Note means the promissory note dated concurrently herewith executed by Borrower payable to the order of Lender in the face amount of $20,000,000.00, and any and all renewals, extensions, modifications, increases, rearrangements and/or replacements thereof.

Obligations means the Indebtedness evidenced by the Note and other sums now or hereafter payable to Lender by Borrower or any other Obligor under any of the Credit Documents, including all payment obligations, contingent or otherwise, whether now or hereafter arising under any Rate Management Transaction, together with performance of all other payment obligations, liabilities and Indebtedness of Borrower to Lender under any one or more of the Credit Documents, including all fees, costs, expenses and indemnity obligations under this Agreement and all other Credit Documents.

Obligors means Borrower and each Guarantor now or hereafter primarily or secondarily obligated to pay to Lender all of the Obligations.

Obsolescence Reserve means, on any day, an amount equal to the obsolescence reserve established and maintained by the Borrower on its balance sheet as of such date.

Off-Balance Sheet Liability of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person (other than operating leases).

Organizational Documents means, with respect to a corporation, the certificate of incorporation, articles of incorporation and bylaws of such corporation; with respect to a partnership, the partnership agreement establishing such partnership; with respect to a limited liability company, the articles of organization or formation and regulations or operating agreement of such limited liability company; with respect to a joint venture, the joint venture agreement establishing such joint venture, and with respect to a trust, the instrument establishing such trust; in each case including any and all modifications thereof as of the date of the Credit Document referring to such Organizational Document and any and all future modifications thereof which are consented to by Lender.

Parties means all Persons other than Lender executing any Credit Document.

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

Permitted Acquisition means any Acquisition by the Borrower or any of its Domestic Subsidiaries in a transaction that satisfies each of the following requirements:

(a) such Acquisition is not a hostile or contested acquisition;

 

(b) the business acquired in connection with such Acquisition is not engaged, directly or indirectly, in any line of business other than the businesses in which the Borrower is engaged on the date of this Agreement, any Permitted Other Business Lines and any business activities that are substantially similar, related, or incidental to any of the foregoing;

 

(c) as soon as available, but not less than thirty (30) days prior to such Acquisition, the Borrower has provided the Lender with written notice of such Acquisition;

 

(d) the purchase price paid by the Borrower or its applicable Subsidiary (i) in connection with any single Acquisition shall not exceed $15,000,000.00, and (ii) for all Acquisitions made during any twelve (12) consecutive calendar months shall not exceed $15,000,000.00 in the aggregate (provided, however, that for Acquisitions for permitted pipeline business activities of the type described in the definition of Permitted Other Business Lines, such aggregate Acquisition price threshold shall not exceed $5,000,000.00); provided, however, that for Acquisitions of pipeline business activities of the type described in the definition of  Permitted Other Business Lines, the foregoing single Acquisition price threshold and aggregate Acquisition purchase price threshold shall each not exceed $5,000,000.00; provided further, however, that to the extent any purchase price paid for any single Acquisition (whether for pipeline or for other permitted business line activities) equals or exceeds $5,000,000.00, then the written notice of such Acquisition required to be furnished by the Borrower to the Lender pursuant to subparagraph (c) above shall be accompanied by a written certificate in favor of the Lender and executed on behalf of the Borrower by an authorized officer of Borrower, together with a pro forma calculation in form and substance reasonably satisfactory to the Lender, confirming that after giving effect to the completion of such Acquisition, the consolidated Leverage Ratio of the Borrower will be less than or equal to 2.25 to 1.0 on a pro forma basis which includes all consideration given in connection with such Acquisition, other than Equity Interests of the Borrower delivered to the seller(s) in such Acquisition, as having been paid in cash at the time of making such Acquisition;

 

  

  

  

(e) if such Acquisition is an acquisition of the Equity Interests of a Person, the Acquisition is structured so that the acquired Person shall become (i) a Domestic Subsidiary of the Borrower of which greater than fifty percent (50%) of the issued and outstanding Equity Interests thereof are owned and held by Borrower and/or one or more Subsidiaries of Borrower and (ii) a Guarantor pursuant to the terms of this Agreement;

 

(f) in connection with an Acquisition of the Equity Interests of any Person, all Liens on property of such Person shall be terminated unless the Lender in its sole discretion consents otherwise, and in connection with an Acquisition of the assets of any Person, all Liens on such assets shall be terminated; and

 

(g) both before and after giving effect to such Acquisition and the Loans (if any) requested to be made in connection therewith, (i) each of the representations and warranties in this Agreement and the other Credit Documents is true and correct (except (1) any such representation or warranty which relates to a specified prior date and (2) to the extent the Lender have been notified in writing by the Borrower that any representation or warranty is not correct and the Lender has explicitly waived in writing compliance with such representation or warranty), and (ii) no Default or Event of Default exists, will exist, or would result therefrom.

 

Permitted Encumbrances means:

(a)           Liens for taxes, assessments or other governmental charges or levies which are not delinquent or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(b)           Liens in connection with workers’ compensation, unemployment insurance or other social security, old age pension or public liability obligations which are not overdue by more than 30 days or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(c)           statutory landlord’s liens, operators’, vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, suppliers’, workers’, materialmen’s, construction or other like Liens arising by operation of law in the ordinary course of business or incident to the exploration, development, operation and maintenance of oil and gas properties each of which is in respect of obligations that are not overdue by more than 30 days or which are being contested in good faith by appropriate action and for which adequate reserves have been maintained in accordance with GAAP;

(d)           easements, restrictions, servitudes, permits, conditions, covenants, exceptions or reservations in any property of Borrower that do not secure any monetary obligations and which in the aggregate do not materially impair the use of such property for the purposes of which such property is held by Borrower or materially impair the value of such property subject thereto; and

(e)           judgment and attachment Liens not giving rise to an Event of Default, if 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 no action to enforce such Lien has been commenced; and

(f)           to the extent not otherwise described above, Liens not securing borrowed money Indebtedness and arising in the ordinary course of business.

Permitted Investments means:

(a)           readily marketable securities issued or fully guaranteed by the United States of America with maturities of not more than one year;

(b)           commercial paper rated "Prime 1" by Moody's Investors Service, Inc. or "A-1" by Standard and Poor's Corporation with maturities of not more than 180 days;

(c)           certificates of deposit or repur­chase obligations issued by any U.S. domestic bank having capital surplus of at least $100,000,000 or by any other financial institution acceptable to Lender, all of the foregoing not having a maturity of more than one year from the date of issuance thereof;

(d)           fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and

(e)           money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated A2 by Standard & Poor’s Ratings Group or P2 by Moody’s Investors Service, Inc., and (iii) have portfolio assets of at least $250,000,000.

Permitted Other Business Lines means any and all of the following:  (a) sales, rental and/or servicing of gas treating and/or processing equipment and/or the providing of gas treating and/or processing services; (b) sales, rental and/or servicing of oil and gas measurement and/or treating equipment and/or the providing of oil and gas measurement and/or treating services; (c) sales, rental and/or servicing of natural gas emissions equipment and/or the providing of natural gas emissions measurement services; and (d) operation of pipelines for in-state transportation of oil and/or gas from a wellhead to a treatment or processing facility.

  

  

  

Person means any individual, corporation, partnership, joint venture, joint stock association, business or other trust, unin­corporated organization, Governmental Authority or any other form of entity.

Plan means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and is either (a) maintained by Borrower, any of its Subsidiaries or any member of a Controlled Group for employees of Borrower or any of its Subsidiaries or (b) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which Borrower, any of its Subsidiaries or any member of a Controlled Group for employees of Borrower or any of its Subsidiaries is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions.

Prime Rate means the rate of interest per annum publicly announced from time to time by the Lender as its prime rate and each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE LENDER’S LOWEST RATE.

Proper Form means in form and substance reasonably satisfactory to Lender.

Property means any interest in any kind of property or asset, whether real, personal or mixed, tangible or intangible.

Quarterly Financial Statements means, with respect to each fiscal quarter of the Borrower (except for the last fiscal quarter), (a) the Borrower’s 10-Q Report filed with the Securities Exchange Commission for such fiscal quarter, prepared in accordance with GAAP and certified as true and correct by an authorized officer of Borrower acceptable to Lender on behalf of Borrower, and (b) the quarterly consolidating financial statements of the Borrower and its Subsidiaries, containing a balance sheet as of the end of such fiscal quarter and an income statement, retained earnings statements and a statement of cash flows for such fiscal quarter, and for the fiscal year to date, subject to normal year-end adjustments, all prepared in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period of the preceding year, certified as true and correct by an authorized officer of Borrower acceptable to Lender on behalf of Borrower, with the parties recognizing that such consolidating statements will be prepared in accordance with GAAP only to the extent normal and customary and shall not be required until the end of the first full fiscal quarter of Borrower occurring after the creation or acquisition by Borrower of its first Subsidiary, if any.

Rate Management Transaction means (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between Borrower and Lender and/or its Affiliates which is a rate swap, swap option, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap, floor, collar, currency swap, cross-currency rate swap, currency option, credit protection transaction, credit swap, credit default swap, credit default option, total return swap, credit spread, repurchase transaction, reverse repurchase transaction, buy/sell-back transaction, securities lending transaction, weather index transaction or forward purchase or sale of a security, commodity or other financial instrument or interest (including any option with respect to any of these transactions), or (b) any type of transaction that is similar to any transaction referred to in clause (a) above that is currently, or in the future becomes, recurrently entered into in the financial markets and which is a forward, swap, future, option or other derivative on one or more rates, currencies, commodities, equity securities or other equity instruments, debt securities or other debt instruments, economic indices or measures of economic risk or value, or other benchmarks against which payments or deliveries are to be made, or any combination of the foregoing transactions.

Rate Selection Date shall mean that Business Day which is (a) in the case of CBFR Borrowings, the date of such borrowing, or (b) in the case of LIBOR Borrowings, the date three (3) Business Days preceding the first day of any proposed Interest Period.

Rate Selection Notice shall have the meaning specified in Section 2.04(b)(1) hereof.

Receivables shall mean each of the following items now or hereafter payable and owing to Borrower and/or any of its Domestic Subsidiaries:  (a) all Accounts; and (b) all rights to payments under leases or other Chattel Paper covering all or any portion of any rental compressor Inventory of Debtor (including any Equipment Inventory).

Regulation D means Regulation D of the Board of Governors of the Federal Reserve System from time to time in effect and shall include any successor or other regulation relating to reserve requirements applicable to member lenders of the Federal Reserve System.

Regulatory Change means, with respect to Lender, any change on or after the date of this Agreement in any Legal Requirement (including Regulation D) or the adoption or making on or after such date of any interpretation, directive or request applying to a class of lenders including Lender under any Legal Requirement (whether or not having the force of law) by any Governmental Authority charged with the interpretation or administration thereof.

Rent Reserves means, (a) with respect to any real property location leased by Borrower as of the date of this Agreement and for which a Collateral Access Agreement has not yet been delivered to Lender as of the applicable determination date, an amount equal to all rent, charges and other amounts payable (or to become payable) by Borrower under the lease covering such location for (i) a three (3)-month period if the applicable determination date for Rent Reserves is within 180 days after of the date of this Agreement, provided, that notwithstanding the foregoing, no such 3-month Rent Reserve will be required during the first 60 days after the date of this Agreement, or (ii) a six (6)-month period if the applicable determination date for Rent Reserves is later than 180 days after of the date of this Agreement, and (b) with respect to any real property location leased by Borrower after the date of this Agreement and for which a Collateral Access Agreement has not yet been delivered to Lender as of the applicable determination date, an amount equal to all rent, charges and other amounts payable (or to become payable) by Borrower under the lease covering such location for a six (6)-month period.

Request for Loan means a request for a Loan duly executed by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower, appropriately completed and substantially in the form of Exhibit A attached hereto, or any other request for a Loan by Borrower submitted under the terms of other documentation or any auto-advance feature acceptable to Lender.

  

  

  

Requirements of Environmental Law means all require­ments imposed by any law (including The Resource Conservation and Recovery Act and The Comprehensive Environmental Response, Compensation, and Liability Act), rule, regulation or order of any Governmental Authority in effect at the applicable time which relate to (i) noise; (ii) pollution, protection or clean-up of the air, surface water, ground water or land; (iii) solid, gaseous or liquid waste gener­ation, recycling, reclamation, treatment, storage, disposal or transportation; (iv) exposure to Hazardous Substances; (v) the safety or health of employees or (vi) regulation of the manufacture, processing, distribution in commerce, use, discharge, release, threatened release, emission or storage of Hazardous Substances.

Reserve Requirement means the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed under Regulation D.

Security Agreements means, collectively, (a) any and all security agreements, pledge agreements, collateral assignments or other similar documents now or hereafter executed by Borrower or any of its Domestic Subsidiaries, if any, in favor of Lender, as security for the payment or performance of any and/or all of the Obligations, and (b) any amendment, modification, restatement or supplement of all or any of the above-described agreements and assignments.

Security Documents means, collectively, this Agreement, the Security Agreements, the Financing Statements and any and all other agreements, deeds of trust, mortgages, chattel mortgages, security agreements, pledges, guaranties, assignments, subordination agreements, undertakings and other instruments and Financing Statements now or hereafter executed and delivered in connection with, or as security for the payment or performance of, any Credit Document, as any of them may from time to time be amended, modified, restated or supplemented.

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

Subordinated Indebtedness means all Indebtedness, if any, of Borrower or any of its Subsidiaries which has been subordinated on terms and conditions satisfactory to Lender, in its sole discretion, to all Obligations to Lender.  Indebtedness shall not be considered as "Subordinated Indebtedness" unless and until Lender shall have received copies of the documentation evidencing or relating to such Indebtedness together with a subordination agreement, in Proper Form, duly executed by the holder or holders of such Indebtedness and evidencing the terms and conditions of subordination required by Lender in its discretion.

Subsidiary means, as to a particular parent Person, any other Person of which 50% or more of the indicia of equity rights (whether outstanding capital stock, partnership interests or otherwise) is at the time directly or indirectly owned or held by such parent Person, or by one or more of its Affiliates.

UCC means the Uniform Commercial Code, as in effect from time to time, of the State of Texas or of any other state the laws of which are required as a result thereof to be applied in connection with the attachment, perfection or priority of, or remedies with respect to, Lender's Lien on any Collateral.

           Unfunded Liabilities means, with respect to any Plan, at any time, the amount (if any) by which (a) the present value of all benefits under such Plan exceeds (b) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent actuarial valuation report for such Plan, but only to the extent that such excess represents a potential liability of any member of the applicable Controlled Group to the PBGC or a Plan under Title IV of ERISA.  With respect to multiemployer Plans, the term "Unfunded Liabilities" shall also include contingent liability for withdrawal liability under Section 4201 of ERISA to all multiemployer Plans to which Borrower, any other Obligor or any member of a Controlled Group for employees of Borrower or any other Obligor contribute in the event of complete withdrawal from such Plans.

Section 1.02                        Terms Generally.  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 and (e) 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

  

  

  

ARTICLE II

Loans; Credit Facility Administration

Section 2.01                      Loans; Commitment.  Lender agrees, subject to all of the terms and conditions of this Agreement, to make Loans to Borrower as follows:

 

(a)           Prior to the Maturity Date, Lender will make Loans to Borrower, if after giving effect to the applicable requested Loan, Availability will be equal to or greater than zero.  Within the foregoing limits and subject to the terms and conditions set forth herein, Borrower may borrow, prepay and reborrow Loans prior to the Maturity Date.  Borrower and Lender agree pursuant to Chapter 346 ("Chapter 346") of the Texas Finance Code that Chapter 346 (which relates to open-end line of credit revolving loan accounts) shall not apply to this Agreement, the Note or any Loan obligation hereunder and that none of this Agreement, the Note nor any Loan obligation hereunder shall be governed by Chapter 346 or subject to its provisions in any manner whatsoever. Loans shall be evidenced by the Note, and Lender shall in no event be obligated to fund more than one (1) Loan per day.  Loan proceeds shall be made available to Borrower by depositing them in an account designated by Borrower and maintained with Lender.

  

(b)           Upon at least five (5) Business Days' prior irrevocable written notice to Lender, Borrower may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Commitment; provided, however, that the Commitment shall not be reduced at any time to an amount less than the sum of the aggregate principal amount of all Loans outstanding at such time and the aggregate Letter of Credit Liabilities outstanding at such time.  Each partial reduction of the Commitment shall be in a minimum of $500,000.00, or an integral multiple of $100,000.00 in excess thereof.

 

(c)           Borrower shall have the right to request from the Lender one or more increases of up to up to $20,000,000.00 in the aggregate in the Commitment, provided that (i) any such request for an increase shall be in a minimum amount of $5,000,000.00 and Borrower may only make a maximum of four such requests, (ii) the aggregate amount of the Commitment after such increase shall not exceed $40,000,000.00, and (iii) the Lender shall have thirty (30) days after receipt from Borrower of the applicable Commitment increase request to review and either approve or reject such requested Commitment increase, in the sole discretion of Lender.  Borrower acknowledges and agrees that Lender shall have no obligation to approve any such requested increase in the Commitment, but in the event of approval by Lender of any such Commitment increase request, Borrower will thereafter promptly execute and deliver to Lender an amendment of this Agreement in the form reasonably required by Lender to evidence the approved increase in the amount of the Commitment.

 

Section 2.02                      Repayment of Principal and Interest of Loans.

 

(a)           Borrower hereby unconditionally promises to pay to Lender in full the unpaid principal balance of the Note on the Maturity Date.

 

(b)           Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date, as well as upon the Maturity Date. After the Maturity Date, accrued and unpaid interest on the Loans shall be payable on demand.

 

Section 2.03                      Prepayments of Loans.

 

(a)           Borrower shall have the right at any time and from time to time to prepay any Loan in whole or in part, without premium or penalty, except as otherwise provided in this Section 2.03 and subsections (a), (b) or (c) of Section 2.05 hereof, but subject to the requirements of this Section.  Prepayments under this subparagraph (a) of any Loan shall be subject to the following additional conditions:

 

(1)           In giving notice of prepayment as hereinafter provided, Borrower shall specify, for the purpose of paragraphs (2) and (3) immediately following, the manner of application of such prepayment as between CBFR Borrowings and LIBOR Borrowings.

 

(2)           Prepayments applied to any LIBOR Borrowing may be made on any Business Day, provided, that (i) Borrower shall have given Lender at least three (3) Business Days' prior irrevocable written or telecopied notice of such prepayment, specifying the principal amount of the LIBOR Borrowing to be prepaid, the particular LIBOR Borrowing to which such prepayment is to be applied and the prepayment date; and (ii) if such prepayment is made on any day other than the last day of the Interest Period corresponding to the LIBOR Borrowing to be prepaid, Borrower shall pay directly to Lender, on the last day of such Interest Period, any Consequential Loss as a result of such prepayment.

 

(3)           Prepayments applied to any CBFR Borrowing may be made prior to 1:00 p.m., Austin, Texas time, on any Business Day.

 

(b)           Borrower shall from time to time on demand by Lender and subject to the requirements of this Section, prepay the Loans in such amounts as shall be necessary so that Availability at all times shall be equal to or greater than zero.

 

Section 2.04                      Interest Rates for Loans; Interest Options.

 

(a)           Subject to Section 8.01 hereof, the outstanding principal balance of the Loans shall bear interest on and after the date of this Agreement at the CB Floating Rate minus the Applicable Margin; provided, that (i) all principal outstanding after the occurrence of an Event of Default which has not been cured or waived in writing by Lender shall bear interest at the Default Rate, (ii) past due principal and interest shall bear interest at the Default Rate, which shall be payable on demand, and (iii) subject to the provisions hereof, Borrower shall have the option of having all or any portion of the principal balances from time to time outstanding under the Loans bear interest until their respective maturities at a rate per annum equal to the Adjusted LIBOR Rate plus the Applicable Margin (together with the CB Floating Rate, individually herein called an "Interest Option" and collectively called "Interest Options").  The records of Lender, with respect to Interest Options, Interest Periods and the amounts of the Loans to which they are applicable shall be binding and conclusive, absent manifest error.  Interest on the Loans shall be calculated at the CB Floating Rate minus the Applicable Margin, except where it is expressly provided pursuant to this Agreement that the Adjusted LIBOR Rate plus the Applicable Margin is to apply.

 

  

  

  

(b)           In accordance with the provisions hereof, and provided no Default or Event of Default has occurred and is continuing, Borrower may elect to have the Adjusted LIBOR Rate plus the Applicable Margin apply or continue to apply to all or any portion of the principal balances of the Loans.  Each change in Interest Options shall be a conversion of the rate of interest applicable to the specified portion of the Loans, but such conversion alone shall not change the outstanding principal balance of the Loans and the Note. The Interest Options shall be designated or converted in the manner provided below:

 

(1)           Borrower shall give Lender by telephone, promptly confirmed by written notice (the "Rate Selection Notice") substantially in the form of Exhibit B hereto.  Each such telephone and written notice shall specify the amount and type of borrowings which are the subject of the designation, if any; the amount and type of borrowings into which such borrowings are to be converted or for which an Interest Option is designated; the proposed date for the designation or conversion (which, in the case of conversion of LIBOR Borrowings, shall be the last day of the Interest Period applicable thereto) and the Interest Period or Periods, if any, selected by the Borrower.  Such notice by telephone shall be irrevocable and shall be given to Lender no later than the applicable Rate Selection Date.  If a new Loan is to be a LIBOR Borrowing, then the Rate Selection Notice shall be included in the Request for Loan applicable to the new Loan, which shall be given to Lender no later than the applicable Rate Selection Date;

 

(2)           No more than three (3) LIBOR Borrowings and corresponding Interest Periods shall be outstanding at any one time with respect to the Loans.  Each LIBOR Borrowing shall be in a minimum aggregate principal amount of at least $500,000, with any increases over such minimum amount being in integral aggregate multiples of $100,000;

 

(3)           Principal included in any borrowing shall not be included in any other borrowing which exists at the same time;

 

(4)           Each designation or conversion shall occur on a Business Day; and

 

(5)           Except as provided in Section 2.05 hereof, no LIBOR Borrowing shall be converted on any day other than the last day of the applicable Interest Period.

 

(c)           All interest will be computed on the basis of a year of 360 days and actual days elapsed (including the first day but excluding the last day) occurring in the period for which payable, unless the effect of so computing shall be to cause the rate of interest to exceed the Ceiling Rate.

 

Section 2.05                      Special Provisions Applicable to LIBOR Borrowings.

 

(a)           If, after the date of this Agreement, any Change in Law or compliance by Lender with any request or directive (whether or not having the force of law) of any Governmental Authority shall at any time make it unlawful or impracticable for Lender to permit the establishment of or to maintain any LIBOR Borrowing, the commitment of Lender to establish or maintain the LIBOR Borrowings affected by such adoption or change shall forthwith be canceled and the Borrower shall forthwith, upon demand by Lender to Borrower, (1) convert such LIBOR Borrowings to CBFR Borrowings; (2) pay all accrued and unpaid interest to date on the amount so converted; and (3) pay any amounts required under paragraph (d) below.  All present and subsequent requests for LIBOR Borrowings by Borrower shall be deemed to be requests for CBFR Borrowings with respect to Lender for all LIBOR Borrowings affected by such adoption or change until such adoption or change no longer affects the LIBOR Borrowings for Lender.

 

(b)           If any Change in Law or compliance by Lender with any request or directive (whether or not having the force of law) from any Governmental Authority shall at any time as a result of any portion of the principal balance of the Loans being maintained on the basis of the Adjusted LIBOR Rate impose, modify, increase or deem applicable any reserve requirement, special deposit requirement or similar requirement (including state law requirements and Regulation D, but excluding Statutory Reserve Rates) against assets held by Lender, or against deposits or accounts in or for the account of Lender, or against loans made by Lender, or against any other funds, obligations or other Property owned or held by Lender and the result of any of the foregoing is to increase the cost to Lender of agreeing to make or of making, renewing or maintaining such borrowing on the basis of the Adjusted LIBOR Rate, or reduce the amount of principal or interest received by Lender, then Borrower shall pay to Lender from time to time additional amounts sufficient to compensate such Lender for such increased cost or reduced amount.

 

(c)           If for any reason with respect to any Interest Period, Lender shall have determined (which determination shall be conclusive and binding upon Borrower) that: (1) Lender is unable through its customary general practices to determine a rate at which Lender is offered deposits in United States dollars by prime banks in the London interbank market, in the appropriate amount for the appropriate period, or by reason of circumstances affecting the London interbank market, generally, Lender is not being offered deposits for the applicable Interest Period and in an amount equal to the amount any LIBOR Borrowing requested by Borrower, or (2) the Adjusted LIBOR Rate will not adequately and fairly reflect the cost to Lender of making and maintaining any LIBOR Borrowing hereunder for any proposed Interest Period, then Lender shall give Borrower notice thereof and thereupon, (A) any Rate Selection Notice previously given by Borrower designating an Adjusted LIBOR Rate which has not commenced as of the date of such notice from Lender shall be deemed for all purposes hereof to be of no force and effect, as if never given, and (B) until Lender shall notify Borrower that the circumstances giving rise to such notice from Lender no longer exist, each Rate Selection Notice requesting an Adjusted LIBOR Rate shall be deemed a request for a CBFR Borrowing, and each outstanding LIBOR Borrowing then in effect shall be converted, without any notice to or from the Borrower, upon the termination of the Interest Period then in effect to a CBFR Borrowing.

 

  

  

  

(d)           Borrower hereby agrees to indemnify Lender against and hold Lender harmless from any actual loss or expense that Lender may sustain or incur as a consequence of (i) failure by Borrower to timely convert or borrow any LIBOR Borrowing after Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (ii) failure by Borrower to make any prepayment after Borrower has given a notice thereof in accordance with the provisions of this Agreement or (iii) the making of a payment or prepayment of any LIBOR Borrowing, or the conversion of any LIBOR Borrowing, on a day that is not the last day of an Interest Period with respect thereto, including without limitation, in each case, any such loss or expense arising from the liquidation or reemployment of funds obtained by Lender or from fees payable to terminate the deposits from which such funds were obtained.

 

(e)           If Borrower requests quotes of the Adjusted LIBOR Rate for different Interest Periods being considered for election by Borrower, Lender will use reasonable efforts to provide such quotes to Borrower promptly.  However, all such quotes provided shall be representative only and shall not be binding on Lender, nor shall they be determinative, directly or indirectly, of any Adjusted LIBOR Rate or any component of any such rate, nor will Borrower's failure to receive or Lender's failure to provide any requested quote or quotes either (1) excuse or extend the time for performance of any obligation of Borrower or for the exercise of any right, option or election of Borrower or (2) impose any duty or liability on Lender.  If Borrower requests a list of the Business Days in any calendar month, Lender will use reasonable efforts to provide such list promptly.  However, any such list provided shall be understood to identify only those days which Lender believes in good faith at the time such list is prepared will be the Business Days for such month.  Lender shall not have any liability for any failure to provide, delay in providing, error or mistake in or omission from, any such quote or list.

 

 

 

(f)           With respect to Lender having a LIBOR Lending Office which differs from its Domestic Lending Office, all Loans that are part of LIBOR Borrowings advanced by Lender's LIBOR Lending Office shall be deemed to have been made by Lender and the obligation of Borrower to repay such Loans shall nevertheless be to Lender and shall be deemed held by Lender for the account of Lender's LIBOR Lending Office.

 

Section 2.06                      Increased Costs.

	
(a)

	
If Lender reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on Lender’s capital or on the capital of Lender’s holding company, if any, as a consequence of this Agreement or any of the Loans to a level below that which Lender or Lender’s holding company could have achieved but for such Change in Law (taking into consideration Lender’s policies and the policies of Lender’s holding company with respect to capital adequacy), then from time to time Borrower will pay to Lender such additional amount or amounts as will compensate Lender or Lender’s holding company for any such reduction suffered; provided, however, that notwithstanding the foregoing, if Borrower (i) fully pays all outstanding Obligations, (ii) pays to Lender, in immediately available funds, an amount equal to 105% of the then aggregate amount available for drawings under all outstanding Letters of Credit, if any (which funds shall be held by Lender as Cover for said Letters of Credit), and (iii) irrevocably terminates the Commitment in writing delivered to Lender, all within twenty (20) days after Borrower’s receipt of any notice from Lender that amounts are or will be owing by Borrower to Lender pursuant to the terms of this Section 2.06, then in such event, Borrower shall not be obligated to pay to Lender any such amounts to the extent, but only to the extent, such amounts are attributable to any period prior to the date of Borrower’s receipt of such notice from Lender.

	
(b)

	
A certificate of Lender setting forth the amount or amounts necessary to compensate Lender or its holding company, as the case may be, as specified in Section 2.06(a) shall be delivered to Borrower, demonstrating in reasonable detail the calculation of the amounts.  Borrower shall pay amounts due under this Section 2.06 within ten (10) days after receipt of the corresponding certificate.

	
(c)

	
Failure or delay on the part of Lender to demand compensation pursuant to this Section shall not constitute a waiver of Lender’s right to demand such compensation; but Borrower shall not be required to compensate Lender pursuant to this Section for any increased costs or reductions incurred more than 180 days before the date that Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of Lender’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive and if Lender notifies Borrower of such Change of Law within 180 days after the adoption, enactment or similar act with respect to such Change of Law, then the 180-day period referred to above shall be extended to include the period from the effective date of such Change of Law to the date of such notice.

Section 2.07                      Payments Generally.

(a)           All payments of the Obligations hereunder shall be made to Lender at Lender’s address specified pursuant to Section 8.08, or at any other office of Lender specified in writing by Lender to Borrower, by 1 p.m. (local time) on the date when due.

 

(b)           Borrower shall make each payment required to be made by it hereunder or under any other Credit Document (whether of principal, interest or fees, or other amounts payable under Article II or otherwise) on or before the time expressly required hereunder or under such other Credit Document for such payment (or, if no such time is expressly required, before 2:00 p.m., Austin, Texas time), on the date when due, in immediately available funds, without set-off, deduction or counterclaim.  Any amounts received after such time on any date may, in the discretion of Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  If any payment under any Credit Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.  Unless otherwise specified therein, all payments under each Credit Document shall be made in Dollars.

 

(c)           If at any time insufficient funds are received by and available to Lender to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, and (ii) second, towards payment of principal, if any, then due hereunder.

  

  

  

 

(d)           If after receipt of any payment which is applied to the payment of all or any part of the Obligations, Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason, then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by Lender and Borrower shall be liable to pay to Lender.  The provisions of this Section 2.07(d) shall be and remain effective notwithstanding any contrary action which may have been taken by Lender in reliance upon such payment or application of proceeds.  The provisions of this Section 2.07(d) shall survive the termination of this Agreement.

 

Section 2.08                      Letter of Credit Facility.

(a)           Subject to the terms and conditions contained herein, Borrower shall have the right from time to time prior to the Maturity Date to obtain from Lender one or more Letters of Credit for the account of Borrower in such amounts and in favor of such beneficiaries as Borrower from time to time shall request; provided, that in no event shall Lender have any obligation to issue any Letter of Credit if (i) the face amount of such Letter of Credit, plus the other Letter of Credit Liabilities at such time, would exceed $2,000,000.00, (ii) such Letter of Credit would have an expiry date beyond the earlier to occur of (1) the scheduled Maturity Date, and (2) one year after the issuance date of such Letter of Credit, (iii) such Letter of Credit is not in a form and does not contain terms satisfactory to Lender in its discretion, (iv) Borrower has not executed and delivered such Applications and other instruments and agreements relating to such Letter of Credit as Lender shall have reasonably requested, (v) any Default or Event of Default has occurred and is continuing, or (vi) such Letter of Credit is not being issued or has not been issued to a landlord of a real property location leased by Borrower in connection with Borrower obtaining a Collateral Access Agreement in favor of Lender from such landlord.

 

 

(b)           Each Letter of Credit will be issued for the account of Borrower, and Borrower shall have full liability for each Letter of Credit.  Borrower promises to pay to the order of Lender the amount of all Letter of Credit Advances.  Each Letter of Credit Advance shall be considered for all purposes as a demand obligation owing by Borrower to Lender, and each Letter of Credit Advance shall bear interest from the date thereof at the Default Rate, without notice of presentment, demand, protest or other formalities of any kind (said past due interest on such Letter of Credit Advance being payable on demand).  To effect repayment of any such Letter of Credit Advance, Lender, at its sole option, shall be entitled to satisfy such Letter of Credit Advance simultaneously with or at any time thereafter that such Letter of Credit Advance remains unpaid by Borrower (subject to the terms and conditions herein) by making a Loan if (A) Availability will be equal to or greater than zero after giving effect to such Loan and the resulting repayment of such Letter of Credit Advance to be contemporaneously paid with the proceeds of such Loan, and (B) no Default or Event of Default shall have occurred which is then continuing.  Lender’s unwillingness to make such a Loan or the unavailability of a Loan to effect repayment of any such Letter of Credit Advance in accordance with the preceding sentence shall not in any way whatsoever affect Borrower's obligation to pay each Letter of Credit Advance on demand and to pay interest at the Default Rate on the amount of such unreimbursed Letter of Credit Advance.

 

(c)           In consideration of the issuance of each Letter of Credit, Borrower agrees to pay to Lender a per annum letter of credit fee (computed on the basis of the actual number of days elapsed in a year composed of 360 days) in an amount equal to the product of (A) the Applicable Margin for LIBOR Borrowings for the applicable period of time from the date of issuance until the expiry date of the applicable Letter of Credit times (B) the original face amount of such Letter of Credit, such letter of credit fee to be payable quarterly in arrears for such Letter of Credit, commencing on the date three (3) months after the issuance date of such Letter of Credit.

 

(d)           In addition to the fees payable under the immediately preceding paragraph, Borrower hereby agrees to pay to Lender customary and reasonable fronting fees and any and all other issuance, administrative, amendment, negotiation, payment and other normal, customary and reasonable fees which are charged by Lender in connection with the issuance or negotiation of any of Letter of Credit and the presentation or payment of any draw under any such Letter of Credit, with all of such amounts being due and payable to Lender upon demand.

 

 

 

ARTICLE III

Conditions Precedent

Section 3.01                      All Loans and Letters of Credit.  The obligation of Lender to make any Loan or issue any Letter of Credit is subject to the accuracy in all material respects of all representations and warranties of Borrower or any other Obligor in this Agreement or any other Credit Document on the date thereof (except where such representation or warranty specifically relates to an earlier date or has been waived in writing by Lender) and if requested by Lender, receipt by Lender of evidence of such accuracy, to the performance by Borrower and the other Obligors of their respective obligations under the Credit Documents (and Lender's receipt of evidence of such performance) and to the satisfaction of the following conditions:

  

  

  

(a)           (i) with respect to any Loan, Lender shall have received by no later than 11:00 a.m. on the date of such requested Loan, telephonic notice from Borrower of the proposed date and amount of such Loan, and by no later than 1:00 p.m. on such date, a Request for Loan and, only to the extent required under Section 5.02(d), a Borrowing Base Certificate dated as of the date of such requested Loan, each signed by an officer of Borrower, and (ii) with respect to any Letter of Credit, Lender shall have received by no later than 11:00 a.m. five (5) Business Days prior to the date of issuance of such requested Letter of Credit, a fully completed and executed Application and all other applicable Letter of Credit Documents required by Lender from Borrower;

(b)           since the date of the most recently delivered financial statements pursuant to this Agreement, there shall have occurred, in the reasonable opinion of Lender, no Material Adverse Effect;

(c)           no Default or Event of Default shall have occurred and be continuing or will occur as a result of the requested Loan or Letter of Credit;

 

(d)           the making of the Loan or issuance of the Letter of Credit shall not be prohibited by any applicable Legal Requirement;

 

(e)           all of the Credit Documents have been executed and delivered, and shall be valid, enforceable and in full force and effect;

 

(f)           all fees and expenses owed to Lender under any of the Credit Documents as of the date thereof shall have been paid in full;

 

(g)           Lender shall have received evidence reasonably satisfactory to Lender as to the perfection and requisite priority of the Liens created by the Security Documents;

 

(h)           no action, suit or proceeding shall have been commenced and then be continuing against or affecting Borrower or involving the validity or enforce­ability of any material provision of any Credit Document, at law or in equity, or before any Governmen­tal Authority, which is not adequately covered by insurance coverage and in Lender's reasonable judgment, impairs or could reasonably be expected to impair Lender's ability in any material respect to collect the Obligations when due; and

 

(i)           Lender shall have received such other documents as it may reasonably require.

 

 

Delivery of any Request for Loan or Application to Lender shall constitute a representation by Borrower that the representations and warranties made by Borrower under this Agreement and the other Credit Documents are true and correct in all material respects as of the date of delivery of such Request for Loan or Application except where such representation or warranty specifically relates to an earlier date or has been waived in writing by Lender.

 

Section 3.02                      Initial Loans and Letters of Credit.  In addition to the conditions described in Section 3.01 hereof, the obligation of Lender to make the initial Loans and issue the initial Letter of Credit hereunder is subject to the receipt by Lender of each of the following, in Proper Form:

 

(a)           the Note, all Security Documents and the other Credit Documents;

(b)           the Organizational Documents of Borrower, together with (i) a duly executed Borrowing Authorization with respect to Borrower and (ii) other reasonably satisfactory evidence confirming that the ownership, organizational structure and capitalization of Borrower is consistent in all material respects to the written descriptions thereof previously furnished to Lender;

(c)           current certificates of fact and account status from the Colorado Secretary of State, the Texas Secretary of State, the Texas Comptroller’s Office or the equivalent Governmental Authority in the Stat of Colorado, as applicable, as to the continued existence and good standing of Borrower in the State of Texas and the continued registration, qualification and good standing of Borrower in the State of Texas;

(d)           certificates of insurance satisfactory to Lender in all respects evidencing the existence of all insurance required to be maintained by Borrower or any other Obligor pursuant to the terms of this Agreement and the Security Documents;

  

  

  

(e)           a Borrowing Base Certificate dated as of the date of the initial Loan hereunder, together with (i) a listing and aging of the Accounts of Borrower as of the end of the most recent calendar month ending prior to the date of the initial Loan hereunder, prepared in reasonable detail and containing such information as Lender may request, and (ii) a summary or listing of the General Inventory and the Equipment Inventory of the Borrower as of the end of the most recent calendar month ending prior to the date of the initial Loan hereunder;

(f)           evidence that (i) all existing Indebtedness not otherwise permitted by this Agreement, including without limitation, all indebtedness of Borrower to Western National Bank has been or concurrently with the date of this Agreement will be terminated and all outstanding amounts thereunder have or concurrently with the date of this Agreement will be paid in full, and (ii) that the holders of all Liens securing such Indebtedness have agreed to promptly file, or have adequately approved the filing of, releases of such Liens in the appropriate public records;

(g)           Lender shall have received the results of a recent lien search in each of the jurisdictions where assets of Borrower or any other Collateral are located, and each such search shall reveal no Liens on any of the assets to be pledged as Collateral except for liens permitted by Section 6.02 or discharged on or prior to the date hereof pursuant to a pay-off letter or other documentation satisfactory to Lender; and

(h)           Lender shall have received all fees required to be paid by Borrower, and all expenses to be paid or reimbursed by Borrower to the extent invoices have been presented for such expenses (including the reasonable fees and expenses of legal counsel).

ARTICLE IV

 

Representations and Warranties

 

Borrower represents and warrants to Lender that:

 

Section 4.01                      Organization; Authorization.  Borrower is duly organized, validly existing and in good standing under the laws of the State of Colorado and has full legal right, power and authority to carry on its business as presently conducted and to execute, deliver and perform its obligations under the Credit Documents, and Borrower is duly qualified to do business and in good standing in the state of Texas and each other jurisdiction in which the nature of its business makes such qualification necessary or desirable, except for those jurisdictions in which the failure to qualify and/or be in good standing would not reasonably be expected to result in a Material Adverse Effect. Borrower's execution, delivery and per­formance of the Credit Documents to which it is a party have been duly authorized by all necessary action under the Organiza­tional Documents of Borrower and otherwise.

 

Section 4.02                      No Consents Necessary.  The execution, delivery and performance of the Credit Documents by Borrower or any other Obligor do not and will not require (i) any consent of any other Person or (ii) any consent, li­cense, permit, authorization or other approval of any court, arbitrator, administrative agency or other Governmental Authority, or any notice to, exemption by, any registration, declaration or filing with or the taking of any other action in respect of, any such court, arbitrator, administra­tive agency or other Governmental Authority.

 

Section 4.03                      No Conflicts.  Neither execution or delivery of any Credit Document, nor the fulfillment of or compliance with its terms and provisions will (i) violate any Legal Requirement or the Organizational Documents of Borrower or any other Obligor, or (ii) conflict with or result in a breach of the terms, conditions or provisions of, or cause a default under, any material agreement, instrument, fran­chise, license or concession to which Borrower or any other Obligor is a party or bound.

 

 

Section 4.04                      Enforceability.  Each Credit Document has been duly and validly exe­cuted, issued and delivered by Borrower or any other applicable Obligor, as the case may be.  They are in proper legal form for prompt enforcement and they are the respective valid and legally binding obligations of Borrower (or the other applicable Obligors, when and if applicable), enforceable in accordance with their terms subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.  The obligations of Borrower (or the other applicable Obligors, when and if applicable) under them rank and will rank at least equal in priority of payment with all of Borrower’s (and the other applicable Obligors, when and if applicable) other Indebtedness (except only for Indebtedness preferred by operation of law or Indebtedness disclosed in writing to Lender before execution and delivery of this Agreement).

 

Section 4.05                      Financial Condition; Title to Property.  All information supplied to Lender, and all statements made to Lender by or on behalf of Borrower or any other Obligor before, concurrently with or after execution of this Agreement are and will be true, correct, complete, valid and genuine in all material respects.  Borrower's and each other Obligor’s financial statements fur­nished to Lender fairly present in all material respects the consolidated financial condition of Borrower (or such other applicable Obligor) as of its date and for the period then ended.  No material adverse change has occurred in the financial conditions reflected in any such statements since their dates, and all assets listed on such statements are subject to the Borrower’s or the other applicable Obligor’s management, control and disposition.  Borrower has good and marketable title to, or a valid leasehold interest in, all of the material Property and assets shown on the most recent consolidated balance sheet for Borrower provided under the terms of Section 5.2, and all assets and Property acquired since the date of such respective balance sheets, except for such Property as is no longer used or useful in the conduct of Borrower’s or its applicable Subsidiary’s business or as have been disposed of in the ordinary course of business or otherwise in accordance with this Agreement, and except for minor defects in title that do not interfere with the ability of Borrower and its Subsidiaries to conduct their respective businesses.

 

  

  

  

Section 4.06                      Taxes.  Borrower has filed all tax returns required to be filed and paid all taxes due, including interest and penalties, except for taxes which are being dili­gently con­tested in good faith and for payment of which adequate reserves have been set aside.

 

Section 4.07                      Litigation.   As of the date of this Agreement, there is no condemnation or other action, suit or proceeding pending—or, to the best of Borrower's knowledge, threatened--against Borrower, any other Obligor or the Collateral, at law or in equity, or before or by any Governmental Authority, which involves a claim or dispute in excess of $100,000.00, except as described and set forth in Schedule 4.07 attached hereto.

 

Section 4.08                      No Defaults.  Neither Borrower nor any other Obligor is in default with respect to any order, writ, injunction, decree or demand of any court or other Governmental Authority, in the payment of any Indebtedness for borrowed money or under any agreement or other papers evidencing or securing any such Indebtedness to the extent the default in such payment would constitute a Default or an Event of Default under Section 7.01(j).

 

Section 4.09                      No Adverse Contracts.  Except for loan documents evidencing permitted Indebtedness or Liens, neither Borrower nor any other Obligor is a party to any contract or agreement which materially and adversely affects any of its businesses, Properties or financial conditions.

 

Section 4.10                      Solvency.  Borrower and each other Obligor is now solvent, and no bankruptcy or insolvency proceedings are pending or contemplated by or--to Borrower's knowledge threatened--against Borrower or any other Obligor.  Borrower’s liabilities and obligations under the Credit Documents do not and will not render Borrower insol­vent, and the liabilities and obligations of each other Obligor under the Credit Documents do not and will not render any other Obligor insol­vent.

 

Section 4.11                      Prior Representations. No representation or warranty contained in any Credit Document and no statement contained in any certificate, schedule, list, financial statement or other papers furnished to Lender by or on behalf of Borrower or any other Obligor contains any untrue statement of material fact, or omits a material fact necessary to make the statements contained therein, taken as a whole, not misleading in light of the circumstances under which such statements were provided.

 

Section 4.11                      Margin Stock.   None of the proceeds of the Note will be used for the purpose of purchasing or carrying, directly or indirectly, any margin stock or for any other purpose which would make such credit a "purpose credit" within the meaning of Regula­tion U of the Board of Governors of the Federal Reserve System.

 

Section 4.12                      Permits.  Borrower and its Subsidiaries possess all permits, licenses, patents, trademarks, tradenames and copyrights required and material to conduct their respective businesses.

 

Section 4.13                      Legal Requirements.  Borrower, each other Obligor and the Collateral are in compliance in all material respects with all applicable Legal Requirements and Borrower manages and operates (and will continue to manage and operate) its business in accordance with good industry practices as determined by Borrower in its reasonable discretion.

 

Section 4.14                      ERISA.  With respect to each Plan, Borrower, each of its Subsidiaries and each member of a Controlled Group for the employees of Borrower or any of its Subsidiaries have fulfilled their obligations, including obligations under the minimum funding standards of ERISA and the Code and are in compliance in all material respects with the provisions of ERISA and the Code.  No event has occurred which could result in a liability of Borrower or any member of a Controlled Group for the employees of Borrower or any of its Subsidiaries to the PBGC or a Plan (other than to make contributions in the ordinary course).  Since the effective date of Title IV of ERISA, there have not been any nor are there now existing as of the date of this Agreement, any events or conditions that would reasonably be expected to cause the Lien provided under Section 4068 of ERISA to attach to any Property of Borrower, or any of its Subsidiaries or any member of a Controlled Group for the employees of Borrower or any of its Subsidiaries.  As of the date of this Agreement, there are no Unfunded Liabilities with respect to any Plan, and no "prohibited transaction" has occurred with respect to any Plan as of the date hereof.

 

Section 4.15                      Investment and Holding Company Status.

 

(a)           Neither Borrower nor or any of its Subsidiaries is an investment company within the meaning of the Investment Company Act of 1940, as amended, or, directly or indirectly, controlled by or acting on behalf of any Person which is an investment company, within the meaning of said Act.

 

(b)           Neither Borrower nor or any of its Subsidiaries is an "affiliate" or a "subsidiary company" of a "public utility company," or a "holding company," or an "affiliate" or a "subsidiary company" of a "holding company," as such terms are defined in the Public Utility Holding Company Act of 1935, as amended ("PUHC Act").  Further, none of the transactions contemplated under this Agreement shall cause or constitute a violation of any of the provisions, rules, regulations or orders of or under the PUHC Act and the PUHC Act does not in any manner impair the legality, validity or enforceability of the Note, the liabilities of Borrower or any of its Subsidiaries under any of the Credit Documents or any Liens created under the Security Documents.

 

  

  

  

Section 4.16                      Environmental Matters.  Except as disclosed in writing to Lender before execution and delivery of this Agreement, (a) Borrower and each of its Subsidiaries has obtained and maintained in effect all Environmental Permits, the failure to obtain which could reasonably be expected to have a Material Adverse Effect, (b) Borrower and each of its Subsidiaries (and its Properties, business and operations) has been and is in compliance in all material respects with all applicable Requirements of Environ­mental Law and Environmen­tal Permits, the failure to obtain which could reasonably be expected to have a Material Adverse Effect, (c) neither Borrower nor any of its Subsidiaries (or any of their Properties, business and operations) is subject to any (i) Environmental Claims or (ii) Environmental Liabilities, in either case direct or contingent, and whether known or unknown, arising from or based upon any act, omission, event, condition or circumstance occurring or existing on or prior to the date hereof which could reasonably be expected to have a Material Adverse Effect, and (d) neither Borrower nor any of its Subsidiaries has received any notice of any violation or alleged viola­tion of any Requirements of Environmental Law or Environmen­tal Permit or any Environmental Claim in connection with its Properties, business or operations which could reasonably be expected to have a Material Adverse Effect.  The liability (including any Environmental Liability and any other damage to persons or Property), if any, of Borrower and each of its Subsidiaries with respect to their Properties, business and operations which is reasonably expected to arise in connection with Require­ments of Environmental Laws currently in effect and other environmental matters presently known by Borrower could not reasonably be expected to have a Material Adverse Effect.  Neither Borrower nor any of its Subsidiaries knows of any event or condition with respect to Environmental Matters with respect to any of its Properties which could reasonably be expected to have a Material Adverse Effect.  The provisions of this Section are cumulative of the provisions relating to this subject matter in the other Credit Documents.

 

Section 4.17                      Executive Offices; Fiscal Year.  As of the date of this Agreement, Borrower's principal place of business and chief executive office is 508 W. Wall Street, Suite 550, Midland, Texas 79701, and Borrower's fiscal year is January 1st to December 31st of each calendar year.

Section 4.18                      Subsidiaries.   As of the date hereof, Borrower has no Subsidiaries.

 

Section 4.19                      Subordinated Indebtedness.  As of the date hereof, Borrower has no Subordinated Indebtedness.

ARTICLE V

 

Affirmative Covenants

 

Borrower covenants and agrees with Lender that prior to the payment in full of the Obligations (other than indemnification liabilities and other similar contingent obligations) and the termination of the Commitment:

 

Section 5.01                      Existence; Conduct of Business.  Borrower shall (and shall cause each of its Subsidiaries to) at all times (a) pay when due all material taxes and governmental charges of every kind upon it or against its income, profits or Property, unless and only to the extent that the same shall be contested diligently in good faith and adequate reserves have been established therefor; (b) to the extent applicable, do all things reasonably necessary to preserve its existence, qualifications, rights and franchises in all states where such qualification is necessary; (c) comply in all material respects with all applicable Legal Requirements (including Requirements of Environmental Law) in respect of the conduct of its business and the ownership of its Property; (d) cause its material Property to be protected, maintained and kept in good repair (ordinary wear and tear and casualty expected) and make all replacements and additions to its Property as may be reasonably necessary to conduct its business, and (e) pay punctually and discharge when due, or renew or extend, any Indebtedness in excess of $250,000.00 incurred by it and discharge, perform and observe the covenants, provisions and conditions to be performed, discharged and observed on its part in connection therewith, or in connection with any agreement or other instru­ment relating thereto or in connection with any mortgage, pledge or lien existing at any time upon any of its Property; provided, however, that nothing contained in this subparagraph (e) shall require payment, discharge, renewal or extension of any such Indebtedness or discharge, performance or observance of any such cove­nants, provisions and conditions so long as any claims which may be asserted against with respect to any such Indebted­ness or any such covenants, provisions and conditions shall be contested diligently and in good faith and reserves with respect thereto deemed adequate by Lender shall be established.

 

 

 

Section 5.02                      Financial Statements; Designation of Equipment Inventory and Other Information.  Borrower shall furnish or cause to be furnished to Lender a copy of each of the following:

 

(a)           as soon as available and in any event within 120 days after the end of each fiscal year of Borrower, the Annual Audited Financial Statements of Borrower;

 

(b)           as soon as available and in any event within 45 days after the end of each fiscal quarter (excluding the last fiscal quarter of each fiscal year) of Borrower, the Quarterly Financial Statements of Borrower;

 

(c)           concurrently with the financial statements provided for in subsections (a) and (b) of this Section 5.02 which are delivered as of the end of any fiscal quarter or fiscal year of Borrower, a compliance certificate ("Compliance Certificate") in the form of Exhibit D hereto accompanied by such schedules, computations and other information, in reasonable detail, as may be required by Lender to demonstrate compliance with the covenants set forth herein or reflecting any non-compliance therewith as of the applicable date, all certified and signed by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower;

 

  

  

  

(d)           within 25 days after the end of each calendar month when any Loans and/or Letter of Credit Liabilities are outstanding as of the end of such calendar month, within 25 days after the end of each fiscal quarter of Borrower (regardless of whether any Loans and/or Letter of Credit Liabilities are outstanding as of the end of such fiscal quarter), and contemporaneously with a Request for Loan to the extent the following information has not been previously provided to the Lender within 30 days prior to the date such Request for Loan is submitted to the Lender, (i) a Borrowing Base Certificate as of the last day of such calendar month or fiscal quarter, as applicable, together with such supporting information as Lender may reasonably request, certified and signed by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower, (ii) a listing and aging of the Receivables of Borrower and each of its Domestic Subsidiaries as of the end of such calendar month or fiscal quarter, as applicable, prepared in reasonable detail and containing such information as Lender may request (including Borrower’s reasonable calculation of the difference between (A) the aggregate amount of all Receivables shown on such listing and aging of Receivables and (B) the actual amount of such Receivables permitted to be included as an asset on the consolidated balance sheet of the Borrower in accordance with GAAP), (iii) a listing and aging of the accounts payable of Borrower and each of its Domestic Subsidiaries as of the end of such calendar month or fiscal quarter, as applicable, prepared in reasonable detail and containing such information as Lender may request, and (iv) a listing of the Equipment Inventory and a summary of the General Inventory of Borrower and each of its Domestic Subsidiaries as of the end of such calendar month or fiscal quarter, as applicable, prepared in reasonable detail and containing such information as Lender may request, including without limitation, updated Book Value amounts for the applicable Equipment Inventory and General Inventory;

 

(e)           within 25 days after the end of each June and December (commencing with December 31, 2010), and promptly on a more frequent basis upon the reasonable request of Lender, a listing covering all Equipment Inventory which is then leased by Borrower or its applicable Subsidiaries which adequately sets forth the following information for each such lease of any Equipment Inventory: (i) a summary of the applicable lease, including the remaining term thereof and the monthly amounts payable thereunder; (ii) the identity of specific Equipment Inventory covered by the applicable lease; (iii) the name and mailing address of the third-party lessee under the applicable lease; and (iv) the physical address that the specific Equipment Inventory is to be maintained by the applicable third-party lessee, if different than such lessee’s mailing address;

 

(f)           from time to time, at any time upon the request of Lender, but at the cost of Borrower (subject to the limitation set forth below), a report of a collateral field examiner or auditor (which may or may not be affiliated with Lender) with respect to the Accounts and General Inventory included in the Borrowing Base (provided, however, that Borrower shall not be required to pay or reimburse to Lender the cost and expense of such a report more than twice per calendar year to the extent of reports prepared when no Default or Event of Default exists); and

 

(g)           such other information relating to the financial condition, operations, prospects or business of any Borrower and/or any of its Subsidiaries as from time to time may be reasonably requested by Lender.

 

Section 5.03                      Financial Covenants.  Borrower shall have and maintain, on a consolidated basis, a Leverage Ratio less than or equal to 2.50 to 1.00 as of the last day of each fiscal quarter (commencing with the fiscal quarter ending December 31, 2010).

 

Section 5.04                      Books and Records; Inspection Rights.   Borrower shall (and shall cause each of its Subsidiaries to) maintain books and records in accordance with GAAP.  Borrower shall permit Lender and any consultant of Lender to inspect its Property, to examine its files, books and records and make and take away copies thereof, and to discuss its affairs with its officers and accountants, during normal business hours and upon reasonable notice from Lender.  In connection therewith, Lender and any consultant of Lender shall each have the right to examine, as often as Lender may reasonably request, the existence and condition of any of the Collateral and to review Borrower's and each other Obligor’s compliance with the terms and conditions of this Agreement and the other Credit Documents, subject to governmental confidentiality requirements.  Borrower shall not be obligated to pay the expenses of Lender with respect to more than two (2) such visits and inspections per year so long as no Default or Event of Default exists.

 

Section 5.05                      Further Assurances.  Borrower shall promptly execute and deliver (or cause to be executed and delivered by any other applicable Obligor), at Borrower's expense, any and all other and further instruments which may be reasonably requested by Lender necessary to cure any defect in the execution and delivery of any Credit Document or more fully to describe particular aspects of the agreements and undertakings set forth in the Credit Documents.

 

 

Section 5.06                      Insurance.  Borrower shall maintain insurance with such insurers, on such of its and its Subsidiaries’ Property, in such amounts and against such risks as is customarily insured by companies similarly situated as Borrower, including without limitation, fire and extended coverage, general liability insurance and worker's compensation coverage, and furnish Lender satisfactory evidence thereof promptly upon request. [Notwithstanding the foregoing property insurance requirement or any other property insurance requirement set forth in any other Loan Document, so long as Borrower continues to maintain in all material respects the existing self-insurance program currently maintained by Borrower for property insurance coverage in lieu of third-party property insurance coverage, Borrower shall be deemed to have complied with all applicable property insurance requirements set forth in this Agreement or in any other Loan Document.]  These insurance provisions are cumulative of the insurance provisions of the Security Documents.  With respect to all such property, casualty and general liability insurance, Lender shall be named as an "additional loss payee" or "additional insured," as applicable, in its capacity as a lender and mortgagee, and shall be provided with copies of all such policies of insurance and one or more certificates of the applicable insurers that such insurance may not be canceled, reduced or materially and adversely affected in any manner without thirty (30) days' prior written notice to Lender.  Wherever permitted and available under applicable law, such property insurance shall name Lender as loss payee and/or mortgagee insured.  If Lender receives any proceeds of any such insurance, such proceeds shall be applied as prepayments against the Loans.

 

 

  

  

  

Section 5.07                      Notice of Material Events.  Borrower shall notify Lender promptly upon acquiring knowledge of the occurrence of, or if Borrower or any of its Subsidiaries causes or intends to cause, as the case may be:  (a) the institution of any lawsuit or administrative proceeding affecting Borrower or any other Obligor in any material respect; (b) any Default or any Event of Default, together with a detailed statement by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower of the steps being taken to cure the effect of such Default or Event of Default; (c) the receipt of any notice from, or the taking of any other action by, the holder of any Indebtedness of Borrower or any of its Subsidiaries in excess of $50,000 with respect to a claimed default, together with a detailed statement by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower specifying the notice given or other action taken by such holder and the nature of the claimed default and what action Borrower or its applicable Subsidiaries, as the case may be, is taking or proposed to take with respect thereto; and (d) any adverse change in any material respect in the accuracy of the representations and warranties of Borrower or any other Obligor in this Agreement or any other Credit Document.  Borrower will notify Lender in writing at least 10 days prior to the date that any Obligor changes its name or its address or the place where it keeps its books and records.

 

Section 5.08                      ERISA Matters.  Borrower shall promptly furnish to Lender (1) promptly after receipt, a copy of any notice of complete or partial withdrawal liability regarding a Plan under Title IV of ERISA and any notice from the PBGC under Title IV of ERISA of an intent to terminate or appoint a trustee to administer any Plan, (2) if requested by Lender, promptly after the filing thereof with the United States Secretary of Labor or the PBGC or the Internal Revenue Service, copies of each annual and other report with respect to each Plan or any trust created thereunder, (3) immediately upon becoming aware of the occurrence of any "reportable event," as such term is defined in Section 4043 of ERISA, for which the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC have not been waived, or of any "prohibited transaction," as such term is defined in Section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by an appropriate officer or other responsible party acceptable to Lender on behalf of Borrower, its applicable Subsidiaries  or the applicable member of a Controlled Group for the employees of Borrower or its applicable Subsidiaries specifying the nature thereof, what action Borrower, its applicable Subsidiaries or the applicable member of such Controlled Group is taking or proposes to take with respect thereto, and, when known, any action taken by the PBGC, the Internal Revenue Service or the Department of Labor with respect thereto, (4) promptly after the filing or receiving thereof by Borrower, any of its Subsidiaries or any member of a Controlled Group for the employees of any such Person of any notice of the institution of any proceedings or other actions which may result in the termination of any Plan, and (5) each request for waiver of the funding standards or extension of the amortization periods required by Sections 303 and 304 of ERISA or Section 412 of the Code regarding a Plan promptly after the request is submitted by Borrower, any of its Subsidiaries or any member of a Controlled Group for the employees of any such Person to the Secretary of the Treasury, the Department of Labor or the Internal Revenue Service, as the case may be.  To the extent required under applicable statutory funding requirements, Borrower will fund, and will cause each of its applicable Subsidiaries to fund, all current service pension liabilities as they are incurred under the provisions of all Plans from time to time in effect, and comply with all applicable provisions of ERISA.  Borrower covenants that it shall and shall cause each of its applicable Subsidiaries and each member of a Controlled Group for the employees of Borrower or any of its Subsidiaries  to (a) make contributions to each Plan in a timely manner and in an amount sufficient to comply with the contribution obligations under such Plan and the minimum funding standards requirements of ERISA; (b) prepare and file in a timely manner all notices and reports required under the terms of ERISA including annual reports regarding such Plans; and (c) pay in a timely manner all required PBGC premiums regarding such Plans.

 

Section 5.09                      Loan Proceeds.  The proceeds of the Loans will be used to provide funds for working capital, acquisition needs, capital expenditures and general corporate purposes for Borrower.

 

Section 5.10                      Deposits, Treasury Management and Traditional Banking Services.  Borrower shall maintain with Lender a substantial portion of its depository and disbursement accounts, related treasury management services and other traditional banking services.

 

Section 5.11                      Designation of Equipment Inventory as Collateral; Requisite Commitment Coverage Ratio.

 

 

(a)           The specific rental compressor Inventory initially designated by Borrower as “Equipment Inventory” for purposes of this Agreement is described in Exhibit E attached hereto.   Borrower and Lender agree that the Book Value of such initially designated Equipment Inventory as of the date of this Agreement is sufficient to cause the Commitment Coverage Ratio to be equal to or greater than 2.00 to 1.0 as of the date of this Agreement.   If the Borrowing Base Certificate and related information delivered by Borrower to Lender as of the end of any fiscal quarter or fiscal year of the Borrower pursuant to the terms of Section 5.02(d) show that the Commitment Coverage Ratio is less than 2.00 to 1.0 as of the end of the applicable fiscal quarter of fiscal year of Borrower, or if it is subsequently discovered that any Equipment Inventory previously included within Eligible Equipment Inventory is actually not Eligible Equipment Inventory as a result of such Equipment Inventory being permanently attached to vehicles, trailers or other transportation equipment covered by any certificate of title or for any other valid reason, then within 15 days after the Lender’s written demand to Borrower for the designation and pledge of additional Equipment Inventory as Collateral, the Borrower shall (i) furnish the Lender with the Borrower’s written designation of additional specific rental compressors of the Borrower and/or any of its Domestic Subsidiaries not already included in Equipment Inventory and having an aggregate Book Value at such time in the amount necessary to cause the Commitment Coverage Ratio to then be equal to or greater than 2.00 to 1.0 after the addition to and inclusion of such additional rental compressors as Equipment Inventory for purposes of hereof and (ii) execute and deliver to the Lender any and all Security Documents reasonably required by the Lender to evidence and perfect a first priority Lien in favor of the Lender in and to such additional Equipment Inventory as additional Collateral.   Borrower acknowledges and agrees that during the period after any above-described written demand by Lender to Borrower for the designation and pledge of additional Equipment Inventory as Collateral, Lender shall have the option to withhold funding any additional Loans and/or issuing any additional Letters of Credit requested by Borrower unless and until Borrower has designated and pledged the requisite additional Equipment Inventory as Collateral in accordance with the foregoing requirements.

 

(b)           The Borrower acknowledges that the initial Equipment Inventory described in Exhibit E hereto is the newest and most recently acquired rental compressor Inventory owned and held by the Borrower as of the date of this Agreement, and the Borrower hereby agrees that (i) each subsequent designation of additional Equipment Inventory after the date hereof shall sufficiently identify such additional Equipment Inventory in a manner (including furnishing of serial numbers and other specific equipment descriptions) to permit the Lender to thereafter file a valid UCC-Financing Statement with a legally sufficient description against all additionally designated Equipment Inventory in the manner required to properly and validly perfect the Lender’s requisite first priority Lien against such Equipment Inventory as Collateral hereunder, and (ii) that the specific rental equipment to be designated by the Borrower as “Equipment Inventory” in each such subsequent Equipment Inventory designation is required to be the newest and most recently acquired rental compressor Inventory then owned and held by the Borrower and/or its applicable Domestic Subsidiaries and which is not yet Equipment Inventory for purposes hereof at the time of such designation.

 

  

  

  

(c)           Lender shall be entitled, upon its reasonable request, to require a current appraisal of the Equipment Inventory and all other rental compressors then owned by Borrower to be prepared by an appraiser acceptable to Lender and at Borrower’s cost and expense in order to substantiate and confirm compliance with the above-described Commitment Coverage Ratio requirement in connection with (i) any increase in the Commitment requested by Borrower pursuant to Section 2.01(c) or (ii) confirming the value of any Equipment Inventory designated by Borrower in accordance with the above provisions that is older than five (5) years. Borrower agrees to promptly remit to Lender the amount of each such appraisal upon demand by Lender accompanied by a copy of the invoice for the applicable appraisal.

 

 

 

ARTICLE VI

 

Negative Covenants

 

Borrower covenants and agrees with Lender that prior to the payment in full of the Obligations (other than indemnification liabilities and other similar contingent obligations) and the termination of the Commitment:

 

Section 6.01                      Indebtedness.  Neither Borrower nor any of its Subsidiaries will create, incur, suffer or permit to exist, or assume or guarantee, directly or indirectly, or become or remain liable with respect to any Indebtedness, whether direct, indirect, absolute, contingent or otherwise, except the following:

 

 

(a)           Indebtedness to Lender or any Affiliate of Lender;

 

(b)           Indebtedness secured by Liens permitted by Section 6.02 hereof;

 

(c)           other liabilities existing on the date of this Agreement and disclosed in the financial statements delivered on or prior to the date hereof;

 

(d)           current accounts payable and unsecured current liabilities, not the result of borrowing, to vendors, suppliers and persons providing services, for expenditures for goods and services normally required by it in the ordinary course of business and on ordinary trade terms;

 

(e)           any Subordinated Indebtedness;

 

(f)           intercompany Indebtedness among Obligors, so long as any such Obligor other than Borrower is a wholly-owned Domestic Subsidiary of Borrower;

 

(g)           intercompany Indebtedness owing by a non-Domestic Subsidiary to any Obligor, so long as (1) Borrower is in compliance with the financial covenant in Section 5.03 hereof after giving effect to all such intercompany Indebtedness extended to non-Domestic Subsidiaries and all Investments permitted by Section 6.07(j), and (2) all such intercompany Indebtedness extended to any non-Domestic Subsidiary is evidenced by a valid and enforceable promissory note executed and payable by the applicable non-Domestic Subsidiary to the order of the applicable Obligor and the Lender has received a perfected first priority Lien (subject only to Permitted Encumbrances) against such promissory note;

 

(h)           Capital Lease Obligations, purchase money Indebtedness incurred to finance the acquisition of any Equipment or any other Indebtedness for borrowed money incurred after the date of this Agreement, so long as the aggregate principal amount of all such Indebtedness shall not exceed $300,000.00 in the aggregate at any time outstanding;

 

(i)           Indebtedness which represents an extension, refinancing, or renewal of any of the Indebtedness described in clauses (b), (c) and (h) hereof; provided that, (1) the principal amount or interest rate of such Indebtedness is not increased, (2) any Liens securing such Indebtedness are not extended to any additional Property of any Obligor, (3) no Obligor that is not originally obligated with respect to repayment of such Indebtedness is required to become obligated with respect thereto, (4) such extension, refinancing or renewal does not result in a shortening of the maturity of the Indebtedness so extended, refinanced or renewed, (5) the terms of any such extension, refinancing, or renewal are not less favorable to the obligor thereunder than the original terms of such Indebtedness and (6) if the Indebtedness that is refinanced, renewed, or extended was Subordinated Indebtedness, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Lender as those that were applicable to the refinanced, renewed, or extended Indebtedness;

 

  

  

  

(j)           Indebtedness owed by Borrower to any Person providing workers' compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to Borrower, in each case incurred in the ordinary course of business; and

 

(k)           Indebtedness of any Borrower in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business.

 

Section 6.02                      Liens.  Neither Borrower nor any of its Subsidiaries will create or suffer to exist any Lien upon any of its Property now owned or hereafter acquired, permit to exist any Lien on any Collateral owned by any other Obligor, or acquire any Property upon any conditional sale or other title retention device or arrangement or any purchase money security agreement; provided, however, that Borrower may create or suffer to exist:

 

 

(a)           Liens in effect on the date hereof and disclosed in Schedule 6.02 attached hereto, provided that neither the Indebtedness secured thereby nor the Property covered thereby shall increase;

 

(b)           Liens in favor of Lender;

 

(c)           Liens created pursuant to Capital Lease Obligations or purchase money Indebtedness for Equipment permitted pursuant to this Agreement, if such Liens are only in respect of the Equipment subject to, and secure only, the respective Capital Lease Obligations or purchase money Indebtedness and do not cover any other Property of Borrower or any of its Subsidiaries; and

 

(d)           Permitted Encumbrances.

Section 6.03                      Fundamental Changes.    Neither Borrower nor any of its Subsidiaries, in any single transaction or series of transactions, directly or indirectly, (a) consolidate, terminate, liquidate or dissolve, (b) be a party to any consolidation, termination, merger or consolidation, (c) sell, convey or lease all or substantially all of its assets (other than to Borrower or another Obligor that is a wholly-owned Subsidiary of Borrower), or (d) except for Permitted Acquisitions, acquire all or substantially all of the assets of any Person, or acquire any Equity Interests of any other Person after the date hereof, without the prior consent of Lender; provided, however, that any wholly-owned Subsidiary of an Obligor may (i) consolidate or merge with Borrower or another Obligor that is a wholly-owned Subsidiary of Borrower or (ii) otherwise terminate, liquidate or dissolve, so long as all of the assets of such Obligor that is terminating, liquidating or dissolving are conveyed to Borrower or another Obligor that is a wholly-owned Subsidiary of Borrower.

Section 6.04                      Asset Sales.   Neither Borrower nor any of its Subsidiaries will, in any single transaction or series of transactions, directly or indirectly, sell, transfer, lease or otherwise dispose of any of its assets, except for (i) sales or other dispositions of Inventory or other assets in the ordinary course of business and for fair value, including, without limitation, sales or other dispositions of damaged, used, surplus or obsolete assets, (ii) sales or other dispositions to any other Obligor and (iii) sales or other dispositions of assets not to exceed $1,000,000.00 in the aggregate in any fiscal year.

 

Section 6.05                      Nature of Business; Management.  Neither Borrower nor any of its Subsidiaries will (a) change the nature of its business in any material respect or enter into any business which is substantially different from the business in which it is presently engaged, other than any Permitted Other Business Lines, or (b) permit a change in the Chief Executive Officer and/or President of the Borrower.

 

Section 6.06                      Affiliate Transactions.  Neither Borrower nor any of its Subsidiaries will enter into any transaction or agreement with any Affiliate or any officer, director, partner, trustee or owner or holder of any Equity Interests of Borrower or any of its Subsidiaries, except (a) transactions in the ordinary course of business that are at prices and on terms and conditions not less favorable to it than could be obtained on an arm’s-length basis from unrelated third parties, (b) any Distribution with respect to any Equity Interests in Borrower permitted hereunder or other transaction or agreement otherwise permitted hereunder, and (c) compensation, employment, severance and benefit arrangements in the ordinary course of business, including payment of directors’ fees.

 

Section 6.07                      Investments; Loans; Advances. Neither Borrower nor any of its Subsidiaries will make any Investment in, any Person, or make any commitment to make any Investment, except the following:

 

(a)           Permitted Investments;

 

(b)           Accounts, Inventory and other working capital accounts, if created in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

 

  

  

  

(c)           loans or advances to employees, officers or directors in the ordinary course of business of Borrower or any of its Subsidiaries, in each case only as permitted by applicable law, including Section 402 of the Sarbanes Oxley Act of 2002, but in any event not to exceed $100,000.00 in the aggregate at any time outstanding;

 

(d)           Investments received in satisfaction or partial satisfaction from financially troubled account debtors as a result of the applicable Obligor’s exercise of its reasonable business judgment;

 

(e)           Equity Interests issued by Subsidiaries permitted hereunder;

 

(f)           Investments in another Obligor;

 

(g)           Investments existing on the date hereof to the extent the same are reflected in the most recent financial statements of Borrower furnished to Lender prior to the date of this Agreement; and

 

(h)           Permitted Acquisitions.

 

 

 

Section 6.08                      New Subsidiaries. Neither Borrower nor any of its Subsidiaries will form, create or acquire any Subsidiary without the prior written consent of Lender, unless (a) Lender is provided not less than thirty (30) days prior written notice by Borrower of the intention to create or acquire such new Subsidiary, (b) if such new Subsidiary is to be acquired, such Acquisition is a Permitted Acquisition, and (c) contemporaneously with the actual creation or acquisition of such new Subsidiary, as applicable, Borrower causes (i) each such Subsidiary that is a Domestic Subsidiary to become an Obligor, by execution and delivery to Lender, of a Guaranty or a Joinder Agreement (if a Joinder Agreement is requested by Lender in lieu of a Guaranty), (ii) each such Subsidiary that is a Domestic Subsidiary to grant to Lender a first priority perfected Lien (subject only to Liens permitted under Section 6.02) against all Collateral now or hereafter owned by such Domestic Subsidiary (subject to the limitations of Section 5.11), (iii) sixty-five percent (65%) of the issued and outstanding Equity Interests of each Subsidiary that is a non-Domestic Subsidiary (or such greater percentage that, due to a change in applicable law after the date hereof, (1) could not reasonably be expected to cause the undistributed earnings of such foreign Subsidiary as determined for U.S. federal income tax purposes to be treated as a deemed dividend to such foreign Subsidiary’s U.S. parent and (2) could not reasonably be expected to cause any material adverse tax consequences) entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2) in each foreign Subsidiary directly owned by the Borrower or any Domestic Subsidiary to be subject at all times to a first priority, perfected Lien in favor of the Lender pursuant to the terms and conditions of the Credit Documents or other security documents as the Lender shall reasonably request., and (iv)  each such Subsidiary to deliver to Lender such related certificates, legal opinions and documents (including Organizational Documents) as Lender may reasonably require.

 

Section 6.09                      ERISA; Unfunded Liabilities.  Neither Borrower nor any of its Subsidiaries will incur any material Unfunded Liabilities or allow any material Unfunded Liabilities to arise or exist under any Plan.

 

Section 6.10                      Sale and Leaseback Transactions.   Neither Borrower nor any of its Subsidiaries will enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any Property, real or personal, used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or lease such Property or other Property that it intends to use for substantially the same purpose or purposes as the Property sold or transferred.

Section 6.11                      Control of Voting Rights of Borrower’s and its Subsidiaries’ Equity Interests.   Borrower will not permit (i) any change in the control of the voting rights for any Equity Interests in Borrower which results in any Person and its Affiliates controlling, directly or indirectly, more than one-third (1/3) of the voting rights under all issued and outstanding classes of Equity Interests in Borrower at any time, or (ii) any change in the ownership of any Equity Interests in any Subsidiary now or hereafter owned and held by Borrower.

Section 6.12                      Dividends and Other Distributions.  Borrower will not:  (a) redeem, retire or otherwise acquire, directly or indirectly, any of its Equity Interests; or (b) pay or make any Distribution of any Property or cash to holders of Equity Interests in Borrower as such, except (i) non-cash dividends of additional Equity Interests, (ii) dividends required to be paid under the current terms of any preferred stock issued and outstanding as of the date of this Agreement, and (iii) redemptions of Equity Interests from officers, directors, employees and consultants upon termination of employment or service of such Person.

 

Section 6.13                      Other Negative Pledge Agreements. Neither Borrower nor any of its Subsidiaries will enter into any contract or other agreement for any purpose with any Person (other than the applicable negative covenants of this Agreement and the other Credit Documents) that directly or indirectly prohibits the Borrower or any of its Subsidiaries from granting any Lien against any Property now or hereafter owned by Borrower or any of its Subsidiaries.

 

  

  

  

ARTICLE VII

 

Defaults

 

Section 7.01                      Default.  The occurrence of any of the following events shall consti­tute an Event of Default (herein so called) under this Agreement:

 

(a)           any part of the Obligations is not paid when due, whether by lapse of time or acceleration or otherwise;

 

(b)           Borrower or any other Obligor fails to perform, observe or comply with--or defaults under--any of the terms, covenants, conditions or provisions of any Credit Document (other than any such failure or default described in one of the other subparagraphs of this Section), unless Lender declares the failure or default fully cured to Lender's satisfaction within fifteen (15) calendar days after Lender has given Borrower written notice thereof (such curative period to run concurrently with, and not in addition to, any other curative periods, if any, provided for in any of the other Credit Documents with respect to the same default);

 

(c)           Borrower or any of its Subsidiaries fails to perform, observe or comply with--or defaults under--Sections 5.02, 5.03 or 5.07 hereof or any negative covenant under Article VI of this Agreement;

 

(d)           any representation or warranty by Borrower or any other Obligor made in any Credit Document or in any other report or other paper now or hereafter provided to Lender pursuant or incident to any Credit Document or the Obligations proves to have been untrue or misleading in any material respect as of the date made or deemed made;

 

(e)           Borrower or any of its Subsidiaries:  (i) voluntarily suspends transaction of business (except as permitted hereunder); (ii) becomes insolvent or unable to pay its Indebtedness as it matures; (iii) commences a voluntary case in bankruptcy or a voluntary petition seeking reorganiza­tion or to effect a plan or other arrangement with creditors; (iv) makes an assignment for the benefit of creditors; (v) applies for or consents to the appoint­ment of a receiver or trustee for any such person or entity or for any substantial portion of its Property; or (vi) makes an assign­ment to an agent authorized to liquidate any substantial part of its assets;

 

 

(f)           in respect of Borrower or any of its Subsidiaries:  (i) an involuntary case shall be commenced with any court or other authority seeking liquidation, reorgani­zation or a creditor's arrangement of any such person or entity; (ii) an order of any court or other authority shall be entered appointing any receiver or trustee for any such person or entity or for any substantial portion of its Property; or (iii) a writ or warrant of attachment or any similar process shall be issued by any court or other authority against any substan­tial portion of the Property of any such person or entity, and in each case, such petition seeking liquidation, reorganiza­tion or a creditor's arrangement or such order appointing a receiver or trustee is not vacated or stayed, or such writ, warrant of attachment or similar process is not vacated, released or bonded off within sixty (60) days after its entry or levy;

 

(g)           the dissolution, li­quidation or termination of the existence of Borrower or any of its Subsidiaries except as otherwise permitted under this Agreement;

 

(h)           any one or more final judgments for the payment of money in excess of $150,000.00 in the aggregate shall be rendered against any Obligor and the same shall remain unstayed or undischarged for a period of 30 days (it being agreed that a judgment shall be deemed stayed for purposes hereof during the prosecution by the applicable Obligor of any legally valid appeal process if a proper supersedeas bond has been timely filed in connection therewith);

 

(i)           the occurrence of any Material Adverse Effect;

 

(j)           Borrower or any of its Subsidiaries shall default in the payment of any amount when due under any other Funded Indebtedness obligation in excess of $50,000.00 in principal amount or the holder of such other obligation declares--or has the right to declare--such obligation due before its stated maturity because of default;

 

(k)           Borrower or any other applicable Obligor shall claim--or any court shall find or rule--that Lender does not have a valid Lien on any material portion of the Collateral;

 

(l)           Borrower or any of its Subsidiaries shall have concealed, removed, or permitted to be concealed or removed, any part of its Property, with intent to hinder, delay or defraud any of its creditors, or made or suffered a transfer of any of its Property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law, or shall have made any transfer of its Property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid, or, while insolvent, shall have suffered or permitted any creditor to obtain a lien upon any of its Property through legal proceedings or distraint which is not vacated within 30 days from its date;

 

  

  

  

(m)           Borrower or any of its Subsidiaries fails to pay when due any amount which he or it is liable to pay to the PBGC or its successor regarding a Plan or to a Plan, or notice of intent to terminate any Plan is filed under ERISA, or PBGC commences proceedings under ERISA to terminate any Plan or to cause a trustee to be appointed to administer any Plan, or a proceeding is commenced by any fiduciary of any Plan to enforce Section 515 or Section 4219(c)(5) of ERISA, or PBGC becomes entitled to obtain a decree adjudicating that any Plan must be terminated; or

 

(n)           The occurrence of any default or event of default under any International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement or other agreement evidencing any Rate Management Transaction that remains uncured after any applicable grace or cure period, if any, provided for therein.

 

Section 7.02                      Remedies.  Upon the occurrence of any Event of Default that is then continuing, Lender shall have the right, at its option, (a) to declare the Commitment terminated (whereupon the Commitment shall be terminated) and to declare the unpaid balance of the Indebtedness evidenced by the Note and all other Credit Documents to be immediately due and payable without further notice (including notice of intent to accelerate and notice of acceleration), protest or demand or presentment for payment, all of which are hereby expressly waived by Borrower, (b) to require Borrower to pay to Lender, in immediately available funds, an amount equal to 105% of the then aggregate amount available for drawings under all Letters of Credit (which funds shall be held by Lender as Cover), and/or (c) to enforce or avail itself of any and all powers, rights and remedies available at law or provided in this Agreement, the Note, the other Credit Documents or any other document executed pursuant hereto or in connection herewith.   All powers, rights and remedies of Lender set forth in this Section shall be cumulative and not exclusive of any other power, right or remedy available to Lender under the law or under this Agreement, the Note, the other Credit Documents or any other docu­ment executed pursuant hereto or in connection herewith to enforce the performance or observance of the covenants and agree­ments contained in this Agreement, and no delay or omission of Lender to exercise any power, right or remedy accruing to Lender shall impair any such power, right or remedy, or shall be con­strued to be a waiver of the right to exercise any such power, right or remedy.  Every power, right or remedy of Lender set forth in this Agreement, the Note, the other Credit Documents or any other document executed pursuant hereto or in connection here­with, or afforded by law may be exercised from time to time, and as often as may be deemed expedient by Lender.

Section 7.03                      Lender's Right to Cure.  If Borrower or any other Obligor should fail to comply with any of its agreements, covenants or obligations under any Credit Document, then after reasonable notice thereof to Borrower, Lender (in the name of Borrower or such other applicable Obligor or in Lender's own name) may perform them or cause them to be performed for Borrower's account and at Borrower's expense, but shall have no obligation to perform any of them or cause them to be performed.  Any and all expenses thus incurred or paid by Lender shall be Borrower's obligations to Lender due and payable on demand, and each shall bear interest from the date Lender pays it until the date Borrower repays it to Lender at the Default Rate.  Upon making any such payment or incurring any such expense, Lender shall be fully and automatically subrogated to all of the rights of the person, corporation or body politic receiving such payment.  Any amounts owing by Borrower to Lender pursuant to this or any other provision of this Agreement shall be secured by all Security Dcouments.  The amount and nature of any such expense and the time when it was paid shall be fully established by the affidavit of Lender or any of Lender's officers or agents.  The exercise of the privileges granted to Lender in this Section shall in no event be considered or constitute a cure of the default or a waiver of Lender's right at any time after an Event of Default that is then continuing to declare the Note to be at once due and payable, but is cumulative of such right and of all other rights given by this Agreement, the Note and the Credit Documents and of all rights given Lender by law.

 

 

ARTICLE VIII

 

Miscellaneous

 

Section 8.01                      Usury Not Intended; Savings Provisions.   Notwith­standing any provision to the contrary contained in any Credit Document, it is expressly provided that in no case or event shall the aggregate of any amounts accrued or paid pursuant to this Agreement which under applicable laws are or may be deemed to constitute interest ever exceed the maximum nonusurious interest rate permitted by applicable Texas or federal laws, whichever permit the higher rate.  In this connection, Borrower and Lender stipulate and agree that it is their common and overriding intent to contract in strict compliance with applicable usury laws.  In furtherance thereof, none of the terms of this Agreement 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 permitted by applicable laws. Neither Borrower nor any other Obligor shall ever be liable for interest in excess of the maximum rate permitted by applicable laws.  If, for any reason whatever, such interest paid or received during the full term of the applicable Indebtedness produces a rate which exceeds the maximum rate permitted by applicable laws, Lender shall credit against the principal of such Indebtedness (or, if such Indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid to produce a rate equal to the maximum rate permitted by applicable laws.  All sums paid or agreed to be paid to Lender for the use, forbearance or detention of money shall, to the extent required to avoid or minimize usury and to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the applicable Indebtedness so that the interest rate does not exceed the Ceiling Rate.  The provisions of this Section shall control all agreements, whether now or hereafter existing and whether written or oral, between Borrower and Lender.

 

Section 8.02                      Documentation Requirements.  Each written instrument required by this Agreement, the Note or the other Credit Documents to be furnished to Lender shall be duly executed by the person or persons specified (or where no particular person is specified, by such person as Lender shall require), duly acknowledged where reasonably required by Lender and, in the case of affidavits and similar sworn instruments, duly sworn to and subscribed before a notary public duly authorized to act by governmental authority; shall be furnished to Lender in one or more copies as required by Lender; and shall in all respects be in form and substance satisfactory to Lender and to its legal counsel.

 

Section 8.03                      Credit Documents Cumulative.  The benefits, rights and remedies of Lender and the security contained herein or provided for in the Note, the other Credit Documents or any other document executed pursuant hereto or in connection herewith are cumulative; provided, how­ever, that to the extent of any conflict between any provision of this Agreement and any provision contained in the Note, the other Credit Documents or any other document executed pursuant hereto or in connection herewith, the provisions of this Agree­ment shall control.

 

  

  

  

Section 8.04                      Satisfaction of Conditions.  Where evidence of the existence or nonexistence of any circumstance or condition is required by this Agreement, the Note, the other Credit Documents or any other document executed pursuant hereto or in connection herewith to be furnished to Lender, such evidence shall in all respects be in form and sub­stance reasonably satisfactory to Lender.

 

Section 8.05                      Survival.  All covenants, agreements, representations and warranties made by Borrower in this Agreement, the Note and the other Credit Documents shall survive the execution and delivery of this Agreement, the Note and the other Credit Documents, and shall continue in full force and effect until full payment of the Indebtedness evidenced by the Note and/or secured by the Credit Documents, complete performance of all of the obligations of Borrower and all other Obligors under the Credit Documents and final termination of Lender's obligations--if any--to make any further advances under the Note or to provide any other financial accommodation to Borrower (provided, however, that all reimbursement obligations, indemnification and hold harmless obligations and other similar obligations of Borrower under any of the Credit Documents shall survive such payment, performance and termination).  No Person other than Borrower shall have any right or action hereon or any rights to Loans at any time, the Loans shall not constitute a trust fund for the benefit of any third parties and no third party shall under any circumstances have or be entitled to any Lien or any trust impressed on any undisbursed Loans.

 

Section 8.06                      Borrower Agrees to Pay or Reimburse Lender's Expenses.  To the extent not prohibited by applicable law and except as otherwise expressly limited herein, Borrower will pay all of the following costs and expenses and reimburse Lender for any and all of the following expenditures incurred or expended from time to time, regardless of whether a Default or an Event of Default shall have occurred, in connection with:

 

(a)           all reasonable out-of-pocket costs and expenses for (i) the preparation, negotiation, documentation, closing, renewal, revision, modification, increase, review or restructuring of any loan or credit facility secured by the Credit Documents, including legal, accounting, auditing, architectural, engineering and inspection services and disbursements, and (ii) Lender’s creating and perfecting its Liens against the Collateral; and

 

(b)           all costs and expenses of realizing upon Lender's Liens on the Collateral, and all costs and expenses relating to Lender's exercising any of its rights and remedies under any Credit Document or at law and/or protecting the Collateral, including all such appraisal fees, consulting fees, filing fees, taxes, brokerage fees and commissions, title review and abstract fees, litigation report fees, UCC search fees, other fees and expenses incident to title searches, reports and security interests, escrow fees, attorneys' fees, legal expenses, court costs, other fees and expenses incurred in connection with any complete or partial liquidation of the Collateral, and all such fees and expenses for any professional services relating to the Collateral or any operations conducted in connection therewith.  Provided, that no right or option granted by Borrower to Lender or otherwise arising pursuant to any provision of any Credit Document shall be deemed to impose or admit a duty on Lender to supervise, monitor or control any aspect of the character or condition of the Collateral or any operations conducted in connection therewith for the benefit of Borrower or any person or entity other than Lender.  Borrower agrees to indemnify, defend and hold Lender, its shareholders, directors, officers, agents, attor­neys, advisors and employees (collective­ly "Indemnified Parties") harmless from and against any and all Environmental Liabilities and any and all other loss, liability, obligation, damage, penalty, judgment, claim, deficiency, expense, action, suit, cost and disbursement of any kind or nature whatsoever (including interest, penalties, attorneys' fees and amounts paid in settlement) REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ANY OF THE INDEMNIFIED PARTIES, imposed on, incurred by or asserted against the Indemnified Parties growing out of or resulting from any Credit Document or any transaction or event contem­plated therein (except that such indemnity shall not be paid to any Indemnified Party to the extent that such loss, etc. directly results from the gross negligence or willful misconduct of that Indemnified Party).   Any amount to be paid under this Section by Borrower to Lender shall be a demand obligation owing by Borrower to Lender and shall bear interest from the date of expenditure until paid at the Default Rate.

 

 

Section 8.07                      Amendments in Writing.  This Agreement shall not be changed orally but shall be changed only by agreement in writing signed by Borrower and Lender.  Any waiver or consent with respect to this Agreement shall be effective only in the specific instance and for the specific purpose for which given.  No course of dealing between the parties, no usage of trade and no parol or extrinsic evidence of any nature shall be used to supplement or modify any of the terms or provisions of this Agreement.

 

Section 8.08                      Notices.  Any notice, request or other communi­cation required or permitted to be given hereunder shall be given in writing by delivering it against receipt for it, by depositing it with an overnight delivery service or by depositing it in a receptacle maintained by the United States Postal Service, postage prepaid, registered or certified mail, return receipt requested, addressed to the respective par­ties at the addresses shown herein (and if so given, shall be deemed given when mailed) or by facsimile or electronic transmission (with confirmation of receipt).  Borrower's or Lender’s address for notice may be changed at any time and from time to time, but only after ten (10) days' advance written notice to the other party and shall be the most recent such address furnished in writ­ing by the applicable party to the other party hereto.  Actual notice, however and from whomever given or received, shall always be effective when received.  Whenever (and if) notice by telecopy by Borrower is permitted hereunder, it is intended for the convenience of Borrower, and Lender may rely on, and shall not be liable for acting (or refraining from acting) upon, any notice, instruction or request purporting to have been signed or presented by the proper party unless such action (or refraining from action) constitutes gross negligence or willful misconduct.

 

Section 8.09                      Gender; "Including" is Not Limiting; Section Headings.  The masculine and neuter genders used in this Agreement each includes the masculine, feminine and neuter gen­ders, and whenever the singular number is used, the same shall include the plural where appropriate, and vice versa.  Wherever the term "including" or a similar term is used in this Agreement, it shall be read as if it were written "including by way of example only and without in any way limiting the generality of the clause or concept referred to."  The headings used is this Agreement are included for reference only and shall not be considered in interpreting, applying or enforcing this Agreement.

 

Section 8.10                      Lender's Offset Rights.  Lender is hereby autho­rized at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all monies and securities owed to Borrower against any and all of Borrower's Obligations to Lender now or hereafter existing under this Agreement, irrespec­tive of whether Lender shall have made any demand under this Agreement.  Lender agrees to use reasonable efforts to promptly notify Borrower after any such set-off and application, provided that failure to give--or delay in giving--any such notice shall not affect the validity of such set-off and applica­tion or impose any liability on Lender.  Lender's rights under this Section are in addition to other rights and remedies (including other rights of set-off) which Lender may have.

 

  

  

  

Section 8.11                      Governing Law; Venue.  This Agreement and the other Credit Documents are performable in Travis County, Texas.  Any legal proceeding in respect of this Agreement or the other Credit Documents shall be brought exclusively in the district courts of Travis County, Texas or the United States District Court for the Western District of Texas, Austin Division (collectively, the "Specified Courts"), to the exclusion of all other venues. Borrower and Lender hereby irrevocably submit to the exclusive jurisdiction of such state and federal courts of the State of Texas.  Each of Borrower and Lender hereby irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to any Credit Document brought in any Specified Court, and hereby further irrevoca­bly waives any claims that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Each of Borrower and Lender further irrevocably consents to the service of process out of any of the Specified Courts in any such suit, action or proceeding by the delivery of copies thereof by certified mail, return receipt requested, postage prepaid.   Each of Borrower and Lender 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.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA FROM TIME TO TIME IN EFFECT.

 

Section 8.12                      Rights Cumulative; Delay Not Waiver.  Lender's exercise of any right, bene­fit or privilege under any of the Credit Documents or any other papers or at law or in equity shall not preclude the concurrent or subsequent exercise of Lender's other pre­sent or future rights, benefits or privileges.  The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law, the Credit Documents or any other papers.  No failure by Lender to exercise, and no delay in exercising, any right under any Credit Document or any other papers shall operate as a waiver thereof.

 

Section 8.13                      Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws, the legality, valid­ity and enforce­ability of the remaining provisions of this Agreement shall not be affected thereby, and this Agreement shall be liberally construed so as to carry out the intent of the parties to it.  Each waiver in this Agreement is subject to the overriding and controlling rule that it shall be effective only if and to the extent that (a) it is not prohibited by applicable law and (b) applicable law neither provides for nor allows any material sanctions to be imposed against Lender.

 

Section 8.14                      Entire Agreement.  This Agreement, the Note and the other Credit Documents together embody the entire agreement and under­standing between Borrower and Lender with respect to the subject matter hereof and supersede all prior conflicting or inconsistent agree­ments, consents and understandings relating to such subject matter.  Borrower acknowledges and agrees that there is no oral agreement between Borrower and Lender which has not been incorporated in this Agreement, the Note and the other Credit Documents.

 

Section 8.15                      Counterparts.  This Agreement may be executed in several identical counterparts, and by the parties hereto on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original instrument, and all such separate counterparts shall constitute but one and the same instrument.

 

 

Section 8.16                      Sale and Assignment.  All obligations of the Borrower shall be binding upon any successors and assigns of Borrower, but any attempted assignment of any rights of Borrower hereunder without the prior written consent of Lender shall be null and void.  Lender reserves the right, in its sole discretion, without notice to Borrower or any other Person, to sell participations or assign its interest, or both, in all or any part of this Agreement, the Note, any of the other Credit Documents, any Loan and the Commitment and to disseminate to Lender’s Affiliates, potential purchasers, derivative counterparties and rating agencies any information it has pertaining to the Loans, including without limitation, complete and current credit information on Borrower and any of its Subsidiaries.  In the event of any such assignment, Borrower will agree (and will cause each of its Subsidiaries to agree) to such modifications to this Agreement and the other Credit Documents, and will cause to be delivered to Lender any legal opinion and other Credit Documents, as required to facilitate such assignment, so long as the same do not modify, alter or increase in any material respect the obligations and liabilities of Borrower under the Credit Documents.  Without limiting the foregoing, and notwithstanding anything contained in any Credit Document to the contrary, Lender may at any time assign all or any portion of its rights under this Agreement, the Note and the other Credit Documents as collateral to a Federal Reserve Bank

 

 

Section 8.17                      JURY TRIAL WAIVER.  EACH OF BORROWER AND LENDER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER AND LENDER.

 

Section 8.18                      USA Patriot Act.  Lender is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act") and hereby notifies Borrower that pursuant to the requirements of the Act, it is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Lender to identify Borrower in accordance with the Act.

  

  

  

Section 8.19                      Confidentiality. Lender agrees to keep confidential all Information (as defined below); provided that nothing herein shall prevent Lender from disclosing any such Information (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Credit Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any Rate Management Transaction relating to Borrower and its Obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to Lender on a non-confidential basis from a source other than Borrower.  For the purposes of this Section, "Information" means all information received from Borrower relating to Borrower or its business, other than any such information that is available to Lender on a non-confidential basis prior to disclosure by Borrower; provided that, in the case of information received from Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential.  Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

 

 

 

NOTICE PURSUANT TO TEX. BUS. & COMM. CODE §26.02

     THIS AGREEMENT, THE NOTE AND THE OTHER CREDIT DOCUMENTS AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES SUBSTANTIALLY CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

EXECUTED effective as of the date first set forth above.

 

 

 

NATURAL GAS SERVICES GROUP, INC.,

a Colorado corporation

By:/s/ Stephen Taylor

Stephen C. Taylor, Chief Executive Officer

Borrower's Address:

508 W. Wall Street, Suite 550

Midland, Texas 79701

Attention: Mr. Steve Taylor, CEO

JPMORGAN CHASE BANK, N.A.

By: /s/ Brenda Pollard

Name:Brenda Pollard

Title: Vice President

Lender's Address:

Mail Code TX3-8211

221 West 6th Street, 2nd Floor

Austin, Texas  78701

Attention:  Manager/Commercial Lending Group

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